"We're like children in a candy shop."

Who said it, and what was he talking about? I'll give you a hint: It was a master investor, and he was talking about buying a small group of stocks. But before I can reveal the exact investor and the precise stocks, I need to set the stage.

How much do you know about the global economy?
You're probably aware that the United States was (and may still be) in a recession. In fact, according to a recent report from the National Bureau of Economic Research, that recession started in December 2007. American stocks over that period of time -- paced by enormous declines in bellwethers such as General Electric (NYSE: GE), Alcoa (NYSE: AA), and Caterpillar (NYSE: CAT) -- are down 35% in aggregate.

Now, while the U.S. economy has receded (i.e., seen negative GDP growth), it looks like China, India, and Brazil all continue to grow. Given those facts, and holding all other variables equal, we would expect that the stock markets in these countries would have far outperformed our own.

But while some have performed slightly better, that has not been the case across the board.

Here's how it breaks down
In fact, Brazil's stocks are down 12% since December 2007, India's 22%, and China's 40%. Again, that's despite the growth all three of these countries saw in 2008.

There is more to an investment's performance than the GDP growth rate of its home country. One must take into account valuation (emerging markets stocks were overvalued last year relative to their U.S. peers), risk (emerging-market stocks will be more volatile than their U.S. peers), and future outlook (emerging markets are expected to perform worse than the U.S. going forward).

Wait a second ...
If you're paying attention, your eyes ground to a halt upon reading the last bit of that last sentence. You may have even set to writing a nasty email to me that questioned my facts, sanity, and competence.

That's because economic growth in the world's emerging markets, though it will slow in 2009, is expected to continue to outpace that of the United States for many, many years to come. Of course, that divergence between the performance of emerging-market stocks and their outlook for the future prompted famed Templeton money manager Mark Mobius to tell Bloomberg that, when he and his team look at emerging markets stocks these days, "We're like children in a candy shop." Continued...