This column originally appeared on Real Money Pro at 9:10 a.m. EDT on Aug 23.
Melissa started by asking me if I was sticking with my market top call and whether I maintained my belief that the bullish days of summer were about over. I said that I stood by my position. I remain concerned about the potential for a disappointing downturn in corporate profits, the likely further erosion in China's economy and a more rapid decline in the EU's economy than is generally anticipated. And then there is the fiscal cliff and the growing likelihood that President Obama will be elected (seen as a negative for businesses and capital markets). We spent some time on China, the world's economic driver of growth. Several panelists felt that China would stimulate itself out of the doldrums. I am less convinced and pointed out the profound weakness in the Chinese stock market, which has dramatically diverged from other world stock markets. It is important to remember that China's stock market was the first to drop in late 2007 and accurately presaged the stock market, financial and economic crisis of 2008. Air China, I opined, may be in for a crash landing. I cited weak exports and imports reported 10 days ago and this week's drop in Japan's exports for July (down 8% year over year vs. expectations of less than a 3% decline as well as a near 12% percent drop into the Chinese market, which is Japan's largest trading partner). My view continues to be that China's current growth and future growth path will be far worse than the consensus view. I would note that last night the August HSBC flash manufacturing index for China was disappointing, at 47.8 compared to July's 49.3, and represented the lowest reading nine months. The official government index will be released on Aug. 31 and will likely fall below 50.0 (expansion) for the first time in 10 months. Tim Seymour was more bullish as were the other members of the "Fast Money" gang, citing positive leadership changes in China, expected interest rate cuts and reduced reserve requirements.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV