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China's growth story

May 18, 2023

During the civil war, some of the Union members thought using air balloons would be a cool idea. Union military officials were not big fans of this though. Hot air balloon Corps as they liked to call themselves, would use the balloons to spot enemy soldiers and coordinate Federal troop movements. Led by Aeronaut, Thaddeus Lowe he accidentally ended up past the confederate but was rescued. The Corps lasted less than two years.

Alright so today we’ve got:

  • China’s growth story has more than hiccups to deal with.

  • Montana kicks TikTok to the curb.

  • City real estate buildings are looking to get rid of their property.

    Let’s do a scan.

The Big Picture

China is big. But how big though, and where do they stand right now? Here are some numbers. Their GDP in 2022 was about $18 trillion, US was $25 trillion. Their share of the world’s exports of goods and services is 20%, the US is at 14%. China grew its GDP this quarter by 4.5%, U.S - 1.something%. That’s a big number for a large economy. Alright, rising power, check. A large chunk of world trade, check.

China GDP($ billions) vs Calendar year. Source: tradingeconomics.com

Here’s something a little concerning about China, and no I’m not going into politics or geopolitics. The unemployment rate for Chinese youth aged 18 - 24, rose by 20% last year. The unemployment rate is steadily rising from 16% last year. In April, several economic indicators fell short like factory production, retail sales, and fixed asset investments. Part of the factory production reasoning is also due to the fact that companies like Apple are pledging to produce Apple hardware products in India. China also faces debt and housing market problems. Another major hurdle China is battling against is its falling fertility rates. Per the latest reports, their fertility rates are at an all time low of 1.3 birth/women and trending downwards. China being a contributor to the world economy, these indicators do not bode well for global markets.

Sector Sweep

Tech

  • Montana just signed the country’s first TikTok ban, paving way for a possible country-wide ban.

  • The class action lawsuit on influencers who promoted FTX heats up, one of them being Shaquille O Neal. The 7 ft NBA celebrity has still not been available for the FTX investor lawyers to send him the summons.

  • Social media shopping scams went up to $1.2 billion targeting adults ages: 18-29. Most likely scams were tech support, sweepstakes or people posing as friends/relatives.

  • Sam Altman, cofounder of Open AI which built ChatGPT testified in the senate subcommittee and accepted the dangers of AI. He also welcomed regulations on AI when it comes to politics, and IP theft while balancing it as a lever to do net good.

  • US and Japan are joining forces to invest $150 million in quantum computing research at the University of Chicago as well as the University of Tokyo to stay ahead of Japan.

Automotive

  • Elon Musk talked about possibly introducing 2 new Tesla products but warned about upcoming challenges due to macroeconomic conditions.

Health

  • Envision Healthcare, one of the largest physician staffing firms, is filing for bankruptcy due to high labor costs, and contract disputes with insurer United Healthcare.

Commercial Real Estate

  • With rising interest rates and reduced occupancy, city office buildings are sold at a fire-sale value.

Energy

  • Oil and gas shares are leading the downfall in energy as a drop in Chevron, and Exxon Mobil is 13 and 4%, respectively.

Consumer products

  • European company Primani, a take on Prime and Armani, is looking to address the US market. This is because they can sell clothes at low prices.

Finance bro term of the day: Bank unrealized losses.

Banks buy government securities like treasury bonds. As securities yield, banks make money. When interest rates start rising, securities like treasury bond yields go down, creating what we call unrealized losses to the banks. In the case of Silicon Valley Bank and Signature Bank they bought 30 year treasury bonds as securities before the pandemic. As Federal reserve raised rates, their balance sheet started going red as treasury yields started going down.

 

That’s all for today, folks. Please keep a lookout for our weekly email about deep stock dives and personal finance strategies this Saturday.

BTW, do tell us how we did. Just hit us with a reply.

Cheers!

Memetic Universe

Zero interest decade pains.

People: We are close to a recession. Let’s spend less and save up for emergencies.

Also, people: Let’s buy this shiny meme coin; it’s up 1000x!