Global Turmoil Predictions Come True

By Rudy Martin | October 6, 2008

Today was the day all were fearing - the first Monday after the US Congress passed a rescue package for financial service companies.

Throughout last week predictions of a new and deeper Black October were surfacing like pimples on a teenager. After the poor reception the US rescue package received on Friday and news that even state governments like California were having troubles it was clear that the US market was headed for another hard period. But now what?

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The world markets, like the continents, are connected. It was 21 years ago this month, in another trading cycle, since we had last seen the horrors of a Black October. Many have never experienced anything like this.

This morning with the Chinese coming back from a week-long national holiday the pent up sell orders flooded the global equity markets. The fear also spread in Europe which is facing its own financial services restructuring challenge.

What investors in Emerging Markets need to know is that if you are staring at a huge buying opportunity for Latin American stocks, especially Brazil. But most able buyers are sitting on the sidelines, holding out for clear signs of a bottom. The hard truth is that financial institutions world-wide and portfolio managers too are hoarding cash - which in this case means US dollars.

In the meantime, Brazil's economy continues to generate a stream of positive news that would make many in New York, London, and Tokyo envious. Vehicle registrations are up and the banks are well capitalized. The few hits corporations have taken on currency derivatives have been isolated and the state oil company continues to announce new oil and gas discoveries.

Eventually, this financial liquidity scare will clear up and the money will find its way to the best markets for growth - Resource-rich Latin America.