Understanding China FUD: Fear, Uncertainty and Doubt


It is quote common for there to be a quasi-permanent battle on all fronts between bears (those who believe a certain asset is overvalued and that prices will go down) and bulls (those who believe the exact opposite, that a certain asset will go up in value). Some bulls and bears have no skin in the game (no active trading positions/investments), whereas others are extremely motivated, with them even being engaged in leveraged trades, leveraged short trades for bears and leveraged long trades for bulls.

Needless to say, the more skin in the game a bull or bear has, the more motivated he will be to defend his assets on all fronts.

And speaking of the “all fronts” dimension, it is worth noting that battles between bears and bulls don’t exclusively take place on the order books of various brokerage platforms, they oftentimes also take place in the form of discussions, from social media debates to more “old school” venues.

If you have ever taken part in such discussions, either passively or actively, you might have oftentimes heard bulls use the term “FUD” when accusing bears of spreading information with the goal of spreading Fear, Uncertainty and Doubt.

Accusations tend to be all over the place, with bulls being frustrated with the fact that in their views, bears share:

  1. False information knowingly (“fake news”), with the sole intention of discrediting the asset they are bearish on
  2. Partially true information in a manipulative manner, starting from something verifiably true but maliciously interpreting that information in a way that leads to a conclusion which isn’t in line with what logical rigor would dictate (“non sequitur” or does not follow, for example)
  3. True information repeatedly, hoping that by continuously supplying the facts in question (true as they may be), the bullish narrative would end up being weakened
  4. Fake displays of concern (or concern trolling, as it is usually called), with bears pretending to be genuinely concerned about a certain topic not because they actually are but because, you’ve guessed it… their intention revolves around spreading FUD rather than engaging in productive discussions

On the opposite side of the spectrum, bulls accuse bears of:

  1. Living in a bubble by choosing to only take information seriously from sources which confirm whichever optimistic bias they have, while willfully ignoring pretty much everything else
  2. Trying to censor objective debates due to the fact that the occasional unpleasant truth might pop up
  3. Engaging in hasty generalization (another logical fallacy) by assuming that each and every piece of negative information a third party shares has to be FUD, that it could impossibly represent a meaningfully worthwhile data point

Are the bulls correct when it comes to accusing bears of pushing their own agenda?


Are bears correct when it comes to accusing bulls of pushing their own agenda?

Once again, yes.

Ask anyone with even a bit of experience in the investing and/or trading world and that person will quickly confirm that perhaps the #1 common denominator among investors/traders when engaging in debates revolves around their tendency of “selling” their own position… whether they are aware of it or not is an entirely different discussion.

As such, bulls feel attacked by anything even remotely negative and are quick to paint everything less than pleasant as FUD, whereas bears retaliate symmetrically. The more in love with a trading position a bull or bear is, the stronger the emotional response will be, with perma-bulls and perma-bears being (in)famous for losing touch with reality.

Who is “right” in this equation?


Whether we are referring to bulls accusing bears of spreading FUD or bears accusing bulls of mindless cheerleading, both behavior types are emotion-driven actions and if there is one thing the ChinaFund.com team can all but guarantee, it’s that an emotion-driven attitude will lead to ruin in the long run, whether you invest in Chinese assets exclusively or treat Chinese assets as a part of your extended portfolio.

Ask a Chinese asset perma-bear what he thinks and he will not stop explaining how China is a primitive jurisdiction that will never change. Ask a Chinese perma-bull what he thinks and he will just as aggressively explain that Chinese assets are a surefire path to generation-defining wealth, with the occasional hiccups such as domestic share market under-performance being nothing more than manipulation.

What does the ChinaFund.com team recommend?

Two words: brutal honesty… especially with yourself.

While we do believe that under the right circumstances, Chinese assets can indeed lead to generation-defining wealth, we just as strongly believe that overly-emotional investors and/or traders will not be on the receiving end of them.

As such, we are anything but perma-bulls (or perma-bears, for that manner) and instead of feeling threatened by FUD, we treat any such feedback as valuable information that we can verify ourselves and which if accurate, will enable us to make better investment decisions. If storm clouds are on the horizon, not only do we want to know, we want to know before everyone else. As such, we don’t hide from FUD, we actively look for it.

If you’re not afraid (Fear), you are making an extremely costly mistake.

If you’re certain you can do no wrong (the opposite of Uncertainty), you’re doing it wrong.

If you never rationally doubt (the “Doubt” dimension of FUD, of course) yourself, you are doing it wrong.

A good investor and/or trader needs to always be hungry for information… the good, bad and downright ugly. Hiding from proverbial FUD may enable you to keep living in your intellectual comfort zone a while longer but we can pretty much assure you that your “stay” will come with a hefty price tag. On the opposite end of the spectrum and as a bit of a conclusion, let’s just say that investing/trading success begins at the end of your intellectual comfort zone.