Month: March 2024

This podcast is originally and first published by BFM 89.9 in this link: https://www.bfm.my/podcast/morning-run/market-watch/oil-gold-bitcoin-markets-up-asset-classes-investment

BFM Description:

We appear to be living in strange times as almost all asset classes are up in tandem. We ask Tony Nash, CEO of Complete Intelligence to explain this conundrum and how to invest in these confusing times.

Transcript

BFM

So joining us on the line to tell us what’s going to be moving markets in the weeks ahead, we speak to Tony Nash, CEO of complete intelligence. Good morning, Tony. Now, let me ask you about what your views are in terms of the US CPI numbers, because it came in slightly higher than expected. I believe the figure was 3.2% for Febre, thanks to a pickup in housing and energy prices. Is inflation actually stickier than we think?

BFM

And what does this then mean for the Fed fund rate?

Tony

Yeah, it is stickier than we think. And if you annualize that, so that 3.2% was month on month. So if you annualize that, that inflation is back at 5.4%. So keep in mind that the Fed’s target is 2% inflation on an annualized basis. So we’re more than double that in America. So what does that mean? Well, there is a hope among, well, the current administration really wants a rate cut this year, and there are a lot of people in markets who are hoping for a rate cut. But as we see persistent inflation at the grocery store, with things like flights, with energy costs, with housing and other things, that cut is less and less likely.

BFM

And Tony, let’s look specifically at some of the sectors. I think the first one that really has caught my eye are the banks. Right now, they’ve paid out large dividends over the past year and also a lot of share buybacks. But with the net interest margins set to go down as a result of these expected rate cuts, will they be able to keep those payouts?

Tony

Yeah. So if we don’t see cut in rates, let’s say we don’t see cut in rates. We don’t expect we’ll see a rate cut before maybe Q three of this year, maybe even further than that if we continue to see persistent inflation. I’m not particularly worried about net interest margin for banks. I think initially rate cuts will not be as large as we saw them hike at the start. So I think we’d see tepid rate cuts at the start unless we saw a pretty dramatic downturn in the US. Now, in terms of buybacks with both banks and other segments, it’s really interesting to look at the amount of corporate debt announced in January and February. It’s a record, at least for the last ten years. And something like 20% to 30% of corporate debt issued is done for share buybacks. So we’re going to have to see what is announced for share buybacks probably in April May time period. But we expect there to be a lot of share buybacks this year, especially for those companies that issued debt in Janfeb.

BFM

So if we can look maybe, perhaps at some of the potential headwinds ahead, we are going to see US federal elections in November. It’s most likely going to be a Biden versus Trump rematch. How do you think investors are going to hedge potential political risks, particularly in equities?

Tony

Well, I think for Biden, I think they’re going to have to be careful of inflation because we’ve seen a lot of federal government spending under Biden. And of course, it was under Trump during COVID and Trump was a spender. But we’ve seen it accelerate under Biden, and we don’t see it slowing down necessarily. So in a second Biden administration, we’d expect the US debt to accelerate, especially if Janet Yellen is still the treasury secretary. She’s very good at issuing T bills to spend, and she’s very politically well connected, so she can get the authority to issue that from Congress. Under Trump, yeah, we would expect spending to slow a bit. And the way to hedge that play under a Trump administration is to look at, say, defense sectors. Under a Trump administration, defense likely wouldn’t do as well under Biden. We’ve seen wars in the Middle east and Ukraine, and we would expect things to at least stay where they are under Biden. Under Trump, there weren’t any wars. So we would expect that the defense sector wouldn’t really do very well under a Trump administration.

BFM

But, Tony, who is better for markets? Biden or.

Tony

Think? I think it cuts both ways. I’m a Republican, so I’m pulling for my party. It doesn’t matter who’s running. I think under Trump, we did see healthy markets without a lot of stimulus. And then, of course, the pandemic hit. And what we’ve seen since the pandemic is wave after wave of stimulus in the US that has really hit markets in a good way. Right? So under Trump, I don’t think we would see the level of stimulus that we would see under Biden. But Trump has also been vocal, saying that he would fire Jerome Powell, who he hired, who he put in place under his regime. So Trump is saying that he would want to cut interest rates. So it’s tricky both ways. And of course, presidents don’t like higher interest rates because they think that it slows down the economy in a very simplistic way. So I think it’s really a coin toss who’s better for markets? It really depends on the amount of fiscal and monetary firepower. I think the Democrats would bring fiscal firepower. I think the Republicans would bring monetary firepower.

BFM

And if we take a look at maybe another aspect, which is crude oil, we do see that oil prices have been rising on the back of diminishing US crude stockpiles. Why are oil inventories being depleted? And will the replenishing of those stocks push oil prices even further?

Tony

Yeah, oil prices are being depleted partly on production caps and partly on maintenance and other things. But crude markets, especially in the Middle east, very tight right now. They’re very tight. So as the US continues to replenish oil stocks in the SPR and other things, that will definitely push crude prices higher. They’ll try to buy opportunistically when prices are low. But as they refill the SPR and as other kind of storage in the US is refilled, that will definitely push prices higher, because the supply globally is so tight right now for both crude and for refined, you know, it’s really hard to see a downward spiral for crude in the next, say, month or two.

BFM

Tony, I have a question, because I’m stuck. If you look at cryptocurrencies, especially bitcoin, it’s like record high. $73,000, but gold, also record high. What does it tell you about markets, or at least sentiment, when equities are also at all time high? Aren’t those the two asset classes I mentioned earlier, defensive ones and commodities?

Tony

This is the problem with inflationary markets. It tells you that there’s a lot of money supply out there. It tells you that there’s more demand than there is supply. And I know people who invest in crypto, I know people who are aggressive crypto. I don’t see the inherent value of crypto, so I wouldn’t recommend anybody either way on that. But I think we do see, especially in the US, we see demand rising because it has to. Because we have inflationary markets. Demand is measured in dollars, it’s not measured in activity. So people will say, oh, the US economy is booming. Well, it’s booming because inflation is high. Right. And so because inflation is high, people have to consume more goods now. And that’s why we see so much demand on things, both because of the nominal value and because prices are going up. So it’s really hard to see anything fall until it does. Right. And those of us who’ve been around markets for 20 plus years, the music does kind of turn off and there are a lot of books I could recommend to you. But once interest rates rise, there is a lag before markets respond.

Tony

So things like cryptocurrency, that’s rallying because they’re in funds, they’re into index funds or, sorry, into ETFs and stuff. But other things, it’s because people are buying because the prices, they believe the prices will continue to rise. We haven’t seen any evidence that prices will fall outside of places like Europe and China, where they’re facing both economic headwinds and demographic headwinds. So that’s why we see things. Japan, China, Europe are slow because they have demographic issues. Of course, that’s a very slow issue, but they’re also seeing demand issues domestically in those markets.

BFM

Tony, thanks very much for speaking with us. That was Tony Nash, CEO of Complete Intelligence, giving us his take on some of the trends that he sees moving markets in the days and weeks ahead. We have a little bit of time on the clock, so we are going to turn our attention to some of the international corporate headlines that we’re watching this morning. We’ve got news coming out of Adidas. Adidas faced its first loss in over 30 years following the termination of its collaboration with Kanye west, which included the highly profitable Yeezy sneaker line. Despite the loss, though, Adidas shares performed well. They outperformed competitors like Nike and Puma. But the company’s decision to maintain its earnings forecast for 2024 at an operating profit of about €500 million did disappoint investors who were anticipating a more optimistic outlook.

BFM

I think the buyers of the stock are fans of the Adidas samba, which.

BFM

Is like the next cult is the big issue, right?

BFM

Yeah, it is the big couch shoe. So maybe people are thinking, who cares about these yeezys easys. We’re moving on. But if you look at the stock, actually yesterday it hit its all time high, traded at 200 and €1.55. Now, what does the street think of this? Are they optimistic? Because there were some write offs earlier on even before these results. And it’s somewhat evenly mixed because it’s 15 buys, 14 holes, just seven sells. Consensus target price for this german listed company, €187.91. Like I say, yesterday was an all time high. So it looks like markets. Who’s buying, I wonder? Maybe samba users.

BFM

Yeah, the fashionistas. I suppose you do see that. I think if we look at sales performance, north american sales are expected to decline due to market saturation. But really other markets are predicted to grow significantly. Yeah. Footwear sales grew by 8%, probably those sambas, while apparel sales fell by 13%. Okay, turning our attention to another stock and company, but this one in pretty big trouble. We see country garden. They’ve missed a coupon payment on a yuan bond for the first time, the latest difficulty faced by the chinese developer that is facing a lawsuit seeking its liquidation in Hong Kong. In response to this, the company said its main onshore unit hasn’t fully prepared a 96 million yuan coupon due on Tuesday for a 4.8% yuan bond maturing in 2026, and further emphasized that there is a 30 trading day grace period for this payment. So they’re trying to buy themselves some time.

BFM

I don’t know how much more time they can buy because they already defaulted on the offshore bonds. And then added to their pressure is the liquidation order by the Hong Kong courts where I think some people still argue, can it be enforced in China? So even the share price is really like all time low, down 25% on a year to date basis. The question is, I don’t think anybody’s going to buy this stock. It’s a question, can it survive? But amazingly, there’s still six buys on this name. Nine holes, six cells. This is listed in Hong Kong. It’s only fifty eight cents. Hong Kong Tiger price $0.63. Wow.

BFM

Some very brave six analysts there to still have a buy call. All right, 719 in the morning. We are going to head into some messages, but we’ll come back to cover the top stories in the newspapers and portals this morning. Stay tuned. BFM 89.9.

BFM

You have been listening to a podcast from BFM 89.9, the business station. For more stories of the same kind, download the BFM app.

This podcast was originally and first published by Business Matters.

BBC Description

Polls are beginning to close across the 15 primary states in the U.S as Super Tuesday comes to an end. Our presenter Roger Hearing will be bringing us up to date on what the polls are saying.

We’ll be hearing from voters who have made up their minds and those who are still considering.

And we find out if the fact that the US economy is beginning to show signs of strength, will affect the outcome in November.

Roger will be joined throughout the programme by two guests: Tony Nash, Chief Economist, Complete Intelligence who’s in Houston and Laura Schwartz, former Advisor to Bill Clinton and democratic strategist, who’s in Chicago.

Transcript

BBC

Hello, and welcome to Business Matters. I’m Roger Herring. Coming up on the program today, millions of voters in the US choose their party’s candidate for the November presidential election on what’s called Super Tuesday. But how are they feeling about the prospect of Biden versus Trump round two?

BBC

Well, we’re going to be hearing from those who have made up their minds and those who are still considering and ask if the fact that the US economy is beginning to show signs of strength will affect the outcome in November. And I’ll be joined throughout the program by two guests, Tony Nash, chief economist, Complete Intelligence, who’s joining us on the line from Houston. Tony, I should say hello to you.

Tony

Hello, Roger.

BBC

Good to have you there with us. And, Tony, I mean, for the Republicans, it is pretty much a coronation, wouldn’t you say?

Tony

Overall, yeah, there’s nobody left. I mean, you may have the four republican voters in Vermont vote for Nikki Haley, but aside from that, I really don’t think she’s going to win much today.

BBC

All right. Fair point. Well, we shall see. She hasn’t said her campaign is over yet. We’ll talk about that. But let’s just bring ourselves up, just be, to what has been happening, because it has been the biggest day so far in the US election year. Millions of people voting in what’s known as Super Tuesday. And the idea is you decide who should be the Republican and who should be the Democrat candidate for November’s presidential election. Now, polling has been taking place in more than a dozen states. The results are only expected to reinforce, as we said, the near certainty that Joe Biden and Donald Trump will face each other again in November. Well, speaking to reporters a little bit earlier, President Biden was pretty defiant about his polling. All right. Well, thanks very much for the moment, Michel. We’ll come back to you in a little while, a little bit later in the program to get an update and see what’s happening and perhaps get some sense of other issues that may be working their way through this election year. But now let me come to my guests, Tony and Laura. So, Tony, first of all, let me come to you.

BBC

Do you get the sense then that this process, this primary process, isn’t really what we’ve had in the past, what we’ve expected, where there’s been at least an element of doubt as to the outcome? And so for that reason, is it more of a drama? Have any issues come up in the process that have been useful?

Tony

Well, one thing about your earlier conversation, there are states where you vote in a partisan primary, but you don’t necessarily have to be a member of that party. So we have, like in Virginia, according to Exopolan, I was just looking at half of the people who voted for Nikki Haley were Democrats. And so this is how the different parties game some of these. And I would say this is a pretty big issue, especially in this primary.

BBC

Sorry, just run that one past me. You’re saying that the Democrats, people who are registered Democrats, can vote for the Republican candidates in some states.

Tony

So I live in Texas. In Texas, you do not have to be a registered Republican to vote in the republican primary. And so this is something that’s been happening for, I don’t know, the past three, four election cycles where party members will go in and vote in the other party’s primary to kind of try to push things one way or another. So since there is really nobody running against Joe Biden because he’s the incumbent, it really is kind of open and fair game for Democrats to try to change the republican primaries. So I voted here in Texas. I’m a Republican. And there were all of the previous names on the ballot. It wasn’t just Donald Trump. There were, I think, seven or eight Republicans to choose from. So just so your listeners understand, Republicans don’t just walk in the door, and Donald Trump is the only name on the ballot. There are many names. If those names are submitted to the state and qualify in time for the primary.

BBC

Interesting. We’ll see about that. Tony, let me bring you in on this, because that point that Laura was making about the court case, and we do know that one criminal trial will happen at least before the election. How much do you think that actually will matter in terms of voters, particularly GOP voters?

Tony

Obviously, it won’t matter. I mean, honestly, I live in the suburbs. I know both men and women. I’m a relatively social person, and I don’t know a single person who that matters for. And so we see this as responses, but I haven’t heard of a single person. Donald Trump being a dog is. I mean, that’s old news, so nobody really cares. I think that the biggest issue that people are facing right now is immigration, and that’s what everybody’s talking about. And that will weigh on Biden more than anything else. More than his corruption, his son’s corruption, his brother’s corruption. Immigration will weigh on Biden. And that campaign more than anything else, because there was some news, I think, out today saying the administration flew 300,000 illegal immigrants into the US. They flew them in to avoid the optics of them crossing the border. And so american citizens are paying for that. They’re paying for these people to be illegally transported and to reside illegally in the US. So we see what’s happening in New York City. We see what’s happening outside of Boston. We see what’s happening in Chicago. These very traditionally democratic cities are having to contend with the things that people like me in Texas on the border.

BBC

Because, I should say, of the movement of people coming over the border, often by republican governors in the south up to these cities.

Tony

Yes and no. Yes. I mean, our governor in Texas has done a lot of that to start that, to bus people up to DC and New York and Boston and Chicago and other places. But the Biden administration itself has flown in 300,000 illegal immigrants into the US. This was just a story out today. So they’re paying airfare, they’re taking Americans off of planes, they’re flying on flights, and then they’re getting vouchers and debit cards once they arrive here. And that’s a massive, massive issue for.

BBC

So you think that will actually dictate where a lot of people go in November will be that issue more than anything else?

Tony

Yes. Especially as we see more layoffs from companies. The displacement that that cohort has for, say, inner city and lower wage workers is huge. And so, again, these are traditionally Democrat voters. And so that immigration issue, it just won’t stop and everybody is talking about it.

BBC

Well, we shall see. That’s a very interesting line that you put there and one I have heard as well before. Anyway, we’re going to move on to the next part of the program. We’re going to be looking at some of what the economy might do to that vote in November. We’re going to say, Tony, let me pick that theme up with you, because do you feel, as someone working in the US economy, do you feel that things are getting better? I mean, you can see, I guess, from the stock market is certainly seeming to reflect that.

Tony

Yeah. So there are a couple of different things. First is inflation. It’s undoubtedly, on average, things are, I think, 24% more expensive today than they were in 2019. So inflation is without a doubt another massive issue this year. The stock market is really about four concentrated stocks, okay? It’s about Microsoft, it’s about Nvidia, it’s about Amazon and it’s about Apple. So when we see the general indices move up and down every day. Money is so concentrated in Nvidia, Microsoft and so on, that’s not necessarily impacting the stock market as a whole. So these are people betting on artificial intelligence. If you look at general stock market performance on the year, it’s down, I think, high single or low double digits so far this year. The general stock market, if you take out those four stocks, and we do see a lot of layoffs, other things. So it’s hard to argue that we’re in a terrible economy. I’m not saying that’s the case at all. But when we look at inflation and when we look know if people are standing still, they’re losing money. Right. Why is that happening? Well, it initially happened because of Fed policy.

Tony

Loose fed policy. Right. And so today it’s happening because Janet Yellen is using the treasury general account as her own personal kind of campaign funds. She’s spending the treasury general account like wildfire. And that is helping to sustain the prices in the US and keeping things up. So Congress has very limited power to stop her from doing that. But Yellen spending from the TGA is one of the biggest issues that nobody talks about, and it’s really keeping inflation up in the US.

BBC

Okay, well, listening to all that, Tony Nash. Tony, I guess that didn’t really surprise you, the kind of things we were hearing there.

Tony

No, it completely validated things that I’ve been telling you for the last 45 minutes. I mean, people on the ground are feeling it. If you’re sitting in New York or Boston or DC, and if you, Roger, are interviewing a talking head sitting in one of those places, they’re not going to tell you this stuff. But you just interviewed two people on the ground and they’re telling you exactly the stresses that they’re feeling.

BBC

Okay, well, let’s. Nash in Houston. It is interesting to hear where these things are going and interesting that John Zogby certainly seemed to think that the legal troubles of Trump may be actually quite instrumental. And I know you disagree with that. You’re not convinced, are you?

Tony

I’m not. I really think inflation and immigration and the people I talk to, and they’re across, I have 20 somethings who work for me and I have a 60 year old who works for me and I talk to, of course, people who don’t work for me. But I get a cross section across every day and I’m not hearing Trump’s legal concerns as an issue. But I’m sure in places like New York or San Francisco or DC, it’s a major issue where media is. But I think, Roger, the major, I think issue this November will be who will show up to vote. And if people are ambivalent about Biden and they don’t show up, then Trump’s going to win. If people are ambivalent about Trump and they don’t show up, then Biden’s going to win. I think that’s a bigger fact than anything because we got a couple of 80 year olds running. It’s really hard to get enthused. You can’t have like an Obama wave.

BBC

Well, I think we seem to have.

Tony

2008 or even a Trump wave.

BBC

We’re just losing the line a little bit to you there, Teddy.

Tony

And with all this other stuff and.

BBC

The partisanship, people, I think we’re just losing the line to you slightly there. But yeah, just a final thought. Does it matter very briefly in a word, or could, we heard you there a little bit there, Tony, thanks very much there. The line getting in the way of that at the end. But I hope we got a decent picture there of Super Tuesday and what it means, just to let you know that at the top of the hour, polls will close in Colorado, Minnesota and Texas. And we’ll bring you up to speed, of course, with projections from that. But that’s it from this special edition of Business matters on super cheesy bye.