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The Financial Ironmonger Blog No 44/2017

The Financial Ironmonger Blog No 44/2017

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.

–THE FINANCIAL IRONMONGER BLOG NO 44/2018–

It took less than six hours to fly from Philadelphia to Dublin on Monday evening, no doubt helped by the fact that the plane was half empty, which was a surprise, given that it is the half term holidays in the UK. I met a guy who worked at the airport, at a reception on Friday evening, and he said that Air Lingus, Icelandic and Norwegian were the airlines to fly with, since they are trying to break in to the market. The first two come with a general warning about their finances, given how competitive the trans Atlantic route is.

I left behind a country where the economy is clearly booming. Real GDP expanded at an annualised rate of 3.6% in Q3, with a strong performance from consumption, which accounts for 68% of the economy. Unemployment is at fifty year lows, and corporate profits continue to rise, and there is little reason to think that these conditions are going to change in the next eighteen months, which is about as far as any credible models will stretch.

All of which provides the best possible backdrop for the midterm elections next Tuesday. They are, of course, all about the Donald, not that he appears on any of the ballots, hence his energetic campaigning across the country, albeit preaching to the hard core supporters. Turnout tends to be much lower than in the full presidential elections, which can significantly distort the results.

He will be hoping that the “shy” vote is holding up for him, but only two presidents in modern history have increased their support at this point, Roosevelt in 1934, (no idea why), and George W Bush in 2002, a backwash from 9/11. The expectation is that he will lose the House, but retain the Senate, not an outcome he will care for, since winning is everything to him, but one that will allow him to continue pretty much unchecked.

Should the Democrats win the House, the way is then open to bring impeachment proceedings, given that they need a simple majority to start the process. The trial is then held in the Senate, where 67% have to vote in favour; in reality, no president has ever been impeached, albeit that Nixon only escaped the history books by quitting. It would, on the surface, be tempting; an opportunity to vanquish the defeat of Hillary, who still has not given up hope of getting elected in 2020.

This is foolish for two reasons. Despite the most expensive campaign in history, she lost an election that was her’s for the taking because she was an utterly useless candidate, interested in just herself. Remember the quote about the “Deplorables”, which only strengthened their resolve. And I think you have seen that again with the scrumage over the election of Brett Kavanaugh to the Supreme Court. They were making good progress in the polls before their scheming got exposed, at which point it hit a brick wall. Impeachment would, therefore, be a huge own goal, but the Donald might just goad them on, the better to consolidate his support base.

Back in the UK, little seems to have changed since I left. Brexit rumbles on, with rumours of a deal by November 19th, which has sent the currency soaring. The saga at the cake shop remains unresolved, (see previous blogs), but the attrition on the High Street continues, with Evans Cycles the latest victim. Bought by the venture capital firm ECI for £75mn in 2015, it lost £17.4mn last year, across just sixty shops. The demise is blamed on the rapid expansion from its base in the south east, where people can afford to spend hundreds, if not thousands, on a pushbike.

And the weather, which is the perennial excuse for any retailer, but to be fair, it has been brutal in the spring, and who would buy one of these machines as the nights draw in, and conditions deteriorate, now. Presumably, if you are a very keen cyclist, you know all the good features, and can buy them off the internet, for home assembly. There has been a store on the outskirts of Chester, where the office is, and I have yet to see anyone entering or leaving , in the last three years.

The chancellor delivered his budget on Monday, which marks something of a turning point in the political cycle. The bleak days of austerity have gone, to be replaced by a sensible compromise between the former, and the spend everything policies of the opposition. Some think it a classic pre election version, which they would be insane to call, but it does show what can be achieved if you set out with a glass half full mentality. I think he probably surprised himself.

–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.