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Actionable news in CAT: CATERPILLAR Inc,

Look to the Companies; Chinese Demand Is for Real: Jim Cramer’s Best Blogs By Jim Cramer | Apr 29, 2016 | 10:51 AM EDT

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Yep, the overnight, pajama-wearing futures traders may want you to trade off of some German data. I say, go with the companies, and if you had to stack up two themes of earnings season so, far they would be: First, the world is getting better. China has bottomed and Europe is getting a head of steam. Second, oil has bottomed because of both increasing demand and declining supply.

These two threads are important to consider as we go through the week, because they are very contrary to most of the thinking I hear and see.

But it is unmistakable. Let me just go through some calls. On the Caterpillar (CAT - Get Report) report, management said three times that China was getting better for them. Asia was actually up in the quarter year-over-year. Caterpillar is already seeing a gain from the recent improvement in commodity prices, and that will only get stronger. CAT was generally positive about the rest of the world, too, noting that Europe is much more positive, even in France. And U.S. roadbuilding is picking up because of state budgets being more flush, and stronger homebuilding in the Southeast and the Southwest. But it's China that's most encouraging.

We know that China's increasing spending more on internal demand. One way they are doing it, clearly, is increased spending on health care. The Chinese increased spending on health care for Action Alerts PLUS portfolio holding GE (GE - Get Report) , chiefly big machines, by 14%. It was one of the big standouts.

On the Honeywell (HON - Get Report) call, CEO Dave Cote called out some very strong Chinese orders for automated controls. Chinese Aircraft sales and service increased double digits, because of strong flight hours. But this gem took my breath away: "If there were any region that surprised me in the past quarter it was Europe, which did a lot better than expected." He acknowledged that he was "quite encouraged" by the strength in the continent.

Finally, General Motors (GM - Get Report) reported that its China numbers were up year over year for the first quarter, with a significant increase in SUV sales.


How about oil? Schlumberger (SLB - Get Report) was adamant this quarter would be a weak one. As the CEO said, "We expect market conditions to worsen further in the second quarter." It's "the deepest financial crisis on record" the company noted on the call. "The industry displayed clear signs of facing a full-scale cash crisis." North America has had an 80% drop in service from peak to trough. Activity in Brazil and Colombia continues to be "in free fall," the first being down 50% and the second off 75%. Russia and China have been drilling less, and SLB's Venezuelan business has been scaled back dramatically because many firms can't pay their bills.

At the same time, though, Schlumberger points out that demand growth remains solid, and there is very little excess supply other than from Saudi Arabia.

But here's the good news: "The magnitude of the exploration and production cuts is so severe that it can only accelerate production decline and the consequent upward movement in oil price." We have reached unsustainable levels and Schlumberger's predicting balance this year, because we will be...


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