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The Financial Ironmonger Blog No 10/2018

The Financial Ironmonger Blog No 10/2018

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 Trump tariffs claimed their first victim this week in the form of the resignation of Gary Cohn, head of the President’s National Economic Council and widely regarded as one of the more sensible people in the administration. Wall Street fell by more than 1% on the news, but as a former head of Goldman Sachs, there was no way that he could support protectionism.

Revelations that he thought the President to be as “dumb as sh*t” cannot have helped, but it is what follows that is the problem, especially if he is replaced by Peter Navarro, the chair of his National Trade Council, a free-trade sceptic. By the middle of the week, tariffs were being linked to a renegotiation of Nafta, the trade agreement with Mexico and Canada, and by the end of the week, “best mate” countries such as Australia and the UK looked as though they might be exempted. Many a carve out between announcement and final deal.

Whilst most sensible people view protectionism with total horror, he campaigned on this, and was elected, so the only surprise is that of a politician carrying out his promises. His support remains rock sold amongst his fans, and a poll showed that more generally, 60% support this stance. He must be nailed on for re-election in 2020. Ed Balls, former Economic Secretary to the UK Treasury between 2006 and 2007, is filming a series for the BBC on this phenomon.

Whilst many are disquieted by the highly unpredictable nature of the administration, it is delivering. 313,000 jobs were created in February, whilst earnings growth has slipped to 2.6% annually, and the January figure of 2.9% has been revised to 2.8%. The original figure sparked the sharp sell-off of equities in February since strong growth indicated that interest rates would have to be increased much quicker than thought. The jury is still out on this one.

Further afield, North Korea has invited the President to talks about denuclearisation, which is an extraordinary development, brokered by South Korea, but probably orchestrated by China, which fears protectionism. It vindicates the stance of US secretary of state Rex Tillerson who said that talking was the way forward, whilst the Donald advocated scortched earth. Good cop, bad cop, maybe, but wherever they meet, you would not want the job of chief food taster.

There is more to come; I am told to expect movement on the Infrastructure Bill, another election promise, very soon.

Meanwhile, with European economies finally showing signs of life, the central bank has indicated that the era of quantitative easing is coming to an end, which has implications for countries such as Italy, and “zombie” companies. The Bank of America reckon that 9% of companies fall in to this category, where interest payment costs are above their earnings, and if those costs rise, it is game over.

The Germans are all in favour of returning the financial system to a more normal basis, since trying to persuade the voters that negative interest rates on their deposits is in some way a good thing is difficult. Here in the UK, I suspect that the feeling is the same, but whether the economy can stand it is a different question.

Certainly, the consumer seems to have taken fright this year, new car sales falling, and a number of restaurant chains in trouble, but there is a difference between caution and disruption, probably the greater threat. Countrywide, the largest UK estate agent announced a loss of £212mn in the last year, and the closure of 200 branches, from a total of 1,500.

The Chief Exec exited in January, following a profit warning, and the share price has now fallen more than 90% since the peak in March 2014. The housing market has been hit with all sorts of problems, including higher stamp duty, the threat of increasing interest rates, and general Brexit uncertainty, particularly in London.

Since 2014, the company has lost 26% of its market share. Big number. And it is going to online competitors, a trend unlikely to reverse. The Chairman, Mr. Long, said that he would give more details of a turnaround plan. In August. I don’t think he gets it.


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.