In a climate where economic planners and market participants are desperate for credible bullish signals on the global economy, it is not surprising that there is hardly any focus on the fine print in the IMF’s semi-annual World Economic Outlook. On Wednesday, the IMF revised its 2010 global growth target to 3.1%, up from a July forecast of 2.5%. But the explanatory memorandum accompanying the revision contains two alarming qualifications.

Firstly, both developed and developing nations will need to prepare for the unwinding of extraordinary levels of public interventions by early next year. Secondly, banks and businesses in emerging markets must service (i.e. refinance) more than US$400 billion in maturing debts, denominated in foreign currencies, over the next six months. Once the two challenges are properly contextualized, it appears that the IMF is pointing towards another serious recession in 2010, not any growth on a global basis.

Are we headed back to the heady days of 2007 any time soon? That seems to be the dilemma that markets are wrestling with. One look at the commodities markets would have you think we are. However, with the global deleveraging cycle underway and expected to continue for many quarters, if not years, there are many reasons to believe we are not.

After careful analysis it seems to me that U.S. numbers are misleading but Japan’s figures are revealing (if only about its trade partners). With so much cheap money sloshing around the system it is critical to regularly ask – is it time to worry about inflation?

Returns from emerging markets stocks are highly correlated to those from U.S. stocks. Also, many people believed that those countries’ growth prospects were hardly a secret, and they had been more than priced into stocks. Still, from price/earnings to growth (PEG) ratio point of view (a ratio used to determine a stock's value while taking into account earnings growth, according to Investopedia), emerging countries’ PEG is still better than SPY’s, which is 1.4.

From a total of 835 ETFs, I filtered out those ETFs with net assets less than $100 million and average volume less than 100,000. Below are 30 emerging market ETFs, along with their PEG and Price to Cash Flow (CF) ratio.

These two tables present those ETFs with over $100M of market-cap and which also have 200-day moving averages that are sloping upward.

If your goal is to own ETFs that have a rising primary trend, then these ETFs are probably a reasonable place at this time to find opportunity.

Total ETF industry assets increased by $5.7 billion, or about 1.0%, during the month of June, driven by both new fund offerings and creation of additional units in existing funds.

Among the other highlights from the monthly statistical bulletin released by SSgA:

The decoupling myth has made the rounds. Emerging markets stayed resilient despite a global crisis unfolding for several months. They then collapsed as it became apparent that no one is safe. Why did the decoupling rationale fail?

When people looked at decoupling, they looked at relative dependence of an economy on its domestic consumption versus its export/import dependence. This is a mistake, and an easy one to make.

Any industry growing as quickly as the ETF space has been over the last few years is bound to experience a few growing pains. As it has transitioned from a closet industry to a component of the mainstream investment universe, the ETF market has become increasingly complex, leading to widespread confusion on more than a few issues.

One such area open to varying interpretation is the reporting of month end ETF industry statistics. While the metric of most interest to the industry tends to be the overall fund inflows/outflows to ETFs for the month, I’m always interested to see which ETF managers have gained or lost market share, and how the composition of the industry totem pole has changed.

Well, it's not exactly reasonable to expect that you'll buy into a bubble before anyone else, or for that matter, that you'll sell at the peak, but that doesn't mean we can't dream... and maybe even catch some of the ride in between the bottom and the top. Regular readers know I would never expect you to put all your eggs in one basket so let's look at a couple different scenarios and spot the next big bubble:

By Eric Roseman

How many investors shorted technology stocks in the late 1990s ahead of the bust in March 2000?

Emerging markets have led the way for a global market rally in recent months, with many broad ETFs (such as ADRE and EEM) rising more than 40% since bottoming out in March.

While nearly all emerging markets are in the black for 2009, no market has experienced a more rapid recovery than Indonesia. After tumbling by more than half in 2008, Indonesia's Jakarta Composite Index has surged in 2009.

It seems as if the spring rally has probably exhausted itself. And it is about time given the extent and rapidity of the move. The MSCI World Index increased by 45.2% from its March lows until the early June high and the MSCI Emerging Markets Index by a staggering 68.9%. Both these indices have only had one down-week since the advance commenced in early March.

Leading markets such as Russia (+137.0%), India (+89.5%), China (+54.7%) and Brazil (+50.4%) significantly outperformed laggards such as the Dow Jones Industrial Index (+27.5%) and the S&P 500 Index (+39.9%), although all markets recorded very respectable returns. The major U.S. indices have gained for 12 out of the past 14 weeks.

Despite these gigantic gains, there is still time to profit from emerging markets. The major averages still aren't anywhere near their 2008 highs. And the shift from the West to the emerging world is a long term trend that will take decades to unfold. With the US dollar steadily losing its value, and Europe and Japan in terminal demographic and economic decline, emerging markets are the logical place to invest for the future.

In an excellent article, Don Dion recently described a series of reasons why emerging markets have not provided investors with shelter in the current bear market. He dissects the now-dismissed notion that was popular in the early to mid-2000s that emerging markets were ‘de-coupling’ from the U.S. and thus would not be too sensitive to a meltdown in the U.S. and other developed markets. In a nice turn of phrase, he suggests that rather than being de-coupled, emerging markets have become ‘unhinged.’

The lack of de-coupling is not the whole story. Not only are the correlations between emerging markets and developed markets not low, but the Betas between emerging market funds and the developed markets tend to be high. This means that emerging markets will often amplify the swings in the U.S. I have been surprised that nobody is pointing out that even as many pundits were promoting ‘de-coupling,’ the statistics never supported this idea. Back in May 2006, I wrote an article that demonstrated these effects. The table below (from the original article) tells the story:

Amid the current global slump, government investments in infrastructure, from a $48.1b provision for transportation in the $787b US stimulus bill to the $586b Chinese stimulus bill, present interesting investment opportunities. The recent Infrastructure Investment World Americas 2009 provided some good insights into recent trends and signals in private sector infrastructure investments.

US public pension funds have shown growing interest in such investments, with about 49 funds currently investing with a combined capacity of $38.1b and another 28 indicating preference with a combined capacity of $27.2b (source: Brian Chase’s presentation). Recently, P3 investment in the US has been focused outside of the highway sector on shorter contract P3 terms as annuity focused assets seem to be priced too high to achieve a profit.

Through the first 1/3 of the year, there's been a stark difference between the performance of popular developed world indexes and the performance of the emerging market indexes. Simply stated, the emerging baskets have appreciated substantially whereas the developed regions are still trying to pull even in 2009.

Early in 2008, "decoupling" advocates suggested that the Unites States could struggle in a recession, while the seemingly healthier economies around the world were less dependent on the world's largest economy. As the financial crisis deepened and as the commodity bubble burst, however, it quickly became clear that the growth of the emerging world was still very much tied to the U.S. consumer and to U.S.-based businesses.

The table below provides a summary of the 50- and 200-day moving averages pertaining to a number of global indices. The orange shading indicates indices still trading below their moving averages and show the percentage gain required in order to reach the moving average line. Conversely, the green shading shows those indices that have already breached the moving averages to the upside and the numbers indicate the percentage decline that will reverse the break.

Click on the table below for a larger image.

Perhaps you remember the "decoupling" theory from earlier in this decade; the idea that emerging markets [EM] might produce returns not correlated with developed markets [DM]. Early in 2008, when equities were declining everywhere, analysts began to debunk this idea, and reasserted the thesis that our interconnected economies would force EMs into following the DM cycles. The crash last summer and fall seemed to settle the matter in favor of the one-world school.

But things have changed. In the first quarter of 2009, while US equities were -12% and the rest f the DM -15% [all numbers from MSCI indices], EMs were only -1%.

The Brown government in the UK is doing its best to set expectations appropriately for the G20 meeting to be held in London this coming Thursday. With a backdrop of domestic dissent between two pillars of the UK financial establishment - the Treasury and the Bank of England, a deficit to GDP ratio this year of at least 11% (and a similar ratio in coming years), and with opinion surveys showing that for a sizable percentage of the UK electorate a chance to boot him out office cannot come quickly enough, Gordon Brown will be very far from presenting the persona that he wanted to at this summit.

There appears to be no emerging consensus on such vital issues, at least from Brown's perspective, as to the size of domestic stimulus packages, the creation of international regulatory structures and a clear statement from the gathered world leaders on a more widespread adoption of quantitative easing.

By Eric Roseman

Are emerging markets the new relative safe-haven for stock investors?

Despite a regional market collapse across Eastern and Central Europe this year, the MSCI Emerging Markets Index is down just 7% versus a 17% loss for the S&P 500 Index and a decline of 18.8% for the MSCI World Index of mature markets.