Thick as a BRIC

The WSJ asks, "what’s hotter than emerging markets?"

The answer is BRICs: Brazil, Russia, India and China.

WSJ:  "Goldman Sachs popularized the term in a 2003 report that suggested these four economies might one day surpass Japan and the West as the most important in the world. By 2050, Goldman ventured, only the U.S. and Japan could have larger economies than any of the BRICs.

The BRIC funds, which invest primarily in the BRIC countries, aren’t currently offered as mutual funds to the broader investing public because they aren’t registered with the Securities and Exchange Commission. Fund managers at Schroders and Templeton, however, said they are looking into registering in order to offer BRIC mutual funds in the U.S. Meantime, many emerging-market mutual funds, which are widely available in the U.S., give investors access to the BRIC countries.

BRICs returns have been eye-popping: while the Morgan Stanley emerging-market index is up 171% since the end of 2002, Morgan Stanley’s BRIC index has surged 262%."

There is a risk in this strategy: the limited number of companies in which to invest from these 4 nations:

"By focusing on four countries, BRIC funds also have a much smaller universe of stocks than broader emerging-market funds. That means an increasing amount of money is chasing a relatively confined group of stocks. The list of attractive companies is made even shorter since the Russian market offers little outside of energy and natural-resource companies, and China’s vast domestic stock market is closed to most foreign investors."

I cannot imagine ever investing in Russia, which is essentially a state run criminal enterprise (disagree with me? Then you go to Jail), while China treats overseas investors like they had Avian Flu, hence the appeal of the surrounding feeder nations: Korea, Japan, Malysia, Taiwan and Australia. That leaves India and Brazil (and I’ve liked the Bovespa for some time).

Hardly a compelling investing thesis, at least as far as individual stock selection is concerned.

On the other hand, if this were an ETF or Index Fund, it could be an absolute home run . . .


Going for BRIC: ‘Emerging’ Fund Lures Investors
Firms Respond to Strong Interest In Risky Markets
Such as China; Lofty Returns Are Projected

WSJ, March 6, 2006; Page C1

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Real Estate Round Up

This past week saw a lot of Real Estate related data, all of which fits our long term thesis about the macro economy and what’s to come over the next few years.

For those of you who may be newer to the site, we have been dicussing this for quite a while: starting in December 2004, we noted how Real Estate was a prime driver of the economy, and in Spring 2005, how new hiring was overly reliant on the Real Estate Sector; in August 2005, we called that Housing was beginning to show signs of cooling, and that this would eventually wreak havoc on consumer spending. In the Fall 2005, we noted how dependent GDP had become on Mortgage Equity extraction. You can find all of these by using the site search function, right sidebar.

Now as  of March 2006, most of these concepts have become widely recognized and (mostly) accepted — but when they were first introduced here, there was no small amount of incredulity and pushback surrounding them.

Looking forward, I see rates rising, housing cooling further, the consumer cutting back, and the stimulus driven economy slowing, if not slipping into an outright recession.

On to the round up:

Existing Home Sales Slip 5th Consec Month

Home Foreclosure Surge

Home Prices Decellerate

Supply Up, New Homes Sales Down

New Homes Sales: 4th Drop in 6 months

• And the most ironic piece of all, The WSJ’s Greg Ip Discovers Data Manipulation

There’s more all over the web if you want to surf, but that’s the main gist of it.


UPDATE March 5, 2006 4:44pm

The NYT’s Sunday Magazine is all about Real Estate

Go to Introduction: The For-Sale Society

See the Sunday Times Mag TOC after the jump . . .


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