i'm mandy drury and this is "trading the globe." here is your itinerary for tonight. it's here. earnings season. but will the global slow down hurt u.s. stocks when they begin reporting next week? we'll go deep inside to tell you which stocks are a buy and which are a sell. plus, china's moment of truth, the world's second biggest economy is set to dump a ton of data next week. is a shocker in store? we'll reveal. and it's the airline every investor wants a piece of. what is it? tim's opening his ambassador indegs on a name he thinks is set to take off. "trading the globe" starts now.

hi, everybody. welcome to the show. joined by tim seymour. tim runs the hedge fund that specializes in emerging markets and a collection of some of the best global investors in the business and the warning siren. it's basically run. yeah, the markets are in turmoil as fears of global slow down are heating up. the question i want to know and the people watching a at home want to know is a global recession on the way? >> it's a big question. if you look what happened this week yesterday in the span of 45 minutes we had three of the world's biggest central banks, the ecb, people's bank of china and a surprise move in the bank of england providing stimulus, cutting rates. here we are a week after the e.u. summit is completed and spanish bond yields are over 7%. the euro has broken levels. we're talking about emerging markets as well. if you look at unemployment today's u.s. payroll number was anemic at best, tepid. if you look at unemployment in

brazil it's a record low. russia, 5.4%. china, 4.4%. in india, 6.7%. the rest of the world is not hemorrhaging under the weight of global debt like we are in the developed world. >> if you look at the stock markets in the emerging world you would say they are pricing for the end of the world as we know it. would you say they are cheap and a good value now? >> emerging markets are near trough levels of 2008. they are pricing global armageddon and there is tremendous opportunity. having said that we'll hit key points on the dollar. there are headwinds coming down the pike here. we have to be careful. the global economy doesn't look good in today's less than good numbers. the strongest player in the room is falling off. >> let's look at some indicators. i want to bring in abigail doolittle. you're miss technical guru here.

if we take commodities which are economically sensitive, very sensitive to what's going on in china, what is the price action and the chart telling you about what's happening in crude, copper and gold which was down today? >> all of the commodities, mandy, tell me that there is a major global slow down under way. it's been under way more than a year. crude started to sell off last may very dramatically. this year it's down year to date 30% from the peak to trough. gold typically thought to be a safe haven asset is down more than 10% from its year to date peak to trough. >> does that tell you perhaps people trading gold are feeling the qe-3 is not on the table or is it just because of the strong dollar it was down? >> investors are re-evaluating the global growth situation and demand and they are adjusting their estimates of the global economy, getting out of less liquid assets, those that are tied up and, you know, moving

toward probably the dollar. so it is tied to the dollar, but i think it's really a flight from the illiquid risk assets to liquidity. it's been happening over a long time over more than a year. that really tells us that investors have been thinking about this. this is not an overnight thing. >> gold not the safe haven it used to be. ron shaw, i want to bring you in. would you be a buyer at these levels for commodities or do you think we got further to the down side? >> i'm a buyer at these levels. the worst is behind us. this is reflecting uncertainty. we have a wlak black cloud over europe creating a lot of turmoil. the worse is behind us. you are seeing lowest prices in years and oil prices trading really cheap. this is one of the buying opportunities in den years. >> that's a good point. one thing that's always been endemic to emerging markets like

india is inflation. there is no inflation. you have banks easing and in the emerging world they have ammunition left. china's rate cut was the second in the last month but only the first time in four years they have gone down that road. how positive is this? this is an extremely bullish backdrop especially for economies that are growing. >> i completely agree. i think we are set up for a bull run for the second half of the year. the indicator i look at is consumer. you know, that's the thing i think is really the driver for the markets we are talking about on this show. emerging markets is about the consumer. china was looking at experts and a lot of them were depending on global growth. they are going back to the consumer markets where you will see the big indicator. >> moving on to the big story next week a company in the usa, aluminum giant alcoa will kick off earnings season on monday. over half of the revenue comes from overseas so the question is will alcoa be the canary in the coal mine?

i'm going to double barrel this one for you. will it be the canary in the coal mine for the global growth story or is it not the bellwether it used to be? is there a better tell in terms of the kbloebl growth story? >> in a world where alcoa is often overplayed and then underplayed because people think we pay too much attention to it, aluminum can be in the way people look at copper as a tell on the global economy, a aluminum tells you, too. if you look at what's going on with aluminum prices they have been weak. around 83 cents a pound i bring it up because that's lower than the cost of production for aluminum producers which means you are getting to a place where some supply -- demand imbalance is coming into picture. alcoa is important because they are a read into how fast china is growing aluminum smelter capacity. at the end of the day the commodity boom of the last five years is debatable whether it will maintain it in full force. if you look at china still 750

billion in power grid infrastructure build out alone in the next three years is something that we need, not the same demand. to say commodities are dead, alcoa won't tell us that and the supply demand markets in general are in a much better place than they were in 2008 when markets were falling. >> abigail do you feel alcoa is the name to watch for global growth or is there a better multinational for us to watch? >> i think it's a good name to watch particularly around the q-2 earnings season. even with expectations in the gutter, five to seven cents per share. down 80% year over year. aluminum is weak, down 10% in the last three months against what alcoa management has been saying. they said aluminum would rise. they have to bring estimates in. that will put a shadow over the

earnings report and it reflects the global growth slowing. i will take the other side of the trade. i think commodities have further to drop. >> give me a name in alcoa's space or coming down the pike that will be a tell on the weakness, maybe another commodity and the short you would hate and you would be getting out of the way? >> that's a great point. there are a lot of names chartwise i would get out of the way. they really aren't in the space. names like walmart, coca-cola, even pfizer, microsoft. we saw the beginning of this with dell, my baby dell. just a month ago when they put up a big miss. the stock was down 20%. global weakness wasn't the only problem there. all of these charts look very weak. the common thread is that global international exposure, 50% plus. very different businesses but they all look ready to drop by 10% to 20%. again, that will be coming from the international arena more so from the u.s. >> give me names of global

companies you expect to tell us a different tale? again, we know the story of emerging multinationals in emerging markets doing well. we have heard about nike, ford, yum that dropped on a warning. not everyone is falling out of bed. >> i like colgate. people aren't going to give up fancy toothpaste in this market. no matter what's happening with industrial markets. i like ge. they are doing a great job in china. the low ticket prices going to the consumer which is healthy and alive and kicking. >> the s&p's foreign revenue percentage is 47%. domestic sales, 53%. earnings not the only story. next week china will be a massive story. it will have a massive day to dump a slew of economic data to watch. investors will get retail sales, gdp, industrial production to name a few. now china cut two key lending rates by more than expected this week which has some investors

spooked that a chinese takeout could be in store for the market. tim, the key here is that the government probably knows the data will be weak. is that your read or is it a preemptive move? >> investors and journalists are understandably cynical about the data that comes out of china. cutting this peek week for the second time in a month after waiting a long time could be a sign of two things. one, the data behind it is weak or they recognize they have a lot more bullets to stimulate their economy. the consumption side of the story in china has a lot of room to run. whatever we are getting in terms of stimulus won't be your father's stimulus in 2008. >> you don't think the rate cuts were behind the times? they were a little bit too late? >> they are moving here and you have perma bears and bulls.

>> ron, you specialize in china. do you believe china is a buy or a sell? >> it's been over sold. gdp numbers will be down from last year. you're not getting 9% but you will get 8%. that's phenomenal when you look at global markets. like tim was saying they have a lot of things they can do. they have trillions in foreign reserves. they have zero inflation. there is a lot of room for them to pull different levers and grow their economy. >> in terms of companies we should be watching, particularly u.s. companies we should be watching that have a big china equation, ge comes to mind for me. >> ge does have big exposure to china. from a technical standpoint that chart really looks like ge is going to take a hit. that's one that i would be looking to take profits in at this point. you can always buy it back. one point that comes to mind, even if china's gdp slows to 8%

still phenomenal. what we are having is the removal of a tail wind. we have brick nations that were propping up, a weak u.s., a weak europe. at best it's a neutral. even though it's growth it will be taking away as we are obviously talking about it from the global economy but in a bigger way. i don't think you can look at it in an isolated way. look at it overall wholistically. it's a neutral at best but it will be a headwind. q two, three and maybe four. >> if people are looking on china and emerging markets to bail out the economy it won't happen. ge's energy infrastructure is one of the i would go with apple. >> despite the fake apple stores? >> that tells you how successful the brand is there. i was a skeptic saying they would be priced out of the market. china mobile the largest player

in the world will start carrying the iphone next year. you have 660 million subscribers who want to own this. we have moved from 7% to 23% revs. >> it's an aspirational product. it's all about aspiration in china. thanks, tim. send us an e-mail at tradingtheglobe@cnbc.com. this is what's coming up next. what do these three companies have in common? we have all felt the wrath of the dollar surge when we come back we're going to tell you which other stocks could feel the pain from the dollar's gain. and then it's the only airline investors want to buy. what is it? tim will reveal when he opens his ambassador's index when we return. choose control.

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hear a lot about currency head winds. >> especially for the consumer companies. coke reports on the 17th. they need north american revenues to outstrip revenue from north america. mcdonald's, coke, yum brands. the bellwethers doing a lot of the consumer work, not just the industrial companies are going to give us a major tell here and the thing is if we are taking a view that the dollar isn't going to reverse trend in the short term that's my view. we are completing a ten-year bear run and we have been convalescing around the 80 to 83 range on the dollar index which is a measure of the dollar against its core trading partners. the dollar is positioned to go on a significant bull run. that will pose interesting challenges for the multinationals and emerging markets. >> launching into a bull run is tim's call. the question is where will the dollar go next.

chris, is king dollar going to reign? do we have another five years of a bull run for the tlar? >> a lot of people are saying the dollar may not be doing so hot or this is a time to jump off the dollar bandwagon but i think this is the second to third inning of the dollar bull market rally. we are seeing signs of the dollar beginning to break out. like tim said, we just broke above 83. that's a huge level. we haven't seen it in nearly two years. this sets the stage for testing the 2010 highs, the 2009 highs, up there around the 88 to 90 dollar level. we are really setting the stage here for a nice break out. >> one thing that at least is counter to that. i agree with the technicals and i believe the dollar goesing higher. this administration has been happy to have a weak dollar in the same way emerging markets are happy. brazil has been pushing currency down. how do you fight it from a policy perspective?

i don't know that the u.s. from an economic policy and i don't think mr. geithner would admit this but it's been good for the u.s. to have a weak dollar. it's benefitted us to the chagrin of our neighbors. >> i agree. they have had the strong dollar policy. but it clearly has been anything but. i think we have to come to the realization that we may have a new administration come the next six to eight months here. how does that work? what happens come november? what happens with the debt ceiling in the next six to eight a months? the other real problem is where do you run now? where do you go? if you don't want the dollar, where do you go. you certainly don't go into euro dollar. >> would you go into the australian dollar? >> it's something a lot of people have been talking about it. you discussed china. we're back north of parity. we went to the 102 to 103 level. it's hitting a nice ceiling there. if we see china slow and china is doing everything in their power to not see it slow. if we see it slow, i think the

aussie could take a nose dive. not just beneath parity but something toward 90, 85, maybe 80 in the next year and a half. >> thank you, chris. tim, what names would you avoid. if you are correct that we are just in the early innings of a bull run for the dollar, is this going to hold the stock market back? is it going to hold the multinationals back? >> first we should talk about how much it will hold back emerging markets. if you look at the index which is the em index against the dollar you will see an inverse relationship that's predictable. for emerging market investors you want to be tethered to the consumer names. vivo in brazil. mbt in russia. high d ivs. if i'm looking at u.s. multinationals caterpillar scares me. it has 31% of revenues from the u.s. this is a company that was trading around $25.

it's an $84 stock now. this is a company that while on an earnings basis, i love what they are doing. if we believe the dollar is rallying because of the global growth story is dying. we have already heard about excavator fall off on demand in china. i would watch freeport. this means copper is coming down. this is one of the great companies of the world where most of the assets lie in indonesia and peru. this is a company with a fantastic balance sheet. again this is a story i would run relatively defensively. i wouldn't necessarily be shorting the company. i don't think they are going out of business again. it's a great company with a great balance sheet. tough to rally here. >> interesting point. two for two in terms of people who think they are in the dollar bull camp. abigail, can we make it three for three? look at the short for the dxy or the euro. >> make it three for three. i think the dollar is going higher. it's fulfilling a bullish pattern. we could see the dollar index at 88 or 90.

it could see a nice pop by the end of the year. this reflects a flight to liquidity. investors are going to safety. >> i agree. i'm four for four. i think you have to -- there are a lot of stocks you have to talk about upside like infosys benefitting from the strong dollar and europe yishs. there are a lot of ways to play it on the positive. >> up next, it is one of the biggest airlines in the world. tim says it's ready to take off. what is it? he'll reveal when he opens the ambassador's index. stay with us.

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largest by largest by market cap, growth opportunity and this is a very exciting time to talk about south america reigning the largest airline. if you look at latam airlines,

the merger of lan and tam airlines it is growing passenger capacity. this is why i like the name. not because of cost cutting efforts or cutting passenger capacity. latin america is the place where they will have the world cup and the olympics in brazil in the next six years but you have the middle class mobility which is a bipart of why they are going to grow. you have a company that through this merger there is massive synergies in sg & a a. hubs around america which they have 55% of the market will see major savings. it will happen in the next couple of years and it's not without risk but you want to own the latin american middle class. delta airlines in the next three to four years you expect up to #% growth at the $9 billion market cap. latam should grow 23% after growing over 30% for the last three years. impressive but it dwarfs the

growth in major airlines. >> growing for the right reasons not because it's cutting up pillows and charging you to go to the bathroom. thank you, tim. do catch another full episode of "trading the globe" next friday at 7:30 p.m. we are all over the olympic trade. that's right here on cnbc. until then, don't think local, trade local. keep cool. [ buzz ] off to work! did you know honey nut cheerios is america's favorite cereal? oh, you're good! hey, did you know that honey nut cheerios is...

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