Ding Ding

Is that a bell I hear ringing?

The New York Times has an article online today (by the way I could swear this article is repeated from a couple of months ago) about the B.R.I.C. investment theme. B.R.I.C. stands for Brazil, Russia, India and China. The article itself reasonably balances the pros and cons of investing in these countries and in emerging markets in general.

One thing that caught my eye, aside from the entire article itself, is that HSBC(HBC) has created a product for European investors the invests in just these four countries and that a similar product may soon roll out in the states.

This is an important development. When investment themes become popular, investment banks create products to cater to demand. Eventually too much product gets created and the theme rolls over and can offer poor returns or completely blow up.

I don't want to minimize the importance of what is happening in these countries. They are all developing nicely and becoming more important to the global economy. Regular readers will know that I believe in these themes and have invested client's money in these areas (and my own money too).

Just because the countries will be better off for what is happening now does not mean that stocks have to up. The internet theme from a few years ago was correct. The internet has changed our lives, I don't think there can be much debate about this. This did not translate to net stocks undoing all previous rules of investing. The stocks did not go up forever, profitability did matter and companies with great stories could fail (Exodus Communications comes to mind).

The B.R.I.C. countries, or the entire emerging theme for that matter, will not go up forever. Economic growth and profitability will matter. My belief in emerging markets does not preclude me from cutting back if I think down a lot is on the way. Successful investing includes not letting emotion or excitement get in the way of logic. At some point Brazil, for example, will rollover. Maybe that will happen tomorrow or maybe not for a couple of years. Pay attention and listen to logic.