As the U.S. and China lower tariffs on $60 billion of goods, one fund is short-selling Christmas decorations before festive joy peaks.
As the U.S. and China cut tariffs on $60 billion of goods, including toys and Christmas decorations, one gloomy fund sees a festive cheer bubble. It has short-sold twenty-six lobby reindeer and is bracing for the tinsel crash.
"...and nobody ringing the bell at the top ever thinks it's the top," said Harlan Vosk, chief risk officer at Grimholt Capital. He was signing paperwork to short-sell twenty-six plastic lawn reindeer. That means borrowing them to sell now and hoping to buy them back cheaper later.
The trade follows news that the U.S. and China will lower tariffs on $60 billion of goods. Toys, sports equipment and Christmas decorations made the list of American imports, CNBC reported. U.S. farm products appeared on the list of Chinese imports.
Markets took this as good news. Markets, it should be noted, also took 1999 as good news.
Grimholt sees something darker: peak cheer. Cheaper tinsel means more tinsel. A nation buried in tinsel, the fund argues, has only one direction left to travel.
"Everyone's looking at the headline number," Vosk said. "I'm looking at the stocking-to-mantel ratio. When the stockings outnumber the hooks, you are in late-cycle territory. We saw the same pattern before the tulips went."
The reindeer came from Grimholt's own lobby display. The fund borrowed them from its holiday committee, which charged a borrowing fee of one mince pie per animal per week. Vosk sold them to a rival fund's lobby on Wednesday. He now waits for the reindeer market to break, as he says all reindeer markets eventually do (see: the inflatable snowman glut, a period nobody on his desk will discuss). He keeps a chart of lawn-ornament prices taped above his monitor. It is drawn entirely in red.
Contagion risk spreads to the playroom
The fund has also bought protection against snow globes. Vosk calls them "the credit default swaps of the mantelpiece," meaning insurance you buy against something going bust. Sports equipment worries him more. "Cheap footballs lead to backyard games," he said. "Backyard games lead to broken windows. Nobody is pricing the glazing exposure."
The farm side of the deal offers no comfort. American soybeans heading east, Vosk said, is "a carry trade in legumes." He would not explain further, which analysts say is how you know it is serious.
Not everyone shares the gloom. Dana Pell, spokesperson for the Coalition of Plush Goods Importers, said lower tariffs simply mean families pay less for gifts. "People will be a bit happier this December," she said. "That's the whole story."
"A bit happier is how it starts," Vosk replied. "Then it's a lot happier. Then it's Weimar with ribbon."
Asked what would prove his thesis wrong, Vosk looked out at the reindeer glowing on the rival lobby's lawn across the street. "A joyful Christmas," he said. "And I'd still call it a dead cat bounce."
