dtblount

Invest in BIC, Not BRIC

I agree with everyone's criticism on your views regarding Russia.

While the RUB has taken a beating and the government has closed trading several times lately, it still provides amazing opportunity. With respect to your own argument, how is it any better than China??? China's currency is pegged/manipulated (depending on who is analyzing it), and the gov't has an even tighter grip on the economy and market than does Russia's. Granted, the Chinese have not exhibited such control lately, but the risk is still very much there. You could argue that Brazil is the weakest because Lula doesn't really have a formal education...or that India is the weakest because they suffer from a plethora of red tape from the British Colonial era. Your one line argument seeking to discount Russia is hardly sufficient. I am incredibly bullish of China...as well as India, Brazil, Russia, and a host of other EMs and FMs.

A country as rich in natural resources as Russia (crude, natty, platinum, palladium, gold, fresh water, grains, etc, etc) - not to mention a pretty decent military with regional diplomatic influence and FX reserves should absolutely be considered for investment. They could be self-sufficient if need be - plus, they have an energy stranglehold on Europe. Yes, there are risks...but I feel the rewards far outweigh these.

Instead of removing any one of the BRICs, I'd focus my time and efforts on figuring out who should be added.

Emerging Markets: The Return of Decoupling?

AndrewBaker, great comment (and a bit late for me to reply, ha...), but I do not think it will take much to get some of the emerging and frontier markets going again simply due to the size of their GDPs. I agree that eventual decoupling will take hold once organic consumption and demand amongst emerging/frontier nations picks up, but I don't think it all hinges on FULL recovery of the US or any other more-developed economy.

I haven't worked out any of the figures, but I am sure that the marginal demand from various stimulus packages around the world (US, China, etc) will work to magnify economic stability and possibly growth in some smaller raw materials-exporting nations. Of course, any "buy American/British/Chinese" stimulus package cuts down on this effect, but raw materials are another story. For example, if the Chinese gov't decides to build more apartment buildings, they will need copper. Domestically, China is already using up all the copper they produce, so they will get it from elsewhere...Chile, Peru, Zambia, etc. Regardless of China's economic recovery, massive purchases of copper from these nations will definitely have a magnified impact on their respective economies and GDP.

Much of the more-developed world relies on emerging/frontier nations for metals, minerals, ags, etc...and this will only grow stronger with time.


On Apr 01 03:15 PM AndrewBaker wrote:

> Decoupling will happen in time ... but not so much just yet. The
> emerging markets still need to export to us and the west to get the
> growth they want and need. As they improve internally, then their
> own populations will want nicer and better things, and that will
> cause the decoupling effect to happen and show due to their own thriving
> internal economies. It will come, but I'd wait for our recovery to
> show first, then back the emerging economies to shoot ahead.

Emerging Markets: The Return of Decoupling?

Great piece and I really like your optimism. I'm of the same mentality as you...it does appear to be that some decoupling has taken effect.

I'm very bullish on China (of course...but I don't think breakneck growth will last much longer - time for some stability), Chile (copper and fiscal responsibility...not many people seem to know what that is anymore!), Brazil (solid currency prospect, ags, oil/energy), South Africa (gold/platinum, I expect elections to go well, Zuma could be another Lula da Silva, Manuel is likely to stay), Russia (excellent nat'l resources, appears to be bottoming-out), Turkey (solid currency prospect, promising future in global trade and diplomacy due to military strength, geographic location, and population)...and Emerging/Frontier Markets on the aggregate (I like FRN and EEM, the basic ETFs).

I think China will lead the recovery, followed by smaller fiscally-conservative, resource-rich EMs/FMs, and the US (first of the developed nations).

Thoughts/responses?

Russia's Too Risky - Barron's

I think we are all forgetting that Russia is an EMERGING MARKET. It is not a developed market and simply cannot be compared to the US or the Eurozone on any real level. Of course there is risk and the threat of geopolitical instability. People don't invest in Russia because of stability and low volatility. They invest because the perceived gains in individual investments are believed to outweigh perceived risks. There are great companies in every country on earth...some are easier to find and invest in than others. Even Zimbabwe has great companies...

In a broad, macro context, I'm extremely bearish on Russia in general...but some individual companies look great to me. However, if commodity prices slow down, I think the Russian economy will see the current problems magnify, as well as the emergence of new issues. I don't think the economy is diversified enough and a lot of new wealth is leveraged on the commodity boom...


Cheers

Minefields in LatAm: Dodging Political Pitfalls

Great article! Good coverage and geopolitical analysis...I'd also love to see a similar piece on Africa....

Cheers