tastytrade logo
US Dollar and Chinese Yuan

Sep 24, 2021

Too Big to Fail

By:Dylan Ratigan

It’s not too often this column is used to make a market call. But every now and again, there seems to be what we call a “pot odds” trade that’s too good to pass up. Usually, those plays are born out of extremes. Right now, it seems there is no more extreme case for pessimism than China. And for that reason alone, we’re optimistic.

Don’t misconstrue what’s being said here. This isn’t an advocacy for China’s political policies. It’s not an exoneration of their many humanitarian atrocities. We’re not excusing China or abdicating them of responsibility for heightened geopolitical risk either. At the same time, China is a country of 1.4 billion people. They’re four times the size of the United States and they aren’t going anywhere.

Economically, we need China. We need them as consumers. We need them for manufacturing. We need them, period. That doesn’t mean we have to agree with them politically. It doesn’t mean we should look the other way when they crack down on fundamental liberties and freedoms we hold sacred. It just means we need to co-exist.

Competitors need rivals. Ali needed Frazier. McEnroe needed Borg. The list goes on. But the point is, competition is the catalyst to improving. Without someone nipping at your heels, there’s little impetus to keep pushing forward. The U.S. not only needs China’s markets, but we need its rivalry to keep pushing us forward.

Whether it’s the real estate market or crackdown on tech companies, China seems to be repeatedly shooting itself in the foot. They’re putting themselves at an economic disadvantage and that’s being reflected in China-related asset prices. But just like the big banks of 2009, there are certain entities too big to fail. Collectively, China is too big to fail.

There’s no fundamental reason to be bullish China right now. There’s no moral reason either. Traders have to be able to look past fundamentals and no one is going to argue traders aren’t extremely adept at putting morals aside when economic opportunity comes knocking. This is one of those moments.

China is not going anywhere. That’s not to say they should be praised, emulated, or anything else. Their leadership stands for the antithesis of everything we believe and we should call them out for their political policies. But it’s tough to believe 1.4 billion people are all bad. It’s impossible to overlook 1.4 billion consumers. And when things look their worst, like they do right now, that’s when the pot odds are too good to pass up. 

Be sure to catch Dylan Ratigan & Tom Sosnoff every Wednesday at 1pm CT for a new episode of Truth or Skepticism live on tastytrade.com.

Listen to previous episodes on Spotify, Apple Podcasts or on tastytrade.com.

Written by Dylan Ratigan and Josh Fabian

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com. 

tastytrade is a trademark/servicemark owned by tastytrade.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).

tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

© copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on tastytrade.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.