There's an otherworldly contrast between the Farnborough Airshow which is going on right now, and the discussion about Chinese orders for our aircraft.
The entire aircraft industry is frantically trying to meet the demand for planes as more and more people become members of the middle class worldwide and begin to travel.
If China is such an important piece of the puzzle, if China is the linchpin for aerospace then what is the deal with Farnborough? Do those orders not count? Is it really about hidden orders to the Chinese?
I know that China is an important commerce generator for Boeing and the United States. China's 13% of Boeing's business up from 7% back in 2011, according to Bloomberg. But Farnborough, where we see that demand is swamping supply, tells us, once again, that China needs Boeing more than Boeing needs China. You want to be at the head of the queue as the two aircraft makers try to meet demand. You don't want to walk away from it.
Oh, and just so we are clear, if China switches its orders all to Airbus they simply won't get anywhere near the planes they need.
We know that China's prospective LACK of plane orders has cast a pall on so many stocks.
We have seen China put a lid on the stocks of Honeywell (HON) and United Technologies (UTX) , given their overexposure to aircraft. It's just going to get "worse" for United Technologies when United Technologies closes its deal with Rockwell Collins (COL) . Honeywell's got so much intellectual property in an aircraft that it's become a China stock.
I also believe that all of the chatter now about Arconic (ARNC) being a prospective leverage buyout candidate is about aerospace because Arconic's business is heavily dependent on aircraft engines.
Even General Electric (GE) has been hurt by the belief that China will cancel orders with Boeing.
Now, it is true,and I am not diminishing anything involving the trade tensions with China. I know that Boeing along with Caterpillar (CAT) are the two stocks that get sold every time Chinese trade heats up.
But I am betting that at a certain point people will come to realize that China will order aircraft from someone - their own industry is still nascent - and the other company will get more orders.
The real worry that should concern everyone is the weakness in the American airlines and how much overcapacity there is in our own country. The fares aren't holding up. The revenue per seat mile is not going higher. The dogfights among carriers are back. The only way to cure all of this is to have fewer planes being bought to take out capacity. That's something worth keeping an eye on.
Against that? The higher oil prices make it more vital for these companies to get more fuel efficient planes to keep the costs down, costs that are wrecking the bottom line for many of these companies.
I will be talking to Larry Kudlow, the chief economic advisor to the President later this week at the Delivering Alpha conference. It's a fair question, I think, about how the U.S. can get the Chinese to buy more plant and equipment from us. Chinese orders to Boeing are certainly a way to do it. But if China doesn't buy 'em, someone else will.