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The Financial Ironmonger Blog No 1/2019

The Financial Ironmonger Blog No 1/2019

Every week our guest blogger, David Oakes of Mosaic Money Management (aka The Financial Ironmonger), shares with us his take on some of the major UK and overseas macro and political events that shaped the previous week.

Please be reminded the value of investments, and the income from them, may fall or rise. The views expressed in this article are those of the author at the date of publication and not necessarily those of Chelverton Asset Management Limited or Mosaic Money Management. The contents of this article are not intended as investment or tax advice and will not be updated after publication unless otherwise stated.

–THE FINANCIAL IRONMONGER BLOG NO 1/2019–

For those fans of Groundhog Day, this year has started as the last one ended, same old, same old. The economic data continues to weaken, with some pretty shocking numbers in the States on Thursday, although it remains the world’s least ugly economy.

I covered some of the reasons for it last week, which I will not repeat, but on top of softening economic data, there are company specific issues. Apple issued a profits warning on Wednesday, cutting its sales forecast for the first time since 2002, blaming it on a downturn in economic growth in China, in particular.

The share price fell 9%, and has now lost a third of its value since October; less than six months ago, it was the world’s most valuable company, worth more than $1 trillion. And yet. The new model launch in September was a flop, customers are bored of upgrading their phones, and China had been slowing all year, all public information.

Likewise, European markets were rattled yesterday when the European Central Bank seized control of the Italian bank Banca Carige, which is more than 500 years old, and Italy’s tenth largest. Non-performing loans make up 27% of the balance sheet, but an attempt to raise £360mn in a bond issue last month, provided by other Italian banks, was blocked by the controlling shareholders Again, why is anyone surprised by this news, since it is widely known that the whole European banking system is in a very poor state. Hence why they are not obsessed by Brexit with other things to worry about.

Equity market volatility has therefore continued; these kind of large falls are not unknown, and in the past ten years, it has been a good strategy to buy the dips, and benefit from the recovery. Maybe central banks will step in, once again, and prop things up, but there is a limit to what they can do. Investors have been pilling in to US 10-Year Treasury bonds, the ultimate safe haven, $2.4bn alone on Wednesday. Fasten your seatbelts?

Meanwhile, newsrooms abhor a vacuum, which is what Christmas is, so they have concentrated on the “invasion” of the UK coast round Dover by potential migrants, largely from Iran. More than 100 have either made it across from France since Christmas Eve, or been intercepted at sea, making a total of some 600 since October. The UK processes some 2,000 applications, for asylum, every month, so it is a stretch to call this a crisis.

Cue the Home Secretary dragged back from a family holiday to “take charge”, (despite the activity going on for months), and the Defence Secretary offering him a ship at a rate of £20/- a day, since none of theirs are available. No one would think that a leadership contest was in the offing.

The Border Force has five patrol ships, known as cutters. One is in dry dock somewhere, one in Plymouth, allegedly, whilst the two in Greece and Gibraltar have been recalled. Reports suggest that two days later, there was no activity on either, and it could be over a month before they get back. Maybe they have seen the forecast; south west 10 in the Bay of Biscay tonight, in a boat with no keel. No thank you!

Which leaves the one cutter in the right place, at the right time. Brilliant photo opportunity, the Home Secretary pictured pointing purposefully at a screen on the bridge of HMC Searcher, tied up in Dover docks. You might think he would ask why they are not at sea, performing their duties, but he clearly does not know that the boat is known locally as “the eternal flame”, since it never goes out.

The abiding mystery is how these people are arriving in inflatable dinghies. You could certainly make the crossing in a RIB, which has a proper hull and a large engine, but there is no way you could do so in the much smaller version. With luck, they might do 4mph, and if you put a bigger engine on, you create a larger bow wave which fills the boat with water.

Added to which, this is the busiest shipping lane in the World, with vessels travelling at 25knots, more than 28mph, leaving big wakes behind. Were it possible, it would be in the next Olympics. One of the major UK news channels has raised this question two nights running with the French, who furiously denied their fishermen have anything to do with it, before anyone suggested that they had.

Next week, Parliament resumes, and the country will become consumed again with Brexit, as March 29th hoves in to view; expect much heat and smoke, but little enlightenment.

–MORE ABOUT OUR GUEST BLOGGER, DAVID OAKES–

David joined Manchester stockbroker Henry Cooke, Lumsden in 1977 and after becoming a member of the London Stock Exchange in 1984 held a number of senior positions within the firm including Managing Director of the in-house fund management company and member of the Executive Committee.

After senior appointments at Cazenove Fund Management and latterly Mercater Capital Management, David joined Mosaic Money Management in 2013. He has successfully managed private client and fund portfolios for over thirty years and has particular expertise in providing a multi manager service to his loyal client base.

The Financial Ironmonger is a hat-tip to Ironmonger Lane, the location of Chelverton’s London office.