i'm mandy drury, and this is "trading the globe yoerks your passport to the global markets. it is friday the 13th, folks. and this is your itinerary for tonight. it's the biggest threat to next week's earnings, the slowdown in china. so which stocks are likely to fall victim to the chinese takeout? tim seymour is naming names. plus, apple's untold growth story. the emerging markets. we'll tell you why the world's greatest growth story could just be heating up. and take cover. because mr. gloom, boom, and doom, marc farber has a fresh warning all global investors need to worry about.

he'll tell you what it is in an exclusive live interview. it is time for "trading the globe." >> indeed it is. hello, everybody, and welcome to the show. happy friday. i'm joined by my co-host tim seymour, who runs a hedge fund that specializes in emerging markets. welcome, tim. always great to have you on the show. >> happy friday the 13th. >> happy friday the 13th. i'm going to call it a lucky day rather than unlucky day. we have a collection of some of the global investors in the business lined up. and it was a simple equation for investors today. you had some decent chinese data. you had some good bank earnings at home. and the market was just really off to the race as the dow was up 200 points. so tim, when we put the aggregate together of all the information we gained today and over the course of the week, have we taken global recession off the table? >> i don't know if we've done that. certainly china's data was less than people had expected in the doomsday scenario of last week that cut rates. people thought that this meant they had possibly something up their sleeve much worse than they gave us, a slew of data this week. a couple things that concerned me. one, electricity production in

china is down significantly year over year. steel prices, iron ore, coke and coal, a lot of that part of the commodity complex i don't think recovers anytime soon. but what's interesting about the chinese data is relative to expectations china is now for the first time this year tracking better than the united states is relative to expectations. i think that's really the story of this week and today. people think the central bank of china, the people's republic bank of china, is going to come to the market with more aggressive stimulus. >> right. >> and that gives riskier assets a lot more room to run. >> so maybe the data today was good enough to facilitate a soft landing in china but bad enough to keep the pboc in play. ron, let me get to you. if the markets have been rallying in part on these chinese stimulus hopes where exactly is that money going and what's the trade? >> yeah, the trade is i think very simple. you've got to really anticipate where is the government going to put their money. they're not putting their money in baidu or internet stocks. where i think they're putting their money is to support the local economy and the people of china. so i like health care. i like a stock, lfc. it's a health care company. well priced.

i like ceo. cnoc, which is the chinese oil company. i think they're going to try to stimulate these two areas to try to bring the economy back and i think the news that came out today was very good. it's going to pump the gas on. >> real quick, though, because people want to see china as a consumption story, the good news is that china consumption to gdp is about 43% whereas a xum years ago it was about 30%. in other words, people want to believe they are truly stimulating. do you believe this is actually happening? >> i do. i think that china is in retrenchment mode. they're trying to move away from being export-oriented economy to becoming a domestic economy. we saw a lot of hurdles and a lot of issues this year because of that transition. but you can see the chinese government really moving in that direction. >> rich, you're up. let's bring up the charts, guys. was the rally today here in the states echoed in some of the other markets, particularly the emerging markets? >> certainly. that was echoed not just here in the states, not just today, but over the past few weeks. clearly china has been the straw that stirs that global macro cocktail. we feel the fears of the

slowdown in china have largely run their course through those risky assets that tim alluded to. we feel that they have been strengthening over the past few weeks and the past few sessions. we're talking about crude oil firming, copper firming, emerging markets well off their bottoms. that's a signal that the trend has turned. and you want to be a buyer of those emerging markets. >> would you agree that what we saw today was more than just a trade, it's something that really we can sort of bite into for, say, the next six, twelve months, tim? >> i'll take both sides of this because i think rich is correct that the expectations out there in the technical markets were very oversold in a lot of these risk assets. i don't think that the world was that bad to begin with. as a matter of fact, i think people are way offsides on china, either too bullish or too bearish. what i think is interesting about what you're saying, rich, is that you believe actually that the euro, for example, can rally to 1.30, which would be a signal at least to other riskier assets that things are okay in europe. but you see that the dollar index, the dxy, is still going to keep in its upward trend, which is somewhat contradictory because to me that means the commodity prices and commodities

and stocks related to have to trade lower if the dollar stays strong. >> good point. one thing is clear, though, folks. i think we can bottom line it by saying china is slowing down, albeit from a very high base. the question now for investors, what will that slowdown mean for earnings for u.s. companies that report next week? we've got a slew of earnings. $$what, about 20% of the s&p is going to come out with their earnings next week. >> right. >> and at this stage the kind of guidance that we're getting is, you know, overseas problems weighing on our earnings and currency headwinds are weighing on our earnings. >> yeah, absolutely. this week we had burberrys. the luxury segment which people have felt needs to be supported by china and the rest of the emerging markets folks and clearly had terrible earnings. cummi cummins, which is industrial engines and diesel. it's a fantastic company. it got destroyed. i think a lot of this is overdone. one of the things we're going to get next sweek a continued tale of fx headwinds. but names like philip morris pm which is an interesting name because it's very defensive. names like yum, names like some of the other places that i think people have been very defensive in this global multinational

growth fear. our names are actually going to surprise on the up side. >> tim, which -- you wanted to jump in. >> i wanted to jump in here. tim makes a fair point about the currencies. but we actually think that the currency translation is going to turn from a significant headwind to a significant tailwind. we think that these multinationals here in the u.s. are going to benefit from a w k weaker dollar when investors start to flee the safe haven or perceived safe haven of the dollar and they move into that riskier euro. >> when are they going to do that? give us a time frame on that. because at the moment the dollar seems to be king. >> right at moment. but we have seen critical bottoms in these e.m. and collateral currencies which have been a banner. of course we know about the battering that's gone on in the euro. we think the trend has turned right here. we're a buyer of the euro at 1.22 and change. we see up side in the short term to 1.30. >> i think you've got to look at stookz somewhat insulated dpr currency. american stocks selling to international markets. stocks like coke and j&j. these are premium products.

the emerging consumer is m somewhat hooked on some of these products and you're going to see good earnings out of some of these companies next week. >> indeed we're watching lots and lots. including google, yum brand, johnson & johnson, intel, qualcomm. many names coming out but there is one name that is sure to be a good tell on the state of the chinese economy. yum brands. it's a fast growing fast food joint and it reports next wednesday. we actually had the company's ceo dave novak on "trading the globe" just recently, and let's have a listen to what he had to say about china. >> china we see growing at least 15% a year. our yum restaurant international business 10 and the u.s. business 5. so obviously china's going to lead the way as we go forward. >> okay. we've just heard the man. tim, you just heard the man as well. you interviewed the man. >> man is the man. >> are you worried about yum next week? >> actually i think people were worried about yum last week. excuse me, last month when the stock went from about 74 down to the low 60s. the problem here with yum is at 21 times earnings it's not a

terribly cheap company. the pullback to me gives me a place where really this is what we call garp. this is growth at a reasonable price. this is a company that is growing their earnings. china as you mentioned 10%. return on investment is about 15%. this is a fantastic company. and i think the market punished it in advance of these numbers. i think it will be a surprise. >> ron, i know you're not a huge fan of yum, but is that largely just a function of price? >> i'm concerned with valuation. i think that he said u.s. market growing at 5. i'm not so sure about that 5% number there. it is a little expensive. and it's all china. it's not india. it's not the other regions. it's really almost all china. they do have presence in other countries. i like a company like domino's pizza. i any they have a great inward focus going to india and other markets in asia as well. >> rich, i understand you think this pullback is actually an outstanding buying opportunity so, you beg to differ with ron. >> that's exactly it. look, mandy, the problem with the strategy of waiting for a pullback in high conviction names like this is when you get

that pullback you don't trade the pullback, you don't want it because things look so ugly. the reality is with the stk down 18% from an all-time high -- >> it's still expensive. 18% down it's still expensive. i think -- you know, the u.s. is a real bad overhang for the company. i'm concerned with that. >> what is interesting to me is rich is pretty bullish about at least the environment for riskier assets. i think yum has been a defensive trade for people who wanted to get that growth but didn't want to stray into cyclicals. we'll see. when i look at nike, another name that was punished a couple weeks ago, mandy, this is a place i think you have an opportunity to buy this. >> whether you do your food shopping here in the united states or whether you're doing it over in asia or even australia because i believe you're watching as well you have undoubtedly noticed a disturbing trend. yeah, higher prices. extreme weather across the globe has caused a surge in the price of corn, wheat, soybeans, lots of things. tim, when we see food inflation in emerging markets this is not just something that hurts your pocketbook. it can cause social unrest as well. >> it's one of the fundamental problems socially for china, for

india, and for other parts of the emerging complex and it's something we deal with all the time as investors. this is not a food crisis. this is a food reality. this is a structural trade higher i think ultimately. nir in other words, in the way demand can ebb and flow in cyclical parts of the economy and the demographic growth story that is emerging the food trade is going to continue to build on aggregate demand. so when what you see when you couple that with effectively weather crisis, hot weather, the top four wheat producers in the world, the u.s., argentina, the ukraine, and kazakhstan, basically ukraine has gotten 25% of their crop that's offline. kazakhstan 50% is offline. the u.s. we've heard about conditions in the midwest. 50% of the crop at least is affected by extreme heat. that won't o'all come offline. it's been a fantastic trading opportunity. but for the underlying fertilizers and even some of the food producers it's an interesting opportunity. >> do the charts back it up, rich? do we see the surge in wheat and corn continuing in the charts? >> the charts unfortunately are bullish for those underlying soft commodities like corn and

soy, touching all-time highs, 2008 highs. unfortunately it's bearish for the human race in that the price of food continues to grow higher. this acts as a regressive tax which hurts the people that have the least the most. if that makes any sense. >> this sounds like the kudlow show. he does a great job with that. >> you know, i think the biggest problem is inflation. food price inflation is going to create inflation across the board. that's the biggest issue in india. they're worried about monsoons. you've got to go for the efficiency play. companies like monsanto. >> monsanto it is. you've got a question, guys? you can send us an e-mail. we've already got something, actually. it is tradingtheglobe@cnbc.com. because we got a whole bunch last week and we sure love getting them, don't be shy. this is what we've got coming up for you next. it's the most dominant company in the world. apple. but while you know about the iphone and the ipad, what you may not know is this tech titan is also a major emerging market play. how much higher can e.m. growth take market shares?

tim will break it down. and then mr. gloom, doom, and boom himself marc farber makes his "trading the globe" debut in a live and exclusive interview. and he's got a shocking warning for global investors. he'll reveal what it is when "trading the globe" returns. i don't spend money on gasoline. i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car.

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sneet keep on rocking ♪ welcome back to "trading the globe." well, apple shares have surged this year because of the ipad and the iphone. less familiar to investors, though, is just how many of those iphones have actually been sold in the emerging markets. well, one could call it apple's hidden growth story. until now my co-host tim seymour is here to break it down. tim, just how big can this company get in the -- >> apple's about $35 e.p.s. so far last year. e.m. can bring another $21 of e.p.s. by 2015 if you see the traditional demographic trends following through. and if you look at what's going on with sales for apple, basically in 2007 this was roughly 7 billion in sales even farther off to the left side of the chart. but if you look last year through 2011 we had about 10

billion. this year well into the 20s, roughly 26 billion in sales in emerging markets. a lot of that is the ipad. even more of that is the iphone. if we look at a couple more graphics here, it tells the story of the opportunity that apple has here. first of all, 75% of the demand for apple within e.m. is coming from thebro bric. china a big part of that, 58%, then the rest sprinkled around. the rest of e.m. 26%. there's an amazing opportunity for these guys in a very concentrated area. >> you feel it's not built into the stock, this growth potential -- >> the exciting part of this story this year is where we've seen the revenue growth has been e.m. but if you talk about where these guys make their money, first of all, 57% of apple sales are coming from the iphone. and that's a place that's very, very underpenetrated. but the place that might be even more interested is if you look at this chart based upon apple's p.c. share growth, where you see 11% in north america, it's 2% in the emerging markets. >> that's incredible. >> one part of this that gets me the most excited is if you look at the iphone in china, and i

look at china mobile with the world's largest cellular company with 675 million subscribers, they haven't even taken part in thichltphone binge. if they get the infrastructure buildout which i expect for 2013 for am -- excuse me, for china mobile to handle a 4g or the apple iphone, that's an exciting part and i think that's really where you're going to see this growth. >> it's a highly aspirational product. and everyone in china wants one. rich, you are actually a rarity in today's world because you are not really buying the story for apple right now, are you? >> well, look, i'm not going to sit here and tell you that it's not a fantastic company, that it's not a fantastic stock. but i do want you to be mindful of a few risks as we enter into the second half of the year. first of all, we just got off of a segment where we talked about a food crisis in the emerging market. apple sells products at a very premium price. so let's consider 2that for one. we also have huge competition out of companies like samsung. the galaxy s3, a phone that's superior to the current iphone in almost every way. and finally i would say we're

talking about a technology company here and a technology company which borders on a fashion company. two seshlths which are extremely transient, very fickle. even the biggest companies like ibm, cisco have had their problems. companies like ibm once looked dominant, once looked unassailable. now aol who? >> this is a fashion trend where they're making fake apple stores in china just to actually compete where they don't have real apple stores. ron, what are your thoughts here? >> i'm kind of with rich actually on this. i think it's a high-end premium product. a lot of people in the emerging markets are price sensitive. and i think apple hasn't yet demonstrated they're going to customize a strategy for the emerging markets. that concerns me. if they want to sustain this growth they want to do something a little different to adapt to these markets. >> do you think they're going to still have pricing power in those very sensitive markets? >> i think these markets really run on more of an open platform system. the whole apple thing is you buy the. pc, you buy the iphone, you buy the ipad, and in emerging markets they're not going to go

all in like that. that concerns me. >> i agree with than, ron. i actually agree with you, guys. i actually think samsung is the apple of emerging markets. i think samsung is the one taking some of the best ideas of apple and probably going to deliver them at a better price point. but apple at 14 times earnings is cheaper than it's ever been. if i look at ibm and some other u.s. tech names that people get very excited about in terms of global growth apple is a better growth story at a better valuation. i'd be long apple against ibm here. >> and rich, i think if apple heard you say they're just a technology company or -- >> i like fashion. >> at 14 times earnings i think there's a reason it's cheap. investors are worried. there's something out there in apple. we just don't know what it is right now. >> worried. look at the move of the stock. and again, it's cheap because of the growth you're seeing in the earnings, not because it's a value trap like a microsoft or a google. >> we've got to leave apple there. do not go anywhere because mr. gloom, doom, and boom himself, marc farber, has just called in. he's live from thailand.

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♪ china's second quarter gdp. the print came in just very slightly above expectations. but it did spark a big wave of optimism as stocks across the globe rallied today. our next guest is not jumping on that bandwagon.

in fact, he is here with a stern warning for our investors. marc farber is editor of the "gloom, boom, and doom report," and he joins us now on the phone. marc, great to have you with us on the show. what is your warning and what do we do about it? >> well, i think first of all investors must realize that the impact of a slowdown in the chinese economy, which in my view is much larger than what the government has been reporting, the government says gdp has been growing at 7.8%, in my view it's much lower because we have very reliable statistics. say, export figures from taiwan. export figures from south korea. where the largest export destination is china. they're down year on year. electricity consumption in china is hardly growing. and so i think the economy in china is rather weak.

but of course the markets have rallied because they think that because of weak economic growth in china they will stimulate, they will print money like in the united states and europe and -- it will boost prices for a while. >> marc, it's tim. thank you for joining us. i agree this is kind of a perverse way to get excited, is that weaker markets bring stimulus which is artificial and it's been proven to have less of a lasting effect. but where do you think the trade is here? because in other words, we're at a place where a lot of these commodities are very beaten up. there's other markets i'm not sure i'd want to short here. i don't think the global growth story is in a very good place. but it's also a dangerous time to be throwing it all out the window. >> i agree with you. the markets are very volatile. and it takes a lot of courage to be short. i don't want to be short copper because copper can like other

markets be manipulated because there are not that many players in the copper market. and so we could see a rally in copper prices. we'll see a rally in gold prices and so forth and so on. but where i see opportunities, we have had now for the last one year bad news and worse news from europe, and we have widespread euro gloom. this is different. two years ago there was euro optimism. and now everybody is so down on europe. the markets of portugal, spain, italy, france, greece are either below the march 2009 lows or close to these lows. >> marc? >> yes. >> marc, i'm going to jump in. it's been great you have to on the show. thank you very much for your time. i want to just get a quick reaction from our traders. ron, how did you feel about what marc was saying?

>> you know, there's a lot of truth to what he's saying, but i think the consumer is still alive and kicking. there's still a lot of great buying opportunities. prices have come down. we talked about it earlier. i like telecoms in the emerging markets across the board. i think you can't ignore the consumer. industrial may be down, but the consumer's still alive. >> look, i think ron brings up great points. emerging markets if you look outside of china and brazil, which are the two biggest economies, at least the ones people are the most -- the most crowded trades. the rest of e.m.'s growing. if you look at southeast asia, indonesia, what's going on in turkey. if you look at other parts of latin america. e.m. is not falling apart. from a markets perspective correlations are going down here. you don't want to be all in. and i think playing the market is a fool's game. i think buying good companies and shorting bad companies, as a hedge fund manager that's what we try to do but again, valuation wills tell the tale. >> rich, do you think that e.m. markets are on sale or do we have to be very selective in our bargain bins here? >> it's both. e.m. markets are on sale. tim makes a great point. correlations are breaking down. you cannot paint the world with

one brush anymore. if i can just respond to marc's comments for one second, the thing that struck me, there is no one out there who wants to buy europe. as a contrarian that tells me you want to start to fish around. volumes are de minimis. no one is there. it's the opposite of a crowded trade. >> sometimes it is darkest before the dawn, right, folks? thank you so much for joining us, all of you. i'm mandy y. thank you, tim, as always. you can catch another full episode of "trading the globe" next friday at 7:30 p.m. until then, don't think local. trade global. please do e-mail in.

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