The US is losing the new cold war

The battle is taking place on the stock exchanges of 3 countries, and right now the Russians and the Chinese are winning.

By Jim Cramer Mar 14, 2014 11:04AM

Traders work on the floor of the New York Stock Exchange © Spencer Platt/Getty ImagesThis market is taking a page out of the Cold War. It's Russia and China versus the U.S -- except the battle is not taking place in Korea or South Vietnam, it's taking place on the stock exchanges of the three countries and right now the Russians and the Chinese are winning when it comes to the hearts and minds of U.S. investors.

Put simply, we are in a vacuum in this country. We are post the big employment number. We are pre any earnings-per-share numbers to speak of. The only two we had of note Thursday were Krispy Kreme (KKD) and Williams-Sonoma (WSM). Both were positive, with the latter being spectacular. If anyone cared about WSM, we would be much higher, not much lower, because this quarter was so superb that you know some of the strength has to be because consumers are still spending on their homes. When you see that kind of spending at a mall, it heartens you. In fact, you feel the investment spending on homes must be getting better, not weaker.

But it doesn't mean a thing.

Nope, what matters is Russia's getting more intransigent again about the Ukraine and the Chinese economy faltering still further. logoRemember when I said we need three eyes to keep track of this market? Until Thursday, I think the third eye was blind -- people didn't see this collapse in commodities. It was obscured because our country seemed to be doing so well. Remember it was only six days ago that we learned how well our economy is doing, as represented by new job growth? We got a snapshot of weekly unemployment Thursday that was consistent with that growth.

But neither bonds nor stocks are paying any attention at all to our hiring or the retail sales of fatty donuts and expensive pots and pans. The bonds are looking at the chaos and fear in Russia and the slow collapse of China.

We know that this market goes to extremes rather quickly. A few days ago, Russia looked like it was going to go to war with Ukraine. Then the Russian stock market got hammered and we heard that the President Vladimir Putin stopped looking at his army and started looking at his portfolio -- and the portfolio of his oligarch comrades -- and decided to turn the other cheek. The Russian market settled down and, sure enough, Ukraine becomes all fluid again. We keep getting undercurrents that the Russians are playing the game the Germans played with Poland right before the war, demanding a corridor to the Black Sea, and the West doesn't want to appease Putin as it appeased Adolf Hitler more than 70 years ago.

I will admit that the parallels are a little eerie. In the 1930s, Hitler was demanding a corridor through Poland to Danzig, a port city on the Baltic Sea with a huge number of German citizens, even though it was within Poland. Russia wants a corridor to Crimea right through Ukraine, again because Crimea is largely Russian and the Russians want the Sevastopol port because they are cut off from the Russian navy right now. For Europeans, this is just too reminiscent of when their fathers and grandfathers were willing to appease Germany. They don't want to repeat history with Putin, another dictator whom they abhor.

You could argue that it is really their problem, and their markets have been taking it on the chin. But when U.S. Secretary of State John Kerry says there could be serious steps Monday if a Crimean secession vote occurs Sunday and, at the same time, Russia is again conducting serious military maneuvers in the area, you have everything you need to provoke selling on Wall Street: a deadline, some armies and commitments by Western leaders to take action. Who wants to be long or own stocks through that weekend? Better to sell Friday and come back Monday if nothing of note happens.

So let's attribute half of Thursday's sell-off to our Russian cold-warrior enemies. But that means the other half falls right into the bailiwick of China. We keep hearing that the Chinese government is reining in reckless banks. We also know that the Chinese government let the corporate bond of a crummy company fail, which is a shot across the bow that it's no longer going to bail out investors in companies that don't deserve to live. When you overlay copper's decline (remember, that's the thermometer for China and the attention of your third eye, if you have one), then you can make a case that China is worsening by the day.

It's not reassuring when only a handful of companies have been able to rally, and they tend to be in the froth cohort again. Clean-battery stocks and dirty government-sponsored-organization stocks like Fannie Mae (FNMA) can't go up when the blue chips rally. Just as in the bad old days of Cold War enemies Russia, China and the U.S., it's mighty hard for truly terrific and lucrative international stocks to coexist on the new-high list with the dregs of the stock market.

I know all of this seems like a ridiculous overreaction, but let's play it out. Does anyone really expect the war of words over Ukraine to turn into World War III between Russia and Germany, this time with us sending our troops to fight alongside the Germans? We can talk tough, but I can't imagine the 82nd Airborne heading to Kiev anytime soon.

However, we have a deadline, and if the deadline is breached, just as with Syria, something has to occur. We don't know what that something is going to be, but it's a super reason to take profits after there's been such a run.

As far as China goes, it can take us down on darned near every negative data point, because we are uncertain at all times about our recovery and because the hedge funds that lord over short-term trading have a sign on their desks that reads "Weak China data equals sell." Until that sign reads "Weak China data means nothing," you are going to get this pattern of copper being down and corporate bonds being allowed to default and China's lending standards tightening.

Given that all of our large-cap stocks trade down when the S&P 500 futures are getting hammered, you know some bargains are being created -- and not just in the utility field where the safe, higher-yielding, all-domestic stocks shined. You know I favor Con Ed (ED), Dominion Resources (D), Southern Co. (SO) and American Electric Power (AEP) if you want to go there.

But you can't capitalize on those bargains today, because tomorrow is even closer to the threatened anti-appeasement actions by the West. So unless Putin says something soon that indicates he's no Hitler when it comes to annexation, we're going to see lower prices still.

If you are a hair-trigger trader, you have a nirvana short-selling moment with the only thing that can hurt you being Putin suddenly becoming the West's big buddy and standing down his military. Barring that, lower prices are coming.

My take is that there's no hurry. This is the beginning of the combined Russo-Chinese offensive against our markets. Next we can begin to sort things out and choose companies that have nothing to do with foreign entanglements, and even do some investing on all those stocks we talk about buying on pullbacks.

That should be the point of maximum pain, barring a Chinese collapse over the weekend and Putin's going into Kiev to complete his 1939-like maneuver.

Jim Cramer headshot

Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio and uncover the stocks Cramer thinks could be winners.

More from TheStreet

Mar 14, 2014 11:33AM
Trade isn't the only thing we have lost our edge on. We are becoming the laughing stock of the world because of our COMPLETE government having their agenda in the wrong place.  Party politics, instead of US politics. They are looking in, instead of out, and making asinine statements.
Mar 14, 2014 12:07PM

I am tired of the media running their mouths about Miley Cyrus, Warren Buffet, The facebook guy, various jocks, who is a millionaire, selfies, baby bumps, etc or any other warped stories they come up with. I don’t give the slightest **ithoot about any of them and I doubt many others do either. These are all ridiculous distractions from the real issues.

Mar 14, 2014 11:29AM
Gee,you think Jimbo? Losing the war…please..this is only an excuse, to blame it on someone else other than The Bozo government in charge in the U.S., constantly spending money that does not exist.

  There is NO recovery,there is NO improvement happening and all I can see is the gutting of the Constitution,and the government totally out of control,lying to the People and looking to blame it on anyone or anything. The weather…the Russians…China… anything!
Mar 14, 2014 11:33AM
The economy is doing so well because of the latest job numbers? 175,000 is 65,000 jobs short of what we need to tread water.  175,000 is sinking.
Mar 14, 2014 12:53PM

Suck it up! You voted for the AHs running the USA.

Putin gathers far more respect than Obozo.

Look around, all the big cities approaching bankruptcy have been run by Democrats for many years.

Mar 14, 2014 11:33AM
In stressful times such as these, it is the responsibility of our Political Leaders, the Press, and yes even financial columnists to speak with reason and clarity. Instead, we get gems like "This is the beginning of the combined Russo-Chinese offensive against our markets."  Russia's Stock Market is down at least 19% since this whole mess started.  Russia's economy is going to be in serious, serious jeopardy if Putin does something stupid. (Which doesn't mean that Putin WON'T do something stupid.  His country will just suffer badly.)  China is in no way pulling an offensive against our market.  China is doing what China always does...focusing on their internal economy and trying to get it back on track.
Mar 14, 2014 1:24PM

Amerika is losing more than that. If you look at our elected "leader", who was influenced by the Socialist Saul Alynsky, he is doing everything textbook.


But why are you complaining? You voted for him - twice!


You reap what you sow.

Mar 14, 2014 12:13PM
Arrogance is the world's most dreaded weapon of mass destruction AND the only difference between a village idiot and hero is the historical reference. 
Russia and China have absorbed a significant amount of the globe's additional $100 Trillion in fiat printed money and put it in major nation's stock markets. Not for investment fodder, for undermining power. Crispy Creme doesn't help build stronger more vital Americans and neither has Facebook and Twitter. They can harm us more by keeping vices and distractions alive, while our own criminal Wall Street won't downgrade any publicly traded inherited entity that has oodles of cash but won't hire.
Flat out, a war in the Ukraine would be short, swift and brutal to us. We are hugely in debt, largely fat and stupid, arrogant and generations who bought into "no fear" and video games would do poorly in actual combat. The fanatical South would do worse. 
What Cramer fails to grasp is-- our entire culture today leans toward self-gratification and crime. History validates that all prior cultures like ours is today-- gets destroyed. You are supposed to be an expert, Jim... tell us... if administratively run business platforms will sustain us, why aren't ANY of the millionaires made since 2008 able in free enterprise? 100% made it either in the techno-train wreck, markets or glass ceiling. Without a foundation, every house crumbles. Ours is run by fools, for fools and fools control our culture. Invest in vultures, they will thrive in what we are headed into. 
Mar 14, 2014 12:46PM

"The country that makes nothing is nothing." China and Russia have won. The U.S. is an economic weakling, a drunk on the FED joke. The only weapon the U.S. has is to throw worthless dollars around. $15-Billion in aid to Ukraine? Why not make it a trillion dollars. Both are worth the same -- absolutely nothing.

Mar 14, 2014 11:40AM
Different weapons of war now Jim. Banks are the offensive weapons of mass destruction.  The declaration of greed is a failed assumption as the US attempts to coerce the world with money. Those who still have principles will come out on top. Unfortunate for us we no longer have any.
Mar 14, 2014 11:40AM
Strong Markets find any Reason to Rise and Weak ones find any Reason to Fall.  Seeing how there has been plenty of Reasons to really tank lately, the question that remains is why hasn't it. That answer is crystal clear to me, a continual flood of Global Crack-Dollars that has created Massive Stock buybacks and Financing of Deals at far lower interest costs then normal. This has had a major impact across a broad spectrum of Global issues.

Puerto Rico is literally Bankrupt, yet their Debt offering was way over subscribed. Tesla just recently closed a $2Billion Dollars offering with interest payments under 2%. The amount of debt globally has soared more than 40 percent to $100 trillion since the Great Recession and that's not counting $500-700Trillion in Scam Banking Derivatives.
So as Global Debt is Continually soaring, eventually Gravity will have it's day.
Mar 14, 2014 12:20PM
If the Crimea votes to secede on Sunday then who are we to tell them they cannot. You either believe in the concept of universal suffrage or you don't - no cherry picking. Yes they may feel pressure from Russia but there is nothing we can do about it and nothing we will do about it except bluster.  Incidently most of the current inhabitants of the Crimean Peninsula are descendants of immigrants moved there by Stalin. The indigenous Tatars are a minority and since nobody is interested in giving it back to them I say let the chips fall where they may.

And Cramer - the markets fell yesterday because the Chinese economy is falling apart ...very simple.
Mar 14, 2014 12:47PM
Divide and conquer, our two political parties have done a good job of that !
Mar 14, 2014 11:57AM
The Two most powerful entities in America are the Supreme Court and the FED.
Mar 14, 2014 1:34PM
Obama dream is coming true right before our eyes. He has continued to dis-mantel America and all you liberals just sit there watch.......sad
Mar 14, 2014 12:44PM
Poor Jim, he writes these articles as if he really believes the numbers being released by the Government are real and accurate for such things as unemployment, jobs added monthly, inflation and consumer confidence.  I guess he overlooks the fact that one month or one quarter later they are corrected significantly.  Recently, such corrections seem to be consistently in a negative direction by 20-35% with a noticeable absence of accompanying news comment . . .  hmmmmmmmmm
Mar 14, 2014 12:01PM
First, the US economy isn't doing that well.  Educated people are taking underpaying jobs because IT has replaced many clerical and factory jobs with ERP's and robots. Second, when is the US going to stop telling everybody how the world order is supposed to be. There are four major religious orders in the world and three of them don't give a damn about Christians and there hypocritical self-righteous rhetoric. The EU and US are going to shoot themselves in both feet this time.
Mar 14, 2014 12:04PM
Trade isn't the only thing we have lost our edge on. We are becoming the laughing stock of the world because of our COMPLETE government having their agenda in the wrong place."

Yet we have a Record amount of Millionaires and Wealth in America, almost everyone in Congress. American Corporations are sitting on Record Profits and Cash Hoards. Luxury Sales are setting Records. Ferrari just announced they will reduce production, not because of lower sales, but because of too many.  They want their buyers to feel more exclusive. New RV sales are up about 12% this past year and expected to grow even more this year. The Wealthy have never had it so well, how is that Trickle Down Working for everyone else?
Mar 14, 2014 11:29AM
"We keep getting undercurrents that the Russians are playing the game the Germans played with Poland right before the war, demanding a corridor to the Black Sea, and the West doesn't want to appease Putin as it appeased Adolf Hitler more than 70 years ago."

This is nothing like Hitler and World War II. However, Western Nations have been plotting against Eastern Nations and vice verse since World War II. What's not talked about enough, the Commodity and Currency Wars that usually cause these Wars to begin with. And guess who started those WARS Jimmy.
Mar 14, 2014 11:26AM
Cramer you are full of you know what. Go back to entertainment and all your bells .
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