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With all of the negative data coming out of China lately, Jim Cramer can just hear investors snickering. Who the heck would want to touch China with a 10-foot pole?
Some 14 million new, self-directed brokerage accounts have been opened in China, year to date, and there's nothing but a stock bubble created with foolish investors willing to pay sky high for stocks. The average stock in China sells at approximately 50 times earnings, while the average in the U.S. is about 20 times earnings.
"I'm starting to think it will keep getting worse until it doesn't. There's too much money being created in the Chinese stock market for it not to impact their economy," the "Mad Money" host said.
After all, if the European Union can be brought back to life, why can't once-vibrant communist China do the same?
Cramer is aware that the statistics coming out of China have been on their deathbed. The "Mad Money" host has always used the Baltic dry index to measure China, and it's been flatlining under 600 lately. Additionally, the country is totally full on all basic materials, and the PMIs are all under 50.
But maybe it won't be like that forever.
Cramer can't help but wonder if all those Chinese brokerage accounts will start to make a profit, and with the central bank having room to maneuver, along with Europe getting better, isn't it just a matter of time before China gets some life back?
This might explain why Alibaba posted phenomenal numbers, with 40 percent-plus growth recently, and why the CEO of PPG told Cramer he is seeing strong demand in the Chinese automobile industry.
"I think it's become too fashionable to say that China's never going to come back; that they build all of those ghost cities with no people in them and there's simply nothing more to build; that the country itself is stagnant because there's no real demand for any construction," Cramer said.
There are plenty of ways for China to come back, and Cramer thinks it will happen quickly. After all, copper managed to rally to $35 from $29 in January, and even the Brazilian iron ore company Vale ran up to $8 from $5 in the past two months. That's a big move, especially considering that iron ore has gone down in price.
This market is signaling something right now. In Cramer's perspective, all of these signals add up to a potential breakout and he thinks a China turnaround is just a few months away.
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What does that mean?
It means stocks are about to go much higher. They haven't moved yet, but they will. Cramer recommended keeping an eye on General Electric, Honeywell, Boeing or 3M, which will bounce when the Baltic freight index finally jumps.
"I say you have to start doing some buying in one of these stocks before everyone realizes that the decline in China's growth rate is slowing, and pretty soon the acceleration will begin."