Wednesday 6 January 2010

Propaganda time

There's a passage in Evelyn Waugh's comic novel Scoop where gentleman nature columnist William Boot, sent on foreign assignment owing to an administrative mix-up, receives instructions from his newspaper's owner:


I was reminded of this today when I heard (via Classic FM) the cheery news that Marks & Spencer has enjoyed an increase in like-for-like sales over the last three-month period. As far as I know, "like-for-like" just means sales turnover in monetary terms, and it's perfectly possible to achieve this if you offer deep discounts, which is what they were doing before Christmas ("3 for 2" on clothes and Christmas gifts, for example). It keeps the show on the road, but it's bound to affect profits - though you may be able to disguise that impact if you mix it up with savings from property sales (27 stores) and redundancies (1,200).

Not that we got that contextualisation on the radio, of course. We are becoming skeptical news consumers, like Russians in the days when they said "v Pravde net izvestiy, v Izvestiyakh net pravdy" (In the Truth there is no news, and in the News there is no truth). It's a shame that we can't rely on mainstream news media, because when forced to the blogosphere to find out what's going on, we discover that not everyone who approaches you in a tatty coat tied together with rope is an Old Testament prophet.

But there's also plenty of stuff from more respectable sources, too. Michael Panzner ( who provides a great scan-and-select service for the economics newsfollower) directs us to this column by Morgan Stanley expert Stephen Roach. Brief highlights:

1. Only about half of an estimated $3.4 trillion in asset losses have been officially written off so far, according to the IMF.
2. The slowdown is worldwide, so other nations are unlikely to take up the slack.
3. The American consumer is not able or willing to resume spending as before.
4. 45% of China's economic activity is in "fixed investment" (building roads, factories etc) and there is a risk that they may be creating a lot of "white elephants".

Money is still changing hands here, but Roach says this is "fueled by a temporary boost from the inventory cycle", i.e. vendors are flogging-off surplus stock at bargain prices - which is why I've cited the feelgood M&S article above. After that, I think, comes cool reality - maybe continued lower prices, but also lower wages, lower profits, higher unemployment and an increase in bankruptcies.

Roach estimates a 40% chance of a "double dip" global recession this year. He also fears that economic stimulus will not be withdrawn quickly enough when a recovery comes, so possibly yet another bubble will be created. Another risk, in his view, is that the US will seek to protect domestic industry against Chinese imports; this could threaten the financial arrangements between the two countries, weaken the dollar and raise inflation.

Is it really not possible for radio and TV news to give a rounder picture of reality?

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1 comment:

OldSouth said...

Hello, Sackerson: Insights spot-on.

Especially re the American consumer, who is holding cash and deleveraging as fast as he can.

I still see Christmas inventory on retail shelves on 10 January. The local supermarket was over-run with excess hams on 3 January, for instance, which two years ago would have disappeared by 24 December.

Huge discounts at online retailers like Coldwater Creek, both before and after Christmas.

No one loves a doomsayer, but increasingly I am uneasy that the truth is not being told via the media outlets here.

Bright spots may be at the CES show, where all the latest-and-greatest electronic gadgets are rolled out; and at Ford Motor, because America drives to work in the F-150 pickup truck.