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August 30, 2008

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Earlier this year I looked into a BRIC fund, but passed on it. I don't know much about Brazil, but have been keeping up with Russia since the mid-1990s. I thought in the short term, 3-5 years, investing in Russia would probably been fine. However, I was completely not confident that long term investing in Russia would work because the government cannot be trusted to resist its autocratic tendencies. Because of this longer term perspective, I passed on the BRIC fund. Now in light of recent developments with Russia, it is unclear that I could stomach the risks involved with investing over the next 3-5 years.

Having a riskier part of one's portfolio is a good thing, but sometimes knowing too much can make things difficult.

Brazil has certainly done well for me in the past, but with commodity prices going lower, it's finally dragged many of Brazil's high fliers back to earth. Companies like Vale (RIO), Sadia (SDA) and Petrobras (PBR) were big holdings of mine in 2007 and held them until mid 2008, but had to ditch them due to rising negative sentiment against the commodity sector by in large. Sentiment dictates everything these days.

Petrobras (PBR) would still be my favorite pick if you had to buy today. They're sitting on billions in untapped oil reserves and have secured contracts with several deep water drillers for something like 5 to 10 years out. Although, with any developing nation, basic service and quality of life plays are also excellent choices. Wireless telecom and banking sector picks would be my second choices, followed up by the housing market.

You could simply buy the Brazilian ETF index (EWZ) if you just wanted exposure to the Brazilian broad market.

The China ETF index (FXI) is also looking fairly attractive at these levels. I'm looking at the FXI for a quick rebound after the Olympics when things get back to work as usual.

The best way to invest is to diversify across all markets. That includes the "BRIC" area, as well as all of the rest of the world. Don't focus on any given area - buy the market through mutual funds that cover the world.

One thing to consider when investing in foreign markets is taxes. Taxes can be higher when dealing with foreign investments.

I'm just curious why Taiwan and South Korea are still considered "emerging" markets?

Decent article. Its not as grossly biased as previous articles by Marotta.

I'm curious, by what measure is Brazil the biggest BRIC country? Its population and economy are smaller than Chinas or Indias.

When you discuss the impact of free trade you claim economic studies say it benefits us. But you provide no reference or basis for that. If you are going to say that unions and hippies are fear mongering and that the facts prove otherwise then state the facts to support it. I'm not doubting there are such studies, I'm just saying you should point to them to support your argument. Most people see the 'anectdotal' evidence of outsourced jobs and shut down manufacturing plants and don't readily believe someone who says studies prove them wrong.

Jim


A very good article with some great information. But why the plug for McCain in the middle? It is random and has nothing to do with the topic.

Jenny --

That's a plug? I see it as neutral for McCain at best.

FMF: He says "President Clinton should be praised", and in the next paragraph states that "John McCain is the heir to the Clinton administration's economic principles." Considering that, from what I know of the candidates' platforms, Obama and McCain don't differ significantly on this particular issue, yeah, I'd call that a plug.

Full disclosure, I disagree with each candidate on at least one important issue issue and I'm not sure who I will vote for yet...I just get annoyed around this time of year when politics gets forced into every conversation. Seems to happen repeatedly with MAM's posts.

if you bother to look at the map, Brazil is definitely not the biggest BRIC country:))

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