Macro Tsimmis

intelligently hedged investment

SELL Market Vectors Russia ETF (RSX)

Posted by intelledgement on Wed, 03 Aug 11

We are stepping aside here—basically at breakeven, maybe a miniscule profit—on increased risk of a significant slowdown. Russia is a close-to-pure growth play, based on their world-class exports of natural gas, oil, steel, et al. With the Chinese growth target now reduced to 7% over next five years, India and Brazil raising rates to fight inflation, the USA flirting with (at best) a double dip recession, and Europe juggling with lit firecrackers (the PIIGS plus others) any one (or more) of which could explode at any moment, we are banking our slight profit here and stepping to the sidelines to avoid the risk of a big decline. Russia, being more vulnerable to a slowdown than better integrated economies, is prone to decline more sharply under such conditions—their stock market was down 72% in 2008.

Of course that volatility works on the upside, too and when conditions improve, we expect to be back in here…likely at a lower level.

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