Tony Nash, CEO and founder of Complete Intelligence, joins the BFM 89.9 The Morning Run show to give insights on the US Market, specially now that the CPI hits 6.2%. What does this mean for the Fed Fund? They also discussed Disney Plus and how to invest in equities right now, especially how to allocate your assets in the current economic climate? Will the telecommunication and transport sector, and oil and gas benefit from the $1 trillion infrastructure spend bill that was just passed? Lastly, what is his view on the oil market? Will it continue its bullish trend, and for how long?
This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/bottom-up-is-the-strategy. on November 11, 2021.
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Show Notes
SM: BFM 89.9 Good morning. You are listening to The Morning Run. I’m Shazana Mokhtar there together with Wong Shou Ning. But for some thoughts on what’s moving global markets we have on the line with us. Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Always good to have you. Can we get some of your thoughts on, I guess this red equity markets outlook? One of the stocks that reported after hours was Disney and they reported results that underwhelmed with only about 2 million new streaming subscribers added this quarter the stock is down and after market hours trading. Do you see this as a buying opportunity, or do you think that there are still headwinds when it comes to the sectors that Disney operates in?
TN: Yeah. I think Disney has some real headwinds. Their park attendance is down on COVID concerns and regulations. Their streaming service just doesn’t really have the content throughput meaning the new content that people would expect from, say a Netflix or a Hulu or other types of streaming services. So part of what Disney needs to do is really have much more throughput on their content on Disney+.
WSN: What about CPI numbers, Tony? Are you really concerned about that? They came in at 6.2%, which was higher than street expectations of 5.9%. I think from now onwards, it’s going to be very hard for the Fed to say that inflation is just transitory, right?
TN: Oh, very much. So the Fed targets 2%, and this was just a little bit above that to the point where it’s really turning heads now and it’s really got people afraid. So part of this is base effects on last year, but not much it really is the supply and demand are weird. In some places, you have real supply chain shocks. You also have demand issues, say winter is coming, things like natural gas, oil, these sorts of things. They’re really being impacted. Food is being impacted. So people are seeing price rises that they haven’t seen for a long, long time.
WSN: Does this change your investment strategy, Tony? Or maybe a change in terms of your asset allocation? Are you going to go long equities or short fixed income? What’s your plan for 2022 or even in the next three months?
TN: Well, we’ve been saying for a while that this really isn’t a broad market environment. This is individual equity or say individual commodity type of market. Because if you are investing broad, yes, you’ll get incremental gains depending on where you are in the world in which market you’re in. But it really is a stock pickers market. You really have to understand the company. You have to understand how a trade you have to understand where the value is and how that is relative to the rest of the market in the economy.
And you also have to understand, actually, at least in the US, you have to understand what the Fed is doing. In your own country, you have to understand what your central bank is doing and what I mean by that is how easy are the monetary conditions? How does that impact individual countries and markets? How does that impact demand and, say commodity prices? So it’s not an easy question to answer, but it is a more specific and expert-driven market than it has been for the last two years.
SM: All right. Sounds like you’re giving our listeners a good reason to stay tuned to our chats every morning, Tony. Turning our attention to some recent developments in the US Biden’s 1 trillion infrastructure bill has just been passed. How much of a windfall will this be for US transport infra and telecommunication companies?
TN: Well, it’ll be a windfall, but it’ll happen over an extended period. This really won’t be spent for probably five to eight years. It will drip out over that time. So, yes, it is a lot of money, but it’s not happening in one tranche. And by passing this bill, it’s effectively saying this is it for infrastructure for the next almost decade. Okay.
So those companies who can successfully lobby and or successfully bid are going to get paid well over that period, those who don’t have the infrastructure in place to do that are going to have a tougher time. So. It’s a massive number. But it’s happening over an extended period.
WSN: What about oil and gas? Do you see them benefiting from this push into infrastructure?
TN: I don’t see an immediate positive impact for oil and gas. There are other reasons I’m positive on oil and gas, but on infrastructure, because this will come out over such an extended period of time. You see, infrastructure spending is really meant to be the foundation for future growth. Right. So you create the infrastructure that, say productivity gains and other things can leverage off of in the future. If we were doing a lot of infrastructure over, say, the next three years, you would expect a lot of oil and gas to be used to manufacture that, to power that and so on and so forth. But because it’s an extended period and because it’s distributed all around the US, there really isn’t a concentration of, say, the activity and it’s happening over a long period. I know I’ve said that several times, but that’s my biggest takeaway from this bill is the slow drip that it comes out on.
WSN: But you did say that you are a bit of a oil and gas bull at this juncture. What are your reasons for it, though?
TN: Well, we have regional, say, shortages or regional supply chain issues, say in Europe and parts of Asia for oil and gas, particularly gas, right now, as winter is coming on. Gas has performed well over the last, say six to nine months, maybe a year, and we expect it to continue to do well for the next few months. Crude oil? It looks like we’ll see some interesting upside in crude oil as well, partly on those regional supply issues as well.
WSN: But historically, by this time, right. Wouldn’t the shale producers be pumping away, too? And kind of adding supply? But it doesn’t seem to be the case this time, right. Because Brent crude this morning is still $83 a barrel.
TN: Right. Well, the shale is a different story because there are so many restrictions and regulations put in place by the US government under the current administration that it’s taking more for them to get started. So without the, I would say, aggressive kind of enforcement and new impediments to domestic shale production in the US, Yes, I believe we would have more rigs moving by now. But because of the impediments that the administration has put in place, the US administration is asking the Middle East, and they’re asking Russia to produce more.They’re not necessarily leaning on US producers. They’re trying to minimize the production here in the US. And part of that is the Green New Deal and other things to kind of regulate green energy into existence in the US.
SM: Tony, thanks very much for your insights. That was Tony Nash, CEO of Complete Intelligence, talking to us about some of the trends moving markets, capping the conversation with a look at the oil and gas sector, and specifically why perhaps the US shale producers aren’t pumping out product, given the higher oil prices at the moment.
WSN: Yeah. I think it’s very interesting to follow this very closely because it’s almost as if the oil and gas or energy sector because of the renewables, is going through a structural change. So the transition to renewables is real. But it’s not going to be linear. And because a lot of national oil companies are shifting the way they spend their capex, it does mean that for the moment, all prices might remain elevated because we haven’t found these new energy sources to fully compensate. So I think this is an interesting time, but it also makes running a business extremely challenging, because all of us, whatever said and done are energy dependent.
SM: And it’s interesting for Malaysia as well, because while other consumers would Bimbo the high oil prices as a country, we do benefit from the high energy prices.
WSN: We are still a net energy exporter, but we do, of course, subsidized petrol at the pumps. I mean, Ron 95 is still to ring it in $0.07, but there are still going to be costs for industrial usage because that’s based on market prices. So of course, it’s inflation. That’s the thing everybody’s talking about US 6.2% never anybody would ever thought it would hit that high. Yeah.
SM: It really seems to look like the use of the word transitory by the Fed wasn’t completely transitory now. Maybe they may be regretting their choice of words. It is coming up to 719 in the morning. We’re taking a quick break. Stay tuned. BFM 89.9.