In the U.S., it's easy to become myopic and lose sight of what's going on in the world. The accelerating pace of life in the U.S. makes it challenging just to stay abreast with what's happening here.
But if you don't take a look at the bigger picture, you could be left behind.
Take a look at the chart below.
Performance of the Brazilian Bovespa index (ticker: EWZ)
vs. the Dow (red line)over the past year
Obviously, the best investments at the moment are not in the U.S. They are in the strong-growth emerging markets, including Brazil, Russia, India and China.
I no longer work in the financial industry, but I still have friends who manage millions of dollars for their individual and institutional investors.
We discuss the state of the markets occasionally. And lately we've been talking a lot about Brazil.
Brazil, which was one of the last countries to enter the recent recession and one of the first to emerge from it, has experienced such an influx of foreign capital lately, they've recently imposed capital controls.
The Brazilian Real currency has become so strong vs. the dollar
officials are concerned that their exports are becoming too expensive
Capital controls are tariffs or restrictions designed to slow the infusion of speculative capital. Though Brazil's future seems bright at the moment, emerging markets have been crushed in the past when sentiment went against them and investors from around the world withdrew their money en masse.
Brazil, whose currency has jumped 35% this year, recently imposed a 2% tax on foreign purchases of Brazilian stocks and bonds. It also levied a 1.5% tax on purchases of U.S.-listed shares of Brazilian companies, which including PetroBras (ticker: PBR) and mining giant Vale (VALE).
Capital controls are the governments way of saying you've got to pay to play. Of course, paying a small tariff to invest in Brazil at the moment shouldn't deter you.
Brazil seems to have genuinely turned the corner and is currently experiencing an emergence as a serious player on the world stage.
The past 10 years have seen a boom in the Brazilian stock market (up 342% vs S&P down 20%). The next seven years seem sure to continue their economic ascension as the country begins pre-drilling and excavating the Tupi and Carioca oil fields and builds out its infrastructure for the 2014 World Cup and 2016 summer Olympics.
On Monday, OGX Petroleo e Gas Participacoes SA, the oil company controlled by Brazilian billionaire Eike Batista, said it found crude in another part of its OGX-2A well, its third announcement in November.
The new find is in “reservoirs of high quality” and “surpassed our expectations,” said CEO Paulo Mendonca in a regulatory filing. “Preliminary data indicate this is one of the best prospects” in the deeper section we have found in Brazil.
After the oil is flowing, Brazil is expected to become a member of OPEC. With their successful ethanol and hydro programs, they're already energy-independent and net exporters.
Do yourself a favor: Take a step back and look at the big picture.
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Related posts:
BRIC Economies Reshaping World's Economic Landscape
For Emerging Market Investments, Forget China; Brazil's a Better Value
Brazil - "The Country of the Future" Has Arrived
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