Thursday, September 27, 2007

FXI - Can lightning strike twice?

FXI? No this has not turned into a sci-fi blog. FXI is the ticket symbol for the iShares FTSE/Xinhua China 25 Index. What the hell is that you ask? Think of it as a mutual fund of top Chinese stocks traded on the NY Stock Exchange.

This bad boy was at $130 earlier this year. I thought it was way overpriced then. I bought some puts, it fell to $110, I made a nice profit. Case closed or so I thought.

I check today and the thing is at $182!! Un-effing-real. Take a look at the charts:

I believe it is buying put time again folks. This thing is up over 100% over the past year. 300% over the past 3 years. Class,anyone else recall the last time (1990s) an index (nasdaq) climbed that fast and that high and what happened to it (down 60%)?

Now the puts aren't cheap but man alive, this thing cannot NOT fall some

Here is the counter argument: China is hosting the Olympics in 2008 and the governement there will be spending money like crazy. Govt spending will make Chinese companies very profitable for the next year and so the high prices are justified. That and the general feeling that China is "the place to be" right now. Plus the weak dollar makes foreign stocks more attractive.

Valid points to an extent. 100% gain a year though? I don't think so.

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