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Strategies & Market Trends : China ETF - FXI -- Ignore unavailable to you. Want to Upgrade?

To: Norrin Radd who wrote (83)	5/22/2009 1:59:38 AM
From: Walkingshadow	Respond to of 105

The GDP figures that emanate from China never made any sense to me. Just consider this: Suppose you have a business, and you decide to build a factory in China. In return for the usual "fees" (read: bribes), they give you essentially free land, abundant cheap labor, and virtually guarantee you no labor problems or environmental issues. You produce goods cheaply, and import them back to the US and sell them cheaper than your competition, so your sales rise, and so do your revenues. This is essentially the business model used by many, many Western corporations "investing" in China. Now tell me: who makes the profit? Whose GDP is really growing? Obviously, it is YOU (and your shareholders) that makes the profit, so the GDP growth should be figured into the US GDP. But it counts as China's GDP, and part of China's exports. That doesn't at all mean China gets nothing. All the officials who allowed you to do this in the first place get rich, and your workers probably make better wages than they otherwise could have. But that's relatively minor compared to how much profit your company makes. Add to that the fact that Chinese statistics have a very long history of being fictitious, sometimes to a preposterous extreme that flies in the face of reality. I think whatever GDP figure is published, you can probably divide that in half, and this would be far closer to the truth. But your question is a very good one: << But can you make it work for you? >> Well now, I sure aim to try: by shorting the Xinhua 25 via FXP. I expect that to be a medium-term to long-term trade (i.e., at least 3 months, and probably more than 6 months). Not the most ideal vehicle at all, but the only other one I know of that takes a short position in China is a mutual fund (UHPIX). That mutual fund tracks the inverse of a different index, the Bank of NY Mellon China Select ADR Index. I will probably buy that one in another account, actually. I figure in 3-6 months, both of these will pay off very well. So let's see what happens. Tell me what you're investing in, and we can compare notes later. WS

To: Norrin Radd who wrote (83)	5/22/2009 2:41:48 AM
From: Walkingshadow	Read Replies (1) \| Respond to of 105

Here's a comparison of the SSEC vs. the two short vehicles, FXP and UHPIX. From the beginning of February 2008 until the beginning of November of that year, SSEC lost 63% of its value. In comparison, FXP (leveraged 200%) should have gained 126%, but in fact only gained about 105%. UHPIX did better, gaining 188%. But something very strange happened right at the end of October. SSEC dropped 8% the last week of October, trading as low as 1664.92. But FXP dropped 51%, and UHPIX dropped 42%. Both bars were exceedingly wide (69% and 56% respectively). Today, the Xinhua 25 was down 2.27%. That means the FXP and UHPIX should have been up about 4.5%, but the actual return for FXP was 3.9% (for UHPIX, it was 4.5%). So there are some very serious tracking issues with these vehicles, and this happens rather frequently, unfortunately.