A theme of ours has been to avoid stocks located in the BRIC nations (Brazil, Russia, India, China) as the economic gains and rewards tend not to flow down to the shareholders of publicly-traded investments.

These economies are also impacted by dramatic and somewhat draconian fiscal and monetary policies which can create “red herrings” in order to draw in unsuspecting foreign investors.

This time last year, China, which was worried about a slowing economy, opened up the liquidity floodgates and expanded credit by a whopping 40% from the summer to the later autumn!

Sure enough, this provided enough temporary financial adrenaline which sucked in investors far and wide.  In fact, eight months ago, Bank of America Merrill Lynch surveyed global money managers and 67% expected a stronger Chinese economy in response to the growth triggered by the increase in credit.

Now, that credit growth has been arrested (because of inflationary and real estate bubble concerns) and the economy immediately slowed down.  Bank of America Merrill Lynch just re-did the survey.  Now, 65% of the global money managers surveyed expect the Chinese economy to weaken.  Note to global money managers: You’ve just been punked!  BRIC investing is usually not what it seems.