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The Financial Ironmonger Blog No 7/2019

The Financial Ironmonger Blog No 7/2019

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.


I spent last weekend reading a couple of books on everyone’s favourite subject, Brexit, trying to find a different angle from the impasse that seems to have gripped the whole thing, of late. That the Government lost another vote on Thursday was no great surprise, since it was only put up to see where the numbers were running, and in what direction. It also defers any further decisions until February 27th, a mere month before the exit day.

There would be much to admire in this approach if you believed that it was part of some detailed plan, itself the distillation of a great strategy painstakingly crafted by the brightest in the land, and beyond. Much like bidding in an auction, you must decide whether to get involved at the beginning, or come in at the last minute, with a knockout blow.

Clearly, the problem is the backstop, designed to prevent a hard border between the two parts of Ireland; the Spectator reckons that the inclusion of just one sentence, creating greater ambiguity, would allow all parties to move on. The first book that I read was by Prof Kevin O’ Rourke, which gave the history of the EU, and how we came to where we are. It explains, in considerable detail, how being part of the EU has transformed the Republic, which I can attest to.

You can, therefore, see why the border is of such importance to them, whilst many in the UK regard it as an issue that never was, and which has been totally overblown. He finished writing the book in Dublin on December 19th last year, and yet less than two months later, it may well be a collector’s item, or destined for pulping, because it turns out that the enduring solidarity of the 27 remaining members only goes so far.

Earlier this week, at a meeting of the European Parliament’s Brexit steering group, two of the six members pointed out the obvious, which is that in the event of no-deal, there would have to be a hard border, otherwise the continent would be flooded by American chlorinated chicken, which seems to hold a particular horror for them, notwithstanding that it would be labelled as such, and does not seem to have killed too many in the New World. Certainly fewer than opioids, and no one is forced to buy either.

The Belgium representative went further; “If Ireland refuses to protect the Northern Irish border after a hard Brexit, we will have to erect a customs frontier on the Continent”. Ireland could not expect Europe to uphold the Good Friday Agreement, “at any cost”. In other words, all exports from Ireland are going to have to go through border checks, as they pass in to the EU, which would be disastrous for their economy.

May not turn out that way, but the Irish have been cut adrift, not least because of the intransigent attitude of the Taoiseach, Leo Varadkar. He has little choice, (at the time of writing), but to give up on the backstop, politically very difficult. You might wonder why there has been a sudden change of heart, even if it is not the official EU position. The economy, however loosely constituted, is in a bad way, and that overrules politics.

For the twelve months ending in December, Eurozone industrial production was down 4.2%, with Spain minus 6.7%, Italy 5.5% and Germany 3.9%. Less industrialised countries, such as the UK, fell only 1.2%. Whilst the numbers for the month of December are awaited, it is clear that the situation is getting worse, and are declining at a greater speed than previously anticipated. Not all of this can be blamed on Brexit, the downturn in China, or the deterioration of their trading relationship with America.

Globally, we are coming to the end of one of the largest economic expansions in history, prolonged, one could argue, by governments printing money. Whilst America, and the UK have desisted, both have their own currencies, and could act to stimulate their economies, independently. The EU has failed to put in place the steps needed to make it a harmonious currency block, and therefore cannot, not least because the political will for ever closer union has ebbed. The result of the elections in May will be worth sitting up for. Thus, over a few weeks, the UK position has moved from being a pathetic supplicant to a far stronger position.

Keep a close eye on potential US sanctions on EU car manufacturers, (25%), and I will cover the conclusions of Book 2 next Blog.


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.