I know that many of the coal, mineral, and machinery stocks are historically cheap, but without a reversal in Chinese fortunes there's no place to put the stuff.
But each day the trade seems to broaden and encompass more stocks. Yesterday we had Yum Brands going higher, which is chiefly Kentucky Fried Chicken, which is chiefly in China.
You have to like the action in Starbucks, where a Bernstein analyst is saying that Asian sales are coming back and could propel the stock higher. It hasn't been Asian weakness that has caused Starbucks to underperform--it's been Europe--but that call-out does matter.
You want encouraging? Take a look at Joy Global, where the marginal buyer is China as you need that company to get minerals, particularly coal, out of the ground. That's a welcome sign for a cheap and well run business.
Caterpillar bounced off some lower levels and seems to be on the upswing once again. What a remarkable comeback for a stock that won't stay down, especially given that it bought Bucyrus, which is in the same business as Joy Global.
Or how about the fact that Coach didn't get clocked despite Burberry telling a woeful story about China?Freeport-McMoRan, the copper company, won't come in. Cliffs Natural, the iron-ore company that is the subject of multiple downgrades, including just yesterday by Goldman Sachs, continues on its rampage. You've for a quick move to $41 from $3 on your hands.
All of this is happening in an environment where the Baltic Freight Index, the best way to monitor world trade, continues to sink. I find it hard to believe that there could be a turnaround anytime soon because of that number. Copper inventories in China are extremely high. Their exports to Europe are coming down, and Europe is 20 percent of their business.
There is nothing cooking in China, nothing whatsoever except decent Macau casino numbers. We can't even hang our hats on the Chinese stock market.
Why am I pointing all of this out? Because stocks do bottom ahead of turns. They bottom well in advance. They are saying you MUST ignore the current data and focus on the future.
I think that we can play this China's-about-to-act-on-stimulus game for ages, simply because there is ample room for them TO act. All that said, if you ask me what's the most vulnerable part of this market, it is the Chinese plays.
Back in 2009 I went so far as to buy a Chinese market derivative because I was so confident that the country's stimulus would work. It certainly did. However, while I am by no means a believer that China's going to crash, I do think that the rally is suspect without a credible bit of news.
The Friday buy/Monday sell trade has gotten a little old as it just doesn't seem that they get the urgency in China or they are leaderless enough that it just doesn't seem to matter to them.
Disclosure: Cramer's charitable trust is long COH.
