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Thread: How to profit from the collapse of the China bubble?

  1. #1
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    Default How to profit from the collapse of the China bubble?

    There are clearly multiple bubbles happening in China: real estate, manufacturing, commodities, etc.

    What are some good ways to profit from the inevitable collapse? Of course, bubbles can sometimes go on for much longer than people expect--so, puts or their equivalents would be one approach, rather than outright shorts.

    A few ideas to get the ball rolling:

    -- short construction-oriented commodities, such as copper, steel and coal
    -- short shipping companies
    -- short copper mining companies
    -- short the Singapore stock market

    There are also a bunch of companies that trade on US stock exchanges that derive most of their revenue from China. Which ones would make good shorts?

    When China collapses, how will that impact the economies of the nearby countries, such as India, Russia, Japan, Korea and Taiwan?

    What would happen to the prices of oil and gold in the event of a China collapse? Would oil decline significantly due to a sudden decline in demand? Would gold increase as people in China flee the yuan in favor of something concrete (in fear of currency devaluation)?

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    Default Re: How to profit from the collapse of the China bubble?

    Quote Originally Posted by Sharky View Post
    There are clearly multiple bubbles happening in China: real estate, manufacturing, commodities, etc.

    What are some good ways to profit from the inevitable collapse? Of course, bubbles can sometimes go on for much longer than people expect--so, puts or their equivalents would be one approach, rather than outright shorts.

    A few ideas to get the ball rolling:

    -- short construction-oriented commodities, such as copper, steel and coal
    -- short shipping companies
    -- short copper mining companies
    -- short the Singapore stock market

    There are also a bunch of companies that trade on US stock exchanges that derive most of their revenue from China. Which ones would make good shorts?

    When China collapses, how will that impact the economies of the nearby countries, such as India, Russia, Japan, Korea and Taiwan?

    What would happen to the prices of oil and gold in the event of a China collapse? Would oil decline significantly due to a sudden decline in demand? Would gold increase as people in China flee the yuan in favor of something concrete (in fear of currency devaluation)?
    If you believe China will collapse, then I think Australia will be in big trouble. You could simply short the AUD; look what happened to it back in September 08.

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    Default Re: How to profit from the collapse of the China bubble?

    Quote Originally Posted by Down Under View Post
    If you believe China will collapse, then I think Australia will be in big trouble. You could simply short the AUD; look what happened to it back in September 08.
    The same may be true for other commodity-oriented economies, such as NZ and even Canada.

    NZ actually exports a lot more food products (dairy, meat, fish) than things like lumber or coal, and China isn't currently a major destination, but past history says that global investors aren't likely to be very discriminating.

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    Default Re: How to profit from the collapse of the China bubble?

    Quote Originally Posted by Sharky View Post
    The same may be true for other commodity-oriented economies, such as NZ and even Canada.

    NZ actually exports a lot more food products (dairy, meat, fish) than things like lumber or coal, and China isn't currently a major destination, but past history says that global investors aren't likely to be very discriminating.
    To me, the million dollar question is how the OZ and NZ economies will fair in regards to a China Crash.

    I'm of the belief when comparing the two that Australia's performance(both +/-) is a magnified version of New Zealand.

    Good news in China and OZ performs better than NZ(respective commodity sectors).

    Bad news in China and OZ suffer worse than NZ(respective commodity sectors).

    I'm going with the assumption that a China Crash will see China still continuing to adopt a more expensive diet...and continue to be a lucrative opportunity for NZ(as well as part of the OZ economy). I may be completely and utterly wrong but I kinda look at low-cost production Dairy as having similar potential today as Coca-Cola in circa 1980.

    So I reckon NZ will suffer from foreign currency investors dropping NZ like a hot potato, but hopefully see dairy commodity prices weather the storm a BIT better than most other non-food commodities.

    That's my HOPE anyway.

    I'm feeling fairly confident that Gold/Silver will not get crushed TOO badly.....capital flight from a crash would have to go somewhere..so I think Gold/Silver could benefit especially being such a small market and the historical penchant for precious metals in the region?

    Energy....that's the trillion dollar question......if we see a China Crash I'd be looking at energy prices like a circa 1999 Dot Com day trader...and buying on any really big dips, and buying BIG if there's a substantial energy price collapse back to prices in the region above last year's bottom.

    Just my 0.02c

    All I know is that I don't know a single person in the real world who's even contemplated the blowback from a China Crash...and that includes folks with some reasonably good perspective on the current state of economic affairs in the wealthy west.

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    Default Re: How to profit from the collapse of the China bubble?

    @lake: agree.

    On the energy side, what I'm thinking is that if there's a big collapse in China, it's likely to be violent. So, even if their use of oil declines substantially, it seems possible that the fear factor could keep prices high, or possibly even drive them higher. Of course, any violence would be partly offset with press censorship, but that just complicates things even more.

    Doesn't Chile get much of their export income from Copper? Between that and the inevitable drain on their economy from the earthquake and its aftermath, there might be some interesting shorts there, too (perhaps after a likely near-term flood of deficit spending wears off).
    Last edited by Sharky; 03-12-10 at 07:42 PM.

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    Default Re: How to profit from the collapse of the China bubble?

    Short gold?

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    Default Re: How to profit from the collapse of the China bubble?

    Quote Originally Posted by Sharky View Post
    The same may be true for other commodity-oriented economies, such as NZ and even Canada.

    NZ actually exports a lot more food products (dairy, meat, fish) than things like lumber or coal, and China isn't currently a major destination, but past history says that global investors aren't likely to be very discriminating.
    Brazil is the commodity export country most likely to feel the immediate results of a China bust...although Australia would rate a close second.

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    Default Re: How to profit from the collapse of the China bubble?

    Quote Originally Posted by cjppjc View Post
    Short gold?
    Possibly, if you're a USD based investor. But, as I watched the AUD fall off a cliff in September - December '08, I was very pleased to have the bulk of my money in gold.

    The mistake I made was not buy AUD, i.e. sell more gold, when gold hit an all time high in AUD terms in early '09.

    The system is broken. Knowing how it'll play out is very difficult to predict. I believe that China will crash, eventually. After that, I have no idea.

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