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Comment by aresant | Hacker News Reader

Serious question - how can a non sophisticated investor bet against the chinese economy?

Probably the least sophisticated way is to buy shares in an inverse ETF. There are a couple bear market ETFs that target Chinese indexes (FXP and CZI). (I'm not endorsing anything here; please understand whatever you invest in before doing so.)

Don't buy any inverse ETFs until you understand the "inverse ETF decay" problem well. Serious stuff.

This really cannot be said enough. I thought I had figured out a way to arbitrage the oil market sometime last year. Luckily I decided to "make the trades on paper" and see how it turned out before actually putting down ten grand. The devil is in the details, of course, and after watching what happened and fully reading the prospectus of the inverse oil ETF I realized what happened. Always READ THE PROSPECTUS if you are going to be using ETFs or anything else exotic. Again: READ. THE. PROSPECTUS.

"The ability of markets to defy gravity exceeds your ability to short them."

So buy puts. =)

How does that help? Puts expire.

Limited downside risk?

You have to understand that when you bet on price movements, you're taking a risk. Options let you do that without risking more money than you want to. They don't solve the problem of having to guess market movements, but nothing will. They solve the problem of shorting being risky to your portfolio's health.

One way is shorting exchange traded funds invested in Chinese companies like GXC. Another way would be to short companies dependent on China's economics growth, or companies highly valued for their Chinese branches like YUM (owns KFC, etc..).

Jim Chanos in a Businessweek (http://www.businessweek.com/magazine/content/10_16/b41740106...) interview recommends the following:

"There are ways to play Chinese companies outside of China. Either they trade in Hong Kong or New York. Probably more important from an investment point of view, this has implications for the people selling stuff to China—cement, glass, copper, steel. "

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