Bath/Head Office:
London Office & Quoted Equity Team:
Edinburgh Office & European Quoted Equity Team:
The Financial Ironmonger Blog No 42/2017

The Financial Ironmonger Blog No 42/2017

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.


Somehow, in some long forgotten plan or place, getting an extension to the Brexit transition period might be thought a wonderful outcome; maybe it is that time of year, pantomime season beckons. By any rough calculation, this is going to cost £1bn a month, surely some of the most expensive meetings in history, with the EU having nil incentive to reach an end agreement.

It soon became clear, long before the PM dragged the wreckage back from Brussels, that this was not going to fly, like previous prototypes. The Chequers model never got off the runway, losing three passengers in the attempt. The usual objections came from the predictable sources such as the ERG, but what is different this time is that previously supportive remainers are now heartily fed up. And that includes the volatile DUP, the votes of whom prop up the edifice of government.

The stumbling block is the Irish Border issue, which is not actually a problem unless you choose to make it one, which the EU clearly want to do. Agreement has been reached on the Spain/Gibraltar border, so progress is possible if people are willing. Indeed, on Monday I am hoping to pass through the hard customs border at Dublin airport putting me on American soil, in the middle of the Irish capital. This problem is totally manufactured.

Curiously, should the UK leave with no deal, there would have to be a hard border under WTO rules, the one thing no one wants. The vast majority of MPs would not countenance leaving with no deal, and parliament would find a way of voting that possibility down. Hence the somewhat half-hearted preparations.

It is difficult to see where the PM goes from here, out of ideas, and her authority totally shredded. No commercial operation would put up with this delusional drift, so they need to install a new head with some backbone, whilst there is still time. The first female PM would not have found herself in this position.

It is worth remembering, amidst all the fog of misinformation, that the UK is the fifth largest economy in the world, an equivalent size of 19 of the 27 EU states. It is the fourth largest in terms of armed forces, albeit that we seem to lack enough sailors to get many ships to sea. It is the financial capital of Europe, if not the globe. It has an awful lot going for it, which is what the EU really fear.

A low tax, deregulated state, that has eschewed tariffs on their border would pose a massive competitive threat, hence they have to keep it under their control. And there are lots of good reasons why the UK should maintain very close ties, but right now, the compromise only seems to be in one direction, and that needs to alter if there is to be any chance of a deal.

Across the Atlantic, the Donald is having trouble with his bankers, following the latest increase in interest rates, a natural reaction to the large, deficit=financed tax cut, near the end of this particular business cycle, which has supercharged growth, and employment.

“Tightening now, (increasing rates), hurts all we have done. I think the Fed has gone crazy”. Yet it is the stimulus that has triggered the hike in rates, cause and effect. Now he has decided that appointing Jay Powell as the chief honcho might have been a misstep; “I put him there, and maybe it is right, maybe it is wrong”, hardly a vote of confidence. But the Fed is right to try and take rates higher, and it would be very difficult to remove Jay.

The economy is clearly doing well, and it will be some time before the full effects of tax cuts, and deregulation feed through. It is hard to think of a better backdrop for the mid-terms in early November, and the next two blogs will be based on what I find when I am over there.

Ultimately, whether the Fed tightens too much, or too quickly, depends on a combination of skill and luck. On top of that, there are “one-off” boosts to the economy, such as the rebuilding of Texas, and Florida, after the epic storms.  These have dramatically increased freight costs already, and there will be many other knock on effects, few predictable.

“I think something is happening, I’m not denying climate change, but it could very well go back”, said the Donald. Which is progress. What is needed is someone to persuade him that, having changed the political weather across western democracies, he could change the actual version.


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.