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Fixing terrible forecasts and the lack of context

Tony Nash joined Geoffrey Cann in Digital Oil and and Gas podcast to talk about his revenue forecasting and predictive intelligence analytics startup company Complete Intelligence — how does the company solve the problem of terrible forecasts and the lack of context around data?

 

Geoffrey Cann joined us in QuickHit: 2 Things Oil & Gas Companies Need to Do Right Now to Win Post Pandemic.

 

This podcast originally appeared at https://digitaloilgas.libsyn.com/159-interview-with-tony-nash-of-complete-intelligence?utm_campaign=interview-with-tony-nash-of-complete-intelligence

 

Digital Oil and Gas Description

 

 

Jul 22, 2020

Today’s podcast is an interview with Tony Nash, CEO and founder of Complete Intelligence. Specializing in revenue forecasting and predictive analytics, Complete Intelligence develops artificial intelligence solutions. In this interview, we discuss predictive intelligence analysis, how Complete Intelligence works, and what value these forecasts can generate. 

 

Show Notes

GC: Welcome back to another episode of Digital Oil and Gas. My name is Geoffrey Cann, the host of the podcast. And I’m joined today by Tony Nash, who is the CEO and co-founder of Complete Intelligence. Tony, welcome to the podcast.

 

TN: Thanks, Geoffrey. It’s good to be here.

 

GC: You and I met probably a bit of a month ago. We did a short video exchange, and it was so much fun, we agreed that we should probably do something a little more involved, and here we are today. Of course, my interest is how digital innovation and digital strategic toolkit are transforming how the oil and gas world operates.

 

Your area of interest and expertise, the focus of your startup is in the application of smart technologies in agile budgeting and forecasting and market modeling. And that’s a big area of interest for oil and gas. That’s the reason why I thought you’d be a terrific guest to come on the show today and talk a little bit about that.

 

TN: Thank you very much.

 

GC: What’s your background? You were with The Economist, is that right?

 

TN: I was with The Economist. I led their global research business for a while. And I built what’s called the Custom Research business. It was a small niche business when I joined. It was a pretty sizable revenue by the time I left. Great organization. Had a lot of fun there. I then moved to a company called IHS MarkIt. Information services firm. I led their Asia consulting business. And from there, we started Complete Intelligence. I’ve been in information services off and on for way too long, since the late 90s.

 

GC: And what’s your education background? Did you start out in computer science or something?

 

TN: I was a graduate at Texas A&M in business and my grad work was in Boston at a school called The Fletcher School, which is a diplomacy school. So I was trained to be a diplomat, although I’m not very diplomatic at the moment. I have my moments.

 

Part of the reason I started going down this road is because in grad school, I had a trade economics professor who was amazing, great guy. I started my career after undergrad at a freight forwarder and customs broker. I didn’t have a glamorous first job. I was actually working the night shift in a warehouse at a freight forwarder, receiving exports and typing out airway bills and all that stuff. I got to know the nuts and bolts of world trade pretty specifically and pretty firsthand. I don’t know of any other trade economists who have started the way I have. I look at trade data differently than almost every other economist that I know of. I look at it somewhat skeptically. It’s that skepticism that I realized in grad school with this fantastic professor that my skepticism was an asset. My skepticism was an asset within statistical, mathematical models, within economic discussions and so on, so forth.

 

I had used it in business before that, but I didn’t think that I necessarily had the ability to apply it in this big world before I had this experience in grad school. So I then took it and I joined The Economist. I kind of conned them into hiring me, which was great, and then within a year or so, I was heading their global research business. From there, we just kind of took off.

 

GC: What are some of the products out of The Economist? Because I buy the magazine every week. And The Economist publishes an occasional handbook of global statistics, GDP by country and balance of trade and so forth. Were you involved in those kinds of products or were the products you were involved in much more specific to a client or customer requirement?

 

TN: I wasn’t. A lot of those are extracts from, say, IMF data. That’s part of The Economist publishing, which is a slightly different business to what I was doing. A lot of what I was doing was really applied work with clients. Solving real problems, figuring real things out. Some of this was corporate forecasting, looking at costs, looking at revenues, those sorts of things. Some of this was doing work for example the World Health Organization in places like Cambodia, comparing different treatments for mother-child transmitted HIV.

 

We had all kinds of cool, different approaches. And from my perspective, we could really play with different methodologies. We could really understand what was working and what wasn’t working. It was a huge sandbox for me. Again, really great smart people. That really started a lot of this kind of true love for me, which is what I’m doing now.

 

GC: What is the business problem that you saw that was sufficiently vexing that you decided to devote a lifetime in a career to trying to solve?

 

Because your career builds you to a point and then you say, “You know what? This is the problem I think I’m going to aim to solve.“ And you know what? You may go on to solve other problems, but at that moment, why would you become a founder to go solve something unless it was so big and so vexing, it was worth your time?

 

TN: I think I became a founder because I underestimated how hard it would be to build a business. Almost every founder will tell you that. When I was with both The Economist and IHS Markit, I had two really consistent feedback points that people gave me.

 

First is the quality of forecasting within information services, within corporate, say, strategy, finance, forecasting units, is pretty terrible. Most people forecast through, let’s say, a moving average approach. Some of the largest companies in the world will forecast using a moving average. If they are super sophisticated, they’ll use a very small maybe regression model or something like that.

 

But what mostly happens is one of two things. Either they look at last year’s and add a small percentage. “We’re just gonna have three percent on this year.“ That’s pretty common. The other one is really just a gut feel like, “I really think it’s going to be X this year.“ If a Wall Street analyst understood how unscientific the way outlooks are done within large companies, they’d be pretty shocked.

 

I mean, there is a belief that there is a lot that goes into the sausage machine. Traditional forecasting is terrible. Any forecast you buy off the shelf? Pretty terrible. Any forecast you’d get within a company? Pretty bad. Even the data scientists that are on staff with a lot of these big companies, really brilliant people, but they’re not necessarily fine tuning their forecasts based on error. And this is the key.

 

Companies who forecast should be required to disclose their error for every forecast they’ve done historically. That’s what we do for our clients. Because the number one problem was the quality of forecasts. So we spent our first two and a half years focused on that problem. We continue our approach to that.

 

GC: When you say “publish the error,” do you mean error in hindsight? How bad were we last year or do you mean here’s what we think our forecasted error is likely to be this year?

 

TN: Every year, any forecaster on planet Earth should say, this is what we forecast last year and this was our error rate. When we look at consensus forecast, for example, for energy like crude oil, natural gas, industrial metals, consensus error rates are typically double digits. Typically double digits. We just did a calculation. When I talk about error rate, I’m talking about absolute percent error. I’m not talking about gaming off pluses and minuses because that’s really convenient. But you look at a plus 10, you look at a minus eight, and that becomes a nine instead of a one.

 

People who forecast should be required to publish their error rates. Companies, especially energy companies, are paying hundreds of thousand dollars, if not seven figures to buy data. Those guys [forecasters] know they’re between 15 and 30 percent off in their forecasts regularly. Businesses are making decisions based on these data.

 

That’s the thing that, as someone who’s run businesses, not just analysts businesses, but run real proper businesses in different spaces, seeing planning people make decisions with a 30 percent error rate or 50 percent error or whatever it is, but no accountability from the information services provider? That’s a problem.

 

That’s a 1990s business model where you could play with the opacity around data. But in 2020, that should not be the case at all. We regularly show our prospects and our clients our error rates because they deserve it. They deserve understanding what our error rates are line by line.

 

GC: In oil and gas, when I’m building up a forecast, particularly for, say, an oil project, I’m having to forecast currency exchange rates, interest rates for my borrowings, the price of certain critical commodities like cement and steel. I’m having to forecast project delivery timeline and schedule. I’m having to forecast future market demand like, where’s my product likely to go? If each of these has a 15 to 30 percent error rate built into them and I’ve added them all up to get to a :here’s my forecasted economics for the year.“ Have I built in and basically had an accumulated error rate that makes my forecast pretty unreliable at that stage? Or these different errors, all sort of stand alone?

 

TN: That’s the budgeting process.

 

GC: I’ve been in that process. Right.

 

TN: Anybody who’s worked on a budget like that, they understand it. Maybe they don’t want to admit it, but we talk to people all the time who tell us. We have a client in Europe who admitted to us that some of their core materials that they buy, they know internally that their forecasts typically have a 30 percent error. And when we say that to people, to other companies, that’s feedback we get consistently that the people who actually know, the data know that their companies have error rates that are 20 to 30 percent or in some cases worse. They’re that far off.

 

When you think about it from a finance perspective, you’re over allocating resources for the procurement of something and that resource could have been used for something else. That’s one of the reasons why it’s really important for us to help people really narrow that down.

 

We check ourselves all the time and we looked at some industrial metals and energy stuff based on a June 2019 forecast for the following twelve months through the COVID period, comparing some consensus forecasts and our forecast. On average, we were 9.4 percent better than consensus. This is a Complete Intelligence forecast. It’s an aggregate looking at one of our manufacturing clients.

 

When you look at the different horizons, we look every three months, what was the error every three months, even up to the COVID period. On average, we were 9.4 percent better on a MAPE (Mean Absolute Percent Error) basis. If you’re buying off the shelf forecasts from some of the typical service providers, you’re looking at a pretty large disadvantage. They’re not using machine learning. They’re not using artificial intelligence. If they are, it’s typically very, very simple.

 

Now, part of what we’ve done through the process is we’ve removed the human process, human involvement in every aspect of data and forecast. From the data sourcing to the validation to anomaly detection to processing, to forecasting, we do not have human analysts who are looking at that and going, “that just doesn’t look right.“

 

GC: OK. It’s all done by machine?

 

TN: Right. We have machines that apply the same rules across assets. Because if we have human beings who gut check things, it just inserts bias and error through the whole process. And with no human intervention, we have a massive scale in terms what we do. We forecast about 1.1 million items every two weeks. Our forecast cycles are every two weeks. And we do it very, very quickly.

 

GC: And nine percent less error rate or a lot lower error?

 

TN: For the ones that we checked for that one client, yes. I would say in general, that’s probably about generally right. In some cases, it’s better.

 

GC: So a few things. One is the huge range of things that you can forecast when you remove all the humans out of it gives you these scale-ups. And then the fact that you can do it over and over and over again in much tighter cycle times than someone who just does it annually, once for a budget. And third, you’re testing your accuracy constantly to improve your algorithm so that you’re getting better and better and better over time.

 

TN: Exactly. When you consider something like crude oil, there are hundreds of crude forecasters who know that, they know that they know the six things that drive the crude oil price, right? And I guarantee you those crude oil forecasters who know what they know, what they know what those six things are, manually change their output once their models run. I guarantee you.

 

GC: I remember working for an oil company in Canada where the coming of the oil sands, but it was the monthly oil sands production expectation and would come into the finance function, where I was working, and the numbers would come in the spreadsheet and the finance people go, “add five percent to that.” Because they would say, they’re wrong every month, we’re tired of being embarrassed about being wrong. And they’re wrong because they undersell their performance. So just add five percent. And that was the number that would go to the market.

 

TN: And then that’s the error, right?

 

GC: And was that even the final error? There may or may not be on top of that?

 

TN: Probably not. And there are very few companies, we have some German clients, so they’re pretty good about doing this. But there are very few companies who actually track their error. And so most companies Are not even aware of how far off they are, which is a problem.

 

Here’s the second problem. The first one is forecasting quality is terrible. So we’ve developed a fully automated process. We measure our error, that sort of stuff. The second one is the context of the forecast. What I mean by that is, let’s say you’re making a specific chemical. You can go to some of these professional chemical forecasters, but they’re not making the chemical exactly where you make it. They don’t have the proportion of feedstocks that you have. Because we’ve built this highly iterative forecast engine that does hundreds of millions of calculations with every run, we can take a bill of material for that microphone in front of you or a chemical or a car, And we can forecast out the cost of every component to that every month for the next 12 to 24 months.

 

GC: Really? So, at any scale or any, I mean, you do it for a phone, you can do it for a car?

 

TN: That’s right. So if you look at a bill of material with, say, a thousand levels in it. Not a thousand components. But, you know, if you look at the parent-child relationship within a bill of materials, these things get really sophisticated really quickly. Some of the largest manufacturers have this data. They have access to it and we can tap into that to help them understand their costs, the likely trajectory of their costs over time. What does that help them? Helps them budget more accurately. It helps them negotiate with their vendors more accurately.

 

If you’re a, let’s say you’re a 20-billion dollar company and you have one percent on your cogs, how additive is that to your valuation if you’re trading at 15 or 20 times EBITDA.

 

GC: Yeah. And just right to the bottom line at that level.

 

TN: Exactly. This is what we’re finding. For the high context as of the second kind of business problem that we’re solving, and so we do this on the cost side. We do this on the revenue side. For that second problem, which is high context, again, the platform that we’ve built allows the scale, because if we had analysts sitting there scratching their head, rubbing their beard for every single thing we’re forecasting, there’s no way we could do this scale.

 

But because it’s automated, because it’s scalable, we can actually do this. And so it adds a whole level of capability within major manufacturing clients and it adds a whole level of risk protection or error mitigation to those guys as well.

 

GC: Just think about the current year that we’re in, which would include, at least in Canada, a pipeline constraints and the potential for rail expansion activity south of the border to either curtail production, the behavior of OPEC. When you think about getting into forecasting world of commodity prices… I can understand a manufacturer bill of materials and get into cost of goods sold and forecasting quite precisely what their forward manufacturing cycle will look like. I can use the same thing, though, in the oil industry, though, and probably gas, too, I would suspect.

 

TN: Yeah, yeah. Absolutely.

 

GC: And what’s the industry’s reaction to it? Because there’ll be people inside oil and gas who are doing forecasting today and they’ll be fairly proud of the models that they built that delivering a forecast. You’re walking in and saying ”I’ve got a whole new way to do this that is so many more cycles faster than what you can manually do, looking at many more products than you practically can. And if I show you that you’re nine percent off, 10 percent off with it.” I can imagine a negative reaction to this. I can also imagine for some organizations, pretty positive reaction on balance. How companies react when you told I can sharpen up your numbers?

 

TN: OK. So I’ll tell you a story about a gas trader. October of 2018, we went into a natural gas trader here in Houston. We showed them what we do. Gave a demo, give them access for a couple weeks so they could poke around. And we went back to them later and they said, “Look, you are showing a like a 30, 31 percent decline in the price of natural gas over the next 6 months. There’s no way that’s going to happen. So thanks, but no thanks.”

 

GC: This was your data telling them? All right. Refresh my memory. What was going on in October of 2018?

 

TN: Nothing yet. But Henry Hub prices fell by forty one percent within six months. So these guys were completely unprepared. The kind of conventional wisdom around natural gas prices at that time were unprepared for that magnitude of fall. But we were showing that that was going to happen. And so when you look at that, we had an 11 percent error rate at that point, which seems kind of high. But conventional wisdom was a 30 percent error rate.

 

We don’t expect to be the single go to source when we first go into a client. That’s not our thought. We know we’re a new vendor. We know we’re offering a different point of view. But we’re in a period of history where you have to think the unthinkable. And this is 2018, ‘19.

 

With the volatility that we’re seeing in markets, you really have to be thinking the unthinkable, at least as a part of your possibility set. It’s really hard. I would think it to be really hard for really anybody who’s trading any magnitude of oil and gas product to put something like this outside of their arsenal of strategic toolkit that they use.

 

GC: Well, certainly, if you had that gap in expectation of gas prices, the gas producer should have been thinking about hedging at that moment. And if their conclusion was, you’re completely wrong and I’m not going to bother with hedging, then shame on them really, because they should have done a far better job of managing to the curve. That’s a great story because it illustrates the challenge.

 

TN: That’s normal. It’s kind of the “not invented here” approach. And I see a lot of that within oil and gas.

 

We see a bit more interest in chemicals. They have to understand the price of their feedstocks. They have to understand their revenues better. And so we see a bit more on the downstream where there is a lot more interest. But midstream, upstream, it’s just not really there.

 

GC: What’s the untapped potential here to sharpen up forecasting? If you’re talking with a company and you say, “I can sharpen up your forecasts and your estimates and tighten up your variability and your business plan.” How does that translate to value and how do you extrapolate that to here’s the the slack, if you like, that’s built up economically within the system and as a whole that we stand potential to extract out and it’s going back to the misallocation of capital, the inadequate negotiations with suppliers, the margin left on the table because of the numbers aren’t just that reliable.

 

TN: We just went through this exercise with a manufacturer with about 20 billion dollars of turnover to help them understand. If you look at, say, the nine percent difference that we had in that exercise that I told you. So let’s say we’re working with the manufacturer with a 20 billion dollars and a PE ratio around 20, which is kind of where they’re trading. If instead of a nine percent or even four and a half percent improvement, let’s just say we had a one percent improvement in their materials. That one percent improvement in their costs translates to a three percent improvement in their net income. That’s three percent improvement in their net income translates to a 1.1 billion dollar improvement on their market capitalization.

 

We’re not going out there saying, “hey, we’re gonna help you save 10 percent of your costs.“ We’re not going out with statements that are that bold. We’re saying, “OK, let’s run a scenario where we help you with a quarter of a percent,“ which would help them add 280 million dollars on to their market capitalization. So procurement management and planning is kind of that tightly calibrated that if we helped this company with 0.25 percent improvement in their costs, keep in mind we’re nine point four percent better than consensus, that actually helps them add 280 million dollars onto their market cap. It’s just exponential.

 

GC: Well, it’s the leverage effect of earnings per share as you drop those earnings to the bottom line. And so anybody who’s actually measured on EPS or stock price should take a very interested look at this because you’re not selling a hardware, big capital investment, stand up a big department, not stuff. This is about taking the current process, that’s their budgeting, and squeezing out the variability or the error rate and trends that translates directly to value. When you think about it, it’s a complete no-brainer. Like, why would you not do this?

 

TN: It is. And we’re not going to charge them 280 million dollars to do it. But we could charge for this agile budgeting and forecasting. But we’re not going to.

 

GC: What you would do is you’d say, we’ll take shares in your company.

 

TN: I mean, that’s been suggested many, many times.

 

GC: Yeah, no, I totally get It. I say to oil companies, I’ll sell my services to you based on the price of oil. But the shareholder actually values the volatility on oil pricing. So they’re not prepared to give that away. And I’d be the same. I wouldn’t do that. But on the other hand, the back to this question of untapped potential. The ship, the bulk of the economy is operating off of wildly inaccurate consensus estimates. I think that’s fair to say, I don’t know if that’s accurate or not, but that would be my my conclusion. The bulk is operating off of inaccurate assessments. And so over time, what should happen is we should see a considerable improvement in that, which in turn translates into much better performing economy, allocation of capital and supply chains and so forth.

 

So you’ve been an entrepreneur now for how long’s it been three years?

 

TN: It’s five. We started as a consulting firm. It’s been about five years now. We actually started the company in Singapore. I moved it to Texas at the end of 2018. I couldn’t really find the coding talent and the math talent in Asia. I know this sounds really weird, but I couldn’t. And so I relocated the business to Texas in 2018.

 

GC: Yeah. And the talent pool is rich enough in the United States to fulfill this ambition?

 

TN: Yeah, yeah. Yeah. Totally fantastic.

 

GC: And what lessons have you taken away from all of this experience? Would you do it again?

 

TN: I would do it again. But I would do It differently. Anybody who starts a business has to realize that markets aren’t necessarily ready for radical new thinking. And it really takes a long time to get an idea of this out there. The kind of AI industry and the talk about automation has been around for a long time. But things like this, companies aren’t really ready to just let go of. It takes a lot for them to consider letting go of this stuff.

 

If your idea is pretty radical, it’s probably to take a while to socialize with an industry. But I would say it’s also, we as a company, we had a staff issue about a year ago, actually, that really shook us. And out of that, we developed our principles and our values. For anybody who wants to do this, you really have to understand what your own principles and values are from early on. It’s not something you wait until you’re 100 people to develop.

 

That issue a year ago was a very clarifying moment for us as a company. It really forced us to think about what kind of business we wanted to build. And I’m grateful for it, although it was really terrible at the time. I’m grateful for it because we have our values. It’s actually posted on our website. Whenever we recruit new people, that’s one of the first things I send to them and say, “Look, this is who we are. If you’re not comfortable with this, then this is not the right place for you. I’m sure you’re talented, all that kind of stuff. But we really live by this stuff and and those things are important.“

 

The other thing I would recommend for anybody who’s doing this is you’ve got to play nice with everyone on the way up and you got to play nice with everyone on the way down. It’s easy for tech entrepreneurs to really think a lot of themselves. And I think that’s fun. But it’s also not really helpful in the long run.

 

There’s a lot that I’ve learned about recruiting leadership teams, finding fit, looking for investors. I have the Asia experience. I have the U.S. experience. The math and the tech around A.I. is almost the easiest issue to solve. With technology, as long as you think big but retain humility, you can do a lot. You have to be bold, but be comfortable with mistakes.

 

The trick is getting the right team and the right investors who are comfortable with that environment. And if you get the right team and the right investors who are comfortable with that, then it can be much more fun. You actually have a chance at being successful because so many startups just fail. They don’t last a year or two years, much less for five. It’s really, really critical to get the right people.

 

GC: Yeah, I completely agree. The people and the money, it’s both sides. If the investors don’t have the patience or they’re marching to a different drum like they want short term results, and that’s as much of a death knell for for many startups as a talent talent deficit.

 

Tony, this has been excellent. Thank you very much for taking the time to join me today on Digital Oil and Gas. And if people want to learn more about Complete Intelligence, where do they go? What’s your website?

 

TN: Our website is completeintel.com. And we’re on Twitter. We’re on LinkedIn. There’s a lot of information there. And like you did about a month ago, we have a lot of five-minute interviews we do with industry experts and a weekly newsletter. There are a lot of ways to get to learn about us.

 

GC: Fantastic. Tony, thank you very much. This has been another episode of Digital Oil and Gas. And if you like what you’ve heard, by all means, press the like button and the share button and add a comment, and that helps other people find the show. And meanwhile, tune back in next week, Wednesdays, when we’ll issue another episode of Digital Oil and Gas. This is Canada Day week. So happy Canada Day to my all my Canadian listeners.

 

And Saturday is Independence Day. It’s July 4th. So, Tony, have a great time on Independence Day. Be socially distant and be safe out there. Thanks again.

Categories
Podcasts

US firms create 4.8 million jobs in June

Complete Intelligence CEO and Founder Tony Nash joins BBC Business Matters to talk about Texas’s approach on handling coronavirus, why there are nearly half of companies in China’s Greater Bay Area are planning to move out of China move out of China, the deadly jade and hardwood industries in Myanmar and if loot box as a potential gambling addiction for children.

 

 

This podcast is originally published at https://www.bbc.co.uk/programmes/w172x18t1d40cnb

 

BBC Description

 

The US economy created jobs at a record pace in June as firms took on more staff after the coronavirus downturn. Payrolls surged 4.8 million, the most since the Labor Department began keeping records in 1939, helped by the reopening of factories and restaurants. But a recent spike in Covid-19 cases has raised fears for continued growth.

 

China’s decision to impose a new security law on Hong Kong is having rapid international ramifications. We explore how various countries are reacting.

Also in the programme – another fatal accident in one of Myanmar’s enormous jade mines. We discuss the scale and immense value of a decidedly murky industry – and how men, women and children can be victims of the blood jade trade.

 

And we’ll hear how a ruling in the UK High Court means that President Maduro of Venezuela will not gain access to a billion-dollar stash of gold stored at the Bank of England.

 

Plus – do loot boxes in the game Overwatch encourage problem gambling?

 

Presenter Fergus Nicoll is joined by Rachel Cartland in Hong Kong and Tony Nash in the US.

 

 

Show Notes

BBC: What do you make of what’s going on right now? The Texas governer now ordering facemasks in public. Does it feel precarious?

 

TN: No not at all. I live in Houston. I see what’s happening here. I work with hospital groups in Texas. The COVID capacity in their hostpitals is around 25% of the ICU. What I see in international media is about case counts. Case counts are higher because testings have risen dramatically. But in terms of the capacity in hospitals, what I see hospital executives are saying is that they are not alarmed and they are not worried. But a lot of the flurry of hype that I see in the international media is about case counts. When we started this, we talked about flattening the curve so we don’t overwhelm the ICU. We’ve actually done that. We’ve flatten things. And the ICUs are at 20% capacity with COVID. What we’ve seen is a lot of people during the COVID peak, people put off their non-COVID procedures and did not have their non-COVID ailments treated. So when you hear about the COVID capacities in ICUs, what I’m hearing is that those non COVID patients who are coming in, who are a lot worse than they were 2 months ago because they were afraid to go to the hospital.

 

BBC: That’s really interesting, and the US is not the only nation, I’m certain with, that that’s phenomenon has been observed. But just ot be clear, would you line up with Chris Engram and say that quarantine those who must be quarantined for their own good. Let business proceed?

 

TN: Yeah. You have to. When you look at the rates of drug addiction, when you look at the rates of suicide, these things are up 20-30 % over normal times. Certainly, every life matters. Take care of the people who are sick and people who need to take precautions, help them take precautions. All of that is necessary. Wash your hands, all that stuff. But we have to move on with the economy. And the people who don’t have an option, the people who are unemployed. We’ve had almost 200 thousand companies close in the US. Obviously there are a lot of jobs than just that.

 

The part of this that is most concerning on my part is that it’s largely state and local government officials who are closing the markets, and closing businesses and they have zero fiscal responsibility for the outcome. Meaning, if any fiscal support is to come, it comes from the federal government. But it’s not the federal government that is closing local communities, it’s the city, county, and state officials who are closing. But they are not helping out the business people. They have zero accountability, they have zero fiscal responsibility for their actions, which is the most troubling for me because people are making decisions that sound good politically, sound good on paper, but they are not sound for people’s lives in terms of the general population, in terms of business, in terms of people who need to get out and see people, and certainly mental health. It’s really reached fever pitch. I think people really need to look at the data around death rates, which is critical. The eficacy of the disease, as far as I’m seeing is declining. Death rates per 100 thousand are declining. And Texas, death rates per 100 thousand is 8. Death rates per 100 thousand in New York is 160. So we are 20 times less fatal in Texas than they were in New York.

 

BBC: You’ve thrown some interesting things in the last few hours on your feed. First of all, you’re talking about the state deparment intervening in terms of those interest in China and investment in China. You also talked about the factory in the Great Bay Area in Southern China thinking about moving house. Just to address those two points, if you would.

 

TN: There’s a recent story done. I did not do this story. I am not the origin of this story. But there was a survey done in China’s Greater Bay Area, which is a large factory of the world, where 43% of the survey respondents, who are factory owners said that they are actively considering relocating our of China. That is significant. Nearly half of factory owners in the manufacturing hub of the world are considering moving our of China. There are domestic factories there, of course. We’ve all seen fall out in COVID. There are larger demand issue in China than what we are seeing with the official data. But with trade, I would guess that most of those factories, I need to look deeper into the data, but most of those factories are export-oriented factories. That’s dramatic.

 

BBC: And when it comes to state departments, warning companies on conducting business with China. That’s from Fox News. I’m wondering does that mean don’t do business with China or are we back to the old grievances about intellectual property and so on?

 

TN: I think it’s more of the latter than the former. You can always say it’s most prudent not to but I don’t necessarily believe that myself. But I think one has to be very, very careful with intellectual property, of course, that’s an old story. But also with this new legislation that made its way to the US Congress. You have to be careful about who you’re doing business with. I think more than ever, American companies have to be really careful who they’re doing business with. Not just what they’re doing.

 

BBC: Tony, you’ve travelled extremely wildly in Southeast Asia. It seems like a perennial tragedy that the Burmese jade industry, the Burmese hardwood logging sector seems to be so frought with these complexities of the military interference and so on.

 

TN: Yes, absolutely. I think when I hear about this even specifically, it reminds me of two things. The first is we had a series of Chinese mining incidents probably over the last 10 or 15 years. We’ve heard less of this in the last 5 years. But it also reminded me in Bangladesh. 3 or 4 years ago, there’s a fire in a garment factory and there have been a series of safety incidence there. This is not a perfect analogy but the fact is, the working environments and the physical safety environments in many parts of the world, in Myanmar, are very, very difficult. And Myanmar is a very poor country and people work very hard to make very little money. And the trade offs that they have to make to try to make that money are have to do with their life and their well being.

 

BBC: Do boycotts work in the commercial sector?

 

TN: I think they have an impact. Do they work? I don’t know. It really depends on how you really define success. I think about the change that we’ve had with things like shark fin over the last 15 years. It hasn’t completely stopped people eating shark fin. But certainly a lot more people who won’t do it. And so, you really have to define what success is and really figure out how you get to that success. What was said about people about lusting after something that’s made by someone far, far away. That’s true. They don’t feel any personal consequence for the difficulties and the dangers of making these stuff.

 

BBC: On young gambling, as a parent, do you watch this kind of thing? Do you set rules? Is it even gambling playing this kind of stuff?

 

TN: I honestly never thought of a loot box as gambling until I saw the story. So, I don’t know if it’s something that I should be interested in and alarmed by. I just never thought of it as gambling. I feel a little bit ignorant.

 

Yeah, my kids play Fortnight, they play Over Watch. But I don’t see them with those types of behaviours. But I’ll take another look at it for sure. But again I never saw it as gambling. Maybe I’m just unaware.

Categories
Visual (Videos)

CNA’s Asia First: Restarting the economy takes a disproportionate amount of resources

Tony Nash, CEO and founder of Complete Intelligence, joins Avril Hong and Adam Bakhtiar of Asia First to share his insights on restarting the economy, Texas’s economy on a lockdown, fiscal stimulus and policy, and if he’s bullish on China. Watch Tony’s segment here and in our Youtube channel.

 

This video is part of a 2-hour live news show at Channel News Asia’s Asia First. CNA is part of Mediacorp. Find the original segment here: https://www.channelnewsasia.com/news/video-on-demand/asia-first

Show Notes

 

CNA: Tony, the last time we spoke was a couple of months ago. At the time, Houston hadn’t confirmed any cases of coronavirus. Fast forward to today, we’re seeing the biggest daily surge in confirmed cases. 10,000 in the state. Do you still think that it’s not as big an issue for the lockdown for restarting the economy especially for the Sun Belt state as a whole?

 

TN: We’re seeing the the case counts rise. But we’re seeing the death rates stay low and even decline. In terms of markets, I think that’s a good sign. If we saw the case counts rise and the death rate stay consistent or rise, then I’d be very concerned. But we’re seeing the case counts rise and the death rates fall. We’re seeing plenty of capacity in hospitals as we talk to hospital administrators here. Here in Texas, places like Arizona, Florida, what I’m seeing by talking to people in healthcare is that things are okay. Again, what I’m keeping an eye on really is the death rates. And the the death rates as that incidence rises. This is a virus. That’s going to get out. It’s going to grow. It’s going to hit more people. I don’t necessarily think that incidents itself is an issue. We have to look at the fatality rate and how persistent that fatality rate is.

 

CNA: Right. Then if it’s not that big of an issue, then is there less of a need for stimulus whether from the Fed or the government in that sense because we’re hearing from some of these Fed officials, they’re warning that growth has plateaued. It’s kind of leveling out and they are asking for more stimulus. But if it’s not such a big concern these surge in coronavirus cases and its impact on restarting the economy, is there still a need for further stimulus?

 

TN: The problem with stopping an economy or pulling the plug on an economy, which is what governments around the world did, is that restarting it takes a disproportionate amount of resources. So governments around the world pulled the plug, stopped business, stopped socializing, stopped all these things, stopped flights, and it killed the oil and gas sector. It killed the hospitality sector. It killed travel and so on and so forth. In order to restart the economy, it takes a disproportionate amount because there’s inertia in economic activity and so we really have to push it along pretty far so that it gets back to that rate. It’s pretty easy to criticize companies that aren’t performing. Q2 revenues for example, Q2 earnings are going to come in pretty poor. But these guys are doing the best they can given the impacts of governments globally. And here in the US, we see state level and local governments making decisions for businesses to stop. But they’re not the ones who provide the fiscal support. It’s the federal government or the central government that actually provides that support. So there’s a weird misalignment of incentives in the US where it’s local governments forcing companies to close our state governments. But they’re not actually accountable and they’re not paying the consequences of it.

 

CNA: Yeah, so that therein raises this moral dilemma I guess, because whether you’re looking at fiscal or monetary policy support, we see the Fed dipping its toes into corporate bonds, buying Apple bonds, Microsoft bonds for example. Apple stocks up 25% year to date and then in terms of fiscal policy support, sure that pandemic aid program, it has according to the Trump administration, helped to save more than 50 million jobs. But it’s also helped the wealthy and connected.

 

TN: Sure. It has. When you see the the Fed of the Treasury spending on things like Apple bonds, yes it’s for Apple, but I don’t think it’s really for Apple. It’s the wealth effect of markets and getting US consumers back to the point of feeling like they can spend again is a very difficult place to get consumers and so, especially when you look at baby boomers and the spending power they have, they’re looking at their retirement years. If they’re looking at their portfolio being cut dramatically, then they’re going to cut back on their spending really, really dramatically. So the sentiment around markets is important. It’s easy to make fun of. A lot of people mock it. But the fact is baby boomers have to feel comfortable to go out and spend because they’re the biggest age cohort. Actually, those guys and millennials in the US are around the same size. But it’s important for them to spend and that the sentiment around markets, the sentiment around things like real estate values are really, really critical right now.

 

CNA: Right. Okay. Let’s shift focus a bit and talk about the Asian markets. We’ve been seeing that Chinese rally. It seems to have, you know, showing no sense of stopping. Shanghai Composite still closing up about half a percent. Do you still feel bullish on the mainland markets?

 

TN: No. Look, they’re way ahead of what we thought they would hit by year end. Sure, you may see more momentum. You may see more of a run in Chinese markets but we don’t see it based really in any fundamentals, which very few markets are right now. But we don’t really see a lot of room left there even before the end of the year. So, we may see some volatility there. I was working in Beijing in 2015 when markets crashed there before and sadly, we may see something similar now. It all depends on how the central government will then address it and if people will walk away whole. But I have friends who in 2015 lost 30, 40 percent of their wealth in that collapse and so, will we see another one? I don’t necessarily think we will. I want to think that they’ll be more prudent. But all the games that we expected before the end of the year have already been taken off the table in the Shanghai Composite.

 

CNA: Thank you for sharing your time and your thoughts with us. That was Tony Nash, Founder and CEO of Complete Intelligence.

Categories
QuickHit Visual (Videos)

QuickHit: U.S. mining operations and supply chain security

In this QuickHit episode, we are joined by Jerry Mullins the Senior Vice President, Government Affairs and External Relations for the National Mining Association. In this episode we explore U.S. mining operations in the height of the pandemic. We take a look at the industry’s serious concern about supply chain security. We also talked about rare earths and how the U.S. miners are contributing to the global green economy.

 

The National Mining Association is the voice of mining in Washington, D.C. with the administration, with Congress, and different agencies. The focus of the organization is to grow domestic mining in the United States and highlight the most significant and timely issues that impact mining’s ability to safely and sustainably locate, permit, mine, transport and utilize the nation’s vast resources .

 

This is QuickHit’s episode 16. For previous episodes you might have missed, kindly check:

 

The “Great Pause” and the rise of agile startups

“LUV in the Time of COVID”

Proactive companies use data to COVID-proof their supply chains

 

The views and opinions expressed in this 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: From your perspective, looking at what happened in mining during COVID and post COVID, what did mining firms see around continuity of operations and the risks there? Also, what did mining clients find with supply chain continuity? That’s a real question and that’s something we saw a lot of issues around as countries like Peru and others just completely shut down.

 

JM: Fortunately, domestic mining in United States was deemed an essential industry, and so it was allowed to continue to operate. That’s really important to recognize. As an industry, it had the ability to absorb the different environment that a pandemic brought on, and companies were allowed to successfully operate. These companies were able to continue to produce the raw materials that were needed for multiple industries across the globe.

 

As far as the effects of other countries and how they were affected, when you think about the global economies that generally slowed down, a lot of folks hit a pause. Economies had to re-calibrate exactly what they were able to do and the best way to do it. The domestic mining in the United States played a real critical role in leadership of showing the nation how to continue to work forward safely and effectively.

 

TN: With the supply chain disruptions and some of the geopolitical issues, there is a real sense in the US that there may be some supply chain security issues around metals and minerals. Can you help us with that? What is the Association doing?

 

JM: That’s an interesting point you bring up about the security issue. Just last month, the National Mining Association conducted a poll and 64% of the respondents said they were concerned about the supply chain dynamics and how reliant the U.S. was on international supplies of different critical minerals.

 

You’ve seen a real zest of excitement and certainly interest in focusing on the ability for U.S. producers to fill that gap and make sure that those critical minerals that are needed can be produced in the United States. [This means] addressing some of the permitting challenges that domestic mining faces and finding ways to more effectively allow for U.S. mining to meet a lot of demand that exists.

 

TN: When you talk about things like permitting and we talk about supply chain risk, one of the big kind of things that flag up is rare earths. Can we talk a little bit about rare earths and understand for the U.S. electronic sector and Department of Defense and others? What are some of the things that you’re thinking about and your observations about rare earths in the U.S. and the exposure to rare earths from other places?

 

JM: Well, certainly the Department of Defense relies on 750,000 tons of minerals each year. That’s for everything from armor for the individual soldier, to armor on a tank, to different requirements for jet engines to telecommunications. When you think about everything from palladium to copper to gold and silver–some rare–some not as rare. But those necessities are real. There’s an opportunity for tremendous growth in the rare earth field in this country. It is really opening up, and that’s something that international investors as well as domestic investors are starting to recognize.

 

TN: One of the other things we hear quite a lot about is the green economy — electric vehicles, battery technology. We hear a lot about those technologies accelerating in other locations and maybe the U.S. has to catch up or there are minerals from other places that the U.S. may or may not produce. How do you see U.S. miners contributing to the green economy and battery technology and electric vehicles and that whole section of the economy?

 

JM: When you talk about battery technology and when you talk about the electrification of the auto fleet, what you’re talking about is copper. And you’re talking about mass needs of copper, mass needs of gold, mass needs of silver, and be able to satisfy the requirements. If you look at the wind technology and the coking steel that’s going to be required, the coking coal for making steel that’s going to be required, these are needed to achieve the goals that have been put out there. The American miner is absolutely part of of that future.

 

TN: Great. Perfect. Jerry, thanks so much for taking your time today. I really appreciate this and I look forward to speaking again as we see all of the supply chain issues with COVID and post-COVID. It’ll be really interesting to reconnect and hear some of your thoughts at that point.

 

JM: Thank you, Tony. I look forward to it.

Categories
Podcasts

Claims, Caution, and China

Tony Nash, CEO of Complete Intelligence speaks with BFM 89.9 about the US market rebound, what to expect in the third quarter of 2020, jobless claims and US unemployment, and Hong Kong amid the US-China cold war or trade war.

 

BFM Notes

It’s been an eventful weekend in politics, and all eyes are on whether markets will reflect the renewed uncertainty. We reached out to Tony Nash, CEO of Complete Intelligence, to help us break down Federal Reserve chairman Jerome Powell’s comments before the US Senate Banking Committee, data expectations, and what the potential impact of Hong Kong losing its special status might be on emerging market currencies.

 

Produced by: Michael Gong, Roshan Kanesan

Presented by: Noelle Lim, Roshan Kanesan, Lyn Mak

 

Listen to the BFM Podcast here.

 

 

Show Notes

 

BFM: Thanks for joining us, Tony. So now, Jerome Powells made some comments before the Senate Banking Committee pointing towards a cautious rebound in the US economy. But nevertheless, U.S. markets closed in the green on the back of some positive housing data. So could you help shed some light on what’s happening here?

 

TN: Sure. We had the positive housing data. We had a broad tech rally. We also had Boeing like 14 percent today on a test flight on the 737 Max. So it was simply a test flight and it was a successful test flight and Boeing rallied 14 percent. It’s a major component and it has an impact on broad market activity. So there are some good things happening, but certainly low expectations environment.

 

BFM: Do you expect end of quarter rebalancing by funds, would that costs significant market volatility? I mean, could you just give us some thoughts about this?

 

TN: As we’ve said before, we expect volatility to continue through probably mid-August. So we will see some rebalancing and we will see as these investors figure out what the right value is for the assets they’re invested in. So we’ll see some change. We’ll see a lot of people kind of take it in Q2. And Q3 is a brand new quarter, so they’ll wipe the slate clean. We’ve seen a lot of companies dump everything but the kitchen sink into the Q2 earnings. Well, but we expect them to. And so Q3 will be hopefully a whole new world. And and we’ll be approaching something more positive by then.

 

BFM: Right. And Tony, when we look at the every week, we’ve been paying very close attention to the jobless claims numbers, right? What are your expectations of the US Weekly jobless claims numbers this week and June Non-Farm payroll data that’s expected on Thursday or Friday overtime?

 

TN: Well, we saw a huge jump in non-farm payrolls in May of 2.5 million, which was pretty massive. Also, the unemployment rate improved from almost 20 percent to like 13 percent. So, we expect things to improve gradually. We don’t expect the two million, although I hope we do, but we don’t expect that magnitude. But we do expect jobs to continue to accumulate as companies gradually come back. So the initial wave of companies opening up in the US produced a lot of new jobs. But now we’re starting to see that continue, but not necessarily at the same magnitude. But again, if we see 2.5 million or more, that will be a delight, everyone.

 

BFM: So now, Tony, fluctuating crude prices and as well as bankruptcies like Chesapeake Energy make oil stocks seem like a bit of a risky proposition. Shouldn’t investors still be considering energy companies as part of their portfolio?

 

TN: Well, I think you have to do with caution. So we look at things like crude oil inventories in the US reached an all time high of something like 540 million barrels about a week and a half two weeks ago. So there’s plenty in storage. I think if you’re investing in energy companies, whether they’re the developers option companies or service providers or whatever, I think you just have to go in with your eyes open to know that the growth there and the draw down in inventories is not likely to be a quick one.

 

TN: So, again, it’s just you have to understand your own risk profile. You have to understand your own tolerance and then go in. I mean, when you look at something like Chesapeake, that was, it happened. And I don’t think it was a complete surprise. But you also look at BP. They sold off their chemical business to Eneos over the weekend. And so some of these companies are hiving off other businesses so they can focus on their core business.

 

BFM: So, now you know, the latest piece of news where US is going to revoke Hong Kong’s special status. So what do you make of this piece of news in the larger picture of the trade war, the Cold War between China and US?

 

TN: I think it puts Hong Kong… It’s another piece in the puzzle to put Hong Kong in a light that it doesn’t really want to be put in, which is one country, one system. Hong Kong has for the last 20, 30 years, been the special place where you can access China without all the baggage. But what we’ve seen with the security like coming in is if you’re in Hong Kong, you’re also accepting the China baggage, which means you have to self-censor your comments, which means you have to be really careful about everything you do and say. And if you’re an investor, that’s a pretty difficult place to be. And so I think, the announcements in the State Department of not selling this technically sensitive equipment there, it was inevitable.

 

I don’t necessarily think it’s a surprise. I think from the Chinese side, it may have been a surprise. But I think they were kind of deluding themselves if they didn’t expect it. So there is accountability for China’s actions and it’s been as they’ve moved into Hong Kong, there have to have been ramifications and were seeing those, and there will be more. And China will have to understand that if they want the benefits of open, say investment markets, they’re going to have to limit their desire to control a number of aspects around business.

 

BFM: Thank you very much for speaking with us this morning, Tony. That was Tony Nash, CEO of Complete Intelligence, giving us his insight into global markets.

Categories
Podcasts

Economies are sputtering, which means trade war will intensify

Here’s another guesting of our founder and CEO Tony Nash in BFM Malaysia, talking about trade war between US and China. Can these two countries actually decouple? Or is the current supply chain too dependent to do that? Can the economy have the V-shaped recovery that everyone is dreaming of, or is it just an illusion? What can the policymakers do to improve the economic outlook for this year? What can his firm Complete Intelligence see happening based on the algorithms and AI?

 

We also discussed regionalization of supply chain as a result of the Trade War in this QuickHitQuickHit episode with Chief Economist Chad Moutray of National Association of Manufacturers.

 

BFM Description:

The trade wars between the US, China and the Eurozone seem to be gaining momentum. Tony Nash, CEO, Complete Intelligence, offers some insights, while also discussing European industrial activity.

 

Produced by: Michael Gong

Presented by: Wong Shou Ning, Khoo Hsu Chuang

 

Listen to the “Economies are sputtering, which means trade war will intensify” podcast in BFM: The Business Station.

 

Show Notes

 

This is a download from BFM eighty nine point nine. So is the station. Good morning. This is BFM eighty nine point nine. I’m considering that I’m with one shotting bringing you all the way through the 10:00 o’clock in the morning and Rano 76. We are talking about markets, but well above 50 bucks sort of because of that with about 15 minutes time, we’re talking to call you. Ling was an independent panel, a political economist at Ciggy and I’m advisers will be discussing palm oil.

 

BFM: So last night in America, the stock market slumped. Investors are cautious, right How did the markets do?

 

Not so well, because there’s been clearly a resurgence in virus cases in multiple states, which puts into question the economic recovery. So, unsurprisingly, the Dow closed down three percent and S&P 500 closed down 2.6 percent, while the Nasdaq closed down 2.2 percent. Meanwhile, in Asia yesterday, only Shanghai was up, which was up 0.3 percent, while the Nikkei 225 closed down marginally by 0.07 per cent. Hang Seng was down 0.5 percent, Singapore down 0.2 percent, and KLCI was down 0.3 percent.

 

So for more clarity into the whys and wherefores of markets, we’ve got it on the line with us Tony Nash, who is the CEO of Complete Intelligence. Now, Tony, thanks for talking to us. Trump’s getting tough on China rhetoric highlights, well, obviously, the American’s concerns about being too reliant on China. And, of course, we can see that being manifested in the list of 20 companies, which is deems suspicious. In your opinion, can the two economies decouple or other interests in supply chains too heavily aligned?

 

TN: Well, I don’t think it’s possible to completely decouple from China. I think the administration are really being hard on each other. And I think the hard line from the US, you know, it’s relatively new. It’s a couple years old. But I don’t think it’s possible, regardless of the hard line for those economies to decouple and for the supply chain to decouple. We had some comments over the weekend out of the U.S. saying that they could decouple if they wanted to. But that’s just the hard line and unaware of the possibilities. We’ve been talking about, for some time, probably two and a half, three years, is regionalization of supply chains. And what we believe is happening is the US-China relations have just accelerated regionalization. It means manufacturing for North America, moving to North America. Not all of it, but some of it. And manufacturing for for Asia is largely centered in Asia. Manufacturing for Europe, some of it moving to Europe. And that’s the progression of the costs in China. And some of the risks are relative risks to supply chains highlighted by COVID} coming to the realization of manufacturers.

 

BFM: U.S. markets corrected sharply last night. So is the market actually now waking up to the reality that COVID 19 is going to be a problem for economic recovery? And this V-shaped that what many investors thought is probably a pipe dream?

 

TN: I think what markets are realizing is that it’s not a straight line. Well, we’ve been saying for a couple months is that end of Q2 or early Q3, we would see a lot of volatility. Then people started to understand how the virus would play out. Until we’ve had some certainty around the path, we will have days like today. And we’ll have a danger with an uptick as optimism comes back, what’s happening is markets are calibrating. People are trying to understand not only the path of COVID, but what those actors mean—the governments, the companies, the individuals—will do to respond, how quickly the markets come back. But what are people going to have to do? What mitigations that we’re going to have to take? What monetary and fiscal policies will governments take as well? We’re not done in that respect. So more of that’s to come, but we don’t know what’s to come there exactly. Markets have moved a lot on new case count. I don’t believe that it’s the case counts itself because a lot of these are are really mild cases. It’s just the uncertainty around how long it will last. The magnitude and the mitigation that people will take around it. There’s more of this volatility to come.

 

BFM: Tony, you might have seen the IMF‘s growth forecast, which was just announced a few hours ago. They’ve now said that global growth will shrink 4.9 percent for 2020. That’s nearly two percent worse than what they originally thought. And I think the U.S. also marked by an expectation of a negative 8 percent, down from negative 6o.1 percent. Do you think this might cause the policymakers to have an even more vigorous policy response and liquidity into the system?

 

TN: It might. I think the U.S. has shown that it’s not really afraid to be pretty aggressive. I think you may see more aggressive policy responses in other places. Obviously, Japan is very active on the monetary policy side. But we need to see more actual spending and more direct support of individuals and companies to make it through this. So, I do think that, obviously, IMF’s forecast concern people and get policymakers attention. I do think that they’re probably a little bit overblown to the downside, though. So I wouldn’t expect 8 percent decline. I wouldn’t expect a global decline as acute as they’ve stated today.

 

BFM: If you look at oil prices declined last night and I think this is on the back of U.S. crude inventories increasing. But is this also a function of COVID-19 fears in terms of how that may impact the economy’s going forward and consumption of oil again?

 

TN: Yeah, that’s interesting. The oil price is our… I think there are a number of things. The storage, of course, as you mentioned. But there’s also how much are people starting to drive again? What do traffic patterns look like? Also, how much are people starting to fly again? We really need to look at like Google Mobility data. We need to be looking at flight data. We need to be looking at looking to really understand where those indicators are headed. So when we compare a $40 a barrel of oil at $39 s barrel for WTI today, compared to where it was a month ago. The folks in oil and gas are really grateful to have that price right now. And it’s a real progress from where we were a month or two months ago. So I think what people are looking at today is the progress and then the expectation. They’re not even necessarily looking at the real market activity today. It’s all relative to a couple of months ago and it’s all expectations about a couple of months from now.

 

BFM: Last question on perhaps the data that your algorithms generated, Complete Intelligence. What kind of signs and indicators does our technology and the AI tell us about the direction the market’s going forward?

 

TN: Yeah, well, this is where we we pulled our assertion of volatility. We we really expected things to be pretty range traded for some time. So, you know, crude oil is a good example. We were saying back in February, March, the crude oil would end the quarter in the low 40s. This is WTI and here we are. So, with volatility, we’re not necessarily trying to capture the high highs and the low lows. We’re just recognizing that the markets are trying to find new prices. So it’s interesting when you look at things like the dollar. The dollar is a relative indicator for, say, emerging market‘s uncertainty and troubles as well. We did expect a dollar rise toward the end of Q1, early Q2, as we saw. But we haven’t expected the dollar to come back to strengthen until, say, September. So there are a number of indicators around trade or on currencies. And what we’re finding generally with our client base, for global manufacturers generally, are the algorithms… We’ve found that our average-based forecasting has an error rate that is about nine percent lower on average than consensus forecasts. So when we had all of the volatility of the last three, four months, consensus forecasts in many cases were 20 to 30 percent off. Ours were about nine percent better than that. Nobody expected the COVID slowdown. If we look at that from a few months ago, the bias that’s in normally of doing things, negotiating, procurement, supply chain, the revenue, that sort of thing. We take that out and this passionate… I would suggest that there is a lot of passion in the analysis from day to day when you look at three percent fall in markets today, but you can’t extrapolate today into forever. And what we can do with AI is taking emotion out of this, take a rational view of things. And really remove, not all of the error, of course, nobody can remove the error. There area a lot of the error from the outlooks in specific assets, currencies, commodities and so on.

 

BFM: All right, Tony, thanks so much for your time. And that was Tony Nash, chief executive for Complete Intelligence talking from Texas, USA. Interesting that this kind of stuff that he does at his business, tries to remove the emotional, the emotive side of the markets and give something a predictor over the future. But I think that sometimes you can’t discount too much of human emotion because it’s all driven by essentially two emotions, right? Greed and of fear.

 

But you know, basically his nugget is it’s going to be volatile. Right. Hang onto your seats. Right. Because we really don’t know. There’s too much uncertainty out there at the moment. This is a scene where it’s for oil prices or even for equity markets.

Categories
Editorials News Articles

2020 Best Tech Startups in The Woodlands

The Complete Intelligence team is so thrilled to have been awarded as one of the best tech startups in The Woodlands for 2020! Thank you so much to The Tech Tribune for this honor.

 

 

Please check the original publication of this here: http://thetechtribune.com/best-tech-startups-in-the-woodlands/.

 

Article as it appeared on the Tech Tribune website is below.

 

The Tech Tribune staff has compiled the very best tech startups in The Woodlands, Texas. In doing our research, we considered several factors including but not limited to:

 

  1. Revenue potential
  2. Leadership team
  3. Brand/product traction
  4. Competitive landscape

 

Additionally, the best tech startups must be independent (un-acquired), privately owned, at most 10 years old, and have received at least one round of funding in order to qualify.

 

Looking for a badge to celebrate your awesome accomplishment? Find it here!

 

1. Othram

Founded: 2018

 

“Othram applies cutting-edge genomics to forensics in a novel way that harnesses the full potential of genome sequencing to deliver superior genomic insight from degraded and low-input DNA samples. Founded in 2018, Othram operates at the intersection of molecular biology, population genetics and bioinformatics. Our team includes leading scientists and engineers working at the frontier of genomics, using proprietary laboratory techniques and computational algorithms to extract the most value possible from human DNA. We work with the military, law enforcement, private investigators, historians, and academic researchers to maximize the value of their genetic samples. Othram is headquartered in The Woodlands, Texas.”

 

2. Complete Intelligence

 

 

Founded: 2015

 

“Using advanced Artificial Intelligence, Complete Intelligence provides highly accurate cost and revenue forecastshighly accurate cost and revenue forecasts fueled by billions of enterprise and public data points using our Global Cognitive System ™. Our platform gives companies insight into their future, so they can plan for success. Stop guessing. Start planning. Succeed.”

Categories
News Articles Uncategorized

Transforming Capital Projects Using Digital

Complete Intelligence is mentioned in this article by digital innovation expert Geoffrey Cann. You can find the first and original version of this at https://geoffreycann.com/transforming-capital-projects-using-digital/. We thank Geoffrey for including us in this valuable piece that helps oil and gas companies in modernizing their operations and technologies. 

 

The oil and gas industry spends hundreds of billions each year on new capital projects. An effort by a group of international producers should eventually improve the efficiency of that spend.

 

DIGITAL CAPITAL

 

I was contacted recently by a trade association representing about 40% of the global production of oil and gas to discuss the role of digital innovation in upstream capital. Their brief states that while most oil and gas companies have programs in place to progress their internal digitalization agenda, some initiatives need to be tackled at the industry level to unlock value at scale. An example of an efficiency opportunity with industry-level appeal is the digitalization of the supply chain.

While their aim is to focus initially on capital projects, it’s probably safe to assume that the initiative will move to other areas of interest in time.

This post summarizes the survey that I submitted in response to the survey.

 

Question 1 — Scope of Digitalization

 

What are the key areas that you think of as being part of a Digitalization agenda?

 

RESPONSE TO SCOPE OF DIGITALIZATION

 

Rather than listing off a random set of possible digital technologies to frame the scope of digital, I set out the key elements of my digital framework which also incorporates infrastructure and work processes areas as integral to a digital game plan.

 

Question 2 — Business Impacts

 

How do you see Digitalization impacting Major Projects in the Oil and Gas Industry? What are your thoughts on the impact on key Capital Project areas?

 

RESPONSE TO BUSINESS IMPACTS

 

Oil and gas capital projects have slipped backwards in terms of productivity gains while most other industry sectors have advanced. At the LNG18 event in Perth in 2016, Shell presented their analysis which shows oil and gas capital has declined in productivity by 25% over the preceding decade whereas most other sectors had gained. The upside for capital is to capture this loss of productivity, and to catch up with other sectors (leading to an outsized gain potential).

 

Oil and gas spends hundreds of billions per year in capital. The IEA estimates that oil and gas stands to gain a minimum of 20% productivity improvement and 20% cost reduction through digital. The opportunity is in the range of $100B in cost savings, and $100B in capital avoidance. Substantial carbon emissions stand to be avoided. Every aspect of the capital cycle is able to leverage digital tools to capture these savings.

 

I contributed to a confidential government study in Australia that set out to understand how the competitiveness of their LNG sector could be improved. The modelling showed that a 25% reduction in schedule (from 4 years to 3, for example), would reduce the break even cost of a typical project by $1 per million British thermal units (MMBTU) for 20 years. To give a sense as to what this means, a 9 million ton LNG plant ships 441 trillion BTU per year. Do the math.

 

CAPITAL STRATEGY

New securitisation technologies (distributed ledger) could be used to transform capital access, and create a new capital asset class. New government crypto currencies (China, EU) may allow for capital market access that avoids US banking system and related sanctions abilities.

 

RISK ANALYSIS

Advanced ML tools can provide much better predictability to underlying volatile commodity assets (currencies, carbon, hydrocarbons, cement, steel, etc). See company Complete Intelligence. Better predictability to commodity risk can lower project capital costs and improve purchasing strategy.

 

SCHEDULING AND PROJECT CONTROLS

The industry routinely produces digital twins of operating assets, but how about creating a digital twin model of the schedule? Another possibility is the use of game tools to create the “game” equivalent of a capital project (see Real Serious Games), used for schedule tuning and post build auditing. Cloud computing can help create deeper virtual environments that span entire supply chains, not just one link at a time, so that schedule and carbon impacts can be visible.

 

ENGINEERING

It’s practically here, but the use of robotic tools to automate routine engineering work is still nascent. Data visualization tools can assist with engineering reviews (see Vizworx) across disciplines and suppliers, provided data is normalized. Open data standards can enable industry cooperation (see OSDU). Deeper virtualisation of teams working across time and location boundaries is enabled by cloud computing, digital twin tools, collaboration systems (zoom, slack). Finally, blockchain tools can be used to capture document versions, protect IP.

 

CONTRACTING

Some companies already use AI to read/interpret contracts, flag areas for review. Bot technology can then conduct alerts, notifications, payments using blockchain interface (smart contracts).

 

PROCUREMENT

The industry can leverage entirely new supply models for common procurement (see The IronHub). Blockchain technology can be used to track carbon content and asset provenance throughout the supply chain during sourcing, fabrication, and mobilization.

 

ON-SITE EXECUTION

There are already examples of robots being used on project sites to facilitate work execution—drones for visual inspections in both aerial and subsea applications. Advanced measurement tools are starting to close the gap between engineering and fabrication (see Glove Systems), which is handy when fabrication is modularised and distributed to multiple global shops. Leading companies create the digital twin of civil site works (see Veerum), allowing for continuous monitoring of site performance, and analytic tools to improve execution, reduce carbon. Safety analytics can identify and predict emerging safety hazards.

 

DIGITAL COLLABORATION

Large projects will leverage cloud computing to enable single source of truth about capital projects.

 

WORKFORCE MANAGEMENT

With most workers now carrying one or two supercomputers on their person, industry can now bring valuable data directly to the worker. Two-way collaboration using cameras and audio can connect workers to supervisors, sites to suppliers, builders to engineers. Game tools can be deployed to show individual performance (safety, time on tools) compared to team, shops, fabricators, best teams, best practice (See EZOPS).

 

MATERIAL MANAGEMENT

Blockchain technology is already in use in supply chains to provide for track and trace of materials in support of warranties, product specifications, certifications (see Finboot) to tighten compliance.

 

Question 3 — Longer Term Impact

 

How do you see Digitalization impacting the overall Oil and Gas Industry over the next 10 years?

 

RESPONSE TO LONGER TERM IMPACT

 

In my book, I set out the substantial headwinds to the oil and gas industry (decarbonization efforts, capital constraints, talent shortfalls, environmental activism, competitive alternatives for transportation). Digital innovations are the only known solution that addresses these cost, productivity and carbon concerns simultaneously.

 

Technology companies supplying the industry are already rapidly adopting digital tools to stay competitive. Brownfield assets are going to slowly adopt digital tools because of operating constraints (short outage windows to make change, management of change process). Capital projects have the opportunity to drive change precisely because they are greenfield, and specifically the short duration capital cycles in unconventional areas.

 

Over the next ten years I expect to see some oil and gas companies distinguishing themselves with new business models that are digitally led. With its substantial spend, oil and gas companies could become one of the leading advanced digital technology industries globally.

 

Question 4 — Key Drivers for Digital

 

What do you see as the key drivers and value areas behind a Digitalization program?

 

RESPONSE TO KEY DRIVERS FOR DIGITAL

 

There are many drivers for digital innovation, but here are four that are at an industry level.

 

TALENT.

The industry is at risk of becoming unattractive to talent (the Greta Thunberg effect). People in oil and gas are falling behind in companies that are falling behind in an industry that is falling behind. Digital tools can make junior resources as productive has highly experienced, as well as make the industry more “high tech” and attractive as an employer.

 

CAPITAL MARKET ACCESS.

Capital markets are shut off to much oil and gas investment. The top 7 largest companies by market cap are all digital (Amazon, Facebook, Alphabet, Apple, Microsoft, Tencent, AliBaba). Oil and gas has shrunk from 15% of NYSE to less than 5%. Apple alone is now larger than the combined oil and gas majors. Capital markets need to hear a thoughtful strategy about how the industry is embracing digital innovations.

 

CARBON MITIGATION.

The EU Green deal is driving carbon neutrality targets for oil and gas (see BP, Shell, Repsol). Oil companies and their supply chains will be unable to access markets without thoughtful carbon gameplan (track, measure, monitor).

 

COST AND PRODUCTIVITY.

Oil and gas spends hundreds of billions per year in capital. The IEA estimates that oil and gas stands to gain a minimum of 20% productivity improvement and 20% cost reduction through digital. The opportunity is in the range of $100B in cost savings, and $100B in capital avoidance. Substantial carbon emissions stand to be avoided. Every aspect of the capital cycle is able to leverage digital tools to capture these savings.

 

Question 5 — Biggest Challenge

 

What is the biggest challenge at implementing a Digitalization strategy?

 

RESPONSE TO BIGGEST CHALLENGE

 

As I see it, digital is not a ‘technology’ opportunity. It is a culture change opportunity. Oil and gas tends to view digital as something to purchase (buy and do digital), rather than as a lever to drive behaviour change (to be digital). Oil and gas companies underinvest in the necessary change management actions to create the conditions for digital success.

There is an inadequate amount of training on the digital basics for the front line workers who need to embrace this unknown technology. A reliance on engineering water fall methods of work instead of agile methods undermines the speed by which digital change can take place. By underinvesting in the user experience side of change, and placing the asset at the center of digital efforts, the industry increases the resistance to technology.

 

Question 6 — Foundational Capabilities

 

What foundational capabilities do you feel need to be in place for O&G companies to fully exploit Digitalization?

 

RESPONSE TO FOUNDATIONAL CAPABILITIES

 

I cover much of this in my book. For example, IT and OT need to be merged into a single organization. Systems need to be cloud enabled as much as possible. Enterprise solutions (SAP, Maximo) need to be upgraded to their digital versions (so that they do not block other digital efforts). An experimentation capacity to run digital trials must be in place. Funding for digital investments must be in place. Clear expectations for achieving desired outcomes (cost, productivity), must be expressed. Methods for doing work must follow agile principles. Better connections to the digital start up ecosystem should be in place.

 

Question 7 —Investment Candidates

 

Have you seen any Digitalization initiatives that should be carried out collectively or would be more effective if adopted in a common way across the industry (including the supply chain)?

 

RESPONSE TO INVESTMENT CANDIDATES

 

OSDU is a powerful illustration for enabling sub surface data management and exchange to accelerate the adoption of digital in the upstream. Something like this for capital projects would be valuable. The OOC is demonstrating the power of community of collaboration to drive blockchain-enabled initiatives forward.

 

CLOSING THOUGHTS

 

Building assets that last 20 years or more is just the first step in their lifecycle. Digital efforts in Capital Projects should enable must faster and more graceful commissioning and handover. For example, CSA Z662 and PHMSA 192 set out the new materials tracing for linear infrastructure (tubular, pumps, fittings, flanges) which can only be achieved by deploying digital in the capital project. Poor quality data about installed infrastructure destroys up to 40% of value in a transaction (and that data is largely generated and collected during capital spend).

 

The sooner the industry tackle capital project efficiency the better.

Categories
QuickHit Visual (Videos)

QuickHit: The “Great Pause” and the rise of agile startups

Vice President for Accelerator Investment Fund for Capital Factory, Bryan Chambers, joins Tony Nash for QuickHit’s 15th episode. In this episode, they discuss the making of agile startups, and how they are amidst an economic recession brought on by the COVID pandemic, energy fallout, and other issues. Chambers also talked about The Great Pause. He sees this as a large contributing factor for the future of startups around the globe.

 

Capital Factory is the center of gravity for entrepreneurs in Texas. They help founders and startups by introducing them to their next investors, their next customers, their next employees. Since 2013, they’ve been the most active VC in the state of Texas, unlocking billions of dollars of new value for startups.

 

The views and opinions expressed in this 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: How have small, innovative companies been impacted by the various kind of problems we’ve seen over the last four months starting with COVID and then energy fallout? And how are corporates responding to that?

 

BC: The best entrepreneurs I’ve ever had the opportunity to work with generally have two characteristics: they’re incredibly resourceful and they are very emotionally intelligent individuals. Those are the two critical aspects of entrepreneurs that are also going to help them successfully navigate a global pandemic.

 

Everybody’s pretty impacted. The impact is significant. And so much that we’ve applied a formula internally called the COVID Impact Score. We ask everybody: how has COVID impacted this business and where is it going? How is it changing? Few people are positively impacted by it. Most people are negatively impacted by it. A few businesses are just neutrally impacted. But most people fall into that first camp, the negatively impacted.

 

People should be looking in the mirror, thinking very deeply about how do they pivot. How do they capitalize on new opportunities? Regardless of a global pandemic, it’s incredibly hard to build a startup and build a successful organization. This makes it even more difficult, and we’re going to see a lot of companies die faster. But we’ll also see lots of new and exciting innovations be born. We know in the wake of a crisis, major innovation and reform, happen. It’s exciting. But it’s also painful to get there.

 

It’s the Great Pause. The investment community is confused because our minds always say “no” when it comes to making an investment decision or a purchasing decision. It may not the [fault] of the product or service. We don’t know what’s going to happen in our business next month or next quarter and confused minds say “no”.  And I think there’s a lot of “no” right now.

 

TN: That’s what we’re seeing in the commercial environment but I think from the investor side, I yearn for the days of Q3 2019 in terms of investment funding. What a beautiful time it was. And it’s just a 180-degrees from that right now. As an entrepreneur and a startup, it’s an interesting time for us. It’s a matter of reorienting who we are. I know Capital Factory is doing the same thing.  Even big corporates are doing the same thing.

 

That’s what we’re seeing in a lot of the conversations we’re having. Many people aren’t really sure of their short-term priorities, and they just kept moving along. We’re finding opportunities in that, which is great.

 

Figuring out how to respond to that had been a challenge for us. But now that we’ve cracked it, we feel like we’re really moving ahead, and I’m hoping that those entrepreneurs that you guys are working with, that many of them can do that.

 

So part of the next step is what are corporates doing? How are corporates innovating through this? Are they relying on Capital Factory companies or external innovations to figure this out, or are they doing that great pause you’re talking about? Or are they just taking their own inventory in-house? Maybe they are trying to figure out where they’re going?

 

BC: It’s all of the above. Budgets have dried up and confusion still remains. People are scrambling to figure out how to re-prioritize innovation projects. But something so unique is happening in the technology ecosystem, not just in Texas, not just in the nation, but across the world. Innovation cycles are continuously speeding up. They’re getting faster. This only makes Fortune 500 companies more and more susceptible to disruption and more and more uncomfortable.

 

Any major corporation has two strategies: an internal strategy and an external strategy. They must be thinking about both. How do we improve our own processes, our own efficiencies and continue to innovate and iterate better and faster? But we better look outside our four walls, because startups are coming to eat our lunch. They can do it better and faster than they ever have in the history of the world, and it’s happening.

 

New business models and new types of firms will emerge. New firms like Capital Factory and our Innovation Council, the service that we help provide to startups and to our Fortune 500 organizations are going to be more prevalent. It is so fast and furious [at this point in time]. No large corporation can [compete] successfully without help from new types of partners.

 

TN: What we saw initially with COVID, especially, is a wave of fear. Now what we’re starting to see is a wave of humility. We could have done this better. We need to look outside. We need to consider that person inside who had that idea. That initial wave of fear was really two months. People were just reacting and trying to figure out how to survive day-to-day. Now they’re taking stock and looking back so they can figure out what their next step is.

 

How do you see corporates operating with external innovative companies going forward? Do you see more action there? Do you see more interest there? Do you see the return of corporate VC arm in any large company?

 

BC: Corporations need to be great at executing low-cost, low-risk proof-of-concepts in a non-production environment. We’re going to need to do integrations with lots of startups and rapidly test. Then [they will need to] choose the ones that work well and scale with them, if not acquire them, invest in them or support them.

 

The global pandemic has brought that confusion which has brought a temporary pause. But we’re going to see it continue to accelerate, and we’re going to see it accelerate in all areas. Organizations will be be forced to start engaging earlier with startups. We’re going to see more corporate venture capital dollars begin to flow.

 

Big corporations, now for the first time, are turning around thinking, “Oh my gosh, that startup can really compete with us and we´re Microsoft.” That statement is more true now than it ever has been. It’s only that level of innovation that will continue to benefit the agile, resourceful startups.

Categories
Podcasts

Mo’ Money, Mo’ Honey

Tony Nash speaks with the BFM team in Malaysia to explain what’s going on in the US markets and economy after the FOMC announcement. What it means for gold and other assets, if businesses actually spend the excess cash for capital reinvestment, how this adds to wealth inequality in America, and how do tech stocks and traditional stocks compare?

 

BFM Notes

 

In the US, the FOMC left interest rates unchanged, pledging to continue with their quantitative easing till 2022, indicating that America’s markets will continue soaring on the back of this wall of cheap liquidity.

 

Tony Nash, the CEO of Complete Intelligence in Texas, discusses the implications of what commentators are calling the Fed’s ‘yield curve control’ policy.

 

Produced by: Michael Gong

Presented by: Roshan Kanesan, Noelle Lim, Khoo Hsu Chuang

 

Listen to this podcast in BFM: The Business Station.

 

Show Notes

 

BFM: Let’s talk about the markets in the U.S. Markets whipsawed as all attention was on the FOMC meeting. The Dow closed down one percent. The S&P 500 closed down 0.5 percent. But the Nasdaq closed up in the green. 0.7 percent. What about Asia? Asia was rather mixed. The Shanghai Composite ended down 0.4 percent. The Hang Seng was marginally down by 0.03 percent. The Nikkei 225, I think they closed up about 0.2 percent. And FBM was up 0.01 percent. Just barely in the green — 0.01 percent. Now for more on global markets, we speak to Tony Nash, CEO of Complete Intelligence. Tony, are you down the line with us?

 

TN: Yes, sir. Morning.

 

BFM: Good morning to you. Now, the FOMC left interest rates unchanged of the meeting, pledging to continue with quantitative easing till 2022. What does this tell you about the state of the economy there?

 

TN: The Fed is really just trying to create stability. We see them, like you said, the next three years, they’ll keep them the same. We think that they’ll just reinforce some of the policies they’ve already put in place. One of the areas we see them focusing on is on yield curve control, although that’s not explicit. We really see that as an area that they’re moving in to encourage capital investment.

 

We’ve really seen capital investment fall here in the States, especially since the COVID time. Oil and gas companies have trimmed billions of dollars of capital investment, for example. So if they can have low-cost borrowing through a yield curve control, it could help that.

 

BFM: What are the implications of doing this? Yield curve control that, for example, on gold?

 

TN: The environment generally with both QE, which is meant to provide liquidity, and yield curve control, which is meant to provide low interest rates, what that does is it really pushes the Dollar down. Although it’s not perfectly inverse, there is generally inverse relationship between the Dollar and gold. So if it’s intended to push the value of the Dollar down, one would expect gold to rise.

 

BFM: Tony, yield curve control can also be called money printing, which has been happening for the last ten, twelve years from an evidence shil standpoint. Have corporations actually spend some of that excess cash on capital reinvestment or have they done it in terms of paying dividends to themselves and their shareholders or even worse, share buybacks?

 

TN: Mostly share buybacks. But share buybacks and dividends, one can argue are similar. It’s just a different form of paying back shareholders. So share buybacks have really been made to be evil over the last, say, five, 10 years or something. But it’s really similar to a dividend that it brings value to the investors themselves. So is it a good thing? I don’t necessarily think so, but it is just one form of getting money back to investors.

 

It’s not necessarily helping capital investment. It hasn’t necessarily helped capital investment. And so, you know, looking at things like yield curve control, what we’ve seen is a lot of QE, but we haven’t seen as much yield curve control. So yield curve control could be one way to provide more incentive for capex.

 

BFM: Well, that hasn’t happened clearly. And to what extent do you think that that policy has exacerbated the wealth inequality in the country, in the United States, which some say has manifested themselves in some of these demonstrations you see all over the country?

 

TN: That’s a very complicated question. And we can spend a lot of time on it. So I think whether a yield curve control has done that, I can’t necessarily argue for or against it. Has QE done that? Oh, surely. I mean, QE has definitely contributed to inequality. It’s definitely contributed more to capital concentration itself than overall inequality. Capital is concentrated with the investment class rather than, say, the working class. Although that sounds very Marxist and it didn’t really mean it to sound that way, but it’s really helped to concentrate capital.

 

BFM: Well, let’s take a look at last night. The U.S. markets were mixed overnight. Is this a reality check that the recovery may not be as soon or as sharp as anticipated by investors?

 

TN: The kind of the relief rally we’ve seen over the past few weeks has really been one of really just excitement that COVID is ending and really hopeful that things will open, as well as recognition of the Fed’s activity and the Treasury’s activity of getting trillions of dollars into the economy. As investors realize how slow those openings are going to be and the impact that it will have on Q2 earnings, but potentially Q3 earnings. I think we’ll see some of this enthusiasm fall away. So markets are trying to find that level. What is that level? And because there is so much uncertainty, we don’t really know that level. This is why we’ve expected volatility through Q2 and into Q3 until there’s more clarity about the pace of opening, how that will affect different industries, and the severity of, say, a second wave. And to be honest, whether people really care about the second wave.

 

BFM: Well, NASDAQ has passed ten thousand and valuation is at the highest in the last 15 years. Where do you think tech stocks will go from here?

 

TN: It really all depends on how companies focus on things like productivity. If we continue to see layoffs and unemployment, companies may decide to invest in technology. We may see some real broad-based investment in productivity like we did twenty five to 20 years ago when companies really started to invest in computing and Internet and all these other productivity shows, it’s quite possible that we see that across large companies.

 

It’s really questionable. Have we expanded valuations as far as we can or is there further expansion there?

 

BFM: Just following up on that. We’ve seen the market recover in the U.S., but there’s definitely a divergence between how the tech stocks have performed and how the larger S&P 500 has performed. Do you think there’s a lot more room for tech stock? Do you think these two indexes will actually going to diverge at this point?

 

TN: We may see a little bit of divergence, but I don’t see that much divergence. I think there is a lot of synchronization within those indexes. We may see a bit like we saw today, but I don’t think that will continue in a massive way.

 

BFM: So when you mean synchronicity, you mean that they will track each other in a parallel? But there is a gap between something like the NY Fang index and the S&P in general. Is that due to the S&P just being weighted down by other classes of assets there?

 

TN: Sure, yeah. It’s looking at traditional businesses that have physical assets and a lot of legacy employees and retirement commitments. These sorts of things really weight down old traditional businesses. The Fang’s, for example, they don’t have a huge retirement commitments than, say, a large manufacturer that’s maybe a 100 years old has. As those things play through and this really has to do with the aging of baby boomers, really. Those retirement commitments will age with them and then they’ll phase out eventually.

 

But a lot of this is around again, those companies are not as efficient as they could be. And until they get to a level of efficiency that they need, we’re gonna see a drag on their earnings. So, of course, with guys like the Fang’s, since they have kind of virtual software related businesses, they will have valuations that are much more generous than traditional, say S&P 500 businesses.

 

BFM: All right, Tony. Thank you so much for your time this morning. That was Tony Nash, CEO of Complete Intelligence.

I think just ending that point is how this divergence between traditional industries and tech industries had been even more highlighted by what we’ve seen.

Yeah, I think that’s really quite concerning because the alternative point of view is that of the Fed’s money printing policy, which has really accelerated exponentially the last three months. There really is no indication from Trump, from Jay Powell, that he has an exit strategy in mind or has any exit strategy at all. Because how do you unwind this much? You basically dopamine the markets without having some kind of pain. It’s very clear, I mean, even though he was quite tempered in his response, this inequality has been really exec-abated for the last 10 years.