I don’t see this happening anytime soon with near weekly stock market crashes. If the large fund managers showed some backbone and stopped panic selling every time a European minister sneezes, the US stock market might recover. But all I see in the markets for the foreseeable future is fear and cowardice.

Consider company American company A and emerging market company E. The cost of manpower for A among the highest in the world. The cost of manpower in E is 30x less. Clearly A is many orders of magnitude more efficient than E.

What is the chance that A can succeed in E’s home turf where wages are 30x less? Excellent.

What is the chance that E can succeed in A’s home turf where wages are 30x higher? Nil, but hell nil.

Consider that the average monthly wage in China is, say, $200. Consider too that an entry-level employee at McDonalds earns say $7 in compensation for 160 hours a month, a total compensation of $1120 a month.

For McDonald’s to duplicate their model in China is trivial. In fact McDonald’s in China should be far more profitable, with the benefit of far lower wages, their biggest cost. Could a Chinese version of McDonalds, which might pay people less than $100 per month succeed here? I can’t see how.

Where is the profusion of Chinese companies landing on our shores?

So under globalization American companies that go international get this massive tailwind. Meanwhile, the American public has this brutal headwind of global wage arbitrage.

Clearly, if the American public wants to hedge its misfortune, it should own American stocks.

The whole crisis was that the American consumer ran out of gas and the emerging world couldn’t take the handoff that Mohammed El Erian talks often about. So this would be exactly the medicine needed to cure the present deflationary winds. It is also bullish for western companies that sell to China.

American exporters are in a sweet spot (well not in re Europe but at least in re China). Western companies can hold a very hard line on wages for their employees for years to come while increasing their sales substantially in the world’s largest market. This is the stuff of increased profits, the long-run driver of the stock market.

Note that when companies are very profitable, they can buy their own shares. Demand for stocks need not come only from the public.

The above argument applies mainly to American exporters. Companies driven by domestic demand surely face tougher sledding.

Besides, there is a rumor that Iran is selling $45 Billion Euros, so really, there is no chance for the Euro to recover unless the European economy improves, plus the European Central banks have to exceed the Iranian dumping with buy backs.

I wish the markets, especially the US markets were a little less prone to panic.