This podcast was first and originally published at https://www.bbc.co.uk/programmes/w172yzrjnk7fbd3

In this BBC podcast episode, Tony Nash, the CEO and founder of Complete Intelligence, shares insights on various topics. The podcast begins with a discussion about the border crisis in Texas, which Tony explains is a significant issue for the state due to its proximity to Mexico. The conversation then shifts to the topic of artificial intelligence (AI) and the recent testimony of Sam Altman, the head of OpenAI, before the US Congress. Altman emphasizes the need for government intervention to ensure the safe development and deployment of AI technologies.

Tony provides his perspective on AI, stating that it is simply a combination of mathematics and code. He suggests that the intentions of the coders determine whether AI could be potentially harmful, comparing AI with a virus if it has nefarious intentions. He clarifies that OpenAI’s Chat GPT, the AI tool he mentions, functions by synthesizing search engine results and creating a textual narrative based on those results. Tony believes that concerns about AI are somewhat exaggerated and emphasizes the need for tech entrepreneurs to take responsibility for their creations.

The podcast then moves on to discuss the possibility of a US debt default and the ongoing dispute between the White House and Congress over the debt ceiling. Tony expresses his belief that the default will likely happen and considers the negotiations between the parties as political theater. He explains that financial markets may experience volatility due to investor perceptions and reactions, even though an agreement to raise the debt ceiling is expected.

Later, the conversation shifts to the exodus of talent from Sri Lanka, prompted by years of economic upheaval and political incompetence. Tony reflects on his personal experience of running a tech startup in Sri Lanka during the civil war and acknowledges the resilience and potential opportunities in the country. He attributes some of Sri Lanka’s challenges to political corruption and highlights the impact of deep-rooted corruption under the Rajapaksa regime.

The discussion concludes with a brief mention of China’s investments in Sri Lanka and the country’s ongoing struggles. Simon, another participant in the podcast, shares his perspective on China, noting that it often receives negative publicity but suggesting that it has made significant investments globally.

Overall, the podcast covers topics such as the Texas border crisis, AI and its potential risks, the US debt default, and the challenges faced by Sri Lanka. Tony Nash provides insights and analysis on each topic, offering his views on the various issues discussed.

Transcript

BBC: Hello and welcome to Business Matters. I’m Roger Hearing. On the program today, we have warnings, but also optimism from the man in charge of the artificial intelligence tool Chat GPT as he gives evidence to the US Congress. Also, no deal yet in sight to avert a US debt default after hours of talks between President Biden and the leading Republican congressman. Not a place to live anymore. The sad exodus of talent from Sri Lanka after years of economic upheaval there. And the Cannes Film Festival opens with blockbusters and tantrums. But has the industry fully recovered from the COVID years of empty cinema and across the other side of the world? Tony Nash, CEO at Complete Intelligence in Houston, Texas. Tony, very good evening to you.

Tony: Good morning, Roger. And good morning, Simon.

Simon: Hi, Tony.

BBC: Good to have you all there. And we will start as we always do, but just getting a sense of what’s going on where you are, unlike in Texas. Well, let’s hear about Texas. Obviously an enormous space, but a lot happening there. Tony, what’s on the news there?

Tony: Well, one of the big things, and I think it’s a global story is the border crisis here in Texas. We have National Guard troops on the border. A lot of people in Texas are aware of this. Of course, Texas, New Mexico, Arizona, California are the ones who contend with this. We’re the closest and Texas has the longest border. So it is a huge issue for us here.

BBC: Yeah, because of course, you’ve ended the special regulations that were in place during COVID They’ve come off. And in fact, I think I’m right in saying it’s a bit confused as to how people get across and what happens if they do. Interesting moment and certainly a big political issue, of course, for Joe Biden. But one of the things that is concerning people in Washington, quite apart from the default, and we will come back to that, is the issues about artificial intelligence. I’m sure you’ve all heard the dire warnings about AI over the last few months, suggestions by some that we’ve built a monster we don’t understand, while others insist that Microsoft, ChatGPT, Google’s, Barred and the others will all put us out of a job. Well, now, for the first time, the US congress has been hearing from the head of the company that created Chat GPT, Sam Altman, who told senators that government intervention is needed to keep the industry safe. Now, he said the technology posed serious risks and licenses and testing requirements would be necessary. Well, it’s been sobering testimony from someone who has reason to know what he’s talking about.

BBC: But where does it leave the debate about the usefulness of AI and its potential risks? Well, earlier I spoke to Reed Blackman. He’s the founder and CEO of Virtue, which is a digital ethical risk consultancy. He’s also the author of the book Ethical Machines your Concise Guide to Totally Unbiased, Transparent And Respectful AI. This is Tony. I mean, I like that idea. How evil can it get? I mean, a lot of people think get very evil. What’s your take?

Tony: No, I think look, artificial intelligence is made of two things. It’s made of math and it’s made of code. Right? It’s that simple. So if the coders have nefarious intentions, then you need to be worried. But what do we call code that has nefarious intentions? It’s a virus. Right? So if we have AI that has nefarious intentions, then it’s simply a virus.

BBC: It generates itself. It isn’t just something you put into it. It actually no. Then generates other things.

Tony: Let’s be careful with that. Okay, so I run an artificial intelligence company called Complete Intelligence. Let’s be clear about what Chat GPT does, okay? If you go in and you type a question into Chat GPT, here’s what it does. It puts the search results together. It amalgamates the search results for that topic. That’s all it does. And then it creates a textual narrative to return that result to you. Okay? So it’s not creating magic out of thin air. It’s simply the synthesis of search engine output. That’s all Chat GPT is. It looks like magic, but it’s simply the synthesis of search engine output. That’s all it is.

BBC: Okay, well, you’ve reassured me, at least at a certain level. Okay, Tony, very briefly, if you would, because we want to get onto the default next, but is it true that there are once those things are in, that it becomes a restrictive thing? It may go outside the boundaries of what we want it to do.

Tony: Yeah, what we want to do as users, yes, definitely. But the guys behind the curtain can control whatever they want. So if things get out that they don’t want, that’s simply an input error. But as I watched Altman talk today, here’s what I thought about. I thought about Robert Oppenheimer. Okay, so Robert Oppenheimer created the atomic bomb, and then he said, Oops, I created a bad thing, and the world has to fix it. Right? And so what Sam Altman is doing is very similar to that. He’s saying, I created something that could be bad, and now the world has to fix it. I really don’t think it’s that bad, but he’s acting like the world has to fix something that he created. And there are these tech entrepreneurs who really don’t have social skills or consideration for the things that they generate. And these guys have to learn if it really is as dangerous as he says, which I don’t believe. They have to learn how to handle their own creations, and they simply don’t have an edit button, and that’s a real problem. Yeah. If I’m right and there’s no accountability. Roger that’s. The other problem.

Tony: Sam Altman is being hailed as this genius, but if this is really damaging, there is zero accountability for him personally.

BBC: Yeah, well, Robert Oppenheimer said he’s feeling when the first atomic bomb exploded. Washeim become death, the destroyer of wills. Yeah, it doesn’t go that far, right? Well, anyway, let’s talk about something that might be a destroyer, at least of the US. Economy, and potentially, I suppose, then the global economy. And we’re talking about default, because the world’s largest and most important economy is facing that real possibility. The reason seems to be a dispute between the White House and parts of Congress over the debt ceiling, how much the government is allowed to borrow. If you actually were keeping tally, currently the limit is $31.4 trillion. Now, President Biden and the top congressional Republican, Kevin McCarthy, held talks in the past few hours to try to resolve the standoff. In fact, it doesn’t seem to have happened. At least they don’t seem to have come to any particularly positive conclusion. In the end, Biden and McCarthy parted with what seemed like, I mean, a bit of an upbeat exchange of views, at least. But McCarthy expressed cautious optimism that perhaps a way forward could be found.

BBC: Let me bring Tony in. I mean, Tony, is this date in the diary the 1 June potential default? Is that nonsense? I mean, is it all just going to happen anyway?

Tony: It’s all going to happen anyway. Let me just give a little bit of background.

BBC: Yeah.

Tony: These guys, Steve Ricketti and Shalanda Young, who have been delegated by the White House. Kevin McCarthy already knows them. And Shalanda Young was a senior staffer on Capitol Hill, so he’s worked with her for years.

BBC: We’re talking about just for background here. This is the Office of Management and Budget director respectively.

Tony: And so there is a relationship there, and it should make the discussion easier to have. Right. So that’s good news, actually, that these people are dedicated to have these discussions. But I think what Simon said correctly is this is political theater, and I think there is a lot of heavy breathing on this right now that most Americans just give this an eye roll, like, oh, my gosh, we’re just here again, and it’s just each party trying to pick apart the other party’s priorities. That’s all it is. Okay, so my assumption is that June 1 is going to come and go and like you pointed out, Roger, we’re going to have these ridiculous things. Like it’s going to be holiday season by June 1. So people are going to want to take a vacation, and the executive branch is going to let the national parks people put them on furlough so that Americans going on vacation have to suffer when other people in government will still work. These things will happen just for show and just for cameras, and we’ll have an agreement by mid-June. So financial markets will probably panic even though everyone knows an agreement is coming. They all know.

BBC: So why do they panic? It doesn’t make any sense, does it? Because if we know this is theater, if we know America is never really going to default, then why panic?

Tony: So there is volatility simply because some investors believe that other investors will panic. That’s it. And it’s this echo chamber where investor A believes that investors B through M are all going to panic. So investor A does something to reflect that panic. That’s all it is. Ignorant investors panic with this, but most investors are going to take advantage of the volatility to make money.

BBC: Well, that’s what my point. It’s not uncertainty then, is it? Really? It’s certainty. We know what’s going to happen.

Tony: But one thing I want to point out here, Roger, is the House has already passed a bill to raise the debt ceiling. Okay? So Kevin McCarthy has already passed a bill to raise the debt ceiling. He did that two weeks ago. Okay. So we already know what the end of this looks like. We know the debt ceiling is going to be raised. We know that the House has already passed that. So that part isn’t in question. The part that’s in question is how much can we blow it out? Right, but the House of Representatives, which according to the U.S. Constitution has the power of the purse or control over spending, they have already passed a bill that raises the debt ceiling.

BBC: It’s already there. It’s just how we get to the point where it all clicks into place. Well, I suppose that’s the best conclusion we can draw. Let me bring you in on this guy. Now, you know this part of the world very well as well, and that sort of issue, I mean, is it more widespread in Asia? I mean, we know that Hong Kong real estate was very, very expensive for a long time. Is that kind of problem and the associated thing, is that really happening?

Tony: Yes. And Singapore isn’t unique. If you look in parts of India, if you look in urban centers in China, and of course, Hong Kong, in some places like India and China, it has to do with urbanization. And I think with Singapore, you could argue it’s an urbanization-like scenario where people are moving to a concentrated urban area like Singapore, and more and more people are fitting into it. So much of Singapore’s economy depends on the real estate sector that for Singapore to work, money needs to constantly flow out of the real estate sector. It’s similar to Hong Kong.

BBC: It causes a lot of problems and immense difficulties for people trying to live. It’s an interesting situation, Tony. Because there are many aspects to this. One is the draining of talent from places like Sri Lanka that desperately need it. But the attractions to more successful economies can’t be ignored. People want to make money and get a good reward for their skills. They go where the money is, don’t they?

Tony: Yes, given the economic difficulties Sri Lanka has faced, especially in the past couple of years, it’s enticing for young people. They want to see opportunities, and if they’re not there, they have to find a way. I ran a business in Sri Lanka during the civil war from 2006 to 2008, and it was a tech startup that we sold in 2008. So I can see that there are opportunities because even during the war, there was resilience in Sri Lankans and the economy that shows people are strong enough to push forward.

BBC: But it needs investment, and that was one of the points that came out. People may be hesitant to invest in a country with these kinds of problems.

Tony: They may not be willing to invest in Sri Lankan rupee terms or companies that transact in Sri Lankan rupees. But if there are companies that can work on different terms, it’s extremely difficult. However, the fact that the woman mentioned they’re doing well tells me that there’s some opportunity there.

BBC: Yes, that’s an interesting point. Sri Lanka has experienced a war, which in itself may be seen as a failure of political leadership. But, Tony, you know Sri Lanka well, even during that war period. What has happened to Sri Lanka? Is it purely due to political incompetence?

Tony: I think a lot of it is political incompetence. The corruption of the Rajapaksas during their long tenure in power and their deep relationships with China caused significant corruption, both domestically and internationally. Corruption exists everywhere, but it reached deep levels under the Rajapaksas, and Sri Lanka is still suffering because of that.

BBC: Well, it’s interesting you mention China, Simon. What are your thoughts on that? China wants to invest, has invested in Sri Lanka, but they can’t be pleased with the current situation, I assume.

Simon: I think China gets a bad press. Like Tony, I’ve spent a lot of time in China, and I don’t believe they invest in countries to create debt slaves, as Western media might suggest. The challenge lies in how to do business with Sri Lanka when their ability to use the money effectively and repay loans can’t be trusted, especially when political dynasties like the Rajapaksas misappropriate funds intended for Sri Lanka’s development.

Tony: I agree with that. The Rajapaksas were a significant part of the problem, so it’s not solely China’s fault. I apologize if my earlier statement suggested otherwise.

BBC: It was more my question, to be honest. But I was interested in the Chinese link and what it indicates about Sri Lanka’s future.

Tony: When I last visited Sri Lanka six or seven years ago, the view of China was actually very favorable. They had invested in infrastructure, and the repayment hadn’t started yet. I attended an event held in an expo hall built by the Chinese government with Chinese contractors, and everyone was happy about it. So there were positive feelings at that time. I’m not sure if they have eroded since then.

BBC: The Chinese investment is still there, as I understand it, in fairly hefty amounts. And also, of course, they have this IMF bailout. But Tony, did you want to come in on that? Because you clearly know the country well. First of all, what about those agricultural decisions? They were in error?

Tony: I’ll be honest. I’m not really sure. Simon obviously knows that better than I do.

Simon: Sorry, being a farmer, I take an interest in these things.

Tony: Sure, absolutely.

BBC: But Tony, let me ask you then, the question about that. I asked Simon about the extent to which Sri Lanka and how long it will take to come back from this position, just briefly.

Tony: Oh, gosh, I think it’s probably going to take at least five years. There’s going to have to be pain, unfortunately. I hope Sri Lanka can learn from, say, Thailand or something after 1997. If they would take, say, Thailand as an example and follow that path, that could be a very interesting and viable path for Sri Lanka. Not that they necessarily put a king in place, but I think from a financial perspective, an economic perspective, Thailand has taken a very strong path.

BBC: Thailand has taken a very interesting path in the very recent days, actually, with an election. We haven’t got time to get onto that right now. We’ll come back to that another edition. It’s an interesting thought. I’d like to bounce this off you, Tony. Do you still go to the cinema? Are there things that make you get away from TV. Really?

Tony: I was just there this week. Yeah.

BBC: What did you see?

Tony: I saw Guardians of the Galaxy Three with my 13-year-old.

BBC: That’s the reason. Okay.

Tony: He wanted to go, so we had to go.

BBC: Okay, well, Simon, I’m going to bounce it off you too. Have you been to the cinema recently?

Simon: Increasingly not, no. Very rarely do I see anything that I fancy at the cinema. I like the way that can kind of basically put the finger up to Hollywood and says, we like Johnny Depp and we don’t care. Don’t forget that Johnny was married to Vanessa Parody for years, who’s a huge star in France and speaks good French and was very much beloved.

BBC: But he speaks French entirely in this movie, apparently, which is an interesting thing.

Simon: Yeah, well, he was married to a French lady for decades.

BBC: But would you go and see this film? I mean, Jean Jean.

Simon: It’s got all the hallmarks of the film I’d love historical drama. Of course, she gets guillotined at the end at the age of 50.

BBC: You definitely want that in the film.

Simon: Yes, well, unless they change history, of course. Hollywood could do something for everyone. I would.

BBC: Well, indeed, yes. That is interesting.

Simon: I do worry about Indiana Jones a bit.

BBC: Well, yes, well, I was going to ask Tony, would Indiana Jones drag you back to the cinema apart from Guardians of the Galaxy? I suppose it falls into the same area.

Tony: Sorry. Look, there’s only one good Indiana Jones movie and that’s the first one.

BBC: Controversy this late on Business Matters.

Tony: That’s right.

BBC: That’s red meat. I have to say I rather like the third. But he’s far too old to be doing this, though, isn’t he? I mean, the kids are not going to come back to see him, are they?

Simon: I’d sort of given up any hope of starring in a Hollywood blockbuster, but I’m only in my sixties. I mean, if he can do it at 80, I mean, I’m going to throw my hat into the ring for the next one. Maybe I could be Indiana Jones Five.

BBC: But what does it say, Tony, about Hollywood, that they want to do this when it’s retreading old ideas? Are there no new ideas? We’ve been down this road before in Business Matters, but it seems to be pretty obvious that that’s the problem.

Tony: It tells me there’s a very large baby boomer audience that can either go to the cinema or pay for it on Amazon Prime or something. Hollywood is really catering to that demographic.

BBC: And that’s where the profits are coming as well, isn’t it? Is that really what it is? They’ve managed to monetize.

Tony: Maverick, Top Gun, Maverick, all that stuff. I mean, these were not aimed at 25-year-olds, they were aimed at 65 and 70-year-olds, and that’s where the money came from.

BBC: Well, this 62-year-old went to a cinema to see Maverick. I have to admit.

Tony: Oh, I did too.

BBC: Put my hand up for that one. And I didn’t have any children with me. So there we are.

Simon: Just to talk about Singapore for a minute. I mean, I’ve been here a long time and the movies that are on now, they’re not Hollywood movies. So when I first came here, they were all Hollywood movies with the occasional Indian movie. Now there’s one Hollywood movie and the rest of them are Indian, Korean, and even Chinese movies. So the cinema has been entirely taken over, and why not exactly by Asian filmmakers? And the career makes wonderful movies.

BBC: One of them won an Oscar, of course, quite recently, so we shouldn’t forget that. So at least maybe we can say that with French films, with Korean films still very much alive out there, that maybe Hollywood isn’t in charge of. Maybe that isn’t a bad thing. Anyway, that is it from us here on Business Matters. My thanks to Tony, my thanks to Simon. Thanks to all of you for listening. I’m back on Friday, but my colleague to be back during the week. We’re always welcome you here on Business Matters. Bye.

This podcast is first and originally published here: https://peterlewismoneytalk.substack.com/p/peter-lewis-money-talk-tuesday-16-5b6

In a recent podcast, Tony Nash, Complete Intelligence CEO and founder, shared his valuable insights on key market developments, including the US debt ceiling talks, the political situation in Turkey, and market developments in China. His perspective shed light on the potential implications and opportunities for investors in an ever-changing economic landscape.

US Debt Ceiling Talks: Tony provided a detailed analysis of the US debt ceiling talks, emphasizing the potential risks associated with a failure to reach a resolution. He highlighted Treasury Secretary Janet Yellen’s warning about the possibility of a default on US obligations, which could have severe consequences for the economy and financial markets. Tony’s insights served as a wake-up call, urging listeners to monitor the developments closely and consider the potential impact on their investment strategies.

Turkish Politics and Economic Outlook: Drawing attention to Turkey, Tony examined the political landscape and its influence on the nation’s economy. He analyzed President Recep Tayyip Erdogan’s policies and their potential ramifications, emphasizing the need for investors to stay informed about political developments in Turkey. Tony’s perspective helped listeners understand the importance of assessing the stability of the nation and its potential impact on investment decisions.

Market Developments in China: Tony delved into the market developments in China, with a particular focus on the Northbound Swap connect scheme. He highlighted the scheme’s significance in linking Hong Kong and mainland China’s interest rate swap markets, opening up new opportunities for global investors. Tony stressed the importance of recognizing China’s commitment to market expansion and the potential for diversification and investment opportunities. His insights provided listeners with a deeper understanding of the evolving dynamics in China and the potential benefits for investors.

Key Takeaways from Tony’s Insights: Throughout the podcast, Tony’s contributions offered valuable takeaways for investors. His emphasis on monitoring the US debt ceiling talks highlighted the importance of assessing potential risks to the economy and financial markets. Tony’s analysis of Turkish politics urged listeners to consider the nation’s stability and its impact on investment decisions. Additionally, his insights on market developments in China emphasized the potential for diversification and investment opportunities through the Northbound Swap connect scheme.

Transcript

Andrew

Every Monday to Friday. This is Peter Lewis’s Money Talk. Money talk.

Peter

Good morning, and welcome to Tuesday. This is Peter Lewis with MoneyTalk on the 16 May. Just a reminder that we’re on itunes, Spotify and Google podcasts. If you go to my website, Peter Lewismoneytalk Substac.com, you’ll find all the links to your favorite Pod cast apps. The program also has a Facebook page, peter Lewis MoneyTalk and I’m on Twitter at MoneyTalk r Three. And this podcast is sponsored by Surfing Group, which is headquartered in Singapore and offers online financial services to 30 million customers across ten countries. In today’s business and finance headlines, US. Treasury Secretary Janet Yellen has reaffirmed June 1 as the so called X date. When the US Treasury could run out of money and default on its obligations. She told Congress in a letter that waiting until the last minute to suspend or increase the debt limit can cause serious harm to businesses and consumer confidence, raise short term borrowing costs for taxpayers and negatively impact the credit rating of the United States. The warning comes as the White House and congressional leaders prepare to resume debt ceiling talks later today. Financial markets in Turkey have plunged after it looks increasingly likely that President Raceeep Taip Erdogan’s unorthodox policies could continue into a third decade.

Peter

The election will go to a runoff in two weeks time after neither President Erdogan nor opposition rivals exceeded 50% of the vote. Turkey’s benchmark BIST 100 index slid 6.1%, with the banking sub index down almost 10%. The Lira remained near a record low and the cost of five year credit default swaps to protect against the default on Turkish debt rose by the most in more than two years. In Thailand, the two main prodemocracy opposition parties have agreed to form a coalition. Move Forward is projected to have won 151 constituency seats and 39% of the votes for the party list, while Per Thai, led by ousted former Prime Minister Takshin Shinuata’s daughter, is projected to have 141 seats and 29% of the votes. Move Forward leader former tech executive Pita Lim Jeron Rats told reporters that the extended invitations to five parties to form the next government to try and oust the military backed government that has ruled for almost a decade and China’s Northbound Swap connect scheme launched on Monday in Hong Kong. It will link Hong Kong and mainland China’s $5 trillion interest rate swap markets and help global investors to participate in the mainland interbank financial derivatives market and hedge risk on Chinese bonds.

Peter

On today’s Money Talk, I’m joined by Asian fund management industry consultant Stuart Ulcroft, Andrew Sullivan, founder of Asian Market Sense and from the USA, Tony Nash, founder, CEO and chief economist at Complete Intelligence. Tech stocks led the advance on Wall Street on Monday on the hopes that interest rates have peaked while the broader market lagged after the latest economic figures indicated the US. Economy was slowing. Data from the New York Fed showed its index measuring manufacturing in New York State plunged from 10.8 in April to -31.8 in May Far below economists forecasts of -3.8 traders were also hoping for a breakthrough between the White House and Republicans in Congress over talks to avoid an unprecedented debt default. The border S and P 500 index traded a third of a percent higher to 4136. The Dow snapped a five day losing streak, gaining 48 points, or 0.1%, to 33,349. The tech heavy Nasdaq outperformed rising zero 7% to 12,365. Regional banks rebounded with the KBW Regional Banking Index jumping 3%. Shares of Microsoft were up 0.1%. Earlier yesterday, EU regulators approved Microsoft’s $69 billion purchase of Call of Duty publisher Activision Blizzard. Despite the deal being blocked by UK.

Peter

Competition authorities. The European Commission said Microsoft had addressed their concerns on competition issues. Chinese markets staged an afternoon rally yesterday. Hong Kong’s HangSeng index rose 344 points, or 1.8% to 19,971. On the mainland, the Shanghai Composites rose 1.2% to 3311. And futures markets are pointing to gains of about 0.9% at the open. And you can get more details on the latest market movements on my daily newsletter which you’ll find at peterlewestmoneytalk substac.com every Monday to Friday, this is Peter Lewis’s MoneyTalk peter Lewis Money Talk let’s welcome our guests. We have with US Asian fund management industry consultant and our regular Tuesday commentator Stuart Allcroft. Morning Stuart.

Stuart

Good morning Peter.

Peter

And also with us from the US is Tony Nash who is the founder and CEO and chief economist at Complete Intelligence. Welcome, Tony.

Tony

Hi Peter. Welcome. All right, thank you.

Peter

And also here in the studio with me we have Andrew Sullivan who is founder of Asian Market Sense. Morning Andrew.

Andrew

Good morning.

Peter

Let’s start with these US debt ceiling negotiations. President Joe Biden is expected to host top congressional leaders on Tuesday for debt ceiling talks. They were postponed this week from Friday. Over the weekend, Janet Yellen told the Wall Street Journal that the Biden administration and Congressional Republicans are making progress in their negotiations over federal spending and raising the debt limit. Ms. Yellen warned that the USA could become unable to pay its bills as soon as June the first if Congress doesn’t first raise the debt ceiling, leading to economic catastrophe. And yesterday she reaffirmed that date as the earliest the US. Could default on its debt. Tony, let’s start with you over in the US. Because you’re on the spot there. Can we be optimistic that maybe something’s going to be resolved here? President Biden seems to be quite optimistic, but House Leader Mick McCarthy was rather negative in some of his comments yesterday.

Tony

Yeah, I think we’re at a point where we’re not going to get something as quickly as we think we’re going to get something. We’re at the stage just for kind of the last minute brinksmanship starts. So the US debt ceiling is an annual event, pretty much annual event here in the US. Where both parties threaten to cut programs from the other. The party in power wants to defend their spending, and the party out of power wants to cut spending. And in America, it’s just a normal course of events. And Yellen speaking and saying June 1 was the X date doesn’t necessarily align with things that we’ve heard in recent weeks. If it is the X date, which I don’t think it is, I think that it could be a ploy, because what we’ve seen in the past at times is, let’s say June 1 is the X date, then we see the federal government close, things like national parks just in time for summer holidays. We see them close, very visible parts of the federal government, while other parts of the government continue running. So it’s all about how it looks, and it’s about embarrassing the other party as we move into an election cycle.

Tony

That’s simply all the debt ceiling is about. At the end of the day, the US. Is going to spend more. At the end of the day, the politicians are going to spend more. There aren’t going to be really any cuts. They’ll push the cuts off to future years so that the politicians in office now don’t have to deal with it. So this is really just a lot of drama. Markets will react because people who are not familiar with it will react. But in truth, this is really just we’re probably going to have probably three to four weeks more of drama.

Peter

So it sounds like then, from what we’ve seen in the past, that even if we do get to this X State, whatever day it is, the US. Isn’t going to suddenly default on its debts because it will prioritize other things, won’t it? It’ll make sure it can still pay the interest and redeem US. Treasuries there’ll be other things happening first, like employees being furloughed. So although it’ll have an effect on them, it’s not necessarily going to be a financial markets crisis.

Tony

No, it’s not going to be a financial markets crisis, or it shouldn’t be a financial markets crisis. And employees may get a week or two or three weeks off of work, but they’ll be paid for all of that time. And federal employees right now are planning on having a holiday. That’s really what’s happening, is they’re planning on having a couple of weeks off. So that’s really the only downside for federal employees. I know that outside of the US. I think this is probably looked at as being really strange if you’re outside of the US. But in the US. It just is an illustration of the divisiveness of politics here, which most Americans, quite frankly, are really tired of. And it shows the extremes to which the political parties feel they need to go in order to satisfy some constituency. And that’s really all it is here in the US. Most people are not the least bit nervous about it.

Peter

Stuart it certainly does look strange to us, doesn’t it, when we look from here?

Stuart

Peter, one of the things I would be a little bit concerned about here is that they might be able to get to some agreement, but I think this is going to be a rehearsal for next year. Next year is an election year for the next president. And I think that if they can find weaknesses, if the Republican Party can find weaknesses in the Democrat position, then they will do that and then try to force it into a position where when they come to do the same thing next year, there will be a problem. And the problem could go on for much longer next year rather than for this year. It’s easy for the Republicans to say, well, okay, we’ll give up now, but we won’t give up, really, because next year is going to be your big problem.

Andrew

Yeah, I think overall, as Tony was saying earlier, it’s an annual event that’s sparring just this year. They seem to have heightened it a little bit by bringing forward the date to start talking.

Peter

Is it really a big problem? When you look at US debt, it’s about, what, 100% of GDP? So that sounds sort of pretty horrendous. But then when you look at, say, Japan, it’s what, 260% of GDP? China’s debts, national debts, 300% of GDP. Is it really a huge problem?

Andrew

Well, no, I think the only problem here is the system that the Americans have chosen to adopt. I mean, it’s something that every country has to go through. They’re large numbers, but I mean, every country goes through this and they just have different systems for agreeing it. At the end of the day. I mean, the only other ones in the world used to be Denmark, which I still think operates the same system, and Australia, and they decided to change theirs because it was too confrontational. So, realistically, I think the US should look at changing the system by which they deal with this, to remove it from the agenda.

Peter

But there seems to be something different about it all this time, doesn’t it? There seems to be some more strident voices over in Congress that are sort of really digging in. And I suppose the fear is that we could get to the point where the US has no choice but to default, and then presumably that’s going to have some big financial market consequences.

Stuart

Oh, I don’t think the US Is going to get to a point where it will default. I think that’s the last thing it wants to do and the last thing the rest of the world wants it to do. I think it’ll just be lots of noise and saber rattling and eventually some sort of agreement will arise. But I think for the rest of the world, we are bemused by the way in which the savor rattling goes on. And it’s not the first year that it’s happened it seems to happen most years, although this year is a little bit worse than it was last year. But two or three years ago, I remember it went beyond the deadline dates and there were closures all over the place.

Tony

I just say here how this is supposed to happen and how this used to happen until, I don’t know, ten or so years ago. The President is supposed to propose a budget to Congress. Congress is supposed to vote on that budget, and Congress then debates the budget and votes on the budget, and then those funds are appropriated. Okay? Presidents haven’t submitted budgets for a decade or more, and the US budget has basically been passed through a continuing resolution. And so this debate we’re having right now is really about this really stupid continuous resolution because the Presidents of the last decade have not done their job and proposed a deficit or a budget I’m sorry to Congress. So this is the way things should happen. But presidents have not proposed budgets because they don’t want to be seen to not be proposing budgets in certain ways. They want to just go along and continue to expand spending from the US. Which is just them not really fulfilling their duty.

Andrew

Yeah, as Tony said that I think the thing this year is, because it’s an election year, next year, neither party will want to be seen as to being taking this too far. So they both got a vested interest in coming to an agreement. But as Tony says, it’s a historic arrangement. That’s the problem. They really need to address that.

Peter

Okay, well, let’s switch our attention to a totally different region, to Thailand, not a country we talk about a lot on this show. But nevertheless, they’ve just had their general election. 99% of the votes have been counted, and the pro democracy opposition parties move forward. And the Per Thai Party, which means four this, have emerged as the biggest winners. They’ve promised to form a coalition to try and oust the military backed government. But Stuart, this could be a problem, couldn’t it? It’s not as simple as that in Thailand.

Stuart

No. The military have been in charge for quite a long time now. They don’t like the idea of anybody else running the country, and now the rest of the country are now saying they don’t like the military running it. And the fact that there’s a sigh on of the Shinoatra family also involved in the potential new government, that also is like a red rag to a bullet with the army in Thailand. What I always think is pretty amazing about Thailand, though, is that the economy seems to thrive, whether it is a military government or a civilian government. And unlike most countries around the world where military coups occur, this doesn’t seem to slow down the Thai economy at all. But what I think will be quite intriguing is that the the Move Forward party in Thailand has indicated that it wants to make fundamental changes to many aspects of the Thai constitution, including making changes to the role of the royal family there. And that has always been sacrosanct as far as Thailand is concerned. And the fact that they are willing to talk publicly about wanting to make changes and then winning the largest proportion of votes suggests that maybe the general public do want to see some changes.

Stuart

And that certainly seems to be the case. I think that over the next few weeks, it’s certainly going to be probably a lot of negotiation going on. What will survive, hopefully, will be some form of acceptance that the democracy process worked and that the Thai people will get the government they want.

Peter

And on that GDP figure that you mentioned, we did get economic data out yesterday from Thailand. Thailand’s GDP advanced 2.7% in the first quarter, accelerating from 1.4% growth in the fourth quarter of 2022. Andrew, this does seem significant, doesn’t it, this election, in that there’s going to have to be some changes. But the problem is the Senate, which effectively has a veto on the government, has never, ever voted for anything other than a military backed government. So the odds are stacked really in favor of the incumbent government.

Andrew

And that, I think, is what’s alluding to there is that’s what the public really want to see changed. And you’ve still got the risk that even after you make these changes, the military decides to have another coup and take back control again. And that’s just the fact that you’ve got such a groundswell of support for change is encouraging. But as you say, everybody in the Senate is military picked, so their alliance is well known. And so this is one of the reasons that I think they’re looking for such a broad coalition so that no one party can be singled out as being an opponent to the crown or to the realm there. It really is a representation of the people.

Peter

Tony, what’s the sort of the geopolitical significance of this, and in particular in terms of Thailand and Southeast Asia’s relationship with the US? I mean, the US is obviously trying to develop stronger ties with the region, and presumably it will have something to say if the current incumbent government doesn’t follow the will of the people.

Tony

Well, the US is trying to rotate its manufacturing out of China, and Thailand is obviously a big part of that. And so I think stability in Thailand is helpful for US businesses who either want part of their supply chains or their own entities in Thailand. And so I think Thailand has been remarkably stable, even through the toxin era and all the instability there. I say instability, but I think to most foreigners, it didn’t really look unstable. The investment was remarkably stable. And so I don’t think anybody wants I don’t even think Thai people want too much trouble in Thailand. But certainly the US wants to find places like Thailand, Malaysia, Vietnam, where they can derisk from their concentration in China.

Peter

And in terms of relationships with the US, does the US see Thailand as a strategic ally, maybe the same way that it does?

Tony

Yeah, it has been for 50 years or longer. So, yes, the US absolutely sees Thailand as a very strategic ally, as does.

Stuart

The EU as well. Point out, Thailand is an ally of most Western nations and that is very much part of why the stability of country has been maintained, I think, even through the military rulership.

Peter

Stuart, what does this mean for investors if we get a period, maybe, of stability? The markets yesterday were a little bit uncertain about this, but presumably we could get a period of stability. If all goes well and the government accepts the opposition parties taking power, would it make Thailand a good investment opportunity?

Stuart

Well, I think if your listeners are looking for a hot tip to say, here’s a market that’s going to bounce up massively as a result of change of government, I think they’re going to be a little bit disappointed. To be honest because the Thai market has performed with or without the military government and doesn’t seem to be affected too much by it. If what happens as a result of the new government, we see further growth in GDP and further opening up the market, because there are a number of restrictions, nevertheless, then that will be received positively. But I think Thailand has been quite a favorite over the years with many emerging market investors. It hasn’t ever escaped properly the emerging market name, but it is no longer really an emerging market. It emerged quite a while ago. I think many people around the world fail to realize just how big Thailand is as a country, how big it is as its GDP. And I know when I talk to people in Europe and America, they are staggered by the size of Thailand. They think of it as being quite a small country. But Bangkok is one of the three largest cities in the world, 25 million people population just in Bangkok.

Stuart

So you have to bear in mind that this is a country that has been growing and growing and growing, even through COVID. So it’s a very positive place from an investment perspective.

Peter

Andrew, from a long term perspective, Thai markets, do you see them as a good investment?

Andrew

Yeah, I think as Stuart saying there, the country has made a lot of progress in improving its infrastructure. I mean, years ago, we used to get regular flooding. Now they’ve looked to improve the infrastructure. As far as that’s concerned, they’ve put in power, they’ve put in good sites, they’ve made the country very investable as far as moving production there is concerned. And I think, as Stuart saying, it’s actually probably one of the advantages of having a military dictatorship, effectively, is that they can just push things through. The fact that they’ve done that in a positive way, I think is encouraging.

Peter

And of course, tourism, that’s a big part of Thailand’s GDP, about 12% of the nation’s economy. Again, presumably, if we have some stability, that’s always good for tourists, isn’t it?

Andrew

Well, yes. I mean, I think one of the things, as Stuart mentioned, that during COVID they were one of the first people to open up phuket, even on a sort of sandbox basis, to try out whether or not they could keep that economic part of their economy, tourism, going during the COVID crisis. And they managed to do that, and that’s kept it on people’s radar streams. And I think that’s one of the things that Hong Kong will have to fight against is the fact that people have just stopped coming here. It’s not been on the agenda, it’s not been possible to get here. It was expensive if you did come here, and hence people have looked at other places and now those other places will become their regular haunts rather than Hong Kong, unfortunately.

Peter

So what would be the priority for the new government in terms of maybe economic financial initiatives? What’s it got to do?

Andrew

I don’t think it’s got to do an awful lot. I mean, it’s just got to say we are still open for business. There is a change. I mean, a lot of the changes that they’re pushing for are constitutional changes rather than economic changes. And the fact that the economy is doing well, I don’t think they’ll really look to interfere with that. They’ll look to try and enhance it, but they are looking for those constitutional changes. They don’t want the overhang of the threat of the army coming back in and disrupting things.

Stuart

Tony I agree with you, Andrew. I think that that’s exactly what they want. It’s a sort of steady as she goes in the economy and let’s try and amend some of the domestic items that don’t affect the rest of the world.

Peter

Tony we’ve got President Biden coming out to the region at the end of this week, or we think anyway, depending upon how these debt negotiation discussions go, but he’s due to attend the G Seven leaders meeting in Hiroshima in Japan. What are his priorities when he comes out here? Presumably China is going to be one of his big focuses.

Tony

Oh, absolutely. But I think also making sure that the Japanese relationship is very much underscored. We had guests from Korea in DC two weeks ago, so that relationship is secure, at least that’s the feeling. But also making sure that the US is seen as holding strong against China in certain ways. It’s China’s incursions into Taiwan and the US will also underscore the technology embargo it has against China right now, which is very inconvenient for China. So I think there are a number of things, but underscoring the importance of relationships in Asia is really critical for Biden right now.

Peter

So I presume he’s pleased about the reproachmont between South Korea and Japan, that they’re now getting on much better and seem to have opened dialogue once again.

Tony

For sure. Absolutely. And those two allies are critical in the US’s. Discussions with of course, they’re not directly involved, but having them on side. If you look eastward from China, you see a line of US. Ally break in that line of US. Allies. Then it could make the US. Negotiating position much more difficult.

Peter

So, Stuart, what should we expect from this G Seven meeting? Talk about trying to resist what the US. Says is economic coercion from China.

Stuart

To be honest, I don’t think we’re going to get very much out of the next G Seven meeting. We’re out of COVID We’re beginning to start to see economic growth. Everything is beginning to improve. I’m not sure that I expect very much to occur, frankly. The fact that there is a geopolitical overhang remains there, and I think there will be continued. Talk about Russia, Ukraine war, and of course, we’ve already just had it without the US. China difficulties. But I don’t think G Seven is going to be able to do very much about any of these things at the moment.

Andrew

Yeah, I think Stuart’s right there. I think it’s going to be a lot of talking. It’s interesting, I think, that China sent its envoy to Ukraine and Russia to start that process, but they’re still in a very awkward position about being the peacemaker there. And there’s still a lot of effort that the rest of the G Seven will put to try and put pressure on China to change that. TAC but the reality is, as in all of these things, china only changes its mind when it suits China.

Peter

And we got key economic data coming out later today. We got retail sales, industrial production, fixed asset investment. Presumably, a lot of focus is going to be on comparing these numbers with a year ago when China was in a pretty dire situation. So I suppose the numbers have got to be better than where they were one year ago, but also a lot of focus on what is the consumer doing.

Stuart

Yes, and anybody who announces numbers in that circumstance will look like a hero, won’t they?

Andrew

Well, I think the people will look much more at the monthly numbers.

Stuart

Those that know and understand what they’re listening to will know that it’s just recovery from COVID recovery from bad times. And it’s not the importance of the difference between this year and last year. It’s the trend and what else is going on around it.

Andrew

Yeah, I mean, I think the the monthly trend is the most important thing that people will look at, because this time last year, Shanghai was in lockdown, and that was devastating. I think the other one that people will be looking very carefully at is obviously unemployment, because China has a problem in creating employment because it’s stepped on and curtailed the education sector. It’s curtailed ecommerce and, to an extent, even Macau. We’re seeing a good rebound in Macau from the recent numbers and Golden Week, but it’s creating larger jobs going forward that China is really going to have a problem with.

Peter

And presumably youth unemployment. Almost one in five people under the age of 26, I think it is, is unemployed. That’s a big problem, isn’t it?

Andrew

It’s a big problem, and we’re just about to get another whole batch of graduates coming out, and historically, 50% of those would have gone into the education sector. That’s not going to happen now because of the curtailment there. So, yes, I think it’s got a big problem there and I think you’re seeing that. And it’ll be why retail sales will be watched closely. Because in China, I think, from my experience, the consumer tends to be very binary. If they’re confident, they will go out and spend. If they’re not, they just stop spending and just revert to essentials. And I think we’ve already seen that trend occurring in the last couple of months.

Peter

Tony, what stood out from the first quarter earnings season, or one of the things that stood out is the number of US and European companies that are talking about China and the impact of China on their earnings. We’ve seen it from Disney, Starbucks in Europe, from LVMH and Rishman. It’s coming up more and more, isn’t it, in terms of either whether these companies have overestimated the rebound in China, which certainly in some cases they have, or whether some other companies are, like Rishman, for example, in the luxury goods area, are seeing a pickup in Chinese demand.

Tony

Right, of course, luxury goods have done very well. But I think many firms overestimated the impact of opening in China and they claimed it in their earnings and they suffered for it. I think if the Q One number looks too good, people will be suspect. So I think from the from the NBS perspective, they really have to be careful with the number that comes out, because foreign companies are not supporting a good number because that’s not what they’ve put out to their shareholders.

Peter

Stuart, is China still open to business for foreign companies? We’ve seen a lot of crackdowns recently, haven’t we? And now a new one on the consulting sector as well. It says, government officials say, we want foreign companies to come here, in particular US companies. But then you see these latest set of crackdowns which put foreign investors off.

Stuart

Yes, this is one of the confusing bits about China. China is very definitely open to global companies going there, setting up and doing business in certain sectors. There are restrictions in sectors such as in the financial services area, but nevertheless, China still wants people to go there. But it makes companies think hard about making that decision. They want them to go there and be very. Committed to setting up and not sort of mess around with it. They want them to be willing to spend money. They’re looking for larger companies rather than smaller companies to go and set up there. For example, whether it’s manufacturing or in the intellectual areas, they’re willing to look at everybody to come in there. But you’ve got to play by Chinese rules. You can’t play by Western rules. And Chinese rules are often very different to Western rules when managing and running the business in China.

Andrew

Yeah, I think Stuart’s very right there. You’ve got to operate on Chinese rules. And I think for that reason, a lot of companies are changing their strategy as far as china is concerned and making it very much more looking at the domestic market, rather than necessarily just as a manufacturing base for global exports. And of course, if you’d look at it that way, then China’s export market is again going to suffer. People aren’t going to put as much manufacturing into China as maybe they would have done historically.

Peter

Tony final word to you. When companies look at what’s going on in China and see these latest crackdowns on us. Consultancy firms. Is it putting American firms off from going to China and investing in China?

Tony

Oh, yeah, absolutely. Without a doubt.

Peter

Okay, well, thank you all very much for your thoughts there. Short and sweet, but that’s how we like it. That was Tony Nash, who’s the founder and CEO and chief economist at Complete Intelligence. You also heard Andrew Sullivan who is the founder of Asian Market Sense and our regular Tuesday commentator, asian Fund management industry consultant Stuart Oldcroft. Thank you for listening to MoneyTalk this morning. You can find more business and finance information from around Asia in my daily newsletter, which is at peterlewismoneytalk. Substac.com on tomorrow’s program, I’m joined by capital preservation specialist for individuals, NGO on file, and Louisa Fox, china equity strategist at bank of Singapore. With a view from Japan is Nick Smith, who is Japan strategist at CLSA. See you tomorrow.

Andrew

Money talk.

This podcast is originally published by BFM 89.9 The Morning Run. Find it here: https://www.bfm.my/podcast/morning-run/market-watch/global-us-markets-debt-ceiling-april-2023

Tony Nash, CEO of Complete Intelligence, spoke to BFM about what is moving international markets.

The recent April headline CPI numbers were better than the projected 5%, coming in at 4.9%. However, core inflation still printed at 5.5%, and so the Fed is unlikely to cut, making it hard for them to stop raising interest rates. The Fed’s rate rise vote was unanimous this month, indicating that the Fed will continue to raise by 25 basis points in June. Tony said the Fed will look at wages and employment figures along with consumer sentiment, producer prices and credit indicators as well.

With regards to the debt ceiling, Tony said it was a US domestic political tool, and in the end, it would last longer than most people wanted it to last, and we would see some melodramatic brinksmanship.

85% of S&P 500 companies have reported actual results for Q1 2023 to date, and of these, 79% have reported actual EPS above estimates. Tony explained that a lot of this is down to margin expansion, and as raw materials prices fell, labor costs rose quickly, allowing companies to raise their prices further.

However, companies are starting to slow down on price rises as consumers are fatigued with the rises. Some tech companies have started laying people off or signaling no pay rises this year, as they realize pushing price rises is something they won’t be able to do much longer in 2023.

Transcript

BFM

This is a podcast from BFM 89.9, The Business Station.

BFM

BFM 89.9. Good morning. It’s 7:07 A.M. On Thursday the 10 May. You are listening to the Morning Run. I’m Shazana Mokhtar with Keith Kam and Mark Tan. Now in half an hour, we’re going to zoom in on the outlook for Chinese equity markets, specifically the Shanghai Composite and the Hang Seng Index. But let’s recap how global markets closed overnight.

BFM

In the US market, stocks mostly climb as better inflation data offset worries about the stalled talks between political leaders that have raised fears of a US default. The Dow was down 0.1%, but S&P 500 up 0.5%, and Nasdaq up 1%. In the Asian markets, it’s rate traffic lights Nikkei down 0.4%, Hang Seng down 0.5%, Shanghai Composite down 1.2%, STI down 0.2% and FBM KLCI down 0.5%.

BFM

So for some thoughts on what’s moving international markets, we have on the line with us Tony Nash, CEO of Complete Intelligence. Tony, good morning. Always good to have you. Let’s start with CPI numbers. April headline CPI numbers came in at 4.9%, better than the projected 5%. Do you think this will have an impact on the Fed’s policy decision in the near term?

Tony

Yeah, I think it’s unlikely by the next meeting. So what we have to look at is what’s called core inflation. And core inflation still printed at five and a half percent. And so that is hitting people enough that it’s really hard for the Fed to stop. They’re certainly not going to cut, but it’s really hard for them to stop raising when core inflation is still at 5.5%. So we have things like food inflation is still up 7.7% on an annual basis. Electricity is up over 8%. Transportation inflation is up 11%. So as these things are still rising at this rate, it’s really hard unless we see some other compelling data come in, it’s really hard to see the Fed either pause or cut. Now what we also have to recognize is the Fed’s rate rise vote was a unanimous vote in favor of a rate rise this month. Typically, before we see a change in policy, we’ll have votes that are not unanimous. So it seems to me that going into the June meeting, at this point, it’s likely the Fed will continue to raise by 25 basis points in June.

BFM

What are some of the other indicators that the Fed may be looking at in order to help refine this decision, Tony? What are you going to be watching coming out next in the weeks ahead of the June meeting?

Tony

Yeah, they’ll look at consumer sentiment, they’ll look at producer prices, they’ll look at wages, these sorts of things. They’ll look at employment. So the key things they’re looking at are really wages and employment. That’s really it. There are a number of other macro metrics that come out, like retail sales, that the Fed doesn’t really look at that stuff. So you don’t really hear markets here moving on retail sales. It’s more at this point in the cycle. It’s things like wages. They may also be looking at things like credit because we’re staring down, really a credit crunch, which is tight credit because rates have moved and because of the banking risks we’ve seen in the US over the past probably six to eight weeks. And so they may start looking at more credit indicators to see how that’s slowing down.

BFM

Now, US Treasury Secretary Janet Yellen has sounded alarm over possible financial market consequences if the debt ceiling was not raised by early June. What would those consequences be, and how likely would it be for Congress to strike a deal by then?

Tony

Yeah, I want to kind of help you guys and your listeners understand that the debt ceiling is really a US domestic political tool. Okay, so the debt ceiling is an annual ritual that we have here where each party threatens the other to cut programs, so say programs that the other party loves. Right. So at the end of the debt ceiling, all of the politicians just agree to spend anyway. So there will be threats that the US will run out of money, but it won’t. It’s not going to happen. The Treasury always finds money. You will likely see us get to some point where, for example, they’ll close national parks or they’ll say federal employees can’t come to work. Those are really signaling more than substantive because all of those employees get paid. We know that the debt ceiling will be signed three or four or five weeks after that happens, and all those employees get their back pay. It’s not as if anybody’s going hungry. They all have their health care while this is happening. So what will happen, and this is very predictable, and it’s a big eye-roll for most Americans. In the end, this will last a lot longer than any of us want it to last.

Tony

And we’ll see some sort of last minute melodramatic Brinksmanship to kind of save America. When we hear about the debt ceiling, we hear breathy headlines about the debt ceiling. Most Americans just kind of ignore it because this is really a Capitol Hill Washington, DC issue more than it is something that really affects real life here.

BFM

Tony, overall, 85% of S&P 500 companies have reported actual results for Q1 2023 to date. Of these companies, 79% have reported actual EPS above estimates. How would you explain this outperformance? Is it time to chill the bubbly?

Tony

Yeah. A lot of this is down to margin expansion. So in 2021 and 22, we saw goods price inflation, which allowed these companies to raise their prices a bit. As those raw materials prices fell, we saw labor costs rise quickly, and that allowed companies to continue raising prices further. So we’re starting to see companies slow down on their price rises. Consumers here are really fatigued with price rises, so we’re starting to see companies slow down. And some tech companies started this laying people off. Some will signal that there’s, say, no pay rises this year. Microsoft has already signaled that. Some of those are prudent measures that leadership teams are taking in the event of a recession. But some of them are just a realization that pushing price rises is just something that we won’t be able to do much longer in 2023.

BFM

And let’s take a look at oil prices, Tony, they’ve been pulled or they are being pulled in opposing directions. We have deteriorating global demand outlook that has been countered by some bullish supply news from the Biden administration as well as Russia. So where do you think oil prices might be heading in the next one to two months?

Tony

Yeah, you’re right. There are definitely mixed messages in crude markets and it’s easy to take either a bearish or a bullish view, depending on what data you’re looking at. Our view is that crude could rise 5% to 10% in the next month or two, and that’s a typical annual seasonal trend. After, say, June, maybe mid, late summer, we’ll definitely see a sell off in markets. Again, that’s pretty normal for this time of year. So we would expect prices to rally a little bit from here and then we’ll see a calm, say, mid summer.

BFM

Tony, I just want to pick your brains a little bit. Gold prices, they’ve managed to stay above $2,000 for some time after hovering like just below that level for the longest time that I can remember. What do you think the direction is going forward?

Tony

Yeah, so our expectation is that gold prices are going to fall a bit over the next two months back below 1900. So we do not expect gold to stay at these elevated levels. It’s possible, but it’s just not within our forecast. So I would be careful with gold at these levels. And if your listeners believe that it’s a rally, go for it. But that’s just not what our data is telling us.

BFM

1900 is quite substantial. What do you think the reason would be to bring it down to that level?

Tony

Well, if risk is taken out of the economy, so if there’s some systemic, say, relief that the Fed or Treasury gives for banks or something like that, investors typically go into gold and crypto when there’s risk, when they fear risk, or they feel devaluation of the dollar or something like that. Right. And so if there were to be programs to support banks, to backstop banks, these sorts of things, from the position that they’re in right now, I believe it would really turn a lot of that gold trade off. And so it’s quite possible that stuff’s happening because it is a concern with the government here and the government especially as we enter a tight credit cycle, they have to make sure that banks are stable. This is a real concern for them. If there isn’t confidence in the banking system, then you’ll see this domino effect of banks to firms and so on. That’s just one scenario, but it’s possible that some sort of federal backstopping of banks for a temporary period, I’ll say additional backstopping of banks will put the risk on trade back on.

BFM

All right, Tony, thanks very much for speaking with us. That was Tony Nash, CEO of Complete Intelligence, giving us his take on some of the trends that he sees moving markets in the days and weeks ahead.

BFM

I like what Tony said about the debt ceiling issue in the US. Right? That’s all political showmanship, and I guess here in Malaysia we’ll call it Wayang Kulit. Right.

BFM

So once all these shenanigans are over with the politicians who agree at Capitol Hill, and they’ll just continue spending their respective programs.

BFM

It’s nice to know that our politicians all over the world are just in it.

BFM

They’re the same. They have the same in a way. It doesn’t reflect well, though, and I think it does cause volatility, at least in the eyes of observers, regardless of what happens there. We’ll be watching that space, but let’s take our attention over to some of the earnings that have crossed our table. We have Walt Disney Company. They reported revenue and profit that were in line with Wall Street’s projections. The company did also reduce streaming losses by $400 million from the previous quarter. And this is thanks to price increases that helped offset the loss of 4 million subscribers at Disney Plus. So, on the one hand, they narrowed their losses, but they also lost subscribers.

BFM

So on the TV side of the business, disney’s direct to consumer segment, which includes the flagship Disney Plus streaming service, posted a loss of $659,000,000. However, this was significantly lower than the Street’s expectations. Right. The company plans to expand its streaming offerings by the end of the year with a new app that combines Disney Plus and Hulu.

BFM

And on the theme park site and Parks Experiences and Products division remains a bright spot for Disney. This saw a 17% increase in revenue to $7.7 billion during the most recent quarter. But I have to point out as well, disney movies, especially with their new live action version of their animation movies, haven’t been actually doing well. The Little Mermaid is coming out on May 26, and there’ll be something interesting to see if you just glean through social media.

BFM

It’s a bit controversial.

BFM

It is controversial, to say the least.

BFM

I think a lot of the live action films have been the subject of controversy in some form or another. I tend to be of the old school.

BFM

Yeah, me too.

BFM

Feeling. I mean, I like the cartoons. I’ll stick with the cartoons, thanks. But they’re trying to court a whole generation of younger viewers with their live action films. So I guess time will tell whether everything will pay off. Don’t forget that Disney is facing a number of challenges ahead. They’ve got their federal lawsuit against Florida Governor Ron DeSantis, and the writer strike is still ongoing. That is going to have an effect on some of the production that is stalled, such as with Blade and also the Disney Plus Star Wars series. Andor so all these things to watch when it comes to Disney Plus. We are coming up to 720 in the morning. We’re taking a quick break, but we’ll come back with more top stories in the newspapers and portals. Stay tuned. BFM 89.9 you have been listening to.

BFM

A podcast from BF M 89.9, the business station. For more stories of the same kind, download the VFM app.

This podcast is originally published by BBC as part of their Business Matters show. Find the original publication here: https://www.bbc.co.uk/programmes/w172yzrhkr95sgp

In a recent BBC podcast episode called “UK gatekeeps gaming merger,” host Devina Gupta discussed cloud gaming and the potential merger between Microsoft and Activision Blizzard with guests Tony Nash and Yoko Ishikura.

Nash, the Chief Economist at Complete Intelligence, believes that the concerns raised by regulators about the merger are unfounded. He believes that Microsoft’s decision to open access to its games on other platforms shows that there is no need to worry about the company’s potential dominance in the gaming market.

Nash also noted that there is no reason to believe that the merger would stifle innovation or harm the UK startup environment.

The podcast also discussed the confidence crisis in the US banking sector, with First Republic Bank facing investor concerns and depositor exits.

The show also touched on Disney suing Ron DeSantis and ageism in China.

Transcript

BBC

Hello and namaste. I’m Devina Gupta and you’re with Business Matters on the BBC World Service. I’m joining you from a brightly lit studio here in Saltford in the UK. And it’s 0106 GMT. And with me in the gallery are Hannah, Matt, Alex and Glenn. And thank you for your company at this hour. Wherever you’re joining us from, it’s a show where we connect with two guests from different sides of the world to talk about business stories that are shaping your world. So here’s what’s coming up on Business Matters. We have our guests from the US and Japan. And on the program today.

BBC

No one’s comfortable right now. They can’t really guarantee formally all the banks, but at the same time they know the reality is they don’t want to take the economy.

BBC

We take a look at how another US bank, First Republic, is now in a hot spot. It finds itself between a rock and a hard place, with many investors and depositors exiting and buyers not committing to take over. Will the US regulators finally step in? More on that in a bit, but let me get our guests in for this edition of Business Matters. We have Tony Nash, who’s the chief economist at Complete Intelligence in the US, joining us. Hi, Tony. How are you?

Tony

Hi. Good evening.

BBC

Good evening, Tony. So to get started, do you think age is just a number?

Tony

Oh, age? No, I think it’s very real. All right. Unfortunately it’s very real.

BBC

Yeah, it is very real. It’s about a deal that is not to be for now at least, because let me tell you, quote unquote. This is the big merger that the gaming industry has been waiting for. That is Microsoft to take over the game developer Activision Blizzard. Now, for those of you who are really online gamers, you would know about Call of Duty, World of Warcraft, Candy Crush, and these are the games that are developed by Activision Blizzard. And this deal is pegged at about $70 billion. But once again it stuck. Competition regulators around the world are looking at this deal and on Wednesday, the UK regulators have said it cannot go ahead.

BBC

Peter, be with me because I want to get our guests Tony and Yoko in as well, because what we’re talking about Tony’s, cloud gaming, which is sort of like the Netflix of gaming, the future that you could just order a game sitting at your home through that cloud gaming platform. But in the sense to the first part of what we’ve been talking with Peter about, what Brad Smith and also what Activision Blizzard’s chief communication officer has said, talking about reassessing our growth plans for the UK is what Activision Blizzard has said from the US. How are you looking at these developments? Because let’s not forget, even the US. Regulators are trying to assess this particular takeover bid.

Tony

Yeah, I think to be honest, I think it’s some probably well meaning government employees who don’t really understand the market. And I don’t know the quality of the CMA in the UK, but I suspect it’s that. The main item that I see is Microsoft has opened these games to other platforms and opened access to other platforms. So, honestly, I don’t understand why this is an issue. And I feel pretty confident that when Microsoft appeals, this will be passed. I mean, I’m not a Microsoft advocate or a shareholder or anything like that, but the more I read about this, the less I understand about why it’s been held up. This deal has even been passed in Japan, where some of the key competitors for Microsoft are. So I don’t understand why it would be held up in the UK.

Tony

I also don’t understand why this would say that innovation would be held up, because we have some pretty big tech companies in say, well, really all over, and there are still tech startups that start every day, every single day, and there are tech startups that succeed and fail every single day. So I just don’t understand how a deal like this would hold up innovation. Because if we look at the top video games in 2014, they were Nintendo games, and so if we look at ten years from now, if Microsoft has a hold on this for ten years, it’s possible that they don’t have top video games in ten years. I have no idea. So I don’t understand from many facets of the deal, I’m just not sure why it’s been held up.

BBC

But Tony, if I could come to you on this, how do you see this moving ahead from now for UK? Because I remember Rishi Sunang, the UK’s Prime Minister, has just recently said that it should be Unicorn Kingdom and he has had delegates going to Silicon Valley and talking up the benefits of moving to the United Kingdom to attract more startups.

Tony

Well, to be honest, I don’t necessarily see how this decision would affect the startup environment in the UK. These are two foreign companies getting approval to do a deal in the UK to access the UK market. So I hear people say that, or I’ve heard people say today that this would affect innovation in the UK. I just don’t think that that is even relevant. This is about big business and market share and the ability to transact in the UK. I don’t think it really has anything to do with innovation. I run a small artificial intelligence company and so this type of deal, it’s way too big for me as a startup to really even care about. Would I love to be bought by Microsoft? Absolutely. But do I think this deal affects my ability as a tech startup to operate? No, I don’t.

BBC

All right, Peter Moore, we’ll say thank you to you at this stage. But before you go, would you be playing Call of Duty? All right. I believe Peter’s left us. But are you a fan, Tony? Call of Duty or any of the video games?

Tony

I am not, but my kids are. Obviously, I was a different generation of games.

BBC

We’re all different generation of gamers. But it’s a big deal, big space to watch out for. And if you talk about generation, we’d carry on this discussion on the other side of Business Matters. Stay with us.

BBC

Welcome back. You’re with Business Matters. And I’m Devina Gupta, and in this half we have loads line up for you. We are talking about business stories shaping your world with our two guests from opposite sides of the world. We have Tony Nash, who’s Chief Economist at Complete Intelligence in the US. And we have Yoko Ishikura, who’s joining us from Japan. She is Professor Emiratus at the Japanese University Hithot Sparshi University, specializing in business strategy from Japan. So thank you, both of you, for being with us.

BBC

Let me get the story that we’ve been tracking through the day. First in, because we’ve been talking about the confidence crisis in the US banking sector. Another regional bank, First Republic, is now in a tough spot. It’s literally between a rock and a hard place because on one side, its investors have continued to dump its shares. They fear that this bank could be the next one to collapse after Silicon Valley Bank, which is another regional bank, collapsed earlier in March.

BBC

So bank shares fell over by 20% on Wednesday, slashing the market value of this bank below $1 billion for the first time. And on the other side, its depositors are exiting as well because there have been exit of about 100 billion dollar worth of deposits, which the bank claimed earlier this week. Now. The US. Regulators are refusing to step in for now. And Tony, I wanted to get you in first for this because how is this being seen, especially when it comes to the confidence of the banking sector in the US?

Tony

It’s crazy, right? When we saw Silicon Valley Bank collapse, I think there was a week where people were really nervous about these smaller regional banks. What we’ve seen since then is we’ve had regional banks in say, California or South Carolina or other places report their quarterly earnings and they’re okay. So I think the overall regional banking story is one where many of the union banks are fine. It’s not as bad as many people had worried. I think First Republic is a special case. They were particularly bad in their communication, so very poor communications to their depositors, to their shareholders and to regulators. And they would convey one message to depositors and then on the same day convey a contradictory message to investors. And of course, all that information is accessible and so that will get out very quickly. So First Republic, I think, had they communicated better, had they taken a few different steps, of course, there are loads of technical and financial issues with this. But had they communicated better, I think they would be in a better place today. But because they communicated so poorly, their depositors continued to leave. And you see what happened today when they at one point today, their shares were down 50%. They recovered a bit before the end of the day, but it’s really not going to end well for them.

BBC

Well, even as a lot of depositors leave the bank. I actually spoke with Tim McCarthy, who’s an investor and is still loyal to First Republic. He’s got money still in the bank.

Tim

They do a great job of really appealing to those that have money, to.

BBC

Be honest, for even First Republic Bank. Now, there are eleven large US banks that have come together to save it. They’ve injected about $30 billion. But the question is, will the US regulators now step in? Tony, what’s your assessment? What’s next now?

Tony

Yeah, I’m quite sure the US regulator will step in. It was funny when your guest said that there hadn’t been a bank run. 100 billion dollar drawdown on deposits of First Republic Bank. That is a bank run. So First Republic has already had a bank run. And so given their share price volatility, given the basic insolvency of the company, I have a high degree of confidence that they will be taken over by somebody else. First Republic cannot continue, or it doesn’t seem that they can continue under the management as it stands, because they couldn’t manage the risk that they had. It wasn’t a secret that the Fed was raising interest rates. And so these banks have very smart people, typically who work for them, who manage their risk, their portfolio risk, their holdings risk, their loans risk, and so on. So this was no secret. This was the best telegraph rate rise in history. And so, of course, the banks have to hold some duration, meaning some stuff at low interest rates, while they lend out at a different duration. But there are a number of activities that could have been taken for them to be in a better position and they just didn’t do it.

BBC

Absolutely. And as they say, lessons are to be learnt. But let’s move on to the other story that we are following, which is about Disney. And this one begins with happy endings, because whenever you think about Disney, there’s always this and they lived happily ever after, isn’t it? But what Disney is now looking at is a grim corporate reality, where Disney is fighting for its happily ever after for its own home turf in Florida. Because after a tumultuous year when its top management changed, its profits have been dented. It’s now locked in a legal fight for its Walt Disney Complex, a theme park and its headquarter in Florida. And today it has sued the elected Governor of the State Ron DeSantis, why? Matt Line, that’s BBC’s Mat lines explaining us what exactly has happened through Wednesday. But Tony, have you been to Disneyland?

Tony

A long time ago, when I was a kid, yes, actually. I was in Hong Kong Disney, a couple of times last decade.

BBC

Yeah, but Tony, here’s also the point that Disney has a special tax district. It enjoys special autonomy and privileges, as Matt was talking about, its own policing, its own waste management, and much more. It’s the highest tax paying company in the state. It employs over 75,000 people. But the crux of the argument also is, should private companies have such autonomy?

Tony

It’s a great question. And obviously at one time, the state of Florida thought it was a great idea because they wanted to attract the investment and the jobs. And I think what we had in the situation, regardless of the political issue, Disney got involved because their employees wanted them to get involved in this issue. But Disney as a functioning entity, should really get involved if the shareholders want them to get involved. And so Disney got involved in a political issue when probably they should have told their employees that as residents, Florida, they’re welcome to vote on those issues. Right? And so imagine if Disney came out in 2016 and said they’re pro Brexit. How would people in the UK feel about that? I mean, that’s a company acting as a political actor. So in Florida, Disney acted as a political actor in a way that wasn’t necessarily in its business interest. And this is where Ron DeSantis, who’s the governor, who the social aspect and the education in Florida, is part of his purview. And his voters obviously wanted that. He had just won a very one sided election in Florida, and he had a mandate to represent his constituents. And so he was representing his constituents in a certain way. Disney didn’t like that.

BBC

But how is it not playing out for Florida Governor Ron DeSantis, who’s also planning to be Republican presidential contender? Because a lot of people have been tweeting and they have been talking about social media, about what Disney has said, that this kind of move is anti business, anti Florida. That’s getting some traction.

Tony

Maybe it is, maybe it isn’t. I think things on social media oftentimes are really amplified. And so Twitter isn’t really life. I mean, the demographic of people on Twitter doesn’t represent society in general, so maybe it’s true. But again, imagine if Disney had been pro Brexit in 2016. Would people object to that? Maybe because it didn’t reflect at least a lot of people in, say, central London of what they wanted. And so the people in Florida support Ron DeSantis. Honestly, I don’t live in Florida, so I don’t really care about this issue. But I look at.

BBC

When you have other cities and other places like New Jersey now saying that, okay, come and set up the business here, set up your shop here, and shift your theme park here. It’s the major tourist attraction. It was also benefiting local businesses, then it’s something to think about, isn’t it?

Tony

Yeah. How many billions of dollars would Disney have to spend to move that theme park? And again, their shareholders would be very upset if they said, we’re going to shut down Disney World in Florida and we’re going to move to another state. Right. It’s a producing asset. It produces a lot of revenue every year. They’ve already put the investment in there. So shareholders would be pretty upset if they decided just to abandon because some of their employees didn’t like something that the governor was doing.

BBC

Well, let’s not forget that the US presidential race is around the corner. And I was actually speaking to legal attorney earlier from Florida, Richard, and he says that it may be a time tactic, a delaying tactic to get a resolution.

BBC

But let’s get on to the story that I’ve been really waiting for in Business Matters, and that’s basically about ageism, and this story is about China. And when you look at glossy advertising campaigns in the fashion world, you often see young faces in the spotlight, but not, it seems, in China, because a small online marketplace in China has been using women over the age of 60 in its latest campaign. And this is part of the brand’s social commerce initiative to recruit more senior citizens into their online advertising. Tony, how much of this debate is making way, especially as Joe Biden, who’s clearly the oldest American president, has now announced that he would be running for the second term? He’s 80 years old. And how much of this ageism debate is now making into the frontline of politics as well in the US.

Tony

I’m not sure. We have old people on TV all the time here, so I don’t know that it’s necessarily controversial. I lived in Asia for 15 years, and I did see a huge amount of young people in advertising in Asia because it reflected the demography of the economies. I think Japan, the US, other places, and Europe especially, have had older populations for a long time with the baby boomer brackets. So we’ve had older people kind of in prime positions in movies and ads for probably 15-20 years. So I’m not sure that it’s necessary, really, as big of an issue here as maybe it would be, say, in China.

BBC

All right, thank you so much, Tony, Deshonda and Yoko, for joining us on this edition of Business Matters. And if you’ve been listening, thank you for being with me at this hour. You can listen to business matters. Just search Business Matters wherever you get your podcast from and see you next time soon again. Namaste.

This podcast was originally published on April 27, 2023 on https://www.bfm.my/, and is being republished here with permission. To listen to the original podcast and for more market insights, please visit https://www.bfm.my/podcast/morning-run/market-watch/first-republic-bank-deposit-loss-us-debt-ceiling.

In this episode of BFM 89.9’s podcast, Shazana Mokhtar and Wong Shou Ning join Tony Nash, CEO of Complete Intelligence, to discuss global market news.

The focus is on First Republic Bank, which lost about $100 billion in deposits and has become a poster child for regional banking issues. According to Nash, the bank’s management team mishandled the situation from the start, leading to poor communication with investors and depositors, and the loss of half their market capitalization.

The hope is that they will be taken in by a globally systemic bank or receive a bailout from the Fed or treasury regulators.

Nash also highlights the potential for a contagion effect on other regional banks in the US. However, he reassures listeners that many regional banks have communicated well with their depositors and investors and have put solid plans together to weather any potential fallout.

Finally, the episode discusses the upcoming Fed meeting and the expected rate hike, despite persistent inflation in the US. If service industry wages slow down, the Fed may pause, but for now, the outlook remains unchanged.

Transcript

BFM

BFM 89.9. It’s 7:06 A.M. on Thursday the 27 April. You’re listening to the Morning Run. I’m Shazana Mokhtar with Wong Shou Ning. Now in half an hour, we’re going to discuss the outlook for Asia Pacific currencies. But as always, let’s kick start the morning with at how global markets closed overnight.

BFM

Well, let’s just say the only sector that was really, really in voke was technology because the Nasdaq was up 0.5%. Meanwhile, the Dow was down 0.7% and the S&P 500 down by 0.4%. In Asia, Nikkei was down 0.7%, Hang Seng up by the same quarter. Quantum, excuse me, Shanghai, was down 0.2%. So relatively flat. Singapore Straits Times down 0.1%, and our very own FBMKLCI was down by 0.8%.

BFM

So for some analysis on what’s moving markets we have on the line with us, Tony Nash, CEO of Complete Intelligence. Tony, good morning. Thanks as always for joining us. Can we start with what’s happening with First Republic Bank? Its share price plummeted after the US regional bank posted its latest quarterly results, which showed that deficits had dropped by nearly 40%. And this has reignited fears of a banking crisis. I mean, what are your thoughts on this?

Tony

Yeah, so First Republic lost about $100 billion of deposits, and I think a lot of people want to see them as a poster child for a lot of the regional banking issues. The First Republic issue was managed particularly badly by their management team from the start. Their communication with investors and depositors and regulators hasn’t really been great from the start. So we’ve seen earnings from other regional banks in South Carolina and California and other places come out and they’ve actually been okay. They’re not stellar, but they’re not as terrible as people had feared. I think First Republic today, they lost about 50% of their market cap this morning and it snapped back a little bit, but their communication just continues to deteriorate. So what’s the hope for First Republic? I don’t know. One would hope that they could be taken in by a globally systemic bank like Silicon Valley Bank was taken in by JPMorgan, but if not, then they’ll have to get a bailout from the Fed or treasury regulators to sort them out.

BFM

And this time not from other banks, which was the case because other banks lend them $30 billion, right?

Tony

Right, yeah. I mean, likely one of those lenders will take them over, one of those banks that lent money to them will take them over. Nobody really knows. Well, some people have a very good idea, but it’s likely that one of those lending banks will take them over.

BFM

Okay, but do you think this has the potential of having a contagion effect on the rest of the regional banks in the United States? Because if I’m a depositor in a small town and I’m reading this headline, I might be thinking why do I want to keep my bang in my small town bank?

Tony

Well, I think if that were to happen, that would have happened three to four weeks ago when Silicon Valley Bank went under. When that happened, the Fed and the treasury came out with very strong support to get liquidity to those banks. And so there was about a week of uncertainty where people really weren’t sure what was happening.

Tony

But again, I think a lot of these regional banks communicated very well with their depositors and with investors and with the government and put solid plans together. And as they report, they’re kind of not as bad as feared, which for now is good enough. And then when we look at, like, the JPMorgans and the Bank of Americas of the world, they’re reporting very well given the environment. So again, it’s kind of in finance, it’s kind of not as bad as we had feared type of quarter, especially for regional banks. And so that’s good news.

Tony

But again, First Republic had been managed particularly poorly. And in these types of situations, communication and cooperation are critical and it’s just not something they did very well. And so because of that, they’re seeing their market cap go down, they’re seeing depositors continue to leave. And I don’t know that they have a lot of hope going forward.

BFM

Let’s take a look at what the expectations for the FOMC meeting, or when they meet next week. What do you think is going to happen? What is the Fed going to take into account in deciding whether to raise rates or put them on pause? What are you looking at, Tony?

Tony

Yeah, there are a number of people saying that these banking issues may push the Fed to pause at the meeting on May 3, but it’s highly unlikely because we’re continuing to see inflation, persistent inflation in the US.

Tony

And what we need to watch is this metric called SuperCore inflation. And SuperCore inflation is really a proxy for service industry wages. And so if service industry wages slow, then we could see a Fed pause. Right. So we saw all the inflation with goods and commodities last year, and that’s kind of subsided. What’s really been persistent is service industry wages, and that’s pushed into a lot of other industries. So it would be good if those wage rises would slow. However, we are headed into the summer vacation period in the States, so we’re likely to see upward pressure on service wages from here. So we don’t expect the Fed to pause, certainly not in May, maybe in the June meeting. But we really won’t see inflation show a real downturn until August, because we see the base effects of, say, the energy prices and other things from last summer really come off at that point.

BFM

Okay, Tony, last evening, the House Speaker managed to pass his debt limit bill, but there’s still no sign of a workable deal with the White House. So is there the risk that the US. Government will run out of cash at some point?

Tony

Well, there was just some news out of the IRS today. The IRS is the tax, the revenue, inland revenue in the US. It’s called the Internal Revenue Service. And they just announced today that they have kind of an extra month of cash that they didn’t know about, which is a little weird. But we can count on this debt ceiling going as far as it can. So it could go into July. So we had thought that we’d be done with this by say, end of May, early June, but it’ll probably go into early July. And so we’re going to hear this droning kind of threat back and forth from the House to the White House for the next two months.

Tony

And so honestly, all this is doing is Republicans want spending cuts. We’re at historic spending levels and Democrats don’t want spending cuts. And that’s really what’s being pushed back and forth and all of them are playing to their base constituencies over this period. This is just a really dumb political issue and so we just need to get past it and it won’t end until July. Nothing will happen until July. We’ll have bills passed, they’ll go across, they won’t be signed. It’s going to happen several times over the next two months.

BFM

Well Tony, let’s turn our attention over to the tech sector. It was expected to be under earnings pressure last quarter, but it’s come through with stronger than expected results this earnings season, especially from names like Alphabet, Microsoft and today Meta. How have they been able to achieve that?

Tony

Yeah, Meta really impressed today and after hours their price action was just stunning. So all the talk in tech is about AI and both Microsoft and Google have cloud businesses that have really thrived because of the extra compute that people need with AI. Microsoft saw huge growth in its Office, Microsoft Office software, they saw 18% growth there, which is pretty amazing. So it’s really AI tearing up cloud capacity and AI capabilities across these tech companies that are doing well.

Tony

We saw a tech company called Roku report this evening and it was terrible. So not all tech companies are doing well. What we’re seeing is say, ad revenue isn’t as bad as people had thought and so that’s a relief. So some of this is a relief, but some of it is actually legitimate really good earnings at a time where people didn’t think they’d be very good.

BFM

Tony, thanks very much for speaking with us. That was Tony Nash, CEO of Complete Intelligence, giving us his take on some of the trends that he sees moving markets in the days and weeks ahead, really casting doubt on the debt ceiling debate and whether it’ll end anytime soon. We’re going to likely see this argument prolong until July, which is pretty baffling. Really?

BFM

Yeah. I can’t imagine a government actually running out of money. But it’s amazing, right? Your tax department can suddenly find one month extra money.

BFM

It’s akin to finding that extra five ringgit in your jeans pocket when you put your jeans on, and, hey, I’ve got money here. Yeah, I love that. That’s a great surprise.

BFM

You’re a government, right? I wonder whether this will ever happen in Malaysia. Like our government wake up and say, “oh, my goodness, you’ve got all that money.” But he did bring up Meta results. And yes, they were rather spectacular, actually. Beating street expectations by a mile.

BFM

Well, beating street expectations on revenue. Yeah, I think because net income, it still fell. Net income, company wide, fell 24% to $5.71 billion, or $2.20 per share. But they did see a rise in revenue of 3% to $28.7 billion. And this was better than what the street expected. They beat street expectations by 4%.

BFM

So this year for them has been the year of efficiency. Right. Because we know that they’ve actually been very aggressive when it comes to job cuts. 21,000 expected, so expenses will come down for sure. But what’s interesting to me is that their Meta Reality Lab, which is developing their virtual reality and augmented technology for the Metaverse, everybody seems to have forgotten that, but it’s still going ahead. It brought in close to $340  million in sales, but it’s losing has lost $4 billion. Painful, right?

BFM

This was something that they really went all in on not too long ago.

BFM

And now everyone’s just met the Apatu, moved on to AI. Does the street like it though a prairie? Yes. 46 buys, eleven holes, five sells. Consensus target price for this stock, $232.56 during regular market hours, it was actually up $1.85. Think we got time to squeeze in one more ebay?

BFM

Sure. Let’s talk about Ebay. Ebay also did pretty well. I think they projected current quarter revenue to be above Wall Street projections after they beat March quarter earnings estimates. And this is thanks to a selective push from the ecommerce firm on items like sneakers and watches and refurbished products that’s helping to drive its sales at a time when consumer spending has moderated.

BFM

If you look at it right, in terms of the street, do they still like this name? And the answer is coming up on Bloomberg. No. Okay, so that was my drum roll. Nine buys, 21 holds, only two sells. Consensus target price, $49.11. Last time price during regular market hours was actually $43.36. It was down $0.65.

Using Data to Scale your Business in a Smarter Way with Tony Nash

Tony Nash, CEO and founder of Complete Intelligence, speaks with Austinpreneur about using data to scale your business and talks about what his company does and how it helps businesses do better forecasting. Questions asked during the podcast:

 

1. Tell us about yourself and your company.
2. Can you contextualize and give examples of how your products and services help procurement folks?
3. How did you come up with this business idea?
4. Why did you decide to move from Singapore to Texas?
5. What do you think caused the skills improvement in the US?
6. What’s causing high turnover rates?
7. What’s your take on AI and how does your computer use that?
8. How are you working to build data privacy and security?
9. What does the future look in AI and Complete Intelligence?
10. What are the trends that you are looking at?
11. Why don’t we have a higher level of transparency in products and processes?

Description from Austinpreneur: Trying to predict the future for any business can be a challenge. Accurate and reliable data is a highly prioritized need for any business in any market. Complete Intelligence was built to provide business with data that is highly accurate and will allow you to build and grow with a glimpse into what the future could be. Tony Nash has built Complete Intelligence to enable revenue teams and finance teams to better manage their risk.

 

Listen to the podcast in Austinpreneur.