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Morning Commentary

China’s Winning the Battles: We Can Win the War

By Charles Payne, CEO & Principal Analyst
3/15/2018 9:46 AM
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Question of the Week

Larry Kudlow replacing Gary Cohn as President Trump's economic adviser in the role of the National Economic Council (NEC) director is big news.

How confident are you with his ability to help "Make America Great Again" and then "Keep America Great"?

Post your answer below.

As elites from Washington to Wall Street cower at the thought of a so-called Trade War with China, that nation continues to gear up to win that same Trade War. 

Xi Jinping has effectively crowned himself emperor, and part of his power consolidation includes merging agencies and ministries into powerful units to make swift decisions, including its ability to print money via an omnipotent central bank.

While the obvious theft of US intellect and trade secrets is no secret itself, what needs to be discussed even more is the fact China isn’t that backwater nation featured in Sally Struthers commercials a couple decades ago.  China has become an economic juggernaut, which plans to usurp America as the preeminent economy on the planet.

Competition is fine.  So, let’s make sure it’s fair as well.

Yesterday, we learned China’s economy grew at 6.9% in 2017, the first year to year increase since 2010.  In addition, China’s industrial production for the first two months of the year rocketed to 7.2%, well above consensus of 5.9%.

The proxy for China’s economic might is Boeing (BA), which saw its shares rally from $159 on inauguration day to a recent high of $365 a share.   Part of the company’s success is its vast sales in Asia, which is becoming the world’s top market for airplane sales.

Back in 1996, 14 of the world’s top 20 airports were in North America.  Today, that number is down to just four.   Yet, new airport growth continues in Asia, paced by China, and cities we’ve never heard of with millions of folks.

Make no mistake. China is already in a trade battle, and it expects to win the war.

Today’s Session

Forget the retail sales report that missed consensus, or news that Toys R Us is closing all its retail locations, people are spending money.  Two retail financial reports, and guidance, prove this contention. 

High End Retail

William Sonoma (WSM), which sells things like fancy $2,000 steam ironing units, posted its financial results after the bell last night with impressive results.

Comp brand revenue was +5.4%, led by a surge of +12.3% at its West Elm stores.

E-commerce was +8.4%, reaching 52.2% of total sales (that’s an Omni-channel success).

Guidance:

Low End Retail

Dollar General (DG), which offers great value on things like Betty Crocker Brownie Mix, posted financial results this morning that were mostly in-line with consensus, but the details and guidance were nothing short of amazing.

The company began 2017 with 13,320 stores and finished with 14,434, increasing its square foot presence by 9.0% from 7.0% in the prior year.

Guidance:

I should note both companies saw some margin pressure from higher SG&A costs, as there is serious competition for those increasing dollars coming from increasingly confident consumers.


Comments
I think it's time we (Congress, etc) let President Trump make his own decisions..good, bad or indifferent.

Michael Branco on 3/15/2018 10:10:11 AM
The main stream media is hammering the President since the day he was elected, and he's fighting them back. I believe he will make and keep America great again. Kudlow is a very good choice, very smart

Charles G Elchoueri on 3/15/2018 10:26:20 AM
Several years ago I would have said very optimistic. Today I say cautiously optimistic. Time will tell if he is a true conservative up to the fight. We need him badly so I hope he shines.

Robert Clanton on 3/15/2018 10:47:34 AM
Love Larry Kudlow. Excellent with foresight on economics. He will do a very good job. Always watched his show.

barbara on 3/15/2018 11:00:33 AM
A great pick. We need his energy and commitment to growth and fair trade.

Leelee on 3/15/2018 12:24:07 PM
Charles ,you& CNN get the News / info we can't, so, Is John Kelly, going to become new AG? We have heard this from various trending results. PLEASE let us know.

Ed on 3/15/2018 12:35:18 PM
Kudrow is the man. Great job President Trump. Now replace Jeff Session back to homeland, & put JOHN KELLY as AG. PLEASE

J on 3/15/2018 12:38:30 PM
Charles, with Larry Kudrow& pres Trump, USA FINALLY will get negotiated fair TRADE. Cohen was ok, but , too much like HRC, Kudrow is a fighter, and knows it is TIME, AFTER tax cuts,( tax cuts 2.0 comming) we now have the competitive means AGAIN. Thank you Charles,& CNN, for being the ONLY SOURCE ON TV FOR FACTS, NOT OPINION NARRATIVES.

Ed on 3/15/2018 1:01:44 PM
Kudlow, not kudrow, sorry DAMN Google autocorrect.

Ed on 3/15/2018 1:03:22 PM
Larry Kudlow is an excellent choice. Very pro growth, pro America and highly schooled on economics. Just hope Pres Trump listens to him.

Martin Hile on 3/15/2018 1:27:00 PM
Larry can blow some serious smoke about King dollar but what can he actually do to stop the long decline in a seriously troubled fiat currency backed by nothing but massive debt loads

al cataldo on 3/16/2018 7:48:22 AM
HE'll prob be GREAT...If he still has the ENERGY and if PREZ let's him. I've ALWAYS liked Mr LARRY


gunny on 3/17/2018 3:31:26 PM
not too confident a news commentator that reads SCRIPTED MESSAGE on tv....is qualified ?

don mc nair on 3/18/2018 11:56:12 AM
I can't really say how good Larry Kudlow will be. Time will tell; however, I enjoyed his commentary and economic expertise when he wrote them for Investor Business Daily. I do feel he is qualified and wish him well.

Sanford Blum on 3/28/2018 7:39:57 PM
Charles, just heard your comment that metal prices are down. That only applies to copper. Carbon Steel and Stainless Steel has gone through the roof and going higher with the tariff and quota decisions. I run a 100 yr old family industrial pipe product distribution company in Washington, Oregon and Alaska, and prices are going crazy.
Gary

Gary Stratiner on 3/29/2018 2:07:53 PM
 

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