Investors have a new geopolitical hot spot to worry about. And this one could potentially trump others in Ukraine and the Levant because it involves China, the world's second-largest economy and an engine of global growth in recent years.
 
For five days, downtown Hong Kong has been taken over by pro-democracy protesters who are seeking additional electoral rights from the Chinese government and don't seem inclined to back down.
 
While Hong Kong itself is a small player in the global economy and markets, a number of financial writers are seeking to handicap the protest's likely impact if China gets drawn into the expanding political crisis.
 
As Paul Davidson of USA Today writes, "The protests in Hong Kong are not yet sparking fears that the region will become the next trouble spot for the global economy, but such concerns will grow if the conflict intensifies and ensnares China."
 
Davidson writes that the unrest, if it continues, could disrupt Golden Week, an early October holiday during which Chinese tourists flock to Hong Kong. "Jewelry and other luxury retailers in the region could see reduced sales, hurting their stocks and Asian stock indexes more broadly." He writes that U.S. stock markets could be modestly affected.
 
But sources who talked to Davidson referred to Hong Kong's status as a major financial center that supplies capital to China. "An escalation of the protests could chill U.S. investment in China, further crimp China's economic growth and ripple across the global economy," he writes.
 
In addition, Davidson adds, there is the possibility that the demonstrations could spread to China, though that seems like a bit of a stretch.
 
The highly influential Mohamed El-Erian, the chief economic advisor at Allianz, has also weighed in on the Hong Kong protest's likely impact on global markets.
 
"Will the tensions in Hong Kong be the straw that breaks the global economy's back?," he asks in a column for Bloomberg View. "The answer is far from straightforward."
 
El-Erian writes that "some are quick to use history to dismiss any lasting economic impact, both domestic and global, of the Hong Kong protests. They rightly point to the repeated ability of the Chinese government to quash internal protests, and without altering the country's growth trajectory. For them, it is only a matter of time until the current civil disobedience in central Hong Kong dissipates."
 
But he points out that this time could be different. "First, the combination of the Internet, social media and better mobility makes it easier to coordinate and sustain protests, while also reinforcing individuals' confidence in meeting their aspirations."
 
El-Erian contends that the Chinese government is likely to prevail over the protest movement in Hong Kong. "But in doing so, it will probably be inclined to slow certain economic reforms for now, seeking instead to squeeze more growth from the old and increasingly exhausted model—similar to how Brazil's government responded to protests there ahead of the World Cup a few months ago. And while this would be part of a broader political strategy to defuse tensions and avoid an immediate growth shock to both China and the global economy, it would undermine the longer-term economic vibrancy of both."
 
Meanwhile, the commentary continues to flow almost as heavily as the bond assets in the wake of the surprise announcement late last week that Bill Gross, a co-founder of Pimco and the most influential bond-fund manager of the past 30 years, was leaving Pimco for Janus Capital, a small fry in the bond-fund world. (Gross is also a longtime member of the Barron's Roundtable.)
 
Neil Irwin, a New York Times columnist, concludes that the news of Gross' departure from Pimco, along with the decision of California's pension fund, Calpers, to exit hedge-fund investing, signals the "end of the cult of the lone genius who can, through superior mental circuitry, outsmart the entire rest of the financial world and earn superior returns for his or her investors."
 

"It has been a long time coming. The advent of low-cost index mutual funds—and more widespread understanding of their advantages—has squeezed out the active stock-pickers of the not-too-distant past," Irwin writes.
 
Irwin is on fairly firm ground, but he is also guilty of overreaching a bit in eulogizing the notion of the investment guru. While there's been a big shift in recent years toward index investment and away from active stock-picking, there will always be a sizable share of investors who seek to beat a market, not just mirror it, and thus seek out talented managers.
 
Perhaps Irwin hasn't noticed that billions of dollars have been flying out the door at Pimco since the word was out that Gross was leaving. Conversely, Janus Capital has been receiving a flood of new bond assets.
It would be naïve to think that guru-chasing was not involved here.