Jim Sinclair thinks that Pakistan is the single biggest wildcard which could change forever the world as we know it.

He's right -- it's a powder keg waiting to explode, and they DO have atomic weapons. Pakistan is closely connected with Afghanistan and the whole "war on terror"

Investors riot in Pakistan as market tumbles
Benchmark down for 15th straight session; loses 27.5% this year so far
By Polya Lesova, MarketWatch
Last update: 5:21 p.m. EDT July 17, 2008
Comments: 11
NEW YORK (MarketWatch) -- Popular anger over tumbling equity prices erupted in Pakistan on Thursday, underscoring the difficulties regulators face in attempting to prop up falling markets as turbulence in many of the world's financial markets continues unabated.
The turmoil in Pakistan comes at a time when several emerging markets are considering market stabilization measures, while regulators in the United States are moving to limit short selling and speculation in the oil market.
Regulators in China have signaled their intention to stabilize the local market, which became the worst performer among global markets this week. India has suspended futures trading in several commodities.
In Pakistan on Thursday, more than 200 protestors attacked the Karachi Stock Exchange, the country's main equity market, and demanded a temporary closure of the market to curb further drops in share prices, the BBC reported.
Smaller protests took place in Islamabad and Lahore.
The Karachi's KSE-100 benchmark stock index fell 2.6% to end at 10,212 points, declining for a 15th session in a row. It is down 27.5% year-to-date. Read more.
"You've seen this before and you'll see it again when a hot stock market has sucked in all the unsophisticated retail money," said Reiner Triltsch, head of the international equity team at Federated Investors.
"People who don't understand markets can go down, they get furious," he said, adding that any government measures to prop up the market usually don't work.
"In the long run, if the fundamentals are not positive, if liquidity is going away, if growth is slowing, and then you introduce the specter of increasing interest rates, [government intervention] will not affect the eventual valuation of the market unless they just shut it down," Triltsch said.
Local investors, who dominate Pakistan's equity market, have learned the hard way how quickly fortunes can change in the stock market.
Pakistani shares, despite the country's precarious political situation, had a great ride until late April this year.
In 2007, for example, the KSE-100 index soared 41%. In the first few months of 2008, the KSE-100 was the best performer among major emerging markets indexes. However, since April 18, when the index soared to a record high of 15,676 points, the KSE-100 has tumbled 35%.
Regulators intervene
"Any excessive speculation is not conducive to the normal functioning of the market," said Jack Dzierwa, global strategist and co-manager of the Global MegaTrends Fund (MEGAX:
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"You don't want to be over-regulating, but where do you draw the line? No one wants to have the market completely collapse," Dzierwa said.
The Pakistani market's precipitous decline prompted regulators to put in place market stabilization measures in late June, which included trading curbs, banning short selling and setting up a market stabilization fund.
The Karachi exchange, for example, reduced the lower trading curb to 1% from 5% previously and increased the upper trading curb to 10% from 5% previously. The day the measures were introduced, shares rallied nearly 9%. See full story.
The new rules, however, also led to a steep decline in trading volume on the Karachi exchange.
Last Friday, regulators reversed the upper and lower circuit breaker to 5% effective July 14. They also allowed short selling and reiterated their intention to launch an Equity Market Opportunity Fund.
This latest decision eroded investor sentiment. The KSE-100 was down 17% year-to-date on Friday, meaning that it has fallen 10% since Monday.
"Government measures to control stock price volatility and the slump proved counterproductive in this case," said Arpitha Bykere, an analyst at RGE Monitor.
"The relaxation of the trading limit has created great uncertainty among investors," she said, explaining that while the initial rules were positive, the reversal of most of those rules was a big negative.
The risk is that if governments create this kind of policy uncertainty, foreign investors will withdraw money from the country, which would make it very hard to finance the country's soaring deficits, Bykere said. Pakistan is also struggling with inflation, which accelerated to a three-decade high of more than 21% in June.
"Looking at recent trend of stock markets around the world, we've seen extreme stock market volatility," Bykere said. "Governments are bound to undertake such measures and it's highly understandable in this kind of market turmoil."