GOING FOR GOLD

What an event and what a show it was in celebration of the Olympics in Beijing, China. This was a peaceful event that transpired amid turbulent times for the entire world to share and participate in what seemed, by all measurable accounts, the public coming-out party that lived up to the hype and far exceeded what most imagined.

Unquestionably, it was the most spectacular opening ceremony to kick things off in the, aptly named, “bird’s nest” stadium that featured artistic and mirror-like precision, synchronized to choreography that was truly daunting and pushing the standard well beyond the usual tedious fare of sleep inducing inaugural ceremonies that normally play out as little more than gratuitous parades of mascots for the host country. This Olympic event was truly one to watch and the best that most people have ever witnessed in history.

The viewing audience shattered previous records and helped reignite Olympic fever that seems to have been missing from many previous events. And in an internet age of downloadable and streaming content available in unprecedented quantity, embrace of new technology and methods of online distribution made the events accessible with limited advertising intrusions.

I must admit, begrudgingly, that these Olympics were by far the most interesting and compelling that I have ever seen, and caused me to spend many late nights due to time zone difference during the two-week rotation, streaming live events that would fail to get prime time coverage. Like any sports event, somehow watching a taped delay replay is just not the same as being broadcast live.

While I enjoy sports and athletics, I am not a “fan” of professional sports. In a day and age with so many other issues that we face for the sake of humanity, prima donna attitudes by ridiculously overpaid athletes truly distorts the value system for young people growing up. The conflict of interest between commercial endorsements and the athletes that hawk their wares like a used car salesman is really despicable, especially when we consider that the target audience centers on the most impressionable youth of our society.

I find it deplorable that mainstream media continues to fan the flames of celebrity worship and pop culture, daring to call an athlete a hero considering that each and every day there are unnoticed acts of true courage by police officers, firefighters, EMS drivers, soldiers, doctors, nurses, school teachers and every unnoticed individual that resides in the shadows of society.

But the Olympics are something different, something special because they tend to focus and highlight more obscure sports that offer far less in monetary award than the usual television dominated pampered athletes in baseball, basketball, soccer, football and other professional sports. And even those professional athletes tend to put their egos to rest for a moment and participate for country over self. Unfortunately, if you didn’t have access to cable or were aware of the NBCOlympics.com website, you may believe the Olympics were about nothing more than swimming events. But, thankfully, access to some of the less primetime featured events were able to be viewed live and without tape delay like Judo, Gymnastics, Wrestling, Badminton, Ping Pong, Shooting, Archery, Track and Field offered some truly incredible moments.

Having said all that, I must admit that watching competitive athletic events in the Olympics has really been a celebration of national pride and mutual respect among different countries. And with few exceptions, I think most of the athletes from all over did an outstanding job of diplomacy by behaving in a public forum that did not bring shame or embarrassment to their own respective countries.

The Olympics tend to remind us all of our own attraction or “love for the game” that we played as children which requires nothing more than the simplicity of pure enjoyment. And there are always some very touching background stories that seem to trump the individual sporting event. Yes, China did win the most gold medals by significant margin, and while accumulation of gold medals may have significance to the participating athletes, I have enjoyed the spirit of the competition. For all those that didn’t accomplish what they expected and for the many more that didn’t even medal, you should be proud for even making it to the highest level of competition. In truth, there were no losers, only winners.

But this article is not just about a single athletic event as much as it is about celebrating the common ground that all nations and all countries share. This Olympic event captured for the most part and, in spirit, our potential as a global community to both compete and participate on level terms when the rules are fair, and the game isn’t rigged.

FROM THE RUBBLE, CHINA ENDURES

I do want to pay respect towards the tremendous loss that the Chinese people suffered with the recent devastation from earthquakes in the Sichuan provinces back in May of this year. It is reported that 70,000 innocent people were killed and an estimated 20,000 or more are still missing and unaccounted for, not to mention the millions of people that remain homeless or displaced in the wake of destruction.

Let’s remember that while mainstream media tends to use statistics as a metric of shock value, these are not just numbers. They reflect real human beings with families no different than you or I. While the world extended their friendship to us with outreach after our own tragic events so, in turn, must we as Americans and other nations alike extend our friendship to others in times of need. We may be capitalists in search of finding prosperity, but we are all human beings first and foremost.

It is a testament to the resiliency of the people in China to continue forward and play the absolutely gracious host despite a tragic ordeal that will require years of recovery and an infusion of billions in capital to begin to repair the destruction that occurred. I can’t imagine that any other country could still continue to host a sporting event after enduring such immense devastation–consider that we, as a nation, have barely recovered from hurricane Katrina, let alone the tragedy of 9/11. But such an event as the Olympics can continue to provide hope and inspiration to not only China, but to all nations in the global community we all share because they are inclusive and ultimately binding as it demonstrates that everyone can compete.

Last on this issue is that I need to mention the most touching moment to me was the 9 year old boy who was escorted by 7 foot 5 inch basketball player Yao Ming. The boy was physically dwarfed in contrast, but he stood, in spirit, above everyone else in stature. Apparently, he was one of the thousands of victims who was attending school when the earthquake hit and collapsed the building he was in with his classmates. It was reported that he went back into the rubble alone multiple times to, single-handedly, rescue fellow classmates; and after that ordeal, he walked miles home to rescue his sisters.

This display of tremendous courage may not be recognized by an Olympic medal but, in my opinion, demonstrates true heroism that no gold medal awarded for “sport” in any Olympic endeavor could equal.

IS CHINA OUR FRIEND, FOE OR OUR MOST IMPORTANT ALLY?

One of the impressions that struck me was that China’s rise and emergence in global standing is really a success story for America. As the saying goes, “imitation is the sincerest form of flattery,” and contrary to the rhetoric that intends to court fear-mongering, you are essentially witnessing an industrial revolution similar to what America experienced in the early part of the 20th century, except this is happening exponentially.

But China’s rise should not be feared because it really demonstrates the positive influence America has had in the world as other nations attempt to emulate the success story that capitalism can bring by opening markets and continuing to participate and expand trade.

Think about it in these terms, such that this unprecedented rate of rise really is a testament to capitalism, which seems odd when politicians and short-sighted individuals wrongly and inappropriately characterize China as a communist country. You can still hear disingenuous commentary or references to China as a “communist state” which harkens back to the old Cold War days of yesteryear.

C’mon, folks, China is hardly a communist state even if in name only. Truth be told, they may be more capitalist than even we are to the point of fault, in that safety standards and legislation are sacrificed at price points that keeps profit margins high for companies that outsource their labor and manufacturing base. And their capitalistic endeavors are especially true when you see the rising prosperity of results that come from a seismic wave of entrepreneurism.

China is far from perfect, but the acceleration and speed at which it has risen is remarkable and unprecedented in modern history. The context of this article is really intended to dispense some of the fear-mongering and political rhetoric that seems popular in mainstream news, especially in a political season that measures candidates by their uncanny ability to promise lies they can’t deliver amid an economic slow down and declining job growth.

It seems that China has become a scapegoat to point the finger at with little regard to our own lack of domestic policies in America that continually blame job losses to outsourcing, without recognizing that innovation and expanded trade in developing economies is what actually creates jobs simply by the flow of capital.

Yes, factory jobs and auto worker unions are a thing of yesteryear, sad as it is, they are the facts we face and no politician can ever fulfill a false promise to bring them back. As it is said, the horse has already left the barn and shutting the door now won’t bring them back; but, we can compete on a level that is promising by adoption of new technologies that generate higher paying jobs down the road, but it takes a commitment for change rather than espousing empty rhetoric.

There has been a very disturbing rise of xenophobia similar to the rhetoric shared in the 1980’s against Japanese investments in real estate here in America. The truth is post-war Japan has always been a staunch ally and, more to the point, a sort of anchor into Asian affairs. However, the end of a Cold War era and the burgeoning 21st century global economy we face makes China’s position significantly different and historical comparison is a futile exercise at best.

Strategically, it is in our best interest to have a strong China because now we face a new breed of global issues that requires partnership and participation by allies that have the capacity to command the respect and attention of others and, more importantly, the ability to enforce violations of global treaties and secure peace and stability in the region. And as the recent events in Georgia sparked off Cold War rhetoric about Russia again, it seems even more of an imperative to improve our relationship with China as an emerging superpower to help temper and stabilize the region.

The fact of the matter is that China is an ancient culture and lack of cultural awareness by some, who would delude you otherwise, fail to recognize that the entrepreneurial spirit of Chinese culture was always alive and well, long before the ruling party of a Maoist communist movement and long after into the 21st century and beyond. Despite the Maoist revolution that occurred in China, the integral sense of cultural awareness never dissipated, nor could it be squelched or tamed. And it is clear that China is well on its way toward embracing capitalism into the future.

In fact, it should be a matter of public policy for the United States to openly embrace China because China represents a global power that helps to restore stability and balance in the world. It’s clear that such policy is supported in relation to trade behind closed doors, underscored by all the moves toward shifting manufacturing outsourcing overseas. And as an entire new generation of consumers come online, the opportunity for an emerging middle class consumer base in China means that American products are ripe for consumption. The CEO’s and executive management of the best American companies both realize and act upon it through strategic initiative, while the rhetoric of politicians tend to grab air-time by playing to crowd sentiment that gets them reelected.

WHY STALEMATES ARE A WIN FOR BOTH SIDES

Contrary to what Reagan worshippers like to believe, the Cold War did not end simply because he said “tear down these walls” to Gorbachev. It wasn’t the rhetoric, instead, it was the result of real economic policy that did occur very effectively under the Reagan administration and transformed world economies; and as the United States climbed out of a post-Jimmy Carter recession, a new rise in prosperity set the tone and groundwork for emerging global markets we see today.

However, none of the economic rise in the United States could have occurred without peace and stability in the world. And part of the reason for peace and stability during the last breaths of the Cold War was a perpetual stale-mate between the U.S. and Russia, and that “mutually-assured destruction” was the undeniable understanding that there was no potentially winning scenario–in effect, peace was the only possible outcome because war was never an option.

And stalemates can be good things when it comes to power. It means that neither country is forced to cede power and that, most importantly, they both have so much “stake in the game” that neither party can afford to lose a high risk game of poker by bluff or folding.

Countries that have strong, vibrant economies become American allies by default, because they have an interest in the game and, therefore, have something to lose if they fail to participate or compromise. On the contrary, impoverished nations with little to gain, in effect, have nothing to lose and that, my friends, makes the smaller, weaker fractured nations a more dangerous threat.

If we truly examine the current geo-political risks in the world today, we understand that economically strong, vibrant economies don’t pose hazards; rather, they reduce risk due to instability or vulnerability and don’t allow radical regimes to exploit power by creating buoyancy to democratic values and capitalistic ideology.

Global balance and harmony exists when we all have common goals and, more importantly, shared economic agendas. If we truly want peace in the world then we must embrace the global community and work toward cooperative trade, investment and ultimately transparent objectives.

People trust what they know, not what they don’t understand…and as we, in America, begin to embrace other cultures we find partnership and forged allies bound by mutual respect.

MANUFACTURING DEFECT OR DESIGN ERROR?

Fears of pet food contamination, Mattell (MAT) toy recalls and, worst of all, baby crib tragedies stir the recent fervor of anti-Chinese rhetoric and absurd proposals of trade protectionism. The conversation and dialogue has become so xenophobic that it has even entered the political diatribe of candidates on the campaign trails.

First off, let’s differentiate between “design flaws” and “manufacturing errors.” To simply point the finger at China because they have become the most cost-effective way to outsource and manufacture goods and products really betrays who lies at fault as the center of blame. Put is this way, Quality Control must be in effect by any good standing corporation, otherwise, where does the responsibility fall? Is it the blame of the company that manufactures a defectively designed product according to the specifications they were given, or is it the blame of the company that initially designed the flawed product?

I would have to argue that no matter where a particular product is manufactured or made, the company that sticks its brand and name on the package must always be held accountable first and foremost. That is, to oversee, test, QC, and validate the guarantee or promise on the box.

Consider the tragedies that occurred several years ago with the Ford (F) Explorers and Firestone tire debacles. Did people stop buying Ford vehicles even though the high-center of gravity was a serious design risk that may have contributed to the cause of innumerous and unnecessary rollovers? Thankfully, Ford did change their design with successive products lines that stabilize their newer models and make it less likely to tip or roll over easily. Or was it the Firestone tires not meeting the stresses imposed on the sidewalls? Or was it the combination of the high-center of gravity that created undue stress on sidewalls that could only withstand normal driving situations? Blame one, blame none or blame them all.

Personally, I think Mattell toys did an excellent job of taking toys off the shelves with a recall and underscoring the fact that they need to increase quality control internally, without passing the blame directly onto China. Kudos to them for acknowledging a problem and dealing with it as opposed to circumnavigating the system through stalling techniques and outright denial. Mattell even went so far as to make a public and formal apology to the Chinese government by taking responsibility for Mattell’s design flaws. Some have criticized this move by Mattell as cow-towing to China to maintain their footprint and access to cheaper manufacturing costs. This is, no doubt, partly true, however, I strongly disagree with the context in which way the criticism was framed in media. It wasn’t weakness on Mattell’s part, rather, it was humility. And humility goes a long way in any trade negotiation or any future and necessary business relationships.

I think that, ultimately, any company or corporation is primarily responsible for the end product that consumer’s pay for. If you slap your brand on the package–you own it! Regardless if they manufacture the products themselves here, domestically, or whether they decide to outsource the job overseas. No matter what, the company that puts their brand on the product must take any and all responsibility. And if the products don’t meet their design standards or criteria, then they should respond by finding a capable manufacturer that can. There are plenty of qualified manufacturer’s here in the United States that allow on-site supervision that may, in the end, be more cost-effective if safety standards are the first priority.

Remember, China’s partnership with American outsourcers is largely as the manufacturer–not the design or product developer. And the reduction in cost translates, ultimately, to the consumer in the short-term. The long-term consequences can be argued with the loss of wages and jobs here in America. And for that, I am wholly sympathetic. However, you can’t blame China for being the manufacturing outsource for American companies that choose on their own volition to farm jobs overseas. Those complaints should rest solely on the companies that freely choose a more competitive wage environment that maintains profit margins for corporate interests. After all, we do have a choice as consumers, don’t we?

So, if it makes you feel better as a consumer to buy a product with a “made in the USA label” that was probably manufactured overseas somewhere anyway, then, by all means, do so. But remember, there is one hidden advantage that importing cheaper goods from overseas actually contributes to our economy that very few are willing to acknowledge.

TEMPERING THE RATE OF INFLATION

Yes, lowered interest rates, a calamity in the housing market with a depreciation rate not seen since the Great Depression and the overall pressure on a falling dollar, cheaper goods from overseas maintain a significant measure of “buying power” that eases the diminishing exchange rate of the dollar as our primary currency. And the current credit bubble burst has direct impact on consumer purchasing power and spending by no longer allowing us to roll debt as easily as before.

This is one of the reasons that, while it is popular in an election cycle to criticize importing goods from China, we remain even capable to continue purchasing discretionary products due to lower costs historically. And as mentioned earlier, the cheaper cost of importing goods and products is actually reducing inflationary pressures to the average household that would be unbelievably higher and out of control if not for low cost manufacturing. Consider also, that wage growth has not risen in relation to real world inflation and that job reductions in employment statistics have added extra ordinary stress to the average households in America.

And, lastly, if not most importantly, America still has one of the best manufacturing sectors in the world through technology and medicine. We should be forward looking and seek to innovate new job growth through the sources of our economy that remain our overall strength. Do we really want to turn back the clock to the days of assembly line style factory workers as the primary engine that drives our economy?

Technology in the form of aerospace and defense, computers and software engineering, medicine and pharmaceutical applications, and, hopefully, “alternative energy” offer the most potentially dramatic shift in our economy that could drive job growth, peace and stability that would lead the world into the 21st century. Oh, well, it’s nice to dream.

FREE MEDIA? CENSORSHIP? WHO ARE WE KIDDING AND WHO ARE WE TO JUDGE?

If you watch the financial mainstream news, you can’t help but notice a man by the name of Peter Navarro pimping his book on a hypothetical war between China and the U.S. This fraud of a character has gotten more air time than his agenda deserves. But he’s not alone as other clowns put on a similar puppet show. This type of fear-mongering is reckless and irresponsible and tends to only engender blame rather than promoting responsibility.

The real miss on this is that his slant is largely a polemic, meant to stir controversy and play to the angst middle America feels in a declining economy. What is really insincere, is that he knows damn well he’s lying and to what crowd he’s playing to so, please, don’t be fooled or misguided.

I am not defending inappropriate behavior by China’s policymakers, but you should never blame the innocent people, even if there is legitimate criticism that is warranted to government policy. But we must be reminded that China, while ancient in terms of history, is a relative newcomer to the game of Monopoly, and as such, a little humility goes a long way in the courtship of a newborn superpower.

China seems very open to America’s influence and careful guidance, as demonstrated by hospitality to our own major economic leaders, but they are far too significant and strong of a culture to be talked down to or played as if they could be mistakenly taken for granted.

Are there criticisms to be levied toward China? Absolutely. Human rights abuses? Definitely, but I’m not so convinced it’s any worse than many other developed western economies we categorize as fledgling democracies. And this is a moral dilemma that we should have difficulty criticizing when we consider the facts on record, in light of our own recent geo-political escapades. Can we really judge anyone on human rights abuses? Abu-grab-ass, anyone? Can we really tout Democracy and civil liberties when policy has been changed into law that removes the very tenants of freedom–in direct violation of our own Constitution–here in America masquerading under law as a “patriot act?”

China may have imprisoned many dissonants over the years, but let’s not forget that we, in America, have the highest percentage of population in prison. So, China may outnumber us by relative size considering they have a population of no less than 1.3 billion people, but proportionately we still house the largest amount of prisoners worldwide. Of course, many of the people in our prison system deserve to be in jail and, probably, should never see the light of day. But this represents a serious disconnect and a failure to enact preventative measures of our own before its too late to intervene; in other words, let’s worry about our own problems before we start criticizing others…

We continually hear accusations of how China’s media and information is state controlled, but we quickly dismiss the pretense of our own mainstream media as being legitimate journalists while they read off the teleprompter and spit out talking points that masquerade as quips and quasi-intelligent insight. If that’s the standard of good reporting and journalism today, then let us at least see the hand controlling the puppet strings or the dummy behind the ventriloquist act.

A recent biography by Scott McClellan, former White House spokesperson, really conveys a sense of agenda driven talking points, spoon fed to mainstream media and pre-digested for recreation of our opinions. And while many liberals love to snicker and ridicule the notion that Fox news is a right-wing mouthpiece, I can say after comparing and contrasting many other mainstream media outlets, like MSNBC, are not much better when you break it down on the issues, point by point. Do you remember that MSNBC canceled Phil Donahue’s show just to shut him up, even though it had an audience of over 500,000 people–more than Chris Matthews–in just several months on air?

Folks, there is no such thing as a “free media” anywhere in the world because it’s all for sale, and it takes revenue to write paychecks so advertising is the only way keep the doors open. Even Google, the self-titled “do no evil” corporate culture, only stays in business because a very successful advertising based revenue model that, freely and openly, sells and markets your personal information to advertisers.

Free media is a concept, an ideology, but not a reality. In my opinion, the only medium left for open and honest debate anymore is reserved to the financial news programs and, maybe, the weather channel when they happen to, on occasion, get that right. At least on a financial news channel there is an open debate by two analysts in a pistol duel-like, head-to-head matchup as they argue their from their sell side book.

In a recent example, isn’t amazing that one of the prominent democratic nominees and former vice-presidential candidate, John Edwards, was exposed for being the fraud that he was by, of all sources, the National Enquirer–a tabloid circular? And what is more reprehensible is that it has been made very clear that mainstream media was well aware of the rumors circulating for a while but refused, not only to report it, but actually investigate the claims. Essentially, they laid down even more than Edwards did. And while I don’t care about scandalous tabloid media, this begs to ask the question: If they refuse to report a superficial story that appeals to tabloid interest, then can you really ever trust mainstream media to report the real news when it actually matters?

INVESTING IN CHINA: PAPER DRAGON OR EMERGING SUPERPOWER?

I would be remiss not to acknowledge the extra ordinary investment opportunities that China has presented to those that view emerging markets as part of a complete portfolio. After all, the main focus of this website is to recognize investment opportunities. So, if you made it this far, here goes my best recommendations related to investing in China.

There are many analysts that have stated that, once the Olympics concluded, China will suddenly face a severe contraction of its economy. I think this is a ridiculous analysis that is fundamentally flawed considering they can barely contain their growth rate less than double digits; however, that does not mean that the Shanghai and Hang Seng indices can’t take a further volatile tumble down. If we had double digit growth in our GDP here in the U.S. we would be on a full out bull run and the DJIA would be above 20,000!

The reasoning is really a failure to understand that Beijing is only one city in China, and represents less than 3% of the total population. While Beijing’s sphere of influence is dominant as the political capital, presumptive assertions that China’s growth is only a one trick pony would be akin to thinking that the 1996 Olympics in Atlanta, Georgia were reflective of the entire United States economy.

As the middle class emerges in the country of China, so too will their sophistication and appetite for investment vehicles and the potential demand for a lifestyle that commands consumer spending similar to our U.S. economy. Unless you feel the entire Chinese economy is nothing more than a paper dragon, the entire financial system will undergo a serious asset revaluation as their currency appreciates in value against other world denominations.

Another interesting benefit is the inevitable revaluation of the Renminbi, which is unquestionably undervalued by all accounts when you consider it is artificially pegged to the U.S. dollar. While China may or may not allow their currency to float freely in the international currency markets, there is clearly an incentive for an internal revaluation of their Renminbi simply to increase domestic buying power and reduce inflationary pressures. And this would, over time, make assets in China extra ordinarily undervalued such as real estate, both commercial and residential, and many of the publicly traded companies that have less lofty earnings multiples.

One of the ways to play this less specific to individual companies and more focused on the underlying currency is the Wisdom Tree (CYB), a currency ETF that allows you to participate in a rising Renminbi without the exposure normally involved with leveraged futures and currency markets.

Some economists might argue that a rise in the currency valuation would make the cost to import items and goods rise in relationship, which is true to a certain degree. But what most economists seem to miss is that they misinterpret that any reduction of U.S. imports would mean a drastic slowdown in the Chinese economy, and that fails to recognize the reality that with upwards of 1.3 billion people in China there is tremendous potential for consumer driven demand domestically that rivals any interdependent trade and commerce.

Common stock recommendations will include Baidu, China Mobile, Sina, PetroChina–all of which are fine companies that trade here in the states as ADRs (American Depository Receipts) and are listed on the NYSE. The iShares ETF (FXI) which tracks the FTSE/Xinhua China 25, or a substitute for the Shanghai index is also very attractive at these levels and allows you to participate in a basket of growth engine drivers similar to playing the S&P 500 here in the states. Certainly, the solar plays of companies like LDK Solar (LDK) and Suntech Power (STP) make the top of the list as well.

Commodities are also an excellent way to play the global growth story and, indirectly, China as well. By far, my favorite commodity plays would be BHP Billiton (BHP), Rio Tinto (RTP), Vale Dolce Rio (RIO), and Freeport McMoran (FCX). All of these are far more than just China but, word to the wise, the commodity play is truly dependent on infrastructure demand. And if China does slow measurably, then expect demand destruction to occur and prices to drop.

But, I’d like to mention my 3 favorite plays that are less talked about and list either as A-shares on the Shanghai index, or as H-shares on the Hang Seng in Hong Kong. While they don’t trade as accessible ADRs here in America yet, they offer tremendous opportunity for those with a hungrier appetite for risk and if you believe in the global growth story.

The best investments in terms of stocks would be ICBC, Industrial Commercial Bank of China (1398), Bank of China (3988), and COSCO (1919).

While many of our domestic financial banking stocks are a timultuous yo-yo of record losses and forced liquidations to writing down assets, ICBC just reported record profits rising 57% and earned a staggering 9.5 billion dollars (64.9 billion yuan). ICBC is the primary lender to major industrial and commercial development in China, hence the name, but it is also the largest bank in the world by market capitalization. To put this in perspective, this is a financial stock of all things, in the middle of a global credit crisis, that earns more net profit than Apple and Google combined.

Bank of China would be a second recommendation for all the reasons outlined in ICBC, they are the second largest financial firm in China and offer a very similar story. They both actually offer a very cheap entry point into playing China with a country that has an enviable national savings rate of 35% or more per average household. In direct comparison to us in America, we have an average savings rate that is negative, which further underscores the facts that consumer spending is primarily driven on revolving credit.

COSCO, on the other hand, is really about capitalizing on China’s tremendous volume of trade, as they are the primary shipping company for both imports and exports. If you believe the global growth story is for real, then trade routes and shipping lanes must be the arteries and conduits that allow the economy to flow freely.

There are multiple brokerages that offer some form of a global trading platform that allows you to trade H-shares on the Hang Seng markets. The only limitation I’ve seen for retail trading would be the limitation of access to options and derivative contracts to hedge the position. Perhaps, a more prudent course of action would be to use the Proshares UltraShort ETF (FXP) as a substitute hedging opportunity to your entire China exposure. You also are required to convert your currency from U.S. dollars into Renminbi, which is approximately 7:1 (Renminbi:U.S.D.).

The other peculiarity is that you cannot trade odd lot orders and usually there is a minimum lot order of 500 to 1000 share minimum block order. All of which can be found by each individual listing from the Hang Seng Exchange website. And due to a problem of “lost in translation,” you’ll find that stocks are listed numerically rather than by name. It’s a little different at first than the standard symbols we see listed here on the NYSE and Nasdaq, but it works out very nicely when you get used to the process.

Of course, if at the end of this you are of the position that you think the Chinese markets are nothing more than paper dragons, you could take on the ProShares ultrashort, or inverse position 2x of the (FXI) by playing the (FXP) ETF.

As with anything else, we recognize that markets can be pushed and pulled in whatever direction the big institutional players decide. But on long-term fundamentals, there is truly opportunity here that should reflect a speculative percentage of one’s portfolio. And by speculative, I wouldn’t advocate investing more than 10-15% of a total portfolio allocation. There are always risks in any type of investing and such risks should be respected.

An uncle of mine used to tell me of an ancient Chinese proverb that states “each generation carries the torch.” I’m paraphrasing from my memory so the exact quote may be off, but the context is clear and stuck with me over the years because it really reflects the idea that we all carry a debt of responsibility for one another, generation to generation. So while the symbolism is not lost on me, one must wonder if China can carry the torch towards global peace, economic prosperity and geo-political responsibility.

Disclosure: Author holds positions in some of the above-mentioned securities.