China Worries: Caterpillar (CAT) And Deere (DE) Show Truth
China has a reputation for making economic numbers up as they go along. This reputation and action by the government has filtered all the way down into their smaller companies. In recent years, many Chinese small cap stocks have been found be frauds.
So how is China really doing? Overall, you need not look any further than Caterpillar Inc. (NYSE:CAT) and Deere & Company (NYSE:DE). Both these stocks have underperformed the U.S markets and are trading at 2013 lows.
Overall, the market seems to know the truth. And the truth speaks very poorly of the economic growth being generated in China. Reports have emerged about insanely lax lending requirements, much like the U.S. had prior to the financial crisis and real estate collapse. This shows the government trying to push growth with easy money policies.
If the Chinese market is weaker than stated, it warrants extra caution here in the United States. While the Dow Jones Industrial Average and S&P 500 hover at all time highs, they do so on the back of Federal Reserve printing. As this printing has less and less impact, eyes will turn back towards the true health of the global economy. This is not a good thing.