While you were sleeping, Asian markets followed the U.S. down. Japan's Nikkei lost 9.6% as a real estate investment trust and an insurance company -- Yamoto Life -- filed for bankruptcy. Markets in Hong Kong, Korea, Australia, Singapore and Thailand fell between 6.5% and 8%. In Europe, markets opened down 10%. Fear is rampant with the volatility index (VIX), a measure of fear, closing at an all time high of 63.92.

By chance, there is a meeting of G7 finance ministers in Washington this weekend, and there will be a push to do something by Sunday night. I think it would be a triumph if everyone in the meeting could agree on a common definition of the key problem: the freezing up of short-term lending markets (the TED Spread, a measure of short-term lending risk, hit a record 4.23%), the lack of capital in the global banking system, or investors fleeing the stock market.

Why would this help? Part of the reason that global efforts so far have failed is that there does not appear to be a common understanding of what is wrong and what it will take to fix it. This has been reflected in uncoordinated tactics -- flooding the markets with liquidity, cutting interest rates, guaranteeing money market funds, injecting capital into banks -- in the UK only -- and our DOA $700 billion reverse auction plan.

With markets in Asia down between 4% and 5%, Europe is following suit. Maybe the $810 billion bailout package that was sold on the premise that it would stop a financial meltdown is not living up to its billing. (Has anyone found those Iraqi WMDs?) But it could simply be that this global financial crisis is taking a bit longer to surface in Europe than it did in the U.S.

How bad is the stock market damage? Japan's Nikkei fell 4.7% to a four-year low and Hong Kong stocks tumbled 5%. European stocks opened lower -- the Dow Jones Stoxx 600 Index lost 3.9%; UK's FTSE 100 and France's CAC-40 Index both lost over 5% of their value, while Germany's DAX declined 4.8%. How can this be happening? Weren't the combination of a $700 billion worth of reverse auctions to buy financial toxic waste and another $110 billion of tax breaks enough to cure what ails the global economy?

In a word, No. Europe has similar problems to those in the U.S. -- financial institutions that borrowed too much money to take on more risk than they could manage. And by creating a single currency that integrated many European economies, the EU is facing its biggest financial challenge since its creation in 1992. So far, it has taken piecemeal steps to deal with problems at particular financial institutions.

On October 31, the benchmark U.S. dollar-denominated MSCI All Country World Index closed at a record price of 427.63. It has since fallen to 366.21, a drop of 14.36%.

Yet not all world markets have fared equally poorly. Over the three-month span, there has been significant divergence between some of the best and worst performers, as the accompanying graph and table attest.

While it is hard to draw definitive conclusions, two things seem to stand out:

• Aside from Japan, which has been among the worst performing Asian markets for quite some time (and thus, has likely attracted considerable "bottom-fishing" inflows from value and contrarian-oriented investors in recent months), and Malaysia, which has remained a curious oasis of stability since global markets peaked, Asia-Pacific markets have not been been a popular investment destination lately. Perhaps we are witnessing the unwinding of ill-fated "decoupling" trades?

Investors with a penchant for international stocks would do well to read "Emerging Giants: Building World-Class Companies in Developing Countries" by Tarun Khanna and Krishna G. Palepu in Harvard Business Review, October 2006.

The authors studied 134 companies in 10 emerging markets to see which of these companies qualified as "emerging giants," and to see if there were common strategies in the movement from local to global player. The authors segment the market in developing countries into 4 components:

Global Tier is dominated by multinational, deep-pocketed Western companies. This segment forms the top of the market pyramid. Customers in this segment are willing to pay a premium for the same quality products that are available in developed markets. Emerging giants cannot hope to compete against the multinationals.