On The Lost Decade Of The BRICs

The BRIC countries were hyped to be the top investment destination before the Global Financial Crisis. As the craze for emerging markets soared Wall Street came up with a nice-sounding term BRIC to denote the next emerging countries of Brazil, Russia, India and China. The simple catch phrase caught on and investors couldn’t get enough of the stocks from these countries during the bubble phase.

From the beginning the term and the logic behind it made no sense. Still no one cared as long as everyone was able to make profits. For instance, there was nothing in common between these countries other than all being developing countries. Brazil was democratic but has so many structural political and economic issues and always remains to be the country of the future. Russia obviously was never democratic and is a superpower in military might but the economy is average. India is another democracy but is plagued by issues even worse than Brazil. China is also neither a democracy nor a military dictatorship but is communist. Somehow these four countries were grouped together to form the BRIC. In reality investors in the BRICs have seen their returned almost turned into worthless bricks in the past decade. In fact, the BRICs have experienced a lost decade.

The MSCI BRIC Index reached its peak in 2007 and is still well below 30% of that peak as shown in the chart below:

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Source: August 2018 Client Letter: BRICs and FAANGs by Matthew Young, Young Investments Ltd.

The key takeaway for investors is to not get carried away by hype such as the BRICs. Or for that matter the newer versions such as MINT, CIVETS, NUTS, EAGLES, etc.

Related ETFs:

  • iShares MSCI Brazil Index (EWZ)
  • iShares FTSE/Xinhua China 25 Index (FXI)
  • Market Vectors Russia ETF (RSX)
  • iShares S&P India Nifty 50 Index (INDY)

Disclosure: No Positions

Stocks Deliver Strong Returns Following Bear Markets

One of the very important factors needed for success with equity investing is the ability to stay invested during any market including bear markets. To put it another way, simply selling out when stocks crash 20% or more is a foolish idea.Investors who are unable to hold stocks when punishing market events occur should not bother venturing into stocks.

When stocks are mauled by the bear, like in 2008-09 with the Global Financial Crisis, it is critical to be patient and not sell out. Many investors who sold out at the peak of that crisis lost out big time. On the other hand, people who dived into stocks at the trough or held on to their stocks have earned excellent returns in the ensuing bull market that continues to roar ahead.

The following chart shows equity returns in various periods following bear markets since the 1960s:
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Source: The Case for Staying Invested in Stocks by Roger Young, T.Rowe Price

As the chart above shows, stocks not only yielded positive returns in the years following bear markets but also earned a double-digit average annual return.

So the key takeaway is that patience and staying invested during all times is the key. Trying to time
the market never works out even for supposdely sophisticated professional investors.

Related ETF:

  • SPDR S&P 500 ETF (SPY)

Disclosure: No Positions

The Media Bias Chart 2018

The media plays an important role in democracies. However bias in the media distorts their work. Some tend to have a right-wing agenda with the coverage while other lean towards the left. Some are neutral. A very few are extreme left or right basically spreading lies and fake news on a daily basis confusing the public.

In the US for example, The Wall Street Journal is a big supporter of President Trump and his policies while The New York Times and The Washington Post are the exact opposite.

I came across the following chart showing the various media outlets with their biases:

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Hat Tip: @Lelde Smits

Maersk Container Ship Loads A World Record 19,038 Containers

Mumbai Maersk is one of the world’s largest container ships owned by Maersk, the Danish shipping giant. Recently the ship was loaded with an astonishing 19,038 Containers at Tanjung Pelepas Port in Malaysia. The ship is on its way to Rotterdam in Europe. According to a news report, the ship beat all previous world records with the loading of over 19,000 boxes.

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Source: Maritime Professional

To put those 19K+ containers in perspective, here is what a typical 20 foot container can hold:

  • 200 full-sized mattresses
  • 48,000 bananas
  • 50-60 refrigerators
  • 400 flat screen TVs

Below is another cool infographic:

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Source: Shippo


The Most Popular Cities of Europe and Tourism Revenues

Tourism is a major industry in most European countries. Millions of tourists flow into the major cities like London, Paris, Barcelona, etc. every year and the numbers only keep growing. Infrastructure in these and other tourist destinations are unable to keep up with the needs of the mass hordes of tourists everyday.

A recent article in Der Spiegel discussed about the impacts of mass tourism on European cities. From the article:

There were times when the hotels lining the beaches in Benidorm, in Arenal on Mallorca and along the Adriatic Sea in Italy, were symbols of the ugliness of modern mass tourism. In retrospect, though, that era seems almost quiet. Benidorm and Arenal are cities that were created so that Europeans would have a place lie on the beach in summer. They are artificial resorts and not very nice, but they do serve a purpose: as factories for mass tourism that could just as easily be removed should the need arise.

Today, these tourist reserves no longer fill the demand. The crowds of sun-seekers have grown so large on the beaches of Southern Europe, that some small bays on Mallorca should actually be closed due to overcrowding. Even along the North and Baltic seas in Germany, hotels and pensions are fully booked out in places like Sylt and Rügen.

The chart below shows the top 5 European cities and their tourist numbers and reviews:

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Source: Paradise Lost – How Tourists Are Destroying the Places They Love, Der Spiegel

The entire article is worth a read.

Below is a picture of Prague, another growing European tourist city.

Prague, Czech Republic