An embedded put option?

Markets are taking a thrashing as unease at the rising volatility is prompting an increasing number of investors to unload their riskier positions. We see this "flight to quality" move as the yen shoots higher and treasury yields drop lower. Fundamentals remain intact in the U.S., however, with earnings growth trends and multiples at reasonable levels and a slower rate of growth already built into expectations for 2007 and beyond. For emerging markets, it's a different story altogether, the democratization of markets such as those of China have led to a large number of relatively inexperienced individuals making investments left, right and center, a bit like the day trading activities of the dot com era. So yes, there is a bit of a bubble out there, but nothing dramatic enough to pull the heavy weights into a full blown recession. The U.S. put option in the form of approximately 2 trillion dollars in private equity is, after all, waiting on the sidelines for the right occasion to enter.