The BRICs countries, especially Brazil, India and China are all experiencing a change of fortune.
For stars they are quickly turning into dogs.
This is of course how boom, bubble and bust works.
From countries that could do no wrong they are now countries that can do no right.
The threat of Fed tapering has exacerbated this trend and now emerging market currencies are in a tail spin as the dollar hardens dramatically, at least across the axis of developed/developing world.
You could see this as the world economy dropping together into the void or you could say it is a rotation from developing countries to developed countries where the tables are turned.
Rather than a new global collapse, growth might become rampant in the west while the Brics go into painful decline.
I go for the latter model.
The boom and bubble of the developing world is now in a bust phase.
However the west is about to boom.
This is a very brave theorem. It could easily be wrong. There is plenty of thing in the system that could polax the badly run, massively indebted west, with their runaway profligate governments that are beginning to snoopy like the KGB on their citizens.
However what would it mean if the west began its own boom, bubble, bust cycle afresh. Let’s face it, it wouldn’t be the first time.
It would be a huge opportunity.
As an investor you should always play the odds, so even if this new boom theory was wrong, how do the odds and the expected return match up?
This is where it gets interesting to me.
How could we get a handle on what that would look like.
Mark Twain said that history doesn’t repeat itself, but it does rhyme.
So lets look at some stanzas from the Bric boom.
Here they are together (all market)
You can see that from around 2000 and the start of the boom the moves have been massive.
Top to bottom India and China went from 1000 to 6000 in their boom phase
(and)
Here is India.
Here is China
Brazil rose nearer 1000%
Russia meanwhile rocketed 50 times in its boom!
So the take home is. If the world has turned and the west is in for a market boom, you need to leave you preconceptions at the door.
It might be a long shot, but if it came home the upside would be massive.
How could stocks get valued like that?
Perhaps imagine the indices if Exxon had a p/e of 40.
Alternatively ask the shareholders of Tesla.