It barely seems possible that anyone is more pessimistic about corporate earnings prospects than American shareholders right now, with the U.S. stock market down almost 15% for the year and the banking system coming unglued before our eyes.
Yet if you take a moment to look around the world, you may be surprised to learn that U.S. stocks are the picture of health compared with their counterparts worldwide. And measured against the gloom in bonds, U.S. stocks are like a sunny day in spring.
Time to gloat? Not on your life. For if there's one thing we know about global markets these days, it's that they seldom diverge for long. So while it might be tempting to look with pity at investors across the seas and in other asset classes, it's more likely that U.S. equities will plunge than that foreign equities will float higher toward our perch.
Just spin a globe to see a few examples from the world of truly Olympian value destruction:
The British stock market has been harried down the rabbit hole to the tune of 22%, or about half again as bad as we have it. Blame energy, banking and telecoms, because those are the downside leaders for the Europeans, particularly basket cases such as wireless giant Vodaphone Group (VOD, news, msgs), down 30%, and Royal Bank of Scotland (RBS, news, msgs), down 44%.
The French market is also une grandestinque-bombe, down 22%, led by energy and banks. The Belgian market is worse, down 30%, with Germany down 24%, Austria down 23%, the Netherlands down 21% and Spain down 23%.
Elsewhere on the Continent, the news does not improve. Sweden is off 23%, Russia is down 23%, Turkey is down 25%, and Greece is down 36%.
How about Asia, the crown jewel of global growth? It's a wet noodle. The Chinese market is down 31%, South Korea is down 27%, once-hot Malaysia is down 29%, and India is down 43%. The best in the region are down half as much but still a lot, as Japan has lost 16% of its value this year. Taiwan is off 14%, Australia is off 21%, and Singapore is down 19%.
And Latin America, that bastion of energy, metals and grains? Well, the bear market in Brazil has only just begun; it is down just 12% so far after being up as much as 22% in mid-May. Mexico is hanging in there at 5%, probably propped up by the narco-trafficking biz. But Argentina has fared a lot worse, sinking 20%.
Most of the European and Asian countries' biggest companies are banks that have suffered the same fate as U.S. financial institutions. Gullible and desperate for income at a time of record-low yields in the mid-2000s, they were suckered by Wall Street investment banks into borrowing to the hilt to buy high-yielding mortgage-backed securities that were mislabeled as high-quality, low-risk investments.
It takes only a 4% loss to wipe out your capital when you're at leverage levels of 30-to-1 -- a measure of how much capital you have at risk compared with how much capital you have before borrowing -- as many banks around the world were. And add to that a crash in metal and energy prices in the past two months, plus a slowdown in industrial growth, and you have a conflagration of capital that knows no borders.
The global dominoes fall
You need read only a single day's worth of headlines to gather that a global, synchronized economic wipeout is under way. On Aug. 18, Bloomberg reported that:
French manufacturing confidence fell in July to the lowest level in five years.
New Zealand's services industry contracted in July for the fourth straight month.
Sales at Japanese department stores fell in July for the fifth straight month.
Singapore's overseas shipments dropped in July for the third straight month as companies shipped fewer electronics and drugs to customers in the West.
[link to articles.moneycentral.msn.com] 
United States
