Global Bull Plays Russian Roulette

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

That said, some other trends are starting to peter out. Such was the case with your long-term bet on “Dr. Copper”, when you were stopped out of the remaining half of iPath DJ AIG Copper TR Subidx ETN (JJC) on Thursday at $37.70 for a gain of 46.69%. As always, stick to your stops in all of your positions. There is no shame in re-entering positions later on.

With global markets slightly jittery, I am going slightly out on the limb with this week’s Global Bull Market Alert pick, a bet on Russian mining and metal company Mechel OAO (MTL). You may recognize Mechel as a previous Global Bull Market Alert pick. It’s a stock that I have recommended in the past as a “high-risk/high-return” play.

Mechel produces everything from coal, iron ore concentrate, steel, rolled products, ferroalloys, hardware, heat and electric power. And it’s becoming a bit of a national champion in representing Russia’s newfound economic clout on the international stage.

Just last week, Russia’s Energy Ministry announced that Chinese investors are in talks with Russian coal miners, including Mechel, to develop reserves and infrastructure in Siberia and Russia’s Far East. Mechel is negotiating with Chinese companies on construction of transport links that would allow the export of coal from its massive Elga deposit in Yakutia.

Mechel’s success in expanding its international reach seems to have been made a pet project of Prime Minister Vladimir Putin. In early September, Putin instructed state-controlled banks to buy 10 billion rubles ($315 million) of Mechel bonds to help develop Mechel’s coal reserves for steelmaking. He also ordered state guarantees for another 30 billion rubles of bonds that Mechel plans to sell in the future. Putin also proposed the introduction of tax breaks for Mechel’s involvement in its future Far Eastern projects.

So, buy Mechel OAO (MTL) at market today and place your stop at $12.50. If you want to play the options on this one, I recommend the January $17.50 calls (MTLAW). Here’s a word of warning. Mechel is a highly volatile stock in a highly volatile market. You can expect the stock to move as much as 10%-15% during a single day’s trading. So you may want to take a smaller position than normal.

Portfolio Update

The iShares MSCI BRIC Index ETF (BKF) hit a high of $42.14 on Sept. 22, before pulling back slightly. BKF remains a BUY.

Baidu, Inc. (BIDU) dropped below the $390 level on Friday. With Goldman Sachs putting a target price of $475 on the stock, the “Google of China” remains a BUY.

iShares MSCI Chile Investable Market Index (ECH) bucked the trend in emerging markets this week, and ended the week slightly higher. ECH remains a HOLD.

The iShares MSCI Israel Cap Invest Mkt Index (EIS) ended the week slightly lower. With the revelation that Iran has another secret nuclear development facility, the chances of a strike against it by Israel have risen. That political risk notwithstanding, EIS is a BUY.

The iShares MSCI Hong Kong Index (EWH) fell slightly this week, and is already technically oversold and due for a bounce. Hong Kong is a BUY on its current pullback.

SPDR S&P Emerging Markets Small Cap ETF (EWX) pulled back slightly this week. This leveraged play on emerging markets is a BUY.

First Trust ISE-Revere Natural Gas (FCG) pulled back from its record highs of the previous week, giving you an opportunity to BUY.

Gafisa S.A. (GFA) fell below $30 in its first week in the portfolio. Like this week’s pick, Mechel (MTL), Gafisa is a high-risk, high-return bet in a volatile emerging market. It remains a BUY.

PowerShares Financial Preferred (PGF) rose 1.9% last week, closing at the $16 mark for the first time in weeks. This high-yielding play remains a BUY.

Claymore/AlphaShares China Real Estate ETF (TAO) ended the week slightly lower. With this position seemingly running out of gas, TAO remains a HOLD.

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