U.S., China Set for Frosty Alaska Summit… But This Might Warm Things Up

Published by Matt Warder on March 18, 2021

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For the first time in this new administration, China and U.S. senior officials are about to meet face to face… And tensions are high.

Secretary of State Antony Blinken and National Security Advisor Jake Sullivan are set to fly to frosty Anchorage, Alaska today, where they are likely to encounter an equally frosty mood from their Chinese counterparts.

Understandably rankled from relations these past four years, Chinese Ambassador Cui Tiankai told reporters Wednesday that Beijing does not have “high expectations or fantasy” regarding the meeting, nor do they “expect to solve all problems in one dialogue.”

But while they may hope to “meet halfway,” per Foreign Ministry Spokesperson and part-time Twitter troll Lijian Zhao, the harsh reality is that there is probably more downside than upside for these talks.

Because the truth is that despite what may have been suggested during election season, being tough on China is a 100% bipartisan issue now.

Secretary Blinken literally led off his very first State-to-State contact with China by pressing them on their horrific treatment of Hong Kong, Tibetans, Uighur Muslims in Xinjiang province.

Then last week, he referred to Taiwan as a “country,” — a term ever before used by US officials.

Just yesterday, he sanctioned 24 Hong Kong and Chinese officials, effectively cutting off their access to U.S. financial institutions, property ownership and dealing with U.S. entities.

Then for the coup de grace, he called them “aggressive,” denounced their “strings attached vaccine diplomacy,” and warned them not to use “coercion and aggression” to get its way.

And despite this laundry list of complaints, China astonishingly plans to ask the U.S. to roll back the Trump tariffs, lift limits on Huawei and remove restrictions on CCP officials.

Given that the U.S. has already indicated that this is not a “strategic dialogue,” but rather the first in a series of high-level policy discussions meant to address key issues, I estimate the chances of those policy rollbacks as…

Not bloody likely.

Honestly, the best outcome we could possibly hope for is that the meeting is cordial.

But if I were forced to find an optimistic angle, there is one aspect of this trip that does have me intrigued…

Small Victories

At least they’re traveling on planes!

I mean let’s be frank, we’ve all been cooped up for a year and at this point, are dying to go somewhere that isn’t our backyard.

Given the vaccine rollout has been comparatively better in the U.S. than in other areas of the world — as I noted in Tuesday’s column — there’s a chance we might just be able to.

Well, don’t look now, but TSA throughput data shows that air travel has been picking up for the past two months!

Source: TSA, Bloomberg

Now, pretty much all airlines have started to go vertical over this time, so we can’t get too long, but there is one that I think works from a relative value perspective and that is Spirit Airlines Inc. (NYSE: SAVE).

First off, Spirit is a discount airline… That sort of matters during periods of economic stress.

And while my only experience flying on the airline created its own stress, looking at their 6-7x forward earnings valuation relative to fellow discounter Southwest’s 12-14x puts me very much at ease.