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Prepper

A historic shift continues to take place in China that is having impacts on both the domestic and global economy. According to the National Bureau of Statistics, the nation's total population fell by over 2M in 2023 to 1.41B, marking the second straight year of contraction. The decline also more than doubled that seen in 2022, when the Chinese population shrank for the first time since the Great Famine of the Mao Zedong era in 1961.

Snapshot: China has long been a key source of labor and demand, but its birth rate has continued to decline as couples delay or decide against having children. That's despite the lifting of the government's one-child policy in 2015, and incentives rolled out in 2021 that encouraged people to have more babies (tax deductions, housing subsidies and longer maternity leave). Sky-high education costs have also led to one of the lowest fertility rates in the world, as well as a trend towards urbanization in a country that had traditionally been rural.

Somewhat of a bright spot was seen in fresh data overnight as China's GDP growth expanded by 5.2% in 2023, beating the official target of "around 5.0%." Others are not convinced as the figure is still way lower than historical growth rates and has consistently failed to meet expectations for a strong post-COVID pandemic bounce. Among the pressures are weak consumer and business confidencemounting debt problems and a spiraling property crisis. In fact, the mainland Chinese stock market was one of the world outliers last year, with the benchmark CSI 300 Index of major Shanghai and Shenzhen-listed stocks sliding around 20% compared to gains seen across the globe.

Looking for growth: The demographic trend calls into question whether China will get old before it gets rich. As deaths outstrip births, Beijing has rolled out plans for a so-called "silver" economy, which is estimated to be worth 30T yuan ($4.2T) by 2035 and account for about 10% of GDP. Services include meal delivery and entertainment to nursing homes and eldercare, as well as industrial parks that will support products for senior citizens. To encourage development, banks will be enticed to extend credit to the businesses involved in the silver economy, while local governments will be able to issue special bonds to finance the transition.

PentagonAI

Artificial intelligence is coming to the U.S. military, with OpenAI confirming a collaboration on cybersecurity tools, as well as software to deal with high rates of veteran suicides. OpenAI announced the partnership with the Pentagon during the World Economic Forum in Davos just days after it removed language from its usage policy that forbade the use of the technology by militaries. The company, which is backed by Microsoft (MSFT), previously had a ban on "activity that has high risk of physical harm," including, "weapons development" and "military and warfare." Note that Microsoft is an established contractor with the U.S. military. (10 comments)

Merger mess

Mayday! Mayday! Spirit Airlines (SAVE) is down another 8% in premarket trade after tumbling by a whopping 47% on Tuesday. A federal judge blocked the carrier's planned $3.8B sale to JetBlue (JBLU) on antitrust grounds, in a move that could result in a Chapter 11 bankruptcy filing. The Department of Justice had previously sued to block the merger in March, after which JetBlue attempted to appease the agency with a divestiture plan involving Allegiant Travel (ALGT) and Frontier (ULCC). The latest news has also triggered fears among M&A traders over Alaska Air's (ALKnearly $2B deal to buy Hawaiian Holdings (HA). (106 comments)

Terror list

The U.S. is expected to redesignate Yemen's Houthis as a foreign terrorist organization as tensions continue to escalate in the Red Sea. The move would reverse President Biden's decision nearly three years ago to remove the Iran-backed group from the list over concerns it would further weaken Yemen's economy. It follows the U.S. launching another round of retaliatory strikes on Houthi targets in Yemen on Tuesday, only for the rebels to hit the M/V Zografia, a Maltese-flagged bulk carrier, with an anti-ship ballistic missile. Multiple companies have been forced to halt their vessels from traveling through the Red Sea, disrupting global trade and even forcing Egypt to raise transit fees for the Suez Canal. (3 comments)

Today's Markets

In Asia, Japan -0.4%. Hong Kong -3.7%. China -2.1%. India -2.2%.
In Europe, at midday, London -1.7%. Paris -1.2%. Frankfurt -1%.
Futures at 6:30, Dow -0.5%. S&P -0.5%. Nasdaq -0.6%. Crude -2.2% to $70.80. Gold -0.1% to $2,027.90. Bitcoin -0.2% to $42,697.
Ten-year Treasury Yield unchanged at 4.06%.

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Retail Sales
8:30 Import/Export Prices
9:00 Fed’s Barr Speech
9:00 Fed's Bowman Speech
9:15 Industrial Production
10:00 Business Inventories
10:00 Housing Market Index
10:00 Atlanta Fed's Business Inflation Expectations
1:00 PM Results of $13B, 20-Year Bond Auction
2:00 PM Fed's Beige Book
3:00 PM Fed’s Williams Speech

Companies reporting earnings today »

What else is happening...

Waller: Fed should be 'methodical and careful' with rate cuts.

Goldman Sachs' (GS) earnings beat driven by asset, wealth unit.

Morgan Stanley (MS) in charts: Institutional Securities revenue dips.

Boeing (BA) back at $200/share after collision at Chicago O'Hare.

Volkswagen's Lamborghini sets record with 10K cars sold worldwide.

Biden urged to thwart TC Energy's (TRPpipeline expansion.

Apple (AAPL) surpasses Samsung to be 2023's top phone maker.

... but Supreme Court denies appeal over Epic's lawsuit.

More layoffs: Google (GOOG) to cut hundreds of ad sales jobs.

Burger King parent (QSR) strikes $1B deal for Carrols (TAST).

Wells Fargo: ESPN's (DIS) stake talks with NFL can only be good.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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