The recently ignored scuffling over trade between the U.S. and China is heating up again with President Obama seemingly firing the latest round this past weekend. In closing comments at the Asia-Pacific Economic Cooperation Summit on Sunday President Obama told China to start behaving like a “grown-up” and follow International trade rules. Predictably the Chinese suggested they’re not beholden to following a set of rules created by committee.
The U.S. has long been the best in the world at devaluing our currency to the benefit of our exporters, meaning there’s no shortage of irony in the President’s angry demands. Cynics might also note that the President’s stance is one of politicking over prudence. But what matters to us at Breakout is how we can trade it. To Ed Dempsey, founder of Pension Partners, the answer is to get long China, perhaps even hedged with a shorting the Dow Jones Industrial Average.
Dempsey likes the FTSE China Index Fund (NYSEArca: FXI) and the lesser known Powershares Golden Dragon Halter (NYSEArca: PGJ). The latter has a “lower weighting to Chinese financials,” says Dempsey. It also has much lower volume than the FXI, suggesting would-be investors won’t have as much liquidity as they may want on entrance or exit.
See the full “Breakout” interview below: