Wait for China's next move
It's tempting to buy stocks on today's weakness, but it's worth pausing to see how the Chinese will respond to surging commodity prices.
A commodities-driven market can take us only so far. That's what we learned in 2008, and that's what it looks like we are going to learn today.
While commodity costs may be less than 10% of our cost of production, it's pretty obvious that for a growth country like China, these days of dizzying heights for oil and copper and cotton can't be sustained.
In 2008 we learned two things. One, you should be thrilled when commodities go up, because it means you aren't going into or aren't having too severe a contraction. And two, you should fear commodities going up, because the Chinese know they are driving commodity costs, and they have enough of a command economy that they won't tolerate endless price hikes.
Today is one of those days when we are squarely in the "Worry about No. 2, forget No. 1" camp.
Given that the Chinese are only signaling that they will do something -- they haven't done it yet -- we will have multiple sessions of worry about their next move.
I would normally be eager to put some of that cash right back into today's weakness. But what we learned in 2008 -- that there has to be a tilt up in commodities, not a ramp up if you don't want to fight the Chinese -- makes me much less eager to take advantage of a sloppy day.
Better to watch. The only thing dumber than fighting the Fed is fighting the Chinese.
At the time of publication, Cramer was long Cisco.
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