Yesterday’s national elections in Russia, widely expected to give President Putin a mandate for much greater political power, should be of concern to Wall Street. So says money manager Tom Postin of Los Angeles-based P&W Partners.

“We have a deteriorating relationship with Mr. Putin that’s bound to get progressively worse,” he says. The Russian president, he notes, is growing bitterly anti-American, is decidedly anti-Israel and pro-Iran, and is a thorn in our side as we attempt to promote peace and stability in the Middle East.

“The Cold War is back,” Mr. Postin says. “We’re in for much tougher times with Russia, which is building up its military, and the war of words between us should get worse. They should probably change the name of the James Bond film ‘From Russia with Love’ to ‘From Russia with Hate.’ I wouldn’t touch a stock in that country. I just don’t trust that market.”

Politically, he’s probably right, but he’s dead wrong on the Russian market, whose Russia Trading System index, which is far outpacing American stock indices, is up about 13% so far this year, following a sizzling 48% jump in 2006.

“When it comes to investing in Russia, forget politics and think market appreciation,” money manager John Connor says. It’s a $1.3 trillion economy, the eighth largest in the world. It is in the midst of a domestic boom, with the middle class expanding to 50% of the population from just 28% over the past year. Russia, he notes, is also enjoying a consumer spending boom starting from a very low base, with widespread purchases of cars, homes, and cosmetics.

Further, he says, its gross domestic product, spurred by surging oil and gas exports, is growing at a brisk 7%, which should continue through 2008. Its currency, the ruble, meanwhile, has appreciated 12% so far this year versus the greenback. Likewise, Mr. Connor points out, Russia is one of the cheapest emerging markets, sporting a price/earnings multiple of just about 12, versus between 18 and 20 for India and Brazil, and more than 40 for China. Russia’s growing prosperity can also be seen in increasing individual wealth, with the latest figures showing 53 billionaires and 103,000 millionaires.

Mr. Connor is the portfolio manager of the Third Millennium Russia Fund (symbol TMRFX) of Lake Wales, Fla., a nine-year-old fund with $110 million in assets. It ran way ahead of the American market last year with a 36% gain, and is up 18% so far in 2007. Over the past five years, Mr. Connor tells me, the fund — one of the few all-Russian investment vehicles available to American investors — has averaged compounded annual growth of just under 40%.

“Mention investing in Russia and most people hold their nose,” he says. “They don’t trust the market, and that’s dumb. Russia’s public companies have good professional managements and very good auditing by American accounting firms.” One of Russia’s main problems, he says, “is that its public relations is terrible, meaning it has no lobby in Washington and has never really learned to play the PR game.”

What about Mr. Putin? “He’s competent, a bureaucrat, and Russian people are thrilled with his competence and professionalism,” Mr. Connor says. “Politically,” he adds, “Mr. Putin, though he sees things differently than we do, should not be viewed as a problem, but rather on a much larger scale as part of the solution.”

Since he runs a fund that invests in Russian securities, our Kremlin bull obviously has an ax to grind when he tells me that the country, the biggest in Europe with a population of 148 million, deserves an active role in every growth-oriented portfolio. Above-average economic growth, accompanied by prospective average annual earnings gains in the 15% to 20% range, and a stock market on a roll, should reinforce that investment message loud and clear, he says.

Because of the custody costs associated with the purchase of a Russian stock, Mr. Connor says he thinks the best way to play the market is through a fund or some specific Russian companies whose stocks are traded on American exchanges. Two of his favorites traded here, both of which are part of the Third Millennium Russia Fund portfolio, are the country’s largest integrated oil company, Lukoil (LUKOY), and a leading mobile phone services provider, Vimpel-Communications (VIP).

Other Russian opportunities favored by Standard & Poor’s include ING Russia Fund (LETRX), JPMorgan Russia (JRUAX), and Market Vectors Russia ETF (RSX).

A word of caution: If the financial markets should run afoul of a new downturn, many pros say those top performing and increasingly expensive emerging markets, including Russia, would be especially vulnerable to steep declines.

dandordan@aol.com