We’ve been following the Chinese stock market closely, because over the last few years it’s been a “canary in the coal mine” for US equities. The fact that the Shanghai index actually peaked last August, and is now in the process of rolling over, should be a concern to anyone who is long US stocks.
Follow the leader: China has been a step or two ahead of US equities over the past 5 years – for better or for worse!
Guru Marc Faber is worried as well – he recently told Bloomberg that China’s economy will slow and possibly “crash” within a year:
“The market is telling you that something is not quite right,” Faber, the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong today. “The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months.”
Here’s Faber’s full interview with Bloomberg – he’s got some great quotes, including that he believes “eventually all governments in the Western world will eventually need to be bailed out!”
If you’re interested in making a short play on Chinese equities, you may want to check out ticker FXP, which is a double-short ETF on Chinese shares. A long position in FXP would make you money – potentially a lot – if Chinese shares continue to roll over.