The full episode was posted at https://www.channelnewsasia.com. It may be removed after a few weeks. This video segment is owned by CNA.
Show Notes
CNA: Welcome back to Asia First. Wall Street took a hit overnight amid concerns that a rise in Omicron cases would stall growth and add to inflationary pressures. Experts say supply chains and corporate profits could be dealt another blow as the possibility of increased restrictions is back on the table.
The Dow and the Nasdaq tumbled 1.2 percent. The S&P 500 closed 1.1 lower, with financials and materials among the biggest decliners. Also weighing on sentiment, Goldman Sachs has lowered its US growth forecast for next year. This after Senator Joe Manchin said over the weekend he would oppose President Biden’s 1.75 trillion dollar spending bill.
Let’s bring in Tony Nash. Now, he’s founder and CEO of Complete Intelligence, joining us from Houston, Texas. Lots to talk about today, Tony. So let’s start with Omicron. How much do you think potential measures are going to dent economic growth given the spread of the highly transmissible variant coinciding with the end of the era of cheap money?
TN: Yeah, it’s a good question. I think it really depends on where in the US you are. I’m in Texas and in in certain parts of the country you could barely tell that there’s a pandemic. There aren’t restrictions at all here, in Florida and other places. And also, we had our surge a couple months ago. So we’re on the downside of that surge now.
In the north, where you have kind of seasonal viruses, they’re on the up upward motion of the surge and so there’s a lot of sensitivity in northern states like New York, Boston, or Massachusetts, Washington DC, Michigan those sorts of places. So I think what you’re seeing is a kind of seasonal sensitivity because of Omicron and people getting nervous and so you know, again it really all depends where you are in the US.
For the upcoming Christmas break, flights are packed. Americans are traveling again. These sorts of things are happening. So, of course, there’s always a risk that people will do a hard lockdown like DC has put in some new measures today. But other places are seeing the virus as endemic and just kind of trying to move on with it. So, I think it could go either way but I don’t necessarily think we’ll have sustained negative impact. We could have short-term negative impact.
CNA: What about the risk from Fed moves and do you think the projected three rate hikes next year are going to be enough to contain inflation given the potential for Omicron to cause these price pressures to spike?
TN: Sure. You know, I do think that the Fed will pursue the tightening, meaning of its balance sheet pretty quickly. I think the rate hikes they’ll probably do one and wait and see and then they’ll proceed with the others later.
I think we can’t forget that 2022 is a midterm election year in the US and the Fed, you know, they they try to stay nonpartisan sometimes. But you know, there’s going to be a lot of pressure for them to make sure that the economy continues growing at an acceptable pace and kind of pushes down against inflation, So they’re in a tricky spot so they can’t just go out of the gate with three rises. They have to take one. See how the market digests it. Continue to build up expectations for the later rate rises then proceed based on how the expectations are set in.
CNA: What would that mean for the flows into markets given how Biden administrations Build Back Better Plan is also facing a setback? We could see a narrower bill than the 1.75 trillion on the social and climate front. What then do you think the market drivers are going to be if both the central bank and the government are curtailing that stimulus?
TN: Right. You know it is possible. Like I said earlier, kind of travel those sorts of things are coming back. I think Americans are just dying to get back to something that’s a little more regular, a little less constricted.
You know we do see things like food, entertainment, travel these sorts of things moving. Temporarily, we do see things like technology dialing back. But you know as we get into Q1 or Q2, we think that stuff will come back and be interesting again. So. But not necessarily as much of the work from home activities. People here are gradually getting back into the office.
So you know what we will see say for US equity markets is because tapering and interest rates we will likely see a stronger Dollar and that stronger Dollar will attract more money from the rest of the world as well. So both domestic growth, although it’ll be a bit tepid in ’22 will help to continue to push markets marginally.
We’re not going to see massive growth like we saw in ’21. But the the strengthening US dollar will draw up liquidity from other parts of the world, too.
CNA: Just very quickly if you can, Tony. What do you think the outlook for energy demand and oil prices is going to be like given how some countries are already reverting back to containment measures?
TN: Yeah. Oil is tricky. In the near term, I think oil is a little bit tricky for the next few months. I think the outlook is better as we get say to the end of Q1 and into Q2. But for now, we’re not expecting a dramatic upturn in crude prices like we’ve seen in gas prices in Europe and other places.
CNA: Okay, we’ll leave it there for today and keep an eye on those commodities. Thanks very much for sharing your insights with us. Tony Nash of Complete Intelligence.
BFM 89.9 asks Tony Nash from Complete Intelligence on how China’s PBOC adoption of looser monetary policy will affect the yuan and the broader Chinese economy.
SM: BFM 89 nine. Good morning. You’re listening to the morning run. I’m Shazana Mokhtar are together with Philip See. It is Christmas Eve, Friday, the 24 December 9:06 in the morning. But in the meantime, let’s take a look at the activity on Bursa Malaysia.
PS: It’s flat like Coke without any bubbles.
SM: Oh, no, that’s the worst kind of flat.
PS: Yes, the foot sabotage. Malaysia is flat slightly down .09% at 1515.
SM: So still above 1500.
PS: Still above 1500.
But it’s been yoyoing a bit green and red so far. But the rest of the markets across Asia are in green territory. The Straits time is up at 3100. Cosby also up 58% at 3015. Nikkei also up zero 6%, 28814. Now, just to bring your attention, looking at the crypto Bitcoin 5998.65 above the 50,000 mark. Theorem also uptrend 4114115.184. Now, if we shift over to the currencies, ring it to US dollar 4.11988. You’re seeing some strengthening there. But across the other two currencies pound and sing dollar, we’re seeing some weakness there.
Ring it to pound 5.62967. Ring it to Sing dollar 3.0922. Now, looking over to the value board. Really. Smattering of small caps actually driving it, but cost number one Ata IMS at .72 cent unchanged, followed by SM Track up 13% at .13, followed by Kajura Tran asphas flat at .26%.
SM: Okay, so that is the snapshot of Bursa Malaysia at 9:09 this morning. We’re taking a look now at how global markets closed yesterday.
So if we look at the US markets, they closed in the green. The Dow was up 0.6%. The S&P P 500 was up zero 6% as well. The Nasdaq was up zero 9%. So a lot of optimism going into the Christmas weekend. Joining us on the line for analysis on what’s moving markets. We have Tony Nash, CEO of Complete Intelligence. Tony, good morning. Thanks for joining us today. Now 2022 is just a week away. And given the triple headwinds of Fed tapering, Omicron and a China slowdown, will there be a difference in how developed and emerging markets in Asia are going to be impacted?
TN: I think with the tightening in the Fed and with what emerging markets are going to have to do, meaning in the near term, like China is going to have to loosen. So I think you’ll have a strengthening dollar and more of a rush for capital into the US, so that should at the margin, kind of help US markets stay strong across debt and equity. Other things. I think in emerging markets it could eventually China loosening. The PVC loosening could help demand in emerging markets, but it’s going to be hard to get around the hard slowdown that started in China around Omicron.
PS: I see.
And so when you contrast that to the Fed tightening, right. You said China PBOC is adopting a looser monetary policy. How will this affect the UN in relation to those Asian currencies in which there’s a lot of trade between these two countries?
TN: Yeah. CNY has been strong for a protracted period, and it’s made sense on one level, so China can import the energy and food, particularly and some raw materials that it needs in a time of uncertainty. So the PVC has kept it strong through this period. What we’ve expected for some time. And what we’ve shown is that after Lunar New Year, we expect the PPOC to begin to weaken the CNA. We don’t think it’s going to be dramatic, but we think it’s going to be obviously evident. Change of policy, Chinese exporters, although they’ve been producing at not capacity, but then producing pretty.
Okay. China is going to have to devalue the CNY to help those exporters regain their revenues that they’ve lost over the last two years. So we’re in a strange period globally of moving from kind of state support back to market support, whether it’s the US, Europe, Asia, we’ve really had state supportive industries, state supportive individuals as we move beyond covet. Hopefully we’re moving more into a market orientation globally, and there will be some volatility with that.
PS: Yeah, but I was wondering for China, especially, I’m interested to know what the state of the Chinese consumer will be in 2022 because the government is worried for slow down. Right. And wouldn’t they want to expedite and give a bit more ammunition to the Chinese consumer?
TN: They would. But the problem is with Chinese real estate values declining, a lot of consumer debt is secured against real estate. And so the ability of Chinese consumers to expand the debt load that they’re carrying. Is it’s pretty delicate? It’s a fine balance that they’re going to have to run. So either the economic authorities in China push real estate markets up to allow Chinese consumers to keep debt with their real estate portfolios, or they make other consumer debt type of rules that allow Chinese consumers to hold more debt.
Real estate is the part that’s really tricky in this whole equation in China, because if real estate values are falling, the perceived wealth of those consumers is falling pretty rapidly as well, and the desire to consume excessively, it’s just tempt out.
SM: And I suppose still sticking to our view of China looking at metal commodities, what metals have been affected by the slowdown of demand in China? And do you foresee a recovery for them in early 2022?
TN: Yeah. We’ve seen industrial metals like copper and steel, and those sorts of things really slow down dramatically compared to where they were earlier in 2021. We’re seeing reports of, say, copper shortages at the warehouse level at the official warehouses in China, but that’s not real. What we’re seeing and I speak to copper producers in Australia and other places. What they’re telling us is that those copper inventories are being shifted to unofficial warehouses to create a perception of shortage. So we may see a run. We may see an uptick in, say, industrial metals prices in early 22, but we don’t expect it to last long because the supply of constraint is not real.
So until demand picks up for manufacturing and goods consumption. And the other thing to remember is we’ve had a massive durable goods wave through covet. Everyone’s talked up on durable goods. Okay, so there is almost no pent up demand for durable goods. And this is the stuff that industrial metals go into on the demand side, there are some real problems on the supply side. There seems to be plenty of supply in many cases. So we don’t necessarily see the pressure upward, at least in Q1 of 2022 on industrial metals.
PS: And that’s why I’m quite interested where you say that this demand is, I think slowly going to dissipate because yesterday key US inflation gauge sharpest rise in nearly 40 years, right? Personal consumption expenditure surged 5.7% in November. How long do you think this elevator level will last?
TN: Well, US consumers are pretty tapped out. So I think inflation happens for a couple of different reasons. Some people say it’s only monetary. Not necessarily true. We’ve seen real supply constraints that contribute to inflation. We’ve seen demand pulls because of overstimulating economies, and those two things together have accelerated inflation. And so we have to remember at the same time in 2020, we saw prices. If things go down pretty dramatically around mid year, say a third of the way through the year to mid year to just after mid year.
Some of these inflationary effects have been a little bit base effects because prices fell so hard in 2020. But we have seen consumption ticking up because of government stimulus. And we have to remember if the Fed is tightening things like mortgage backed securities, their purchases of mortgage backed securities will slow. Okay, so if people can’t refinance their house or buy new houses again, those wealth effects dissipate if you have a home. If your home price is rising, whether it’s the US or China or elsewhere, the wealth perception is there and people have a propensity to spend.
But if the Fed is pulling back on mortgage backed securities, then you won’t necessarily have that wealth effect that will dissipate. So government spending will decline marginally because build back better didn’t pass. We won’t have that sugar rush of government spending flowing into the economy early in 2002, although we may see something later. I believe governments love to spend money. So I believe the US government will come with some massive package later in the year to bring government spending back up.
SM: Tony, thanks very much for speaking to us. And an early Merry Christmas to you. That was Tony Nash, CEO of Complete Intelligence, giving us a quick take on what he sees moving markets in the final year. In the final weeks of 2021. Looking ahead to 2022.
In the wake of the financial system’s cash glut and collateral shortage from the Fed’s quantitative easing program, the Secured Overnight Financing Rate drops to 0.04% from 0.05% on Monday, the first decline since October.
Even with asset purchase tapering underway, “it’s largely the same set of circumstances as in October,” TD Securities Strategist Gennadiy Goldberg told Bloomberg. “Lots of cash in the system and not a lot of collateral and that’s weighing down repo.”
Meanwhile, U.S. commercial banks park yet another record $1.75T at the Fed’s overnight repo facility, implying the banks are drowning in excess reserves, while searching for yield – which is scarce as most of the Treasury yield curve trades in net negative territory on an inflation-adjusted basis.
There’s an “incredibly large amount of cash sloshing the market,” said Complete Intelligence Founder Tony Nash via Twitter.
In August, the Fed’s overnight repo facility took up more than $1T.
Complete Intelligence – a fully automated and globally integrated AI platform for smarter cost and revenue planning.
Complete Intelligence provides actionable, accurate, and timely data to make better investment and procurement decisions.
The platform provides an integrated global model to ensure that actions in one market, country, or sector of the economy are reflected elsewhere in markets, industries, and the global economy. International trade, economic indicators, currencies, commodity prices, and equity indices are all factored in to create a proxy of the global economy. Over 1200 industries in more than 100 countries are covered!
Based on interviews with Tony Nash, founder, CEO, and Chief Data Scientist, this brief report introduces Complete Intelligence, one of a growing number of highly innovative companies supported by the Oracle for Startups program. The company, founded in 2019, is already significantly improving the forecasting and budget planning of a variety of large corporations through its advanced AI-driven intelligence platform. The theme for this month is around startups in the energy and utility sector and how they are innovating, changing the competitive landscape, and contributing to sustainability. CX-Create is an independent IT industry analyst and advisory firm, and this report is sponsored by the Oracle for Startups program team.
The business context for Complete Intelligence
Commodity price volatility and a post-pandemic surge in demand drive the need for more timely and accurate forecasting Businesses coming out of lockdown have increased demand for commodities, from energy supply to raw materials for their products. In Europe, benchmark prices for natural gas to power their factories and heat their buildings have risen from €16 megawatt-hour in January 2021 to €88 in October. This, in turn, has sent electricity prices soaring. (Source: Euronews). While some have locked in prices through forward-buying, others have been exposed and seen profit margins plummet, unable to pass on price hikes to their customers.
But it is not just energy prices that are volatile. Semiconductor chip shortages have impacted many industries that depend on them, from automotive to electronic household goods manufacturers, putting a brake on their post-pandemic recoveries despite strengthening demand.
The growing demand for clean and sustainable energy sources and precious metals, like copper and lithium that power batteries have also seen tremendous volatility. As major industrial companies digitally transform their organizations and business models seeking elusive growth, the importance of data and AI are increasingly recognized as fundamental to success.
Forecasting and budgeting needs data science, not spreadsheets The ability to sense change, respond quickly and adapt rapidly relies on a synthesis of massively increased volumes and varieties of data, both from operational and external sources. Data volumes are too complex for manual approaches and spreadsheets and require AI to extract insight and meaning from this complex array of external demand and supply signals. The old industrial-age planning approaches can’t cope. They are too slow, involve armies of accountants and analysts, and political wrestling between departmental heads, and are often based on opinion and inaccurate forecasts leading to erroneous budgeting decisions.
Complete Intelligence provides the accurate evidence base for budgeting and forecasting decisions
When markets are relatively calm and stable, the cycle of annual planning and budgeting makes sense. But amidst continual volatility and dramatic accelerated change, the planning cycle is too slow. It fails to mitigate the risks unfolding at such speed and is impacted by a confluence of so many variables, like extreme weather, scarcity of raw materials, pandemics, and weakened supply chains. An array of intelligent internal and external feedback loops is needed to mitigate risks and optimize resources in pursuit of the company’s goals. This is what Complete Intelligence provides with its integrated and modular intelligence platform.
Key observations
• Complete Intelligence provides the accurate evidence base for budgeting and forecasting decisions • The Complete Intelligence Platform consists of three modules – CI Futures, RevenueFlow and CostFlow • Forecast accuracy has rapidly improved, and error rates are now around 2%, which compares favorably with traditional methods and error rates of 35% or more
Complete Intelligence, the story so far
Tony Nash, founder, CEO, and Chief Data Scientist, is steeped in market intelligence. A former VP of market intelligence firm IHS (now IHS Markit), and The Economist Intelligence Unit, where he was Global Director Consulting and Custom Research. He observed that large international companies he had supported typically followed an annual budgeting cycle based on often inaccurate or opinion-based data. It was not unusual to find large teams of people, sometimes several hundred involved in the process and heavily reliant on gathering data from multiple departments in complicated spreadsheets. The process could last several months, and the variance between forecasts and actuals was often above 35%, which could erode profits or tie up resources unnecessarily.
Trial, error, and persistence As a data scientist familiar with cloud technologies, he developed algorithms to improve forecast accuracy and a complete process from data ingestion to forecasting and testing the results. He started developing the machine learning ML algorithms in 2017 while still consulting in Asia from his base in Singapore. His first iteration failed to produce a level of accuracy that would provide a sufficiently compelling proposition. He wanted to get down to an error rate of no more than 5%-7%. He adopted the ‘ensemble’ approach covering thousands of different scenarios layering external data on commodities such as the copper price with a customer’s actual costs, identified in their general ledger.
Ready for launch late 2019 In 2019, Nash returned from Singapore and set up his company in The Woodlands, near Houston, Texas. He continued his work on the algorithms and developed a commercial product ready to launch in early 2020. And then Covid-19 struck.
Through Covid-19, companies first tried to understand the changing environment, then remained risk-averse until public health, business environment, and supply chains became more stable. This has been a challenge for a cutting-edge machine learning firm like Complete Intelligence. It is only as the environment has begun to stabilize that enterprises have sought new solutions to legacy problems. With that has come a renewed interest in Complete Intelligence and deployment at a large scale.
Solution overview The Complete Intelligence Platform consists of three modules The Complete Intelligence Platform hosted on Oracle Cloud Infrastructure (OCI) consists of three forecasting modules:
•CI Futures – to forecast market trends. Covering over 1,400 industries in more than 100 countries and a database of over 16 billion data points from proprietary and publicly available data. Millions of learning algorithms are used, which factor in the most recent global events.
• RevenueFlow – provides accurate results for demand and forecast sales and revenue projections.
• CostFlow – to enhance product line profitability and improve supply chain and procurement outcomes.
Figure 1. provides a diagram of the Complete Intelligence Platform
Figure 1: Complete Intelligence Platform by Complete Intelligence.
Market data is ingested from multiple trusted data sources like national statistical agencies, multilateral banks, multilateral government bodies, commodities exchanges, bilateral trade bodies and combined with the client’s data from their general ledger. A multi-layer testing and validation process used to ensure the accuracy of the data to be used in any forecast. Third-party data is gathered via internet spiders and APIs.
The platform provides an integrated global model to ensure that actions in one market, country, or sector of the economy are reflected elsewhere in markets, industries, and the global economy. International trade, economic indicators, currencies, commodity prices, and equity indices are all factored in to create a proxy of the global economy.
A comprehensive list of futures, currencies, and market indices is covered and accessed through a highly graphical and easy-to-use interface. Almost 1,000 assets, with historical data from 2010 and forecasts over a one-year horizon, are provided. More assets are being added all the time.
The platform is designed around three attributes: • A globally integrated model • A data-driven process without human intervention in the output • A simple means of interfacing with the platform.
The platform can be connected to existing ERP systems and automatically upload pricing data from the general ledger at a very granular level for each item.
The Complete Intelligence Platform supports a variety of use cases: • Supply Chain & Purchasing Optimization – help lower costs, anticipate risks, and provide input to sourcing strategies. • Sales and market entry strategies – by identifying higher growth markets and optimizing resources • Strategic Financial Planning – identifying growth markets and fine-tuning resource allocations in each market to minimize exposure to currency fluctuations. • Mergers and acquisitions – provide a snapshot of cost structures and projections of future costs and profitability of target acquisitions.
Forecast accuracy has rapidly improved, and error rates are now around 2% Nash’s persistence has resulted in significant levels of forecasting accuracy. A twelve-month forecast now sees error rates around 2%, which gives users considerable confidence compared with traditional methods, where the error rates are often above 35%.
As well as dramatically improving forecast accuracy on markets, revenues, and costs, the onboarding process to going live is a matter of a few weeks. After that, forecasting takes hours, not months.
Current position
Successes to date
While still a relatively new company, Complete Intelligence has already proved its value to several large companies.
• A major petrochemical company wanted to improve its predictive intelligence capability for feedstocks and refined products. They asked Complete Intelligence to examine nine categories across crude oil, gasoline, diesel, natural gas, and gas-to-liquid (GTL) products. Monthly forecast averages are provided by category with extremely low differences from actual results on the order of 3% or less.
• A global furniture company wanted a more explicit link between their sales and revenue planning and their sales teams in China. Complete Intelligence built a sales forecasting model that more clearly identified and utilized market demand drivers and connected these directly to their business. An analytics-based approach to identify the drivers of sales by city and industry. Complete Intelligence built a city and industry-level forecasting tool that determined the company’s growth trajectory and provided recommendations to support the direction and transition of their sales teams. • A global chemicals company needed a better understanding of the trends for costs in their supply chain and a more precise way to manage margin expansion and contraction at the bill of material level. Complete Intelligence was commissioned to forecast factor inputs and currencies for the key categories. The forecasts were calibrated based on the component make-up of the bill of materials. This enabled the client to identify the direction of the materials pricing and the impact on their BOM. Through the process, the client learned how to anticipate cost movements and protect margins.
Current go-to-market model
Complete Intelligence sells directly to large organizations, mainly targeting CFOs and COOs with a broad view of their companies and strategic decisions.
The company also has strategic partnerships with Microsoft and is listed on the Azure Marketplace and with Oracle as part of the Oracle for Startups program and hosted on OCI.
Other partnerships with Bloomberg and Refinitiv allow for exchanging financial and market data and connection to their platforms.
More transparent accuracy reporting so customers can view accuracy/error for every line item
More robust and flexible data visualization for clients to utilize Complete Intelligence forecasts within their visual narratives
More sophisticated data science to account for detailed sentiment and other qualitative factors
Do-it-yourself forecasts for customers to do ad hoc forecasts for any data at any time. This will enable teams within a company to do their own sophisticated, reliable forecasts without waiting on their in-house market analysis or forecasting team with complicated macros and massive spreadsheet workbooks
Embedding Complete Intelligence forecast APIs into ERP and accounting software.
Oracle Cloud Infrastructure and the Oracle for Startups program prove their value to Complete Intelligence When asked what he felt about the relationship with Oracle and the Oracle for Startups program, Nash said, “Oracle Cloud Infrastructure is very flexible and secure. The Oracle for Startups team has been great. Oracle has been the most responsive and helpful of all our partnerships, connecting us to the right people to help with marketing, sales, or technical questions. I really feel that they want us to succeed. I’m a huge advocate of the Oracle for Startups program.’’
CX-Create’s viewpoint The Complete Intelligence Platform addresses a fundamental business need
Providing a global proxy model on markets, commodities, currency fluctuations, and many other aspects and making this easily accessible for business people will significantly improve strategic investment and procurement decisions. The emphasis on accurate and timely data supported by ML models will make it easier for business people to make informed decisions, stripped of personal bias. Digital transformation should lead to a more agile and responsive organization. The more progressive organizations will want highly attuned external signals that are constantly updated, enabling them to de-risk investment decisions and optimize resources for growth. Complete Intelligence provides for that.
Our CEO, Tony Nash, talks about inflation’s and Omicron’s role in US shares sinking, as fears spread over their non-transitory nature. And how will Asia react to the ‘non-transitory’ nature of inflation and the new Covid variant? Is Gold a good asset to use to hedge against inflation?
Discover how Complete Intelligence can help your company be more profitable with AI and ML technologies. Book a demo here.
Show Notes
PS: Markets in the US were down across the board. The Dow is down 1.3%. S&P 500 down 1.2% Nasdaq down 1.8%. Now over across in Asia, everyone was up. Nikkei was up .4% Hang Seng up .8% Shanghai Composite also up .4% and STI Singapore up 1.9%. And as I was saying early on, FBM KLCI was down 1.1%.
TN: Yeah. Thanks for having me, guys. I think the biggest consideration really is Powell’s comments on inflation, saying it’s kind of no longer transitory. So people should expect inflation to stay. What that means generally is we’ve hit a new pricing level is his expectation. So meaning prices are not in his mind, in many cases, going to go back to the levels that we saw before this inflationary stairstep. And what we’ve seen, particularly in the US, is consumers have accepted this and consumers accepted it, thinking that it was a temporary rise in prices.
But what he delivered today is some bad news that it’s likely a permanent prize in the level of prices. And the kind of short term cost rises that people thought they were going to endure are more permanent.
KSC: Yeah. So, Tony, try and give us a bit of a perspective here, because obviously the last twelve years and the last accelerated two years of monetary easing have induced this inflation. How does it all end? And does it stop the weak economic growth we’ve been seeing in the US the last few months.
TN: Yeah. So US economic growth, we don’t see a rapid acceleration of US economic growth. And so we have the US, China, Japan, and the EU, all at very subdued growth rates. And that’s bad. Those are the four largest economies with elevated price rises. Earnings are growing in some areas. I’m sorry, wages are growing in some areas, but they’re not necessarily growing across the economy. And part of that, particularly in the US, is a shortage of staff. So people have opted out of the workforce. We’ve lost, like 6 million workers in the US since Covid.
And so there are fewer workers. And so we have wages rising in certain areas. But it’s not necessarily across the board. So people are really going to have to start taking a look at their disposable income to understand what of these ongoing price rises that they can continue to accept. And I think we’re at a point where, since it’s no longer viewed as temporary, people and companies are going to have to start making trade offs. This is really the bad news is when people have to, when it’s no longer temporary, companies and people have to start making trade offs of what to do with their resources.
And that’s where the real problem is. So it’s not ongoing expansionary spending. And even I think it was Biden who said today we don’t expect a stimulus package for the current variant. Again, people are having to look at trade offs, and this is the real problem. When companies have to look at trade offs, they’re looking at their operating costs, they’re looking at their capital expenditure, they’re looking at their investments, they’re looking at other things. So down to Earth type of environment where we’re starting to enter Realville, we’re starting to exit the kind of fantasy environment we’ve been in the monetary induced sugar coma that we’ve been in for the past year and a half.
PS: So that’s a very interesting point, because I’ve always felt like in 2021, we saw this huge divergence in recovery right between the developed world led by the US and emerging markets, which are still really struggling to contain the virus and such. So when we talk about Asia, how do you think markets will react to this tightening of monetary policy by the Fed?
TN: Yeah. We think that Southeast Asia generally will stay pretty muted. We don’t expect early breakout at least over the next quarter or two. We don’t expect really breakout moves in Southeast Asia. We expect China to have a fair bit of volatility, but we do expect China to be generally positive over the next quarter to quarter horizon. We do expect Japan to continue to rise pretty well in India as well. Japan largely on the back of monetary policy automation, other things. So Asia is not one market, of course.
So we do expect different parts of Asia to react differently. Korea will be a mix between China and Japan like it always is. So we’ll see some volatility there reflecting China, but we’ll see some, I guess, acceleration and equities like we would see in Japan to make some both.
KSC: Well, Tony, in truth, inflation has been with us for some weeks now. But what hasn’t been with us for some weeks has been on the Omicron that’s the other big roadblock posing an obstacle to markets. How does Asia behave? How does Asia react, especially since we’re going to be opening in a few hours time?
TN: Yeah, I think Asia generally. You guys know I lived in Asia for most of my life, and Asia generally takes these things in stride with more vaccines available with the typical kind of weathering, the storm kind of approach that people have, particularly in Southeast Asia. I think people will generally take it in stride. This is really the first pandemic. Let’s say in the west that people have had for probably 50 years where they’ve really been kind of freaked out and worried in Asia, we’ve seen these types of pandemics for 2030 years.
It’s a bit different. People are more conservative, people are more used to these types of volatile, say, public health and market and other type of environments in Asia. So of course, we’ll see things shake up, but we won’t necessarily see the dire kind of messages that we’ve seen, say in the west. I don’t think we will. We’ve seen dire messages come out of, say, Germany and Italy and Austria, particularly over the past week with full lockdowns with 100% vaccine mandates, with really dire messaging. I don’t necessarily think we’re going to see super negative messaging in Asia like we’ve seen there.
PS: We won’t freak out as much as what you’re saying then essentially.
TN: No. Come on, man. It’s Asia, right? People are used to volatility in Asia and the developed markets. Developed markets are highly calibrated. Right? 0.2% change. Either way is people see as dramatic in Asia a small they’re not as calibrated. So people are accustomed to more ups and downs, and people just generally take it in stride.
PS: And I said that generally it’s quite calming. Is gold with inflation basically consigned away from this trend trade term? What’s your view in terms of gold? That’s a hit against inflation then? Because if I look at the data, the method is down 6% year to date.
TN: Right. And a lot of the inflationary rise has already happened. A lot of the stuff happens in stairstep fashion, and a lot of the mitigation efforts are already under way. So while we’ll continue to see inflation and we’ll continue to stay at an inflated level, I don’t necessarily. Or we’re not seeing dramatic price rises going forward. Okay. You’ll see it in pockets where there are, say, supply issues or something like that. But gold is more effective when everything is well, gold is a barometer for finding value.
I’ll say that much. It’s a tangible metal and people see it as worth something. And so what used to happen is gold and say the dollar as the dollar do value the gold would appreciate. But now we have crypto and people treat crypto kind of in the same way they used to treat gold. The gold market is really trying to find itself. So I think we’re going to have to see some fallout in crypto if it is to happen. We’ll have to see some fallout in crypto before we start to see gold being the safe haven again or being the preeminent safe haven.
So until Bitcoin and the other crypto assets really deteriorate in value and people go flocking back to gold, which I think will happen eventually. I don’t think it’ll happen overnight, but until we see a lack of faith in crypto, I don’t think we’ll necessarily see dramatic price pressure on gold.
KSC: Tony, you talked about Asia, right? And now China is moving to banners via structure, which is the loophole that allows its companies to list in New York and other foreign exchanges. What does this mean in terms of China’s overall strategy to go its own way to quote Fleetwood Mac?
TN: Sure. Yeah. So I think, of course, it hurts Western banks, and it hurts the Western banks that are in Asia because they don’t necessarily have those fees to take things public in the west. But I think the bigger problem is this those companies going public don’t have US dollar denominated resources to access, and so they have to get CNY or Hong Kong dollar or Japanese yen or other Sing dollar other denominated assets. Okay. But the US dollar is 87% of global transactions. So it helps those companies to have US dollar reserves, especially as they’re newly public.
Because why do you go public? Because you want to buy another company, you want to use that cash for a big investment or something, you want to expand in a big way. So if you don’t have the US dollar assets that come from going public, say, in New York or somewhere in the US or whatever, it’s really hard to have a big source of cash to do a massive international expansion or undertake a big international project or do a big international buy that’s I guess the biggest downside I would see from the decline of that type of structure in China.
KSC: All right, Tony, thank you so much for your time, Tony Nash there chief executive of Complete Intelligence. And just to hang on this last point, Phil, if you don’t list in the US, you don’t get US dollars necessarily. But that doesn’t matter if you are China, and you believe that the real market is domestically or within ASEAN, where you’ve got to combine, I don’t know, 2.1 trillion people or 2.1 billion people. That’s quite a fair few heads. Yes.
PS: Correct. I think it’s a question of whether you see a convergence between where you list versus where you operate.
KSC: Absolutely.
PS: And I think in the past we thought, okay, you could tap financial markets globally to serve your local markets. But I think China is kind of proving the point. No. I think it’ll be closer together.
KSC: Yeah. And what he was talking about in response to your question on gold, Phil, how gold hasn’t responded to all this uncertainty, which has been traditionally the case. And Bitcoin is somewhere hovering around in the mid 50s, which is a bit weird because you would expect some kind of flight to what was seen as safe havens, right.
PS: Ironic is considered Bitcoin a flight to safe havens.
KSC: Well, because it’s finite in nature. So it’s a bit like gold, right. It seems interesting, because in the last few weeks, we’ve seen a move among corporates like Mark Zuckerberg of Facebook and now Jack Dorsey, formerly of Twitter, who has left his job at Twitter. Still, at the same time was CEO of Square fintech platform financial platform. He’s moving to turn Square into a company called Block, and it’s a bit like it would make Mr. Miyagi proud because martial arts moves from square to block, but he’s going all in.
PS: But this is a very interesting thing because he’s going all in on crypto. And I think you’re referring to Blockchain blockchain reference to Blockchain, which is the distributed platform for data used by Crypto.
But it’s interesting, right? This whole name shift.
I think Jack Dorsey, I think, is trying to evolve away from just being a pure payments provider to offering solutions that are anchored on blockchain as a solution.
