Scan the Russian press, and it quickly becomes apparent that the contrast between the collective economic mood of Russia and the United States couldn’t be sharper. While U.S. drivers cringe at $4 per gallon gas, Russia celebrates high oil prices as the source of its newfound wealth. To add insult to injury, the most recent Forbes 400 list confirms that Moscow now boasts more billionaires than New York City.
Vladimir Putin’s political shenanigans notwithstanding, it’s hard to deny Russian economic achievements. Soaring global demand for its precious commodities and a rising middle class whose disposable income has exploded during the past few years have fueled Russia’s decade-long economic boom. During that period, Russia’s nominal gross domestic product soared to $1.7 trillion in 2007 from less than $200 billion in 1999. While the United States struggles to skirt recession, Russia’s government expects GDP to hit 7.6% for 2008. That’s within striking range of India’s projected growth rate of 8.5% this year. Ebullient Russian policymakers have set themselves a goal for becoming one of the world’s top five economies by 2020 even as Goldman Sachs predicts that Russia’s economy will overtake Britain, France and Germany during the next few decades to become the biggest economy in Europe.
And after the Chinese Olympics in Beijing this summer, expect attention to turn toward Russia as it gets set to take the world stage in six years when it will be hosting the Winter Olympics in 2014. In preparation for the games, Russia is planning to invest $200 billion in its own crumbling infrastructure.
The single best way to play Russia’s economy and stock market is through the Market Vectors Russia ETF (RSX). RSX is weighted most heavily in oil and gas (40%), metals (25%), telecom (13%) and finance (11%). Its largest individual weightings are in Lukoil (10%), Russia’s second-largest oil producer, and Gazprom (8%), the world’s largest gas company. VimpelCom, Russia’s second-largest mobile provider, followed by telecoms Mobile TeleSystems and Rostelecom, steel producer Mechel, and Wimm-Bill-Dann Foods make up the ETF’s next largest holdings.
So buy the Market Vectors Russia ETF (RSX) at market today and place your stop at $49.50. For potentially even bigger gains, buy the November $60 call options (RSXKK.X).
This week, I am recommending another set of options for NII Holdings (NIHD), as I believe the stock is about to move another leg up. If you want to leverage your returns in this turnaround play, buy the December $55 call options (QHQLK.X).
Sociedad Quimica y Minera de Chile S.A. (SQM) hit record highs again this week, before correcting slightly. It now is up 27.96% since you first bought it two weeks ago.
Several of your current positions are technically oversold, most notably Atwood Oceanics (ATW) and Vivo Participacoes S.A. (VIV), and set to rally strongly once the market stabilizes.
Let’s sell the iShares Silver Trust (SLV) at small loss to make room for this week’s pick.
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