Conspiracy theorists, meet the Nostradamus of Novels: Tom Clancy.

My colleague and fellow analyst, Christian DeHaemer, and I were reading up on the latest news from the South Ossetia conflict between Russia and Georgia. We were passing articles back and forth, trying to determine what was really at the heart of the matter, and how it would affect the markets.

(Turns out, Russian markets aren’t taking it too well… The ruble fell 1.6%.)

Then Chris turns to me and asks, “Have you ever heard of Ghost Recon?”

Back in 2001, military science novelist, Tom Clancy designed a video game called Ghost Recon. Here’s the story’s timeline…

The Russian Democratic Union, consisting of Russia, Ukraine, Belarus, and Kazakhstan, is formed in 2007, with the goal of reuniting the former Soviet Union states. Action comes to a head in April 2008, when ultra-nationalists seize total power in Russia and begin invading the Baltics and Georgia. U.S. Special Forces join with rebel factions in Tbilisi, Georgia, but can’t hold back the Russian tide…

Earlier today, in real life, Russian planes flew over the presidential palace in Tbilisi.

This coincidence gave me chills. You can check out the real timeline for the current conflict in this article from Reuters.

The Georgian president, Mikhail Saakashvili, says this conflict, in which Russia is supposedly supporting a separatist faction in Abkazia (an area in South Ossetia), is because Russia wants to control energy routes through the Caucasus.

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The word nuclear stirs up all kinds of fears nowadays… Everything from Chernobyl to Iran comes to mind, and the fallout is – in my opinion – mostly political.

So what does it say when nine countries in central and southeast Europe take up the atom?

We’ve heard that China wants to build 30 new nuclear reactors over the next 15 years, and now news has hit the public that Russia will spend $40 billion to boost its nuclear power sector over the next seven years…

But have you heard that Turkey, long-pressed by an energy shortage, has plans to build three nuclear plants? By September 24, it will close the call for bids to build the first nuclear plant in the country.

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Ask yourself this…

If the U.S. housing market is at rock bottom, how can heavy-equipment maker Caterpillar, Inc. grow its sales by 13%?

The answer is simple: emerging markets.

In April, Caterpillar (NYSE:CAT) announced surprisingly strong results and a 13% surge in Q1 profits. Caterpillar’s work-around to the U.S. housing crunch is an aggressive push into emerging markets.

Countries such as China, India and Russia contributed to the company’s 30% leap in international sales. By contrast, North American sales rose a paltry 4%. Sales and revenues outside North America represented 58% of total sales and revenues in Q1 — up from 53% of the total a year ago.

Naturally, Caterpillar is increasing its commitment to emerging markets. In addition to China and India, the company is focused on the Commonwealth of Independent States — or the former Soviet Bloc.

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If you look at the chart of the Istanbul Stock Exchange your gut instinct is to cut and run. But is that the best strategy for an emerging market with great upside potential?

Like other emerging markets, Turkey is taking it beating from inflation. So far, the government’s policies have kept inflation below 10% — putting it a notch above China.

Let’s face it: inflation is wreaking havoc on all markets, including the U.S. In fact, inflation is probably the biggest cause of volatility in emerging markets today. For investors, that leaves that basically leaves two choices: 1) go into something stable like bonds or 2) get in at the bottom and ride out a market that has the legs for long-term growth.

Turkey’s economic fundamentals tell me that long-term growth is the way to play the Istanbul Stock Exchange. And the best way to get in now is through the ISE National 100 Index. Since it reflects the performance of the Istanbul Stock Exchange, the chart below may lead you think that Turkey is in deep trouble. However, if you discount the effects of inflation, Turkey has the potential to be a good place to put your money for the next few years.

One of the most important aspects of investing in emerging markets is government stability. The largely Muslim nation is on a quest to make important reforms for the 21st century.

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