In the Street lingo, institutional investors are often referred to as the " smart money." There is a reason for that. Institutions manage huge amounts of money, and they are typically at the epicenters of information quakes, since, most of the time, they are the ones causing them. Finally, their vast market and trading experience gives them quite an edge in comparison to the rest of us. And, although, as of late, they are hardly saying anything new, it is still "nice" to hear one's opinions (read nightmares!) confirmed.

Last Thursday, Merrill Lynch completed its monthly survey of global fund managers, compiling opinions of 204 institutional investors from around the globe, who cumulatively manage about $919 billion. Incidentally, the survey results came out a day before all hell broke loose on the world stock markets. It was almost as if their concerns about the economy, inflation, dollar, and interest rates set the stage for what happened on Monday of this week.

So, what exactly is the "smart money" thinking? Well, they expect global economic growth to continue on its disaster path. Apparently, 43% of managers believe that world economies will grow either only marginally or not at all.

In particular, portfolio managers think the days of undervalued stocks are over. In May survey, only 14% of managers believed stocks were discounted, as opposed to 24% in April.

Moreover, a staggering 70% of respondents believe that inflation will reach uncomfortable levels in the next 12 months. This is a significant jump from 56% reported in April.

In terms of expectations for the U.S. dollar, the greenback has, more or less, received a failing mark. When asked to compare the three major world currencies, the greenback, euro and yen, 76% of those surveyed expect the greenback to keep on depreciating. The choice number two was euro, receiving a failing mark from only ten percent of those surveyed.

Not surprisingly, most of the surveyed managers have decided to hold their horses when it comes to risk tolerance. Consequently, many of them are increasing their cash positions, shortening their investment horizons, and limiting risk.

Since they're called the "smart money," perhaps it would be a good idea to do same in our portfolios. For starters, get rid of any long-term "losers" you might have in your portfolio. If they did not perform by now, chances are, they will not going forward either. It may also be a good idea to execute every new trade with stop limits firmly in place. The perfect storm may be brewing above the world's markets, and that means that anything that past performances are irrelevant when so many powerful political and economic factors are at their worst play.