Watch what happens with oil and the dollar. I think the world is betting on the US weathering the recession better than most, thus the price of Oil in dollars is dropping, and the dollar is rising against the Euro. Also, the degree to which Oil has dropped speaks volumes about what people think about the depth of the recession to come. People are betting very very large that the ultimate 'means of production' isn't going to be that much in demand.

The critical issue that is still a complete mystery is whats going to happen to China. An economic downturn for Chinese Markets ('1st world' economies) will really put the test to if the past ten years of remarkable Chinese growth is a global reality or one of the biggest bubbles ever seen.

If it turns out to be a Bubble and the Chinese economy goes into a free-fall correction- you will see another loss of global wealth on the same scale as what we are now witnessing with the so-called 'credit crisis'. That is a scary thought. Hedge Funds and Mutuals are already heavily beset by losses, if Chinese markets 'pull a Russia' and go to virtually nothing and Chinese businesses start running pout of money and going bust...

However, interestingly, a huge amount of Chinese manufacturing is in goods that people will not stop buying just because the economy has turned south. Everyone needs socks, underwear, dinner dishes, utensiles, bed sheets and other household consumer products. China could carry on virtually untouched.

On the other hand (again), if they don't, it will be interesting to see what happens to the Chinese tolerance with the heavy-handedness of their own government. Authoritarianism is one thing when you are prosperous and wealthier than your parents could ever have hoped to become. Its quite another thing when you are losing ground.

Yeti