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Also in today’s edition: The finfluencer dilemma; "Big Short" Burry plays Chinese checkers; Gaming without fear; More public banks to go private
Good morning! Your DNA is in the air. It's also in the water, on your gloves, in hospital rooms, and in your favourite coffee mug. According to The New York Times, it's all over the place. Water from a soda-can-sized sample of water collected from a creek in Florida gave enough insight into the population around the area. And while wildlife researchers applied environmental DNA, or eDNA, to study disease in sea turtles, it may not stop here. Think lack of consent for genetic testing and the potential misuse of genetic engineering. And you thought Black Mirror was dystopian.
🎧 A once-overlooked book on finance has become a cult favourite among investors. Also in today's edition: how does finfluencer marketing work? Listen to The Signal Daily on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts.
The Signal is now on Telegram! We've launched a group — The Signal Forum — where we share what we’re reading and listening through the day. Join us to be a part of the conversation!
Today’s edition also features pieces by Julie Koshy Sam, Srijonee Bhattacharjee, and Jaideep Vaidya.
The Market Signal*
Stocks & economy: Indian equities may slide as US stocks suffered losses due to a delay in the resolution of the debt ceiling standoff. Traders may also sell to skim off profits from the surge in indices in the last few sessions.
Global investors stocked up cash in May while allocation of funds to shares, led by tech stocks, rose to the highest for the year. Funds devoted to bonds were at multi-year highs while that to commodities fell, reflecting pessimism about global growth and a credit crunch. The outlook has become clouded after data showed emerging weakness in Germany and China. Oil prices fell immediately.
However, greener patches were visible in parts of Asia. Japan posted better-than-expected economic recovery and growth, fuelling gains in share indices. The economy has found favour with foreign investors due to agile corporate reforms and a loose monetary policy.
Will Chatbots Make Us Lonelier?
It’s a fundamental question, one with implications for humans as social animals.
Never alone, always lonely: Experts in the US have long raised concerns about the effects of social media on teen mental health and the ensuing “loneliness epidemic”. But this epidemic isn’t exclusive to younger demographics. If anything, studies show that ageing populations are perhaps most vulnerable to it. And we aren’t even broaching the long-term effects of pandemic-induced lockdowns.
Where does AI fit in?: There are some use cases for AI therapists and/or companions (senior care, the differently-abled, people who lack resources to consult human therapists), and a growing industry for AI pets, too.
But: There are over 10,000 virtual mental health apps or services, of which few are certified by governments or professional associations. Experts are also questioning whether AI should be used this way, considering it will further limit human-to-human contact.
A MESSAGE FROM OUR PARTNER
It Pays to Reserve
The holidays are here and ever since the pandemic petered out, people have taken to travelling with a vengeance. Domestic air traffic reached a record high on 30th April, with 456,082 passengers taking to the skies. However, amidst this travel frenzy, over 27 million travellers had their rail tickets waitlisted and unconfirmed in FY23. It's shaping up to be a summer with uncertainties.
With the impending chaos on the horizon, it becomes crucial to prepare yourself: Expect long queues, massive crowds, and potential travel nightmares. The last thing you want during your vacation is to be left waiting and stranded, making it a frustrating ordeal.
While guaranteeing a confirmed train berth may be difficult, Uber can guarantee you a ride with Reserve to ensure you never miss a train or flight. Schedule a ride ahead of time and let the vacation truly begin.
Beware Of Finfluencer Marketing
The next time you watch a video by a “finfluencer” on social media or YouTube, keep in mind that they earn money not just from an upfront fee paid by the company they’re promoting but also when you click on the link below the video and open a trading account.
According to a Mint investigation, brokers pay finfluencers a commission for every trading account opened via so-called affiliate links. India's biggest stock broker Zerodha, for instance, pays a 10% commission. Finfluencers also get a commission from intraday trading, and futures and options trades made from these accounts, the report said.
As we wrote in The Impression last month, markets regulator Sebi has finally stepped in and released an advertisement code for investment advisers. But the industry is still unregulated. Finance minister Nirmala Sitharaman even said last month that her ministry hasn’t received any proposal to regulate finfluencers.
The Long And Short Of It
The fearless are wading in where angels fear to tread. Contrarian investor Michael Burry of The Big Short fame has been buying up Alibaba and JD.com shares. They are now a fifth of the equity portfolio of his Scion Asset Management. This, while other hedge funds have cut their exposure to Chinese companies from 13.3% to 10.5%.
New tap: Global bond investors had missed out on a Chinese bond rally, but the country is opening up a new $3 trillion avenue for them to participate in the market while adequately hedging risk.
Rush hour: The long arm of China’s law enforcement is unsettling Canada, the United States, and Germany as they crack down on illegal “Chinese police stations” operating in their cities. Canada and China have also gone about tit-for-tat diplomat expulsions.
At this point, China’s economy and businesses present a conundrum for global investors. Its prickly relations with the west are a daunting political risk. Big US bankers and manufacturers are finding it difficult to take on the risk or match up to local vigour, leaving investors with no choice but to bet on Chinese companies. Yet, with the economy struggling for momentum, bond investors may have an opportunity. Industrial output and consumer spending haven’t cranked up as much as expected and youth unemployment topped 20% in April, splashing cold water on Wall Street’s rising enthusiasm. That could mean rate cuts and, as a result, another unmissable bond rally could be in the offing.
Without Fear Or Favour
In 2022, the Game Developers Conference’s annual State of the Game Industry report noted that 39% of the 2,700 developers (devs) surveyed were trying to make games more inclusive for players with “sensory, motor, or other impairments”. Per Axios, devs are also incorporating in-game restrictions and tweaks for people with phobias.
Details: Devs have been offering alternative modes ever since House Flipper (Playway SA) allowed players to swap cockroaches for broken glass, and Satisfactory gave the option to swap spiders for cats. Grounded (Microsoft-owned Obsidian Entertainment), Hogwarts Legacy (Warner Bros. Games), and Star Wars Jedi: Survivor (Electronic Arts) have arachnophobia modes for people who fear spiders. Horizon Forbidden West (Sony PlayStation) has a “thalassophobia mode” for people who fear the ocean.
In other news: The EU has approved Microsoft’s acquisition of Activision Blizzard, just weeks after the UK rejected it. Now over to the US to break the tie.
Buy, Own, Operate, Merge
The Indian government may set up a panel to pick a new set of public sector banks to sell off. The targets this time are likely to be smaller ones, such as Bank of Maharashtra and UCO Bank, The Economic Times reports.
Meanwhile, two suitors have emerged as frontrunners to buy IDBI Bank, which began life as a development finance institution in 1964, but is now a private bank—even though the government holds over 45% and the public-sector Life Insurance Corporation owns 51% of the bank.
Buy side: Both parties—Kotak Mahindra Bank and the Fairfax Group of Canadian-Indian billionaire Prem Watsa, who has a near-50% stake in Kerala-based CSB Bank—would buy but prefer to keep the bank at arm’s length from their existing businesses. Both want to merge it with their group entities later. Current laws bar promoters from owning two banks or one bank owning another.
Bandwagon: Zomato has joined hands with ICICI Bank to roll out Unified Payments Interface services. Walmart-backed Flipkart will launch the real-time payments service next.
Exit: Fintech startup ZestMoney founders Lizzie Chapman, Priya Sharma, and Ashish Anantharaman announced their resignations months after an acquisition by PhonePe fell apart.
New shores?: In an effort to diversify beyond China, Tesla executives will arrive in India to discuss sourcing local components for the company’s electric vehicles.
Follow the leader competitor: Zoom has invested an undisclosed sum in AI startup Anthropic, which competes directly with Microsoft-backed OpenAI. Zoom and Microsoft Teams are rivals in the video-conferencing space.
First mover: The EU has approved the Markets in Crypto Assets (MiCA) regula2tion, becoming the first major jurisdiction with a licensing regime for cryptocurrencies.
That escalated quickly: China's military has vowed to “resolutely smash any form of Taiwan independence” as the US prepares to send advisors and an arms package to the country.
Plan B: US President has dropped a planned trip to Australia and Papua New Guinea to be in Washington to tackle the debt-ceiling impasse.
THE DAILY DIGIT
The amount that US bank Wells Fargo will pay shareholders to settle a lawsuit related to its 2016 fake accounts scandal. (The Wall Street Journal)
Blast from the past: The year was 1991. Fund manager Seth Klarman had just published a book on investing titled Margin of Safety. The book didn’t go far; only 5,000 copies exist. Fast forward 32 years, and the book has turned into a cult favourite so rare that it’s selling for thousands of dollars apiece. Unsurprisingly, there are fake editions, too. Famed investor Warren Buffet apparently owns a copy. Pretty sure Klarman wouldn’t have anticipated his book becoming an investment itself.
Outsourced: In today's edition of AI-everything, Pizza Hut India has installed an AI-enabled mood detector machine to help customers decide which pizza to buy based on, well, their mood. The device tracks facial expressions such as eye movements and frowns, among other cues, to recommend a pizza. Ah, the things brands can do in the absence of a privacy bill 🙃.
Smile like everyone's watching: Smile tutoring is a legit profession in Japan, and it’s in hot demand rn. The Japanese basically want to learn how to smile again after Covid-19 literally and figuratively masked their expressions. Japan was among the last countries in the world to relax the mask mandate after three years. As a result, tutors such as Keiko Kawano have witnessed increasing demand for their “smile sessions”. Kawano also holds a one-day, $650 certification training course for folks who want to teach others how to smile. Wake us up when there are instructors for "resting b*tchface".