China Is Lurking

 | Jan 09, 2014 | 10:53 AM EST  | Comments
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You want my biggest worry? China.

We are seeing degradation in the Baltic Freight Index to the point that it's tough to watch. We have seen a decline in copper. We get government numbers that aren't so hot and auto numbers that are cooling, and none of it is good news. Vale (VALE) has been a hideous underperformer for the Action Alerts PLUS charitable trust and it, too, is connected to China via iron ore.

Now, let's put it in context. This stock rally is a U.S.-led one. The emerging markets have been horrendous. Europe's coming back in fits and starts. China's been intermittent, but the market is strongest when China is in a positive part of the cycle.

The only reason I endeavor to point this out is that the weakness in the stock market is pervasive enough that you have to break out the list of real concerns, and this is the top one.

Now, the day rates for oil tankers are up nicely -- funny, the Nordic American Tankers (NAT) downgrade by Maxim Group seems wrong-headed to me. Further, the U.S. companies that deal with China, Caterpillar (CAT) excluded, are not singing a downbeat tune.

But I am conscious that China is lurking. Unless we start seeing some better commodity numbers -- and I am not even included the plummeting in West Texas Intermediate crude, because that's heavily domestic -- the market will not be able to advance with any alacrity.

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