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Month: February 2021

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Cold Front on Oil Prices?

Tony Nash is back in the Morning Run, hosted by BFM 89.9, as he points out the crude oil price and how long to expect the rally, considering factors like weather, demand, and supply. Tony also mentioned about a potential pullback and snap and how you can better be prepared for it. Should you continue buying tech stocks or move elsewhere? Also, they discussed crops and where the prices are going this year.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/cold-front-on-oil-prices on February 18, 2021.

 

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BFM Description

 

Tony Nash from Complete Intelligence, from freezing Texas, shares with us the current supply constraints in the US impacting oil prices in the short- and medium-term.

 

Produced by: Mike Gong

 

Presented by: Philip See, Wong Shou Ning

 

 

Show Notes

 

WSN: For some color on where global markets are heading, we have in the line with us Tony Nash, CEO of Complete Intelligence. Tony, are you freezing out there in Texas?

 

TN: Yes, we are. We haven’t had it this cold air for decades. So it’s it’s been a really interesting week.

 

WSN: That has had an impact on oil prices. Bloomberg showing Brent crude at $64 per barrel, WTI at $61 per barrel. So how badly impacted our energy markets at the moment? Where do you think oil prices are going?

 

TN: A lot of this is very short term. What you’re not seeing that the traders really pay attention to right now is that a lot of refineries are closed because of weather and they’re starting to close for annual maintenance. There’s this presumption that there’s a demand pull, which we’re not really seeing from anywhere in the world right now, and that the winter storm issues will pull energy prices. But again, the fact is the refineries that would take this stuff are closed. We expect this to be short lived. This is an extension of a crude price rally that we saw that we expected to come in Jan, it’s lasted into February and we really don’t expect this to have a lot of legs to it.

 

PS: What do you think the outlook looks like then for the mid-term like quarter to quarter three?

 

TN: We would see 10 to 20 percent off of this price? We don’t necessarily think that this is a sustainable level short of some sort of supply cuts. But the weather in Texas, for example, we’re going to be kind of in normal weather ranges in two days. What we’ve seen this week and the close down, as we’ve seen this week, it’ll take people a couple of days, maybe a week at most to get things back on line. So this perceived supply shortage will be back on line fairly soon.

 

WSN: How about yields on U.S. 10 year bonds? Because they’ve hit a new high one year high. What what is that trying to tell this? What a market try to tell us?

 

TN: U.S. is trying to raise money and they’re willing to pay more for it. I think that is is really it. I think there is a growing fear that equity markets are as high as they’ll get. We’ve started to see more of that tension come in into chatter over the last few days. People are willing to pay to get out of markets, to park their money in debt.

 

So I’m sure it helps the U.S. as they’re raising more money for stimulus and for operations. But as we creep up to four thousand, that is just unimaginable for a lot of people. And it’s not as if we are doing better as an economy than we were in 2019 or the first quarter of 2020. This is built on stimulus, as we’ve talked about before. It’s built on central bank activity.

 

And you can only stretch that so far before things have to snap. We’ll see some of these things that are at double and triple and quadruple kind of the standard multiples. And P is the only way to measure this stuff. But we’ll see things that are really, really stretched, snap into a more reasonable region. But it’ll happen any time tomorrow, three weeks from now, a month from now, whatever. It’ll just happen. It’ll happen any time. And it’s best to be prepared for it.

 

PS: So are you expecting some pullback eventually? Right. What is the tipping point where investors will essentially do that exodus or flock to U.S. Treasuries then?

 

TN: One of the tipping points is going to be the resolution of stimulus. I’ve been saying for weeks that stimulus will not be what the administration wants it to be. There are such high expectations put on that stimulus right now and they’re not going to get it. They’ll get a lot of it, but they’re not going to get all of it. Expectations are sky high. And when it doesn’t hit, I think that will be one of the catalysts.

 

But there are other things like when the crude price starts to fall because this supply constraint isn’t there anymore. These sorts of things, these things add up and then they snowball and and then you start to see markets really, really take a dove. We’re not necessarily calling for a 2008 generational type of decline in markets. It’s just a bit of a pullback so that people can just say, “OK, wait a minute, let’s check, take stock how businesses are doing. Take a look at our investments and our allocation and then reallocate.” That’s really what it’s about.

 

WSN: Where would you relocate to and what are the safe haven assets? Because almost every asset class on a year to date basis is up. Right. And maybe except for Google, which is down six percent on the year today.

 

TN: What you’re likely going to see is a pretty serious rotation out of technology where people have focused on because of the work from home activities. This may not be immediate, but I think you’ll see a rotation out of a lot of the work from home stuff as people start real life again and you’ll see people move into. This is not really my the basis of our outlook. But you may see more of a regional move into things like tourism.

 

These things have just taken real hits. A lot of them have had speculative rises, some of the cruise lines. But some of them are still way down. All of this depends on gradual normalization. But I can tell you, Americans are really tired of being locked in, really tired of not socializing. And some of these things are going to have to start up again.

 

PS: What about not all out commodities then, like agriculture and precious metals?

 

TN: We had some real pressure. And part of the reason of that pressure was because there was a perception that a lot of the Chinese corn crop didn’t come in last year. But a lot of the drought was outside of that zone. Some of that pressure was alleviated.

 

But still, we’re seeing some pressure on wheat right now in the U.S. It really all depends on how much the current cold snap impacts the output later in the year or the ability to plant. Right now it’s not terrible.

 

Until we start seeing real demand come back in entertaining and in consumption and these sorts of things, we’re not going to see a major demand pull on food because people are already buying their standard cook at home type of things right now as they’ve rebuilt their behaviors over the last year. We’ll see that change. But unless we see a drought or unless we see an issue in a high consumption part of the world, we’re not necessarily going to see a boom in those places.

 

WSN: All right. Thank you for your time. That was Tony Nash, CEO of Complete Intelligence, giving us his views on global markets and saying that, hey, oil prices are going to come under pressure probably in the next two to three months, because this is not really driven by real demand, is just probably weather patterns which are going to normalize anyway in Texas in a few days.

 

PS: He also made a point about oil, where this, I think, a slight surge in prices is actually a short term because supply is going to get back on quite soon.

 

WSN: Yeah, but other interesting news is actually the ongoing saga of big tech versus Australia, because it looks like Facebook has defied Australia’s push to make big pay for news by banning the sharing of content on its platform in the country. And this is the most far reaching restriction is ever placed on any publisher in any part of the world.

 

PS: So the extreme step to remove Australian news came as Google separately struck a global deal with Rupert Murdoch’s News Corp diffusing a long running dispute between the two companies. The dramatically different approaches could mark a pivotal moment for the media industry, which had hoped Australia’s tough regulatory approach would help reset its terms of trade with Google and Facebook worldwide.

 

WSN: So the moves by Google and Facebook came on the day Australia begin debating laws that would force big online platforms to license news. Now Facebook’s action will have a global impact. Under the provisions, news from Australian publishers will be blocked on the platform for all Facebook users, regardless of where they are based. The Australian government said it will continue to engage with Facebook. Press ahead with legislating the code, Canberra also warned that withdrawing news from Facebook’s platform in Australia could dent its credibility with users.

While this is quite big stuff. Actually, yes.

 

PS: Yes. I mean, Australia wasn’t the first country to, you know, get into this spat. I think you really was in having discussions. And France and Spain already had deals with a lot of with Google and Facebook with respect to media purchase. But it’s a question about publishers.

 

WSN: Yeah, I mean, at the end of the day, right. We do know media companies are suffering. Right. Álex has come under pressure. Subscriber growth has come down. How a media company is going to generate the revenue. So in the past, all these big tech companies, the argument was that they got to earn super normal above what is the what super normal profits without paying the likes of the media companies because they were using these media companies content to their benefit.

 

So some countries like Australia and even if you try to kind of diffuse the situation and have, I suppose maybe in their mind, a fairer playing field. But the Google deal nonetheless, if you look at it, the Google deal with News Corp announced on Wednesday goes beyond the Australian market, extending to Murdoch’s titles such as The Wall Street Journal and The New York Post in the U.S. and The Times and the Sun in the UK. No other news publisher has reached a single deal with Google across multiple countries.

 

Now, critics say the deal would benefit News Corp. rather than the rest of the news industry.

 

PS: Yes, well, we’ve been talking about the price. And since you looking at Google’s valuation, I suspect Google’s to be the winner because they have just really this unique access to this quality content. So. So why not?

 

WSN: Well, they’ve pledged so far to spend one billion over the years on buying news content and reach agreements with publishers in about a dozen countries.

 

But we’ll be watching this space because we do a media outlet.

 

But up next, we’ll be discussing the recently announced national unity blueprint. Stay tuned for that. BFM eighty nine point nine.

 

Thank you for listening to this podcast. To find full great interviews, go to PFM Goodbye or find us on iTunes, BFM eighty nine point nine. That is the station.

 

Categories
QuickHit

QuickHit: Can Western companies solve the China dilemma?

This week’s QuickHit, we have Isaac Stone Fish of Strategy Risks to talk about how western companies and other companies around the world should deal with China and compromises that you need to do for that. He also shares the status of Hong Kong as a gateway to China. How about the environmental and human rights violations of China and how the US companies can make sure they are running an ethical business? And what is the status of non-profit organizations in China, especially those that are environment and human rights focuses?

 

Strategy Risks quantifies corporate exposure to Beijing. This was started because Isaac got frustrated at the way that ESG environmental, social and corporate governance providers were ranking Chinese companies and US companies that had exposures to China. Isaac thought it would be fun and interesting and hopefully very useful to have a different way of measuring and quantifying this exposure.

 

Isaac grew up in Syracuse, a nice little place but basically about as far away from the center of anything as possible. He started going to China when he was 16 for something different. He started in Western China and ended up living in Beijing for about six years. He also worked in journalism mostly, it was the Asia foreign policy. Spent a few years doing a mix of public affairs, commentating, bloviating, writing, and then started Strategy Risks roughly six months ago.

 

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This QuickHit episode was recorded on February 3, 2021.

 

The views and opinions expressed in this Normalization of China QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes

 

TN: It’s really interesting looking at ESG and public markets and I think we’ve seen over the past few years a lot of tensions between China and the U.S. They’ve been there for 10 years but they really took shape over the last few years. If you’re a publicly traded company today in the U.S. or traded on a U.S. exchange, what are the things that you need to really think about with regard to China? What are the biggest risks and biggest considerations that you’re talking to your clients about?

 

ISF: One thing that people overlook is the risks of their China strategy. Not in China itself but globally and especially in the United States. The rules for engagement in China are so different for these corporations in China than they are in the United States. And the U.S. is drawing some pretty thick regulatory lines especially around Xinjiang, the region of northwest China where there are roughly a million Muslims in concentration camps. That a lot of times, these major corporations, their China offices will ignore or overlook or not put nearly enough attention on.

 

The messages that we’re communicating and the things that luckily are starting to bubble up into these board rooms is the understanding that to have a China strategy, you need to have a global strategy that is very aware both of what Beijing wants but also what the Biden administration and many American people want.

 

TN: For the last 15, 20 years it almost seems like companies have had a global strategy and then they’ve had this China strategy off to the side because it was such a big market, growing so fast. It seems to me like you’re talking almost about the normalization of China in terms of performance expectations, social expectations, those sorts of things. Is that right? Is that kind of what you’re implying?

 

ISF: One of the smartest ways of the Chinese communist party, which has ruled China since 1949, were the smartest things they have done is made it seem like their country was a normal country. And there’s nothing aberrant about China or the Chinese people. But there’s something quite apparent about the Chinese Communist Party.

 

And the rules for playing in China are quite different than they are in basically everywhere else. What we’re starting to see is the realization that companies need to do something to limit the influence of Beijing on their corporate headquarters, on their products and on their decision making.

 

TN: But can you do that actually? Because if you’re saying an automotive company and most of your revenues come from China, and the Chinese government says something, it seems really hard. And companies have been awkward about doing that for the past say 10, 15 years. Really changing how you help companies treat them like any other country? I think what you raised about what the CCP has done since 1949 is amazing. It’s great perspective. But can the CCP understand that they’re being normalized as well?

 

ISF: The CCP are doing this as an active strategy in as much as such a complex institution has a single strategy. They’re certainly trying to make people think that they are normal in our sort of western liberalism definition of that. Most of the companies that we talk about in this space, the U.S. is a far more important market for them than China. NBA is a great example.

 

China is its growth market. The USA is its most important market and what companies are starting to realize is that what happens to them in China and what touches China doesn’t just touch on their business in China but affects their business in the United States as well.

 

What we do at Strategy Risks is less working with the companies like the NBA that are having these problems, but work with other people in the financial chains, institutional investors, pension funds, endowments and explain to them the different risks and exposures that they’ll have with the companies in their portfolio and some of the problems they might have with being overweight in certain companies about Chinese or American that are complicit in Chinese human rights abuses.

 

TN: From a portfolio investor’a perspective, until very recently, you could park a whole lot of money in Hong Kong and then dip into China as needed. But it seems that that’s becoming less of an easy strategy since the crackdown in Hong Kong last year. Is that the case or is Hong Kong still in a pretty good place to take advantage of mainland stuff?

 

ISF: From a pure markets perspective, Hong Kong is still an excellent place for that. What’s really changed is the safety and the rule of law and the feeling of security for people doing deals in Hong Kong. Hong Kong is still an excellent window into China and we’re seeing Shenzhen and Shanghai supplanting a lot of what Hong Kong is doing in Seoul to agree. But the issue with Hong Kong is much more for the people there as opposed to the people who are using it as a conduit.

 

TN: That’s really interesting what you say about Shenzhen, Shanghai, and Seoul because I’ve been seeing that take shape over the last five or six years and it’s interesting that it’s getting a lot of traction.

 

With Xinjiang and with other things happening socially in China, what about things like non-profits? Issues that they have to raise in China? How can you operate a non-profit in China and stay true to your mission if it’s kind of awkward with Beijing or with the CCP, which are one and the same?

 

ISF: Most times, you can’t. What’s been happening is that a huge amount of western nonprofits have, sometimes it’s this evangelical view and sometimes it’s just well this is a very important country filled with a lot of lovely people and we want to come here and do good. But they find that knowingly or unknowingly, their message and their mission gets corrupted because they need to work with their government partners. And sometimes, their mission is totally at odds with the mission of the party. And so, they have to make sacrifices that I would say perverts what they’re doing.

 

We see this perhaps most intently in both the very human rights focused nonprofits and in the environmental focused non-profits. A lot of whom have found themselves being very praiseworthy of what Beijing is doing even though China’s far and away the worst polluter and the worst carbon emitter. They take signs coming from top leaders that Beijing is committed to making these changes even though the changes often don’t get made. But they are finding themselves in a position where in order to be there, they have to sacrifice some of their credibility. A very heartening sign I’m seeing is people saying, maybe I don’t actually need to be in China in order to do something that’s positive for the world.

 

TN: Do you see a path to China having that type of environment in 5, 10, 20 years time? Or do you think we’re kind of on this this really is it slower than that?

 

ISF: It’s such an important question and I wish I had some good way to answer it. In China, as Chinese officials love to say, has 5,000 years of history. The Communist Party has been in power for what, one and a half percent of that time. At some point, in the near future, the party will no longer rule China. Will that be next year? Will that be 30 years? Will that be 200 years? It’s so hard to say, but it’s certainly not inevitable.

Categories
Podcasts

Microsoft Executive Backs Australian Government In Tech War

Tech war in Australia, Trump’s impeachment hearing, companies moving to cheaper areas, volatility in the market, and online dating — these are some of the topics in the recent guesting of Tony Nash at BBC’s Business Matters. From Texas, he joins Rahul Tandon in UK and Michelle Jamrisko in Singapore.

 

What will happen to Australian businesses if Google left? Will Biden be involved in China deals? How will Trump’s impeachment hearings will bring about? How will this move to rural places evolve overtime, for example Californian companies moving to Texas? How will the stocks market play out with too much volatility with increasing number of retail investors? And will online scrabble be the new way of dating?

 

This podcast was published on February 12, 2021 and the original source can be found at https://www.bbc.co.uk/sounds/play/w172x197h9pkh53

 

BBC Business Matters Description:

 

The President of Microsoft, Brad Smith, says Australia’s proposals that tech giants pay for news appearing on their services, strengthen democracy by supporting a free press. We hear more from Rebecca Klar, a tech journalist from The Hill. As the second cricket test match in this series between India and England starts this weekend, the BBC’s Rahul Tandon reports that more Indian players are now coming from smaller towns than bigger cities, and how that reflects a broader economic change taking place in the country. It’s an interesting time for dating services with the pandemic throwing the world of romance into disarray; our reporter Deborah Weitzmann has been to meet some people looking for love in the time of Covid. And we’re joined throughout the programme by Michelle Jamrisko, Blomberg’s senior Asia economy reporter who is based in Singapore and economist, Tony Nash from Complete Intelligence; he’s based in Houston.

 

 

Show Notes

 

RT: Will there be some sort of compromise? Because Australia, and many of the businesses in Australia, particularly small and medium sized ones, would struggle if Google suddenly left?

 

TN: They would. How much of a compromise there would be? I’m not sure, and I think about like GDP in Europe, that wasn’t a real huge compromise. We start to see these nation states starting to act like nation states again. We’ve seen India push back on Twitter over the past. Right? And we’re starting to see countries push back on tech giants because they’re sovereign nations.

 

RT: What will we see countries getting together in a unified way to push back on the tech giants because there are two very powerful sides there?

 

TN: I hope they do, because they rule their own countries. And it’s up to a company to learn how to operate within a geography rather than the other way around.

 

RT: Do you think President Biden will want to get involved in this particular issue?

 

TN: I don’t think so. It’s interesting when you look at, like China has their way with tech companies all day long. They cultivate their own giants and they do whatever they want with Western companies. I don’t really think Biden will get involved or want to get involved, to be honest. I think it has a lot to do with whoever is closer to the campaign and whoever is closest to the Oval Office. But I think he would want to stay out of it.

 

RT: Do you think minds will be changed amongst those Republicans, 17 of them are going to have to vote to impeach President Trump? That looks unlikely, doesn’t it?

 

TN: Well, like Joe Biden, I really don’t know of anybody who’s watched it.

 

RT: I read something that said this had more viewers than the first impeachment trial. But from what you’re saying, it’s not exactly something that’s bringing in the ratings figures.

 

TN: I’m a political nerd. I talk to people all the time. I honestly don’t know of anybody who’s watching it. So what you say is possible, but it’s just not what I see. Do I think they change minds? Look, Trump is out of office like somebody pining over like losing a football game or something. This guy is out of office. They need to just let him go. That’s the way most of the people who I speak to feel. Every politician is competitive. Every politician uses rhetoric to win. And what Trump said was no different from what many, many Republicans and Democrats have said over the last four, eight, 12, 16 years. So I think this is just a clown show and it’s not going to result in anything.

 

RT: Michelle raised an interesting question, that is this about preventing what happened, making sure it doesn’t happen again or is a little bit about this preventing from Donald Trump running again?

 

TN: It’s more the latter than the former. If we look at the Supreme Court justice discussions over the last two years, especially during the cabinet hearings, there were protests in government buildings in the capital all over the place, people being violent.

 

RT: But this was different and they’re very different.

 

TN: But I don’t understand how it was different because though this was different because there was so much ruckus made about it and people wanted to make an issue of it. But if you look at the protests and the violence around the Kavanaugh hearings and you set them side by side with what happened on January 6th, there is very, very little difference aside from the Capitol Police letting people into the Capitol building, which they did.

 

And it’s on footage. People also let protesters into various government buildings during the Capitol hearings. So, again, this is completely about Donald Trump. Democrats are obsessed with Donald Trump and they just need to let it go. The guy’s not even in office anymore, so they just need to let it go.

 

RT: It’s not going to be let go for a while. And it’s going to be a conversation that we will be continuing here on business matters over the next few days as that impeachment trial continues. And Tony, China says to the U.S. confrontation will be disastrous. President Biden says he will work with China when it benefits the American people and he will have to work with China on some issues when he particularly his ideas on climate change.

 

TN: We will live in an integrated world. I actually think Xi Jinping would talk a a tougher game on climate change than Biden would. He certainly has at the World Economic Forum for several years. The question is what they actually do about it.

 

I actually worked for the Chinese government for a couple of years and the Central Economic Planning Agency. So I understand in a very detailed matter how the Chinese government actually works. And this discussion is just preliminary. It doesn’t mean anything. OK, we’ll know in six or nine or 18 months what the real policies are.

 

My concerns are with, we really have to look at the people on the National Security Council in the US and their relationships with China.How many paid speeches have they had in China that those are the biggest issues that we need to look at with regard to China policy today from the U.S. perspective.

 

RT: That trend in India where we’re seeing the growth of what’s called Taiwan tier two, often, these much smaller towns. Is that something that you’re seeing in Texas at all or is it still very much focused around Houston, Dallas, Austin, economic growth?

 

TN: First on India. The tier two and three cities is something I would forecast when I was with The Economist back in those days. We did work on this 10, 15 years ago. And it’s amazing to see it happen. You go outside of cities like Chandigarh and you see what used to be fields. That is all some suburban cities. It’s really incredible to see that is in Texas.

 

What we’ve seen since COVID is more people are moving to semi-rural areas or buying bigger plots of land further out. And it’s some people from Texas, but it’s a lot of people from outside of Texas. Some of us, including myself, get a little bit defensive about Texas, if you can imagine.

 

RT: One interesting thing I think that we are seeing as well is maybe COVID will accelerate this. But this was always going to happen, that we will see businesses moving to cheaper areas. We see that in the States, don’t we? With some movement from California towards Texas?

 

TN: Yes, but you also see this in places like I was hearing about a technology company that in Taiwan, so the companies are based in Taipei, for example, and the workers wanted to move outside of the city since they couldn’t come into town, into the office. So they moved to small towns around Taiwan where their family was. The company actually indexed their pay based upon the cost of living to those country towns. Right. So and I think what you’ll start seeing as you see the diffusion of employment, companies will start looking at their costs and say, “look, these people aren’t paying for an apartment in Manhattan, they’re living in Iowa.” So we need to really understand where people are living. That company in Taiwan was using mobile phone records to understand where those individuals were so they can index their pay. I think you’ll see more and more of that. It’s not that people won’t be able to live. It’s just that they won’t make the salary from Manhattan while living in, say, rural Texas.

 

RT: I think we’re seeing that in many parts of the world with that sort of story you described. The taking place in and companies looking at and what’s happening with employees if they move to what you could describe as cheaper areas.

 

We had Carrie Lee here, there being a little bit cautious about what’s happening with many of these companies are going public. There is a lot of cash around from stimulus in the U.S. Interest rates are very low. Do you see this continuing?

 

TN: We’re very late in the investment cycle and we’ve moved from a company being valued on its earnings or future potential to a speculator’s market. And a lot of what we’re seeing in markets today are stocks that pop for one day by 50 percent and then they lose that 50 percent the next day. We just saw that with a big pot stock, a big marijuana stock over the past 24 hours here in the U.S. And people are trying to to squeeze out as much gain as they can in markets. So this this market is very long in the tooth. I just don’t see this lasting much longer because we are in such a speculative market right now.

 

RT: Do you not think that when stimulus begins to to slow down in many parts of the world, some of that frothiness in the markets may disappear?

 

TN: There’s a concept of stock, meaning how much money is in the market. And then there’s a concept of flow, meaning how much money is moving into the market. And because a lot of the investment climate right now is focused on flow. So how much money is coming in stimulus? How much money is coming in support from other mechanisms? Not necessarily a reallocation of the money that’s already in the market.

 

One of the big triggers potentially could be a possible disappointment with the the package coming out of the U.S. Congress. If it’s not what people have been promised, then there’s a possibility that those marginal investors who’ve been pumping stocks up by 50 percent per day could be squeezed out of the market. And then we see that flow start or grind to a trickle. And then the action really slows down and then we start to see a correction. No one wants to call a top. I don’t necessarily think this is it. I have no idea. But it is that stock and flow discussion that really worries me.

 

RT: The thought of dating is always absolutely petrified me. I was always happy my mom would have arranged my marriage and to Indian way somehow there were not many takers. Unfortunately, if you had to go back in the dating scene, would playing Scrabble online be your idea of romance?

 

TN: No. No, not at all, sorry, it just doesn’t cut it.

 

RT: No?

 

TN: We would find way. Look, I have two 19 year old kids. They get out, they’ve been social. Their friends are dating. I know it’s impacted some parts of the world in a very difficult way, but it hasn’t necessarily impacted my kids and their friends. I certainly wouldn’t settle for online scrabble. Who is the researcher at the university in London who snuck out for a hookup? I think we would sneak out outside a curfew to get things done if needed.

 

RT: OK. All right. Thank you, Tony. We’re getting a very different image of you now. Tony, stop sneaking out, please. No breaking curfew for you. That’s it for business matters.

Categories
Podcasts

American Carnage

In this Morning Run BFM podcast episode, Tony Nash justifies his pessimistic outlook of the US political environment on markets and the transition of the Reddit Army into a full-blown populist movement. Will this be a common theme in the US markets? And what does he mean about the 97% correlation between Bitcoin and gun sales?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/american-carnage on February 4, 2021.

 

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Show Notes

 

WSN: To find out where global markets are heading, we have on the line with us Tony Nash, CEO of Complete Intelligence. Let’s have this little bit of discussion. Will the tussle between the populous investors and institutional shareholders lead to any real structural change in the way Wall Street behaves? Do you think this is going to be a common phenomenon?

 

TN: I do. I don’t think we’ll see much change politically because the funds themselves are very large donors for politicians. There really isn’t an incentive for politicians and regulators to change things. But the populism that we’ve seen in U.S. politics over the last four to six years or even 10 years, it’s growing into financial markets and people are really angry with Wall Street. They’re really angry with bailouts for funds and for banks.

 

This type of populist activism and distributing investment are going to continue and it’ll get more aggressive if the government doesn’t respond or if the funds respond aggressively and arrogantly. This could turn into an aggressive political movement. The funds and the regulators have to be really careful here.

 

PS: You really hit the nail on the head because if you see the backlash, you see the right wing with Ted Cruz, Alexandria Ocasio-Cortez on the left, both asking for investigations and reviews to this. Do you think the US government and the politics of both sides will be able to reconcile and find a solution to regulate, monitor this?

 

TN: They may have an “investigation.” I think nothing will happen. Again, these funds have deep pockets. They invest a lot of money, either directly or indirectly through shadow organizations and corrupt means. So zero will happen on this. Unless there is dramatic…

 

You guys have heard of Antifa in Malaysia, right? If Wall Street needs turned into an Antifa-like organization, and had violent protests, then maybe we would see some results. But there is absolutely no way short of violence in the streets that the US government… You will have Ted Cruz, you will have AOC talk about this. But this government will not respond to this because it’s in their interest to defend these funds.

 

PS: Tony, I’m gobsmacked. In just last month, we had an insurrection and impeachment and inauguration in the space of two weeks. Isn’t that like a big paradigm shift in the politics? Don’t you see any changes there?

 

TN: Here’s what I learned today and I’ll get to your point in just a second. There is a 97% correlation between the sale of guns and the price of Bitcoin in the U.S.. What does that tell us? It tells us there is an absolute lack of trust in institutions. People can’t trust law enforcement. They can’t trust politics. They can’t trust the central bank. Americans feel like they just can’t trust institutions. So they’re investing in Bitcoin and they’re buying guns. So there is a real frustration among Americans. They just absolutely don’t trust the government.

 

WSN: That’s an interesting point, Tony. But on the flip side, if I look at Biden’s administration. Let’s talk about his stimulus plans, because originally the target was a $1.9 trillion plan. But I think that’s probably likely to be scaled down, especially with the vaccination rollout. So what do your gut feel in terms of what the figure will be?

 

TN: The administration, unfortunately, has lost a lot of credibility because they two million or 20 million vaccines over the past week. They’ve come in saying that they had a better plan and then they’ve actually lost 20 million vaccines. This is supposed to be a Covid relief bill with more money for vaccines and more money to address Covid. But they can’t manage the resources they have today. People are really frustrated with that as this stupid $600 they’ve been promising for six months. Nobody even wants it now. People are so frustrated over this whole thing.

 

So will it be scaled back? Probably. You have Republicans in the Senate especially, who are being really stupid politically by pushing back on this. And you have Democrats who are pushing for stupid spending programs. Again, there is frustration. This is not just in Texas. This is across the country. Americans are so upset with government and so frustrated that they just want something passed and they want the least damage possible. They know it’s going to be a dumb bill. They know there’s going to be pork and they know there’s going to be corruption, but they want the least damage possible done with this.

 

WSN: But if I look at markets, it doesn’t seem like, you know, that that there’s any negativity or disappointment, right? Yeah. Because we are looking at, you know, the index also NASDAQ closed to an all time high. So are you saying that markets are reflecting this or, you know, there’s just too much optimism in terms of forward earnings?

 

TN: No, the markets are reflecting a bet on the central bank. They’re betting on the stimulus coming from the bill, passing through consumers and passing through businesses. And they’re betting on the the bailouts for different industries, on a weaker dollar, on a lot of things. That’s what they’re betting on. They’re not betting on earnings or on corporate health.

 

We suspect that the stimulus won’t be as strong as many had hoped and the central bank won’t be as accommodating as many hope and that there will be a pullback. We think there’s going to be something this quarter in terms of a pullback. But again, nobody is betting on companies or sectors.

 

WSN: All right. Thank you for your time. That was Tony Nash of Complete Intelligence, giving us his views on where global markets are heading and in particular on the U.S. government.

 

Some interesting points. Right Philip?

 

PS: I’m kind of lost for words for that. He really is pushing for this decade implosion of the once vaunted American institution.

 

WSN: He’s saying that there’s a lot of dissatisfaction with regards to the roll out of the stimulus plan. That it is very, very delayed. And people just like, hurry up, just sign the bill and  hand out those 600 U.S. dollar checks. The longer you wait after a while, people just don’t seem to care about it.

 

But when I look at the markets, I’m somewhat still conflicted because I’m not in total agreement with him. I think markets are pricing in vaccine optimism. And on the back of that, there will be some corporate earnings, especially when you come to the tech companies. So is the whole of America unhappy? Well, we do know from the way the vote, is a very divided nation.

Categories
QuickHit

QuickHit: Will China Invade Taiwan? (Part 2)

This is Part 2 of the QuickHit episode on “Will China invade Taiwan?” with Chris Balding and Albert Marko. In this second part, the guys discussed Hong Kong, the semiconductor industry, and possible actions by the Biden administration. Tony Nash is hosting this show where the two experts discuss likely possibilities for China, Taiwan and other countries that may be affected by the conflict between the two countries like the US, Japan, and South Korea.

 

In Part 1, we looked at the plausibility of China invading Taiwan and what that might look like. In Part 2, we look at is Hong Kong a precedent for China potentially taking over Taiwan? We also look at the global semiconductor industry and firms like TSMC. What kind of impact would Chinese action on Taiwan have toward TSMC and also how would we expect the US to react and what would the different reactions do to US credibility in East Asia?

 

You can watch the Part 1 here: https://www.completeintel.com/2021/01/27/quickhit-will-china-invade-taiwan-1/

 

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This QuickHit episode was recorded on January 26, 2021.

 

The views and opinions expressed in this Chinese invasion of Taiwan QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes

 

CB: What you’re saying about body bags makes perfect sense. Is Xi that directly rational? Because it would seem like there would be a better way to handle Hong Kong than what has taken place?

 

AM: Hong Kong was a little financial center with no military, no nothing. There’s just a bunch of woke millennials running around, thinking they can hold off the PLA. That doesn’t work like that in real life. You got to come at them with guns to earn your freedom. It was a circle by China. It was inevitable.

 

TN: Since ‘97, there hasn’t been a question as to whether Hong Kong is China. Hong Kong is China. And people have shrugged their shoulders since ‘97 and said look, it’s China. It’s a matter of time. It’s a special zone.

 

CB: Maybe my meaning was lost a little bit. The cost-benefit of what Xi has done in China or in Hong Kong, he clearly probably could have reaped more benefit by saying we’re gonna let Hong Kong continue to be Hong Kong for another 10 years or something. There wasn’t really a need for him to move. It’s probably going to create bigger problems internationally. There’s probably assets that are going to move out of Hong Kong and other places, Singapore. So what if we look at a strict cost-benefit, there wasn’t really a reason for Xi to do that.

 

TN: There was. The protests that would come, first every five years, then every two years, and so on, it was becoming increasingly embarrassing to Beijing. The official channel to as an inward or outbound investment lane through Hong Kong, it’s still there. But Beijing couldn’t take the embarrassment of this and what they didn’t want is to have some rogue police brigade kill a bunch of 25-year-olds on accident. I believe they had to pull the trigger and I think this has been planned and architected over years and it seems like something sudden that people are like “wait, what’s going on?” They’re rolling military and this has been planned for years.

 

CB: What you’re getting at is this was embarrassing domestically and he basically said to hell with the consequences internationally? If we apply that same basic line of thinking to Taiwan, the question would then become, well, they’re willing to deal with the international consequences. We know that in colossal range barriers. What other domestic issues are at play here about Taiwan?

 

TN: I think it’s backwards. It was more embarrassing internationally because the CCP plays international media like a fiddle. Xi Jinping goes into Davos or speaks at a WEF event. Everyone walks away, enlightened and they play international media like a fiddle. They were less worried about what international media would think and even less worried about what domestic populations would think over time.

 

They just needed to rip the band-aid off so that kind of righteous reporters in Hong Kong wouldn’t keep raising this story because it’s inconvenient. They knew that at some point, they were going to take over, and so they just did it and that it’s inevitable that’s going to happen. They just did it.

 

And global media? They’ve fallen in line over the last nine months. Nobody talks about Hong Kong anymore and the rights and being trampled upon and all that stuff. International media have fallen in line on this. They don’t care. They want to make China happy. Why? Because the CCP and their companies are going to buy supplements in their newspapers and in their online forums and they’re going to pay for their think tank pieces and all that stuff.

 

CB: There are specific media outlets that are decidedly less critical of China than they used to be as an editorial line.

 

AM: I agree and I love that analogy of like ripping the band-aid off because Hong Kong was ripping a band-aid off but Taiwan would be like ripping duct tape off a Greek guy’s chest. That’s the problem here, and that’s what we think we have to understand that not only is it economically damaging, it’s politically damaging internationally, militarily. The risks, just in my opinion, way outweigh the benefits of trying to take over Taiwan.

 

TN: Let’s say this happened. Let’s say six, nine months, something happens. What happens economically? I know there’s cross holdings with CCP princes and stuff but let’s look at say semiconductors, TSMC. The otherfoundries are disrupted for a period of time.

 

AM: I know where you’re going with this and this would actually make me flip my position if I was advising China. If they wanted to hit the West and create even a bigger semiconductor shortage, then you absolutely destroy Taiwan. This is where I’m going. You absolutely would do that.

 

TN: Right. So, does it make SMIC relevant and does it make the Chinese foundries relevant? What is in that gap? TSMC, all the execs are moving to Phoenix. What happens then?

 

CB: Taiwan and TSMC are in the very awkward space. At this point, they’re probably like THE manufacturing firm. The other places do the design and stuff like that. There’s a lot of firms that are in the mid and low end. But when it comes to your high-end stuff, it’s pretty much TSMC. I think you could make a case that Beijing says, “screw it!” Forget about Taiwan. If we can capture TSMC, we’ve got it all.

 

TN: We just invade Hsinchu, right?

 

AM: The Chinese, for all the negative things that I have to say about them, are really good asymmetrically combating the West especially the United States where they’ve weaponized Caterpillar, weaponized multiple American companies within China to hit the United States politically and economically. That would make perfect sense from the Chinese perspective to just cut off the semiconductors specifically because those semiconductors go to Apple, to the big three automobile sector, which is the only thing right now that’s going to be able to get unemployment back down to a decent level for the Biden administration.

 

TN: If that did happen, would that present an opportunity for Japanese, Korean firms to fill that void to circumvent Chinese control or has that ship sailed years ago and there’s no way they can recover that?

 

AM: I don’t think that they’d be able to recover especially in the near term. I think the chip shortage would be so, so damaging to the entire global economy that it would be pretty devastating for a while.

 

CB: And the people I talk to in chips basically say, when it comes to manufacturing of higher end chips, it’s basically TSMC. Not even Intel these days is manufacturing their own chips. So even if TSMC is Chinese tomorrow, it would probably take five years before Korean and Japanese firms at the earliest would be producing high-end chips that could compete with TSMC.

 

TN: If China threatens to invade Taiwan and the West is like “look, do whatever you want, we just want to make sure we have our chips.“ Is that really a plausible negotiating point?

 

AM: I don’t think the West could even trust China in that respect. Has the Chinese ever given us assurances and anything like that ever?

 

TN: Let’s act like this happens. Something happens in June, July whatever. What does the US Navy do? Will they protect Taiwan or will they distance and reevaluate?

 

AM: The US would probably let Taiwan defend itself for a certain period of time and float in a carrier strike group just to deter China at some point. They’d have to walk defense there. That’s not an easy solution. You’re talking about going up against China within proximity of their borders, which they would have an advantage of.

 

CB: They’re not going to do something like this just launching a couple volleys of low-grade missiles. This is moving all your chips to the center of the table. And so basically, the question that the US Navy would have to ask is are we going to move all our chips to the middle of the table otherwise, let China have it.

 

TN: If the US says, “fine, we’re not going gonna move our chip to the side of the table. Let China have it,” then does that destroy US credibility in East Asia because the obligation of the US to defend Japan, Korea and so on, those are gone then, because US has an obligation to defend Taiwan.

 

AM: The South Korea would be the biggest problem immediately after that.

 

CB: One of the first comments about by the administration foreign policy was the Japanese defense minister saying China is a real problem, you boys need to get your big boy pants on. That was a month ago or a couple weeks ago. That was pretty much the Japanese saying, “you know this isn’t 2008 boys. We’ve got to be ready.”

 

The other thing was, is over the past couple years, there’s been a shift in the US Military. Basically, all the US Military in Korea is now way far down the peninsula. And South Korea knows that. The US Military is in a position where if the North Korea decides to stream across the border, they can pretty much pack up their personnel and be gone in a couple of hours. If something happens, Tokyo and Seoul are absolutely going to be paranoid. Doesn’t stand right there and start firing back.