Winning With China; Fed Unfriends Wall Street: Jim Cramer's Best Blogs
Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- How the changes in China's economy are good news for plenty of U.S. companies.
- Why the Federal Reserve doesn't care what rate hikes and tightening will do to your portfolio.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
The Champs in China's New Growth Story
Posted on Nov. 11 at 6:58 a.m. EST
What do we want out of China? Do we want the Chinese to buy steel, or do we want them to buy Nikes? Do we want them to buy coal, or do we want them to buy Starbucks? Do we want them to consume iron, or do we want them to buy iPhones. Do we want them to import aluminum, or do we want them to purchase Huggies and Pampers?
In each case, if we want the former, we are in even bigger trouble than we were in 2008, because industrial production is now in the 6% range, while there are plenty of companies that can't survive unless that needle goes back to the high-single-digits.
But if we want the latter, then the 11% growth in retail sales that we got last night, plus record-breaking sales, today, on Singles Day -- the made-up day of consumption that the Chinese government has blessed -- is Chinese heaven.
There's a lot of handwringing about the decline in industrial production in China, and what it means for the globe. I think a lot of the fretting is silly, if you are an American stock picker. No, it's not stupid if you work at Freeport McMoran (FCX) - Get Report , which is, in many ways, a conglomerate with earnings based in Chinese industrial growth. But it's a nightmare if you are a U.S. steel producer, because it appears that the Chinese are allowed to dump all the steel they want here. Is there really any other explanation for the pathetic stock prices of AK Steel (AKS) - Get Report and US Steel (X) - Get Report ?
The coal stocks aren't just going to oblivion because of our government's war against fossil fuels. The Chinese Communist Party has pivoted, and is trying to wean its country from coal now that a million people are dying of respiratory illnesses a year. And while we hear of a deficit in aluminum, the Chinese keep making more than they can use -- and they keep trying to sell it overseas because they don't need it there.
These are all bad signs for some of our basic industries. But, unlike, say, Brazil, which is exists for basic industries, our economy went the new way of the Chinese economy years ago, and if you are still in the business of basics you have lost your best market.
But if you are in the business of making basic retail goods, and the Chinese let you sell them and enforce your intellectual property rights, then you are a winner in this environment, not a loser.
That's why, when I see these Chinese consumption numbers, I am cheered. I do not live in Brazil, which is ground zero for the fallout from the industrial Chinese economy. And I do not live in Switzerland -- which is another no-fly zone: While the Communist Party is encouraging consumption, to the point where it is waiving the one-child-only prohibition -- something that seems to come just in time for Singles Day, I might add -- it doesn't encourage conspicuous consumption.
But the U.S.? It's a net winner in a world where Chinese consumers are buying more finished product, where they are going on websites and buying U.S. goods, where the government is letting Apple (AAPL) - Get Report and Nike (NKE) - Get Report and Starbucks (SBUX) - Get Report sell unlimited goods.
Now, to be sure, there are capital goods companies that won't do as well as they have been, or have done elsewhere. United Technologiesundefined is not going to sell as many Otis elevators, there. Caterpillar (CAT) - Get Report is totally in the crosshairs of the new China. Cummins (CMI) - Get Report doesn't fare well at all. Both the latter companies make the kinds of trucks and engines that just aren't as needed as before.
For other companies, it just isn't clear yet what the opportunity may (or may not) be. What is China doing with American technology? We don't know where the government stands on a day-to-day basis. How about autos? They are looking better, but is that because of a change in tax policy? We have some case-by-case situations developing.
But we have to face facts here. Our economy is driven by consumption. If the Chinese government wants to recreate our economy, who can do it better than we can? You have to look at it on a net-net basis, and if you do it that way, I can easily declare us the big winner in this global trade war, except that "us" is a different set of winners this time than in the 2000s, when Chinese commodity demand peaked. It has been downhill ever since, and may be downhill for many years to come.
Investor Beware: The Fed Is Your Enemy
Posted on Nov. 12 at 1:04 p.m. EST
Get used to days like today. They are the way it is going to be, because this is what happens when you get closer and closer to a rate hike -- especially one that seems almost insane given the immense decline in the prices of all commodities and the rapid depreciation of all inventories everywhere.
This is what happens when the psychology takes over that the free-money ride must end because the window is open -- and when it is open, the Federal Reserve must jump through it.
Remember, I have become a fatalist about this rate-hike stuff. There will be no "one and done" either, because the same people who are calling for one rate hike will be calling for another immediately after. They don't call it an "interest-rate tightening cycle" for nothing.
What you need to understand is that tightening cycles are just brutal for equities unless they are accompanied by strong growth. Usually, for example, you wouldn't be calling for a rate hike when giant engine company Cummins (CMI) - Get Report and huge retailer Macy's (M) - Get Report are trading at multiyear lows. You would be doing it when they are trading at multiyear highs.
The cascading prices of copper and steel and iron should give pause to the Fed. But it is clear that unemployment is all that matters right now to these Fed people, who love to squawk particularly on down days!
The Fed is not going to factor in your stock portfolio. It is not going to look at the 52-week-low list and marvel. It is not going to say, "Wow, we are killing stocks."
But we have to say that. We have to raise cash. We have to recognize that the only input that would cause the Fed to raise rates is that employment indicator and nothing more.
Will the Fed ultimately blink? Sure. But we need to recognize the Fed is an enemy now. And it is an enemy that sends stocks down because higher stocks mean nothing to Fed members.
Remember that every time stocks go higher. It's important, because the world has changed -- for the worse -- at least for now.
Of course, we can rally. We will rally. We will rally hard when we get too oversold. That's the risk to the upside that you must be cognizant of if you raise cash into any moment of strength. Accept it and understand that we have a fickle, capricious group of Fed heads and they, too, are nothing but the enemy -- at least when it comes to stocks.
At the time of publication, Jim Cramer's charitable trust Action Alerts PLUS,
was long AAPL and SBUX.