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The Financial Ironmonger Blog No 17/2019

The Financial Ironmonger Blog No 17/2019

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.


European equity markets have been as much unloved by the locals as the UK, but there are signs that earnings expectations are improving, which has yet to be recognised. March was the eleventh consecutive month that mutual funds had posted net outflows, and that is not just from global allocators. Germans, in particular, have lost faith.

Early results from companies in the STOXX 600 show both revenues and earnings coming in higher than analysts’ expectations; should that trend continue, an overweight position would be the answer. Not that all is sweetness and light; the proposed merger between Deutsche Bank and Commerzbank has ground to a halt. It would have been difficult enough anyway, and all but impossible given the lack of enthusiasm. Both trade at about 25% of book value, a pretty shattering indictment of management. Expect the smaller of the two, Commerzbank, to be put out of its misery.

There is growing optimism that the world trade cycle might still have some legs, with the American economy growing at 3% plus, and signs that a deal will be cut with China. Cynics might suggest that if the thing peaked out in 2021, that would tie in well with the Presidential political business cycle, but there are other things at play.

Unlike the tech boom at the end of the last century, when anything with dot com after its name was deemed the future, the big companies of today are well established businesses, with little need of capital, and throwing off tons of cash. Both Apple and Microsoft are already paying dividends, whilst  Amazon and Facebook might start this year. Amazon has just reported Q1 profits of $3.6bn, a trend that has been accelerating for the last four quarters.

Traditionally, dividends from oil and pharmaceutical companies have been the key income drivers for markets, and the potential for them to be joined by the big tech stocks will only drive prices higher, given that pension funds reinvest most of their income.

Not that rising markets will lift all stocks, witness the disastrous failure to merge Sainsburys, (one of the large UK food retailers), with Asda, (another). The later is owned by Walmart which has deep enough pockets, and the time, to find another solution, but Sainsburys, having pinned all its hopes on a most unlikely outcome, is now loosing market share, and has no obvious Plan B. Advisors are understood to have charged some £50mn for their advice.

And then there are the politics to consider. Last weekend, the Ukrainians voted 73% in favour of electing a 41-year-old professional comedian as their next president, a total unknown in a highly combustible country on the eastern edge of Europe. In London, meanwhile, a 16-year-old Swedish schoolgirl, Greta, arrived to crown the street protests of the eco warriors, and enthral the politicians, who have no idea how to react. Whilst this movement could have profound, and totally unforeseen outcomes, she is learning the game quickly, taking a train across Europe, first-class, of course.

Candidate No.20 announced that he is standing for the Democrats in the forthcoming presidential elections, one 76-year-old Joe Biden. Forced to stand aside in 1987, he was beaten by Obama in 2008, and subsequently failed to get his support in 2016, despite being Vice president for the previous 8 years. Described as being Obama, without the hope, his pitch is that he wants America to go back to “how it was before”; quite who, what or when remains unanswered, and likely to remain so.

Here in the UK, our elected representatives have enjoyed a two-week holiday, the hope of the government being that this would provide time to pause for reflection, and reconsideration of all the nasty things that have been said and done, by both sides of the Brexit debate. Which it has, but only to further entrench such views. Virtually all players in the Conservative party, from the cabinet, through the MPs, and now the grass-roots members want rid of the Prime Minister, as soon as possible.

Imagine my surprise, then, to receive an e mail last Wednesday afternoon inviting me to meet her on Thursday, amidst the usual secrecy, in a town north of Manchester, aptly named Bury. Whilst I politely declined, you must wonder who is advising her.


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.