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The Financial Ironmonger Blog No 28/2019

The Financial Ironmonger Blog No 28/2019

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.


On Sunday, Deutsche Bank finally bowed to the inevitable, and substantially trimmed its investment banking operations, at a cost of 18,000 jobs, and any remaining pretence at playing against the global stars. The only bank to have achieved this is Barclays, who swept in for the wreckage of Lehman Brothers after the crash, but otherwise the Americans remain dominant.

I am not sure that this activity ever had anything much to do with banking, in the proper meaning of the word, but in the good times, it was far more profitable than the more mundane stuff, and the people who practised this noble art were rewarded handsomely, including getting bonuses in the year of the crash, despite horrendous losses. Apparently, they might be tempted to defect elsewhere, otherwise. The writing on the wall was there for all to see, you might think.

UBS and Credit Suisse gave the game up years ago, and it is no longer the money spinner it once was. Hedge funds, and asset managers have taken advantage of new technology to trade direct and now that they have to pay for research, they have become far more selective. Small deal advisory firms have sprung up, often started by former investment bank stars, and being nimble, they can undercut fees, whilst still living very well.

You could argue that these steps should have been taken ten years ago, but finally they have put £66bn of non-performing loans in to a separate operation, something most European banks have yet to face up to. Where it goes from here is another matter; German retail, and European corporate banking are margin free zones; the glory days are over.

The “slow news” season has claimed its first victim in the form of the UK ambassador to Washington, who described the President and his government as “inept, insecure and incompetent”, in some leaked e mails. The BBC defended him on the basis that he was only saying what everyone else in DC thought, but this is the sort of analysis you might get from a first year undergraduate, rather than our top chap in the US. It would have been no surprise if their man in London had reported back, in similar terms, about the May “government”.

Since the Donald will no longer deal with him, he has fallen on his dress sword, amidst all sorts of righteous indignation about politicising the civil service. This is nonsense. For some time, the objective of the Foreign Office has been to promote UK trade and interests overseas; they are working in sales, but this message has not got across to the troops, who still act as if they are reporting back from the empire, via horse and messenger. It is a wonder they survived the invention of the telephone, but the idea that they can remain aloof, and non-aligned from the government of the day, is gone.

Meanwhile, in what passes for the real world, yields on German 10-year bunds have hit -0.31%. The European Central Bank, fearful of deflation, have promised more QE, and a further cut in deposit rates, which are -0.4% to maybe -1.2%. Crazy, but buying now then makes sense. The Fed are also threatening to cut rates next month, a far cry from the two increases we were expecting this year.

Presumably, this joint action will serve to further inflate asset prices, which, in theory would help banks stuffed with non-performing loans if they had any asset backing to them. Not that they do, but it is all that Central Bankers can think of. So, you have a choice. Either pay the German government 2% per annum for the privilege of lending your money to them, or buy something else. Oh, and don’t send e mails which might come back to embarrass you.


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.