Few financial concepts have caught on as quickly as "BRICs," which stands for Brazil, Russia, India and China, the "Big Four" fast-growth economies in the world today. The term was coined by investment bank Goldman Sachs, and rival Morgan Stanley launched an MSCI BRIC Equity Index last year. Global investment pioneer Templeton Investments even launched a BRIC Fund.

Why the sudden focus on these four markets? Simple: they are simply the hottest markets on the planet. The Brazilian and Chinese ETFs are each up close to 40% just in the last six months. And if anything, the recent rises in India and Russia have been even more spectacular. In the first quarter alone, the MSCI BRIC index rose 18.7%. U.S. investors saw a turbocharged 22.2% return thanks to local currency gains against the dollar.

Goldman's View

Here's what Goldman Sachs had to say in its report Dreaming with BRICS: The Path to 2050:

• China's economy will surpass Germany in the next few years, Japan by 2015, and the U.S. by 2041.

• India's growth rate will be the highest -- not China's -- and it will overtake Japan (today the world's second largest economy) by 2032.

• BRICs’ currencies could appreciate by 300% over the next 50 years, providing a big tailwind for investors in BRIC assets.

• Taken together, the BRICs could be larger than the U.S. and the developed economies of Europe within 40 years.

• Over the next two decades, BRICs will bring another 200 million people with incomes above $15,000 into the world's economy. That's equal to the combined populations of Germany, France and the U.K.

Bullish on BRICs

Here's why BRICs should be part of your high profit portfolio:

First, for the first time in recent memory, BRICs are growing not by borrowing, but by investing. China has the world's highest savings rate. Russia is sitting on huge foreign currency reserves, thanks to windfalls from oil profits. Even freewheeling Brazil is showing heretofore unseen discipline by running a fiscal surplus.

Second, soaring commodity prices have put more money in BRICs’ pockets than ever before. That means much less danger of a financial meltdown like the ones Brazil and Russia had the 1980s and 1990s.

Finally, higher credit ratings mean that BRICs today can issue debts in their own currencies. The result? Much more stable economic expansion and financing of investment that depends on the whims of foreign investors.

"Prediction Is Hard, Especially About the Future" —Yogi Berra

A lot can happen between now and 2053. It's worth remembering that 50 years ago Japan and Germany had just been flattened after losing a World War. Thirty years ago, large swaths of Korea were still rice fields. And even 10 years ago China was a mere blip on the world's economic radar screen.

Here's a reality check: BRICs have to get a lot of things right to replicate the success of Japan, Germany and South Korea. Hoover Institution fellow and Harvard economics professor Robert Barro has isolated the key elements of sustainable economic growth: sound economic policies, strong political institutions, openness to trade, and commitment to education.

By these standards, today each BRIC country falls short on at least one measure. Potential problems China's political uncertainty, India's choking bureaucracy, Brazil's history of policy flip-flops, and Russia's gangster capitalism.

And historical prediction is a mug's game. The year 1900 had its own version of BRICs: Argentina, Russia, Austria-Hungary, and the U.S. were the fastest-growing economies in the world. Investors were clamoring to buy Russian railroad bonds for the same reasons that they are investing in Chinese Internet stocks today.

What did the world look like in 1950? Two world wars and several revolutions later, Austria-Hungary and Russia didn't even exist; Argentina went from economic bull to basket case, and the U.S. was a global superpower responsible for 50% of the world's economic output.

Profiting from the BRIC Megatrend

Cautionary tales notwithstanding, BRIC countries today offer some of the most exciting investment opportunities on the planet. You can make more money in a month investing in BRIC stocks than what you can grind out in the S&P over three years. And today it's easy to invest in BRICs: There are 34 Brazilian companies listed on the New York Stock Exchange, plus six Russian, eight Indian, and 16 Chinese. And that doesn't include technology companies listed on Nasdaq. At Global Bull Market Alert, BRIC stocks have been our biggest winners. Our investment in a Brazilian airline is up over 50% in less than two months, and options in an Indian Internet company were up 222% in a matter of a few short weeks.

Over the next few weeks, I'll dedicate an issue of The Global Guru to each BRIC market, to help you profit from this exciting megatrend in global investing.

Sincerely,

Nicholas A. Vardy
Editor, The Global Guru

P.S. The rise of the BRIC economies is often presented by the mainstream media as a threat to the U.S. That's the wrong way to look at it. In 50 years time, the per-capita GDP in the U.S. will be $80,000. China's will be about $15,000, putting it at the same level as ex-Communist Hungary today. Better to view the rise of the BRICs as an unprecedented opportunity to reap big investment profits, as my subscribers to Global Bull Market Alert have done.

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