Bath/Head Office & Unquoted Equity Team:
London Office & Quoted Equity Team:
Edinburgh Office & European Quoted Equity Team:
The Financial Ironmonger Blog No 47/2017

The Financial Ironmonger Blog No 47/2017

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 47/2018–

Until recently, here in the UK there was a crap, low budget, vacuous TV quiz show called Deal or No Deal, intellectually stimulating for only the most challenged amongst the populous. The arrival of the Brexit Withdrawal Agreement, closely followed by the political declaration, is a ghastly reminder of the wretched show, albeit the former is legally binding, whilst the latter is no more than a wish list.

In so far as these can be understood by a mere punter, to get to the next stage, we will have to pay £39bn, and hope that things turn out well for us in future negotiations, which must be concluded by December 2020. Or maybe 2 years later, under an extension granted by the EU. The Canada trade deal took 9 years.

There are many problems, not least that an essential element of trust is wholly absent anywhere you care to look, starting with the Cabinet, through the Conservative party, the Opposition, and then amongst the negotiators. The central bone of contention is the backstop agreement which keeps the whole of the UK in the customs union until a new Free Trade Agreement is agreed, on which there is no time limit.

For MPs of all persuasion, this is too much to bare, and it therefore appears inevitable that the Withdrawal Agreement will fail to get through the Commons, leading to the UK leaving the EU at the end of March, 2019, on WTO terms. The idea that the choice is between this deal and no Brexit is simply wrong; leaving is enshrined in law.

The corporate sector can only look on in horror. Meaningful contingency plans are all but impossible in most sectors, the latest to cry wolf being the Dutch flower industry, which provides 80% of UK stocks, transported by air, or short sea crossings. Maybe we could get by for a few weeks, or grow our own..

Majestic Wine, which sells some £450mn of the stuff, mostly in the UK, announced Thursday that they will increase their stocks of £100mn by between £5mn to £8mn, in the first quarter, which hardly sounds like blind panic; perversely, the economy could actually pick up significant growth if the deal fails imminently, albeit that it would front load the rest of 2019.

The next few days, and weeks, are going to be wobbly, although the recent retreat in markets has much more to do with the defenestration of the Wall Street tech giants than worries about the future relationship with Europe, and certainly provides some interesting buy opportunities, given  pretty indiscriminate falls. The question is to what extent a no deal is already priced in; unlike the banking crisis, which was existential, investors have had ample time to position themselves, which is why UK equities are the most unloved asset class in the world.

Thursday marked Thanksgiving Day in America, a national holiday to celebrate a successful harvest, although the Donald decided that what he was most grateful for was that he is in charge, and is getting stuff sorted. Sometimes, you just could not make this up.

Traditionally, families get together to enjoy a meal of turkey, chosen because it is not economic to rear them for egg production, unlike chickens. And the good news is that the real cost of a 2018 Thanksgiving dinner is the lowest since 2010, and 26% cheaper than 1986, according to the American Farm Bureau Federation.

The following day has become known as Black Friday, which marks the start of Christmas shopping, and for some retailers indicates the day when they finally turn a profit, having been in the red all year. For others, it will be the last hurrah before collapsing in to bankruptcy come the dark days of January. Some will remember this one as the day the oil price fell more than 7%, taking cumulative declines to over 30% since the beginning of October. Nearly everyone was positioned the other way. Ouch.

Meanwhile, the Times has reported that the Donald spent more than $80mn on golf trips during his first year, including $300/- to upgrade buggies so that they can travel at 19mph, rather than just 14 for the standard version, an increase of 35%. So many different ways to make America Great Again.

Please do not contact me to say the wretched things are made in Mexico.

–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.