“A ruler should not call his general to arms simply out of anger; a general should not attack because he has been insulted.”

-Sun Tzu, The Art of War

President Trump was obviously upset when China announced tariffs on an additional $75 billion in U.S. exports. Since the administration took on this fight, China has countered each tariff announcement with one of their own. It’s a move from their vantage point that gets a free pass in the U.S. press, which continues to portray this battle as something Trump started.

On the contrary, it’s something he aims to win. However, my greatest fear from day one is what would constitute a victory, and whether he would allow President Xi a way to save face or not. I appreciate the firmness of President Trump's resolve, but with so many forces rooting against him, any signs of panic or anger will become media fodder.

Usually, the media vs Trump is just another day, but when it involves big market selloffs and excuses to toss around the "R" word, it becomes dangerous. I don't care about big businesses whining after shipping off millions of American jobs, but there are powerful forces that understand that a sustained market selloff can make a lot of bad stuff a reality.

For now, President Trump has raised the stakes again.

• Tariffs on existing $250 billion in Chinese exports will climb to 30% from 25% on October 1, 2019
• Tariffs on proposed $300 billion in Chinese exports will start September 1, 2019, at 15% instead of 10%

On Friday, only nine stocks were higher in the S&P 500. In other words, there was no place to hide.  Remember the fundamentals of 99 stocks? It did not change on Friday or even in the past four weeks.   This is where individual investors want to make sure they do not react in anger or panic, even as the market tumbles on more uncertainty.

President Trump cannot blink. However, he can walk back some of the actions and articulate with the American public about the game plan from here. 

Americans, especially those that don’t worship at the altar – and the country should only be about big businesses making unlimited profits - are behind in this fight.

Meanwhile, China’s former vice minister at the Ministry of Commerce spoke overnight, saying China awaits a fair and equal trade deal.  If that’s true, they will begin to negotiate in good faith and avoid the wrath of Trump. 

I’m surprised they haven’t learned that yet. They need to come up with something quickly to show they are serious. 

Approach

Communication Services	Consumer Discretionary	Consumer Staples
1	2	1
Energy	Financials	Healthcare
1	1	2
Industrial	Materials	Real Estate
3	3	1
Technology	Utilities	Cash
2	0	3

 

Hey, Business Roundtable (BRT), I heard you’ve changed. If that’s true, I would like to see it. Here’s my letter.

Dear Business Roundtable,

Your recent shift in the “purpose of a corporation” sent shockwaves through the business world that was also met with skepticism and outright disbelief.

By shifting from the bedrock position established since 1977, the sole purpose of a business is to make profits, there is a tacit admission that you have let down society in many ways. You now say the commitment is to a free market economy that serves all Americans in the goal of more inclusive prosperity.

These are the new goals beyond fatter bottom lines. 

• Delivering value to our customer
• Investing in our employees - we foster diversity, inclusion, dignity, and respect
• Dealing fairly and ethically with our suppliers
• Supporting the communities in which we work -we respect the people in our communities and protect the environment by embracing sustainable practices across our businesses

If you are serious about these commitments, then why isn’t there a greater effort to push for real fair and free trade with China?  China’s actions counter everything that the new “woke” Business Roundtable says it stands for:

• World’s greatest polluter (not even close)
• War on religious freedom, including putting one million Muslims in reeducation “camps”
• No freedom of the press
• No due process
• Rampant theft of American intellectual property
• Debt diplomacy and militaristic ambitions

I appreciate the goal of moving forward without the constant relitigating of the past holding back further evolution. However, this means action and putting your money where your mouth is.

Millions of American manufacturing jobs were shipped overseas.

Millions of American manufacturing and farming jobs have gone to immigrants seduced into illegally entering America by providing them an income significantly higher than what they can earn in their home nations while paying too little for Americans to move away from financial assistance programs.

If your answer to these issues is to argue for the status quo and suggest any changes would mean higher prices for consumers, you are being disingenuous, and your statement is a farce. The moment is now, and businesses are going to have to do more than get rid of plastic straws. 

Otherwise, it is only about fatter profits, not American dignity or respect.

Charles V. Payne

Today’s Session

Once again durable goods came in significantly better than Wall Street anticipated and appear to be building momentum.

Highlights

• Transportation $86.3 billion +7.0%          
• Communication equipment $3.9 billion +1.9%
• Non-Defense Aircraft $10.6 billion +34.4%
• Non-Defense Capital Goods* ex-Aircraft $69.65 billion +0.4%

*It’s interesting the experts keep saying there is no business investment and yet we continue to see solid investments especially in intellectual property.  Meanwhile, the number has come in above Wall Street consensus for the third month in a row.

Business Investment	Estimate	Actual
May	+0.1%	+0.3%
June	+0.2%	+0.9%
July	-0.1%	+0.4%

Comments

Saving face is a ancient myth, that no longer is valid with modern Chinese dictatorship. Maybe at one time, honor was of highest importance. In modern times, power by underlying deception is the primary motivation. Allowing them the media perception of honor, only gives this deception undeserved credibility. The Chinese in the last 30 years have yet to honor agreements, and when confronted, deny and cover-up their economic and social crimes with no press, ours or theirs, to challenge them. MICHAEL A CRAWFORD on 8/26/2019 11:38:15 AM

Your comments on the BRT are spot on. Does the BRT support national e-verify? Jacob on 8/26/2019 12:26:36 PM

Great letter, Charles. You are spot on. Keep up the good work for Americans. William Brown on 8/26/2019 1:18:29 PM

Charles, I couldn't agree more regarding your comments to the Business Roundtable in your letter above. When I was studying for my MBA, all of those "new goals" were part of a businesses social obligation. I think that the oversized compensation of corporate executives has caused most Americans to focus on how corporations are contributing to the quality of life for everyone, not just the 1%. Thanks for raising these good points. Tim on 8/26/2019 4:03:24 PM

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