China Groove

03/06/25 Prospero.ai Investing (198th) Edition (Midweek)

Alibaba has been dominant in our signals for a bit now. Unfortunately, ignored and that has been a missed opportunity for us. I added it this morning, despite my typical reservation on China stocks. Historically, I don’t trust stocks that I can’t see a clear and consistent path to gains. And for Chinese stocks their government has too much influence on business. But, here we are! Although we are a free country, through social media, etc, our government has more sway on the market than ever before. The markets are swinging on a daily basis when our government speaks on tariffs, cryptocurrency regulations and foreign policy. This isn’t a comment on those policies, just a reality that this is a difficult environment to predict and read on a daily basis.

Yesterday our QQQ net options sentiment reached 47 with SPY literally at 0. That is the widest disparity we’ve ever seen! Especially given that the SPY 0 flatline suggests aggressive hedging, even as people make aggressive swing trades on Tech.

But there are some more potential realities that are increasingly hard to ignore.

1. With BABA announcing today a model similar to Deepseek. You have to ask: “why are our tech giants behind?” Can we catch up or will China continue to accelerate ahead?

It’s an important question. For a long time China’s government has had a long term plan; while we’ve been plagued with infighting and a “what have you done for me lately” election cycle.

2. Do we need to start looking at international opportunities more because other countries might be less interested in buying our stocks? With China demonstrating they have stronger tech, and our markets demonstrating they may have similar drawbacks, are reasons enough for this to happen. But I don’t think we can ignore what is going on with Tesla sales in Europe and the world. They’re down 76% year over year and 49% in China with BYD sales up 90%.

We don’t need to get into all the complexities of why this may be happening, but the one key is our clear alignment with Russia. We even stopped offensive hacking on them yesterday. A HUGE policy change for a decades old enemy. Indeed one of the pillars of our European alliances was the shared front against Russia. We are not here to say if this is a good or bad policy, but we do have to face the fact that it may lead to dollars that previously flowed in our country no longer coming. And as always, we will be looking for the best ways to invest around the hand the market is dealing with.

A WORD FROM OUR CEO

Another tough week but we are navigating it well, above where we were this weekend. Our paper trading portfolio is beating the S&P 500 by 45% annualized, with a win rate of 64% against SPY benchmarks.

We updated our short intro + learning videos to include our new full app tour as well as advice on how to use this letter.

Don’t have our app yet? Use it to track your investments with Prospero’s proprietary AI tech.

---

China Groove

Cap Analysis