The China Turn Is Real -- and Powerful

 | Sep 09, 2013 | 11:03 AM EDT
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Stop underestimating this turn in China already. China was the primary driver of so many stocks, even as it might not have been a primary driver of the actual earnings. For example, Caterpillar (CAT) doesn't have all that much business in China, but it is the place that was most over-inventoried. Cummins (CMI), on the other hand, is all about China growth. So if you overlaid one on the other, you would see that Cummins is all about a model that can be blown out because of new, environmentally friendly diesel engines. Who knows how high this thing could go if the 12-liter Westport Innovations (WPRT) engine is to be used?

If you want to understand the power of the turn in China, look at Yum! Brands (YUM). We own it for the Action Alerts PLUS charitable trust. It did not report a good number. "So what?" this market is saying. It's China, and we now give companies doing business in China the benefit of the doubt.

There are two others we have been behind for the trust. One is Joy Global (JOY), for which the only real growth market is in China: The company is opening a new coal plant every ten days. The other is Vale (VALE), which is beginning to make a major turn because of the better iron ore pricing. This stock is both heavily shorted and down about 80% from its China-related high.

China trades off the Baltic Dry Freight index, which has been soaring. We just saw a plus-126 figure last night. This thing was going up in dribs and drabs. This is a monster move. Look at all these bulk carriers going higher. My favorite is Diana Shipping (DSX).

Also, don't forget that China and Europe are joined at the hip, with 25% of exports from the former going to the continent – and China exports were way up, according to this weekend's data.

This move is real. It is aggressive. It is playable. How about the iShares FTSE/Xinhua China 25 Index (FXI)? Too hard for this guy. Sorry.

Random musings: Stop worrying about congressional approval for a U.S. attack on Syria. That government is despised worldwide, and Obama will not hesitate to take unilateral action if he has to. He also probably has the votes, even though the media says he doesn't.


I'm excited about TheStreet's Open House this weekend and want to hear your feedback and ideas for more articles. Please email me at, and I will respond to you. Booyah!

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