Hints of Something Brewing in China

 | Dec 11, 2012 | 6:31 PM EST
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Why are DuPont (DD) and Cummins (CMI) buying back huge amounts of stock if the world is coming to an end? Isn't it better for the world to end and then buy?

Now, I know that when we see buybacks, we should be jaded by now. We should presume the companies are just announcing them for show.

I get that. Cynicism is justified.

It's just that you can't help but notice that these two companies do a huge business in China. Could they be seeing something right now that makes sense for them to pounce on their own stocks?

We own DuPont for the Action Alerts PLUS charitable trust, and it has been a huge disappointment. Not as bad as Devon Energy (DVN) or Dollar General (DG), to mention two real bad ones -- because we talk about the good a lot -- but this has been a real dog. Hmm, maybe we should stay away from stocks that begin with the letter D!

To me, it just seems that the coincidence is too great and that both managements, which have truly been ping-ponged here, are betting once again that Asia is turning.

If so, this would be a real wake-up call for another of our favorites, Caterpillar (CAT). Hardly a day goes by when I don't read some survey about how poorly Caterpillar is doing. Yet the stock has been slowly rallying pretty much in synch with the negative chatter.

To me, again, this says the industrials that are levered to China are starting to get better order flow.

I guess we will know soon enough. The ultimate Chinese barometer, Joy Global (JOY), reports tomorrow. I bet the number is not so hot, but if we read the Cummins-DuPont tea leaves, the outlook will be something to write home about.

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volatility is quite low here, and we could see some downsides here in the short term. ...



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