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The Financial Ironmonger Blog No 30/2019

The Financial Ironmonger Blog No 30/2019

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.

–THE FINANCIAL IRONMONGER BLOG NO 30/2019–

The new Prime Minister, Boris Johnson, has started as he means to go on, ruthlessly clearing out the Cabinet in a way not seen before. There is much to be achieved before the UK leaves the EU on October 31st, which many forget is actually the default position. Parliament refused to back Mrs. May’s Withdrawal Agreement on three separate occasions, the first being January 15th, when it went down by 230 votes, the largest margin of defeat suffered by a government in history.

Since then, the government was forced to ask the EU for an extension to the deadline from the end of March, (granted until the end of October), and pretty much nothing else has happened. The Irish have conceded that customs checks can take place miles from the theoretical border, which obviates the need for the hated backstop, and this is a direction the new government may pursue.

An alternative proposal is a standstill agreement, whereby everything continues to work on the same basis as present whilst a new Free Trade Agreement is put in to place. The Prime Minister, and his fully supportive Cabinet are now signed up to leaving with no deal, if that is what it takes, which would be sub-optimal, whichever side of the argument you support.

Something, however, had to give. The ship of state had become becalmed in an impenetrable fog, the captain having lost any sense of direction, and with no motivation to find one, the crew had become mutinous. Now, with a change of leadership, a way forward has been plotted, which by definition can only be more successful than having no plan at all. We will learn very quickly whether that is to succeed, but the Donald is on board, which should not be underestimated.

Whilst the UK basked in the highest temperatures ever recorded, results from Fever-Tree came in distinctly below market expectations. The extraordinary growth of this tonic water manufacturer was fuelled by the boom in artisan gin consumption, but sales growth in the UK, its biggest market, were up by just 5% in the first six months of this year, compared to 73% 12 months ago. The big hope is that they can repeat their success in America, where sales were up 31%, but there is a rather large soft drinks company well entrenched there, who are not likely to let this happen.

More likely, we are seeing “gin fatigue”, where the market is awash with the stuff, and consumers are replete. I still think that there is huge growth in the market for non-alcoholic drinks, as opposed to soft drinks, but have yet to find a quoted play on this.

It is not just gin where high-end demand has vanished. Another set of dismal results from car maker Aston Martin saw the share price tumble to just £6, down from £19 when it came to the market only last October, valued at an astonishing £4.3bn. I have yet to meet any manager that admits to owning a single share, which is often the case with such disasters, but some analysts are now talking of the need for a rights issue. To be fair, the CEO Andy Palmer has stated that in its first century, it went bankrupt seven times. Let us hope he can steer it along a better path.

–MORE ABOUT OUR GUEST BLOGGER, DAVID OAKES–

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.