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The Financial Ironmonger Blog No 49/2017

The Financial Ironmonger Blog No 49/2017

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 49/2018–

It has been a pretty grim week for global equity markets, falls sparked by fears that the US/China postponement of tariffs will come to nought, and be imposed in April. The Donald, who cannot resist chucking petrol on any fire he comes across, described himself as the “Tariff Man”, ending his tweet with an adaptation of the 2016 election to say “Make America Rich Again”.

That was Tuesday, leading to the fourth largest fall in the Dow Jones index on record. By Wednesday, he had got more conciliatory, saying what a great deal he was going to make with China, but he is now in a fix. Tariffs are bad, although I agree that America has suffered seriously from anti-competitive behaviour, by many countries, and wants a rebalancing.

But, the more he beats up China, the worse the damage to the economy, at least in the short term, and he needs that humming to get through the elections, in just under two years time. And whatever all the learned academic studies say, voters care most about their personal financial circumstances. Just look at the reaction in France to a proposed rise in fuel duties, although the French love a good riot, whatever the cause.

Wall Street was closed on Wednesday, but any hope that a pause for reflection might stabilize markets was broken by the news that the chief financial officer of the Chinese telecom group, Huawei, had been arrested in Vancouver, and the Americans are seeking to have her extradited to the US in connection with charges of sanction busting in Iran. It does not help that she is the daughter of the Chairman, and founder, of the company. So a very high profile asset in the Chinese system.

Presumably, the Canadians, having seen the wrath of the Donald during the renegotiation of the NAFTA free trade deal, (my terms or none), will happily bundle her over the border, where she will learn that the Americans don’t care for sanction busting. It is incredibly naive of her to venture in to territories within their sphere of influence, but it is another case of people thinking that the higher they climb a ladder, the more invincible they are. Gravity only applies to the downtrodden.

Investors panicked, with the UK FTSE dropping more than 3%, the “worst day since the Brexit vote”, the headlines screamed, despite the fact that there is no correlation, whatsoever. But I guess it is a useful lead in to the subject that no one wants to think about anymore, even dedicated political geeks like me, who need to refocus. Maybe take up knitting, or something.

It is easy to lose track of the days, but it was as long ago as Tuesday that the Government lost three votes in 63 minutes, including being found in contempt of parliament, which has never happened before. This relates to their refusal to publish the full legal advice on the effects of the Withdrawal Bill, which they promptly conceded.

This revealed, unsurprisingly, that Northern Ireland could be stuck in the EU forever, unless all sides agree otherwise, which was much too much for MP’s of all parties, including the highly vocal DUP, the party of the loyalists. Sinn Fein, the Republican party, refuse to take their seats in Westminster, so their voice is unheard. A letter in the FT pointed out that Eire is all but bust, so the last thing needed was any talk of the two countries merging.

Those who think the backstop to be a giant EU conspiracy are probably barking up the wrong tree; nobody wants it. Bar the people of Northern Ireland. A poll has revealed that 60% of them are very happy to remain in the EU, and that is across religious groups, and age ranges. They see enormous economic upside in being the gateway to both the EU, and GB, as it would become, if they stayed in.

Meanwhile, the Government hurtles towards defeat next Tuesday, the more campaigning Theresa does, the worse the numbers get. Maybe the answer is to ask the people of Northern Ireland what they want, which would be demanded by the Scottish as well, leaving Brexit confined to a “Former United Kingdom of England and Wales”, as described by Garvan Walshe, a onetime advisor to the Tories. You can spell out the acronym yourself.

–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.