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Investment view

I confess to being confused by two very different – and somewhat contradictory – reports into the same set of statistics published last week. According to one publication, sales of investment funds were up by 7 per cent in July to £4.1bn.

These figures come from the IMA, a body which has had more name changes than the average City firm. Yet, reporting on precisely the same set of statistics, a leading financial daily newspaper pointed to sales of Isas tumbling in the wake of the stockmarket collapse. Apparently, they were down by 35 per cent in July. Confused? You should be.

Read more deeply and it was all simply explained when you saw that one report was comparing July with June while the other was looking at the same month last year as the base from which the change was to be calculated.

Of course, they were not even extracting the same set of figures from the statistics published. It all goes to show that the phrase lies, damn lies and statistics has more veracity than we should feel comfortable with. You can read anything into a set of figures. More specifically, you are usually able to read exactly what you wish.

This seems particularly important with the change in the law in the US, which will mean that erring company bosses can be jailed if the accounts they present paint a false picture of the health of their business. Make no mistake,balance sheets are capable of interpretation in a number of different ways.

There have been plenty of reports and accounts published that are as much a work of fiction as anything Jeffrey Archer has written, so it is not surprising that organisations representing Britain&#39s bosses are just a tad concerned over what the lawyers may do to directors of UK companies with a stockmarket listing in the US if they choose to interpret figures produced in a way that suggests malpractice.

Already, BMW has cancelled plans to list its shares in the US, so it will be as well to recognise that this is a real issue. But perhaps the most relevant aspect of this is the way in which it highlights the importance of interpreting a set of results from a company in the appropriate way.It is for this that analysts are often so highly paid and they have not been having an easy time of it recently either.

Aside from the accusations of publishing research more for the benefit of the corporate finance department than to enlighten investors, analysts are faced with a deteriorating corporate background and considerable doubts over whether their expectations for earnings will be met.

Their forecasts of a bounce in company profits in the US in the second half of this year now look to be unduly optimistic. Some of America&#39s best known names have been warning shareholders that they are lowering their expectations for demand. Consumer confidence has fallen to a nine-month low. It is little wonder that Wall Street&#39s rally ran out of steam so quickly.

Of course, as the holiday season comes to an end and business volumes start to pick up, we may get a better feel for the likely direction of the market.

Professionals remain on tenterhooks over the technical pressures that are being brought to bear. The issues over pension funding are not just about whether you should hold bonds in preference to equities.

The fact that companies are now having to account more definitively for their pension liabilities could lead to a lowering in profits, which in turn could put dividends under threat – which has implications for pension funds. And so on and so on.

One answer, of course, would be to restore the double taxation relief that was taken from pension funds by Gordon Brown when New Labour first came to office. By abolishing advance corporation tax, the Government effectively taxes dividends twice.

Companies pay their dividends from profits that have already been subject to tax. For those dividends to be taxed again is considered by many to be unfair. I would not hold your breath, though. A sluggish economy will reduce tax revenues while the Chancellor has a big spending programme to fund. It looks as though current market uncertainty may persist for a little while.


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