Mozart, Arnold Schwarzenegger, and the Blue Danube…

Welcome to the inaugural issue of Vardy’s Global Bull Market Alert, where we’ll be investing in the world’s hottest markets. To start building our portfolio, we’re starting out with one pick a week over the next several weeks. So let’s get to it.

As investors in the U.S. markets are nursing losses in the low single digits so far in 2005, investors in Austria have already reaped profits of 24.4% in dollar terms.

Long ridiculed as backward and lethargic compared with its larger Western European rivals, Austria has quietly overtaken the stagnating European Union (EU) economies by almost every measure.

The source of Austria’s new-found success as Western Europe’s stock market champion is no mystery: a cut in its corporate income tax rate from 34% to 25%, a tax cut package that has put more money in consumers’ pockets, and the long overdue privatization of the Austrian national pension system.

The combination of free market reforms like Austria’s has been a huge boon to the stock markets of other countries around the globe including Chile — where graduates of the University of Chicago (the "Chicago Boys") implemented similar policies in the early 1980s.

In addition, Austrian blue chips — like oil and gas company OMV, Telekom Austria and Erste Bank — are raking in hefty profits from well-timed investments into the fast growth economies of the new EU members of the "New Europe." OMV is one of the leaders of expansion in the region (and already up 200% in the past two years), Telekom Austria recently announced a 50% jump in net profits, and Erste Bank recently reported earnings that were up 21%… handily beating analysts’ estimates.

Furthermore, as James Oates, a London Junto member and senior advisor to Austria’s leading investment bank CAIB, pointed out to me at a recent lunch, the Austrian stock market has become a magnet for the listing of fast growth Central European startups like Slovakia based discount airline Sky Europe.

With lower labor costs, flat tax regimes, and economic growth rates two or three times that of "Old Europe," profits from the countries of "New Europe" (Estonia, Lithuania, Latvia, Hungary, Poland, the Czech Republic, Slovenia and Slovakia) will ensure that the Austrian stock market will continue to generate rich investment profits for investors.

The recent — and usual — October pullback in global markets provides the perfect opportunity to take a position in Austria. The best way to play the Austrian bull market is by investing in the Austria ETF (Exchange Traded Fund), symbol NYSE: EWO. OMV, Telecom Austria and Erste Bank are the top three components in the Austrian ETF — together making up just under half of the ETF. The remaining stocks are other fast growth Austria plays. Let’s make this our first position and buy it at market today. Place a protective stop at $21.75. (There are no options on this one.)

The fourth quarter has been traditionally the strongest quarter for Austrian stocks. So there is plenty of upside for Global Bull Market Alert Subscribers.