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The Financial Ironmonger Blog No 48/2017

The Financial Ironmonger Blog No 48/2017

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 48/2018–

This week, we were treated to the Bank of England analysis of what leaving the EU without a deal might look like economically. Note, they said, that this is not a forecast, but it was taken as such, and by Wednesday evening, Liz Truss, Chief Secretary to the Treasury suggested that they be banned altogether.

House prices are to collapse by 30%, commercial property by 48%, the currency will implode, and both inflation and interest rates will go through the roof. Other predictions included flight cancellations, a shortage of medicines, and clean water, since we won’t be able to import the purifying chemicals needed. Leading, no doubt, to the death of the first born, and many others.

Perhaps the most absurd possible outcome is that GDP would fall by 8% in the following 12 months, and not recover, which is a bit odd, given that our open economy would be able to strike free trade deals with the rest of the world, at that point.

To get this in to context, the largest recorded fall in GDP in modern times was in 2009, when half the UK banking system was nationalised, and we had the worst recession since the 1920’s. Nor was this just a domestic problem; most of the developed world was in the same boat. Our GDP fell by 4% then, so the idea that moving to WTO rules under which most trade is conducted is going to be twice as bad as 2009 is patently absurd, and those responsible should hang their heads in shame.

For years we have been told that no deal is better than a bad deal, and yet in the last two weeks, that has turned through 180 degrees, and any deal, however bad, is May’s preferred option. She has been going round the countryside trying to flog this to the electorate, although I have seen no footage of her actually engaging with any live punters, ahead of a televised debate on December 9th.

The plan, so cunning, is to highlight that Labour has diverse opinions in its ranks, (who knew?), that they offer no alternative, and therefore only her deal will do. It is all reminiscent of an election she called in 2017 from which she has clearly learnt nothing. She is useless at campaigning, and cannot think on her feet, so there is no point in either of these displacement activities.

The electorate she must persuade are the 650 MP’s in Westminster, who vote on December 11th, not the general public. Apparently, she thinks that once the punters come to understand just how good her deal is, they will swamp their MP’s with e mails, letters and phone calls beseeching them to see the folly of their ways in not supporting her. Yer, right.

It is thought that she could lose the vote by more than 100, which could be career ending, not least because Plan B is to cancel the Christmas recess, and drag the same deal back for a second vote, the markets having obligingly collapsed in the meantime. Or, maybe she will get binned, there will be some kind of cross party consensus on a way forward such as Norway or Canada plus, and she will be replaced by someone in possession of a backbone who can negotiate properly.

Last word to the Donald; “It’s a great deal. For the EU”.

–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.