NEW YORK (Real Money) -- 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:
- China, whose economy takes up the "riddle wrapped in an enigma" mantle once worn by the USSR
- The topsy-turvy state of the retail sector
- Why Netflix's stock split is may have a more than cosmetic affect.
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China: The World's Biggest Conundrum
Posted on June 19 at 1:51 p.m. EDT
What's the deal with China? What is really going on there?
This morning we learned the jarring news from Hershey (HSY) that chocolate sales are down because, and I quote, "Macroeconomic challenges and trends are affecting consumer shopping behavior resulting in continued softness within the China modern trade." Jeez, people are cutting back on chocolate?
Making matters worse, Hershey had just shelled out $394 million for an 80% interest in Shanghai Golden Monkey Food last September. In today's release, Hershey said it was "moderating" its full-year net sales expectations for the Shanghai Golden Monkey acquisition because of the Chinese slowdown.
This news is on top of a note this morning from the Wells Fargo research department that Macau gambling is coming in at a four-year low, with June numbers being as much as 20% down from the average for the first five months of the year - and those numbers were incredibly weak to begin with. That spells trouble again for MGM (MGM), Wynn (WYNN) Las Vegas Sands (LVS).
We know from Diageo (DEO) that its best liquor brands haven't been selling well in China. I covered that last night on Mad Money.
We also know that sales for expensive clothes and accessories such as watches are way down, quite a change from the old days.
What could be going on here? First, I think that the Communist Party is cutting down on conspicuous consumption. The big gambling junkets to Macau are clearly a thing of the past. You don't get that kind of a dropoff unless it's mandated.
But expensive jewelry, liquor and chocolates? Some of that could be the crackdown on government corruption. For example, if you want to bribe an official, what better way to do it than giving them a big case of Johnnie Walker Black or an expensive Richemont watch.
This, to me, all seems too government-led, and not consumer-led.
Now it is true that the Chinese stock market got hammered hard this week, with the major stock index having its biggest weekly drop since 2008. But Hershey flagged these trends from April and May when the index was still soaring. Same with all the other consumer product and gambling slowdowns.