China, PMIs, meh.

“Well, it was one of those days — not much to do. I was chillin downtown, with my old school crew.”
– Slick Rick from Mona Lisa

I don’t know, you seeing anything interesting out there today worth trading or discussing? I’m not.

The one thing I’ll say is that it’s pretty surprising to see the market trade so well off of those Markit Flash PMIs, especially China’s.  The most positive thing I heard about it was that its growth rate it slowing but it’s slowing at a slower rate than it was last month. Whatever.

The market plainly doesn’t care, as flows are trumping fundamentals once again – but my pal Dougie Kass does, here he is at The Street talking about why China matters:

As mentioned in my column on Monday, China is an important part of my thesis that a global slowdown in manufacturing activity is threatening U.S. corporate profit growth. Last night, the Markit economic research group estimate of the purchasing managers’ index for the eurozone fell to 45.9 in September from 46.3 in August.

Risk assets (Asian markets and S&P futures) sold off on the release of this data last night.

China bulls point to the recently introduced 1-trillion-yuan fiscal stimulus package and the hopes for more central bank reserve and interest-rate cuts. But just as the U.S. faces structural headwinds that might render more liquidity injections and ever-lower interest rates unable to change the trajectory of domestic economic growth, China faces its own set of challenges, as it makes the transition from an export and infrastructure-led economy to one that is consumer-based.

I remain cautious and net short as a result of the growing economic weakness in Europe and China (and nearly every other region in the world), an estimated sluggish 3.5% current nominal GDP growth in the U.S. (which portends weak top-line corporate growth) and renewed signs of limited business pricing flexibility (at a point in time where profit margins are at a near-57-year high) that lead me to view consensus 2012-2013 earnings expectations are far too high.

Anyway, other than that, not much else going on from what I can see.  I’m in and out of client meetings all day so more later…


Bearing Down on China (TheStreet)


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