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