After noticing the potential for an asset bubble, investors have been pulling money out of Brazilian stocks and ETFs. Nevertheless, Brazil is proving to be a robust economy as both consumption and exports rise.

Angel Gurria, Organization for Economic Cooperation and Development (OECD) chief, said that there’s “a danger of asset bubbles in places like Brazil… and we should be careful about that,” as stated in MecroPress. The statement came as investors also noticed the risk and began funneling more than $500 million out of the Sao Paulo stock market in January.

During the earlier part of this week, Goldman Sachs (GS) recommended buying the Brazilian real again after its recent slide during January. During the late part of Q3 they recommended buying the real at around 1.88/USD and indicated it would appreciate to around 1.71/USD; it did and then some and eventually bottomed out at around 1.69/USD. After weakening to around 1.72-1.74/USD, Goldman announced in mid December that it was overvalued. Then came the attack by Brazil's central bank and the imposed 2% tax. Needles to say Goldman called it right. I participated in this rally by holding VALE (VALE) and Petrobras (PBR) ADR's and therefore was exposed to the appreciating real. These were sold about a week after the announcement of 2% tax.

Yesterday, Blackrock Investments (BLK) announced that their target for the Bovespa by quarter's end would be @ 77K, which is approx 14-15% above Tuesday's close. Brazil's domestic economy is still very resilient and strong, and a good place to buy risky investments in the emerging world with China cooling off, and Russia's poor treatment of foreign capital, hopefully not a route Brazil will take further with their taxes.