We have followed the BRIC phenomenon with some interest here. Our fear was that the ‘sexy’ aspects and outstanding performance of the BRIC countries were simply marketing fodder for (yet) another trendy investment product. It now appears that the R in BRIC is beginning to show some signs of tiring.

A couple of items brought into the focus the question of what is happening in Russia. Victoria Howley at WSJ.com notes the uncertain environment that some Russian IPOs are facing as they look to come to market.

With the Russian economic situation dependent on earnings from its vast hydrocarbon sector, IPO candidates must contend with skepticism about the wisdom of coming to market when oil prices are falling.

The energy sector is important because by one measure the energy sector makes up some 25% of the Russian economy. One could argue that having an energy producing country like Russia in BRIC funds is a natural hedge against energy consumers like China. However this sort of economy-wide dependence on volatile commodities makes for a decidely rocky future.

That is especially true if energy prices not only stop going up, but actually start going down again. The Stalwart has been reading up on energy and has found a credible expert who sees oil prices continuing to fall into 2008.

There is much to be said for investing in the emerging markets, however diversification, not concentration, should be the watchword. The BRIC countries may very well lead the world economy going forward, but the investment case is a different one altogether.