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Increased Legal Risk in China and Russia

|Includes: iShares China Large-Cap ETF (FXI), RSX

As the pie shrinks, rent seekers have a larger incentive to use more stringent methods to take more. We are seeing this occur in China with Rio Tinto and Russia with Ikea, ArcelorMittal, and Telnor. The only thing that restricts rent seekers is the law. Eventually these issues will feed through to the larger economies as I have been predicting. Only India and Brazil that have relatively strong legal systems will be able to sustain higher growth rates although I believe that Brazil will be affected by China.