Invest in BRIC?

BRIC? Everyone is talking about big emerging markets and wants a piece of the action. Businesses and individuals are rapidly embracing new technologies. There are a few rogue countries and terrorists continue to threaten but basically we are all friends now. Economies around the world are doing great. It's a permanent plateau of peace and prosperity! It really is different this time!

Yes it's...1906. Time to put money to work for the long term. My pension consultant told my plan trustees we can't lose provided we hold for decades. According to them unmanaged "low cost" index funds are the best bet. They tell me there are even speculators out there who dare to short sell! Suckers are born every minute. Long only is the way to go. Short sellers will be wiped out with the outlook for 1907 looking so good...

Other countries' prospects are even better. Russia is attractive with all those natural resources. Argentina just entered the top ten of world economies with analysts predicting massive growth. I will buy German stocks too with Europe so stable these days. Europe clearly has no chance of those wasteful territorial squabbles ever again. Will buy another ski rental condo in Austria. Can't lose money there. And China has all those people and now a free market economy. I'll buy China stocks and hold to maturity those "investment grade" China bonds. It's clearly going to be a Chinese 20th century...

Of course the investment returns from those countries' "securities", decades later, were effectively 100% losses on stocks AND bonds. All looked like prudent investments in 1906. It will be interesting to see which countries' benchmarks fall to ZERO in the 21st century and whose "risk free" government bonds default. MANY will. Perhaps the ones we least expect. Maybe those that look today like "no brainer" long term holdings. Forget the EURO. Europe is about as "united" today as in 1906 and look how that turned out.

There is no such thing as long term investment. Just a manic depressive series of short terms and you must invest accordingly. No-one has a clue on the long haul; not you, not me and definitely not bank salesmen coining BRIC acronyms. All you can do is hedge, manage risk and attempt to make money from what is happening NOW. Every country offers opportunities for skilled investment strategies. Buying and holding stocks and bonds is not one of them.

My preferred BRIC, Bangladesh, Romania, Indonesia and Colombia, will probably do just as well as that more famous BRIC. In general small stocks outperform large stocks and small hedge funds outperform big hedge funds. And there has NEVER been any link between a country's population and its stock market returns. Australia and South Africa crushed the northern hemisphere last century.