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Shares of Houston’s Cornell Cos. Inc. gained more than one third of their value in pre-market trading Monday morning after GEO Group Inc. announced it will buy the rival correctional facility operator for about $685 million in cash and stock.

The purchase price includes about $300 million in Cornell debt assumption.

The combined company will manage and/or own 97 correctional and detention facilities with a total design capacity of approximately 76,000 beds and 32 behavioral health facilities with a total design capacity of approximately 5,000 beds.

The deal is expected to close in the third quarter.

Boca Raton, Fla.-based GEO’s (NYSE: GEO) expects its purchase of Cornell Cos. (NYSE: CRN) to increase its total annual revenues by approximately $400 million to more than $1.5 billion.

In pre-market trading Cornell Cos.’ Stock was up nearly 37 percent to a new 52-week-high of $25.29.

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Woe is us.

Unemployment is 9.7 percent. The U.S. stock market is still 25 percent off its high. The federal deficit is measured in trillions. Our dollar is mocked overseas.

The Chinese lecture us on fiscal responsibility as they lend us billions of dollars so that we can buy their TVs, clothing and other trinkets of an American lifestyle built on credit.

The 20th century was the American Century — with our nation the premier economic and military superpower. The 21st century may belong to someone else.

That possibility has implications for investors. If growth is going to be faster overseas, is that where you should be investing?

That’s not an easy question. Venturing abroad means taking currency and political risks that we don’t get at home. And foreign stock prices may already reflect high growth prospects, making them no bargain.

The chances are you’re already investing more globally than you think. The S&P 500 companies — all big American firms — draw 40 percent of their revenue from overseas, up from 32 percent eight years ago, according to T. Rowe Price, the Baltimore mutual fund firm.

At least in the short run, growth in the developing world will be more rapid than in the U.S., or Europe and Japan for that matter.

The International Monetary Fund expects economic growth of 2.7 percent in the U.S. this year, only 1 percent in the Eurozone and 1.8 percent for Japan. By contrast, the IMF expects 10 percent growth in China, 7.7 percent in India, 4 percent in Mexico and 6 percent in emerging markets overall.

This may be the first global economic recovery led by China. The world usually follows the U.S. The IMF expects the growth gap to continue through 2011, with 2.5 percent growth in advanced countries, and 6.9 percent in emerging markets.

Those growth rates should, in theory, mean higher company profits and higher stock prices. So, should we be buying stocks in Brazil, India or the Far East?

Over the past decade, you’d have been much better off investing in the developing world than at home.

Since March of 2000, the Hang Seng Index of stocks traded in Hong Kong is up 66 percent with dividends reinvested and measured in U.S. dollars. The Mexican Bolsa and Brazilian Bovespa were both up 269 percent and the Russian Trading System Index was up 725 percent as of midweek. By contrast, the S&P 500 index of large American stocks lost 3 percent over the last 10 years.

The last five years also favored the foreigners. The MSCI Emerging Markets Index gained 84 percent in that time, excluding dividends. The S&P was flat.

American investors have noticed. Lately, 95 percent of American investments in foreign stocks have gone into the emerging markets, notes Alan Skrainka, chief market strategist at Edward Jones in Des Peres.

Skrainka thinks that’s a mistake. "When the crowd heads one way, you’d better head the other," he notes. The emerging markets have largely had their run, and it’s too late to jump aboard, he argues.

As they say on the fund prospectuses; past performance is no guarantee of future return.

"The emerging markets have been temporarily underperforming the U.S. markets for the last three months. This could persist for a year or two," says Chad Morganlander, portfolio manager in global asset allocation at Stifel Nicolaus & Co.

Morganlander’s bottom line: Don’t jump into emerging markets with both feet. Tiptoe in during dips in the market.

If you’re thinking of investing there, you had better enjoy roller coasters. Emerging markets are 60 percent more volatile than the developed world.

The great stock market crash sent U.S. stocks down 56 percent from their 2007 highs by March of last year. Emerging markets fell 66 percent before bouncing back.

"It has a much rougher road on the downside than the U.S. market," said Morganlander.

There’s more oomph on the way up, too. Both the emerging markets and the S&P are now both 25 percent off their highs of 2007.

Step outside the developed world and an investor finds a whole new set of worries: the whims of Latin strongmen and Iranian ayatollahs, unstable currencies, religious conflicts and guerilla insurgencies.

While world stock markets were crashing in late 2008, investors in India had an extra worry — nuclear war as Indian and Pakistani rattled swords in the wake of the Mumbai massacre. The Indian market had dropped 73 percent by March 2009.

On the other hand, the emerging markets aren’t as wild and woolly as they used to be. Currency blowups, rampant inflation and outright fraud aren’t as common and fiscal controls are better. "In some cases, their sovereign debt picture is better than Japan, the UK, Greece, maybe even the U.S.," says Paul Christopher, senior international strategist at Wells Fargo Advisors in St. Louis.

All this argues for letting a pro do the stock picking, which is what you get when you buy a mutual fund.

Morningstar, the mutual fund analysis firm, recommends Oppenheimer Developing Markets (ODMAX) and American Funds New World (NEWFX). New World supplements emerging markets stocks by buying developed-country stocks in companies that do a lot of business in the developed world. That tends to smooth out the roller-coaster ride a bit, says Morningstar.

You could also buy the whole shebang at once. iShares MSCI Emerging Markets Index (EEM) is an exchange-traded fund that tracks an index of third-world stocks in 20 countries, with the bulk in China, Korea, Brazil, Russia, South Africa, India, and Mexico.

Another alternative is to target certain countries through country-specific funds. "The best opportunities in the world come from selecting countries the way you select stocks," says Christopher, of Wells Fargo.

China has been the big growth story of the past decade, but some think the Chinese market is overheated. Stifel’s Morganlander sees a bubble building. Much of last year’s growth was government-manufactured, the result of stimulus spending designed to make up for falling exports. Stimulus doesn’t last forever, he notes, and when the building boom ends, the nation could have a nasty fall.

India is a better bet, he says. It’s economy is less dependent on exports than China and the Indian government is friendlier to foreign investors.

Countries such as Brazil and Mexico are natural resource plays. They supply food and raw materials for the high-growth Asian markets.

Meanwhile, a stronger dollar is making one developed market — Europe — look a little sweeter at the moment.

The dollar was on a long decline against major currencies from 2002 to 2008, weighed down by our trade deficit. That’s one reason that foreign investments performed so well, when measured in dollars. The financial panic of 2008 sent the dollar up as worried investors fled back to the buck, but the greenback’s slump resumed last year.

Lately, though, Europe has been having its own financial panic over the chance that Greece might default on government bonds, followed possibly by Spain and Ireland. The euro is down 10 percent against the dollar since November.

If you think that the euro’s problems are temporary, and the dollar is still a dud, then European stocks look interesting. "If the dollar’s weakness resumes, you’ll earn a good return," says Skrainka.

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The German government may offer an aid package to Greece and other debt-ridden European nations in an effort to stave off the default concerns that have stunted global markets, according to reports.

The Wall Street Journal, citing unnamed sources, said a loan guarantee plan would be led by Germany but completed along with European Union partners.

The threat of a default in Greece has given investors pause, as the effect would likely ripple to other members of 16-nation euro zone. Other debt-choked nations in the bloc include Portugal, Spain, Ireland and Italy.

European Union officials are set to meet Thursday to discuss the economy, and Greece is expected to be a major topic on the docket.

In December, Greece’s credit rating was downgraded. S&P’s move came after health care companies complained that the country was behind on payments related to its public health system.

Investors across the globe have been trying to digest what impact such a crisis would have on the nascent signs of recovery, and ripple-effect fears have sent worldwide markets lower payday loans.

The WSJ article said Germany’s finance minister, Wolfgang Schaeuble, has discussed the aid idea in with European Central Bank President Jean-Claude Trichet.

But earlier Tuesday, Reuters reported that German government spokesman Ulrich Wilhelm called reports that a decision was already in effect "unfounded."

A bailout of Greece would mark the first time any EU country rescued a euro zone member.

The U.S. stock market was cheered by the reports of possible Greek aid, as the blue-chip Dow index (INDU) added almost 2% with less than 2 hours left in the session. The euro also rose in late trading. 

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Houston Public Radio and the Bauer College of Business at the University of Houston have joined together to launch a weekly business radio feature.

KUHF business reporter Ed Mayberry will host Bauer Business Focus each Friday morning at 8:35 a.m., starting Jan. 29.

"There's a lot of change taking placing in business today, and we're pleased to be able to provide a forum on public radio to discuss those changes and what's happening in the local business community," said Debra Fraser, station manager. "I think Bauer Business Focus will appeal even to people who wouldn't normally think of listening to a business program, because it's really about issues that impact all of us fast cash online."

Topics of the program will range from big-picture issues, job growth, economic diversification and entrepreneurship and innovation in emerging industries.

"We can't wait to explore trends and issues weighing on the minds of the business community," said Arthur Warga, dean of the Bauer College, and the first scheduled interview.

The program is available on 88.7 FM, HD Digital Channel 1 and streaming online at www.kuhf.org.

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The U.K.’s inflation rate probably jumped the most in at least 12 years in December as the economy shook off the recession and oil prices rose, economists say.

Consumer prices climbed 2.6 percent from a year earlier, compared with a 1.9 percent gain the previous month, according to the median forecast of 30 economists in a Bloomberg News survey. The 0.7 percentage-point jump would be the most since comparable records began in 1997. The Office for National Statistics will publish the data at 9.30 a.m. today in London.

The data would be the first since May showing inflation above the Bank of England’s 2 percent target, presenting a challenge to officials as they assess when to start raising interest rates from a record low. Gordon Brown’s spokesman said last week that the prime minister, who faces an election by June, is confident the economy has returned to growth.

“While the economy has been in recession the Bank of England hasn’t been focusing on inflation but it will become more of a concern,” Michael Saunders, chief economist for western Europe at Citigroup Inc, said in an interview. “I think they’ll hike rates in the second or third quarter.”

Saunders predicts the Bank of England will raise the benchmark interest rate to 1.5 percent by the end of the year. Officials makers have kept the rate at 0.5 percent since March. He says January data for inflation due next month will breach the government’s 3 percent upper limit, and it will reach 4 percent by the middle of the year.

Inflation, which troughed at 1.1 percent in September, has accelerated since then as energy costs increased and the economy recovered from the slump.

Producer Prices

Crude oil has doubled in the past 12 months, raising consumer gasoline costs. Producer prices jumped 0.5 percent in December, more than twice as much as the median forecast of economists in a survey by Bloomberg News.

The factory-gate data in part reflect the weakness of sterling. The pound has dropped by about a quarter in the past two years against a trade-weighted basket of currencies, raising the cost of imports for manufacturers.

Finance Minister Alistair Darling’s temporary 2.5 percentage-point reduction in sales tax in December 2008 to stimulate the economy will drop out of the annual comparison in the data for December 2009 and also raise the inflation rate, Saunders said.

For now, Bank of England officials say inflation will accelerate before dipping below the target later this year because of slack in the economy after the recession. Policy makers are showing few signs of unwinding emergency measures designed to fight deflation after they pledged to buy 200 billion pounds ($327 billion) of bonds. The bank will release new forecasts on Feb. 10.

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JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, whose bank had promised to build a European headquarters in London, told U.K. Chancellor of the Exchequer Alistair Darling a 50 percent tax on bonuses would unfairly penalize the U.S. lender, a person close to the firm said.

Dimon reminded Darling that JPMorgan never took a U.K. bailout and said plans to build a European headquarters at Canary Wharf show the New York-based company’s commitment to London, the person said. JPMorgan, the second-largest U.S. lender by assets, may scrap its Canary Wharf project because of the bonus tax, the Financial Times reported, citing an unidentified bank executive.

Financial firms may face higher costs after Darling said on Dec. 9 he’d impose a 50 percent tax on discretionary bonuses greater than 25,000 pounds ($40,000). European and U.S. regulators imposed pay curbs after the world’s financial firms ran up $1.7 trillion in losses and writedowns during the global crisis.

“Jamie is quite a controlled character, so this is an example of the fury that has been created,” said Stuart Fraser, the head of policy for the City of London, the financial district’s lobby. “There is a real sense of indignation and anger about this tax.”

The tax may apply to compensation for about 20,000 people with the cost imposed on employers. During the call, Dimon, 53, mentioned that JPMorgan has paid U.K. taxes and reminded Darling of plans to spend about $2.4 billion on the Canary Wharf project, according to the person, who declined to be identified because the discussions were private.

U.K. Defends Tax

The conversation with Darling was reported yesterday by the London Telegraph. JPMorgan spokesman David Wells declined to comment. A U.K. Treasury spokesman yesterday defended the tax as fair because it would apply to all banks and said he couldn’t confirm the telephone conversation with Dimon.

“The government cannot allow itself to be blackmailed,” Liberal Democrat Vince Cable said today in an e-mailed statement.

Financial firms are threatening to leave the U.K. because they say increased taxes and regulation make London less attractive. Tullett Prebon Plc, the inter-dealer broker, said it will help employees relocate.

BlueCrest Capital Management Ltd., a London-based hedge- fund firm that oversees about $15.4 billion, plans to open a Geneva office, a person familiar with the situation said last month. As many as 50 of BlueCrest’s 300 employees in London may move, the person said.

Deutsche Bank, Nomura

Deutsche Bank AG CEO Josef Ackermann said on Dec. 12 that Germany has a “comparative advantage” over other financial hubs because it doesn’t plan to tax bonuses. The Frankfurt-based bank said it plans to spread the costs of the U.K. bonus tax to its employees worldwide.

Nomura Holdings Inc., the Tokyo-based bank that bought the U.K. operations of the collapsed Lehman Brothers Holdings Inc., has no plans to reconsider its new City of London headquarters.

Nomura, which in August signed a 20-year lease for a 525,000-square-foot (48,774-square-meter) building overlooking the River Thames, will move into new offices in July, spokesman Patrick Meyer said in London today.

European Alternatives

The bonus levy forced Dimon to consider, “Do we want to be in a more tax-friendly, corporate-friendly environment?” said Jeff Harte, an analyst in Chicago for New York-based Sandler O’Neill & Partners LP. “There are opportunities all over Europe. There are a lot of cities that could handle operation hubs.”

JPMorgan agreed to pay about $349 million in November 2008 for land in London’s Canary Wharf financial district to build a 1.9 million-square-foot (176,500-square-meter) tower.

Under the agreement with Canary Wharf’s owners, who will build the offices, JPMorgan can scale back the size of the project. The planned headquarters will house JPMorgan employees from seven other buildings after the bank scrapped plans to build an office in London’s main financial district.

If construction is delayed or canceled, JPMorgan will have to pay a 76 million-pound fee to developer Canary Wharf Group Plc, according to a November 2008 statement when the deal was announced. The bank will be responsible for paying for completed work including design, planning and infrastructure, the statement said.

Banks’ ‘Sticks’

Shifting business centers elsewhere is “one of the sticks they’ll use to try and fight this legislation, but in the end how realistic is it?” said Joe Sorrentino, managing director at executive compensation consultant Steven Hall & Partners specializing in financial services. “This is a people business. How do you get your talent, if they’re U.K-based, to move to other countries?”

The U.K. Treasury is working with banks to identify employees who are excluded from the tax, and Darling said Dec. 16 he will resist calls to change the policy. Banks can’t avoid the levy by arguing that some activities aren’t defined as banking, he said.

Shares of Songbird Estates Plc, which controlled more than half the buildings in the Canary Wharf estate, were little changed at 157 pence at 3:04 p.m. in London trading. A spokesman for Songbird declined to comment. JPMorgan’s stock fell 4 cents to $41.68 at 12:43 p.m. in New York Stock Exchange composite trading.

“It comes as no surprise that the recent, knee-jerk and ill-thought-out tax grab by government to punish bankers is causing some of our most important institutions to consider their options,” said Mayor of London Boris Johnson. “This should act as a strong wake-up call to our leaders that their policies could seriously threaten our competitiveness.”

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The U.S. Treasury Department said Thursday that it will remove the caps on assistance to Fannie Mae and Freddie Mac for the next three years to alleviate market concern about the effect of limited government assistance.

The two companies, the largest sources of mortgage financing in the U.S., are currently under government conservatorship and have caps of $200 billion each in backstop capital from the Treasury. Under the new deal, these caps can rise as needed to cover net losses over the next three years.

Fannie Mae and Freddie Mac now are using a combined $111 billion of the total $400 billion in available assistance. Treasury Department officials said they did not expect the companies to need assistance beyond what is available under the current caps, barring significant deterioration in the economic outlook.

Thursday’s announcement "should leave no uncertainty about the Treasury’s commitment to support these firms as they continue to play a vital role in the housing market during this current crisis," the Treasury said in a statement in Washington.

The Treasury also relaxed its timeline for Fannie Mae and Freddie Mac to shrink their portfolio of retained mortgages. Previously, the companies were instructed to shrink their portfolios at a rate of 10 percent a year. Now, they will be required to keep their portfolios below a maximum limit, currently $900 billion, that will fall by 10 percent a year.

This means they will not need to take immediate action to reduce their holdings and could allow them to rise payday loans for bad credit. Fannie Mae’s portfolio ended October at $771.5 billion and Freddie Mac’s holdings at the end of November were $761.8 billion, according to the latest figures released by the companies.

The Treasury said Thursday that it is ending its mortgage- backed security purchase program as of Dec. 31, after $220 billion in purchases. The government also is eliminating a short-term credit facility for the two companies and the Federal Home Loan Banks that was never used.

EXECUTIVE PAY

The two chief executives of Fannie Mae and Freddie Mac could get paid as much as $6 million for 2009, despite the companies’ dismal performances this year, which cost taxpayers more than $100 billion.

Fannie’s CEO, Michael Williams, and Freddie CEO Charles "Ed" Haldeman Jr. each will receive $900,000 in salary, $3.1 million in deferred payments next year and another $2 million if they meet performance goals, according to filings with the SEC on Thursday.

The packages were approved by the Treasury and the Federal Housing Finance Agency, which regulates Fannie and Freddie.

The Associated Press contributed to this report.

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For six months, I attended every "investment seminar" offering a free lunch that I found advertised in the newspaper or in postcards I got in the mail.

I soon realized I would learn little about investing but a lot about high-pressure sales tactics for high-commission products. Although I had no intention of buying anything, I continued attending to gather material for my columns.

After a while, the seminars became so predictably unpleasant that I stopped going. Now, based on a study by AARP and the North American Securities Administrators Association, I see that little if anything has changed.

"Many people go to these seminars hoping to learn about ways to create a more secure retirement, but instead are pitched financial products that are fraudulent or unsuitable for them." said Jean Setzfand, director of financial security at AARP, the advocacy group for people 50 and over.

I must emphasize that some investment seminars are indeed educational. I’ve attended many, including several sponsored by investment firms and featuring talks by economists and money managers. My main concern — and that of regulators — is with solicitations for "free lunch" seminars that prey on seniors’ fears by implying they risk financial catastrophe if they don’t do what the presenter says.

An estimated 5.9 million Americans 55 and older have attended a seminar offering a free lunch or dinner in the past three years, with mail as the most common method of solicitation. Of those solicited by mail or e-mail, 27 percent have received 10 or more invitations.

In response to such solicitations, AARP, in collaboration with NASAA, which is an organization of state securities regulators, launched a "Free Lunch Monitor" program in October 2008. Armed with checklists, 180 volunteer monitors attended these seminars and reported what they saw Internet Payday loans. (To learn more about the program or to volunteer, see www.aarp.org/nofreelunch.)

The volunteers’ findings, together with the responses to a telephone survey of 1,012 Americans 55 and older, are summarized in a new study titled "Protecting Older Investors: 2009 Free Lunch Seminar Report."

For example, 78 percent of people who attended seminars expected they would focus on opportunities to learn more about financial issues. However, once at the seminar, half said they were asked for personal information; 46 percent said the presenter tried to make a follow-up appointment at their home; and 39 percent said the presenter tried to sell them something during or after the seminar.

Many of the seminars focused on annuities. Two-thirds of the volunteer monitors said the presenter did not discuss surrender charges or tax penalties if annuities are cashed in early, and 48 percent said the presenter did not discuss any annuity risks.

Attendees were consistently promised the products were low risk and would yield high rates of return (54 percent of the volunteer monitors said they were promised returns of 7 percent or more. I assure you no annuity today can guarantee that).

This is definitely not a knock against annuities. In fact, I own several. But these can be complex products, and there are many types of annuities, each with its own risks.

"Low risk, high reward is a red flag warning for possible investment fraud," said Denise Voigt Crawford, NASAA president. "I encourage all seniors to investigate before they invest in any offer served at a free lunch seminar," including checking the presenter’s credentials with securities regulators.

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Hawaii Biotech, Inc. announced Friday that it will file for Chapter 11 reorganization in U.S. Bankruptcy Court in Honolulu.

The move appears to be an attempt to stave off an effort by one the company's largest shareholders to gain control of the company at the shareholders’ meeting scheduled for Dec. 16.

The privately held biotech company said in a news release that the filing is intended to allow it “to continue its current and planned human clinical trials, keep its staff in place, pursue funding and protect current investors.”

The Aiea company, founded in 1982, has not previously hinted at financial troubles. Over the past eight years, it has raised more than $55 million in federal and state research grants and more than $36 million in private equity financing.

Hawaii Biotech said its president and CEO, Elliot Parks, will continue to manage the company and that the company has lined up more than $2 million from local investors to continue operations.

The company’s bankruptcy filing, which lists assets and debts, was not immediately available from the court.

Executives of Acuvax Ltd., an Australian company that owns 28 percent of Hawaii Biotech, has claimed that Hawaii Biotech’s current management team, led by Parks, has not been aggressive enough in generating income from its vaccines for West Nile virus and dengue fever no fax payday loan.

Acuvax CEO William Ardrey, who holds a seat on the board, has said he wants to try to oust members of Hawaii Biotech’s five-member board, including Parks and Debra Guerin Beresini, co-founder of Silicon Valley-based International Venture Fund.

Acuvax’s main shareholder, another Australian company, owns a 12 percent interest in Hawaii Biotech, for a combined 40 percent stake in Hawaii Biotech.

“Our goal is to continue to build on our recent clinical successes and create value for all shareholders,” Parks said in a prepared statement. “We believe that this reorganization is the best plan of action to attract additional capital, to keep Hawaii Biotech local and to continue progressing through our clinical trials.”

Under Parks’ leadership, Hawaii Biotech, which has 23 full-time employees, entered into human clinical trials for West Nile and dengue fever vaccines within the past two years.

Late last year, Hawaii Biotech completed the first of three phases to prove the safety and efficacy of its proprietary vaccination for West Nile virus.

Meanwhile, in August, the company started the first phase of a clinical safety trial for its dengue vaccine, and said results are expected within a year.

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The worldwide decline in equities spurred by Dubai’s efforts to reschedule its debt is a sign that government spending alone won’t be enough to protect financial markets, according to Arnab Das of Roubini Global Economics.

Stock volatility will probably jump as countries and companies default on loans, said Das, the head of market research and strategy at RGE, the advisory firm founded by economist Nouriel Roubini.

Shares slumped from Shanghai to Brazil and European shares fell the most in seven months yesterday after Dubai World, the government investment company burdened by $59 billion of liabilities, sought to delay repayment on much of its debt. Governments have spent, lent or guaranteed $11.6 trillion and central banks held interest rates near zero percent to end the first global recession since World War II.

“We’re bound to see a rise in risk aversion,” Das, who is based in London, said in an interview. “The Dubai situation signifies that although the major central banks around the world have stabilized the financial system, they can’t make all the excesses simply disappear. We still have to work out those balance sheet stresses. The recovery is proceeding, but significant challenges still lie ahead.”

Japanese stocks fell today after commodity prices declined and the dollar depreciated to a 14-year low against the yen, dimming the overseas earnings prospects for exporters. The Nikkei 225 Stock Average lost 1.9 percent to 9,204.65 as of 10:10 a.m. in Tokyo. Futures on the Standard & Poor’s 500 Index slipped 2.1 percent after the MSCI World Index of 23 developed- country markets lost 1.4 percent yesterday.

Bank Writedowns

Banks wrote down or lost $1.7 trillion from the collapse of the subprime mortgage market and raised $1.5 trillion since the credit crunch began in 2007, data compiled by Bloomberg show.

“In some countries and sectors, debtors will be able to get by because government intervention has made it easier for them to refinance,” said Das. “In other places, excessively leveraged debtors, who always get access to too much credit during a boom, cannot roll over their debt and will default.”

Das, the former head of emerging-markets strategy at Dresdner Kleinwort, joined RGE last month to lead a new team that advises investors on allocations in stocks, bonds, interest-rate products, commodities and currencies in developed and emerging markets advance payday loans. Roubini, an economics professor at New York University and chairman of RGE, predicted the financial crisis that spurred credit losses and asset writedowns at global financial companies.

Protected Investors

Roubini’s 2006 warning about the crisis shielded clients from the worst slump in global equities since at least 1988. He said in March that the stock rally that began that month was a “dead-cat bounce” and that it may “fizzle” in May. The MSCI World Index of has since rallied 68 percent, and the Standard & Poor’s 500 Index has climbed 64 percent in the steepest rally since the Great Depression.

Roubini warned in July that the economy is “not out of the woods.” Reports since then have shown that the U.S. exited a four-quarter contraction in gross domestic product, expanding 2.8 percent from July through September.

The benchmark index for U.S. stock options, which measures the cost of using options as insurance against declines in the S&P 500 over the next month, has dropped 49 percent this year. It surged last November to a record 80.86, a level almost four times higher than its 20.28 average over its 19-year history.

Market Correlation

The so-called correlation coefficient that measures how closely markets rise and fall together reached the highest level ever in June, with the S&P 500 and benchmark measures for raw materials, developing-country equities and hedge funds rallying in tandem, according to data compiled by Bloomberg. Oil has jumped 71 percent this year, the Reuters/Jefferies CRB Index of 19 raw materials climbed 21 percent and the MSCI Emerging Markets Index soared 69 percent.

“All this should magnify differentiation between riskier and less risky asset classes and names, after a couple of quarters in which correlations have risen sharply as market participants put on risk pretty much across the board,” Das said. “That will make it harder to make money simply by riding the liquidity wave from central banks. People are going to have to start focusing even more on the fundamentals.”

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