More on oil:

First, I wanted to follow up on the oil piece I posted earliert this week. Today the dollar and crude maintained their tight, inverse relationship they've been following for some time. Here's a pop-up weekly chart since early 2004 showing the mostly inverse relationship between the dollar index and crude. Notice how the dollar just spiked up as crude tumbled (down from nearly 120 to 112 in the past couple of sessions:

View image

The Big Picture:

On the U.S. home front, GDP growth stayed technically positive in the first quarter, coming in at 0.6%. This number is lower than the GDP from the first quarter of 2007, which came in at 1.7%, but it is still in the positive. I do have some doubts about the accuracy of some of the calculations. You see, the GDP is based on a basket of goods. The components - as well as the component weightings and the way the data for each good is interpreted can become more art than science, especially if there is a strong political prerogative to shift the public's perception of how out economy is "really" doing.

Regardless of my doubts, many are looking at the quarter's positive GDP and saying we've avoided what seems to be the most feared recession in all history. You'd think that a recession meant the extinction of all mankind or something the way everybody has been so terrified of the "R" word!

Personally, I don't think it really matters if the numbers say that our economy is slowing dramatically or that it is officially going into negative growth for two consecutive quarters (the common definition of recession). The fact of the matter is that the economy is hurting and it wlll likely get worse.

Because of this, the Fed is doing everything it can to revive the economy. Just yesterday, the Fed cut interest rates by another 0.25%, marking the seventh cut in the past seven months. Although the cut to 2% has given the markets a short-term fix, the cut is also placing more inflationary pressure on the dollar.

The U.S. dollar has been trashed vs. other major currencies in recent months. The dollar is currently trading at about $1.50 against the euro, and it is likely to continue to weaken. Adding to the U.S. economic problems is the fact that more damage will likely become obvious in the U.S. credit markets and housing markets since inflation is making it more difficult for people to stretch their pennies. In addition, consumer spending will probably continue to tank, as March's consumer spending numbers were flat, and consumer confidence has dropped to a 26-year low.

While we may think that our country's economy problems are bad, the credit mess, slowing GDP and housing crisis doesn't stop at the U.S. shores. Much of Europe is feeling the pinch too, especially in the UK and Ireland, where we're seeing some serious housing market problems as the U.S. contagion spreads.

Just like in the U.S., the housing problem in the UK and Ireland started when so many housing loans and other loans were neatly packaged and "securitized" into highly rated-debt instruments, which seemed to have minimal risk. But the risk was anything but minimal, as the rating agencies were either idiots or getting kick-backs, and now this gigantic pyramid scheme is going to come crashing down to the tune of nearly $1 trillion in write-downs.

This has all created a difficult global market environment for investors to profit from. So how are we maneuvering through all this mess? Well, the easy answer would be to focus on some emerging market that isn't ever touched by the problems in the U.S. and other troubled markets. But the problem with this strategy is that emerging markets can no longer automatically and successfully "decouple" from other economies. You can't just blindly buy some ETF focusing on a far-away land and automatically score big. Instead, you have to be a smart stock picker with a global perspective and an understanding of all the interplay that's involved between markets.

This is exactly what I'm here for. A good example is our investment in two Chinese solar stocks, LDK Solar (NYSE: LDK) and Suntech Power (NYSE: STP). They have been doing great since we started positions in them, not just because of how the China stock market is moving up in comparison to other markets, but because of the fundamental promises of these two companies. It's the combination of these factors that make a smart trade, not just where the trade is located. This is a core part of my investment strategy, when looking at new investments.

Now, let's take a look at what is happening in a couple regions around the world, and where I'm looking at for possible new investments.

Global Markets Update:

Asia/Pacific: In this region, China's indexes, including Shanghai and Hong Kong, surged this week. One of the main factors for this strength was a 66% cut in the share trading tax. Unlike the U.S., China doesn't inflict capital gains taxes on its investors' profits. Rather, it has a tax on each trade investors make, and revenues from it go back to the Chinese government. So when this tax rate is slashed, the result is a lower expense to invest in the local stock markets.

The pop in the regions' stocks markets, following the rate cut announcement, helped our China holdings quite a bit (see position update, below). We'll take it!

While I'm glad to see our Chinese stocks moving higher, I'm not confident that this Asian rally is sustainable longer-term. So, for now, we'll continue to ride the strength higher, and I'll keep you posted on any other developments in the region.

The Americas: S&P raised Brazil's sovereign credit rating one notch to investment grade "BBB". This upgrade showed that the country's growing trade surplus and declining interest rates have enabled the country to pay off its debt. The news drove the Brazilian stock index -- the Bovespa -- to a record high. It also helped to buoy the Argentina and Mexican markets due to their close trading ties with Brazil.

I believe the strong rally in Brazil's stock market is primarily commodity driven in nature (oil and ethanol are key here) and is somewhat vulnerable here. That's why I haven't been advising many positions there, even though I am bullish on the region. I have a number of companies in Brazil and the surrounding region that I would love to recommend for long-term trades -- but not at these entry prices.

The bull market in commodities has driven stock markets around the globe to new highs and commodity stocks to higher valuations. So as with many of the commodity-centric markets (Australia, South Africa and Canada, as well as many others), I think we should wait for a dip in the Brazil index before we start buying substantial positions.

Investment Outlook:

The growing middle class in countries across the globe is still one of the biggest investment themes of our time. This theme particularly focuses on Central Europe, Russia and Brazil, amongst the other emerging markets. And I continue to favor the opportunities that I see in these countries because of the strength of their middle classes.

A conversation about the opportunities in emerging middle classes, though, wouldn't be complete without mentioning China. This country also has a fast-growing middle class, but the stocks there may come under pressure in the short-term. Since we already have a number of China-based holdings right now, we're going to be more selective going forward.

As for other countries, I also have some interesting potential plays that I'm considering in Australia, Norway, India, Peru, Chile, the Middle East and Malaysia/Indonesia. I'm sifting through the news and research right now, so I'll be sure to let you know in an Alert or weekly-wrap issue if any of these turn out to be good trades right now. So stay tuned for more details.

Position Update:

Suntech Power (STP) shares continued to back off slightly this week on some normal profit taking, following their late March/Mid-April rally. In light of this recent action, I'm watching the position for possible adjustments. For now, though, hold STP.

LDK Solar (LDK), our other solar position, has run basically sideways this week, after giving us a very strong performance in March and early April. As we discussed last week, the multi-year silicon supply contract that LDK recently inked should keep this company at a competitive advantage for some time.

LDK's edge with the supply contracts and low labor cost advantage should continue to inspire confidence and keep a floor under the shares. Hold LDK.

Wyeth (WYE) shares have backed off a tad this week, moving to just under $45. But the bullish mood in the shares remains intact. As I've been saying, Alzheimer's is a disease that is ravaging the elderly population and has the potential to become one of the fastest-growing pandemics in history. And Wyeth should be releasing data from Phase III trials of its potentially breakthrough Alzheimer's drug, Bapineuzuma, sometime this month. This drug actually works, clearing away the toxic protein that clogs Alzheimer's patients' brains, and I expect it to be a big winner for the company.

Continue to hold WYE in anticipation of clinical trial results. I expect we'll hear some updates on the drug in early or mid-May.

Oriental Education (EDU) shares continue their solid, stair-step run-up, and are now flirting with $76 (up about $14 a share since I first advised). EDU is one of the leading education services companies in China, and it will continue to profit from more and more Chinese people's desire to learn English. Hold EDU.

China Finance Online (JRJC) also had a very solid couple of weeks, moving up from about $14 to over $20. That's a respectable gain over our initial basis of $16.60, but I think we can expect more, based on the technical momentum being exhibited by the shares and due to the strong growth of China Internet usage.

Trading Advice: 1) Take H1 (first half of your position) profits at $25
2) Stop (sell if it falls below) H1 < 18.40.

Turkcell (TKC) is making telecom headlines with its bid to buy the Belarusian mobile operator Belarusian Telecom Network. This buyout would add a modest number of subscribers to the Turkcell rolls, but more importantly it would open up a whole new region for Turkcell to capitalize on.

Turkcell shares are behaving well, but they aren't showing enough amplitude to get excited about just yet. I expect we'll see that change as Turkey enters the global spotlight more, and we see more positive developments and smart acquisitions by Turkcell. Buy TKC up to $20 per share.

Baidu.com (BIDU): Our bearish May $350 put position on BIDU continues to move against us, following last week's positive earnings and this week's positive momentum in the region. I'm may have you make adjustments to this position soon, if it doesn't start behaving the way I originally anticipated. For now continue to hold the BIDU puts, but watch for an alert on any further strength.

That's it for now -- have a great weekend!

Best wishes,

Jeff Manera
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

Today's New Recommendation: Posco August $130 call (PKX HF)

Rationale: Posco (PKX) is a South Korean steel company that has a lot to offer us. It's the largest steel producer, by far, in South Korea and is geographically situated right next to the largest steel producer in the world -- China. The company also has a cheap labor force, which works six days a week and cutting edge production technology.

Right now, Posco's chart looks to have more upside potential than downside -- the stock's trend line (teal line on chart below), which has been respected since October 2007, just breached, telling me that it's on the verge of a breakout. This action is in sharp contrast to U.S. steel players, such as U.S. Steel (X) and Reliance (RS) whose shares are soaring to new highs and look vulnerable to a correction.

The primary caveat that I see is the cost of raw materials, including iron ore and coal. But PKX is seeking to vertically acquire some miners to reduce this cost risk.

To take advantage of the move up that I'm expecting in Posco's shares, I recommend that you either purchase shares on any pullbacks to $124 or better or, if you're inclined to trade options, consider the August $130 call (PKX HF) at limit 8 or better (cancel if this doesn't fill in the next few trading sessions). I've chosen the August 130 call because it has a reasonable delta and we're getting plenty of time, with 101 days left until expiration.

As always, I suggest you buy only a modest position and spread your capital over a portfolio of diversified holdings.

Best wishes,

Jeff Manera
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

Big Picture:

Inflation!

That one word is just about summing up the primary global "big-picture" concern at the moment. And with good reason.

U.S. inflation, by some measures, is wildly understated in the sugar-coated reports that we have been provided with in recent weeks. These reports have been spoon feeding us easy to digest - but completely fictional - inflation figures a little over 3%. Are they nuts!! Anybody who's eaten, paid for their health insurance or filled up their gas tank knows something is drastically amuck with the official numbers.

So what's the REAL inflation data? I've read more than one compelling analysis that shows -- when you consider the excluded data in inflation and pricing data, and return the cleverly adjusted weightings back to their base levels -- we're much closer to 11% or 12% REAL inflation. And that's painful. That's the type of numbers that you hear about in third-world countries -- and its way too high.

With inflation rates sitting at such high levels, it's no wonder that we're seeing higher prices everywhere. What's important to note, though, is that we're not alone. Globally, you can bet that we're not getting the full picture either, as its in the best interest of central banks everywhere to retain calm and prevent panic, even though we're starting to see inflationary rumblings popping up around the globe.

There's been a 43% jump in global food prices in the first quarter, so it's no wonder that people are starting to complain. These elevated prices have sparked food riots in Asia --Japan, China and Indonesia -- and Egypt. Plus, India is banning commodity futures in the hopes that it will reduce speculation and keep prices down.

Much of these protests can be directly related to the price of rice. Rice is the staple of billions of low-income and poverty-stricken hungry folks in emerging and frontier countries. And with rice prices shooting through the roof, these poor people are struggling to even buy their main food source.

If you look at the two graphics that I've included below, you can see how global economic growth and a weak dollar are fueling this surge in commodity prices. I've pulled these images from a really great article in The Wall Street Journal on April 10 that discussed inflation in depth. These key images from the article help portray graphically the scope and scale of the inflation problem (credits to the original data source are displayed in each graphic).

The first graphic, composed of three graphs, clearly illustrates the close correlation between GDP growth, the weakening U.S. dollar and commodity inflation:

View image

The next graph leaves no question as to the magnitude of inflation in key commodities -- grains, industrial metals and crude oil and oil products.

View image

The Role of Interest Rates

Now, as you know, interest rates are the primary tool that central banks use to keep inflation in check. So isn't it about time for the Fed to start ramping up the darn rate to prevent some kind of inflation disaster?

The problem is Fed Chairman Ben Bernanke and the U.S. Federal Reserve has its inflation fighting guns holstered right now. Not only are they not raising rates to staunch inflation, they just cut rates drastically seven consecutive times in the past seven months!

Sure, slashing the Fed funds rate to 2% has given the financial markets a short-term adrenaline fix and reduced the "hardness" of the landing in the housing and credit markets. But these rate cuts have also unleashed a dangerous amount of inflationary pressure on the dollar and increased the risk of some serious "moral hazard" -- enabling those bad-decision makers, who used cheap credit to get us into the huge global credit crisis that we're now in, to do it all over again!

Also, the Fed's rate cutting campaign has sent the dollar's value on a downward spiral. As I've alluded to before in the blog and here last week, the crashing U.S. dollar is feeding a vicious kind of inflation cycle, both in the U.S. and globally.

While the weak dollar and high inflation rates are pinching your pockets right now, let me just tell you that there is a way to ease your pain. You see, all of this confusion can also create opportunities for those savvy enough to read the undercurrents of these macro trends and (to stretch out this metaphor) know how to sidestroke away from the rip currents threatening to suck your portfolio out to sea.

There are ports in this inflation storm, where we can make outsized returns while avoiding some of the uncertainties here at home. And it's my job to find them for you. How are we going to do it? We're going to focus on taking advantage of the economic growth in emerging markets and the trends that are forming there, and steer clear of U.S. focused plays. Currently, I'm honing in on some emerging markets, and I am also looking at a few key developed markets like Australia.

We've already been following this strategy here at G3 Global Options, and so far it's working out well for us. For example, our investment in the Central Europe & Russia ETF (CEE) has been looking strong. And our two Chinese solar stocks, LDK Solar (NYSE: LDK) and Suntech Power (NYSE: STP) benefit from global macro forces that can sidestep inflation and economic factors, and continue to outperform. These two companies are doing well for us already -- up 45% and 33% respectively. And I also have a couple more strong bets, with similar potential to LDK and STP, in the queue that I'm waiting for clear buying signals on -- so stay tuned!

Now, let's take a look at what is happening in a couple regions around the world, and where I'm looking at for possible new investments.

Global Markets -- Major Events and Economy

Russia: Departing Russian president Putin stole the spotlight, even as his newly-inaugurated successor Dmitry Medvedev took power. Putin made it very clear that he would remain in control of his country, even though his hat would shift from president to prime minister. We can only hope that Medvedev becomes more than a figurehead and shows some back bone to work through Russian's growth pains. I believe he will and that Putin will allow him enough latitude to enact some positive reform which will be good for Russia's economy and it's people.

Asia/Pacific: The horrific cyclone that struck Burma may have caused up to 100,000 deaths and left up to one million people homeless. This natural disaster is resulting in human suffering on a scale that's almost unimaginable.

I urge readers to donate to the Red Cross to help with their relief efforts in the region, as I will. Our thoughts are with the survivors.

The Americas: Another strike by Argentina farmers threatens to throw fuel on the regions already difficult food shortages (primarily soybeans -- the country's major export -- and also wheat) and inflationary spiral (as discussed above).

This creates risk in the region but also potential profit if we pick and choose our plays carefully and hone in on companies that either are not adversely affected by these clear inflationary factors - or perhaps can even profit from them...

Investment Outlook

Like I discussed last week, we will continue to invest in the growth and strength of the middle class in countries across the world. This trend will remain one of the biggest investment themes of our time, as emerging markets like Central Europe, Russia and Brazil are becoming powerful economic forces as their middle class grows.

This trend presents excellent investment opportunities for us, especially during a time of economic slowdown here in the U.S. Central Europe, Russia and Brazil are somewhat insulated from the sluggish economy in the U.S. in part because of their strong and growing middle class that is allow "growth from within", making them smart investments at this time.

Outside of that core focus, I'm continuing to consider trades in Australia, Norway, India, Peru, Chile, the Middle East and Malaysia/Indonesia. Right now, there aren't any companies that are ripe for investment in these emerging countries. But I am keeping a close eye on them, and I will let you know if any profitable opportunities arise.

Position Update

Posco (PKX) is our most recently added position. Its shares have been buffeted around like a young duck in a windstorm, first spiking immediately after my recommendation, then selling off nearly $3 the next day, and now shares are trying to recover. It's enough to make you seasick! This share bouncing wasn't driven by any particular news or event, it's just that these shares can have a mind of their own at times and have a tendency to be volatile in the short-term.

Our specific Posco options position, the August 130 call, is up from near $8 when I recommended it to about $12 now -- that's a 30% gain in just three days. Continue to hold PKX.

Suntech Power (STP) shares continued to consolidate this week. If we don't see some firming in the shares soon, I may recommend that you take partial profits before long, so stay tuned. For now, continue to hold STP.

LDK Solar (LDK), our other solar holding, has been performing better, making a nice run up this week of almost 10%. The multi-year silicon supply contract that LDK wisely locked-in earlier this year should keep this company at a competitive advantage for some time. Continue to hold H1 (half of your shares) of LDK Solar.

H2 Trading Advice: 1) Take H2 profits (half of your position) at $38.
2) Stop H2 (sell if it falls below) < $33.

Wyeth (WYE) shares continue to act in a ho-hum to slightly bearish fashion this past week.

We're still awaiting any release of data from Wyeth's Phase III trials of its potentially breakthrough Alzheimer's drug, Bapineuzuma, sometime this month. As I've detailed in previous issues, this amazing drug works -- at least early results strongly hint that it works -- by actually clearing away the toxic protein that clogs Alzheimer's patients' brains. The way Bapineuzuma treats the disease is definitely what sets it apart from the other Alzheimer drugs in the works.

However, we must consider that this new drug may have disappointing results as that's a chance we always take with a drug in clinical trials. If there are disappointing results, we could see the shares take a hit. So make sure you haven't overloaded your portfolio with this position -- as always, you should never concentrate your holdings into one or a few holdings. I advise no more than 10% of your investment funds in any one position, and less than that if you're using the leverage of options.

So, continue to hold WYE in anticipation of clinical trial results. I expect we'll hear some updates on the drug in near mid-May.

New Oriental Education (EDU) shares took a modest dip this week, but they have almost fully recovered (shares are now near $75 -- down about $1 from the end of last week) and remain firmly in rally mode and above their key moving averages. I expect that EDU should continue profiting from its captive audience as more and more Chinese learn English. Hold EDU.

China Finance Online (JRJC) shares also dipped early this week, but quickly recovered and continued to rally in stair-step fashion, tacking on another $2 or so since last week's update to reach about $22 now (vs. our entry price of $16.60). Looking forward, I continue to expect more upside. The shares' technical momentum is giving us a green arrow, and as Internet usage grows in China, it should benefit this online seller of financial services.

Trading Advice: 1) Take H1 (first half of your position) profits at $25.
2) Stop (sell if it falls below) H1 < $18.40.

Turkcell (TKC) shares declined this week, following its earnings release that was slightly below analysts' expectations. I think the sell-off was overdone, especially because earnings were still up a very respectable 79% over this quarter last year.

I expect we'll see that changeas Turkey enters the global spotlight more, and we see more positive developments and smart acquisitions by Turkcell. HoldTKC.

Baidu.com (BIDU) shares continue to rudely defy my bearish predictions. However, the chart is showing a rounded top with decreasing momentum -- plus a candlestick doji (hesitation) and bearish engulfing patterns. The odds are looking better that we will see the shares tick lower going forward, which will improve our position's value. But our time is running thin on these options, so if you haven't heard from me and the shares sell down to 348 or lower close this out with a partial recovery. If they start to rally again and go over 355 or so, also close the position.

Best wishes,

Jeff Manera
G3 Global Options,
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

Plus...

52% Profits Taken on China Finance Shares...
Posco Calls up 163% in 2 weeks!
Full Recovery in Turkcell...
Another great Week for our Portfolio!

Big Picture: A Super Spike in Oil

If you thought oil at $100 per barrel or even the more recent price of $125 per barrel was bad, brace yourselves--higher levels are on the way.

Goldman Sachs recently called for a "super spike" in oil, suggesting that we could see $150 to $200 per barrel within the next two years. And I think there's a good chance that this could be self-fulfilling, whether the logic is completely valid or not. This type of statement by a highly respected firm, alone, could very well drive oil higher, at least in the short- to mid-term. Longer term, on the other hand, actually depends on real factors, like structural supply and demand.

As I've suggested before, I believe the structurally justified price of oil is around $70 -- that is, if you could remove the speculative factors, oil-region political worries and excessive dollar weakness from the equation. But you can't -- so we won't be seeing oil at that level for some time, if ever again.

How do we make money from this situation? Well, you could run out and buy oil futures or invest in one of the oil ETFs, but that's a risky concentrated way of doing it. If you play the futures, don't forget to close out your position out -- or watch out for some big ugly tanker to pull up to your door asking where you want your oil stored! Also, with oil at all-time highs and some oil analysts calling the rally over-extended, we could see a meaningful correction in oil prices at any moment, which would quickly kill an investment in any direct oil bet.

I prefer to ferret out investments for you in economies that flourish and profit when oil is high. Plus, these recommendations must not be too closely connected to the U.S. economy (as I've told you repeatedly, the U.S. is on shaky ground), or vulnerable to the world inflationary spiral that I've been telling you about. And they can't take a disastrous hit should oil prices decline suddenly.

What fits that bill right now? At the top of my list: Russia.

We've already been profiting from this strategy here at G3 Global Options. Our investment in the Central Europe & Russia ETF (CEE) continues to tack higher. This ETF is concentrated in Russian energy companies with the two largest holdings being Gazprom and Lukoil -- two companies that we want to be watching, considering the oil inflationary scenario that I laid out above.

I've contemplated recommending these two companies directly, but there are liquidity issues holding me back. So in this instance, I prefer the diversification that the Central Europe & Russia ETF offers. It's safer, and you can still rock and roll in profits as oil climbs higher.

If we get a dip in oil, I may also have you spice things up with direct Russian oil plays. The shares of the companies that I'm currently looking at have run up to lofty levels for now, and I don't want to chase. We should see a pullback in share price, though, if oil pauses or dips from the current record levels. When that happens, I will most likely have you jump in. Be sure to stay tuned.

The Right Call

Now don't think that you have to be directly invested in Russian oil companies to profit from the stability that slippery commodity is infusing into the land of the Perpetual Prime Minister. You can actually profit nicely in Russia by betting on the country's growing middle class. To do this, we need to invest in companies with strong management, which is what we're doing with today's new recommendation.

Mobile TeleSystems (MBT) is, in my opinion, the best way to play the strong telecom market that exists in Russia and the surrounding Central European countries today. As the market leader in this industry, MBT has strong margins, double-digit subscriber growth and an accelerating upward trend in new subscribers. That's what I like to see!
MBT is the largest cell phone operator in Russia, with over 83.88 million subscribers. In just the eight years since its IPO, the company has established a larger footprint than its major regional competitors -- Vimpelcom and Rostelecom. And I like that the company hasn't scattered itself too far from home: Russia makes up 70% of MBT's base, and it also has a strong presence in Ukraine -- the two key markets in the region.

I believe the shares, currently trading at $79, could find their way to $90 + in the next six months. I think the best way to play this bet is with the September $80 call options (MBTIP) -- we may roll them into a later month as that expiration nears. With this call we're buying a good bit of time and paying a reasonable price for a strong delta of about 58 (so the call will move about 58 cents for each dollar that the shares move up in the near term and near this price level -- and even better than that as the shares improve). The December 80 or 85 call would also have worked -- we may roll into these on the way to September expiration.

Buy the Mobile TeleSystems September 80 calls paying up to $7.40

Global Markets -- Major Events and Economy

Russia: Russia's new prime-minister/ex-president recently announced the country's new cabinet members. It's no surprise that Putin brought along his key, mostly ex-KGB, ministers with him to his new position of power.

His successor as Russian president, Dmitry Medvedev, is now officially in power, which for all practical purposes can be considered second in command. However, I believe the transition to Medvedev as president is a net positive for Russia and its capital markets. Putin has made it clear that he will allow the new president enough latitude to enact some positive reform, which will be good for Russia's economy -- and us as investors in Russia.

The Americas: I love Brazil -- and I think that it offers one of the best investment environments of any emerging market. However, this country continues to garner attention from the investment community. A little too much attention. I am looking at several great plays for you in Brazil, but the shares have run up to, what I consider, unsustainable levels here. So I'm waiting for a minor pullback before recommending some Brazil plays. Stay tuned.

Investment Outlook

As we've been discussing for weeks, one of the best ways to profit in emerging markets is by taking advantage of the growth and strength of the middle class in countries across the world. This trend will remain one of the biggest investment themes of our time, as emerging markets like Central Europe, Russia and Brazil are becoming powerful economic forces as their middle class grows.

This trend presents excellent investment opportunities for us, especially during a time of economic slowdown here in the U.S. Central Europe, Russia and Brazil are somewhat insulated from the sluggish economy in the U.S. in part because their strong and growing middle class allows "growth from within." This, in my opinion, makes them smart investments at this time.

Outside of that core focus, I'm continuing to consider trades in Australia, Norway, India, Peru, Chile, the Middle East and Malaysia/Indonesia. Right now, there aren't any companies that are ripe for investment in these emerging countries. But I am keeping a close eye on them, and I will let you know if any profitable opportunities arise.

Position Update
Posco (PKX), the South Korean steel company that's the newest addition to our buy list has been tearing up the charts! Its shares have been on a rocket ride -- up over 17 points since I told you to buy in last week. Common shares are now trading over $144. As I've said, this company's shares have a tendency to be volatile in the short-term -- and they've been acting just as we wanted by being volatile to the upside!

Posco's common shares are up a very respectable 13%. That's great considering it's more than the major indexes are able to muster for an average year. But due to the powerful leverage of correctly placed options, our specific Posco call option position -- the August $130 call -- is up from near $9 when I recommended it to about $21 now. That's a 126% gain since I recommended this position on May 6 -- that's a triple-digit gain in less than two weeks!

Place a limit order to take profits on half your call position at $25 or better. Then, continue to hold your remaining PKX calls.

H1 Trading Advice: 1) Take H1 profits (half of your position) at limit $25.

Suntech Power (STP) showed us a little positive attitude this week, shaking off their recent sideways doldrums to tick up modestly. With all the attention being given to the exciting solar market and STP's strong positioning in the market, I think we will see even more upside. For now, continue to hold STP.

LDK Solar (LDK), our other solar holding, has traded mostly sideways this week after giving us a very nice run up recently. The multi-year silicon supply contract that LDK wisely locked-in earlier this year should keep this company at a competitive advantage for some time.

H1 Trading Advice: 1) Take H2 profits (half of your position) at $38 or...
2) Stop H2 (sell if it falls below) < $33.

Continue to hold H2 (remaining half of your shares) of LDK Solar.

Wyeth (WYE) didn't have any new headlines this week, other than the approval of a new depression drug that's only a minor part of the company's story. Shares continue to act in a ho-hum to slightly bearish fashion.

We're still awaiting any release of data from Wyeth's Phase III trials of the company's potentially breakthrough Alzheimer's drug, Bapineuzuma, sometime this month or in early June.

Make sure you didn't overload your portfolio with this position as there is always risk in betting on clinical trial data. You should never concentrate your holdings into one or a few holdings. I advise no more than 10% of your investment funds in any one position, and less than that if you're using the leverage of options. Continue to hold WYE.

New Oriental Education (EDU) shares continue to tack on strong gains -- adding another $4+ to the rally that we were already enjoying. At $79 +, we're now up a solid $26 (49%) per share since I recommended this company at around $54. We expect EDU to keep profiting handsomely from its captive audience in China, as more and more Chinese seek to learn English. Hold EDU.

China Finance Online (JRJC) shares have been giving us something to celebrate about! The shares hit my H1 target yesterday, so you should have taken a 52% profit on half your position. You probably got even more as the shares gapped up to over $25 and climbed quickly from there.

What caused this happy share spike, you ask? The company came out with great earnings and guidance, with revenues up an amazing 163%, and earnings up 328% year over year! Plus, the company gave strong guidance for the current year, reflecting expectations of 300% growth.

With these kind of blow-away numbers it's hard to imagine the shares not seeing more upside. The promise of China Finance continues: With Internet usage growing strong in China, it should benefit this online seller of financial services. Hold your remaining shares.

NOTE: I recommended China Finance before we were using the power of options on each recommendation. If I had recommended the right call option at the time instead of the shares that 50% or 60% gain you just took could have been much, much more...

Turkcell (TKC) shares have fully recovered from their earnings sell-off and we're back to about where we started, at $19 at change.

I continue to expect more positive developments and smart acquisitions by Turkcell, which should help keep a floor under the shares. Hold TKC.

Baidu.com (BIDU) shares briefly dipped to a level that should have triggered you to close out your May put position at a 40% loss or so, if you followed my earlier instructions.

Best wishes,

Jeff Manera
G3 Global Options,
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net