Trying (and Failing) To Profit Off of the Chinese Market Decline

The Chinese are trying to kill me. I know it sounds ludicrous -- that a whole country is out to get me -- but hear me out.

Yesterday, I brushed my teeth. Nothing suspicious about that until I read the Chinese are making toothpaste with the poisonous chemical diethylene glyco. I looked on the tube and, sure enough, it was marked "MADE IN CHINA". I thought "this has to be a mistake because, why would the Chinese try to kill me?" I'm a big fan of the General Chow's Chicken. My wife is even planning to run the Great Wall Marathon. No China bashing going on in my house.

Then I fed our cat, Mr. Kaiser. Mr. Kaiser has been acting fine but then I saw a Chinese company made its pet food with tainted wheat gluten. I checked and, again, MY cat food was marked "MADE IN CHINA." First me, now my pets? This can no longer be a coincidence.

So last month I gave my boy the "Thomas The Train" wooden toy set for his second birthday. And yesterday, I hear they were recalled because the Chinese manufacturer used lead paint. Holy Feng Shui...now they're trying to kill my kids too!

I look around. These Chinese are everywhere. My computer, my chair, the TV, the phone -- all MADE IN CHINA! I could be slowly being poisoned. Even my underwear -- MADE IN CHINA. Who knows what evil chemicals lurk in my undergarments. Ahhhh! I'm surrounded.

Why? Why me, Wen Jiabao?

It couldn't be because of the China stock bubble article I wrote last week, could it? I mean, I was just making an observation. Nothing personal. Really.

Sure, I was trying to make money off of a China stock market decline, but I couldn't even figure out how to do it. The China bubble seems to be truly a phenomenon isolated to the Shanghai market, which foreign citizens can't even trade. So even though the Shanghai market declined about 15% in eight days, I couldn't make a cent off the drop.

It certainly wasn't for a lack of looking. First, I researched Chinese stocks trading as ADRs on the NYSE but most of them were decent companies that weren't worth shorting. And most of them didn't even blink during the Shanghai decline. China Mobile (CHL), PetroChina (PTR) and Aluminum Corp (ACH) are all actually higher now than at the beginning of the recent drop.

Then I looked at some of the more speculative China stocks listed on the NASDAQ, but most were too risky to short because of the low liquidity. Or, like C.trip (CTRP) and The9 (NCTY), they were pretty good companies and could be bought out. Again, too risky.

I finally settled on the a proxy for the Shanghai market, the Singapore iShares ETF (EWS). But even it barely budged. By the time I could have made a couple of bucks, the Shanghai reversed and I would have exited the trade poorer after commissions and fees.

So, Mr. Jiabao, you see....I can't even make money shorting China stocks. Now, I can't promise that I won't try. My overlay of the Shanghai market with the NASDAQ still shows that if the Shanghai doesn't make a new high, it could roll over into a serious decline. But my stubbornness could be someone else's gain. And isn't that what capitalism is all about.

You really have nothing to worry about, China. I promise to buy whatever stuff you make because, well, I really don't have a choice. Just stop trying to kill me and my family. And please, get out of my pants!

Comments

[Lei Yang:]

Haha, at least, it's bit funny.

2007 Jun 15 08:51 AM

[JW:]

there's a old chinese saying: the private who tried to escape from the battle and run 50steps distance made fun of another private who also tried to escape from the battle and run 100steps distance.
obviously, writer of this essay is the 1st private.

2007 Jun 16 10:41 AM

[bigswing:]

Chinese manufactures will improve their products by producing high quality and more safe manufactured good for people in the world. Americans "really have nothing to worry about". Just go to K-Mart, Wal-Mart, Best Buy, Circuit City, or whatever big stores, and check the lable and see any popular products that are not "made in China"...

2007 Sep 03 12:03 AM