Bill Bonner says there are still some great investment plays in emerging markets. Yes, inflation is rearing its ugly head in all corners of the globe. Yes, emerging markets are volatile and unpredictable. But capital investment is high, and growth is way above that in the developed world.

That is why Bill expects stocks in Vietnam - which have taken a beating this year - to bounce back. And Brazil’s resources, beaches and credible monetary policy makes its real estate industry an attractive option…

The news is not bad everywhere in the world.While we think this is a good time to unload U.S. stocks - remember the Trade of the Decade still stands: Sell Stocks, Buy Gold - it may be a good time to buy stocks elsewhere. Vietnam, for example. Vietnamese stocks were battered much harder than those in the United States - with the average share cut in half from its peak. But whereas the United States is wobbling on the top of the financial pyramid…Vietnam is wobbling at the bottom. Wages are low. Investment in factories and infrastructure is high. Inflation is high too - but it’s not necessarily anything Vietnam can cure, since it is largely imported, not domestic. Of course, we have no idea what direction Vietnam is going, but we like betting on underdogs…and Vietnam is such an underdog investors get fleabites.

And how about the BRICs - Brazil, Russia, India and China? These four countries are the world’s biggest nations…and its fastest-growing economies. But they are very different one from the other. Brazil and Russia are resource exporters. India and China are resource importers. When the price of oil goes up, so do Brazil and Russia. India and China tend to go down on higher oil prices. And vice versa.

All of these countries suffer higher rates of inflation than the United States. Inflation is 14% in Russia, 12% in India, 8% in China, and 6% in Brazil.

The way to stop inflation, by the way, is to put the key-lending rate well above the inflation rate. In the late ’70s, for example, Paul Volcker pushed Treasury yields up to 15% - 18%, in order to stop inflation, then running about 10% in the U.S. Britain had a similar experience, though its inflation rates were twice those of the United States.

Yesterday, India announced a hike in its key rate - designed to try to curb inflation. Instead of lending at 7.5%, the central bank said it would henceforth lend at 8%. But of these major nations, only Brazil is really fighting inflation seriously. As mentioned above, the inflation rate in Brazil is about 6%. But Brazil’s central bank lends at 13%.

When you are investing for the long term, you have to take a long look ahead. It’s hard enough to guess about what will happen tomorrow, let alone what the world might look like in 10 years. Still, a cheap country with plenty of energy, plenty of water, plenty of food, and a sound inflation-fighting monetary policy seems a better bet than a country with none of those advantages.

We’ll bet on property in Brazil (which has some of the best beaches in the world)…and stocks in Vietnam.

Source: Every Party Has a Pooper