Right now, four fundamental concerns are pressuring stocks worldwide'

- Fear of inflation
- Excessive Fed tightening, and in turn, recession and/or a dampening of -global growth
- A housing bubble meltdown
- Geopolitical instability in the Middle East

The market is fraught with uncertainty. And, as you can see, the list is long and the concerns are not small. This 'Wall of Worry' is high and thick.

Consequently, the 'discounts' that current stock prices reflect are substantialand represent a spectacular investing opportunity, especially in global stocks'

As these uncertainties are resolved, the market will resume its climb, propelled by global synchronic growth and strong corporate earnings. Indeed, if these risks do not materialize into greater problems, prices should run up very strongly, as I soon expect.

As for now, the market is massively oversoldand rife with opportunity. Let's dismantle this Wall of Worry, brick by brick'

Inflation Is A Trailing Indicator

As Fed Chairman Bernanke recently stated to Congress, since the U.S. economy is showing unequivocal signs of cooling off and inflationary expectations remain contained, the slowdown will bring core inflation down to the 1%-2% range that the Fed is comfortable with. (The slowdown is already underway, thanks to higher interest ratesfrom 1% to 5.25%.)

In the meantime, the Fed can refrain from increasing interest rates further (since monetary tightening works with lags), and it can monitor the situation to ensure that inflationary expectations remain anchored.

The Fear of Excessive Fed Tightening

We tasted a prelude of what happens in the markets when this fear subsides. We enjoyed a sharp rally when Bernanke testified in front of Congress his view of a U.S. economic non-inflationary soft landing. The Dow raced 212 points higher, for a one-day 2% gain. The iShares MSCI Emerging Market Index (AMEX: EEM) climbed a quick 6%.

Bernanke's views are very similar to my own: The U.S. economy will slow down to trend growth of around 3%; inflation will drop to the comfort zone as a result; and the housing market will cool off significantly, but will not blow up.

This scenario is not only the most probable, but also the most desirable, since the economy's risk of a recession is quite considerable, now that the consumer is overleveraged. Therefore, I believe that the Fed will go to great efforts to ensure that the U.S. economy avoids a recession.

In the meantime, the global economy is fantastic:

- China just announced a scorching 10.9% GDP growth in the first half. This has prompted the People's Bank of China (China's central bank) to announce an interest-rate increase of 27 basis points and to increase reserve requirements in the banking system. This approach, which is too-little-too-late, will not be effective in curbing demand and controlling some inflationary pressures without allowing their currency to appreciate further. And it will not cool off demand and prices for steel, iron ore and other industrial metals from China, as some predicate.

- Brazil announced that government debt as a percentage of GDP has dropped from 64% in 2002 to 51% today. This, together with inflation registering the lowest level in two decades, allows the Central Bank to keep reducing interest rates, which in turn reduces the government's borrowing costs and allows for the expansion of credit and economic growth.

- Japan and Europe are also accelerating, lending more support to global growth.

There Is No 'Housing Bubble'

All real estate markets are local and fragmented. Therefore, the corrections to prices can be huge in markets where speculation was rampant, like Miami, but will be moderate or non-existent in other markets where there was little, if any, speculation (the Midwest).

In general, the top of the market and the prime areas in both coasts are the most vulnerable, but the majority of the nationwide market will not see anything beyond a normal slowdown.

Subsiding Geopolitical Risk

Last, but not least, geopolitical instability is the prevailing concern. But this risk is subsiding as we speak. As Iran was being referred to the UN Security Council for its unacceptable pursuit of nuclear weapons technology, the country's close ally, the terrorist organization nested inside Lebanon, launched a provocation of Israel. Some speculate that the timing of Hezbollah's provocation was intended to distract the international attention from the condemnation of Iran by the UN Security Council. The kidnapping of two Israeli soldiers by Hezbollah and Hezbollah's subsequent attacks with rockets on Northern Israeli towns were too much for Israel to tolerate.

Israel found itself attacked and threatened in the north, even after having in recent months shown very significant overtures for peace and having pulled out entirely from Gaza at great internal political cost.

The Israeli military response was extremely successful. On July 18, The Jerusalem Post reported that Israeli generals had characterized the degradation of Hezbollah's capabilities due to the air strikes to 40%-50%. We learned from senior Israeli politicians that their objective was to eliminate the Hezbollah threat of rocket attacks, so that it would be rendered harmless for a few years, at least.

What's more, in order to complete the objective, it would be necessary to have ground troops complete the job and finalize the actions with some sort of cease-fire agreement, preferably enforced by reliable and powerful third-party peace forces.

Now, U.S. Secretary of State Condoleezza Rice has visited the Middle East in a mission to achieve some agreement that will end the fighting, and the EU is jumping on board to support a 'sustainable' cease-fire that will include UN troops to guarantee a safe and non-aggressive Southern Lebanon. This geopolitical risk is abating fast.

Extreme Bearishness Means 'Buy' for Global Investments

The badly-justified attempts to create market fear by some market participants, their obvious discontent with the Bernanke comments about a soft landing, and the violent market action leads me to conclude that very fast and very big money is short the market, unable to cover their short positions profitably. Witness the storming short-covering across the board, but prevailing in cyclicals and the crash of the CBOE Volatility Index (^VIX) at the end of the August 1 session.

These investors are especially short cyclicals, and their clock ticks faster than ours, since their trading horizon is formally established.

Their view is confirmed by a recent Merrill Lynch survey of fund managers, which shows:

- 60% expect the U.S. economy to slow down
- Cash levels are very high
- Risk appetites are the lowest since 9/11
- Expectations of corporate profits are vulnerable

Point is, when bearishness reaches these extremes, it is almost always wrongand an excellent time to buy. And there are strong indications of this global investing opportunity'

At the same time that a Citicorp strategist comes on TV to explain how investors should shift exposure from emerging markets to defensive stocks, the firm is hiring 30 analysts to expand emerging market coverage. And another huge broker, which I can't name here, internally evaluated its past involvement with emerging markets equities, considering expanding the area.

Finally, second-half GDP growth in the U.S. showed that the Fed is done, and, very importantly, showed that infrastructure work is very strong and picking up, which demand commodities like iron ore, steel and copper that are supplied by emerging economies and globally cyclical stocks. This, too, reaffirms the unique buying opportunity in worldwide equities and especially in emerging markets and global cyclical stocks.

Enjoy and profit,

Horacio M'rquez