From hope to despair; and often back again. Bad breaks and big bounces, often in the same, high frequency day. The latter (+3.7%) was the response to Mervyn King’s latest munificence with our (great-)grandchildren’s taxes, a cool £75 billion of financial alchemy that is equivalent to one-fifth of our entire economy. Will that be enough, as policy-makers boldly go?

Well, one of our number has at home a fine and venerable horse-chestnut tree (an Aesculus hippocastanum). It is infected with bacterial bleeding canker, Pseudomonas Syringae pv aesculi. The bacteria of this pestilence produce gas, and that blocks the tree’s sap. Denied that succour, first the tree’s extremities wither, and then ...

As with excessive debts, clearfell, sadly, is the only answer. Cut down the rotten tree(s). Burn the wood. But neither such dendrology, nor even xylology, is our politicians’ way. All eyes are on Greece, where striking civil servants have just blocked access to Elstat, the Hellene statistical service. So the numbers are becoming even more opaque, even as the troika seek and need Linnaean taxonomy.

Yet even in full sight, Greece is a sapling. The ECB has only kept those sequoias of debt, Italy and Spain, upright by buying their bonds steadily since early August. And now the ECB has announced that it will buy a further €40 billion of covered bonds, starting next month. The more it does, will over-indebted governments simply do less if European banks can keep coming to Mama? When will the Greeks and Italians actually start paying taxes, for example?

In short, and as they say in the people’s republic of Scotland, we hae wir doots. Debt, and the repaying of debt with debt, could yet prove a hardwood of the type found in the Gran Chaco of north-west Paraguay and called quebracho — the axe-breaker. Pseudomonas will not be denied.

And so ...

For a start, (re-)consider e.g. the lessons from The Triumph of the Optimists or Anatomy of the Bear. Forecasting the economic cycle may be fun; but it is unlikely to make you money. Good equity market returns are primarily the result of low starting valuations.

For those, secondly, and although of course it could fall further, the p/e ratio on the UK market is down to 10.3x. Since 1965, that ratio has reached over 20x (in 1968/69 and 1999/00). Other than the low of 1974, when it fell to 3.2x, the p/e has rarely traded below 8x and averaged over 14x. So on most definitions the equity market is cheap and gilts are expensive. “Probably time for a decent rally,” says Adrian Frost of Income. “We have added to BT and International Power and bought Pennon.”

For Global Select, Simon Edelsten is no less sanguine: “We believe that current valuations for Coach, Louis Vuitton and Richemont (Cartier, IWC watches, Montblanc pens etc) are attractive for longer-term investors. Meanwhile our defensive portfolio — Japanese growth stocks, telecoms and personal care companies, no miners, few oils and no western banks — gives a relatively stable portfolio while we wait for the fog to clear.”

At the coal-face, for UK Special Situations Derek and Ruth are finding much resilience. For example their holding Smiths Group has announced full year results — and confirmed the tough outlook for trading. But, says Derek, “the attraction of Smiths is the ‘self-help’ which Smiths’ management can focus on to offset these top line pressures. There are still significant costs to come out of the business, especially in the detection subsidiary. This will underpin the group’s profitability in the medium term. In the meantime, the shares trade on 10x earnings — for a company with nearly a 20% return on capital employed.

“We’ve also had a positive trading update from Tate & Lyle, where high corn prices are supporting profitability; and LSE, where continued internal improvements are producing results. Trading also remains strong at Genus (animal genetics) and Shanks (waste recycling).” Such is the best, of bottle British, even in these testing times.