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Don’t Get Burned By Hot Emerging Markets

An IMF forecast suggests by next year the economies of at least two BRIC nations could be on fire.

They says China's economy should grow by 8.5% in 2010 while India will likely see growth of 6.5%.

But the robust pace of development isn't limited to just these nations. Overall they say growth in emerging and developing economies should accelerate to 4.7% in 2010 from 1.5% this year.

Not too shabby.

But before you take the plunge, Steve Cortes of Veracruz has a word of caution. These markets are so hot you could get burned.

He tells the Fast Money desk that most emerging market ETFs should be tracking the downturn in commodities prices; historically they're highly correlated. But so far they haven’t moved lower to the same degree. That suggests to Cortes that either the ETFs are too high or commodities are too low and some kind of correction is at hand. As a result he recommends the following trades:

Don’t Get Burned’ By Hot Emerging Markets Trades

Short Brazil ETF
ShortEmerging Markets ETF
LongAg Commodities ETF
LongOil Fund

“The chasm between the physicals and the prices of shares can’t sustain themselves. As you can see above I’m a buyer of physicals and a seller of shares,” says Cortes.

In other words he’s shorting the ETFs which he thinks could move lower and getting long the commodities which could move higher.

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Trader disclosure: On July 9th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman's Firm And Finerman Own (BAC) Preferred Shares; Finerman's Firm And Finerman Own (RIG); Finerman's Firm Owns (ELX) And (ELX) Puts; Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Finerman's Firm Owns (DYN), (TGT), (MSFT), (PBR), (WMT); Finerman's Firm Is Short (XRT), (IYR), (IJR), (MDY), (SPY), (IWM), (USO), (USO); Seymour Owns (AA), (AAPL), (BAC), (C), (DBA), (EEM); Seygem Asset Management Is Short (FXI); Seymour Owns (MGM); Seygem Asset Management Owns (DO); Terranova Owns (OIH), (XBI), (ABT), (MSFT), (POT), (RIMM); Terranova Owns Crude Oil Futures

Terranova Works For (VRTS); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO

Virtus Diversifier PHOLIO Owns (IGE); (DBC); (DBV) , (ABD) Virtus Investment Partners Owns More Than 1% Of (ABD), (CBL), (CAL), (CLB), (DLR), (EXR), (IGE) (MEE), (DBC), (DBV), (DBA), (SKT), (TNB), (UA), (WBMD) ; Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co

For Steve Cortes
Cortes's Firm Is Short (EWZ)
Cortes's Firm Is Short S&P Futures
Cortes's Firm Is Long Oil Futures
Cortes's Firm Is Long Soybean Futures