New Recommendation in SFO: Short Emerging Markets

Here is an excerpt from my recent trade recommendation in SFO Weekly:

As we are writing this, on January 20, an off-hand comment by a Chinese regulator has caused global markets to crash. China intends to take steps to restrict lending and to avoid dangerous bubbles from forming in Chinese real estate.

BULL IN CHINA SHOP

Of course, central banks tend to be a bit clumsy when trying to cool overheated markets. The art of slowing an asset bubble without causing it to burst violently is a delicate one, and over the years Chinese policymakers have proven to be more adept at crushing ants with sledgehammers. In other words, we don’t think this will end well.

LOOK OUT BELOW

To us, China’s lending curbs are the straw that breaks the camel’s back, and we recommend that investors short China and emerging markets using the Powershares Emerging Markets Infrastructure Fund (PXR).

CONTAGION

It is our fear that a crash in China will spill over into a broader emerging market crisis, and we believe that any such crisis would hit the construction and infrastructure sectors the hardest given that these have been the centers of speculation. This leads us to choose PXR as our short target rather than the more popular EEM or FXI.

To read the rest of the recommendation, please follow this link to SFO's site.

Charles Lewis Sizemore, CFA
Chief Investment Officer, Sizemore Capital Management LLC

Sizemore Capital Management LLC is a registered investment advisor specializing in money management and financial planning for individuals. Please visit us on the web for more information: www.sizemorecapital.com

Check out Charles's new book, available on Amazon.com: Boom or Bust: Understanding and Profiting from a Changing Consumer Economy

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