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The Financial Ironmonger Blog No 5/2019

The Financial Ironmonger Blog No 5/2019

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 5/2019–

The Sunday papers set the tone, lest we leave the EU without a deal. “Martial Law, curfews and travel bans”, and when that silly boy Matt Hancock, (who is meant to be running the NHS), was quizzed about this on a Sunday talk show, he replied “I cannot deny it; we are preparing for all eventualities”.

Maybe they are trying to find something for the 3,500 troops, who will be on standby, to actually do, but across a population of circa 65mn, they might be thinly spread. In so far as I can discover, the last curfew in the UK was in 1471, but since 2003, the police have had the power, between 9pm and 6am, to escort home children under 16 if they are engaged in anti-social behaviour, or likely to do so. They have used these powers to devastating effect to curb knife crime in London. Not.

A curfew on the general population in a 24/7 economy would only incite the civil disobedience they seek to avoid amongst a generally law abiding, fair minded and tolerant population. In our village of 2,700 we have eight places that are either pubs, restaurants, or both, and we have one Police Community Support Officer, who seems to work one day a week, funded incidentally by the Parish Council, i.e. the residents, despite paying for the actual police force.

Imagine the fun if 10% of the residents set off for the pub at 9.01 pm, which is exactly what would happen; what is the chap to do, since there are no reinforcements? Which leads us to travel bans. Try this on the beleaguered season ticket holders who have to commute in to London, and other major cities, every day.

Yet a senior cabinet minister refuses to deny it; and, it is only Sunday.

A far more serious problem emerged on Monday, not really Brexit related, which was that senior wine industry experts are warning that a shortage of bottles has pushed up prices, particularly for the green variety. There is of course a childrens’ song forewarning of exactly this calamity, Ten Green Bottles, but the obvious answer is to open shops where they sell directly from the barrel in to your own container, known as vini sfusi in Italy. Suffice to say, a shortage of empty wine bottles is not a threat that this household will be taking too seriously.

Which leads us to Tuesday, when MPs got to vote on amendments tabled to the Plan A, which lost by 230 votes last time it ran. Well, some of the amendments, anyway. Two passed, although they have no legal standing. One said that we cannot leave without a deal, a margin of eight, whilst the other said that the original deal is fine, but without the backstop, a margin of sixteen. Oddly, the Prime Minister voted for this, thus trashing the Withdrawal Agreement, which she had only recently told parliament was the only one available.

Interestingly, those seeking to extend the leave date beyond March 29th were either defeated, or not tabled, indicating that an answer must be forthcoming, a view strongly supported by national opinion polls. The ball is now back with the EU, who are sticking with their line of no renegotiation.

The choice for them is stark; keep the backstop, resulting in no deal, no £39bn and the hard border that their rules would impose, or dump it and proceed to sensible discussions on the future relationship. The Irish border was never a serious problem until they confected it to be so, and now it has come back to bite them.

On Wednesday, whilst I rushed to check my stash of empty wine bottles, the doomsters had a day off, probably following biblical guidance, seventh day etc. But they were back again on Thursday, a shortage of cherry tomatoes from Spain is likely to lead to a 10% price increase, despite the fact that there has been no such rise in the last 15 years. It is all good displacement activity, and it could be that the EU won’t budge because they don’t have time.

Italy is now back in recession, with all that implies for its chronic banking system, whilst Germany and France are heading in the same direction. Since the GFC in 2008, they have made no progress on a fiscal union, or a pan Euro deposit scheme, so they head in to the next downturn with far more debt than last time, and almost zero tools to sort it out.

Add to that the European elections in May, likely to boost populist support, and it becomes an interesting mix. Everybody, outside Germany, is tired of austerity and with youth unemployment rates of 30% plus in many countries, who could blame them.

Hopefully, there will be a chance to talk on other matters next week.

–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.