Bath/Head Office:
London Office & Quoted Equity Team:
Edinburgh Office & European Quoted Equity Team:
The Financial Ironmonger Blog No 11/2018

The Financial Ironmonger Blog No 11/2018

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.


Perhaps it was not such a good idea, in last week’s blog, to praise US secretary of state Rex Tillerson for his efforts in bringing North Korea to the negotiating table since he was promptly fired by Donald, citing a lack of chemistry. Even neutral observers reckon that he caused a lot of damage at his department, the North Korean expert having left a couple of weeks ago.

Having run Exxon Mobil, one of the world’s largest companies for ten years, I guess he was not going to play second fiddle to Trump, although calling the boss a moron in a public meeting was always going to be a career limiting move. The track record of business leaders moving in to politics is not good, especially in the UK; a different culture. However, he did exercise some restraint, so we will now see what constitutes the Trump foreign policy, if anything.

Perhaps it won’t matter anyway. The Republicans lost the election in the Pennsylvania 18th district race for a Congress seat on Wednesday, an area where the president won by 20 points in 2016. Indeed, this seat was considered so solid in the past that the Democrats didn’t field a candidate in either 2012 or 2014. It might be a one-off, due to a weak candidate, or a portend of what is to come with the mid-terms on November 6th. Losing control of the House of Representatives could open him up to impeachment proceedings, which are originated there.

The immediate storm of the Trump Tariffs seems to have blown over. Chinese steel accounts for 3% of the imports, $50bn last year, which is just 1.7% of all goods going in to America. A far bigger figure is the $84bn of Chinese telecom equipment imported last year, but targeting that would simply drive up prices for consumers. And it is more complicated than that. Most of the components originate in other countries, Universal Display Corporation, (personal holding), supply screens to Samsung in South Korea, before all the bits are assembled in China. So, these are not really Chinese phones, in any sense.

White House shenanigans aside, the economy is bubbling along, even if the recovery is now 105 months in the making, causing many to fret. The longest was 120 months in the 1990s, when the economy expanded at 3.6% average annually, compared to 2.2% in this cycle. In theory, we are at the tail-end of it, but maybe we are just coming to a point where the economy has stabilized after the shock of 2008, and is now poised to take off.

New orders for capital goods, which exclude ships and aircraft, were up 6.3% in the twelve months to January, whilst sales of heavy trucks, those over seven tons, expanded by 17.6% in the same period. In spite of higher interest rates, and a limit of mortgage payments as a tax deductible allowance, new housing permits issued in Q4, 2017 were the highest since 2007. Improving economics mean higher interest rates, but these will be both measured, and well flagged. The potential for a recession, in the near-term, is pretty much zero.

This weekend, the Russians are holding an election, with president Putin the only likely winner. The UK headlines are dominated by the poisoning of a former spy, and his daughter, from a nerve agent, Novichok, the first known use of this type of substance in modern times. The response has been out of the Cold War playbook; we have expelled 23 of their diplomats, whilst they have thrown out 23 of ours.

There has been no extension of sanctions, financial or otherwise, which have a much more devastating impact, perhaps a recognition that impoverishing the country only leads to more extreme outcomes. Gloating over the downfall of the Soviet Union in the ninety’s, when help should have been offered, has led to this outcome. The economy is heavily dependent on the oil price, but unlike Saudi Arabia, it is not able to diversify away from it. IMF estimates for 2017 reckon that GDP per head was $8,655, which compares with $59,495 in America, and $38,847 in the UK. It ranks one ahead of Brazil, (at 71st), and four ahead of China. Both of those countries have enormous potential, but Russia, locked in this mind-set, does not.

Ultimately, it is the numbers that matter, even if the nature of the threat changes from conventional warfare to cyber-attacks, and other forms of disruption. But in war, as in many other things, scale counts. According to the Economist, America, and its European NATO allies spent $871bn on defence in 2015, compared to Russia’s $52bn.

Which, if you go back to the start of this blog, is less than America spent on I phones, or their equivalent. Which would be a great line for the Donald; “we spend more on communicating with each other than Russia’s total defence budget”. And that is the cost of buying a phone, not running it.

Remain optimistic!


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.