Emerging Troubles for Developing Markets

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You would have to be Rip Van Winkle to have missed the news of growing global unrest over the past couple of months. The violence is spreading and intensifying as embattled leaders employ desperate measures to preserve their positions of power.

The cause of this social unrest well documented. People living in third-world countries (and emerging markets) spend approximately 50% of their income on food. With food prices rising fast, millions of lives are being threatened. People are getting restless, and for good reason.

Inflation can easily be described as the rising cost of goods that we use and buy every day. Inflation is growing rapidly in many emerging market countries. Besides food, the costs of heat, gas and many other basic staples are skyrocketing.

With today's broad array of social networking options (Facebook, email, Twitter, etc.), likeminded people have the ability to quickly organize rallies to demand change.

Chinese President Hu Jintao last Saturday called for stricter government management of the Internet and warned top Communist Party leaders that China was facing deepening social conflicts that would test the party's ability to maintain firm control.

I recently discussed the ProShares UltraShort FTSE China 25 ETF (FXP), which corresponds to 2 times the inverse of the daily performance of the FTSE China 25 Index. FXP rises as the Chinese markets decline. It is a leveraged fund and therefore carries more risk than many other ETFs.

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