Christmas cannot come early enough for General Electric ($GE).
While Oxford Street may be getting its Christmas lights switched on today, the festive mood has yet to bleed into global stockmarkets. GE in particular could really use some eggnog right now.
The latest issue of Zero Hour Alert went out on Friday. It detailed the biggest prediction I’ve made here at Southbank Investment Research – that the US and China are now locked on a path to Cold War II, with global repercussions for investors (and everybody else for that matter).
GE is an early casualty of this skirmish that is increasing in intensity. As I’ll explain, GE is an early casualty of China’s rise, and yet another indicator to Americans that this whole “globalisation” thing may not be in their best interests.
First they came for General Electric, and the US did not speak up…
While GE’s woes are many and varied, a key driver of its downfall was the decline of the US’ manufacturing and industrial base.
GE, a former titan of American industry and manufacturing, was collateral damage in China’s crusade to gain global economic influence. China’s ambitions to become the world’s industrial/manufacturing base – by seizing such bases from other countries – left icons like GE behind.
But while China gutted “flyover America” of the industries and professions that made the US an economic power, the politicos in Washington weren’t listening. As an impassioned Jeffrey Immelt, former CEO of GE, said in 2012:
“If you even whisper the phrase ‘industrial policy’ in Washington DC today, within 24 hours you will be stoned to death. I mean, China is out there eating [our] lunch every day but we still won’t challenge the orthodoxy…I read all these Washington economists’ reports and think tank studies that say ‘Let the market work’, except that the guys who are writing the books in China think it’s f***ing bullsh*t. [They say] ‘Please let those guys in Washington keep reading those books. Things are going just fine!’”
The mainstream narrative was that if the West opened trade to China it would become more liberal and democratic. This has clearly not been the case for years, yet the narrative is only now beginning to change.
The reason for this delayed response is somewhat sinister. American Hedge fund manager Kyle Bass said the following in a recent interview:
I’m going to sound conspiratorial, but I’ll tell you there are a lot of reports out there on Chinese influence and our think tanks. I know of a few instances personally where the Chinese either pay the think tanks, or more importantly, they pay a think tank writer’s spouse to teach Chinese elites English… And they pay that spouse way more than the person at the think tank earns in a year.
And so they have a lot of influence, both in the media. They have a lot of influence in the think tanks and in the universities of the US…
China took the US’ industrial and manufacturing base. Now it wants the technology base as well – as made abundantly clear in its “Made in China 2025” plan. If China is successful in its ambitions, you can expect large Western tech companies to go the way of GE.
But the US government, after years of inaction, is “waking up to the music” of China’s economic aggression, and is beginning to respond in kind. For reasons I explain in Zero Hour Alert, it has become a matter of national security to wage a trade war on China, regardless of objections by think tanks, economists, or media pundits.
If you think a second Cold War isn’t on the cards, that Donald Trump’s anti-China rhetoric was all bluster, take a look at this speech the US Vice President Mike Pence gave last month. The media, obsessed with Brett Kavanaugh, ignored a cutting insight into just how grim the relationship between the two great powers is becoming.
It may not be Christmas yet, but it sure is getting cold out there.
All the best,
Editor, Southbank Investment Research