Can your eyes actually glaze over positive news?
That's what I feel like today when I read through the agreement with China while I plow through the earnings we are getting and study all of the incredible stories coming out of the JP Morgan Healthcare conference in San Francisco I am out here to cover.
This morning kicked off with an interview with Larry Kudlow, the president's chief economic adviser, who talked about how the agreement with China is far more reaching than anyone realizes. The agreement actually forces changes in the way China runs its economy forcing the PRC to create a level playing field with no stealing of ideas or else.
What is or else? Simple: the tariffs on $370 billion that remain will stay on and maybe more tariffs will be put on.
But Larry also said something no one else has talked about, he said that the relationship with China is actually quite cordial because the Chinese recognize that the United States doesn't' want to disengage with China. The fault lines behind the scenes with this deal revolved around those who don't believe China can redeem itself so why not just humble them to the point that they can't be as important in world trade or challenge our hegemony, and those who think that China must be a partner and it must be treated with the respect due a partner. Call it the engage versus the disengage camps and what this deal showed, perhaps more important than the $200 billion in promises to buy American products, is that the engage camp won.
If you remove ideology, if you believe the DNA of a country can change, then this deal is for you because it is going to promote a lot more financial and tech company business than we currently have. Many of our tech companies have shied away from China because of the endless theft of intellectual property. Larry thinks that can change. Our financial companies have been shut out of the lucrative Chinese market, Larry thinks that could change. I believe that could open a Mastercard (MA) or a Visa (V) to issue credit cards, and banks like JP Morgan (JPM) and Goldman Sachs (GS) to have their own franchises. That's got me musing about the possibility of China allowing Apple (AAPL) to offer a credit card, currently only offered in the U.S., that would be fantastic for Apple and even better for its partner, Goldman Sachs. Visa and Mastercard have been praying to get into China to no avail. Until now. Numbers could got up gigantically if they can be unfettered into China. The moves on both were muted, though. In my opinion it won't remain that way.
Are the $200 billion in U..S. purchases for real? My barometer? The Transports which, at last, hit a new high, so important as a bellwether for future commerce. You know I like Union Pacific (UNP) but have you considered buying FedEx (FDX) off this? That company spent fortunes building out China and had just gotten to where it could become immensely profitable before it was pretty much shutdown. No longer.
Many have doubted the companies that have spent fortunes building out liquefied natural gas trains to export LNG. But Sempra Energy (SRE) , Dominion (D) , Cheniere (LNG) and Tellurian (TELL) will be rewarded with a customer that can easily get hooked on our way with too plentiful natural gas. Maybe the $6 Tellurian is not a stock worth speculating on?
Don't forget that we make more than just planes and heavy machinery. The Chinese can buy medical instruments like the ones I heard about out here at the JP Morgan Healthcare Conference. And let's remember that IBM (IBM) , Emerson (EMR) , 3M (MMM) , Honeywell (HON) and United Technologies (UTX) have a ton of merchandise to sell. Needless to say, Apple's a winner, too.
Oh, and in case you need more companies, the President named dozens of them at his press conference which, at times, felt like the list of the Fortune 500. All while he kept the Chinese waiting.
Again, if China doesn't allow this kind of commerce then the tariffs stay in place. Larry has historically been anti-tariff but even he had to admit that tariffs, true sledge hammers, worked largely perhaps because of weakness in the Chinese economy. I would add that a lot of that weakness was caused by our tariffs and the pullout of American businesses from China to other countries.
I have been among the most wary of China and its ability to change. I remain that way. But I had to admit to Larry that the U.S. got more than I ever thought.
The collective eyes, though? They glazed over. I think the market yawned too much on this new deal.
Or how about the banks? Today Bank of America (BAC) and Goldman Sachs reported incredible numbers but because JP Morgan and Citigroup (C) had just reported amazing results these numbers seem to mean nothing. I kept going over the results again and again to see what I was missing. The answer: nothing. There was just ennui, nothing but ennui. At least Goldman's prowess was acknowledged with a turn later in the day.
We saw the same delayed reaction to UnitedHealth (UNH) . The company reported at around 6 a.m. and the stock sunk almost immediately because the numbers was allegedly in line. Then when the conference call proceeded the stock levitated because the number's components were extraordinary.
I think that these moves may not be done. This is day one of a much better than expected agreement and there are going to be more deals, Larry said, because the Chinese need them, the Chinese need to get rid of those tariffs.
It wasn't all positive. Two high flying stocks were at last down: those of Tesla (TSLA) and Beyond Meat (BYND) , the latter already up 55% this year. I'm a believer in both but enough already. Parabolic move are, per se, unsustainable.
And in the only true disappointment so far this week, Target (TGT) effectively "blew up", showing a dramatic deceleration in same store sales. CEO Brian Cornell called the plus one and change same store sales a disappointment with the miss concentrated in electronics, toys and home. I think these below expectations categories can be explained by encroachment by Amazon (AMZN) and Costco (COST) coupled with the dramatic sales of the Apple iPhone 11. Yes it could be that big.
To me, though, the issue even as we are at all-time highs, is how the actual stocks of the actual winners, the ones the president singled out at his press conference, refused to jump big despite the market-moving information. It's just ennui.
Many have said that I am partisan to the president's China policies. I am partisan alright, partisan to events, in Washington or Wall Street, that can raise estimates regardless of the lack of excitement or movement. That was today's action. What an opportunity on any decline for the stocks of companies that have access to Chinese orders and are now going to get them, again, or else.
(Mastercard, JP Morgan, Goldman Sachs, Apple, Honeywell, Citigroup, UnitedHealth and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocksL? Learn more now.)