Sunday, 23 January 2011

Long term China - How to profit from turndown?

While there's a lot of public mainstream support for growing china and etc etc, there's just too many cases indicating china's going to have massive problems in the near future. Top of those lists are unsustainable property price increases (housing bubble), way too loose credit, large inflation runs, etc. There's a good chance of a china crash and many large funds are starting to place bets against China now (similar to how housing bubble bets got placed).

"“The Chinese delegation has said all week that there will be double-digit growth for years to come and the Brits have lapped it up. But the data doesn’t add up. We think we’ve experienced credit bubbles over the past few years, but China is the biggest. And yet the global economy is looking to China as not just a crutch but a springboard out of the recession. It’s crazy.”"

So now to think of how to profit from this?...

Well, many of those funds mentioned are private so no access, what other ways to benefit from a crash?

1) Short FXI/China ETF's - very obvious
2) Short anything related to China
3) Commodities - china is driving the cost of many energy and construction materials up (copper? cement? steel?)
4) Long term leap options

Of those, 1 & 2 are sorta risky and normal payoff so not as interesting.

3 & 4 are interesting ideas but require very well timed bets.

Note: need to find etf's for those commodities.

Follow Up:

Some suggestions:

XME - S&P mining index - steel + others - not sure if companies or commodity
SLX - Steel index - companies
DBB - general futures price of basket of metals

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