Jim Cramer: Kudlow's Policy Comes Down to the Word 'Growth'

 | Mar 14, 2018 | 4:20 PM EDT
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Can we invest based on what comes out of the White House on economic policy? Can we make decisions about stocks because someone can speak about the markets with a soothing voice even if you know our so-called trade partners may not like what's said?

I would like to think there's more to investing than trying to fathom the world of President Trump.

But if today's any example of what can happen, with the market having a decent turn but tech point blank reversing on the news of the appointment of Larry Kudlow to be the president's top economic investor, the answer may be if you want higher stock prices you just got your gift.

You know me. I play with an open hand.Today's the thirteenth anniversary of the beginning of Mad Money. But previous to this show I worked for four years with Larry on a show called Kudlow & Cramer. I have some insights I want to share with you about what it means for the stock market-not necessarily for politics-but for the stock market to have Larry as the president's closest economic adviser.

First, let me distill Larry's philosophy to one word: growth. Larry's the most pro-growth person I have ever met. In our time together we didn't see eye to eye on much but the glue, what held it altogether was our affinity for growth because growth can cure so much and growth can make our country stronger and more powerful than any other elixir.

The nature of the show was pretty simple: people with two differing views often using guests as foils to make our points. It often got heated but Larry knew I favored higher stock prices and his stand on growth would get us there.

So to my first point: growth is true north for this fine but forceful gentleman and that's going to be terrific both short and long term for the direction of the stock market.

Second, Larry is a fantastic speaker and a legendarily congenial and articulate statesman. My mother always said comparisons are odious, and I always admitted that Larry's predecessor, Gary Cohn late of Goldman Sachs, is my friend, but Larry will be more at home with the media and that matters tremendously when you have a president who seems at home with only one portion of the media, the people who agree with him.

As Larry always said before he landed a round house -- with all due respect Jimmy -- and he meant it, he respected the other side. It's a quality this president needs badly and it's a quality that will make it so there will be fewer shocks that can cause the market to have a real hiccup.

I think that Larry will be an eloquent defender of this president's agenda and will flesh out the tweets that often are the president's own worst enemies. No he won't be much help on errant tweets about Saturday Night Live, but he will be a heck of a lot more empirical and rigorous about what the president's policies have done for business because Larry is the most pro business person I have ever met.

But, and there is always but here, Larry does not necessarily jive with the president on key issues, or at least hadn't in the past. While he was an early supporter of President Trump, again because they share the notion of unfettered growth, Larry's the most free economist I have ever met. He hates tariffs. Hates them. He would rather subsidize American industries that are being attacked by so-called trading partners that erect barriers that could raise the cost of our goods to our own citizens.

That's not the president's stand. Not at all. The president knows predatory practices when he sees them. When I used to regularly interview President Trump before he ever ran for office he would often bring up how the Chinese were our financial enemy and how they don't play fair.

Therefore it was not a surprise when he slapped tariffs on steel and aluminum to try to keep those industries afloat and against the Peoples Republic of China which outright targets various industries for job creation in their country and job destruction in our country.

In the last few months, though, Larry has softened his stance on this issue and begun to recognize the pernicious nature of the Chinese methods of keeping the peace in their nation while crushing our own businesses. He has begun to speak of the need for fair trade with China, which is code for the need to use tariffs to teach the Chinese to play fair or else.

I think that was integral to his getting the job and in order to keep his job I sure hope he drops the notion of subsidies for our industries. You take a company like Nucor (NUE) , our largest steel market. It's the lowest cost producer of steel in the world. It abides by pollution standards that other countries simply do not care about. It doesn't lay off employees. It creates whole business ecosystems in the towns it choose to build new plants. And it makes a ton of money for shareholders.

It's downright insulting to think that Nucor wants a hand out and I think that Larry's beginning to understand the crucial issue between a level playing field and a field that doesn't even exist because the Chinese took it away from us. I know Larry can compromise; I saw it first hand in the many years we worked together, especially when we championed tax relief on dividends in order to increase stock ownership for regular Americans. I think he will be able to agree with the president that it's not right to wipe out those businesses that pay those dividends just to make it so we allow the Chinese to get us addicted to their subsidized products.

So you might ask, if I think that Larry's so fabulous for stocks, how come the stock market didn't jump on this news the way it fell when Gary Cohn resigned as chief economic adviser?

First, it's downright silly to think the stock market as a whole will rally for Larry. But what does matter is that the stocks that were getting hammered the worst, the stocks of tech companies that do a ton of business in China did halt their decline and in many cases reverse their trajectory. It's a little too much to ask a day after the president shot down a merger between Broadcom (AVGO) and Qualcomm  (QCOM) because the president didn't want Qualcomm's 5G secrets being given to the Chinese if the deal occurred not that I believed they would be.

But the non-Chinese tech stocks, the ones that don't do any direct business in China, Alphabet (GOOGL) , Netflix (NFLX) and Amazon (AMZN) went for a real romp on the news of the appointment.

I know that two stocks people regard as the ultimate Chinese plays, Apple (AAPL) and Boeing (BA) , didn't' rally. But Cai Von Rumohr, a respected analyst did say that Boeing might have a weaker than expected quarter and I think that had a lot more to do with the weakness in that stock than possible Chinese retaliation for the nixing of Broadcom's attempt to buy Qualcomm or for the steel and aluminum tariffs and the tough words that came with them. As for Apple? Give me a break, it's stock hit an all-time high yesterday and every stock deserves a breather.

So here's where I come out. Until these tariffs we always regarded a tweet from the president or a talk about economics to provide a put underneath stocks. That's been frayed by the president putting up his dukes against China, something no president seems to ever want to do. I think Larry Kudlow will argue forcefully internally for whatever is the most pro-growth position imaginable, but in the end will take the president's views and present them, no matter how harsh, in a velvet gloved fist that gets the point across even to both sides of the aisle, and more importantly in these days of uber-polarization, both sides of the media.

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