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No pain no gain

While the saying 'no pain no gain' is used in many forms of life the stock market could not be a more apt place for the saying. News that the US rescue deal has fallen through, at least for the time being, together with the demise of Bradford and Bingley has sent investors running for the exit. As one prominent investor put it today on the radio, 'The one thing which the City hates is uncertainty but that is what we have in abundance now'.

As we have mentioned a number of times in the past, the City can cope with any bad news which is thrown its way, as long as there is no uncertainty. Investment values and share prices can be calculated on any scenario but if nobody knows the end game then confusion and uncertainty prevail. Is that share you are buying at £2 actually worth £1 or £3 when the final picture starts to clear?

The City has to go through a painful process now to find the bottom of the market and flush all of the bad news out of the system. This could take 2 weeks it could take 2 months or it could take 2 years, we are literally in no-mans land. Nobody has seen the system crash the way it has over the last 15 months and nobody knows how to inject a short term fix.

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