Category: Podcasts

This podcast was first and originally published by Peter Lewis’ Money Talk. Find the Substack here:

https://peterlewismoneytalk.substack.com/p/peter-lewis-money-talk-friday-22-6c2

Topics discussed:

• Federal Reserve Chair Jerome Powell’s perceived dovish stance is critiqued for potentially leading to increased inflation and discontent among voters.
• Market reactions to the Federal Reserve meeting were positive, resulting in a broad rally across various asset classes.
• Concerns are expressed about the impact of new legislation in Hong Kong, particularly on foreign investors and the perceived shift towards authoritarianism.
• The potential implications of stricter laws on data privacy and state secrets in Hong Kong are discussed, raising concerns about its impact on the region’s business environment.

Transcript

Peter Lewis

Tony, what are your thoughts? I mean, it’s interesting, isn’t it, because he’s raised the inflation forecast. He’s raised his growth forecast quite considerably, but no change to the number of rate cuts this year, although we did get one taken off for next year, didn’t we? There was going to be four next year. Now they’re only talking about three year. So I suppose one of the rate cuts has come out for next year. But what are your thoughts?

Tony Nash

I think it’s silly, Peter. We can’t be raising our economic expectations, seeing wages rise, seeing prices rise, raising our inflation expectations and saying, oh, yeah, we’re going to make money easier. Right. And he even said during the meeting that they were going to slow the pace of the offtake from the fed balance sheet. They’re cultivating an environment for pretty easy money where demand seems to be right now. And that’s how markets took it. Markets took it after the meeting and they just ran with it because he came across as very dovish. In fact, Powell has a way of coming across either way too hawkish or way too dovish. And then other Fed speakers have to course correct in the following days. So I think he probably came off way too dovish. And I think we’re going to see fed speakers over the next week. Correct. More on the hawkish side to say, whoa, that’s not really what we meant. And I really think that that’s what’s going to happen is they’ll make the three interest rate cuts seem more questionable than they are. Although the vote was unanimous, we did see a slightly more hawkish trend in the dots.

Tony Nash

Not a lot, but slightly more hawkish.

Peter Lewis

And what was also interesting was out of the 19 FOMC members, nine of them, so a minority, but a substantial minority, actually think the Fed is going to cut less than three times this year. So I think that’s maybe Jerome Powell is sort of out on a bit of a limb there, isn’t he?

Tony Nash

Yeah, I think you’re right. I do think that he does over calibrate either hawkish or dovish, depending on the direction, and I think he’s trying to signal the direction, but I think he always overdoes it just a little bit. He doesn’t have an easy job. Everyone reads everything into the way he holds his papers, the way he clears his throat or whatever. Right. I mean, everything is overly analyzed with him. But again, we have seen this where he comes out and he’s overly one way or the other. And I think, yeah, seeing those nine voters say hey, we’re not going to have three this year. I think as we’ve been talking about, my team has been talking about a resurgence in inflation for over a year, and we’ve seen it over the past couple of months, and we’re going to see that accelerate. They try to present Jan, Feb as just an aberration, but it’s not. And so it’s going to accelerate. Their expectations are going to be probably even exceeded. And it’s very difficult to have an interest rate cutting environment when you have inflation rising because it’s an election year.

Tony Nash

And consumers love, and voters love to complain justifiably about prices and prices keep rising. What did we see after the Fed meeting? We saw commodity prices soar. A lot of commodity prices soared after the Fed meeting, and that’s going to hit consumers within two. You know, this very unnecessarily dovish talk out of Powell has resulted in inflation definitely being locked in for at least two months.

Peter Lewis

Tony, I’m wondering what you think about this. Is the Fed taking a risk here? Because they basically seem to be saying the economy can run faster without generating significant overheating pressures and they’re willing to cut even while they’re still away from their target.

Tony Nash

Well, this is very similar to like a 2020 2021 argument when things were actually doing okay in the middle of COVID at least in the US, and people kept saying, hey, let it run hot. Let it run hot. Right. And it seems like we’re replaying that again, where, although people may not be using those words, the subtext is let it run hot. And I think the problem is, as Andrew was talking about GDP, the quality of that GDP is not great. It’s overwhelmingly government spending in terms of the growth areas. Okay, so we’re not having private sector growth as a contribution of GDP in the US. We’re having government spending as a growth area in GDP. And so what we’re seeing is heavy fiscal and we’re seeing dovish monetary. And so that’s great, but it just means that we’re going to see more inflation. Inflation is going to come back. Well, it already has, but it’s going to continue to accelerate. If this is the world that policymakers are comfortable with and if this is the world that policymakers are comfortable with, it makes us voters very unhappy because their pay rises are not keeping up with inflation.

Tony Nash

Now, what’s interesting, public sector pay rises are something like twice the size of private sector pay rises. So public sector wages are keeping up with inflation, but private sector wages aren’t and so this is the problem with an election year. American voters are really tired of it and inflation comes up in almost every discussion I have.

Peter Lewis

And I wonder what American voters also think about what he said about labor supply. He sort of mentioned the strength of the data on labor supply, but then he pointed to the strong pace of immigration as helping on that front. That’s rather a hot political topic to.

Tony Nash

It’s a lightning rod, and it’s not a very positive discussion in most parts of the US, even in very heavily democratic parts of the US, which favor inflation in state Massachusetts, New York, it is just a sour topic for people and it’s a very sensitive topic. So when the Fed chair gets up and says immigration is helping the labor market, it makes Americans very uncomfortable and it makes them not really like him.

Peter Lewis

Tony, what do you make of the market reaction to this? Jerome Powell didn’t talk down the rally at all, did he? In his press conference in either stocks or risk assets. He didn’t even acknowledge that this is easing financial conditions and maybe making their job a bit harder.

Tony Nash

He did not. And I think he turned it from a tech rally to an everything rally. If you look across markets at the close in the US today, and as you mentioned at the top of the program with Hong Kong was coming on strong this morning, international markets coming on strong this morning. I think with this, I think overly dovish Fed meeting, he turned the rally from a tech rally to an everything rally.

Peter Lewis

Do you think this is going to continue?

Tony Nash

It’s possible. I think we have to see how things go into the end of the week. If things stay strong into the end of the week, then look out. But I think if we start to see things stall out Thursday and Friday in the US, then we could see things settle back to the levels we had seen a few days ago.

Peter Lewis

Tony, if you look at the reaction of the yen to this, clearly the currency traders don’t think that this is the start of a sustained period of rate increases in Japan. And there’s still going to be that wide yield differential between US rates and Japanese rates.

Tony Nash

Yeah, it wasn’t a big statement. ET seems to be very conservative. He doesn’t want to be seen as shaking things up at the BOJ. He almost acts like a caretaker. And so I think currency traders expected something a little bit more. They want a little bit more in the end, want a little bit more. In terms of markets being slightly tighter, he’s not a big bold move maker and this just wasn’t it. So to see the end continue to weaken on this was just really interesting for me to watch this.

Peter Lewis

Okay. Okay, Tony, what are your thoughts? You’re obviously looking at this from overseas. As Andrew says, it’s no surprise it passed, and it passed with unanimous vote in ledge coat. But now that it has passed, and foreign investors are going to have a chance to scrutinize it and see the impact of it, is there anything to worry them?

Tony Nash

Oh, sure there is. I think the law allows trials without a jury. It allows trials behind closed doors. It allows handpicked judges. So anybody forming a company, anybody who’s a board member, anybody who’s an officer in a company, in a jurisdiction like Hong Kong, you have to worry. Why don’t you have a lot of international companies centered in Beijing because of laws like this, right? So Hong Kong, which 1020 years ago, 30 years ago, was the place to have a company because it was the most business friendly city in the world. Today it’s not that way. And if you’re an officer or director in a company, it’s got to be a little know, give you second. You know, one of the attractors for Hong Kong for a few decades has been media. There is great media in Hong Kong, but it’s no longer a media center, it’s no longer an arts center. And the sad part about that is a lot of that stuff is moving, or has moved to Singapore, which is a pretty strong state in terms of control of messages. So people are so worried about the impact of this new law on Hong Kong that they’re moving to Singapore and seeing it as a freer place than Hong Kong, completely 180 degrees from the way things were ten years ago?

Peter Lewis

John Lee and the government will say, what this Article 23 legislation does is it brings stability to Hong Kong. So will foreign investors look at that and say, yes, Hong Kong is more stable as a result of that, and that’s a positive.

Tony Nash

No, it brings opacity and it brings authoritarianism, in truth. And authoritarianism generally is stable until it. And so, you know, Singapore is an authoritarian place and it’s stable. It’s marginally freer than Hong Kong now, I guess. But no, authoritarianism doesn’t bring stability necessarily, or the stability it does bring is short lived. And again, Hong Kong was very vibrant, very creative, very interesting business hub. And I don’t think it’s totally gone, but I think the risks to officers, investors, board members and so on are much, much higher than they were before.

Peter Lewis

Tony, you are a financial analyst. If you were based in Hong Kong, would you be worried about this state secrets legislation or this state street secrets article that includes economic information, technological information on Hong Kong?

Tony Nash

Yeah, absolutely. So I used to be with a company called IHS, and it’s since been bought by S and P. But twelve or 15 years ago, there was an IHS analyst who lived in China who had some information on crude output or something like that, crude storage. And this person, from what I understand, got it from an industry association or something because they used it in a business environment. The chinese authorities prosecuted him and put him in jail for a long, long time. And at the time, I was working with the economist, but we were shocked at what was happening, because you used to be able to do research, find information, and if you could find information, you could use it to your advantage. And part of using things to your advantage is to trade on it. Right. And so if Hong Kong is to remain a vibrant financial center and a vibrant trading hub, you have to be able to dig for information. But if the Chinese authorities are going to prosecute people for finding information, then Hong Kong as a competitive center is no more. It just isn’t.

Peter Lewis

I mean, that’s what some people are worried about is that Hong Kong is becoming more like mainland China in terms of things like data privacy, state secrets, and what constitutes state secrets?

Tony Nash

Well, there are huge data centers in Hong Kong, right? I mean, there have been for 30 years. And so those data centers, I don’t know, a lot of foreign companies that people have their servers outside of China for a reason, and they have their data stored outside of China for a reason. These new laws allow the government to look into whatever they. So, you know, that stuff that has remained in Hong Kong, I’m sure at some point will move elsewhere if it’s remotely confidential.

Peter Lewis

Okay, well, thank you very much for your thoughts this morning. Great to hear you. That’s Tony Nash over in Texas, USA, who is the founder of Complete Intelligence.

This podcast is originally published by BBC Business Matters in this link with title “Hong Kong’s lawmakers pass tough security bill”: https://www.bbc.co.uk/programmes/w172yzs33f96cxs.

BBC’s Description:

The new law broadens the definition of state secrets in a way that could scare away investors. Will the city be able to maintain its place as a top financial hub?

The British band Chumbawamba is trying to prevent its biggest hit from being used by a politician in New Zealand. The lead singer tells us why.

And Star Wars creator George Lucas steps into the boardroom power battle at Disney to support the firm’s CEO, Bob Iger. Will the Force be with him?

Transcript

BBC

The new law also broadens the definition of state secrets to include information about the economic, technological and scientific development of Hong Kong or mainland China. And this has caused concerns among investors. Tony Nash is the CEO of AI forecasting platform complete intelligence. He also ran the Economist’s research business and their Asia headquarters in Hong Kong.

Tony Nash

Do I think first, we’ve seen legal agreements move to other jurisdictions, so that’s an easy thing to do. They can write it with UK law or something like that. We’ve also seen financial services staff and multinational staff move to other locations, like Singapore. I lived in Singapore for 15 years, and it’s a great place, but Hong Kong always had a very special buz. It had a level of hard work, creativity, intelligence. That Singapore, although it’s a really great pace, it didn’t have that special buz that Hong Kong had. So this stuff has people moving, it has business moving, and sadly, that specialness of Hong Kong is going with it.

BBC

Do you think there might be some businesses that might stick around in Hong Kong, or do you think that the rules are just too much for them?

Tony Nash

Sure, Hong Kong’s not dead. Companies still need people to do work in Hong Kong, but I think the decision makers and the people who are, say, the regional heads or the sea levels or the board members, those people will want to be in other places because of the potential liability that they have. Traders can trade on all kinds of information, and so if something is deemed a state secret and a trader uses some information that they’ve heard, there could be criminal prosecution for that. And so this was never a part of Hong Kong. Of course, things like insider trading are illegal, but I’ve been in the research business for a long time, and there’s a company called IHS that probably ten to twelve years ago had one of their researchers in China put in jail for getting some information that was relatively easy to get. It wasn’t hidden, but it was later deemed a state secret, and that person was put in was.

BBC

Sorry to interrupt you, Tony, but that uncertainty is just going to make it very difficult to do any business out there.

Tony Nash

That’s right, it is. And especially if decisions are made after the fact. Right. So this person had this information, it was deemed a state secret after this person had it, and that person went to jail for a long time. So these are the difficulties that executives and business leaders and researchers and media people face as and if they stay in Hong Kong.

This podcast is originally published by BBC Business Matters in this link with title “Donald Trump favourite to win New Hampshire poll”: https://www.bbc.co.uk/programmes/p0h6qtgx.

BBC’s Description:

Voters are set to select Donald Trump as Republican candidate in New Hampshire. Exit polls put him ahead of his rival Nikki Haley. We look at what this would all mean for the US economy.

Netflix pays 5 billion dollars for the right to stream WWE Wrestling. We assess what this means for the streaming giant which has also added millions of new subscribers.

Passengers traveling with Asiana Airlines on international flights will be weighed when they fly out for from Seoul. We hear why the data is being collected on travelers.

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Subscribe to CI Markets Free. Learn more.

Transcript

BBC

We’ve got two guests on opposite sides of the world, as always, Tony Nash from Complete Intelligence, who’s there in Texas. I’ve been checking out your X Twitter feed. You’ve been talking about your ironing board studio. Elaborate for us, Tony.

Tony Nash

Well, it’s nothing but the best high-quality studio for me here in Texas, Rahul. I have my laptop on top of an ironing board, as I’ve done for years.

BBC

Well, there we go. And I wanted to bring in Tony here. New Hampshire is different in a way, isn’t it? Because there’s a lot more, as you would say, the US electorate, many people say is now divided between college educated, non college educated New Hampshire, a bit more college educated than some of the other states.

Tony Nash

Yeah, New Hampshire is right next to Massachusetts. Massachusetts is a very kind of blue state. So I think what your guest said about New Hampshire is definitely not Iowa. It’s not the socially conservative profile that Iowa is. The interesting part about the New Hampshire primary also is that independents and democrats can vote in that primary for whichever party they want. And it’s a pretty split state. So it makes for a really interesting primary.

BBC

It does make for an interesting primary. Tony, is he reflective of something much deeper, which is a very divided us now, not just politically, but as Thomas said there, economically?

Tony Nash

I think to some extent, yes. I don’t believe the US in general is as divided as portrayed on social media or whatever. My neighbors, people I work with, I don’t necessarily think there’s the hatred that we see in clips on Instagram or whatever

BBC

That magnifies everything. But the economic divide that does exist, doesn’t it?

Tony Nash

Well, there is a huge amount of economic frustration in America. A lot of people feel like the national statistics are lying about inflation, lying about unemployment, these sorts of things. So people feel their own personal financial and economic frustration and they see the data and they say, that’s not, know those guys don’t go grocery shopping with me. They’re sitting in DC collecting these statistics. They have no idea what I’m going through. So there’s that from the economic and financial situation, from the political situation. I think in the middle of America, I think there is a general feeling that people are not necessarily represented in DC. And I think that’s on both sides. Look, we’ve got two 80 year old guys who are running for president. It’s really hard to relate to that if you’re in your in your 20s or 30s. Are those guys, if you’re in your in 20s or 30s, are you going to go out and vote? Are you going to be riled up to go out and vote for these guys? I seriously doubt it. And the other side of that is those two 80 year old guys. Neither of them will have to deal with the downstream implications of their policy decisions.

BBC

Yeah, that is an interesting point that you made. And you know what? We’re going to be talking about ageism a little bit later in the program. I’m not accusing you of ageism there in any way, Tony. Tony, there you are in one of the most important states when it comes to the US economy, Texas. How would people around you. Yeah, how would people around know, look at the fact of an increasing amount of tariffs being put on imports. Would it be welcomed or would they worry about the global implications of that for trade, which the US is central to?

Tony Nash

Well, I think what Rebecca mentioned about subsidies and non tariff barriers, I think is a really important, it’s a very boring point, but it’s a really important point to inject because I think people here look at the protective, say, trade barriers and these sorts of things and say, hey, we really do need to do something here in different industries. And a lot of American products companies have already started to move parts of their supply chains to places like Mexico. And there is an understanding that things will be a bit more expensive as we move to slightly higher cost countries. So this isn’t kind of a, hey, Americans don’t like China discussion, the reciprocity discussion, although Trump is a very imperfect vessel to deliver that it is a relevant discussion to have. And with China holding so much of global manufacturing and presenting such a risk to supply chains during the pandemic, it is a discussion that we have to have not just around reciprocity, but around the security of global supply chains.

BBC

Tony, I can imagine you must be in your 30s as well.

Tony Nash

I love you, Rahul. I’m 52.

BBC

52. Well.

Tony Nash

Yes, sir.

BBC

We are now going to talk about ageism in the workplace before we listen to a report by Ed Butler Ray, familiar voice presenter on these programs, often on business daily. Is it something that you’ve noticed? Is it something that you see discussed? Tony?

Tony Nash

Well, I’ve certainly noticed it more since I turned 50. I know that ageism is something that is talked about a lot in Asia as if it’s unique to Asia. It is absolutely not. It is something that is an issue in America. At 52 years old, it’s really hard to look for a job. My friends in their 50s, if they lose their job, they’re terrified. Nobody wants to hire anybody over 50, regardless of the salary, regardless of the position, unless it’s in a shop or something. Nobody in corporate America and nobody in mid sized companies wants to hire anybody over 50. They will never say that out loud, but it’s a very uncomfortable issue.

BBC

It is an uncomfortable. Tony, are you a Mac man or are you a Windows man?

Tony Nash

I have never had a Mac in my life. I’ve never used a Mac in my life. I’ve never had an iPhone. So I am the unicorn.

BBC

You are the unicorn. Bringing back to where we started on ageism, Tony, if we do have Biden against Trump, then it certainly isn’t ageism there, is it? You got two men who, let’s say, are in the more elderly phases of life.

Tony Nash

Yes, they are a couple of 80 year old geezers running for president. Right. I think it’s certainly the primary process has led us toward some elderly candidates, for sure.

BBC

Get reactions from both of you. Rebecca first, then Tony, if you want to pick up after Rebecca finishes. Rebecca, how would you feel if somebody said to you, you’ve got to be weighed before you get on a plane?

Rebecca Choong Wilkins

Well, I have to admit, I am one of those people that is always trying to squeeze on an extra few kilos over my luggage allowance. I’ve always got an extra hard back or three and sometimes try and get away with it by slipping into a pocket and all that kind of stuff. So the thought of sort of being weighed and even just this sort of really sort of high level of scrutiny, overweight in some ways is my nightmare at an airport. Not just over me, but my luggage and my hand luggage and my backpack. That is sort of my nightmare scenario.

BBC

Tony?

Tony Nash

Yeah. So I’ve gone through parts of my career in my thirty s and forty s where I was on a plane 84, 85% of the time. And for me, it’s less of a hand or a carry on weight issue than it is a personal space issue. So I’ve been on a few flights where the person next to me was so large that they actually took up part of my seat. So I’m a fairly fit guy, but I have really broad shoulders, and if I pay for a seat, I need my seat. Right. And so I do think that there is a bit of respect toward the other passengers. And I really didn’t think it was fair that I would fly trans Pacific flights, and it was extremely uncomfortable. So I’m all for Asia on doing this. It doesn’t really bother me at all.

BBC

Okay, we’ve got a lot to get through in the last few minutes. We want to talk about Netflix. Now, they paid $5 billion to stream WWE Raw, pro wrestling’s most popular weekly show. Also, great figures come out from Netflix added more than 13.1 million subscriptions in the three months ending in December. Tony, people were worried whether the streaming bubble had burst. Clearly not. And their crackdown on password sharing seems to be working.

Tony Nash

Yeah, I think what Netflix has done masterfully is understood that consumers are feeling the pinch. And so they had ad based models come in that lowered that monthly cost. They spread it across a family, and so they’re getting ad revenue and subscription revenue. It’s absolutely brilliant.

BBC

Question for both of you, Tony, first, how many streaming platforms do you subscribe to?

Tony Nash

Oh, my gosh, 1234. Probably 4.

BBC

You need to check because I don’t think you know, really, do you?

Tony Nash

Well, my daughter pays for one and my son pays for another one and I pay for.

BBC

You not supposed to do that.

Tony Nash

We don’t share, Rahul.

BBC

What about you, Rebecca? How many have you got?

Rebecca Choong Wilkins

So I am, in this scenario, the daughter that is the sponsor of all of my family platforms. Two. Two different ones.

BBC

Two different ones. There we go. We’re going to come back next time Tony’s on, we’re going to ask him. We’ve written down, it’s four. How many actually.

Rebecca Choong Wilkins

Isn’t a blessing to have these loving children in your life, Tony.

Tony Nash

Yes, it is. Absolutely. Yes, it is.

BBC

It certainly is, Tony. She is the last one standing against Donald Trump. But for how much longer and how much longer will the money keep flowing into her campaign, do you think?

Tony Nash

I don’t think very long. I have to tell you. You know, Rahul, I’ve mentioned before, my youngest son is Indian, so I would love to see an Indian president in the US, but I just don’t think that she can do it. It’s a question whether she can win in her own state of South Carolina. So as your guest earlier said, I just don’t know how much longer she has in the campaign.

BBC

Do you think South Carolina, because it’s a different demographic, isn’t it, in terms of, is it a demographic, at least within the republican party, that will play more for Trump?

Tony Nash

Absolutely. Yes. Yeah. And also because Haley was a part of his administration, it’s really hard for her know, go back to her own state and know I made a mistake being a part of his administration and he’s a bad, just, it’s just a very awkward discussion for her to have in her home state.

BBC

It is indeed. Thank you to both of you for joining. Rebecca, you can go and watch some of those two streaming channels you have, Tony, go and work out how many you have and enjoy the four, because you seem to be paying a lot of money for that. Is it for business matters? A lot more analysis of what has been going on in New Hampshire coming up on the newsroom after this program.

This podcast was first and originally published by Peter Lewis’ Money Talk. Find the Substack here:

https://peterlewismoneytalk.substack.com/p/peter-lewis-money-talk-thursday-4-be5

Topics discussed:

• The upcoming Taiwan election and its potential impact on Taiwan-China relations, with observations on the evolving stance of the Democratic Progressive Party (DPP).
• The potential weakening of democratic institutions globally, influenced by factors such as economic success, illiberalism, and the impact of the pandemic.
• The involvement and engagement of young people in politics are considered, with emphasis on their potential interest in national elections and the impact on their lives.
• The possibility of a Trump presidency, its potential implications, and the dynamics within the Republican party are also discussed, including the potential influence of the primaries.

✅ Create and forecast your own investment portfolios.
✅ 94.7% market forecast accuracy.
✅ 1,600+ assets forecasted every week.

Subscribe to CI Markets for free. Learn more.

Transcript

Peter Lewis

I’m joined now by Tony Nash, who is founder of Complete Intelligence over in Texas in the USA. Very good morning, Tony. Happy New year to you.

Tony Nash

Hi, Peter. Happy New year.

Peter Lewis

Thank you. Looking forward to 2024. Lots of things to talk about, but I think one of the things that’s going to be interesting is elections this year is going to be dominated by elections in a way in which we haven’t seen before. Eight of the ten most populous countries in the world are going to hold elections. More than 70 countries, about 2 billion people, half the adult population of the globe, is going to have the chance to vote in 2024. It’s a record for one year. This is going to be pretty important, isn’t it? And we got some pretty significant ones, maybe starting with one in just a few days time in Taiwan.

Tony Nash

Right. Yeah, it’s a really interesting year. And the Taiwan election is also very interesting with the DPPKMT and some other things happening there. I think it’ll be interesting to see if there’s a clear winner and who it is. It’s also interesting to see the mainland’s discussion around the Taiwan election, too, which they do this every election. Right. So here in the US, there’s a lot made about the mainland discussion around Taiwan, but this is something that we see every election cycle.

Peter Lewis

It seems to be, though, the rhetoric seems to be ratcheting up this time, doesn’t it? Because this is going to be now, if the DPP wins, the Democratic Progressive Party, it’s going to be their third victory in a row, really broke the stranglehold that the KMT used to have on elections in Taiwan. So it feels like this one in particular is going to be very significant and is going to have some implications for markets as well, as. Well, of course, as relations between Taiwan and China. Mainland China.

Tony Nash

Yeah, it could be significant. I don’t necessarily get the sense that the DPP is as kind of polar opposite of, say, KMT nationalism as they have been in the past. I think the DPP’s moderated just a little bit. Of course, they don’t want unification, but they’ve moderated just a little bit. I think they’ve come a little bit more to the center. And so I think that’s why they’re appealing, and that’s why it’s possible that they have a third term. I think it makes the mainland a little bit uncomfortable. But again, I think this is not something that is completely unique, although it’s ratcheting up. The other thing to remember, and I know your listeners in Asia will know this. But Taiwan has really only had direct elections since the 1990s. And so we hear a lot about kind of the democracy in Taiwan versus the mainland, but there really hasn’t been direct elections for more than 30 years. So it’s really interesting to see how Taiwan has really gravitated to that and how they do elections incredibly well.

Peter Lewis

I mean, these are proper democratic elections, aren’t they? Unlike maybe in some of the countries that are going to hold elections this year where it’s either already a foregone conclusion or do you get the feeling, though, that maybe there is a bit of a recession going on in democracies around the world, that maybe there’s this spreading sort of illiberalism and a weakening of democracy around the world?

Tony Nash

Well, I think a couple of factors have played into that. I think the economic success that we’ve seen in the mainland over the last 30 years has really contributed to, say, I would say maybe an academic and maybe media and other, say, political institutional view that maybe a less liberal approach. And we could even look at Singapore, where people look at a potentially less liberal approach as one that maybe gets more economic success. At least that’s some of the perception. I don’t necessarily think that democracy is weakening, but I do think that those ideas. Does less liberal governance allow more, say, success or economic success or I think a central government strategy? People complain a lot here in the US about the US not having a strategy. I think illiberalism lends itself to having a central strategy. I think one of the other contributing factors is the pandemic, quite frankly. I mean, I think a lot of social liberties were taken away from people for a period of time. And I think it’s driven a lot of maybe thought and or paranoia about growing illiberalism.

Peter Lewis

I mean, I’m thinking maybe one example this year is going to be India, obviously, elections coming up in India as well. That seems to be one country where there does seem to be a weakening of sort of democratic institutions despite the fact that this is still the biggest democracy in the world.

Tony Nash

Yeah, it is a big democracy. The BJP is very, very popular. And it’ll be very interesting to see what happens in India because we do have a very vocal media in India. We have a very vocal population. And so I think as there are or if there are issues around the elections, I think we’ll hear about them. And I don’t think people will be quiet about it.

Peter Lewis

And then, of course, we have some other key elections going on around the world as well. I mean, one of the things that I’m wondering is about young people. I mean, they’re a key voting group in many of these elections, probably in all of these elections that are going on, do you get the feeling that maybe young people are becoming more disengaged? They just don’t feel that democracy is working for them, that elections are making any big difference for them, which is why we’re seeing maybe some of these sort of radical leaders win, populist leaders win in places such as Argentina.

Tony Nash

Well, I don’t know. So here in the US, we have the boomers, Gen X, millennials, and then Gen Z. I have three kids that are Gen Z, and I find them, the discussions that they have about politics are pretty informed. I wouldn’t say very informed, but pretty informed. Their friends who talk about politics, they’re pretty informed. Again, they’re getting a lot from social media, but I think they do have the opportunity to dig into issues. And so I think there’s always an observation from older generations that kind of younger people don’t care as much about politics, but the fact is they’re not paying as much in taxes. They may or may not own property. They may or may not have kids attending a school. So they just may not be as interested in particularly some of those local issues. Right. But I wouldn’t necessarily say that we’re seeing, I would say more extreme candidates because of, say, the Gen Z population. I think it’s a balance of, say, here in the US, it’s a balance of baby boomers. And when we look at the disposable income that people can put toward campaigns here in the US, it’s really overwhelmingly the baby boomers who lend to campaigns that then become extreme.

Tony Nash

So I don’t know what it looks like in other countries, but I know that the level of disposable income and the giving to campaigns here in the US is largely done by baby boomers.

Peter Lewis

And when your kids discuss elections, do they feel that the outcome is likely to make any difference to them personally, to their livelihoods, to their chances of getting a better job or a higher paying job?

Tony Nash

I think potentially, yes, I think they do. One of the things here in the US, obviously, we have local elections and then we have state elections, and then we have national elections. The national elections are what gets most of the attention. But the things that have the most, the races that have the most to do with them getting jobs really are the local and state elections. Is a state more appealing economically? Is there a regulation locally? These sorts of things, but they’re paying more attention to the national elections, of course, because that’s what’s in media. But I think they find the local elections pretty boring, quite frankly. And so they are paying attention to the national elections. And I think they do see that as an opportunity for them. Again, they’re not incredibly well informed, but I think they do see the national elections in terms of social policy and economic policy as something that will impact their lives.

Peter Lewis

And, of course, we’ve got to mention the US election coming up in November. Do we have any sense of what a potential Trump presidency is going to look like?

Tony Nash

That’s a big assumption, Peter. I don’t know. I think there is more of a competition on the republican side than we’re led to believe. I don’t know. It’s probably going to be Trump, but I think it’s possible that there is a different candidate. I don’t know exactly who would be, but I think there’s more of a competition on the republican side than some of the polls today are showing because what we’re seeing are a lot of national polls, and we don’t necessarily vote nationally in the US. We vote at a state level, which awards representatives who vote proportionally to the number of representatives that we have in the. So I think it’ll be more of a contest than we’re led to believe. Now, if Trump is know, I’m not really sure because the last time around, he was not a great administrator. He definitely speaks from the bully pulpit, but he’s not a great administrator. And I think many people who are, say, middle aged or younger in the US look at the current president Biden, and they look at Trump as a potential candidate, and they’re both 80 years old, give or take. And I think the concern from a lot of voters is they want a president who has to live with the consequences of their own policies.

Tony Nash

So I think Americans are looking at these older candidates who are at the extreme end of electable and saying, look, these guys, I’m not really sure that they should govern because they’re really too old to live with the consequences of their policies. So that’s why I think we may see more of a contest on the republican side than we’re being led to believe right now.

Peter Lewis

Mean, on the Republicans. I mean, there are candidates, aren’t there, who are quite considerably younger than Trump who could present an alternative? I’m thinking of people like Nikki Haley, Ron DeSantis. They’re all sort of candidates who would have to live with the consequences of their decisions.

Tony Nash

That’s right. And so until we start seeing some of the primaries come in with Iowa, New Hampshire, and some of these early primaries, I don’t know that we’ll necessarily understand what people on the ground are thinking. And let’s say, for example, Trump doesn’t win Iowa. Well, we’ll hear, well, Iowa is not really important. And then if he doesn’t win New Hampshire, we’ll hear him say that, well, New Hampshire is not really important, these sorts of things. But I do believe that as we start to see some of these early primaries come in, other Americans will get a view of what those early voters are thinking, because these candidates have spent a lot of time on the ground in Iowa, in New Hampshire and other places. And so they’re really reflective or starting to reflect what some of these people on the ground are hearing and seeing.

Peter Lewis

And if Trump were to win, I mean, the way he’s talking at the moment, it sounds like his presidency is going to be quite a vindictive one. It’s going to be about taking revenge on all the people he feels have slighted him over the last sort of four years or so.

Tony Nash

Yeah, I think it’s really interesting to see the mood in 2016 was very different from what it is now. And the mood in 2016 was that people just wanted to see some sort of change. They felt like their voice wasn’t heard. At least this is on the republican side. Right? They really wanted to see change. I think Trump today is an angrier candidate and a more vindictive candidate than he was in 2016. In 2016, he came across as frustrated but constructive. He now comes across as vindictive and angry. And I don’t know how many people that’s going to appeal to. I know there are a lot of frustrated voters, but I’m not really sure that having that angry of a message can really attract the voters that he needs.

Peter Lewis

And he’s also coming across as being fairly illiberal as well. He’s going to tear down some democratic institutions that have been around for a long time and doesn’t seem to respect some of those institutions.

Tony Nash

Well, we’ll see. I mean, does he have the power to do see a lot? We’ve seen a lot of, say, directive government from the executive office. We saw it under Obama, we saw it under Trump. We see it under Biden, where these things are then taken to the federal courts and they’re struck down. So can he actually disassemble some of those institutions? I think it would be really hard.

Peter Lewis

Well, look, Tony, it’s going to be a fascinating year. Look forward to talking to you more about some of these issues as the year develops. As we said, Taiwan’s elections coming up in just a few days time. So thank you very much for your contribution this morning. Have a happy new year. Look forward to speaking to you.

Tony Nash

Thank you, Peter. Happy New Year.

Peter Lewis

That’s Tony Nash, who is the founder of Complete Intelligence.

This podcast is originally published by BBC Business Matters in this link with title “Japan earthquake: What impact will it have on the economy?”: https://www.bbc.co.uk/programmes/p0h2h5h6.

BBC’s Description:

Japan is hit by another earthquake. We hear about the impact it could have on the economy.

We examine microfinance and how it works in practice after a Bangladeshi pioneer of this type of finance is sentenced for violating labour laws.

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Transcript

BBC

I’ve been speaking to Tony Nash. He’s founder of the AI firm Complete Intelligence and formerly a nonexecutive director with Credit Microfinance bank in Cambodia. I asked him first to explain how microfinance works.

Tony Nash

I’ve been working with microfinance in both Sri Lanka and in Cambodia for almost 20 years. And so what we do is we take what’s called concessional safe financial rates from big lenders, whether they’re nonprofits or major international banks, and they lend to the microfinance banks. Most of these microfinance banks are regulated by central banks. So in the past, they were pretty much charities that would lend out at very low rates. They’re now regulated by central banks. So they don’t have a lot of control over a lot of the rates that they lend at. They’re highly, highly regulated by central banks. So what those companies do is they take the, I guess, lower rates. They assume a lot of risk when giving out these small loans, because these are typically people who are, say, pepper farmers, or they’re people who are making small goods or something like that, and collecting the, say, payments on those funds. Actually, in terms of the cost of loan, it’s very high. You have to send somebody out to their house, or you have to maintain that loan.

BBC

And Tony, is it actually effective in alleviating poverty, which was Muhammad Yunus’s whole pitch at the beginning. He founded Grameen bank, of course, very involved in putting this together. But has it been effective in bringing people out of poverty?

Tony Nash

It is, absolutely. So when Muhammad Yunus started Grameen, the model they were working on was one of collective responsibilities. So he would lend to syndicates of people, say ten or 20 different people who own businesses, and they were accountable for each other to pay back their loans. That can get pretty difficult in some places when someone doesn’t pay back their loan. Over the last 20 years, that model hasn’t been used for probably 15 years at least. You really have individual loans, and those are largely for people who are starting businesses or other things.

BBC

And what about the impact on the people who the money is lent to, who sometimes can’t pay back? Because this has been one of the criticisms that you push people already in trouble into worse trouble.

Tony Nash

Well, so when I was at the bank, we would watch the debt ratios and the non payment ratios very very closely, and they were typically 1% or less, often less than 1%. So microfinance banks have to watch their ratios every month. They have to report them to the central bank every month. So when we hear about microfinance banks that are acting in a way that isn’t appropriate, where they’re leveraging people too much. They may be in a place where microfinance banks are unregulated, where they’re not regulated by the central bank.

BBC

Tony Nash, there.

This podcast is originally produced and published by BFM 89.9 and can be found at https://www.bfm.my/podcast/morning-run/market-watch/us-fed-tech-nasdaq-cop28-energy-red-sea-2024.

With CI Markets Free, our goal is to democratize financial insights. We believe that everyone should have access to powerful forecasting tools, enabling them to make informed decisions that align with their financial goals.

In this BFM podcast episode, the hosts interview Tony Nash, CEO of Complete Intelligence, who explains the sudden downturn in US markets and predicts a slowing rate of rise for the Nasdaq in 2024. Nash also discusses the potential outperformance of finance and banking sectors over cyclicals and forecasts a lackluster year for 2024.

Additionally, the segment covers developments from the UN Climate Change Conference, COP28, and its long-term impact on energy markets. Tony highlights the challenges faced by middle-income and emerging markets in transitioning to green technologies amidst fiscal constraints and higher interest rates. The discussion also touches on the disruptions in the Red Sea region’s supply chain and their potential economic impacts, as well as the positive revenue forecast and strong performance of Micron, a leading US memory chip maker.

Transcript:

 

BFM

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. Thanks for joining us. Very quickly, can maybe you help us understand why US markets are down quite significantly this morning? I thought it was a Christmas rally all the way up to the end of the year. What explains the markets being in the red?

Tony Nash

The old Santa rally? Well, markets were doing great until about 1:30 Eastern time, and then they just fell off a cliff and we closed in the red. Even things like Nasdaq, up until about 1:30 PM, Nasdaq had been up six % for the month, so it was doing extremely well. Then things turned and I think there may be some whispers of an event coming or there’s fear that the Fed isn’t going to be as doveish as was said. I think possibly going into the break, people are really thinking about how much risk they want to have on over the holiday.

BFM

But what does that mean for, I guess, the end of the year performance? Especially if we look at the Nasdaq 100, it is up a whopping 41 % for the year. Are we going to see a repeat of this outperformance next year? Or do you think we’re at the zenith of the euphoria?

Tony Nash

Are we at the zenith? I don’t know. Certainly, the rate of rise will slow. I seriously doubt we’re going to see things fall off dramatically in, say, January. But just to give you an example, we forecast markets, as you know, and currencies and stuff. We had forecast a 5.65% rise in Nasdaq for December. Up until 1:30 today, it had risen 6%. We’re pretty good at forecasting that. Our average expectation for Nasdaq in 2024 is 14,746, which is a fall from now. I would expect we’ll start out Q1 fairly okay, but through the year, the appeal of Nasdaq is going to decline. As people accept that hire for longer is here to stay, which doesn’t mean rates are going to continue to rise, but they’re not going to fall for six cuts or whatever, 10 cuts that some people are saying.

BFM

Tony, it wasn’t solely growth stocks, which captured the limelight. Now, cyclical names like Carnival Cruisers and GE saw their share prices surge 117 and 86% respectively in 2023. Now, are investors likely to see more symmetric returns coming from growth and defensive companies next year?

Tony Nash

It’s unlikely, sadly. We saw companies expand margins with cost inflation as an excuse to justify price rises as incomes grew and government cash handouts accumulated. But we really saw that stuff stop in 2023, second quarter, third quarter with inflation abating. Now, inflation abating doesn’t mean prices falling. It just means that the rate of price rises is slowing. Pay rises are unlikely to continue and consumers will likely have to tighten their belts. As that happens, cyclicals will settle. Things like travel and tourism, things like GE will have to settle a bit. The returns really depend on your risk appetite. So where to look? I would say look at things like finance and banking, some natural resources like miners. I wouldn’t necessarily go directly in commodity prices, but I would look at some of those guys who process natural resources, those sorts of things.

BFM

Tony, overall, what’s your investment outlook and advice for 2024 when it comes to asset allocation then? Because bonds were very volatile this year. Is it going to continue next year? Equity surprisingly did much better despite the talk of a recession that has yet to materialize. What’s your recommendation?

Tony Nash

Yeah, I think if you look at the tenure, for example, I think it’s hard to see the tenure much higher than, say, 4% over the next few months at least. Sentiment is really doveish or has been really doveish. The words out of the Fed, they haven’t completely walked back Powell’s very doveish briefing last week. People still believe that the economy has a way to run and that rates will come down dramatically. I actually think the ’24 is probably going to be a pretty lackluster year. I think after the excitement of the last few years, I think we could all do for a little less excitement for a period of time. But the Fed has really been trying to crush volatility and cap yields. They’re trying to take the risk out of the market, but not have the market get out of control.

BFM

Can we take a look at some of the year and themes that have been circulating around? And this really comes from the UN Climate Change Conference that took place in December COP28. It did stop short of calling for a phase out of fossil fuels, opting instead for a transition away from them and specifically in energy systems. How are markets responding to this development? And what do you think are the implications of investors in the energy sector? Is this more likely to be a long-term development rather than a short term one?

Tony Nash

Absolutely a long-term development. COP28 paved the way for a much longer path to fully green feedstocks. They even talked about coal and released some of the pressure on coal power generation. Part of the problem here is higher interest rates. Higher interest rates are making these very costly green projects much more expensive. The government bureaucrats who are really pushing this stuff have to find a way to temper expectations for that green spending without completely surrendering to the fiscal constraints. A lot of these, say, middle income and emerging markets that are pushing green projects or having been pushed on them, this is where budgets are super tight. Look at a country like Sri Lanka where they have an IMF support. There’s push for green technologies, but they just can’t afford to do it. A lot of countries are looking at balancing that out and trying to figure out how they continue to move toward a greener future, but balancing out the fiscal reality of higher interest rates and budget constraints.

BFM

Now, we’ve been reading news about disruptions in their supply chain, especially in the Red Sea region. Now, geopolitical tensions have caused shipping companies to divert over $30 billion worth of cargo away from the Red Sea? What are the potential economic impacts, especially on the price of oil from disruptions on global supply chains?

Tony Nash

Yeah, it really depends on the horizon and how long this is going to last. I would expect this to be a relatively short-term event. If it is a relatively short-term event, then it’s pretty inconvenient. It’s pretty inconvenient, but it’s not really all that costly because we have shipping rates that are pretty low, we have fuel rates that are pretty low. The impact, aside from delays, and in the West, we’re at the end of the holiday season or we’re mid holiday season, but things shipping have already shipped in terms of finished goods. So the impact on consumers isn’t going to be felt like this is… If they’re going to do this, this is probably a really good time of year to do it because everything’s in shops.

BFM

Tony, thanks so much for speaking to us. And Merry Christmas to you. We look forward to catching up in the new year. 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, commenting there on the shipping disruptions in the Red Sea, as well as what the impact might be on oil prices also coming up out of COP28 and just the developments that could happen in the energy landscape.

BFM

I wonder whether 2024 is going to be the year of the Magnificent Seven, right? It was so much talked about in 2023, these seven stocks that literally lifted up the Nasdaq and, of course, the S&P 500, of course, the seven A, Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla.

BFM

I feel like it’s getting longer and longer. It used to be the fang stocks, and then it was like FAG, and then now it’s the Magnificent Seven.

BFM

Yeah, it went from 1A to double As, right? And now it’s a whole new acronym. So I don’t know, are they going to add a new Magnificent 8, 9, 10, or is it just going to be down to maybe that magnificent three, because some haven’t done so well. For example, Tesla is the one that actually hasn’t performed at all. That surprised me. But talking about, I think overnight, there was a big US talk that came out with the results, the biggest chip maker there, which is actually Micron, and they did better than expected.

BFM

That’s right. Micron issued a strong revenue forecast for the current period and reporting for the first quarter results topped Wall Street estimates. This really sent the shares of Micron surging about four % in extended trading. This is as data center demand is making up for a slowly recovering PC and smartphone market.

BFM

In the fiscal first quarter that ended on 13th of November, Micron saw a 16 % year-on-year rise in its revenue to $4.7 billion. Loss per share came in 95 cents, which was better than what analysts’ estimates are. And now the largest US maker on memory chips expects fiscal second quarter revenue to be between $5.1 to $5.5 billion, versus an average estimate of $4.99 billion.

BFM

Okay, so this pales in comparison with NVIDIA, which also does chips, but of course, NVIDIA is all about artificial intelligence. It’s the number one proxy if you want to write that theme. But Micron, on a year to date basis, still up 54 %. Now, does the street like this? Because it hasn’t been doing so well in the past in terms of the results. Are we at the trough? And the indications are yes. So unsurprisingly, there are 30 buys, seven holds, two sales. Consensus target price for Micron is $85.25. During after-market hours, actually, the stock did trade up eight %, so indicating that I think investors are going to be more optimistic just based on the guidance that the company is giving.

BFM

All right, it is 7:17 AM. Let’s head into some messages, but we’ll come back to cover the top stories in the newspapers and portals this morning. Stay tuned, BFM 89.9.

 

This podcast is originally produced and published by BFM 89.9 and can be found at https://www.bfm.my/podcast/morning-run/market-watch/oil-six-month-low-apple-credit-fed-opec.

With CI Markets Free, our goal is to democratize financial insights. We believe that everyone should have access to powerful forecasting tools, enabling them to make informed decisions that align with their financial goals.

In this BFM podcast episode, the hosts interviewed Tony Nash, CEO of Complete Intelligence, who shared insights on the impact of OPEC+’ accrued oil cuts, the US job market, and the Fed’s interest rate policies. Nash also discussed the potential impact of elevated interest rates on corporates and consumer spending financed by credit cards.

Furthermore, Nash highlighted concerns about smaller companies facing debt distress due to high-interest rates on new debt, as well as the rise in credit card balances, which could lead to weaker future consumption.

Transcript:

BFM

BFM 89.9 is 7:07. It’s Thursday, the seventh of December. And of course, you’re listening to the morning run with Keith Kam, Anwar Mahbob, and I’m Wong Shou Ning. Now, in about 30 minutes, we’ll discuss she and its threat to Southeast Asia’s e-commerce platforms with Nathan Naidu or Bloomberg Intelligence. But in the meantime, let’s recap how global markets closed yesterday.

BFM

Well, the Dow closed down to 0.2%. S&p 500 was down 0.4 %, while the Nasdaq was down 0.6 %. On the Asian side, Nikkei was up two %, Hang Seng was up 0.8 %, the Shanghai Composite, unfortunately, was down 0.1 %, STI was up 0.3 %, and our very own FBMKLCI was down 0.3 %.

BFM

Okay, so somewhat of a mixed day for markets, but for more insights into where international markets are heading, we speak to Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Can we start off with all, please? Because the prices have fallen to a two-year low? Please help us understand why, especially since OPEC Plus has committed to supply cuts to at least March.

Tony Nash

Yeah, accrued prices were down almost four % today, I think. So additional OPEC Plus accrued cuts, they’re not major new supply holdbacks. So doing small incremental cuts through that OPEC is saying that they really don’t want to do too much to unsettle prices. I think generally there’s a view that the market is in balance. I think there are a lot of worries in OPEC countries with the economy in China and the economy in Europe. I think the US is doing okay. I mean, it could be great or it could not be great. We saw with some of the job stuff today, but they’re mostly worried about consumption in, say, East Asia and Europe.

BFM

Us job openings pulled back in October to the lowest level since early 2021, underscoring a gradual cooling in the labor market. Now, these figures support expectations that the Fed will leave interest rates unchanged at next week’s policy meeting?

Tony Nash

It’s likely that the Fed will keep things unchanged. If we look at job growth, it’s really just dropping to long-term trend levels. If we look at this on a longer-term basis, the total jobs in the US is now really just at the level it was if we extrapolated the normal Jan 2020 jobs until today, we’re back at that line. We’re likely to see the new openings and other things slow down. The other thing to keep in mind is we’ve seen downward revisions of previous job openings data, which implies to me that job openings will likely be weaker in the near term. What does that do for us? Well, the wages and the employment mandate that the Fed has, that’s coming into line. They’re slowing down that job growth. We’ve seen inflation slow. And so are we right on target with the Fed? No, which is why they’re keeping rates higher. But I don’t think markets and data are telling the Fed that they need to tighten now. So December is likely on hold.

BFM

Going back to the job data, tomorrow your time, you’re going to get non-farm payroll data. Is that going to be vastly different from the job data we talked about just a second ago?

Tony Nash

I don’t think it’ll be vastly different from the JOLTS data. It may be different from the ADP data that came out today. There’s usually a difference between the NFP data, which is from the US government, and the ADP data that is calculated from a private sector company. The ADP data showed payrolls, I think, 20,000 below expectations. Again, it’s just confirming that the jobs market is slowing. Now, it’s slowing from an incredibly hot market. This doesn’t mean we’re going into some desperate state. It just means that things are slowing from an incredibly hot market.

BFM

But doesn’t this then mean that the Fed has achieved one of its mandates? In the sense that the job market has to be robust, right? They need to actually ensure that their unemployment isn’t too high because we talk about inflation a lot, but we don’t talk about the other mandate that the Fed has, which is employment.

Tony Nash

Yeah. I mean, the real issue with employment is the super core inflation. Super core inflation is where those two overlap. Super core inflation is really service wages. It’s those services wages that have been pushing up. They’ve been persistent within the employment numbers. And so that’s where you see the overlap of the jobs data and the inflation data. And that’s really why the Fed is focused so much on super core, because what they wanted to do is slow down those services, jobs, wages that have been rising so quickly. So are they doing their job in both counts? Yeah, I think they are. And I think it’s really easy to knock on the Fed and criticize the Fed and say that they’re not doing the right policies. But I actually think that they’re doing an okay job.

BFM

Tony, we always look at the effect of elevated interest rates on consumers. What has the impact been for corporates with significant debt levels? Are they in any danger of falling into debt distress at these current levels now?

Tony Nash

I don’t really see companies, larger companies fall into debt distress. So if we look at net interest paid as a % of profits, we’re at, I don’t know if we’re at historically low levels, but we’re lower than we’ve been at any time since 1970 when this data started being held. So net interest as a % of profits is around three %, maybe a little bit lower. And the Fed Fund’s rate or Fed Fund’s target is 5.25. So we’re well below the Fed Fund’s target. Net interest paid as a % of profits is usually notably higher, at least a couple, if not a few % higher than the Fed’s target. So large companies are in pretty good shape. They can get better interest rates on savings than their net interest payment. So it’s all good for big companies. The concern that I have is with smaller companies because smaller companies are saying that as they try to take on new debt, they’re seeing double-digit interest rates. So it’s really expensive given the higher interest rates. It’s relatively more expensive for smaller companies to take out new debt at a time that they’re losing pricing power. So inflation is ramping down.

Tony Nash

So smaller companies are losing the opportunity to capture more margin. And so the risk is with those smaller companies. So I wouldn’t be surprised to see some stress within smaller companies.

BFM

Tony, in the period of this year and gift giving and shopping season. There’s a report on CNBC that says consumer spending is being financed by credit cards, where interest is now over the top and possibly out of control. Some are expecting 2024 as well to be not as rosy with possible retrenchments may be happening. How worried should we be?

Tony Nash

I think we should be worried. I think the credit card balances are up 40 % from 2020 or something like that. And if you think about credit as just borrowing from the future, right? I mean, you’re consuming today what you would consume after you saved up that money. And so if people are accruing balances on credit cards, then that’s future consumption. And so if people are financing their holiday spending or other things through credit cards, then it just tells me that we’ll likely see weaker consumption in the future, and maybe that’s two quarters out, but it is in the future and it comes at a cost. So I think it is something to worry about. A lot of people love to talk about how Americans have cash on the sidelines or bank accounts are full or something like that. But if that was true, we wouldn’t see credit card balances rise by 40 %. So I think it’s easy to look at, say, the wealthiest of people saying they’ve accrued savings in a big way, but most Americans are not fortunate enough to be in that position.

BFM

All right. Thank you very much for your time. That was Tony Nash, CEO of Complete Intelligence.

BFM

I think it’s a very timely-.

BFM

Giving a bit of a warning bell.

BFM

No, it’s a timely reminder because a lot of us don’t realize that when you spend with your credit card, it comes back to bite you back in the future.

BFM

If you don’t pay off your balance in full, right? Exactly. You’re using your credit cards. In-

BFM

The interest builds up.

BFM

Yes, it’s 18 % here in Malaysia. I’m not sure what the figure is like in the United States. Basically, you’re using debt to fund your lifestyle.

BFM

And he did emphasize that credit card balances were up 40 %, but a lot of people are going to buy now, pay later. So eventually, it will come and bite you. Yeah.

BFM

So there are many schemes available even here in Malaysia. Buy Now, Pay Later is one, using your credit card is another, using personal loans. So when you look at your total debt servicing number, you have to figure all this in. All this is included, right? It’s not necessary just your housing loan or your car loan, for example. But let’s turn our attention to AI and the world of it in the sense that all these companies are trying to compete for a slice of it. And AMD, which is Advanced Micro Devices, has also joined the bandwagon. They are unveiled their new accelerator chips lineup, the MI300. They are able to run artificial intelligence software faster than rival products. Just go figure, okay? Because these chips contain more than 150 billion transistors, and they are 2.4 times more memory than the Windows H100, the current market leader. So of course, clearly, they’re here to compete with them. No pricing has been revealed, though. This was all done yesterday, last night in US, and I was listening to the on-site radio interview that Bloomberg had with AMD’s CEO. They’re, of course, clearly excited about this.

BFM

Now this will compete with NVIDIA’s in the budgeting market for AI, and other data center operators. But no pricing again was revealed at this event, surging demand for NVIDIA chips by data center operators. Well, that helped drive NVIDIA shares this year, sending the company’s market value way past $1.1 trillion.

BFM

And at that same AMD event, Meta, OpenAI, and Microsoft, they also said that they will use AMD’s newest AI chip, the Instinct MI300X. So this point is to assign that tech companies are searching for alternatives to the more expensive NVIDIA graphics processes. Meta and Microsoft were the two largest purchases of NVIDIA chips this year. Meta said it will use that same chip for AI inference workloads.

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Okay, as the stock is up 80 % on a year to date basis, trading only at 44 times PE. Cheap when you think NVIDIA is trading at much larger multiples. Street Loves It, 39 buys, 15 holds, just one sell. Of course, I think NVIDIA doesn’t even have a single hold. Everybody’s a buy. Consensus target price is $131.88. Regular market hours, however, and the AMD was down $1.56 to $116.82. That’s all the corporate news. Up next, of course, we’ll be looking at the top stories in the newspapers and portals this morning. Stay tuned for that BFM 89.9.