Don Dion posts his current insights on the stock, bond, commodity and currency markets in his RealMoney blog , anticipating which ETFs will be in play next. Among his blogs this week are the following, in which he wrote about the selloff in India, why commodities have further to fall and the outlook for a brokerage ETF.

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India Selloff Should Bring Better Prices

Posted 7/7/2009 10:04 a.m. EDT

India's Sensex Index tumbled 5.8% on Monday after the government projected a much-larger-than-expected deficit and failed to deliver on promises of reform. Shares recovered on Tuesday but remain well below the Friday close. Monday's tanking is a foil to the 20% surge in May, which followed the election of a centrist government that many Indians expected to reform the economy. Instead, the finance minister announced the fiscal deficit would be 6% of GDP, but the prime minister's advisers already expect at least an 8% deficit, given that more stimuli may be necessary.

Although many news articles focused on the deficit, the main concern should be that India's economy is much weaker than expected. Government stimulus may be the worst way for an economy to allocate resources -- generally speaking, stimulus is like drinking a beer to cure a hangover. It makes you feel better for a while and tides you over, but doesn't solve the problem. Already in the U.S., Obama adviser Laura Tyson came out in favor of a second stimulus and economist Paul Krugman also argued for more stimulus spending. On the other hand, India's stronger growth rate should help it pay for the stimulus package, and much more of the money is aimed at tax relief and infrastructure projects.

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