FALLS CHURCH, Va.–It certainly seems that the markets are anxious to rise again, a restlessness that weakens the case–argued by many market observers–that February 27 marked the beginning of something more than a 10 percent correction.

I maintain the view, detailed last week, that it was a profit-taking incident. Still puzzling–assuming it stops here–is the short duration of the selloff. It looks like investors were eager to book profits and to reduce risk as soon as possible–getting it over with and moving forward.

It’s, therefore, become very tempting to buy the market. Last week’s action wiped out USD1.5 trillion of the world’s equity markets’ capitalization–reducing valuations to more-acceptable levels at the same time.

I’ll resist this temptation for now. The relative brevity of the selloff suggests this may be, in a sense, too much of a good thing. As the table below indicates, corrections–particularly where the context is Asia–tend to last more than a week.

MSCI ex-Japan Index Corrections
Peak	Trough	Decline	Days*
04/13/04	05/17/04	-20.9%	34
03/01/05	04/18/05	-8.1%	48
05/08/06	06/13/06	-18.6%	36

<sup>*Number of days from peak to trough.

Source: Bloomberg, SRI</sup>

One reservation with this move is that trading volume seriously indicates the selling may be over. The chance you take is that you’re missing out on a window of opportunity to buy solid assets at good prices. But at this juncture, I’ll take that chance.

That said, investors who would like to add to positions in SRI Portfolio recommendations at lower valuations should focus on the following markets, in order: Korea, Malaysia, Russia, Singapore, Europe, Hong Kong, Japan, India, China, Taiwan and Macau.

US Housing

It’s well known by now that most bears have pinpointed the unraveling of the subprime mortgage lending sector of the housing market and the consequences for the broader economy. You can’t underestimate the importance of housing in determining wealth in the US (and in the rest of the Anglo-Saxon economies, for that matter) and the negative consequences a drastic slowdown there would have.

But subprime lending accounts for only about 7 percent of the total stock of outstanding mortgages; it’s simply not as important as a lot of commentators would have you believe. If the prime market experiences a healthy slowdown and a smooth readjustment to credit guidelines, the effects of the subprime meltdown on the US economy would be largely mitigated.

In a country where wealth is as concentrated as it is in the US (see SRI, 15 March 2006, Killing Me Softly), the burst of the subprime miracle–having not spilled over–will eventually be remembered as another good idea taken to the extreme (as all good ideas tend to be in the US).

Some businesses will be wiped out in the process, and the poor souls who thought a hybrid “2/28” loan was their express ticket to property ownership and a higher standard of living will be out looking to rent again. In the end, I expect the global financial system should be able to absorb the subprime fiasco and move on, albeit at a lower pace.

My view on the US economy remains quite benign: Although I expect growth to slow, a recession isn’t included in my base-case scenario. As I noted last week:

I still expect a global economic slowdown to happen this year, but there’s no conviction of a US-led global recession outcome. The latter is mentioned because there’s been talk–from serious analysts–that 2007 will be the year that a real estate-based recession will take place in the US eventually affecting the global economy and markets.

The US economy will slow to a sub-2 percent annualized growth rate during the first half of the year.

The ride could be bumpier than a lot of investors anticipate, and this failure of foresight could create some problems later into 2007. Nevertheless, while some of my favorite economic indicators continue to signal a slowdown, the readings are far from recessionary.

The chart below depicts initial jobless claims in the US. Although there’s no doubt that jobless claims have risen recently–a clear indication of a slowdown–the index is far from the extreme readings (i.e., above 450,000) it registered during the 1990 and 2000 recessions.


Source: Bloomberg

The ISM Index also remains in growth territory, although it has weakened noticeably. Nevertheless, at 52.3, it’s comfortably above levels seen during recessions (i.e., below 44).


Source: Bloomberg

Brokers

Many readers have requested information on brokers that can better execute orders for SRI recommendations. Click the headline “Resources,” and see under “Brokers & Services.”

Interactive Brokers provides an excellent service and can easily execute a trade for you overseas, as can Delta Global Advisors; both are featured on the page mentioned above.

E*Trade is a mainstream broker that can now handle some international trading online. Commissions are slightly higher, but the Web site is particularly easy to use and includes solid news and quote feeds for most foreign markets.

The company became the first US discount brokerage to let customers’ trade foreign-listed stocks online when it rolled out a pilot test for 1,000 account holders of its global trading platform. Those customers are now able to buy, hold and sell stocks listed in major international markets. The rollout is expected to take two months before all customers have access.

Others will probably have to follow suit, and soon. Interest for direct access to Europe and Asia has prompted the change. Customers will also be able to buy and sell euros, pounds, yen and Hong Kong dollars. The platform could eventually support access to 42 more countries and related currencies.

According to a recent Wall Street Journal article, Fidelity has seen a fourfold increase in customer requests for international stock purchases. As a result, it’s beefed up its customer service staff to handle the transactions. You can buy foreign stocks through Fidelity by calling the broker directly.

A reader recently pointed out that he’s been using International Assets Advisory and has been very happy with its service. I haven’t done the research to confirm its quality, but it’s a good piece of information.