AChina's tech index just hit a milestone nobody wanted: down forty percent since June.
BAnd that's the good news. The bad news is Morgan Stanley thinks there's another ten to fifteen percent to go.
AWatcher Guru posted the number a minute ago. The STAR 50, that's Shanghai's tech-heavy board, has been in freefall since the summer.
BForty percent. And this is the index Beijing wanted to be its answer to the Nasdaq.
AThe numbers behind it are brutal. Almost half a trillion dollars erased from that one index. Two point four trillion from Chinese stocks since May.
BTwo point four trillion. That's not a correction, that's a verdict.
AReuters ran the analysis yesterday: China's AI bubble has burst. Not is bursting. Burst.
BAnd here's the part that should scare people. AI stocks were forty-two percent of China's entire market value. Fifty-seven percent of all trading.
AThat's not a stock market with some AI companies. That's an AI casino with a stock market attached.
BAnd the valuation! The STAR 50 was trading at a hundred times earnings. The Nasdaq is around thirty. A hundred times!
ASo when the music stopped, there was nothing underneath. Some AI chipmakers and optical suppliers fell fifty, sixty percent from their highs.
BAnd Beijing tried to build what they called a slow bull market. Instead they got, in Reuters' words, a speculative crazy bull.
ANow the state-backed funds are reportedly stepping in to stop the bleeding. That's the playbook.
BAnd it won't work. You can't prop up a bubble that's already popped. The air's gone.
AMorgan Stanley says another ten to fifteen percent downside before it bottoms. UBS says sentiment won't recover soon.
BBut here's where I'll push back on the doom. Goldman Sachs still has dozens of Chinese AI stocks on its buy list.
AThey do? After a forty percent crash?
BThey do. And BNP Paribas says there are buying opportunities for the careful. Careful being the key word.
AI think careful is doing a lot of work in that sentence. When an index falls forty percent, careful usually means waiting.
BOr it means the market finally starts separating companies with real revenue from the ones that just have a story about AI.
AThat's the real lesson here. A hundred times earnings was never sustainable. Not in Shanghai, not anywhere.
BAnd the timing matters. This isn't happening in a vacuum. The Fed meets in two days, and the whole world is watching.
ASpeaking of which, Crypto Rover is out with a post that's getting a lot of attention. FOMC in fifty hours, and he says Kevin Warsh is completely trapped.
BCompletely trapped. That's one way to describe running the Federal Reserve.
AHis argument: oil is rising, inflation is hot, the labor market is weak. Cut rates and markets go parabolic. Hold and they stay flat. Hike and they crash.
BSo every possible outcome, and he's covered them all. That's not analysis, that's a menu.
AIt's the rare forecast that can't be wrong. Whatever happens, he called it.
BBut the underlying point is fair. Warsh is in a genuinely tough spot. Oil's up, inflation's sticky, and the jobs market is softening.
AOne reply from a trader named Leo put it well: cut and risk looking soft on inflation, hike and risk breaking the labor market.
BThat's the dilemma in one sentence. And I don't envy the guy making that call.
AI'll say this: the market's already pricing in a lot of uncertainty. Bitcoin's been tracking U.S. stocks lower, and now there's a new wrinkle.
BWu Blockchain posted that QCP Capital is warning about AI infrastructure credit stress spilling into equities and crypto.
AThe claim is that rising financing risks in AI infrastructure are hitting both markets. We haven't independently confirmed the report, but the logic tracks.
BIt tracks because we just spent five minutes talking about China's AI bubble bursting. Credit stress doesn't stay in one country.
AAnd when AI infrastructure loans start looking shaky, the banks that made them get nervous. Nervous banks pull back. Everything slows down.
BThat's the transmission mechanism. It's not just a China story. It's a global credit story.
AMeanwhile, a smaller story that caught my eye. Ken Tumin posted his top five online savings accounts by yield.
BTop five savings accounts. After talking about a two trillion dollar wipeout, this feels almost quaint.
ABut it matters for regular people. FourLeaf Federal Credit Union has a new savings account at the top of the list.
BAnd the thread tracks how online savings and money market yields have changed since the Fed started cutting rates back in September 2024.
AThat's the quiet story. When the Fed cuts, the yield on your savings account follows. Slowly, but it follows.
BAnd if Warsh holds rates this week, those yields stay put a little longer. If he cuts, they drift down again.
ASo the FOMC decision isn't just about markets. It's about what your emergency fund earns while you sleep.
BOne more quick one from the Telegram wires. FinancialJuice says Gazprom's CEO met with Iran's national gas company.
AThat's unconfirmed, but if true, it's Russia and Iran getting cozier on energy. Two of the world's most sanctioned gas producers.
BNot a lot of buyers for their gas in the West. So they sell to each other, or try to build pipelines to places that won't sanction them.
AIt's a reminder that energy politics never really sleep, even when the market's focused on the Fed.
BAnd on that note, the Fed decision is coming. Fifty hours, if Crypto Rover's math is right.
AWe'll be watching. And we'll be back with more after this.