A Trip Down Forget-Me-Not Lane
Welcome to the House of Amnesia, where the Shadow Chancellor has forgotten his role in creating the financial crisis and the Chancellor has forgotten that he promised to fix it.
The Autumn Statement is beginning to take on a familiar pattern, with the date for the economy to come right moving one year further into the distance. Not so much jam tomorrow as jam in five years time, and a rolling five years at that.
George Osborne set off on his statement as if he were firing the first shots in the next general election campaign (which he may well have been doing). But, alas, we all knew what was coming because a good deal of bad news was leaked the previous day in order not to let it spoil the joy of the moment.
In simple terms, things are improving but very slowly. Osborne did manage to point out that increases in benefits and the threshold for the upper rate of income tax were less than the rate of inflation – he obviously realised people would work that out for themselves and thought that admitting the discrepancy would take the sting out of any criticism.
What he did not mention was that his previous forecasts for improvements in national debt and economic growth were well out of line and that his latest forecasts are pretty much what he expected a lost year ago. Why then should we hold out much hope that they will be more accurate this time? We must hope that he has to be right some day.
The cancellation of the 3p a litre rise in fuel tax due in January is very welcome and will probably do more for the economy than anything else in this statement. At the risk of sounding callous, I would suggest that moves towards limiting benefits so that the advantages of working are not eroded further are also welcome. The further modest increase in the personal tax-free income allowance from April is another step in this direction.
It is also encouraging that at long last Osborne is putting more spending into capital projects that will help to get the economy moving.
On the whole, this was, as golfers might say, a decent approach shot from a pretty poor lie in the rough. The investment outlook has improved just a little, despite the fact that ratings agencies look increasingly likely to reduce the UK’s credit score. Shareholders should hang on in there.
To read more about how Osborne is fiddling with pensions, read "Chancellor Cuts Pension Tax Relief".
Every Little Helps
Investors’ reaction to the latest update from 
Tesco (TSCO) is curious to say the least. In the days when Tesco swept all before it, each excellent set of figures or positive trading outlook was greeted with an immediate fall in the share prices as ungrateful shareholders always hoped for even more. Now it is the other way round.
This is not the first time since Tesco started to wobble on its perch that such a nondescript statement was greeted with such a quick rise in the share price.
Investors seem to be finding comfort in the fact that the company stated that, in the UK, "our outlook for the year as a whole is unchanged" while in the rest of the world "we expect the broad trends in the third quarter to continue through the balance of the year".
First of all, it is rarely a good idea to take reassurance from news that things have not got any worse. Secondly, the last trading statement two months ago accompanied half-year figures showing trading profit in the UK and abroad both down by double digits.
Tesco's October outlook statement said: "We expect trading margins in the UK to be similar in the second half to the first … the global economic environment continues to be very challenging, with customers facing real financial pressures and our businesses bearing the burden of higher costs".
If this is the continuing situation, what is there to feel optimistic about?
Whenever you see a trading statement saying that nothing much has changed, it is always worth looking back to the previous guidance on the Morningstar or London Stock Exchange website to see precisely what was said. Outlook guidance is often vague or lacking in specifics and can be repeated ad nauseam.
Meanwhile, chief executive Philip Clarke promised two months ago to "continue to act decisively to tackle challenges". One challenge that Tesco has delayed facing is the Fresh & Easy chain in the US. As Tesco cut back on investment in the loss-making division earlier this year, it is hardly surprising that this operation shows no signs of coming good.
Even now, Tesco is not biting the expensive bullet and pulling out. Instead it will conduct a "strategic review" that will probably but not necessarily lead to an exit. This does not sound decisive, more like a reluctance to face reality.
I do not think that Tesco is a bad investment but if you do go in at least do so with your eyes open. Life there has not suddenly gotten better.
Market Performance: December 3 - 7
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Rodney Hobson is a long-term investor commenting on his own ideas and portfolio; his comments are for informational purposes only and should not be construed as investment advice.
