Decoupling Myth Shatttered ! You hear that,..Yaacob!

Fears of a recession in the U.S. and further credit market disruption ripped through global stock markets and put over half the world's exchanges into technical bear markets – at least 20% down from recent highs. The bloodletting began Monday... " They called it a stormy Monday,..but Tuesday just as bad !"


On Tuesday Asian markets continued to reel as Europe stabilized somewhat :Pan-Europe -1.2% England -0.3% Germany -1.7% France -0.9% India -4.9% Hong Kong 8.6% China Mainland -7.2% Singapore -1.7% Japan -5.6% Korea -4.4% Australia -7.1% Thailand: -3.2%

The sell-off of the past two days has been broad, showing no sector or asset class is immune from the deflationary trend. Global stock markets are painfully beginning to price in a U.S. recession in and the resulting spill-over, and many questions whether emerging market economies are in fact 'de-coupled' from the United States. - " Learn something intelligent from here, Mhmd. Yaacob.. ! for crying out loud!! "

The root of the concern is at the same time economic, financial and political. How emerging market economies fare in the coming months – and years – will go a long way to settling the question of the extent to which American consumer demand still drives the world economy. As China and India led developing nations into the global market, many believed a slowdown in the U.S. would not matter as growth in Asia, Latin America and Central Europe would make up for slackened demand. Events of the past two days have shown investors are skeptical this theory will hold true.

Since last June, chaos has reigned in the financial markets. Higher than expected defaults on subprime mortgages and falling home prices in America kicked off wide spread dislocations in the capital markets and spurred central bankers into action. Major financial institutions have already written off have billions in bad subprime-related debt, yet many wonders if this may just be the tip of the iceberg.

And finally, markets do not seem confident that Washington is capable of righting the economic and financial ships. Debates rage as to whether the Fed has been too active, too passive, or just plain wrong since the summer, and in this, an election year, a fiscal solution is already in the works. $150 billion is around 1% of U.S. GDP, but as BNP Paribas economist Andrew Freris noted in the WSJ, "The Markets will look at the $150 billion figure and smile. They trade that in a morning."

Well, the Fed just cut, again..,by 0.75 pts. (just learned that from Bloomberg this evening) But one thing is for certain: tonite will not be for the faint at heart in the US mkts. Bring along your helmets, it's going to be wild out there.