Complete Intelligence

Login

Month: March 2021

Categories
Visual (Videos)

A Mission-Critical Focus to Enable Growth

This article originally published at https://www.admentus.com/podcast/a-mission-critical-focus-to-enable-growth-with-tony-nash-of-complete-intelligence/ on March 26, 2021.

 

 

Every company wishes they have a crystal ball when it comes to making business decisions, and while a physical iteration of that wish is not possible, Tony Nash has developed the next best thing for his clients at his startup, Complete Intelligence.

 

Tony is the CEO and Founder of Complete Intelligence. Before founding Complete Intelligence, Tony was the global head of research for The Economist and the head of Asia consulting for IHS Markit.

 

Complete Intelligence is a fully automated and globally integrated AI platform for smarter cost and revenue proactive planning. Using advanced AI, they provide highly accurate cost and revenue forecasts fueled by billions of enterprise and public data points.

 

Key Takeaway: As a growing, scaling business, you must know what you are good at, what you do, and what you do not do. Maintain your mission-critical focus on the most important aspects of your business and outsource the parts that you are simply not good at or are outside of your mission.

 

Lessons Learned:

 

• Put Significant Thought into Your Senior Hires – hire low first, then hire the upper levels as they will be the ones that have to share your mission and must be the right hire.

• Know what You Do Not Do – Knowing what you don’t do is just as important as knowing what you do do.

• Define Your Culture – Define the culture you are building and continually and intentionally reinforce it.

 

Show Notes

 

JC: Hello everybody, Jeff Chastain here with the building to scale podcast again, where I get the opportunity really to speak with entrepreneurial business leaders growth-minded leaders who are working to grow and scale their own companies. And some of the we’ll discuss some of the challenges. Some of the successes as they’ve had over the years working through that.

 

Today’s guest with me here is Tony Nash with Complete Intelligence out of the Houston, Texas area. So first off Tony welcome to the show and thank you for taking a few minutes out of your busy day to join us here.

 

TN: Thanks, Jeff. I appreciate the opportunity.

 

JC: So give us a little bit about what Complete Intelligence is and what you guys have got going on there?

 

TN: Sure. We run an artificial intelligence platform. We use it to forecast market activity say currencies, commodities, equities for investors. We also help people companies understand their costs and their revenues which are really important on the budgeting side. So we help people de-risk their future business decisions by understanding where their costs are going to go and where their revenues will likely go.

 

JC: Okay, so I’ve got a background in technology and we kind of talked about AI and stuff beforehand but if we were to bring that down. And say okay I put you on the spot here but it was well the networking questions I’ve heard before like. Okay, if you describe that to a five-year-old what do you really do? So I know we kind of talked beforehand that this is typically big enterprise focus but for those that are not into that industry or not dealing with 9 10 figure dollar budgets, kind of a thing. Proactive budget planning. What does that really mean from a obviously from a company your size or your perspective?

 

TN: Sure, if I have to describe it to a five or ten year old. It’d say look, if you run a lemonade stand you have to understand how much the lemons are going to cost. How much the water is going to cost. How much the sugar is going to cost you. Also want to understand how many customers you’re going to have. How much money they’re going to spend. How much money you’re going to take in through the lemonade stand, right?

 

So we work with customers to understand all of those things. Now when companies themselves forecast this stuff and we know this from talking to our clients. They typically have 30 error rates or worse, even for raw materials costs. So their planning is way off, okay? When you look at industry experts investment banks economists, industry experts, these sorts of things. Their error rates are typically 20% off, okay? Our error rates are typically about around 4.6 percent, okay? And that’s on an absolute percent error basis. So we’re not gaming the pluses and minuses, okay?

 

So if you’re buying those lemons and that sugar and that sort of thing you can pay a dollar 20 for it. For us maybe a dollar five or something like that, right? So we’ll help you save 15 cents a lemon, okay? And you’ll understand where those costs are going. And so when you scale that up to very large customers who have you know 2 billion, 5 billion, 20 billion dollars in turnover or more. They’re buying in tens and hundreds of millions of dollars.

 

So let’s say a 17% improvement in their ability to forecast things, those are very large numbers. And so we’re working with enterprise scale data in the cloud and helping them understand where their business is going. And I would say probably better than just about anybody else out there. And so it doesn’t have to be the biggest company in the world doing this stuff. We work with mid-sized companies as well, okay? Because we’ll take data out of their enterprise planning system or something like that. And we’ll use it on our platform to help them make better decisions. We’re not telling them what to do, we’re just telling them where the data tell us that things are going to go.

 

So the real problem we’re solving aside from the obvious of what’s going to happen in their markets and their costs. Every company has a very painful budgeting process, okay? Some companies it takes a month or two or three months. Some companies some of our customers it takes six or seven months. And they’re going through in a very meticulous way of proactive planning their budgets. And there are hundreds of people involved and at the end of the day it goes up to the CFO and the CPO the chief procurement officer or the CFO and the head of sales and it’s a verbal agreement on what’s actually going to happen. This is actually one of the CFO pain points.

 

Not all that data driven, right? And so what we do is we give them a straw man to base it on so they can a very meticulous and detailed straw man. So that seven month process is taken down to a couple days, okay? From data transmission processing to sending back. And they also get a continuous budgeting exercise, okay? Every month we’ll reforecast their budgets for them so if something like Covid happens as it did last March, April. We help them understand what’s likely to happen uh in their business.

 

JC: Now that makes sense and that’s really one of those things that regardless of the business side that it’s like, okay having actual real data not seven month old data actually having it on a monthly basis or even closer kind of a thing. You can actually make real decisions on it at that point rather than just thinking like you said one code would happen. Everybody had their budget set January, February for what 2020 was going to be. And now two months later they’re completely invalidated that either the like you said earlier some some businesses are up, some are down, some are pulling back the the expenses. So it may have turned out okay but all the proactive planning they did initial on is completely out of window at that point.

 

TN: Right and most of those guys their revenue budgets were blown out like they had no idea what was going to happen there. They were saddled with their cost budgets that they had to continue paying for all this stuff. They didn’t know what was coming in on the top line. And so they then had to be very reactive on the on the cost side. And initially it was just a lot of you know arbitrary cost cutting and no disrespect to anybody. They were doing the best they could right but a lot of these big companies initially were just like, we don’t know what what we’re going to be in three months.

 

We were initially told covered was four to six weeks. And you know it’s still going on right and so what we saw is a lot of companies cut costs in the second quarter and the third quarter and by the end of the third quarter the management views looked up and said, well we’ve cut it as much as we can through the first three quarters let’s not release any more budget in Q4. So that just helped them on the income side so that they you know their bottom line looked better than it probably would have if they would have been a status cooperation.

 

JC: Yeah

 

TN: But still what we’re doing is using actual live data to help clients make the actual decisions that they need to make to run their businesses.

 

JC: Yeah and that’s really to me the key whether you’re got the small business that you simply just don’t have that much data to be processing all the way up to the enterprise. It’s still the same thing of saying, okay making those decisions on the numbers rather than, like you said with with Covid where it’s almost an immediate knee-jerk panic reaction of, hey we’ve got to cut things or hey everything’s going to be down. It’s like okay let’s look at the numbers and hopefully by a Q2 Q3 et cetera we’ve got some actual real data that we can start looking at.

 

So but yeah that’s that’s interesting so going back to Complete Intelligence then take us back. And say I think you said it 6 to 7 years old for the company itself. So how did this how did this kind of come about from a entrepreneurial standpoint.

 

TN: Sure, yeah, I used to run global research for a company called The Economist based in the UK, publishing company. And then I moved to a company called IHS Market which was just bought by S&P about six months ago. I was their Asia head of consulting. I was working with clients on a lot of data-driven decisions. And what clients were telling me were two things first the forecast that everyone was doing not just stuff, us were wrong and there was no accountability for that, okay?

 

The second is they could never get a forecast for their exact decisions. Forecasts were always too high level or not the right thing or something. So I rolled out of IHS market saying I want to have a data driven company that actually helps people make real decisions about their business. And so we started as a consulting firm for our first few years we were a consulting firm. And I was trying to understand the types of decisions that people needed to make I knew it from my consulting days with bigger firms but I wanted to understand what we could actually do.

 

About three years in we decided to turn into a product firm. Which is a very different type of business and so you know we built an initial platform that was very customizable but then to productize it out to build it to scale really is a very different skill set. Aside from a little bit math and a little bit of code it’s a very different same marketing and sales operation. It’s a very different you know infrastructure and all that stuff, right?

 

So a couple years ago we decided to productize with some subscription online subscription data products. And then we’ve got more specific with say cost and revenue products. So, I started the company in Asia in Singapore and then in 2017 we moved to Texas. So part of our, my calculation there was the talent in my mind is better here in the US. The customers are much easier to access here in the US and the business environment is pretty friendly. So it was a pretty easy decision for us to decide to come to Texas.

 

JC: Interesting. Okay. So what kind of challenges or what did you face in going from I guess I don’t necessarily know what your role was when you were saying with the economist except I’m assuming you’re you’re managing a team but you’re not necessarily managing a company. At that point to now owning and running your own company here with you said what 10 11 something employees up to now?

 

TN: Yes, that’s right that’s right, I think. So you know first is always the administrative part of it, right. I mean I think every new business owner just isn’t aware of the administrative stuff. And also the fear of missing something, right. What have I not done. what what tax filing have I not done or you know something like that, right? So there’s always that which was not a major issue but it was an additional burden.

 

When I think the biggest part of it was, I was just doing everything. And you come as a as a business owner you come to a point where you’re doing everything and you’re involved in everything. And then you’ll come to a point where you have to delegate stuff. And finding the right balance of when to do that and how to do that is I would say it’s more art than science. And other things like scaling RIT infrastructure that’s never really a decision I’d make before. I’m a math nerd and economics and data nerd, right.

 

So you know those types of decisions were really new but also on the customer side. Although, I had been customer facing when and this is kind of a no-brainer of course but when you don’t have a big brand behind you. Getting to the right people is a much more difficult process. And so we, I knew that coming out of the gate but I underestimated how hard it would be.

 

We started talking with some of our sales partners right away. Knowing that they wouldn’t give us a yes, right away but starting the relationship so guys like oracle guys like Bloomberg, Microsoft, Refinitive Tompson, Reuters these guys are all major partners for us now. Major sales channel partners and it took us four to five years to get those relationships moving and commercialized. So for a small business owner who is looking at channels as a major part of their business strategy. I would recommend you have to start talking to those partners right now like a year or two or three before you intend on getting your first dollar.

 

And so the other part as we’ve grown is we’ve had to think through, what do we do well as a company. And what’s best for us to outsource so things like HR. You know what, we don’t have an HR team. We have an outsourced HR firm, right, that’s a no-brainer but you know I can’t do it all myself. I don’t know the laws and stuff so we have outsourced HR. As I said with our channels we are scaling up our sales force but to have that as a kind of a force multiplier is huge for us, right. And things like marketing we have a marketing team in the Philippines and we have some marketing here but where can we get great skills at the best price really, right. And so we have to look around to find out you know what that stuff looks like.

 

We don’t have any of our data science team or any of our developers offshore. They’re all here in the US and part of that is for our client base. We don’t want things going to Eastern Europe or Asia or whatever but where we can push things off and make sure that we keep our core business. We’re happy to push things off. And so what I mean is we are a technology company, okay. We are not a human resources company we are not a marketing company and we’re not a consulting firm. And so we partner or outsource so that we can stay small and scale but do it very very well.

 

JC: Yeah and really even still that’s giving you the ability to scale because you’re not having to hire in like you said a whole team of HR. It’s a lot more cost effective especially for a smaller business to say hey we’re going to go pay a much smaller fraction of that to an outsourced group still allows you to scale and grow the business but at a much slower cost at that point.

 

TN: Right.

 

JC: So kind of what was that did you just walk into that and say day one we’re just not going to do HR. We’re just not going to do marketing etc. or was that kind of a a transition process because I know a lot of people will try to do some of it before they finally throw up their hands. And say okay, yeah this is not us or how quickly did you make that handoff there.

 

TN: That was immediate. I knew we didn’t want to do that from the start. Just from my corporate experience I knew that that wasn’t something I knew that we would spend a lot of money there not necessarily get good value. And so when somebody is a vendor you can you know you need some output, you need some outcomes. And so we just chose to make some of those guys vendors instead of making them full-time employees.

 

JC: So I’m curious since obviously you’re a numbers driven company accounting stuff like that. What does your relationship with some of these vendors look like how much of a numbers kind of basis relationship are you doing with them or are they is that more free flowing?

 

TN: Well, U think when you say numbers basis what what do you mean by that? I’m sorry.

 

JC: A lot of times. I’ll work with companies to sit here and say okay we’ve still got to measure our return on ROI kind of a thing on everything. So do we have specific numbers do we have specific milestones measurables et cetera tied to outside vendors the same way as we’d have tied to an employee?

 

TN: Oh, yeah absolutely. So like with our HR you know our outside stage our vendor. What we get from them on a monthly basis, I would probably have to hire a couple people to do internally. It just doesn’t make sense for us the the fully loaded FTE costs are just way too much. On the marketing side, unless somebody has absolutely stellar marketing skills, a lot of the direct marketing campaigns, social media marketing all that stuff for a firm our size at least it just doesn’t make sense to hire somebody. We can direct that activity manage it every day that sort of thing but the execution of it is better outsourced because we can do better with an outsourced vendor like dramatically better than we can by hiring those people directly, right. And so and so and we’re not talking a small kind of we’re saving 20% we’re saving a lot more than that by hiring marketing people directly.

 

JC: Yeah, that makes sense.

 

TN: Yeah and so I think again with most of the decisions we make. We really question how core is that to our business does it add to the technology, does it add to the customer relationship? And that’s really what it comes down to so I think we’re you know we’re at a place with things like video calls. And with a lot of the other technology that’s come around over the last 10 years. Where you don’t necessarily need that you don’t need everything in house it’s just not necessary. And if I have a vendor then I don’t necessarily have to pay for them to learn. If somebody is on staff I have to pay for them to learn. And so it’s not necessarily all fully productive time, right. And so again we’re very results oriented company. And so again we think through all that stuff. So for the guys who are watching your podcast. I would say look you know if you’re growing a company you really need to think through what your head count expectations are. What are they doing can you get that outsourced do you absolutely need to hire that person or can you turn it into an invoice.

 

JC: Yeah and that’s that’s really the the key because I see a lot more today of having a lot more availability and options of those outsourcing kind of a thing. That it’s not just necessarily the one big accounting firm that you had to be local face to face meeting somebody with the technology these days. I can have my account on the other side of the country kind of a thing and it’s just no big deal or I can have a marketing firm like you said all the way over the Philippines. It’s no big deal at that point so it’s almost it’s driven competition in those fields for sure. So it’s really almost like you said a no-brainer that okay why would you why would you want to go build your own in-house marketing firm when you’re a technology company or when you’re a financial services company something like that. It’s like that’s not your core business but still really identifying that core business is obviously the key there.

 

TN: Right.

 

JC: So talking about that core business you said you kind of made a an evolutionary change there with within your own company of saying okay consulting to now today being the the 100 product focus. What did that process look like or I guess for that matter? Why did you necessarily say because a lot of people I was that was my own background coming out of corporate America was, okay we’re going to be a consultant kind of thing. So how did you go from the consultant to saying okay we need to do something different or something transitioning towards the product side?

 

TN: Yeah, it’s very simple. As a consultant my upside is limited. I only have so many hours in the week and I can only bill against those hours. And if I hire people the upside is limited for them, right. So and if I want to grow a large revenue base I then have to hire a lot of people and then add x percent on top of their cost. And you know if their time isn’t sold then I can’t hire them anymore, right.

 

So I just got really tired of being the main guy consulting and you know billing against my hours. And so we productized because you know I wanted to make sure we could scale the kind of intellectual property that was in my head. And build that out as much as possible. Now that process was a it took a lot longer than I thought and a lot longer than I had hoped. That transition really took 18 months to two years. So you because you know, I had resources that were helping us on client engagements. I had to take them off of client engagement so they weren’t revenue generating to develop the IP around our product business because they can’t do both, okay. They can’t serve clients and develop IP because the development of  IP always gets put off. And so I had to make as a business owner, I had to make a very hard decision to say we’re going to stop you know selling, right now, okay.

 

And I’m going to pay the cost on these resources to develop this capability so that we can then productize it in 18 months time. And that was a very very hard decision but we did it because we had to otherwise I would have been flying all over working you know 90 hours a week, all that stuff. And we did it we bit the bullet and we came out with some pretty amazing capability.

 

JC: Oh and that’s really the key to me of saying, yes it’s a longer term vision you’re playing the longer game there even like you were talking about with the channel partners. Okay, you gotta start investing in things now looking towards that that longer term goal. And if you’re only looking towards next quarter, next month even next year. You might not necessarily have made that change to go product because you’re just looking at okay how can we get more billable revenues here in the next quarter.

 

So yeah it’s looking at that so kind of going down that direction. What does what does the vision look like for Complete Intelligence? Well how do you define vision from a company perspective and what’s your what’s your bigger picture vision there since it obviously sounds like you’re one to look longer term than just focusing on the immediate short term?

 

TN: Yeah I think so so our focus is really to continue to build out what we’ve started to do which is licensing sales for our core capability and aligning with other products. So how do we get built into core let’s say core erp software or core e-procurement software or you know something like that. So that a client doesn’t even have to think about working with us it’s just all baked into that software, right. And so that’s part of the vision.

 

The other part of the vision is how do we ensure that the results of our efforts are easy for a client to work into their internal processes. So just producing data or just producing something. If it’s an extra step then it’s a hassle for people, right. So how do we make sure and part of this is integration with other software that sort of thing but how do we make sure what we’re doing is really really easy for our customers to use. So that it helps them rather than adds more tasks to their day.

 

JC: Makes sense. So a lot of times I’ll see this where the the company owner. I’m not saying you are but the company owner has the vision there the ideas going forward how do you bring that down or how how do you bring that down in your own company to the team to say okay there. How do you get them bought into that vision or them understanding that vision internally?

 

TN: I think anybody doing that has to be comfortable with a lot of kind of a lot of mistakes and ongoing iteration of processes. I may have a short-term view of things that may not be right my team may be doing stuff that ends up wrong. I have to be okay with that and we have to learn. So and it’s not that’s not a luxury if you’re doing something like we’re doing we have to be a learning organization that is always seeing things that aren’t just right. And say okay that’s not right let’s take a couple days fix it. And then we’ll you know we’ll roll it out again or something like that, right. So as a software company we can do that. If we were making something physical it could, it would be different.

 

JC: Yeah.

 

TN: But as a software company we can iterate as we’re going, right. And so I think delivering that vision is really helping people understand on an ongoing basis. What the original vision is but then adjusting incrementally on a regular basis. And those regular adjustments they may be technology issues where we can’t actually do what I want to do, okay but that’s fine we iterate and we move along toward that path.

 

JC: Makes sense. So running a little long here running out of time. I always like to kind of come back and we we’ve talked about a bunch of different things over time but still what is kind of the best tip the best strategy that hey if I had known this six years ago. When we started the company or if I had this in mind this path in mind things might have been easier? What comes to mind as being your kind of your top idea here that wish I’d known this or thought about this or done this earlier?

 

TN: I think you know the biggest thing that I would have done is really thought through what I needed in a management team. If you’re scaling and you’re building the people who you put in place in a management team are really really critical. So what I would say is higher lower levels first and then make sure that the senior level management team that you’re hiring is somebody that you can really trust and someone who can really manage a team.

 

So put off those senior hires as long as possible. And it’s going to be painful and it’s going to mean you’re going to have to work a lot. And you know that sort of thing but higher low first then higher the upper levels, okay. And that’s almost the opposite of what say a venture capital investor or something would tell you. They want to see a management team but the fact is you need execution and then you need to build into those senior people that you can really trust to execute on the vision.

 

JC: That makes sense that’s interesting since we hadn’t touched on that one yet. I was figuring you’d go different directions but yeah I know a lot of times I’ll see that especially with the small ones if you’re don’t not having to do venture capital or stuff like that because I do agree there but a lot of times it is. Still it’s almost more the challenge that was what I run into of you start building out the lower levels. And you’re still trying to wrap your arms around it for honestly too long before you start introducing that management but yeah it’s doing that lower level and really understanding what’s going on first. And making sure you’ve got to keep handle on it before you can start bringing in people and really focusing at that point on.

 

Okay, what even going back to like what you were saying. Okay, what’s our core focus in the business this turns into. Okay, what’s your core focus as a leader to say. Okay, what are the aspects that I don’t want to do that I don’t enjoy doing that I don’t do well etc to hire on but yeah I like that from the focus on on building out the lower level team first that makes a lot of sense because a lot of times you’ll see startups said hey here’s our full sweet sea level
suite all these people we brought in it’s like. Okay, who’s actually doing the work at this point so yeah very cool, right?

 

TN: That’s right.

 

JC: So the listener wants to learn more about uh your company about Complete Intelligence about yourself where can they go find some more information here?

 

TN: Sure, so you can find us on on the web at completeintel.com. On social media on twitter we’re @complete_intel and you know just look us up online and we have a lot of interviews. A lot of resources on our website to find out more.

 

JC: Okay, we really appreciate it so thank you for taking time out.

 

TN: Thanks Jeff.

 

JC: Thank you.

 

TN: Thanks have a great day.

 

Categories
Podcasts

WHO says there’s no link between the Oxford-AstraZeneca vaccine and blood clots

Tony Nash joins Rahul Tandon at the BBC Business Matters podcast and they discussed worries about the Covid vaccine AstraZeneca in Texas. Also discussed during the show are prevalence of electric cars in the street of America — is it now a more common scenario? And with Volkswagen and other car manufacturers jumping on the electric car making, what will be Tesla’s future now? Lastly, Oscars this year and next.

 

This podcast was published on March 16, 2021 and the original source can be found at https://www.bbc.co.uk/sounds/play/w172x1999n85jh0

 

 

BBC Business Matters Description:

 

The WHO’s conclusion came after several European countries have suspended the use of the Oxford-AstraZeneca vaccine, including France and Germany. But as the numbers of Covid-19 cases rise in Europe, what will this mean for the vaccine rollout? We speak to epidemiologist Dr Maria Sundaram.

 

Volkswagen has announced plans to increase its car battery production and charging network across Europe, the US and China. Nikki Gordon-Bloomfield is a tech journalist who specialises in electric vehicles, and was watching VW’s announcement.

 

Also in the programme, with obesity believed to be a major factor in which countries have the worst Covid-19 death rates, the BBC’s Manuela Saragosa reports on whether it could mark a moment of reckoning for food and beverage businesses, in terms of making their products more healthy.

 

Plus, the shortlist for this year’s Oscars has been released. KJ Matthews is an entertainment reporter in Los Angeles, and tells us what this year’s selection says about the impact of the pandemic on filmmaking, and progress made towards diversity in the industry.

 

Rahul Tandon is joined throughout the programme by Karen Lema, Reuters bureau chief for the Philippines – who’s in Manila, and Tony Nash, chief economist at Complete Intelligence in Houston, Texas.

 

 

Show Notes

 

RT: Tony, when you when you hear that from Karen, the U.S. is moving on with great speed when it comes to vaccination. Incredible numbers there. Are you seeing that in Texas as well, or is there a bit of vaccine hesitancy in Texas?

 

TN: I think there’s there’s a bit of both. So we in Texas, we’ve given about eight point three million doses of the vaccine. We have something like three million people who have been fully vaccinated. People are prioritized if they want to get vaccinated. Vaccines are available. We’ve had about almost 10 million doses shipped to Texas. People who want it are signing up and getting it.

 

RT: When you look at what’s happening in Europe at the moment, AstraZeneca is vaccine hasn’t been cleared yet in the U.S., even though I think you have 100 million doses that you’ve bought, what do you make of them? What do you think Americans make of what’s happening with AstraZeneca in this part of the world?

 

TN: I think most people honestly look at the Covid vaccine and believe it’s kind of all the same thing. And but I also think that communications around what it actually does could have been clear and could have been better. And also the fact that this is such an early vaccine, I’m not sure that the risks have been highlighted.  The person you interviewed talked about the risk communications. I’m not sure that was really done very well. I think it’s been positioned as only the benefits. But it’s really hard knowing that it’s such a young drug. And so I don’t blame the people who are worried about it because these are really innovative drugs. That’s great. It’s amazing, but they’re pretty untested. And so it makes sense that people are worried.

 

RT: Tony, you’re in Texas, a part of the world that, of course, we associate with oil very much the emergence of the electric car. It’s something that we’re going to see a lot more of on the road. Does that cause concern in Texas?

 

TN: No, Tesla just moved a big facility here. So Tesla now has its largest facility in Austin, Texas. So we have oil and gas firms and electric car firms here. So like it or not, Texas is the future.

 

RT: You always like to tell us that here on on Business Matters, but some of the things that Volkswagen is talking about are going to be a challenge to Tesla because they do have huge pockets which could see them challenge Tesla as the leader in this particular facility.

 

TN: Tesla had a head start among the big guys, but the big guys have distribution networks, they have maintenance networks, they have a lot of things that Tesla doesn’t really have. I think that as you have the Volkswagen’s, the Toyotas and other guys really come in a big, big way, along with these national charging networks and and other stations, I think we’ll start to see a lot of competition with Tesla. Not that I’m rooting for this, but it’s possible that Tesla is brought down to earth in terms of expectations. So it’s seen as a normal, as other car companies become electric car companies.

 

RT: Can I come back to you quickly here, because we’ve talked to you about it. How many you had that cold snap in Texas recently, heavily covid, where there was a lot of homes that were allowed without electricity for a long period of time. I was just reading an article which said that electric cars could have helped in that situation because people could have used some of the battery power. Do you think that is something that people will look at in the future?

 

TN: It’s an electric car. It’s just a big battery with four wheels and a couple of computers. So, you could have pulled your car into your home and potentially used that as a generator as needed. In fact, some people use old Tesla batteries as backup power for their homes, though, use solar panels, power up their Tesla battery and use it to power their homes. So they could have been helpful. But whether it’s an electric car or just a backup battery or a generator, it would all kind of achieve the same thing.

 

RT: And just paint a picture for us when you’re out there on the open roads. What do you see around you at the moment? Is it a lot of four by fours? Are we seeing more electric cars?

 

TN: Well, we’re definitely seeing more electric cars. I wouldn’t say they’re uncommon at all. They are more in affluent areas and you’re still seeing a lot of trucks and that sort of thing. So it’s a mixed. But, yes, electric cars are becoming a larger portion of the overall mix.

 

RT: And, Tony, if I can come to you here first, the U.S., one of the countries that’s really suffering from obesity levels at over 40 percent of the population at the moment post the pandemic, even during the pandemic. Are we seeing a much bigger debate about obesity taking place?

 

TN: I don’t really see people here talking about it. I think you’ll be shunned if you bring up obesity as a potential causal or coincidental factor. So I’m glad that the discussion is happening in Europe and I think it’s a healthy one to have.

 

RT: Do you see I mean, one does want to stereotype, but when you think of Texas, you probably don’t think the most healthy food. Is that a fair comment?

 

TN: I’ll be careful here. You could say that we’ve got all kinds of food here. People were farmers, right. And they burned a lot of calories during the day. So they ate hardier food. And, yeah, the traditional southern food is pretty rich.

 

RT: Yeah. I must say, listening to that report, I now come to regret the two pieces of cheesecake I had prior to the program. I am probably in the overweight. What about things like sugar taxes? Because this obesity is having a huge impact on health care health systems, isn’t it, on health care services as well? Would sugar tax work? What can we do to persuade people to try and eat more healthily?

 

TN: It is. But I think it would be a punitive tax disproportionately affecting people who can’t afford to eat healthier food. I think it’s really problematic whether people either can’t afford to eat better food or choose not to. And so I think things like a sugar tax, people need to eat what they want to eat. They suffer the consequences. And that sounds maybe dismissive. But I think, people need to take care of their own bodies and they need to choose what they eat.

 

RT: But sometimes we have to step in. I mean, in the same ways as government stepped in with smoking, if obesity is going to have a huge impact on people’s health, a huge impact on our health care services.

 

TN: But part of the reason people stop smoking is because insurance rates, health insurance rates went up dramatically if you’re a smoker. So if you’re obese, if your health insurance goes up dramatically, then that would be a huge disincentive to be obese. There are taxes on cigarettes. So kind of tobacco consumption plays both sides of that coin.

 

RT: K.J. Matthews is looking forward to this year’s Oscars. I’ve seen the trial of the Chicago some very good. I don’t see many of the others on that list to have you, Tony.

 

TN: No, I haven’t I don’t know how I missed them all, but I missed a lot of them.

 

RT: Never mind. We’ll make sure that, you know, before your next appearance and you can review them for the fact that we’re seeing a more diverse list of nominations there, Tony. That just reflects the changing nature of the industry, doesn’t it, that we see a lot more black as we see a lot more women directing films, and that’s a good thing?

 

TN: My youngest son is ethnically Indian and he’s also an actor. And so when I see stuff like this, I think of him and I think, great, he’s got a shot at awards and roles just like anyone else.

 

RT: Do you worry that when he entered the profession that he wouldn’t get so many roles?

 

TN: And I always find that. So yeah.

 

RT: But because of his background, because of that side of his background, did you worry more?

 

TN: Well, yeah, absolutely. So even right now, he’s in a play and he was cast in a role that wouldn’t necessarily have an Indian in that role. And he was so good they cast him, which warms my heart. So, I expect him to be as good or better than anybody. I don’t care what color they are. And if he’s not as good or better than them, then he shouldn’t get the role. It’s just it’s a tough business, right?

 

RT: I was saying this is clearly a chip off the old block. If he’s quite good at that. I think every part of the world loves movies, then they very quickly turn into and on good for the streaming services this year because of the pandemic. Do you think we could see the studios hitting back next year when when we have the Oscars, if things do get better?

 

TN: They could. It really all depends on how things go and how cinemas and all this works, but yeah, I can see him heading back. Absolutely.

 

RT: Well, let’s see what happens with the Oscars next year. Let’s see who wins this year at the Oscars.

Categories
QuickHit

Future of the US Dollar: Weaker or Stronger?

Commodities expert Tracy Shuchart graced our QuickHit this week with interesting and fresh insights about USD, CNY, oil, and metals. Will USD continue on the uptrend with Yellen on board? What is the near-term direction of CNY? Will metals like copper, aluminum, etc. continue to rise, or will they correct? Will crude continue the rally or is it time for a pause? Watch as Tracy explains her analysis on the markets in the latest QuickHit episode.

 

💌 Subscribe to CI Newsletter and gain AI-driven intelligence.

📺 Subscribe to our Youtube Channel.

📊 Forward-looking companies become more profitable with Complete Intelligence. The only fully automated and globally integrated AI platform for smarter cost and revenue planning. Book a demo here.

📈 Check out the CI Futures platform to forecast currencies, commodities, and equity indices

 

 

This QuickHit episode was recorded on March 12, 2021.

The views and opinions expressed in this How robust is the global financial system in the wake of Covid? 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: I’ve been focused for the past few weeks on the Dollar and Chinese Yuan and on industrial metals. Can you talk to me a little bit about your view on the Dollar? What’s happening with the Treasury and Fed and some of their views of the Dollar and how is that spreading out to markets?

 

TS: Right now, we have a little bit of mixed messaging, right? So, we have the Fed that wants a weaker Dollar. But then, we have Yellen who’s come in and she wants a strong Dollar policy. So, I think that markets are confused right now. Do we want a weaker Dollar or do we want a stronger Dollar? And so, we’re seeing a lot of volatility in the markets because of that sentiment.

 

TN: So who do you think’s gonna win?

 

TS: I think that Yellen’s going to win. I think we’re probably going to get a little bit of a stronger Dollar. I don’t think we’re going to see a hundred anytime soon again. We’ve seen stronger Dollar when she was at the Fed. She’s come in right now and said that she wants a stronger Dollar. We would probably have at least a little bit more elevated than the low that we just had, like 89.

 

TN: I think things are so stretched right now that even a slightly marginally stronger Dollar, let’s say to 95 or something like that would really impact markets in a big way.

 

I’ve been watching CNY. I watch it really closely and, you know, we bottomed out, or let’s say it appreciated a lot over the last six months. It feels like we bottomed out and it’s weakening again. What does that mean to you? What is the impact of that?

 

TS: The impact obviously will have a lot to do with manufacturing, with exports, and things of that nature. So if their currency starts depreciating, and they’re going to export that deflation to the rest of the world, it’s just starting to bounce over the last week or so. Unless we have another trade war, I don’t think we’re probably gonna see like seven, seven plus. I remember last time we were talking about it, we were talking about it’s going to be 7.20 and you nailed that. It’s definitely something to keep an eye on obviously, because they’re such a big purchaser and because they’re such a big exporter.

 

TN: We’re expecting 6.6 this month, and continue to weaken, but not dramatically. We’re expecting a pretty managed weakening of CNY barring some event.

This China discussion is from our Telegram Channel. Join us here: https://t.me/completeintelligence

 

This chart was generated using the CI Futures app. For more information about it, go to https://www.completeintel.com/ci-futures/

What I’ve been observing as we’ve had a very strong CNY over the past six months is hoarding of industrial metals and we’ve seen that in things like the copper price. Have you seen that yourself? And with a weaker CNY, what does that do to some of those industrial metals prices in terms of magnitude, not necessarily specific levels, but what do you think that does to industrial metals prices?

 

TS: We’ve been seeing that across all industrial metals, right. It hasn’t just been copper. It’s been iron ore. It’s been aluminum. It’s been nickel. We’ve seen that across all of those. China likes to hoard. So when everything was very cheap like last summer, when everything kind of bottomed out, they started purchasing a lot. Then we also had problems with supply because of Covid. So prices really accelerated and then suddenly we just had China’s currency pretty much strengthened. We’ll probably see a pullback in those prices. It’ll be partly because of their currency. If they allow that to depreciate a little bit. And then also, as extended supply comes back on the market.

 

But it’s even getting to the point now where if you look at oil, oil prices are getting really high too. We’ll likely see China scale back on purchases, probably a little bit going forward just because prices are so high. Or we will see them, which we’re seeing now, is buy more from Iran, because they need the money. They get it at a great discount. It’s cheap. If they start buying more from Iran, that takes it away from Saudi Arabia and Russia, who are the two largest oil producers.

 

TN: When I look at Chinese consumption, at least over the past 15 months, there’s been almost an adverse relationship of CNY to USD and say industrial metals prices. It looks like a mirror. Crude oil doesn’t look that way. It’s really interesting how the crude price in CNY there really isn’t that type of relationship.

 

One would expect that if CNY devalues, they’ll necessarily cut back on purchases. I would argue and I could be wrong here, that it’s not necessarily the currency that would cause them to cut back on purchases. They’ve hoarded and stored so much that they don’t necessarily need to keep purchasing what they have been. Is that fair to say?

 

TS: They still like to hoard a lot. Between January and February, they were still up 6% year over year, where January was very high, February was lower because they have holiday during February. Oil, that is different. It’s not really related so much to their currency because you have outside factors such as OPEC, which has really taken eight percent off the market and they’ve held that over again for another month. And the fundamentals are improving with oil. I’ve been seeing a lot of strength in the market over the last eight months.

 

US is the world’s largest consumer. Whereas you look at something like industrial metals, they are the world’s largest consumer. When we were talking about crude oil, because that’s spread out so much, they don’t really have that much pull on the market per se that they would in metals markets.

 

TS: And I’ll remind you. I’m sure you remember this. When we spoke in Q2 of 2020, you said it would be Q2 of ’21 before we even started to return to normal consumption patterns for crude and downstream products. I think you hit that spot on. And it’s pretty amazing to see. I had hoped that it would return sooner, but of course it didn’t.

Categories
Podcasts

Synthetic Economy

Tony Nash joins the BFM Morning Run podcast from Malaysia and explained why we have synthetic economy and how to navigate through this. Also discussed are tech stocks — is this the end for them?

 

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

 

❗️ Check out more of our insights in featured in the CI Newsletter and QuickHit interviews with experts.

❗️ Discover how Complete Intelligence can help your company be more profitable with AI and ML technologies. Book a demo here.

 

 

Show Notes

 

WSN: Nasdaq closed sharply down last night, continuing a trend that sees it almost erased all its year-to-date gains led by declines in Apple, Amazon and Tesla. Is this the end of big tech?

 

TN: I don’t think it’s the end of big tech. I think investors are taking a pause. We saw tech jump a lot in the wake of Covid. Investors are really starting to wonder how much additional growth is there over time. We’ve seen the work-from-home stocks and other things really get lifted through Covid. But how much immediate rapid growth is left is where a lot of the investor questions lie.

 

WSN: Is this also the beginning of a trend where we really see the rotation from growth into value?

 

TN: “Value” is a scary word right now. It has been for a long time. We have a ways to go, but I think we could get there. We’ve been talking for a few months about a pullback in March and we expect the pullback to continue and will begin to recover in late March, April. So we think this has a little ways to go unless there’s dramatic intervention by central banks and other things. But we think this pullback is not ideal but it’s necessary given stretched valuations and stretched expectations. So this is healthy for us. We just need to figure out what to do with it.

 

PS: Just give me another angle that instead of looking at it from values about sector specific, because yesterday, energy and financials did do relatively well. But was the energy upside due to the rising prices? And how does that correlate with OPEC’s decision coming soon with respect to oil production?

 

TN: I don’t think it gets really much more complicated than rising oil prices. These energy companies generally are still extremely bloated, extremely inefficient. Aside from the crude pressurizing, there really isn’t a lot that we see driving it. So we do expect commodities to take a pause. We’ve expected this for some time. We’ve seen copper come down by five percent or something.

 

Over the past few trading days, crude oil has leveled off in general. It’s not rising as fast as it was. Some of this has to do with CNY starting to weaken a bit. Chinese and the U.S. Dollar to start to strengthen their sort of related, but they’re not necessarily one and the same. So as we see some of that, an unraveling of some of that, Kerry, we’ll see some commodities start to come off of it as well.

 

WSN: BDA shows that the U.S. manufacturing grew at its fastest pace in three years. So are we really on the road to recovery?

 

TN: I don’t necessarily think that the economic growth expectations that we’ve seen from economists saying seven percent growth or something like that are necessarily the right way to go. When we look at the growth that we saw in Q4 and the growth that we’ve seen in Q1, I’m not sure we’re already back, at least in the U.S., to where we were before the virus. And so it’s really questionable for an economy that’s been growing one to three percent, depending on the year. Is a seven percent growth rate really warranted? Additionally, when you see things like deflation and the Chinese CPI, those two growth engines, we’re not necessarily seeing the rapid growth that some people have been claiming.

 

PS: Just another angle then, which is employment data, because December, January data didn’t meet expectations. What’s your outlook for February then?

 

TN: It’ll probably be OK. I think if the employment data is extremely positive. The US is susceptible to politicization of macro data just like everyone else. If we see a pop in employment data, I think they would be revised out. All of these macroeconomic indicators are revised three or four times. If we see a pop in a sample of employment data, which they look at a subset of houses and companies, they don’t look at the entire economy. If we see a pop, which we’re not necessarily seeing, we think that would be revised out over time. So I would say be really careful about optimism here. OK, it’s great. I live in Texas. We just announced that Texas one hundred percent open yesterday. All this stuff. It’s great to be optimistic, but we’ve really had synthetically driven growth. It’s not necessarily real growth. It’s all subsidized growth in many, many countries over the last, say, nine to 12 months.

 

WSN: That’s very true because this the twin Goldilocks effect of monetary and fiscal stimulus but somewhat related to unemployment numbers is that if the number is better on Friday, do you think markets might get nervous? Because that’s one of the indicators the feds are looking at to raise rates.

 

TN: We’re in that place where bad news is bad news and good news is potentially bad news. So we really have to be careful. What’s going to happen to Treasuries? Is the Fed going to raise rates? How does all that work if we start going to hot? I think it’s the right question that you’re asking. When we have an equity market and global equity markets that are so stretched, if the cost of money, which is what interest rates are, starts to rise, then we really have to be careful about equity valuations.

 

PS: During a deep dove into a specific sector, which is basically all this office collaboration companies like Zoom and Slack, what’s your outlook for those kind of sectors in the short term and mid-term?

 

TN: It’s good. They’ve grown a huge amount over the past year, but I really think we have to look at what growth is. They’re likely going forward, meaning there is growth. But is it as fast as what we’ve seen over the past year? I think the answer is probably no. They are probably also working on their revenue models to monetize some of the things that they’ve been giving away for free for the past year. Like a Zoom call is free. How do they monetize those things? That’s a serious question, but what are they substitution for and what do they enhance?

 

They’ve been substitution for meeting face to face people in the same office. But as more places go back to work, albeit slowly, they won’t necessarily need that for day to day, although it’ll still be used. Again, my question is the growth will be slower, but I would hope it’s better growth, meaning more monetized growth.

 

WSN: All right. Thank you for your time. That was Tony Nash of Complete Intelligence, giving us his views on markets and a very important point in that all these work from home teams may be the easy money is made because we did see stellar growth. Right, as everyone switch to zoom calls and all these kind of new technology. But now the question is, are we going to really see profit coming in? Is there going to be margin expansion?

 

PS: I want to know how they’re going to monetize and whether they’re going to expand the services beyond what they do. As Tony, you see, a lot of it is kind of free of charge. So what is the business model going to evolve to deliver sustainable profit? It’s a big question mark for me.

 

WSN: Yeah, and one company which hasn’t impressed is actually Snowflake, and that’s a data cloud company. Now, they announce a revenue for fourth quarter, which came in at one hundred and ninety million U.S. dollars, slightly better than the one hundred seventy eight million dollars that was expected. So this represents I mean, it is impressive when you just look at the headline numbers. It represents one hundred and seventeen percent growth year on year. But like as Tony highlighted, this company actually suffers a net loss.

 

So their net loss widened to one hundred and ninety nine million U.S. dollars. That’s more than double that 83 million in the. The same period a year ago.

 

PS: Yeah, I mean, the markets didn’t like it because the stock dropped eight percent on Wednesday. I mean, just a reminder to all of you guys, Snowflake was the largest IPO in 2020. Right. So with respect to guidance, snowflakes specs 185 to 200 million U.S. dollars in productivity in the first fiscal quarter, which is will be up about 90 to 96 percent year on year.

 

WSN: So, yeah, you can be hard on a stock that has a fantastic concept data. Right. Everybody wants that in the clouds. But in a day, patience with investors will run thin if you don’t make money. And that’s the reality of any business. So I think, like you sit like what Tony highlighted those companies where you see stellar revenue growth, but not profit after a while.

 

Market’s not going to tolerate it for that long. And when they issue like a set of results, which are below expectations and widened widening, no losses, no end to that, you know, no no sense of when are they going to turn around. I think you then see that sharp sell down again.

 

PS: And take, you know Tony, said something really interesting. Bad news is bad news. Good news could be potentially bad news.

 

WSN: Is that there is the cup half full or is it half empty? Sometimes the market is like this, the same set of data. Depending on the mood, the sentiment can be viewed either very positively or negatively. So if you get a better data but you’re in a positive mood, you can say, oh, the worst is over, let’s look forward.

 

But if you’re in a bad mood or you think the market’s being pessimistic and resolve, everyone’s like, oh, no more to come. So who knows? But up next, we’ll be speaking to on JinMing MP for Bungay about Malaysia’s economic recovery. Stay tuned. BFM eighty nine point nine.

 

Categories
QuickHit

QuickHit: How robust is the global financial system in the wake of Covid?

This week, we are joined by Seth Levine of the Integrating Investor, a professional investor and investment market blogger, sharing to us his thoughts on the current financial system, central banks, and debt cycles.

 

Seth Levine is the author and creator of the Integrating Investor Blog. Seth is also an avid coffee roaster, who influenced Tony Nash into roasting as well.

 

💌 Subscribe to CI Newsletter and gain AI-driven intelligence.

📺 Subscribe to our Youtube Channel.

📊 Forward-looking companies become more profitable with Complete Intelligence. The only fully automated and globally integrated AI platform for smarter cost and revenue planning. Book a demo here. simplify financial planning.

📈 Check out the CI Futures platform to forecast currencies, commodities, and equity indices

 

This QuickHit episode was recorded on February 19, 2021.

 

The views and opinions expressed in this How robust is the global financial system in the wake of Covid? 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: We have a new administration in the U.S. We have Jerome Powell, Central Banker who’s been there for a while. We have Janet Yellen coming in as a treasury secretary. But we’re also late in this Covid cycle with a lot of overhang and bad policy decisions. Some people may like them. But we’ve got a lot of things that need to restart. At the same time, we have Europe that is still shutting things down and the ECB and we have demographic issues in Europe. All those sorts of things.

 

I’m really curious about in the financial system, but more specifically, central banks and treasury. What are your thoughts on where we are and where we’ll likely go in the next year or so with those financial system central banks and treasuries, what does it look like from your perspective?

 

SL: The financial system is just a really interesting topic all together because it is a very big word, a very big concept. And it’s an abstraction that a lot of people grasp onto, and some of the work I’ve done a couple years ago, I really tried to untangle that abstraction and concretize it and what I found is that, when we say “financial system,” we’re really just talking about a system of interconnected banks.

 

So at its base, we’re talking about very simple banking. Banking is complicated. But when I think about banking at its core, what is it? It’s really just a carry trade. If you have bank XYZ, you take in deposits and then you try and invest those and earn an asset yield that’s an excess of your deposits. And you keep a little bit in your deposit and you keep a little bit behind for reserves, i.e. liquidity.

 

It’s a leverage system. When we talk about the global financial system, we’re really talking about a leveraged system of interconnected, financial services companies. And that’s what we see on the screen. They’re in the markets for bond stocks, derivatives, all sorts of things and it is giant. Because we not only we have Central Banks. We also have what’s called the shadow banking system. Or some people call it the Euro-Dollar system.

 

So we look at what has happened over the course of my life. I really see this carry trade being squeezed in one direction. The funding side has perpetually been squeezed lower. And what’s that done? The asset side has come down as well. But I see all these like market events, whether it be Covid or the bombing event of a couple years ago or any number of market sell-offs. That is a signal that the market is trying to deleverage.

 

There’s been asset mis-pricing on the market and because we’re levered, again the impact is so much greater so the response out of policy makers has always been to lower the funding costs. If the asset yield is coming down, the funding cost has to come down too to keep that carry trade together. And now as asymptotically reach zero, maybe even going the other way, it’s really interesting to see what’s going to happen with that asset yield because again if there’s a mismatch of any sort, that’s when we can start hitting some turbulence.

 

TN: Do you think we’re hitting that mismatch point? We have a lot of precarious events like right now, whether you’re looking at big events like the demographic handoff from baby boomers to millennials, or if you’re looking at Covid or if you’re looking at some specific corporate events or even cryptocurrencies. There are so many different things happening right now that could mess with that carry trade.

 

SL: If you want to talk about cryptos, that’s a separate conversation. It depends on your time frame. If you look long-term, it’s the millennial taking over from the baby boomer and just a giant debt burden that we’ve amassed and I’ll claim it squarely on the fiat currency regime because again if you look at all fiat currency regimes they tend to go in this direction where the spending gets and the debt load tends to overwhelm the productive capability of the current economy and that is an issue that I think has to resolve and how that resolves, I’m not going to say anything unique here, but I believe there’s only three ways out.

 

You can either inflate it away. You can either restructure the debt or the obligations and in this case would probably mean restructuring social security and medicare benefits or you can repay it or default on it, right, which I think repayment is going to be difficult. And default, I’m not sure we need that considering that it’s a fiat currency and we could print it ourselves and that actually leads into what I think is the war of MMT right now and again, if bitcoin is one bottle of tequila I think MMT is a bad case of it.

 

That’s the draw of that because people are trying to find a way out of this and that’s longer term. If we go back to the more near-term view, I think inflation is really an interesting development here. And when we say inflation, I mean we’re specifically talking about CPI growth.

 

So we get to a point where the CPI is going up and bond yields for whatever reason follow CPI growth up, then let’s go back to that carry trade. Now we’re talking about our funding costs going up and asset yields don’t go up. That’s going to be a problem for the financial system and keeping that carry trade together.

 

However, it’s also how to get the asset yields up. Well the price has to come down. So that I think is a pretty interesting potential risk that we may be facing in the economy unless we can really generate the growth so we can get the asset yield up to match the increase in funding costs.

 

TN: I believe we’re in that very precarious position right now as we look at bond yields rising we look at other things. There’s a lot happening right at this very moment and so if you are a Janet Yellen or a Jerome Powell, what are you thinking about, I mean aside from these big problems we’ve talked about, what kind of tools do you think you’re looking at aside from dump trucks of trillions of dollars? Like, is there a lot… Do they have other options, really?

 

SL: I’m gonna answer this in some really different ways. The stimulus route that most people would like to go to, I actually think that’s counterproductive because I think about stimulus right, as opposed to say QE for example, you’re actually giving money in the hands of citizens. These are not institutions. These are actual citizens who are going to go out and purchase things.

 

So that actually I think puts upward pressure on CPI growth in a way that QE just simply did not, just from a pure mechanical perspective. So if that’s the case, we start seeing… So if you go and unleash some stimulus and then you start seeing CPI growth and then you start seeing bond yields go up, I mean you’re actually exacerbating the problem, right.

 

So my preferred method as a pure capitalist here, if I’m Jerome Powell, if I’m Yellen, I’m thinking of ways to get the asset yield up and I mean like bona fide get the asset yield up and from my perspective that’s purely deregulation and going to as free market and economy as possible. But that to me would be the only way of really getting the asset yield up and the growth up that we need to grow our way out of out of the debt load that we’ve created.

 

TN: Okay, interesting. So what are some of those deregulation paths you’d go down? Like again, the broad swallows of them and and how would you sequence that to not have immediately negative impact on the on everything? What would you focus on and how and when would you focus on it?

 

SL: So this is gonna sound like a punk, but it’s not. I think this is a very specialized issue and there are and they’re probably like really good policy makers, policy experts who can actually opine on this. But the way how I like to think of these problems and I get a lot of criticism for this, but it’s really to me the only way, the best way that I know to think about them is think of the end state, think about where we are now.

 

Like, let’s devise the ideal end state and then once we agree on the ideal end state then we could talk about the strategy to get us from here to there in the least disruptive way possible. So I mean ultimately my end state would involve going to a free banking regime. We’ve tried this throughout history. There’s been periods of it in the US. There’s been, it’s been tried best probably in Scotland. There’s also some in Canada.

 

If you’re looking for resources on free banking, I highly recommend the work of George Seljun and Larry White, definitely the foremost experts on the topic. If I were Jerome Powell, the way how I would go. I would try and think of how to put myself out of a job in a sense, which we know is probably unrealistic and probably doesn’t have a lot of consensus behind it but, that’s the way forward I see. These prescriptions that we’re talking about are going to be financial because we are talking about Jerome Powell who’s the head of the central bank. So he is a banker in the financial system.

 

And Janet Yellen is treasury secretary. I don’t really know how much power she has because she’s just trying to fund the government. If I’m Janet Yellen, I’d probably have to get a little bit shorter and then, maybe try and try and lobby for some deregulation angle and take some of that pressure off me to actually to have to fund a large government with that has a very big reach.

 

TN: Sure. Okay and so when we look at going down that path and we look at say the US Dollar as, like it or not, as a global currency, how do other say central banks or financial systems interact with the US as we would potentially move down that path?

 

SL: Sure. So the dollar is very important in the global financial system. It is the base reserve currency. But right now, all currencies are floating right. So I think perception probably has a lot more to do with it than anything else. At least from a fiat perspective, it ultimately, the buck is going to stop with the strength of the US economy. And it’s going to and that’s with any currency.

 

In order to keep the US Dollar as reserve currency, we need the strongest currency possible. That also means honoring the obligations possible. So that puts a lot more pressure on the inflation prescription and on the default prescription. And really I think leaves you with the growth angle as a way to maintain the Dollar’s importance in the system.

 

TN: It sounds to me like you’re fairly concerned about inflation in the coming years. Is that fair to say?

 

SL: I am sort of a secular deflationist and I am for a couple reasons, and it’s probably none that you’ve ever heard before. One I’m just pro, I’m a big believer in human ingenuity and a lot of this has to do with definition, right.

 

If we’re talking about inflation’s definition, right, it’s… Today, people are talking about CPI growth, right. The rate. So that is just the price of consumer goods and services. Right, I mean, that should fall over time. I mean just no… that is, I mean, that is the way of human prosperity. In fact, the only way CPI growth increases are times during shortages and tough times actually, if you look at the inflation we’re seeing now, right? The CPI growth that is like coming because we are seeing shortages throughout the supply chains, right. And that’s okay.

 

TN: So let’s stop there and let’s talk about that in terms of shortages. Do you think we’ll continue, like are those shortages something that are here to stay, let’s say in the short to medium term? Because like you, I’m a technologist.

 

I started technology for a reason mostly because I’m an optimist. So over the long term I certainly believe that prices go down generally because of innovation. But these supply shocks will say almost, a generalized supply shock, that we’re seeing in the wake of Covid, do you think that will be with us for a sufficient amount of time to have an impact on short to medium term CPI and provide a disruption to that balance that you’ve talked about?

 

SL: That’s an interesting question. I think it’s a matter of time frames because I think longer term, right I mean, you’re in business, I’ve been a bottoms-up analyst for 17 years here. And if there’s one takeaway is there’s no better cure for high prices than high prices. And why is that? Well that’s because businessmen and women innovate, they do bottleneck processes and they find a way to improve productivity and bring those prices down.

 

These Covid shortages I believe are temporary because I believe that we’re gonna see business people innovate and try and meet the demand with as much supply as possible for as low as price as possible and to make simply as much profit as possible for them as well.

 

So I think it’s short-term. I don’t have a way to really gauge how long that’s going to be because quite honestly it’s going to be a very micro-analysis. Are you talking about meat supply or talking about the chip shortages, and you know chip shortages that we’re seeing or are we talking about, you know, what what industry?

 

TN: So right. But in general, you think, it’s pretty short-lived. So we may see a short shock but for the most part where that equilibrium that you talk about can remain.

 

SL: Let’s go back to the financial system right back. How quickly is the bond market going to react? I think that’s probably the most interesting part of this conversation.

 

TN: Treasuries have risen like 33% since feb 1.

 

SL: Treasures have more than doubled, right.

 

TN: Exactly. Yeah. Doubled from zero, right.

 

SL: So from a pretty low base, yeah, the ten years specifically. Investors are forward looking and the question is how are people going to react to the perceived rise in CPI growth? How far will this take it? What are also supply demand imbalances within the financial system?

 

These are very complicated systems with a lot of inputs and I think we all tend to fall for this. We try and we oversimplify these because we hang on to a narrative. Let’s just be blunt. Like, I have no idea where else we’re going to go.

 

TN: I think everybody does. We make this stuff up as we go along, right. So bringing this back to say Yellen and Powell and central bankers, the tools that they have, they’re facing the dilemma of stimulus versus let’s say near-term say CPI inflationary activities. Do you see an easy path for them in the near term?

 

SL: I don’t see them as the main players in this argument at all. The central banker’s job, if you go back to the early central banks, it is just simply to try match the assets and liabilities and keep everything together. How much power does he have to juice the asset yield of the economy, and I would say very little. The proof is in the pudding. When look at how economies have performed over the past couple years, no matter how low they’ve taken, treasury yields, you haven’t really seen,  a boom in GDP at all.

 

It’s completely elusive. That’s just because that’s not within his power even though there’s just this belief out there that if you control the liability side cost then, all of a sudden you can control the asset costs and the only lever in there that gets tweaked with is actually the leverage and I think that’s probably the most dangerous thing.

 

TN: So in the short term, we’ll live belong, it sounds like, as usual. Okay. But in the longer term and I want to wrap this up fairly quickly, it sounds like we have to transfer liabilities from baby boomers onto millennials. Do you see any feasible tools for them to do that in a way, you know, that can happen in an organized, won’t be painless, but a relatively organized way. Or will it have to be some sort of disruption?

 

SL: I think the only organized way to do it is through growth, right. You need to come up with policies and again my biases as a capitalist for many reasons, we may need tothrow an extra case of tequila on the truck to get down that path. So that is a tool set that I think is necessary to tackle these problems.

 

If you don’t bring up the asset yield, then you have to deal with the funding costs and again you’re left with three issues and I think they’re all pretty ugly.

 

TN: Great. Seth, on that optimistic note, we’ll wrap it up. Thanks to everybody for tuning in for this QuickHit. Please subscribe below on the page and we’ll see you for the next QuickHit. Thanks very much, Seth. Thanks.