When you see the Chinese government numbers, like the industrial production and retail sales figures we got last night, both, almost as a matter of hand, well below expectations you have to say, wait, they will have to give in eventually. They are not up for a trade war. They don't have the ammo.
But then you look at this morning's release from Alibaba (BABA) , a blockbuster set of figures with revenue growth up 51% to $13.6 billion, and you say, nah, they don't have to surrender, they are strong. Maybe even on fire?
Which numbers can you trust to measure the Chinese consumer ? How about the Chinese export market? How will we know if we are winning or not?
This is the game we now play, and I can tell you it is one stupid game. If we are going to grade China let alone take action on it, we are going to lose a lot of money and be revealed as closet hedge fund trading addicts. These numbers are, in a sense, opium, and we've got to stop smoking it.
First: The Chinese do not care what these figures are. I am surprised they even bother to put them out. What kind of pastiche, if not mosaic, do they create? I don't know but if they are really bad shouldn't we just presume they are actually much worse? Why do we trust these figures anyway? The Party will determine how strong the economy really is.
Second: President Trump doesn't care about these numbers as he has already decided that the Chinese economy is failing. He will say it endlessly. There is no real accountability because the president doesn't allow any other narrative. Man, is he ever - as we say in law school - sui generis.
Third: The Chinese are not going to abandon their 2025 plan and their Belt and Road initiative. No figures are going to stop the real juggernaut that the Chinese hardliners care about which is why we should presume there will be tariffs on all goods from China.
Fourth: If you know there will be tariffs on everything, then you know that anyone who relies on China for the fastest part of their growth or for their supplies is a loser.
Fifth: Tech companies are the ones who might be hurt less than you think because they figured out a long time ago that their technology will be stolen or pirated, as Adobe's (ADBE) Shantanu Narayen told me just yesterday.
Sixth: Everything you hear about how well President Trump likes Xi and vice versa is totally ridiculous. So just let this play out and you will know there will be a day where we go down big because of the tariffs of $300 billion but we will come back because far fewer companies will be hurt than we think. The real pain will be felt by the farmers, not publicly traded companies, except the retailers who have to step up quickly or their multiples are going to shrink far faster than we currently expect.
Seventh: Position yourself now before the next chunk of tariffs get put on because it probably happens sooner than you think. The president absolutely loves bashing China and the Chinese government simply doesn't know how to deal with Trump because, like the other candidates who ran against Trump in the Republican party or Hillary Clinton, Democrats, they have never ever seen anything like him. Not only does he not care how much Chinese hate us, he enjoys the trash talk and making up things about the Chinese.
Eighth: Finally. Given how much Trump loves this fight, and how he will not back down, the companies that move out of China will get a higher multiple than those that don't.
So forget the numbers. Remember that Trump doesn't care about them and he'll make them up anyway. So, both governments make the numbers. Don't take them seriously and gird yourself for the two things that Trump thinks will let him win in 2020 - gigantic tariffs paid for by the Chinese that he says will reduce the deficit by $100 billion a year, and embarrassing the Chinese every day on Twitter. It's a virtual reality game on both sides and it will only get worse because our president has decided, like the New York Times, that China is failing and he will never relent because he fears losing in 2020 and this is THE issue he is running on.