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The Financial Ironmonger Blog No 23/2017

The Financial Ironmonger Blog No 23/2017

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.


Markets have reacted surprisingly well to the tariffs that the Donald introduced on June 1st, relating to steel and aluminium, maybe because they don’t matter. It is a very small part of overall trade, but useful political cover ahead of the forthcoming mid-terms, in November. He made the steel workers a promise, and he has kept it. But it is much like the stage-set at your local theatre, (although I appreciate that such facilities are not available to all readers).

Behind the scenes, it is a different story. In 1980, it used to take a worker 10 hours to produce a ton of steel, often pictured at the mouth of a raging furnace. A proper blue-collar job. Now it takes less than two hours to produce the same amount, if not more, and the only people in the plant are highly qualified engineers checking readings, and making small adjustments.

Making America Great Again, his highly successful campaign slogan, is a hark back to the glories of the past, the steel mills, coal mines, car factories and railroads. And maybe intrepid pioneers heading west in wagons with wooden wheels. There is no going back, and he knows it, but it sells well with a certain set of voters.

Clearly, if you have seen an Amish buggy, (a horse drawn trap), someone has perfected the art of building wooden wheels capable of high speeds whilst surviving roads which are, occasionally, third world. Just that it is a somewhat limited market. If you strip out the financial engineering of share buybacks, some 80% of new investment is in technology, mostly by the very large corporations such as Apple and Amazon. Share prices have followed, because unlike the tech boom at the end of the last century, these are highly profitable businesses. Amazon, for instance, has more than doubled its revenues in the last five years.

However, as their dominance increases, they could become just as fragile as those cart wheels, witness Facebook being dragged through the mangle, recently. Meanwhile, the economy powers on. Non-farm payrolls grew by 223,000 in May, up 2.4mn in the last year. There are now 148mn Americans in work, the highest number, ever. Of that annual increase, just 21,000 are government jobs, a notable 269,000 in manufacturing, but the vast majority in the service sector.

The unemployment rate is now 3.8%, forecast to fall to 3.2% by the end of next year, and lower in 2020. Against this background, the Economist has produced a model suggesting that there is a 65% chance of the Democrats winning the mid-terms in November, although to be fair, they admit that it is so tight that they cannot call it. They also managed to get it totally wrong in 2016, but their editorial line was so compromised that there could not be any other outcome.  Bill Clinton, who managed to get elected twice, unlike his partner, reckoned it was all about the economy, and I would agree. On that basis, the Donald should clean up.

Meanwhile, he has been at the G7 summit this week reading the riot act to the other six, such that there are calls to rename it the 6+1, or the 7-1. He has a point; European countries, mostly, refuse to invest the agreed 2% of GDP spend on defence, the cornerstone of NATO, their security shield, leaving the Americans to pick up the balance. They also impose much higher tariffs on American goods than are reciprocated, and so he has had enough. A level playing field means that these other countries are going to have to “pony up”.

It is nearly two years since the UK voted to leave the EU; much has been written on the subject since then, and I have to admit that a general fog has descended on the subject from my point of view. I was therefore fortunate to attend a conference last week at which the main guest speaker was Tim Shipman, political editor of the Sunday Times, who has devoted his life since then to the subject. Don’t feel too sorry for him; a couple of excellent books have resulted, together with highly lucrative speaking gigs like the one I was at, whilst still hanging on to the day job. As an aside, this seems to be the norm now, whether you are on TV, or in the press. The job gets you the exposure to pursue far more beneficial financial activities outside, and puts you in a perfect loop; demand more salary from your employer, due to higher recognition statistics. Clever!

He is widely recognised as the most informed person outside government on the subject, and given that he is the first anyone phones to get across their opinion, he probably knows more than any of the Cabinet, given that the briefings allow him to see where many of the pieces of the jigsaw lie.

His take, albeit that it was as long ago as last Thursday afternoon, was that Theresa May is aiming to land the softest possible version of a hard Brexit, leaving the single market and the customs union in name only, with a long transition period, which will have no end date, not least because the EU have no incentive to negotiate one.

The hard core leavers can just about swallow this, but they want the final date cast in stone, however far away that may be. As to the Irish border issue, he said it was only a problem if you wanted to make it so, and not if you didn’t. This comes with a heavy caveat; it was his opinion 72 hours before publication of this blog. One thing you can say for certain is that this kind of shambles would never be allowed to happen in a quoted company.


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.