China’s Alibaba Antitrust Case, Yuan Appreciation, FANMAG Not Confirming New Market Highs And Cathie Wood

On Thursday, a completely unimportant day, something important happened: The Chinese government initiated an antitrust probe into Alibaba (BABA), hitting its shares to the tune of 13.34% on 7x average volume – by far the highest volume day of the last 12 months.

BABA has a market cap of in excess of $600 billion – even after Thursday’s hit – and is one of the seven most important stocks in the world (#1 – AAPL#2 – AMZN #3 – MSFT #4 – (GOOGLGOOG) #s 5-7 FB TSLA BABA (not sure about the order)). It is an important component of the FXI, the leading Chinese Market ETF, and the largest component of the (EEM), the leading Emerging Markets ETF. Clearly this is a negative for world equity markets and bears watching.

Above all, Xi Jinping Thought aims to grant Mr. Xi the legitimacy to remain in power and continue his quest to make China a rich, truly global power by 2049, the centenary of Mao’s victory – Jeremy Page, “How The US Misread China’s Xi: Hoping for a Globalist, It Got an Autocrat”, WSJ, Thursday December 24, A1 [SUBSCRIPTION REQUIRED]

The WSJ ran an important front page piece on Xi Jinping, China’s leader, on Thursday. What becomes clear from the article is that China is has no intention of becoming a free society like ours but it does have ambitions to be THE global superpower. This is The New Cold War. It will likely be fought in the economic sphere but its outcome will have important geopolitical consequences.

Beijing has used the crisis to accelerate its long-planned transition from an export-led economy dependent on the rest of the world to one driven more by domestic consumption – Randall Forsyth summarizing Stephanie Pomboy, “China’s Currency Is Getting Stronger, What That Means for the US”, Barron’s, December 26 [SUBSCRIPTION REQUIRED]

One important development that hasn’t gotten a lot of discussion is the appreciation of the Yuan against the Dollar over the last 7 months. At its peak in May, the Dollar bought almost 7.2 Yuan. Now, it buys slightly more than 6.5.

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