Tuesday, January 06, 2009
(Cont'd from above)...

Jim (cont'd):    Now, we can count … we can count on the Chinese communist party… Not just because China has the biggest budget surplus… well we have a big budget deficit… But because they don’t have a choice if they want to stay in power. They need to keep their economy… the whole countries economy growing. And that is why this is the real thesis. The parties actually admitted as much. A whole spade of recent articles from one China’s premier state run magazines… Has suggested that there could be tremendous social and political unrest… I want you to think protests and riots… if the economy gets worse. Hey let me give you a little snipit… in 2009 Chinese society may face even more conflicts and clashes that will test even more the governing abilities of all levels of the partying government…. that’s from there. Admittedly it loses something in translation… but you get the point. The party better deliver a genuine great leap forward or otherwise it is cultural revolution time. And since this marks the 20th anniversary of Teanaman Square protest… you better believe the Chinese government is not taking any chances. These guys… by the way… do not fear off year elections… like the Democrats. They fear off year revolutions… insurrections… beheadings. There is nothing like the possibility of being overthrown to keep the money rolling.

Chinese central bank has already cut interest rates 5 times in less than 4 months… They have indicated that they will probably cut rates 2 or 3% points in the future… Man this is a good story… They have a ton of room to cut rates.. not like the good old U.S.A… These potential cuts actually mean something, not just for China.. but for you, for me, for the rest of the world.. Since China will be the engine of global growth in 2009... not us…

And it could mean even more to the European central banks… if they follow in China’s footsteps. Then there’s China‘s… here’s the… this is… this is unbelievable. 600 billion dollar stimulus program. That is 20% of the countries GDP… That’s money thrown across the whole Chinese economy. And they are actually putting people to work there… not like here… infrastructure, telecom, health care, financials, real estate… they are trying to let 100 million jobs bloom. I have actually read some articles about how they are trying to build railways that will acquire pretty much all the world’s steel… No wonder Nucor (NUE) has had such a big move… take a ride on the Chinese Reading will you...

Okay, Beijing has fully embraced the Malcolm X/Chinese 8th Army by any means necessary strategy. I hope they dedicate the public works program to Din Chow Ping… or maybe Mao’s late wife there… the Cramer fave and Warren Buffet acolyte, Chang Ching… At the end of the day, it is looking capitalist road is paved with caterpillars… Now on top of the 600 billion the Chinese have already… how about this one 40 billion calculus stimulus plan. Help build out their domestic technology. I think it is going to help build out QualComm Inc. (QCOM*).. which I own for my charitable trust.. also support the development of wireless technologies. Beyond that they are cutting fuel taxes. Creating various incentives to bolster the residential real estate market… which has been really ice cold. And Chinese oil ministers said that they are buying crude… hey, maybe they need a second… still greater wall. Built and built fast.

They are throwing everything they can at their economy to get it moving. Because they know what the consequences are if they don’t. So why does all this matter?…. Why is it so important to you?… Well, you’ve noticed the market has been pretty strong since the year began. I always search for a legitimate reason to be excited about a market. This is a bullish thesis… with more heft than any other one… which I hear all day. And that’s not even true at the moment… or that there are tons of bears waiting to be converted to bulls… no… this rally is about a China recovery… as opposed to the China syndrome. It is fueling one of the greatest sector rotations in history. Out of the recession proof consumer product companies like Merck and McDonalds… and into the big industrial companies… mineral stocks like BHP Billiton Ltd. (BHP) … Joy Global (JOYG)… Eaton Corp. (ETN*) which we will hear from later because I want to verify this… and still Cramer fave and ActionAlertsPlus.com, my charitable trust, Freeport-McMoRan (FCX*)…

You are going to hear tomorrow… today.. Thursday… Friday. That the rotation is caused by a rise in commodity prices and lower mortgage rates. But the former is because of China.. and the latter hasn’t kicked in yet. And won’t until housing bottoms in June… Notice when I first did this… everyone laughed.. kinda like Carrie when Travolta threw the blood on her… now they are not laughing anymore. I am like Amy Irving reaching… no, never mind. Remember when she gets pulled… Don’t throw out all of the recession stocks, you need to something for the sake of diversification.

But here’s the bottom line..

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The Bottom Line!:     I think the Chinese Communist will be the salvation of capitalism. That makes it a good time to buy a nice broad Chinese ETF… like I did yesterday for my trust, ActionAlertsPlus.com, my charitable trust… and it gives us a reason to like the stocks that need a strong world economy to work. Infrastructure plays, commodities.. everything the peoples republic needs to jump start it’s economy.

Memo to China: We are counting on you to turn this economy around… We have been using the playbook… no, this time it is not Real Money… although this is certainly the version they are probably reading… it’s the quotations from one of the greatest capitalist of all times… Mao Tse Tung.

I think china’s recovery could have a global impact... think commodities & industrial companies...

[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:    I am looking at a combination play on China and health care. In China Medical Technologies (CMED)... I wanted to know what you think now that they have sold off their medical device division recently. So they are going to be a pure play on molecular diagnostics, kind of like Ceguonom that you recently featured.

Jim:    How about the Sequenom Inc. (SQNM), that be smoking… Okay, China medical… um, I used to follow that one very closely… I do feel by the way… that here is the problem with China medical… and this is really important for people to understand. Why I have been buying FXI at 31 for my trust… I can’t own stocks individually… which is down from 71 about 14 months ago. The reason I am picking the ETF and not an individual stock is… How do I know that this isn’t the one, China Med, that had the earnings problem?… How do I know that it is not the one that is actually is going to legislated out of existence… cause you know the Chinese communist is different from the American capitalist… they are pro growth. But not actually pro any particular company… So I would rather see do an ETF. I never recommend an ETF on this show… why?… because I think I can pick individual stocks better in this country than an ETF… but not when it comes to China.

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Q:    It seems the whole world is getting a stimulus package. Europe has one. Asia has one. And we have one in the upcoming weeks. How will this affect the financial sector? And more specifically how will it affect Bank of America (BAC)?

Jim:    Alright, now, let me look at Bank of America (BAC) today… wow, USG Corp. (USG) just did up big on that… I am just hitting up random stocks, that is the way I think… Okay, BAC was up 26 cents … when we at 3:00 o’clock on the closing bell… mentioned that the quarter could have a shortfall… we were repeating a story from the Wall Street Journal… sure enough, the stock actually climbed after that. Not down. You know why?… Because they have a lot of mortgages… and the refinance rate is so low that I am busy during the commercials trying to refinance myself… So I think the answer is you are going to see bad quarters from the banks… and the stocks are going to go higher after the bad quarters. You, my friend, have got horse sense.

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Q:    I am concerned about the stimulus package that Obama is putting together. Is it going to affect the marketplace in a good way? And is it a good idea for the government to be artificially injecting money into the system to begin with?

Jim:    First of all, absolutely. We were in a great depression in the 30’s and Roosevelt figured out that if we bust the budget, and we just put a lot of people to work we are going to do well… Here is what I am concerned about with the stimulus package… I want to see real jobs created like they are doing in China. I am seeing unemployment extended… I am hearing about health care benefits extended… I am hearing about giving money to states. I need jobs created… President-elect Obama must create jobs… He most put people to work like China. That is why China is going to lead us out of this… not the United States.


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