Sell, buy, hold or just cry?

What to do?

The market is jumping around like a ferret on speed, but mostly down. When will this correction end? Or will it turn into a crash? Can the bargains available be resisted?

If there were easy answers to questions like these then investing would not be so difficult and so potentially rewarding.

Personally I do not see a crash coming. Valuations are too cheap and the economy is not doing badly enough for that. I could be wrong though.

Assuming that a crash is not coming it would make sense to buy some bargains. The problem with that is that this correction might not be over. I bought some British Airways on Friday at bargain basement prices. This move looked great on Monday when the stock jumped up but after today's fall they are showing a small loss.

If I had a cash position at the moment I would probably do some bargain hunting at these levels but hold at least half the cash back in case the market drops further.

Potential bargains? Where do I start? CSR look good at 625p. It should earn 60p per share next year and is growing at a rate of 15 - 20% which makes its 2008 PE of 11 look nice. And as a UK technology stock it has absolutely no exposure to the US sub-prime mortgage sector!

Airlines look over-sold here - British Airways or Continental Airlines might be worth a punt.

Banks obviously are crazily cheap. British mortgage bank Northern Rock is on a 2008 PE of 6.5 and is supposed to be growing at 15%! If you are not quite brave enough to buy a mortgage bank then RBS is more solid and has a 2008 PE of 7!

For nervous types it is hard to go wrong with Tesco at 404p!

If, like me, you invest in the stockmarket in a monthly saving plan then probably the best thing to do is to keep buying something that has really got hammered and hold tight. In a few years it will look like you got a bargain.

Sleep well!