Asian Contagion - We Called It!

We said this just two days ago, "Thus, high flying emerging markets seem destined for a tragic setback." "The point of all this drama is that we believe the sirens of globalization are drawing the unsuspecting sailors of global investment into a rocky shore." There are many reasons why you should be reading Wall Street Greek. We called the housing decline last year. We predicted the fallout within sub-prime lending. We correctly advised investors to buy back into oil at $50 and even correctly pegged the day of the bottom. And, this past weekend and yesterday, we predicted the collapse of the Chinese and other hot emerging markets, including India.

Quoting Wall Street Greek from Monday's copy of "Today's Morning Coffee":

"the Iranian issue threatens to crush emerging markets whose valuation-to-risk status we compare to walking on the ledge of a skyscraper."

"Mainland Chinese and Taiwanese shares opened up after a week of new year's celebration. The euphoria continued in China, despite a scary week off that included inflation fright in the U.S. on the CPI data and an intensifying Iranian situation. To be quite honest, we were surprised that the Shanghai and Shenzhen 300 Index rose 1.16% today."

Quoting Wall Street Greek from Sunday's copy of "The Greek's Week Ahead - Emerging Market Glam":

"Markets in mainland China and in Taiwan were closed all last week, so Chinese investors have a lot to swallow when shares begin trading again on Monday. During their week off, as investors in high flying Chinese shares celebrated their good fortunes from lunar 2006, the Core CPI index in the United States, China's favorite export market, exceeded growth estimates. This reminded global investors of the Fed's top concern, inflation, and the possibility of a Fed rate hike to control it. This is not a cure for a post new year's party hangover my friends. But that wasn't all that happened while the party rocked on."

"As we alluded to earlier, Iran defied the world, and its stubborn hardline rhetoric that seems to insure war's likelihood persisted as well. Iran is kind of critical to China. America does not buy any oil from Iran, but Iranian oil flows heavily to India and China. Last week, Russian, Indian and Chinese officials met to discuss a new alliance to balance against the power of America. So, what reason does India have to position itself opposite America? Well, there is the obvious American support of Musharraf's Pakistan? Yes, but India and Pakistan signed a nice treaty this past week, and we all know that America's support of Pakistan is just an Islamic radical fundamentalist's bullet in Musharraf's head away from nonexistence. (Whew! Take a breath here) So there must be another pretty important reason for India right? The energy resource provided from Iran is so important to both India and China, that conflict with Iran could send the valuation rich emerging markets into a steep downward spiral, in our view. Therefore, Wall Street Greek is presenting the award for markets most unlikely to repeat their stellar performances of 2006 to China and India."

And we continued...

"The point of all this drama is that we believe the sirens of globalization are drawing the unsuspecting sailors of global investment into a rocky shore. For all the progress of civilization since World War II, it seems mankind will have to take a step backward, before moving forward again. It may not happen with the impending Iranian conflict that threatens us now, but as global powers, Russia and China find themselves increasingly opposite the United States on so many issues, the flint is in place for the fire of world war. Thus, high flying emerging markets seem destined for a tragic setback. Iran's oil is just as important to China as impeding Iran's nuclear progress is to the United States."

So what is the Greek's most significant prediction this year? Read this, "Geopolitical Factor - Israel Will Do the Bombing."

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