Collapse of Some Emerging Markets is Probably Very Near

Interbank borrowing rates are again across many of the emerging markets, after a several day lull. And today, three-month LIBOR (the London interbank borrowing rate -- widely used worldwide) rates fell by the smallest margin in nine days, according to this Bloomberg article. The credit freeze is getting colder again, which is plunging many emerging markets toward deeper recession and ultimately defaults. This shock will provide the next leg-down in global risk markets, including the U.S. equity market, we believe. We thought that recognition of this pending "day of reckoning" would send U.S. equities plunging yesterday (Thursday). It might be today. It might be in the next few weeks, but it's coming real soon. When it happens, we're going to raise our U.S. and emerging market equity weightings closer toward our long-run "policy allocation." How much we invest depends on how badly equity markets crater.