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The Financial Ironmonger Blog No 15/2019

The Financial Ironmonger Blog No 15/2019

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.


Here are various quotes from the UK Prime Minister:

Brexit means Brexit.

The UK is leaving the EU on March 29th, 2019.

As Prime Minister, I am not prepared to delay Brexit further than June 30th.

What is important is that any extension enables us to leave at the point at which we ratify a Withdrawal Agreement.

From President Macron:

It is with great impatience that I will listen to Theresa May.

From former Chancellor Gordon Brown to Prime Minister Tony Blair:

There is nothing that you could say to me now that I would ever believe.

Friday, April 12th, was another deadline that seems to have come and gone, and Brexit is no closer. Officially, the next staging post is October 31st, but there are plenty of hints that further extensions could be granted thereafter, which is probably the main takeaway from this week’s talks.

The EU does not want the UK leaving without a deal, and neither do the majority of MP’s, a stance of which they might be disabused in the forthcoming local and European elections. The Withdrawal Agreement is never going to get signed off, and now that the two-year deal with the DUP has all but run out, the Government has lost any vestige of a majority.

The reality is that there is no time to agree anything before October 31st. MP’s are now on a two-week holiday, and then the EU elections loom on May 23rd, with new MEP’s sworn in on July 1st. The whole of Europe then goes on holiday for two months, before choosing who is going to get the top jobs in the first fortnight of September. At which point, there will be just six weeks until the end of October.

Even if there was agreement, there would be no time to implement it. To some extent, this cosy pact of doing nothing might get blown off course if the nationalists have a strong showing in the elections, or the Tories manage to get a new leader installed by then, but neither are certain, at this stage.

The UK equity market seems to have decided that whatever happens, it is not likely to be much of a surprise, and whilst it is not yet full “risk on”, it has certainly recovered its composure from last autumn. Markets in general have been helped by the cowering of the FED; every time they venture an opinion, the Donald reminds them that they are not permitted to have one.

The ongoing debate about Brexit has dominated UK politics for as long as anyone can remember, certainly to the exclusion of any domestic policy. This lack of leadership has been especially pronounced at the Department for Transport, responsible for the cost over-run on Crossrail, the timetable fiasco of last summer, hiring ferry companies that turned out to have none, and the forthcoming debacle over HS2, the largest government project ever undertaken.

Millions of people rely on these services every day, probably of far more interest, and impact, on them than Brexit, and all of these people have a vote. Under a previous shamble, the government own the infrastructure, (rails, signals, stations etc.), whilst the operation of the trains is conducted by private companies, who compete for a franchise every seven years, for a particular route. Thus, lip service is paid to the idea of competition, which in reality cannot exist, unlike the aviation market. Looming over all of this is the age-old problem of pension funds.

The Railways Pension Scheme had assets of £27.5bn at the end of 2017, with some 340/- active or retired members. The accounts do not indicate if the fund is in surplus, or deficit, although reports suggest that there is a £6bn black hole. This has come to light as negotiations take place on the renewal of three franchises, not least of which is the West Coast mainline, successfully run by Virgin Trains for the last 22 years.

Under existing arrangements, franchisees are “custodians” of the pension scheme during their seven-year term, but the Government now expects any successful franchise bidder to be responsible for the total shortfall, without limit as to time, or date. Not surprisingly, no company, whether public or private, would ever agree to such an obligation, not least one that is unquantifiable. As it stands, the West Coast will be left without a train operating company as early as October; voters, who are tired of being thought stupid, might have a view on this.

Finally, my new computer has arrived, helped by some wonderful people who transferred all the data from the old one, at an embarrassingly low cost. I asked how long this machine would last, “two, maybe three years. It is a total lottery, but we can tell as soon as it comes out of the box if it will be any good”. Thereafter, the cost of parts and labour render them uneconomic to fix, which must offer an opportunity for an enterprising recycler.


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.