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I also thought about shorting Canadian banks, especially Vancouver, the joke is that there's not many corporations traded on stock exchange, but I feel like the

I also thought about shorting Canadian banks, especially Vancouver, the joke is that there's not many corporations traded on stock exchange, but I feel like the Chinese economy crashing would send ripples here where Chinese money is keeping BC afloat, especially when the real estate bubble here pops, we will see vast majority of homeowners using debt to make payments default.

vegabook 11y ago
Yep decent strategy I would think. The idea is to find the second order implications which are not yet priced in. The first order "China is slowing down" is already in the price of the pureplay indices, and as you point out above, the implied downside vol is now much higher than the upside as a result.
- 7Figures2Commas 11y ago
  Playing the collateral damage is always a wise strategy to consider, but it's also worth considering the possibility that the decline has a lot further to go. In hindsight, prices today might look like ideal entries for short positions months from now if this is just the beginning of a major decline. In markets like this, no action should be taken without a thorough fundamental and technical analysis. Making an ill-researched assumption one way or the other will cause a lot of people on both sides of the market to lose money.
  - vegabook 11y ago
    Both sides cannot lose money simultaneously, by construction of the financial markets. +1 - 1 will always equal zero. Not -2. If your point is that "it always goes back to the fundamentals" and therefore fundamentally-driven investors will always win in the long run, I put to you that there is so much accumulated capital over centuries in Europe, that the ECB can wield this to fight the fundamentals for far longer than you can stay solvent. Consequently: When we're in a regime-shift scenario, as now, fast decision making is a much better value-adding skill than weeks of fundamental analysis which can be swept aside at the whim of a policy maker. Therefore I completely disagree with you. Those who are currently holding on to fundamental analysis are losing money hand over fist in a market which values connections and reading of policy maker tea leaves. I give you as evidence, the EURUSD exchange rate. Here is the most liquid series on earth, and one which is barely moving on fundamentals, namely the existential crisis which the euro itself is facing. It is manipulated and no amount of conscientous fundamental analysis will help. Instead fundamentals will just bog you down in irrelevant detail and a false identification of the drivers. Techs, positioning, and fast moving gut feel is what matters in this market. Basically: there is no definitive winning formula in finance. You have to use your instinct and flit between strategies as the state of the world requires. Sometimes that's fundamentals. Right now it isn't.
    - 7Figures2Commas 11y ago
      > Both sides cannot lose money simultaneously... You're being far too literal here my friend. The instruments you use, your timing, horizon, leverage, money management, etc. all affect your ability to realize gains, even if your overall investment or trading thesis is correct. For instance, I could be on the right side of a trade but a margin call could screw it all up. When all is said and done, people playing China long and people playing China short will both end up losing money during this volatile period. Not because they were all wrong about what was going to happen but because many of them won't be positioned perfectly or have the wherewithal to see their positions through. > If your point is that "it always goes back to the fundamentals" and therefore fundamentally-driven investors will always win in the long run I wrote "In markets like this, no action should be taken without a thorough fundamental and technical analysis." How in the world did that lead you to conclude that I was arguing "'it always goes back to the fundamentals' and therefore fundamentally-driven investors will always win in the long run"? Why did you completely ignore my reference to technicals? It seems you're searching for an argument that doesn't exist.
Tiktaalik 11y ago
Vancouver housing being affected depends on what amount of foreign investment properties have mortgages dependent on foreign derived income, and what amount was bought outright with laundered cash.
- jacquesm 11y ago
  I'd bet on 'mostly cash' because the only people that have money to invest in China are the well connected ones that can actually get the money out and BC banks would likely not apply the normal mortgage rules to such buyers.
frandroid 11y ago
That's assuming that a Chinese crash would not push more Chinese people to move their money to Vancouver.

vegabook 11y ago

Yep decent strategy I would think. The idea is to find the second order implications which are not yet priced in. The first order "China is slowing down" is already in the price of the pureplay indices, and as you point out above, the implied downside vol is now much higher than the upside as a result.

7Figures2Commas 11y ago
Playing the collateral damage is always a wise strategy to consider, but it's also worth considering the possibility that the decline has a lot further to go. In hindsight, prices today might look like ideal entries for short positions months from now if this is just the beginning of a major decline. In markets like this, no action should be taken without a thorough fundamental and technical analysis. Making an ill-researched assumption one way or the other will cause a lot of people on both sides of the market to lose money.
- vegabook 11y ago
  Both sides cannot lose money simultaneously, by construction of the financial markets. +1 - 1 will always equal zero. Not -2. If your point is that "it always goes back to the fundamentals" and therefore fundamentally-driven investors will always win in the long run, I put to you that there is so much accumulated capital over centuries in Europe, that the ECB can wield this to fight the fundamentals for far longer than you can stay solvent. Consequently: When we're in a regime-shift scenario, as now, fast decision making is a much better value-adding skill than weeks of fundamental analysis which can be swept aside at the whim of a policy maker. Therefore I completely disagree with you. Those who are currently holding on to fundamental analysis are losing money hand over fist in a market which values connections and reading of policy maker tea leaves. I give you as evidence, the EURUSD exchange rate. Here is the most liquid series on earth, and one which is barely moving on fundamentals, namely the existential crisis which the euro itself is facing. It is manipulated and no amount of conscientous fundamental analysis will help. Instead fundamentals will just bog you down in irrelevant detail and a false identification of the drivers. Techs, positioning, and fast moving gut feel is what matters in this market. Basically: there is no definitive winning formula in finance. You have to use your instinct and flit between strategies as the state of the world requires. Sometimes that's fundamentals. Right now it isn't.
  - 7Figures2Commas 11y ago
    > Both sides cannot lose money simultaneously... You're being far too literal here my friend. The instruments you use, your timing, horizon, leverage, money management, etc. all affect your ability to realize gains, even if your overall investment or trading thesis is correct. For instance, I could be on the right side of a trade but a margin call could screw it all up. When all is said and done, people playing China long and people playing China short will both end up losing money during this volatile period. Not because they were all wrong about what was going to happen but because many of them won't be positioned perfectly or have the wherewithal to see their positions through. > If your point is that "it always goes back to the fundamentals" and therefore fundamentally-driven investors will always win in the long run I wrote "In markets like this, no action should be taken without a thorough fundamental and technical analysis." How in the world did that lead you to conclude that I was arguing "'it always goes back to the fundamentals' and therefore fundamentally-driven investors will always win in the long run"? Why did you completely ignore my reference to technicals? It seems you're searching for an argument that doesn't exist.

Tiktaalik 11y ago

Vancouver housing being affected depends on what amount of foreign investment properties have mortgages dependent on foreign derived income, and what amount was bought outright with laundered cash.

jacquesm 11y ago
I'd bet on 'mostly cash' because the only people that have money to invest in China are the well connected ones that can actually get the money out and BC banks would likely not apply the normal mortgage rules to such buyers.

frandroid 11y ago

That's assuming that a Chinese crash would not push more Chinese people to move their money to Vancouver.