Short China buy Going Long the FXP

The time to Short Chinese Securities is almost upon us.  Going long the ProShares UltraSh FTSE/Xinhua China 25 (NYSE:FXP) is one way to bank coin should Chinese stocks fall as you would be collectively shorting 25 of the largest and most liquid Chinese stocks.

To quote Vitaliy N. Katsenelson -- "Everyone wants a shortcut to greatness, but there isn’t one. China has been trying to bend the laws of economics for a while, and with the control it exerts over its economy it may seem that it’s succeeded."

Play with fire and you are going to get burned, it's that simple.

You can expect the Masters to add the FXP to Master Picks very soon, its just looking too good and the perfect storm is headed to where the sun rises, East to China.

FXP 101:

The FXP has traded between $7.16 and $28.40 over the past 12 months, today its at $8.50 a share and trending up 3%.

The ProShares UltraShort FTSE/Xinhua China 25 (the Fund) seeks daily investment results that correspond to twice (200%) the inverse (opposite) of the daily performance of the FTSE/Xinhua China 25 Index (the Index). The Index consists of 25 of the largest and most liquid Chinese stocks listed on the Hong Kong Stock Exchange (HKEX). This free float-adjusted Index caps the weight of any of constituent stock at 10% to ensure broad representation of the Chinese economy.

The Fund takes positions in securities and/or financial instruments that, in combination, should have similar daily return characteristics as –200% of the daily return of the Index.

WHY SHORT CHINA?

Can you say "bubble"?

Remember the 1994 movie “Speed”? A young cop (Keanu Reeves) had to save passengers on a bus that would explode if its speed dropped below 50 m.p.h. Well, China is like that bus with 1.3 billion people aboard. If the Communist Party can’t keep the economy growing at a fast clip, the result will be catastrophic.

Fellow Masters, read Vitaliy's article titled China: the coming costs of a superbubble

Sure you can't believe everything you read but after digesting what he is getting at, watching the market, and trying to predict where the world market is headed -- a small position in the FXP could be a good way to hedge if everything comes crashing down.

Then there's just the small issue of China official rejects US complaints on currency that came out today.  Jesus tap dancing C. already.

LIAR, LIAR, PANTS ON FIRE

Come on, Really?  Seth and Jerry could do a SNL "Really China, Really?" skit on all the bullshit they are dishing out on just about everything that happens behind the great curtain.

China vs. Google is one thing, but when it comes to China's Economy, well, to quote Katsenelson:

China lies. It goes to great lengths to maintain appearances, including censoring media and jailing those who write antigovernment articles. That’s why we have to rely on hard data instead.

....

We look at China and are mesmerized by its 1.3 billion people, its achievements of the past decade, its recent economic resiliency, and its ability to achieve spectacular results on the fly. But we have to remember that economic bubbles are usually just a good thing taken too far. The Chinese economy is no exception. Its long-term future may be bright, but in the short run we’ve got a bubble on our hands.

Everyone wants a shortcut to greatness, but there isn’t one. China has been trying to bend the laws of economics for a while, and with the control it exerts over its economy it may seem that it’s succeeded.

But this is only a temporary mirage, which must be followed by a painful reality. No, there is no shortcut to greatness – not in personal life, not in politics, and not in economics.

SOURCE:

http://www.csmonitor.com/Commentary/Opinion/2010/0316/China-the-coming-costs-of-a-superbubble