Long time lurker on WSB, thought I would share (a very simplified version of) my journey over the past two years…
\- Started dipping my toes in early 2020, tried to buy some front month oil futures when it got down to around $20, only for oil to trade deeply negative for a few hours. Lose 20k in a few days. Decide to cut risk for a while.
\- Spring/summer of 2021. The world has gone mad, if this is not a bubble then I don’t know what is. Start shorting QQQ, also start posting more margin every 1-2 days for the rest of the year.
\- Start of Jan 2022. Everyone suddenly realises that J Pow wasn’t kidding in December, shorts start working. Ramp up long oil positions.
\- Spring of 2022. Start closing out QQQ shorts (too early but was cautious after a decade+ of buy the dip mentality) and oil longs (everyone and their dog thinks oil is going to $200). Begin trying to catch a falling knife in China (surely zero-Covid will end soon) and short USDJPY (how long can YCC last when the JPY cost of oil is going thru the roof?).
\- Now. Pissing against the wind trying to be long China and short JPY. Valuations never matter when the crowd is chasing the trend, but still think they are on my side in the long run. Hoping that Xi will pull something out of the bag to support the economy after the CCP congress and that in Japan the MoF will do another intervention or that the BoJ will eventually abandon/adjust YCC.
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Everything seemed fine until you got to the China part. That was a hard turn into shit territory
I think your problem is trying to predict what will happen. Instead of reacting to what actually happens. I like to trade once I already see the candles.
You’re deeply wrong on China. No way there but down, both in the short and the long term:
* massive property bubble. Basically most personal investment is in housing, with planned residential units able to house 3B (!) people. Land sales are essentially local governments’ main source of income, and they’ve been pushing it to developers even as the central government has tried to slowly deflate the bubble. At least 25% of China’s economy relies on property, and it will go down – massively. The question is when – the government might be able to kick the can a while longer, but can only do it so far. The can is also getting bigger each time.
* no way zero-covid will be wound down. At a minimum, experts estimate 150,000 excess deaths. Some claim as high as 1.6m deaths if zero-covid is lifted. I’ve lived in China for about two years, and the healthcare system there is complete poop emoji.
* decreasing population and overall economy growth. If the current population growth rate in the US (positive) and China (negative) continues, some estimate that by 2100 China and the US will have similar size populations, at 600M. Also – China just now implemented its first ever private pension system. Kids are expected to take care of two generations (parents and grandparents), own a house before marriage, etc. Productivity is taking a hit as people just tune out of the economy, but mostly because of a structurally inadequate economy, based on investment in non-productive assets (local governments raising money to build amusement parks and stuff). Welcome to 2% year growth.
To these add: more inward-turning of the government, more conservatism, more nationalism, more clamping down on private enterprise, more talent fleeing abroad, more delisting of Chinese stocks from US stock markets, and I just can’t see how investing in China can be a part of anyone’s strategy.
The best resources to read about this would be the “Great Wall Of Debt” book and “Revising down the rise of China” report by Lowy Institute.
Please keep us up to date on your positions, I think you have the makings of a mini Cramer. Long China, that’s one is true gold. I’m adding to my JD shorts and my long YANG. Thank you. You’re doing god’s work.