- how to invest in China right now; and
- why bearish thinking on retailers isn't paying off.
For China Exposure, Play the Field Posted at 3:36 p.m. EDT on Thursday, Nov. 2 You believe in China? You believe in the FXI then. We've been buying the iShares FTSE China 25 Index ETF ( FXI) for the Action Alerts PLUS charitable trust, even though it does have a lot of financials, because we want to play what could be a gigantic turn in China, and we don't want to have to bet on the wrong Chinese horse and get skunked by it. I can't overestimate the importance of that Chinese PMI number we got last night, especially given that it was very unexpected by most of the cognoscenti. We have a combination of the new leadership coming in with the first upside surprise of data, and it's so potent and palpable that it's not enough to go with the usual derivatives, like Emerson Electric ( EMR), Caterpillar ( CAT), Vale ( VALE) and Eaton ( ETN), even as the trust owns those, too. > > Bull or Bear? Vote in Our Poll We all know the U.S. is holding in because of the consumer. We all know Europe is going away, because of the governmental paralysis. China had been the wild card. Just two months ago, I remarked on "Squawk on the Street" that I wondered who those economists were who kept predicting better things for China, because each data point was worse than the previous one. Finally, though, that skein has been broken. The result is this terrific rally, and given how long the downturn has lasted, you can't believe that all you are going to get from the FXI is a move from $32 to $37. I think there is much more ahead, and that is why we keep putting money to work in the ETF, as you can see from this morning's note that was sent out before today's opening. Given that we just got earnings from a host of companies that had bemoaned China's weakness, these new data don't fit the negativity or the short-selling. The green you see on your screen? That's the covering that could power us higher, and the best way to play China is, alas, China itself.
In Retail, Pessimism Doesn't Pay Posted at 12:23 p.m. EDT on Thursday, Nov. 1 You know what's been a real sucker trade? Being gloomy about retail. I keep thinking back to last night's interview with Manny Chirico, the CEO of PVH ( PVH), which made that remarkable move on Warnaco ( WRC). At the same time that he announced that deal, he pointed out that October was a very strong month for his company, a statement that's incredible, given the breadth of his business, which encompasses shirts, slacks, ties and shoes at a host of different price points. Frankly, that's not supposed to be happening. We've heard endlessly that October was not a strong month in this economy. We know it from the tech businesses we have heard from. We know it from the giant industrials. We know it from the chemical companies and the materials companies. But you know who we don't know it from? The consumer. And the consumer is remarkable in this country. Whether it be homes or cars or shirts or sweaters, the consumer is spending beyond what would seem to be possible. Every time you think the consumer is quitting, whether it be because there's a hiccup at Coach ( COH), or a downbeat number from Nike ( NKE), or a disappointment from Deckers Outdoor ( DECK) or a skipped beat at VF Corp. ( VFC), you draw the wrong conclusion. Hedge funds in particular are guilty of this kind of corrosive, across-the-board thinking. They don't think, "Hmm, Coach has taken its eye off the ball in this country by stopping its couponing." Instead, they short every department store. They don't think, "Aha, Nike's charging too much for goods in China, they say footwear is awful everywhere." They don't think Uggs, the key brand from Deckers, has peaked, they think the stores that carry Uggs, such as Nordstrom ( JWN) and Macy's ( M), have stopped ringing up big sales. And when VF Corp. botches the quarter, they don't stop to ponder how strong the U.S. was and how Europe offset it, they just bet against every apparel company. Which brings me back to PVH. You know a stock doesn't go up 20% in a day just because you bump numbers by 30 cents, which is how much the company predicted it would gain simply by purchasing Warnaco with its Calvin Klein jeans and underwear licensing businesses.