Contagion

The word we have all just learned is contagion, defined in my dictionary as "the transmission of a disease by contact". When this is all over I hope the bankers will remain humbled by being the origin of this ghastly infection. But how far will it spread? I detect ever increasing gloom in the City where it has rapidly become apparent that the impact on the debt markets is going to be more severe and lasting than first thought. Almost everyone is now saying "there is worse to come" whereas a couple of months ago it seemed only I was saying that .....

I don't believe China is uncoupled and think the country will soon start to export inflation. Consumer confidence has been shaken both here and in the US and the housing market has stalled. Add in a near record oil price and sky high commodities and the economic outlook is decidedly cloudy.

Meanwhile on the Stock market for many companies, particularly financials, there has already been a big pricing correction and despite the uncertainty, I don't forsee another crash (the particularly overstretched structured finance markets have already been decimated). Overall the market has further to fall but for the long term equity investor there are a few value opportunities emerging so for me cautious and very, very selective buying.