What do we want out of China? Do we want the Chinese to buy steel, or do we want them to buy Nikes? Do we want them to buy coal, or do we want them to buy Starbucks? Do we want them to consume iron, or do we want them to buy iPhones. Do we want them to import aluminum, or do we want them to purchase Huggies and Pampers?
In each case, if we want the former, we are in even bigger trouble than we were in 2008, because industrial production is now in the 6% range, while there are plenty of companies that can't survive unless that needle goes back to the high-single-digits.
But if we want the latter, then the 11% growth in retail sales that we got last night, plus record-breaking sales, today, on Singles Day -- the made-up day of consumption that the Chinese government has blessed -- is Chinese heaven.
There's a lot of handwringing about the decline in industrial production in China, and what it means for the globe. I think a lot of the fretting is silly, if you are an American stock picker. No, it's not stupid if you work at Freeport McMoran, which is, in many ways, a conglomerate with earnings based in Chinese industrial growth. But it's a nightmare if you are a U.S. steel producer, because it appears that the Chinese are allowed to dump all the steel they want here. Is there really any other explanation for the pathetic stock prices of AK Steel (AKS) and US Steel (X)?
The coal stocks aren't just going to oblivion because of our government's war against fossil fuels. The Chinese Communist Party has pivoted, and is trying to wean its country from coal now that a million people are dying of respiratory illnesses a year. And while we hear of a deficit in aluminum, the Chinese keep making more than they can use -- and they keep trying to sell it overseas because they don't need it there.
These are all bad signs for some of our basic industries. But, unlike, say, Brazil, which is exists for basic industries, our economy went the new way of the Chinese economy years ago, and if you are still in the business of basics you have lost your best market.
But if you are in the business of making basic retail goods, and the Chinese let you sell them and enforce your intellectual property rights, then you are a winner in this environment, not a loser.
That's why, when I see these Chinese consumption numbers, I am cheered. I do not live in Brazil, which is ground zero for the fallout from the industrial Chinese economy. And I do not live in Switzerland -- which is another no-fly zone: While the Communist Party is encouraging consumption, to the point where it is waiving the one-child-only prohibition -- something that seems to come just in time for singles day, I might add -- it doesn't encourage conspicuous consumption.
But the U.S.? It's a net winner in a world where Chinese consumers are buying more finished product, where they are going on websites and buying U.S. goods, where the government is letting Apple (AAPL) and Nike (NKE) and Starbucks (SBUX) sell unlimited goods.
Now, to be sure, there are capital goods companies that won't do as well as they have been, or have done elsewhere. United Technologies (UTX) is not going to sell as many Otis elevators, there. Caterpillar (CAT) is totally in the crosshairs of the new China. Cummins (CMI) doesn't fair well at all. Both the latter companies make the kinds of trucks and engines that just aren't as needed as before.
For other companies, it just isn't clear yet what the opportunity may (or may not) be. What is China doing with American technology? We don't know where the government stands on a day-to-day basis. How about autos? They are looking better, but is that because of a change in tax policy? We have some case-by-case situations developing.
But we have to face facts here. Our economy is driven by consumption. If the Chinese government wants to recreate our economy, who can do it better than we can? You have to look at it on a net-net basis, and if you do it that way, I can easily declare us the big winner in this global trade war, except that "us" is a different set of winners this time than in the 2000s, when Chinese commodity demand peaked. It has been downhill ever since, and may be downhill for many years to come.