The bad news is that the markets were pretty ugly yesterday.  The good news is that volumes were relatively light and will likely remain so as we head into a holiday shortened week.  When big moves to either the upside or downside are not accompanied by higher trading volumes, they tend to lack significant informational value. 

After a brief one day spike last week, oil traded back down to roughly $114 per barrell.  To us, it is increasingly obvious that the once heralded, buy’em and forget’em emerging markets have come under significant pressure.  With many of these stock markets down over 50% this year, we take it as a decent leading indicator that global markets are cooling and perhaps due for some shorter term trouble.  The wildly successful Beijing games are now over and time will quickly tell us if an Olympic-sized hangover is in the cards.         

Falling global growth should lead to a further slowdown in commodity induced inflationary pressures.  In our view, the dollar’s recent strength doesn’t so much reflect an improvement in our nation’s outlook as an improvement in our outlook relative to foreign economies which are now showing signs of cracking.  It wouldn’t surprise us to see the U.S. stock market be among the world’s best performers in the next year or two as fund flows return after several years of chasing sexier things in faraway lands.    

Russia’s aggressive move into Georgia during the Olympics and the ensuing efforts it has made to thwart the installation of NATO affiliated missile defense systems in neighboring countries merits a mention.   All of this action clearly symbolizes Russia’s return to the world stage as not only an economic power to be reckoned with, but now a political one as well.   Flush with cash from a land rich in natural resources and a global economy hungry for them, Russia proclaims its arrival and commands our attention at a time when sibling China seems to be getting all the attention.  

As citizens of the United States, we know Russia need not fear an attack from either us or NATO, but I would also presume we would be more sympathetic to their situation if our country were Kansas and all of our neighboring states former Communist sympathizers.  Thug or not, Russia the teenager wants its space.  She should also, perhaps, diversify.

Pride, they say, always comes before the fall.  If we’re right about slowing global economies and falling commodity prices, then perhaps Russia is making these moves — perhaps knowingly — while the gettin’s still good.  Economic cycles do happen, after all, even for the youthful.  They may also remind us that we’re not God, even when newly found powers lull us into believing otherwise.