In our “Sell in May & go away” post, published hours before the Flash Crash, we wrote about the Australia-China connections, especially in regards to commodities (particularly copper):
Liquidity tightening in China and the Australian mining super-tax are further important catalysts for commodities selling, particularly in copper, which in our view is currently in a bubble. Indeed, copper prices are down over 15% in the last month or so. Meanwhile, the “draconian” measures out of China to curb housing price appreciation and speculation are sending property and property-related names plummeting.
On this thesis, we went short Freeport McMoran (FCX) as a proxy for negative exposure to: 1. (unwinding) copper (bubble); 2. (diminishing) demand from (imploding) China; 3. (unwinding) USD-funded risk carries.
Today, Bloomberg presented an interview with Jimmy Chanos, in which he details, among other things, his proxies for shorting the Chinese property bubble. One of the media he mentions is through “first derivatives” of the property boom, namely the supply side and miners.
We have no idea whether he’s short FCX (or TAO, which we also mentioned in the “Sell in May & go away” post), but the interview is a fascinating view, particularly in the parallels that can be drawn from Chanos’ and our theses: