💉 China Gives its Economy a Shot of Adrenaline

MARKET UPDATE

Good Morning Investor! The US Dollar has continued to fall after three-straight weeks of decline, Germany and Canada have both joined the US and UK with un-inverting yield curves — a concerning economic indicator, OpenAI CTO Mira Murati announced she’s leaving the company, Caroline Ellison was sentenced to two years in prison for her role in FTX’s collapse, and the Chinese stock market has surged 5.3% since the announcement of immense stimulus from the People's Bank of China.

TODAY’S BIG HEADLINES

US Proposes Ban on Chinese Car Technology

OpenAI Promoted Another Crypto Scam

China Gives its Economy a Shot of Adrenaline

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ANTITRUST

US Proposes Ban on Chinese Car Technology🚘

Uncle Sam's Latest Hit Single: US regulators have determined that China shouldn't be able to hear you belting out Celine Dion in your car. Because apparently, your off-key rendition of "My Heart Will Go On" is a matter of national security. The Commerce Department proposed a ban on Chinese and Russian software and hardware in web-connected cars on US roads — probably why shares of Tesla ($TSLA) are up over 9% over the past 5 days.

• The goal is to protect "national security" by keeping American data safe from foreign car tech that uses microphones, cameras, Bluetooth, and GPS. Because heaven forbid anyone finds out about your secret Nickelback obsession.

• Meantime, carmakers in the States like GM and Tesla have controversially tapped center consoles to get data about Americans' driving habits. The spying being conducted by governments and major corporations knows no limits.

When One Door Closes, Another Opens: The ban would be the latest hit to China's EV industry, which has rapidly expanded globally but whose growth has been stunted in the US by measures like President Biden's 100% tariffs. Last year, China's BYD sold more EVs globally than Tesla. Though the brand's $10K cars aren't sold in America, the budget rides can technically be imported. The proposed ban would make it even harder to get Chinese cars in, leaving Americans to wonder if they'll ever experience the joy of driving a car that costs less than a small island.

• As a result of being given the cold shoulder by the US, Chinese automakers have turned their attention towards Europe, with BYD's plans to invest up to $1 billion into Turkey. They're building a manufacturing compound capable of producing 150,000 electric and hybrid vehicles. Moreover, BYD also plans to establish a research and development center near Izmir. Because nothing says "we're over you" like building a fancy new R&D center in someone else's country.

The US-China Breakup Saga Continues: The Biden admin tightened trade with Chinese chip companies, restricting the sale of advanced US-made semiconductors to the mainland. In 2022, the US banned imports of new telecom equipment from Chinese companies including ZTE and Huawei. And of course there’s the ongoing divest-or-ban situation with TikTok. The US says these crackdowns stem from national-security concerns as economic and diplomatic relations erode.

CRYPTOCURRENCY

OpenAI Promoted Another Crypto Scam💰

When AI Meets Nigerian Prince: This week, AI pioneer OpenAI became the latest victim of a hack on X, proving that even the smartest AI can't outsmart a determined scammer with a VPN and a dream. The gold-checkmarked account started promoting a fake "$OPENAI" token. The bogus pitch? OpenAI users could claim a free token that'd grant them access to future beta projects. Because nothing says "cutting-edge technology" like falling for the oldest trick in the book.

• The posts were up for at least an hour, giving scammers just enough time to convince gullible investors that OpenAI had suddenly decided to pivot from revolutionizing AI to becoming a discount crypto broker.

• This hack came the same day that OpenAI reportedly warned employees that hackers were targeting their socials.

The X-Files of Crypto Scams: This week's X hack wasn't a first for OpenAI. Its chief scientist's and CTO's X accounts had been taken over before, presumably by hackers who thought, "If at first you don't succeed, try, try again... preferably with a higher-ranking executive." Companies haven't been the only targets in a slew of X breaches. Lara and Tiffany Trump's X accounts were hacked recently to post crypto-scam links. Because nothing says "credible investment opportunity" like a Trump endorsement, right?

Scamming is Big Business: Crypto fraudsters aren't just on social media; they're everywhere, like glitter after a craft project. Earlier this month, the FBI released a report detailing the $5.6B it said Americans lost last year to crypto-related fraud (a 45% year-over-year jump). The FBI said it got 69K+ crypto-related complaints, and that folks lost $3.9B to investment fraud (including "pig butchering" scams). Plus, an FTC report this month said consumers lost $110M to bitcoin ATM scams last year — up nearly 10x since 2020. At this rate, "professional scammer" might become a viable career option on LinkedIn.

When Being Tech-Savvy Backfires: Consumers are often less familiar with new tech like crypto and AI, making those industries more appealing targets for scammers. It's like shooting fish in a barrel, if the fish were wearing VR headsets and had their life savings in Dogecoin. In the case of OpenAI, scammers took advantage of investors' hunger to get in on the AI boom. Other prominent enterprises and individuals who have fallen victim to the same attack include: Bitcoin hodler MicroStrategy, cybersecurity firm Mandiant (how ironic), and even ethereum cofounder Vitalik Buterin.

MACROECONOMICS

China Gives its Economy a Shot of Adrenaline💉

We’re So Back Baby: The People's Bank of China (PBOC) just announced plans to puff up the country's property sector and stock market, leading to China's biggest stock market rally in four years. The SSE Composite Index shot up over 4% followed by another 1% on Wednesday.

China's Real Estate Rollercoaster: China's flailing property market has been a real drag on the economy, like trying to run a marathon with your shoelaces tied together. So, in a move that screams "desperate times call for desperate measures," the PBOC is:

• Cutting rates on individual borrowers' existing mortgages by an average of 0.5 percentage points. It's like a nationwide "We're sorry we inflated this bubble" discount.

• Lowering the minimum down payment for second homes from 25% to 15%. Because nothing says "healthy economy" like encouraging people to buy more houses they can't afford.

• Reducing the amount of money that banks must hold in reserve, a bid to encourage them to hand out more loans.

Buybacks Galore: And to top it all off, the PBOC is supporting the stock market with $113 billion to help certain companies buy stocks and others afford share buybacks. That combination of measures is a lot, sure, but it still may not be enough to fix up China’s dilapidated housing market. It's like trying to fix the Titanic with duct tape and positive thinking.

"Made in China" Applies to Investors Too: Investors have been fleeing China's stock markets faster than tourists running from a surprise street performance. They've been spooked by the sluggish economy – a problem that'll only worsen if the country's prices continue to fall. In fact, expectations are so low that news of the support was enough to lift investors' spirits and, in turn, the stock market. It's like being so hungry that a picture of food makes you feel full. China's CSI 300 Index picked up by 4.3% on Tuesday, marking its best day since July 2020 – although it's still lost about a third of its value from three years ago.

When a Dragon Sneezes, the World Catches a Cold: Australian mining companies have seen their share prices sink with China buying fewer commodities. And European luxury brands and car companies have suffered a similar fate, as Chinese customers have tightened their purse strings. Turns out, when the going gets tough, the tough don't buy Gucci. The country’s even pushed oil prices down a few notches: China guzzles up 13% of the world’s supply, so its pullback has left a lot of the slippery stuff on the shelf.

MORE NEWS

Additional market-moving events🌎

Covert Merger: Italy’s UniCredit appears to have caught German authorities off guard with a potential multibillion euro merger of Frankfurt-based Commerzbank. (CNBC)

Italy Goes Private: The Italian government plans to sell up to 15% of the shares of Poste Italiane SpA for $2.7 billion as part of a privatization aimed at reducing public debt. (Reuters)

Real Estate Bid Rejected: UK real estate hub Rightmove (LON:RMV) rejected a sweetened $8.1B acquisition offer from Australia's REA Group (ASX:REA) — which is majority-owned by News Corp ($NWSA) — stating that the proposal still undervalued it. (CNBC)

Merck Fails Cancer Trial: Merck's ($MRK) experimental colorectal cancer trial failed to show a significant improvement in overall survival rates in a late-stage trial. (Reuters)

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Our selections performance👾

On Monday the 11th of March, we released our “superperformers” stock pick which we believe will provide significant outperformance compared to the S&P 500. Then on the 14th of June we released our next stock selection. Lastly, on August 6th, we initiated a position in Celsius holdings.

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