This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Kass: From China to Omaha

Stocks in this article: BRK.ABRK.B

This column originally appeared on Real Money Pro on March 4.

NEW YORK ( Real Money) -

China Syndrome

China's policy moves and soft economic data have put a damper on markets worldwide.

Reflecting the policy goings-on in China and the weakening growth signals, China's Shanghai Composite plunged by 3.7% overnight.

First, China is tightening on its property markets. China's State Council has imposed a personal income tax of 20% on profits from home sales. (Previously, home sellers had a choice to pay a 20% tax on the profit from property they sold or a 1% to 3% tax on the selling price, for which most sellers opted.)

Second, China's economic growth continues to show further signs of decelerating. The February China Non-Manufacturing Index was 54.5 vs. 56.2 in January. Though still in expansion, the current reading is the lowest since September 2012. The February Manufacturing Index was also weaker than expected, and, joined with the February decline in the service sector index, the data clearly suggest some moderation in China's economic growth after an eight-month acceleration that began in the summer.

The bulls see win/win: If China's economy weakens, fiscal and monetary policies can be used; if the economy strengthens, then all is fine in China.

Regardless of view, the message of the weakening Chinese bourses over the past two months seems to be crystal clear -- the Shanghai Composite is flat year-to-date -- that the region's growth is rolling over. And more generally, it does appear that global GDP growth has begun to slow somewhat.

The bulls seem to be of the view that China's slowing does not portend recession either in the U.S. or globally, as none of the excesses that typically precede a recession/economic stress (e.g., expanding inventory, rising inflation and inflationary expectations, an inverted yield curve, rising jobless claims and unemployment, etc.) are currently present domestically or in the global data. As such, bulls see the (monetary policy added) global economic expansion as self-sustaining, serving as a tailwind to stock prices and valuations.

The bears see it as different this time, as excessive global easing (for as far as the eye can see) underscores a structurally weak recovery (vulnerable to innumerable shocks), with deleveraging continuing and with more profound structural economic weakness facing the U.S., the peripheral EU countries and other areas of the world. They (read: the bears, such as myself) ask why investors should be/are willing to pay an average (five-decade) multiple of 15x given the above conditions.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Our Tweets

Brokerage Partners

Top Rated Stocks Top Rated Funds Top Rated ETFs