We are China. I know, no one wants to hear it. But it is true.
Take early this morning. At 4 a.m. ET, the Chinese market was down 8%, a true crash, and our S&P 500 futures were relatively flat. I pointed out on Twitter.com@jimcramer the absurdity of this because when people wake up and see China's crashed -- again! -- they will bang down the futures and really head for the exits.
Sure enough, as the slothful awoke, the early bird truly had gotten the worm and the futures were smashed down to 12, about a 0.6 decline.
Now you can say, "That's absurd, we have nothing to do with China." You can say our stock markets aren't linked because we didn't have the dramatic move up that they did, so why the heck should we follow them on the way down? The Shanghai Stock Exchange Composite Index essentially doubled from November until mid- June, going from 2494 to 5191 during a period where the S&P 500 was exactly flat. So why the heck, if the Shanghai Composite went from 5191 to 3726 from the top, should we be impacted at all?
The answer? Simple: because in a world where there is very little growth, we need every country to do its part to ignite growth, and the stock market complex in China is doing the exact opposite. Plus that "floor" is so false because about 1,400 stocks were suspended for being limit down and lots of stocks have simply stopped trading. It's insane given all of the provisions the Chinese government has made -- including canceling all new IPOs, banning short-selling, stopping large holders from selling and directly buying back stock -- to think this market could stand on its own two feet. The fact that it is still up for the year -- 15%, and an even more nutty 52% increase for the smaller Shenzhen Composite -- is just plain fanciful.
Plus, it is likely that the vast majority of players in the market bought in at the top, like our Nasdaq in 2000.
Still, why care? First, because a huge number of our major companies export to China, and we know China's hurting. Second, because we now know the Chinese Communist government isn't as shrewd or masterful as we thought. And three, because our market's always held hostage by the futures and the futures trade in reaction to whatever's bad overseas. Silly? How about fact of life.
Look, it's not like China was doing well in the first place. All of the indicators of economic strength are trending lower. The commodities that China has historically imported are selling at multiyear lows. Only the Baltic Freight index holds up, which gives a faint hope to some sort of infrastructure that might buoy the market.
And all of these are making the worldwide glut of commodities even worse at a time when the companies that produce them are often overstretched financially. As I have said, use Freeport McMoran (FCX) as the proxy as it produces gold, copper and oil, all under pressure, to see how ugly things really are.
So China's us whether we like it or not. Let's stop kidding ourselves. We are in lockstep on the way down with the domestic stocks and high-growth techs, FANG -- Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOGL) -- propelling us higher after the smoke clears. (Facebook and Google are part of TheStreet's Action Alerts PLUS portfolio. Amazon is part of the Growth Seeker portfolio.)
You got used to it with Greece, which was really a proxy for the European market, population 770 million. The stock market there is a proxy for the fortunes of 1.3 billion Chinese until proven otherwise. And right now it is doing anything but proving us otherwise.