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You have to smile, don&#39t you? The world&#39s greatest democracy cannot even elect a president. If it were not for the importance of the US to investors everywhere, I would have spent the past week rolling around the aisles.

Let us not forget the US stockmarket is worth more than all other stockmarkets put together. This is not just a by-pro duct of high share valuations and a strong dollar. The US has led in technological innovation, has created vast individual wealth and kept the world economy buoyant.

Markets are torn by the Gore/Bush debacle. Paralysis of government is generally viewed as a good thing. Less government, not more, has helped the US build its position as the epitome of successful capitalism. But that is not to say a vacuum at the pinnacle of power is to be welcomed. Markets dislike uncertainty and further progress will need a resolution.

At the end of last week, it was looking as though this story could run and run. One immediate effect was to give the dollar a touch of the jitters. Given the level of the balance of payment deficit, that may be no bad thing although any continued slide could choke off imports, which will hardly do much good for other exporting nations. In the short term, we must watch how the US market reacts to this unsatisfactory political situation. In the longer run, it may make little difference and it is worth remembering that president Clinton still holds the executive reins.

The other recent piece of important news was, of course, the so-called pre-Budget statement. It was Ken Clarke who tried to rationalise the Exchequer&#39s outpourings to the nation by merging the March Budget with the autumn spending review. Gordon Brown promptly separated them again and this year he has gone one better by delivering three financial statements. Brown is known for harbouring a delight in tinkering with taxes, so perhaps we should not be surprised that he enjoys also tinkering with the way in which the message is delivered.

He is a fortunate Chancellor. The embarrassment of riches he possesses, bolstered by revenues from the sale of mobile telephone licences, has allowed him to give away money. It represents a fair loosening of fiscal policy, so perhaps we should be relieved that the monetary policy committee decided not to react by putting up interest rates up when it met. But it will be monitoring the effects of higher public spending and tax giveaways very closely.

There was a welcome measure which will have implications for portfolio managers such as ourselves. The investment rules for Peps are to be brought into line with those of Isas. Clearly, simplification like this is a good thing, as is the merger of single-company and general Peps. Aside from anything else, single-company Peps can be dangerous. You cannot, for example, top-slice a successful holding. It is all or nothing if you wish to realise a profit and, of course, you then have to reinvest all into another single share. This can lead to some very unbalanced portfolios and investment decisions being taken for the wrong reasons.

Need it stop there? If Pep investment rules are the same as for Isas, why should Pep and Isa portfolios not be allowed to merge? This would have the ability of reducing administration costs for managers and the Inland Revenue, leading to lower charges. I hope on this occasion that good sense, which will benefit investors, will be allowed to prevail. In the meantime, at least we have a higher Isa limit for the foreseeable future.

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