“I woke up this morning and everything was green – not the trees but the gains on my emerging market portfolio.”

Up, up, up, with the exception of the iShares MSCI Turkey Invest Mkt Index (NYSE:TUR), which was down 5.67%.

Some of the highlights include the HANG SENG INDEX (^HSI) up 12.82%. The RTSI INDEX (RTS.RS) jumped 18.2% after Putin approved nearly $10 billion in bailout loans – most of them going to his billionaire pals who made extremely bad bets on the markets.

The JAKARTA COMPOSITE INDEX (^JKSE) increased 5.41%. The TSEC weighted index (^TWII) was up 6.21%. And the IBOVESPA SAO PAULO (^BVSP) market gained 5.94% after taking a tremendous beating.

Does this mean it’s time to get back into emerging markets?

Probably not.

But it does indicate some rationalization between the skyrocketing prices during the so-called commodities supercycle and the new everyday reality of emerging nations facing a raw reality head-on.

Maybe you can call it sort of a fiscal post-pubescent coming of age, where enormous subsidies and reserves from natural resources will give away to the promise of responsible stewardship by business and government.

Of course, no one really enjoys being responsible for very long, and the whole stupendous spectacle will cycle up all over again.

That said, we should really be looking to China as the bellwether for a sustained emerging market rally. The country is now dealing with the backlash to a global credit crunch, post-Olympic slump and credit and currency problems.

Inevitably, China will pull itself up by the bootstraps and continue the march toward its own economic Manifest Destiny.

Naturally, an upswing in oil, natural gas and metals will also help determine an emerging-market recovery.

In the meantime, though, we have to follow the credit, because that’s what these countries need to normalize their economic progress.

The International Monetary Fund (IMF) will make available as much as $100 billion to countries battered by the financial crisis.

During the past few years, emerging markets have avoided the IMF because of restrictions that are imposed with the loans. These often include budget cuts and interest-rate increases. When these countries get in bed with the IMF, fiscal responsibility is the first order of business.

Countries such as Brazil, Mexico and countries of the former Soviet Union would be likely candidates for IMF infusions.

In the end, don’t get your hopes up high for any emerging market bubbles in the near term. On the other hand, if you’re looking for a return to long-term fiscal responsibility (and the inevitable bubble) keep on your eye on these up-and-comers.

Key
ALL ORDINARIES IDX (ASX: ^AORD) Australia
BSE SENSEX (Bombay: ^BSESN) India
IBOVESPA SAO PAULO (^BVSP) Brazil
EGYPT CMA GENL INDX (Cairo: ^CCSI) Egypt
HANG SENG INDEX (HKSE: ^HSI) Hong Kong
COMPOSITE INDEX (Jakarta: ^JKSE) Jakarta
COMPOSITE INDEX (Kuala Lumpur: ^KLSE) Kuala Lumpar
KOSPI Composite Index (KSE: ^KS11) South Korea
MERVAL BUENOS AIRES (Buenos Aires: ^MERV) Argentina
IPC (Mexico: ^MXX) Mexico
NZX 50 INDEX GROSS (NZSE: ^NZ50) New Zealand
IGBM (Madrid: ^SMSI) Spain
TEL-AV TASE-100 IND (^TA100) Israel
TSEC weighted index (Taiwan: ^TWII) Taiwan
SSE Composite Index (Shanghai: 000001.SS) Shanghai
iShares MSCI South Africa Index (EZA) South Africa
RTSI INDEX (RUS: RTS.RS) Russia
ISHARES MSCI THAILAN (NYSEArca: THD) Thailand
iShares MSCI Turkey Invest Mkt Index (TUR) Turkey

Our index shows one thing clearly. When it comes to Big Media’s news rant about wild inflation in emerging markets, you’re not getting the full story. Despite double-digit inflation in resource-rich Russia, Kazakhstan and Saudi Arabia, there is still money to be made from the oil, natural gas and other commodities that these countries export to the rest of the world.

The news gap between what you read in Big Media and what our index proves is that inflation impacts the man on the street. Commodities, meanwhile, contribute to the inflation through rising prices that are making investors rich.

With commodities, it’s very possible that the gains you realize far outstrip the corrosive effects of inflation.

For example, our big winner today is Hong Kong’s Hang Seng Index (HKSE: ^HSI). It was largely driven by gains in coal, oil and shipping. ^HSI is a perfect illustration of what I just mentioned about the disconnect between inflation and market gains in economies fueled by the commodity boom.

If you look at the big winners in the ^HSI, notably oil and shipping, they are the culprits blamed for global inflation. And if you had money in ^HSI, your gains could have been much higher than the rate of inflation — putting you ahead.

Sure, you’re feeling the pain of spiking prices in gas, groceries and utilities. But investors are still making money in emerging markets. Are you?

Have a great weekend.

Irwin Greenstein

Source: Taipan Emerging Market Index Gains 44.2%