"The Bears' Worst Fear -- China's Getting It Right"
By Jim Cramer
RealMoney Columnist
5/26/2010 6:57 AM EDT
"Eureka! I think I have found out what all of the bears who talk about the destruction of Greece, Spain, Portugal, Italy or the euro really fear. I think they fear CHINESE GROWTH!
I know, it seems silly, but we have to remember that there are two kinds of risks that Europe poses to the world: systemic -- think Lehman -- and growth -- think commodities. Many of the people who chatter every day about these issues and how they should send us to Dow 8260 -- my disaster scenario -- may need both systemic risk and growth risk to remain front and center. They ignore all of these budget cuts being put through -- no doubt with the help of the Grim Reaper IMF -- because they hurt the systemic risk case. And they ignore any of the corporate assurances we get pretty much every day that business is still good in Europe, because that hurts the bear growth case. In fact, they dismiss anything that says we aren't double-dipping because of Europe.
Well, not everything. They can't dismiss China. Just like Europe is graded every day by the euro and Libor and the bond spreads between Germany and the ne'er-do-wells, China's graded every day through the Baltic Freight Index, oil and copper. As long as those commodities are going down, then the bears have NO FEARS WHATSOEVER. And man, have they had the run of the place in the month of May.
Last week when Germany put in the unilateral short-selling bans, many people -- myself included -- figured that we were on the verge of a Lehman and we would know in about 48 hours whether we would see it. We didn't. Ever since then, while the euro hasn't rallied, it hasn't plunged, either. I take that to mean stasis, and the bears can't do much with stasis. It's hard to rumor stasis, although I am sure at some point today the "break the euro" crowd will make its move and we will get some sort of euro-related swoon as we do EVERY DAY.
But the bears are struggling with China. In the last week we have heard numerous stories out of China that can be summarized like this: the government is bifurcating the economy. It is going to allow the domestic consumption market, the service market, grow faster and it is going to force the property sector into a serious reversal. The government will attempt to balance the growth of the consumption market with the government-induced weakness of the real estate market to produce a smooth, soft landing. Those who want the market down, those who need prices lower to complete this month's awful rout, need to get out the story that China can't do that, that it's impossible.
I think it is possible. I think it is possible because China's a command economy. There are no silly lobbyists saying that they need some sort of accelerated depreciation to keep the real estate boom growing. There are no housing and property companies that own senators and congressmen. There are no payments for elections that make it so that houses get built and financed by the Chinese Fannie Mae (FNM - commentary - Trade Now). They execute the Fannie Mae types over there.
Now, I am not saying that China can trump Europe's systemic risk. That risk is real and will remain so until we see something coordinated by the central bank and the major countries that gives us a Bernanke -- by any means necessary -- quantitative ease and a pledge that Greece/Portugal/Spain either do X or they are out.
But I think that growth risk as represented by Europe can easily be counteracted by China. One of the reasons I expect to see the minerals and oils up today is that if you think that China succeeds in a soft landing, these are all buys. More important, many of the tech stocks, the ones that started firming yesterday, are heavily linked to Asia, and an Asian reboot could make short-sellers feel less confident about coming number cuts, other than from cuts related to currencies.
(By the way, do not be confused/angered by the notion that the "bears need this," or the "bulls need that," as it is pretty clear from both the hedge fund community and the ubiquitous users of the ETFs of mass destruction, the double and triple Ultras (I hope you are keeping up on this stuff with Eric Oberg and the pieces he has been doing) that the short-selling community is every bit as strong these days as the long-buying community and that they are both, at Dow 10,000, on pretty equal footing. The actions of the short-sellers here, in fact, I think are more important than the long-buyers, as the longs seem to have been driven away by the mechanics of the market and by fear. )
I believe that oil can stabilize -- the Dan Dicker thesis -- and that's good for the China bulls, although I also share with Dan that oil can't power higher until BP (BP - commentary - Trade Now) gets its Gulf act together, and I don't have a lot of faith in Top Kill. Copper's up again and the Baltic's on fire. Good for the China bulls. Australian companies are finally stopping their "woe is me, mining tax" crying and actually admitting that business is really strong in China, something that's good for the China bulls.
So, it comes down to this: A horrible month is about to come to an end. Bulls are surveying the landscape and saying, "Wow, we are down too much if China is not going into recession and we haven't had a Lehman collapse yet in Europe, so let's go buy something or at least stop selling." Bears are surveying the landscape and saying, "We ought to take some profits in everything short except the euro," a sentiment that I agree with, as I hate the euro. (Tim Collins did a good job helping out on the CurrencyShares Euro (FXE - commentary - Trade Now) with his charts that I showed on "Mad Money" last night).
The result? Some stability as the sellers dry up and the buyers stop fearing the market.
The bears do have one edge -- they can rumor NOW knowing it can't be counteracted until well after we go home tonight. But the fact is that lately they have been counteracted, and that if it weren't for stories about nuclear war in Seoul, it looks like we might not have been down at all yesterday simply because, at last, China's growth is knocking Europe's weakness off the front pages of the traders' minds.
At the time of publication, Cramer was long BP. "
(in
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Enviado: 27/5/2010 15:54
!!! Hummm.....