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The Financial Ironmonger Blog No 18/2017

The Financial Ironmonger Blog No 18/2017

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 in the UK, it is quite unusual for a cabinet minister to resign, although four have exited in the last six months, the latest being Amber Rudd, Home Secretary, one of the three senior offices of state. By contrast, the Donald would regard six months as long enough before the chemistry wears thin.

Pressure had been mounting over the treatment of the “Windrush generation”, people who came from the Caribbean after the war, and were granted indefinite leave to remain in the early seventies. Not all of them have documentation to prove this, and new laws and practices have therefore caught them in the net, which applies to everyone. Photo ID is essential for many activities, now. It is most unfortunate that people have been caught up in this classic administrative foul-up, not of their making.

The opposition have sought to conflate this with the issue of deporting illegal immigrants, which these people clearly were not, the fire stoked by leaking of internal Home Office documentation at the highest level. The row centred on whether or not there was a target for the numbers of illegals who should be removed each year, and she had told a parliamentary select committee that there was not, having been briefed minutes before by her most senior civil servants.

There is no greater crime than misleading your fellow parliamentarians, (although they are not averse to treating voters with the same courtesy), and thus she had to go, totally stitched up. Her supporters had spent the weekend on the airwaves trying to prop up her position, but a resignation at 22.05 on Sunday would indicate that yet more damaging revelations were coming down the line.

The department is far too big, and needs splitting up. Trying to curtail terrorist activity is more than a full time job, let alone all the other responsibilities, so it is no surprise that she did not have a grip on the detail. Her replacement is Sadid Javid, who had twenty year career in the bond markets, (where they take no prisoners), before entering politics, and is no fan of the PM. Indeed, had she reinforced her majority at the election, he would now be exiled to the back benches, which demonstrates how weak her position now is.

Away from the intensity of the media circus, it is worth looking at what few statistics there are. Apparently, the target was to remove 12,400 in 2017, under what is called a “hostile environment” policy, Amber having written to the PM saying that they could achieve a 10% improvement on the previous year, according to the leaked documents.

No one knows how many people are in the UK illegally, since the Home Office does not keep a check on who is entering, or leaving, but it is widely thought to be around 1.1mn. 10,971 were deported in 2016, falling to 9966 last year (-9%), so not even the minimal target is being met. You have a greater chance of dying than being deported.

Germany at least has a better grip, since all the people who entered the country in the recent wave were documented. At the end of 2016, 556,499 were refused asylum of which just 22,200 were deported last year. The evidence is that, for all the rhetoric, the politicians are simply not interested, which would explain how Amber got caught out. Given that the subject is top of the voters’ concerns, they are playing a very dangerous game.

All this was entirely predictable if you name your child after part of a traffic light system. Red would have been fine, implying fire and danger, whilst green signifies a child more in to nature. Amber means proceed with caution, which proved fatal for her career, but at least she had a ringside seat for the car crashes that inevitably happen at such junctions.

The other excitement of last weekend was the news that Sainsbury’s and Asda are seeking to merge, giving them 30% of the food retail market, overtaking Tesco, which has 27%. Needless to say, these figures are hotly disputed, but you get the drift. Both have been suffering from declining market share and profitability, goaded by the discounters Aldi and Lidl, with the threat of Amazon in the background.

The combined business will start off with 330,000 employees, more than four times the size of the British Army, which is managed on a highly disciplined command and control system. The fluffy assumption is that they can get this deal past the regulator largely intact, which I doubt, but the integration risks are huge, notwithstanding that the competition will be watching your every move.

The vendor of Asda is Walmart, the largest retailer, by sales, in the world. They are taking a loss of £1.5bn on their cost price, and extracting £3bn in cash, whilst retaining 42% of the equity, for the moment. I am happy to be proved wrong, as ever, but if Walmart are such a willing seller, it takes a leap of faith to believe that combining two weak businesses can create a strong one.

Finally, for those of you who missed the April PMI figures, there was a slight improvement on March, which would indicate that the economy is growing at 0.2% per annum, compared to 0.1% in the first quarter. Depending on your view, either these numbers are woeful, or the rate of growth in April was double that achieved in the first quarter, cause to celebrate.


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.