One of the bonds we’ll be featuring will be from Russian Railways. This company is a natural monopoly with most of Russian industry and much of the civil population depending upon it in one way or another. This means of course it has pricing power to ensure its profitability, assure revenues, and of course make sure you the bondholder, is assured of a safe investment. This company has expansion plans in the future so expect bonds to debut in the approaching months.

It’s not a sleepy summer with the Russian automotive industry as two major deals could be on the verge of happening. First, Daimler is considering building a trucking plant in Russia or just as likely purchasing a minority stake in Russian truck manufacturer KAMAZ. General Motors is in discussion with GAZ to build an auto plant to begin manufacturing a new mid-sized vehicle for the largest automobile market in Europe. This will require capital of over a billion dollars. In both cases, expect announcements sooner rather than later.

One way for our American investors to profit from high inflation is telecommunications stocks. This is an industry that has seen meteoric growth in Russia and Ukraine yet still has additional market growth ahead in addition to new services being bundled together for its customers. Due to inflation and an appreciating Ruble, expect more revenues and equity prices to reflect this.

Through June 2008, the inflation rate stood at 15.1% year over year and up 1.1% vs. the month before. As high as this sounds, inflation rates were even worse in cities such as Moscow and St. Petersburg. The central bank will likely be raising rates to contain inflation and reign in an overheating economy, this means good news to fixed income buyers.

Russian industrial production was up almost 6% in the first half of the year. Keep in mind, much of the government’s planned infrastructure development plans have yet to be implemented (in other words the money is not flowing through the system yet). Yes, we know what stocks should benefit from this money, just ask us.

Even more news on growth from Russian aviation. News from the Farnborough show has them adding to their order backlog for the Super Jet-100 regional jet. Already they have over 70 firm contracts with 30 options signed this year. Well over 100 additional contracts are expected to be signed by the end of the year, and this is in a down market for airlines. 30 contracts and 30 options were signed at the Farnborough for the Tu-204, a 200 seat modern jet for deliver in the next 2-4 years.

Exiting news in the world of Russian aviation. It was just announced the MC-21 project will receive over 6 Billion dollars in funding to bring the mid-sized regional jet to market. Its capacity will be in the 150-210 passenger area with much of the plane being made from new composite material. The competition for this plane will be the Boeing 737 series and the price is projected to be 35,000,000 Dollars with it debuting in 2015.

Putin will be in charge of a commission that will look into foreign acquisitions of Russian companies in certain industries. What does this mean to our average investor? We suggest ignoring this as well unless your plans included purchasing a telecommunications or oil company. We have always advocated purchasing bonds and selected equities as where you want to be looking and this will have no impact on the average investor. Just yesterday the Dollar slipped a little bit more vs. the Ruble, bringing joy to many of our investors.

Many investors and potential investors are wondering what impact the disagreement between the West and Russia over missile defense and the uncertainty over the new U.S. president and what the new administration’s policy will be. We strongly advise our clients to ignore what is in the news section in this regard. Capital will go where its best opportunities are. As recent proof, despite the chilly government relations, business between Russia and the UK has never been more active.

Billionaires Prhokorov and Deripaska have lately disclosed their plans to invest in Russian technology such as renewable energy, computers, and nano-technology. This sounds much like the government’s official language about the importance of technology to the future of Russia and announcing funding to implement it. Of course intellectual property must be safeguarded by laws Medvedev is currently considering, as a brainpower society is only as good as the laws that exist that protect it. It will be interesting to see how these two issues develop in the near future, as having a legal framework is important to the development of Russia’s new industries.

In a situation of good news- bad news, Russia’s oil production continues to trend down in recent months, but legislation to give the industry tax breaks made significant progress in the legislature. As part of a larger design to change how the government works, Medvedev announced certain powers will be transferred from the Federal sphere to the state level, a significant change over what has happened over the past 8 years. How significant, we’ll have to wait and see. He announced major legislation will be passed and signed early next year to change the system.

Look for the government to encourage Ruble appreciation as the latest inflation statistics don’t look positive. For the first half of the year they hit nearly 9%, showing no signs of abating. Inflation is one of the few areas of immediate concern for the economy, but as economists know it has the power to bring down all the other successes, we see it being addressed by the government through Ruble appreciation.