Monday, March 16, 2009

Bespoke Investment: BRIC Country Return 1 year and 10 year vs the US of A

If you are not familiar with "BRIC" it is a firm Goldman Sachs coined early in the decade for the 4 horsemen of growth (B)razil (R)ussia (I)ndia and (C)hina. Personally I like BIC (Russia is so levered to oil) but if you can time your trades right a lot of money is to be made in any. At this point China is China, and basically Brazil is a 2nd derivative to China (i.e. when China runs, it needs to buy commodities. Who has commodities? Brazil. And Brazil is like Russia without the political risk) India is a unique case in and of itself.

I am a big fan of the Chindia (and by derivative Brazil) stories over the long run. I do believe, however, the hype about China somehow AGAIN decoupling from the rest of the world is.... a reach. And this from a person who advocated last summer/fall when the punditry said the United States would be the first to recover (since it was the first to fall) than indeed that was false and China would lead the world in recovery. But I think it's premature to get excited by a country so reliant on foreign exports, when global trade is collapsing. But we'll address this another day.

For today some quite snazzy graphs from the fellows over at Bespoke Investment Group - a comparison of the BRIC countries stock returns versus the U.S. in both the 1 year and 10 year time horizons. I'll let the pictures do the talking. Much like I said in this weekend's post about oil - if you have a 10 year horizon and can ignore the stomach turning shorter term losses in the stock market - throw money at the next 500 million people (Chindia) who are going to move from poverty to middle class & check back in 2019.

1 Year

10 Year

Keep in mind it's all about "where you start the graph" - while China's return is not as attractive over a 10 year period, I'd expect from 2005-2007 it trounced any other index. I don't recall what was happening in 1999 in Russia but the world was dealing with multiple currency crisis' of which the ruble is usually somehow connected... hence the "starting point" might be affecting the relative outperformance of Russia.

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