Ignore warnings at own Peril

Article link, Emerging Markets

The collapse of the emerging markets, especially China, India, and Brazil, will have a huge ripple effect on the rest of the world’s economies, and will plunge most countries back into a global recession.

It is our view that emerging market growth has reached an unsustainable level and that a slowdown is taking place. A slowdown is generally not such a calamitous situation, but with expectations for China, and emerging markets at such extremes, the failure to meet or beat these lofty forecasts could mean big shocks to global economies and stocks.

Emerging Market Warning Signs

Surging inflation that threatens sustainable growth

Soaring money supply that fuels bubbles in stocks and real estate

Credit bubbles

Massive and understated loan exposure

Tightening monetary policy that could “put the brakes” on the economy

Inverted yield curves that usually appear before recessions

Real estate bubbles evident in ghost towns and empty malls

Overconfidence buying at auctions

The infamous “skyscraper indicator”

Fraudulent companies that have attracted investment from around the world when they are nothing but “shell” companies with unproven financials

Most importantly: The stock markets of China, Brazil, and others have been deep into bear-market territory in 2011 – down between 20 percent and 30 percent from their peaks