Here in the Emerging Markets Insider blog as well as in past G3 Global Options and G3 Global Investor issues I've discussed my views on China's "Olympic glow" and how it may fade following the games.

So I've continued to keep an eye on the situation, hoping such a sell-off would reap some nice oversold opportunities for us as global investors. We have already seen some weakness in those markets, but now there appears to be hope that the government will put some of its massive resources and capital reserves as an economic stimulus infusion. That would work to prevent or ease a slowdown from happening.

If this thesis of government intervention preventing economic decline proves valid and plays out in real life, industries that could benefit would include steel and iron ore as well as infrastructure and construction firms - especially those who have been badly beaten down and those who have close inroads already paved with the Chinese government.

So, with this new perspective, I've been digging through all the usual suspects in this area. We're already invested in a couple of the likely infrastructure beneficiaries in the G3 Global Options portfolio, but there are others that could even also ride this trend to recover nicely from their current share price levels.

Remember, this country is the world's largest consumer of steel, iron ore, aluminum, nickel, coal and copper, so a big bump in government spending should increase demand for commodities globally and benefit ore minors for example, such as those based in Australia, Peru and Chile.

The obvious players there include the likes of Australia's BHP Billiton and US based (but with most operations in Peru) Southern Copper Corp. (PCU). Those investments may pan out eventually, but I would buy cautiously. I don't believe they have the right fundamental to underlie a solid rally vs. some of their better-positioned peers.

I'm looking into a short list of other companies - one in Brazil and one on the China mainland, which may fit the investment bill better.

More in this week's G3 Global Options issue...

Best wishes,

Jeff Manera
G3 Global Options,
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

I dug into the continuing Thailand mess I discussed last week - and the new developments over there are right out of a soap opera!

Update: Thailand continues to experience some significant political turmoil. In the latest twist, the country's prime minister is been ousted on the grounds that he once hosted a cooking show and accepted payment for it!

And while that sounds absolutely ridiculous, it is actually illegal for members of the Thai cabinet to accept payment from private companies. So Prime Minister Samak Sundaravej was shown the door. This has come after protestors wanting government reform have filled the streets of Bangkok and demanded Sundaravej out.

What's really behind this story: Mr. Sundaravej's protesters have been accusing Mr. Samak of being a proxy for widely loathed former Prime Minister Thaksin Shinawatra, who was ousted in an army coup in 2006 amid accusations of corruption and abuse of power.

The investment implications are intriguing. If Thaksin is removed and a more respected leader is installed, the region may become much riper for investment.

I'll keep you updated as this drama develops!

Best wishes,

Jeff Manera
G3 Global Options,
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

With all the financial turmoil in the equity markets, it's been easy to overlook the steady slide downward in crude oil. But it has suffered a dramatic decline.

As oil traded downward, we took some nice profits on the U.S. Oil Fund puts and oil continued to slide south. It's now trading at about $92 a barrel.

When oil was trading at nearly $150 a barrel, I was loudly suggesting -- and scoffed at by many -- that the markets were being completely manipulated and that huge price spike had little to do with supply and demand, which sounded like a wild conspiracy theory to many at the time. This has been proved to be true. Indeed, a number of reports have come out showing that one invisible entity controlled fully 15% of the oil futures on the way up -- and that at one point 85% of the bullish futures bets had nothing to do with structural trades (for example airlines or oil refiners hedging) but were purely speculative in nature by big money firms. I suspect Goldman Sachs -- who was loudly calling for $200 oil at the time -- was complicit in this manipulation.

Now that all the manipulators and speculators have slithered out of these markets, oil futures are moving straight down as they look for some kind of natural support. Another thing to consider: During the period that oil was so high it caused actual demand destruction -- some of it not so temporary. For example, airlines and the auto industry had to lay off tens of thousands of employees and airlines had to raise rates substantially -- causing many travelers to make alternative plans which they are now accustomed to. Again, some of the demand destruction may be permanent - an unintended consequence of the manipulation games being played when oil was climbing to crazy levels.

More recently, in a twist of fate, the current crisis with AIG I talk about in today's G3 Global Investor issue, has also been putting some downward pressure on oil for the past couple of days -- it has to do with AIG's insuring certain counter party risk to the futures transactions that are now less secure. That downward pressure may be temporary depending on what happens with AIG, but the forces driving crude down are likely to continue.

Where will oil bottom? How do we make money on this new trend?

Well, we made money on the way down. Now, the time is getting closer to play the other end of the equation. I'm starting to look closer at the drilling and exploration companies and the domestic oil plays with strong "proven reserves" for when demand and supply are back in sync.

Of special interest are the oil rig operators who took a hit when hurricane Ike roared into Texas. The likes of Transocean (RIG), Diamond Offshore (DO) and Noble Corp. (NE) are on my radar. I don't think it's time to buy just yet, but these stocks are worth a look.

Best wishes,

Jeff Manera
G3 Global Options
G3 Global Investor
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

With the history-making, tumultuous events inspiring shocking headlines on almost a daily basis, who stands to benefit?

It's too early to say for sure, but the possibilities are out there for our consideration.

Goldman Sachs Group (GS) and Morgan Stanley (MS) may not the companies they used to be due to the new government regulations and restrictions that will now apply with their conversions to bank holding companies, but both will likely be left standing when the dust has settled - and with substantially less competition to contend with after the demise of Bear Stearns and Lehman Brothers (LEH) and pending digestion of Merrill (MER) by Bank of America (BAC). Both companies possess very strong businesses and are well placed without any competition left.

Insurance firms may be attractive for a number of reasons. First, they will likely gain a big chunk of the market now that AIG has basically disappeared - as well as directly benefiting from the reduced competition. Also they have some pretty attractive assets which may demand inflated prices. Travelers (TRV) and Chubb (CB) fit this theme well as well as some of the major life insurers such as MetLife (MET) and Prudential (PRU).

I will be digging deeper into these and may be recommending one or two of the best positioned in this week's G3 Global Options issue, but it's too early to make bets on these now as there are too many question marks outstanding. If you dip your toes into any of these players, use restraint until we know more. At the very least we should wait and see more details from the bailout being hammered out right now on the congressional floor.

All in all one thing we are certain to see in the next days and weeks will be greater transparency in the valuation of these mortgage securities both here in the US and globally. Hopefully we will have had a jump start in identifying good companies with some potentially profitable holdings.

Jeff Manera, Editor
G3 Global Options
G3 Global Investor
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

Well, news out of the U.S. that revisions to the Bush administration's proposed $700 billion bailout plan failed to pass a vote in the House of Representatives was bad news for U.S. and overseas stock markets. As reported in our G3 Flash Alert yesterday, the Dow went into a 600-plus point freefall as news of the bailout plan's failure broke and the MSCI World Index plunged 5.9%, Brazil's Bovespa tumbled 7.1%, Russia's leading index dropped 5.5%, India's Sensitive index fell 3.8% and the MSCI Asia-Pacific index slumped 2.1%.

Today's a different story, with a dramatic broad-market rally across much of the globe in anticipation of some version of the plan passing later this week.

Negotiating a bailout
As I've been reporting in G3 Global Options issues and in my special alerts to subscribers, we need Congress to take strong, decisive action quickly to shore up confidence in the financial system and perform some form of financial 'triage' that has the capacity to revive the frozen credit markets.

Many believe that "C-level" executives and government officials who managed their organizations into this mess should be held accountable, and be penalized for doing so. The first revision to the Bush administration's bailout plan to make it to the House floor yesterday did include what was deemed "a slap on the wrist" for the wrong-doers, by one news report.

If it had passed, the revised bailout plan would have placed "reasonable" limits on severance packages going forward, for executives at banks, securities brokerages and insurance companies that benefit from the bailout program, according to an AP news report.

It also called on the financial industry to make up some of the difference if the government was unable to recoup its bailout plan investments in five years. The government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies' future profits, according to an unnamed AP source.

In addition, it would have required that government bailout program administrators at least attempt to gain some relief for mortgage defaulters by renegotiating lower rates and payments so that they could keep their homes.

Where's the hanging judge?
It should be clear that the largest, most complete breakdown of the U.S. financial system since the 1930s didn't just simply happen overnight. Its roots stretch back at least to the late 1990s when financial industry influence over politicians and regulators set the stage for the establishment of a new regulatory regime, along with lax policing, prosecution and enforcement.

Changes to banking, securities and futures industry regulations opened up wide new vistas for leading banks, brokerages and insurers to double and triple the leverage on their capital bases while creating an unending stream of new, ever more complex derivatives that could be traded in relatively opaque, illiquid over-the-counter markets and on exchanges.

The trick was not to hold on any real assets for any length of time, rather to keep transaction volumes flowing, move inventory and book profits as early and as often as possible. All the while, the firms on top of this game were booking handsome profits and their executives were being richly rewarded. This game of musical chairs, fueled by loose monetary policy and lax regulatory oversight, has finally reached its nadir--well let's hope so anyway.

Making off scott-free
Needless to say, financial industry executives are none too popular at the moment. In a Sept. 25 article, Bloomberg reported that top executives at Wall Street's five biggest firms were paid more than $3 billion in the last five years to their top executives while they oversaw and managed their way to collapsing the nation's financial system.

According to the report, Merrill Lynch CEO Stanley O'Neal "earned" $172 million from 2003 to 2007 while his colleague and current CEO John Thain, including his signing bonus, raked in a mere $86 million upon joining Merrill in December. Failed Bear Stearns' CEO James Cayne earned $161 million before the "Bear" went under.

Such astronomical earnings are nothing new or particularly impressive to Treasury Secretary Henry Paulson. The former Goldman Sachs CEO received some $111 million from his former firm between 2003 and 2006!

Jeff Manera, Editor
G3 Global Options
G3 Global Investor
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net