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The spread between the 2-year and 10-year US treasuries has widened with markets saying that a Powell recession is here. We speak to Tony Nash, CEO of Complete Intelligence as to whether he agrees. We also ask him if the recent aggressive job cuts by the tech and now finance sector will be part of the Federal Reserve’s decision-making process at the next FOMC meeting.

Transcript

BFM

This is a podcast from BFM 89.9. The Business Station. The World Market Watch is brought to you by CMB Preferred.

BFM

BFM 89.9. 7:06 Thursday, eight of December. And of course, you’re listening to the Morning Run with Chong Tjen San and I’m Wong Shou Ning. But in the meantime, let’s recap how global markets closed yesterday.

For US markets, the Dow closed flat, the S&P 500 was down by 0.2%. It’s the fifth consecutive day of declines and the Nasdaq was down 0.5%. In Asian markets, they were all in the rip. Nikkei was down 0.7%, Hang Seng was down 3.2%, the Shanghai Composit was down 0.4%, the Straits Times Index was down 0.8% and the FBM KLCI was down 0.3%.

So joining us on the line to tell us where markets are heading, we have Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Always good to speak to you. I want to start with Treasuries for a change, and the two-year and ten-year treasury rate spread is currently very wide. Is the bond market already telling us that a Powell recession is here?

Tony

Well, yeah, I think that’s part of it. I think that’s contributed to a lot of the discussion around the kind of perceived inevitability of a recession in 2023. And what we’ve been saying for months is we’re already there. We already saw negative GDP numbers in the US in the first two quarters of this year. The holdout is jobs. And now that we’re starting to see, some say, turnover in the jobs front, meaning it’s still strong, but it’s not as strong as it was two months ago, there is a feeling that we’re definitely headed in that direction.

BFM

And Tony, I like to tap your expertise on all market. The market is quite divided as to what the G7 price cap and the EU ban on Russian seabourn all will do to oil prices and crude supplies in the coming months. Can you give us some insights?

Tony

Yeah. So what’s happening actually today, Xi Jinping landed in Saudi Arabia for a meeting with GCC leads and Saudi Arabian government. So what’s happening in the oil market is the OPEC countries are being very open about the fact that China is the main price setter for global oil markets. And that really is kicking off with that meeting in the Middle East today. That’s been known for some time, but it hasn’t been as explicit and overt as it is today. We’re seeing more supply with things like Venezuelan crude coming on for the US. But we’re also seeing the price cap for Russia and which we know, pretty much know won’t work. Europeans will find a way to circumvent it, Russians will find a way to get crude on the market. And so that’s why we’re seeing weakness in crude prices.

BFM

But at the same time, Tony, we are seeing more positive news coming out of China. They are easing a range of COVID restrictions, including allowing people to quarantine at home rather than in centralized camps, suggesting that the economy is slowly easing out of the Zero COVID policy. Shouldn’t that be a reason for all prices to go up then?

Tony

Well, I think it will. And if you look at futures I looked a few days ago and a few months out, there’s definitely expectations for higher oil prices. But right now, if we’re looking at spot markets, there really isn’t that much expectation of things moving. So when you look beyond February, for example, there is an expectation that China opens. And yes, that is very positive for crude prices and that is one of the most important economic events in the world. We’re waiting for it, we all need it, whether you’re in Asia or the US or Europe. China opening is good for everybody, but it will be positive commodity prices and it will push those prices up.

BFM

Okay. How else can we position for this eventual reopening in terms of our portfolio? What should we be looking at?

Tony

Well, if we look at things like industrial metals, like copper, we’ve seen some really interesting action copper over the past few days on expectations of China opening up. Over the past, say, probably three or four days, we’ve seen some interesting action in Chinese tech and there’s expectation that Chinese tech and consumer goods will be very positive in the coming months. So we’re seeing that in equity prices right now. So those are some areas that I would look at and be paying attention to because they’ve already proven to have some positive traction. But that will likely improve as China’s opening accelerates.

BFM

And Tony still sticking to the topic of oil and energy commodities, the UK instituted a windfall tax on oil and gas recently. Why have they decided to go down that route? And what effect will that have on energy companies with major investments there?

Tony

Yeah, this came right after the COP meeting and it was a very populist move by the UK government, very populous move by the UK government. It didn’t make any sense commercially and it doesn’t make any sense in terms of energy strategy. We’ve already seen companies like Total and Shell pull back on announced investments that they plan to make in the UK and it’s already making energy prices higher in the UK. So I think the UK government’s calculation there was, we’re going to make a populist move and get some voters behind us, but it was really a really stupid move and they’re going to have to do an about face on that within a few months.

BFM

Okay, let’s talk about job cuts or the possibility of it. Yesterday we saw a raft of top US bankers warning of layoffs and freezing when it comes to hiring. What does this then mean for the US labor market?

Tony

We already saw this start in tech a couple of months ago and it’s just kind of cascading out to other industries. Right. And so first they announced job freezes. Then they announced job cuts, usually, right? And it’s in things like in banks, it starts in mortgages because house buying has slowed. And it’ll go into other areas, of course. And we’ve seen this in media, too, with BuzzFeed, and there are issues at other media companies because they’re having to compete in those CPM rates, meaning those advertising rates are declining because places like Facebook and Netflix and other places are getting more competitive on advertising. So it just means that companies have to get more productive.

So whether they’re tech companies or banks or media firms, companies are having to get more productive. What we saw through COVID generally, was margin expansion for companies. A lot of companies profits through, say, mid 2020 continued to expand because companies didn’t have to pay for certain things, but they could charge higher prices because people were working from home. They didn’t have to pay for certain things, but yet they could charge higher prices. What we’re seeing now is with wages rising as fast as they are and staying there, companies are having to pay more all around.

And the markets like mortgages or advertising or tech or whatever, they’re not where they were a year ago. So they’re having to cut heads. And you look at Facebook cutting like 13, 14% of their workforce. Look at what these other guys are doing. They’re realizing they’re way overstaffed given where we’re going in 2023.

BFM

Okay, so how does this then inform the Fed decision when they meet this month for the FOMC meeting? Because employment is another indicator that they watch is part of their twin mandate, isn’t it?

Tony

It is. It’s one of their mandates. So there are a couple of things that I’m watching. So first, last week we saw the jolts. This is the job openings, okay? And with jolts, we saw that really turn over, meaning the job openings has declined. Now, it’s still strong, but it’s really turned over in terms of we’re not the highest anymore. That was probably two months ago. So we’re starting to see a decline in the number of job openings and the rate of growth of job openings. And when you look at the employment data that came out, the strength in jobs is really in, say, lower level services and health care. Okay? So it’s not necessarily in the higher level, higher earning jobs as it was, say, a year ago. So we’re seeing I’m sorry to put it this way, but kind of lower quality jobs come through, and that’s when we can tell that it’s weakening. Those are the last to be strong before going into recession. They’re the first to be strong as you’re coming out of it. So what is the Fed looking at? Well, Powell talked about the lag effects of monetary policy at his Brookings speech last week.

And so I think the Fed is being really sensitive to the lag effects of their policy, and they’re likely going to still go with 50 basis points this month and next month.

BFM

All right, thank you very much. That was Tony Nash, CEO of Complete Intelligence, telling us at least forecasting what the Fed is going to do at the next FOMC meeting.

But very quickly, I want to talk about one stock that was really a bit of a COVID pandemic winner, and that is Gamestop. So their fiscal third quarter sales declined while its cash pile sharply dwindled as the brick and mortar retailer had been working to expand its digital presence. Now, for no reason, this stock actually went up. A lot to do with retail investors who just wanted to like, very bullish on this counter. But although the fundamentals weren’t great, there.

Was a documentary on this Gamestop, actually on Netflix. I watched. It was really interesting. So if you’re interested to see what really happened and how they actually lure retailers in and the retail battle between institutional investors and all the renowned hedge funds and how retailers actually trumped in the end, but maybe not in the end, for the moment, it is actually a very interesting documentary or show to watch on Netflix.

Well, because it’s one of those odd stocks, there isn’t much coverage. There’s actually three analysts, they all have a sell on this. Target price is $6. This morning. During regular hours, the stock was actually down one dollars and $0.13 is $22.26. And if you’re wondering whether who won in the end, don’t think the retailers won because on a year to date basis, the stock is down 40%. But up next, we’ll cover the top stories in the newspapers and portals. Stay tuned for that. BFM 89.9 the world market watch, is.

Brought to you by CMB preferred moving forward with you, visit CMB preferred.com dot my for their preferential services. Be banking.

You have been listening to a podcast from BFM 89 nine, the business station. For more stories of the same kind, download the BFM app.

This video interview is owned by Channel News Asia, and the original source can be found at https://youtu.be/U_Im05ClsN0

The United States Federal Reserve’s plan to ease its pace of interest rate hikes as soon as December would bring some relief for markets concerned about the central bank overtightening too quickly, Mr. Tony Nash, founder and chief executive of data analytics firm Complete Intelligence, told CNA’s Asia First.

Transcript

CNA: Federal Reserve chair Jerome Powell has signaled policymakers could slow interest rate increases starting this month. That sets the stage for a possible to downshift to a 50bps rate hike when Fed officials gather again in two weeks.

Powell: Monetary policy affects the economy and inflation with uncertain lags. And the full effects of our rapid tightening so far are yet to be felt.

Thus it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting.

CNA: But it isn’t quite a dovish turn. The U.S Central Bank Chief also stressed that they have a long way to go in restoring price stability despite some promising developments.

Mr. Powell warns against reading too much into one month of inflation data saying that the FED has yet to see clear progress on that front. In order to gain control of inflation, the Fed chair says the American labor market also has to loosen up to reduce upward pressure on wages. Job gains in the country remain high at nearly 300,000 positions per month and borrowing costs are likely to remain restrictive for some time to tamp down rapid price surges.

This is where U.S interest rates stand after an unprecedented series of four 75 bps rate hikes. Policymakers projected earlier that this could go as high as 4.6 percent but Powell says they will likely need to keep lifting rates more and go beyond that level until the inflation fight is done.

The less hawkish tone from Powell Boyd U.S market stow and the S&P500 erased losses it searched three percent. The Dow gained two percent while the NASDAQ jumped more than 4.4 percent. the 10-year treasury yield also dipped as Bond Traders dialed back their expectations on how high the Fed may push interest rates while the U.S dollar retreated.

Tony Nash is founder and CEO of Complete Intelligence joining us from Houston, Texas for some analysis. Now Tony, just looking at Powell’s comments, the first differs in some way with what the Fed and its officials have been telling us earlier in the year and how we’ll get there fast to try to reach the terminal rate. But now it’s signaling that it will get there slower. What is this going to mean for businesses and consumers in the US?

Tony: I think what it means is we’re going to get to the same destination. It’s just going to take a little bit more time to get there. So the Fed has seen jobs turn around they’ve seen jobs aren’t necessarily slowing but the rate of rise in open jobs is slowing. We’ve seen mortgage rates go up. We’ve seen the rate of inflation rise slowly.

So the Fed is seeing some things that they want and they’re worried about over-tightening too quickly. Because what we’ve seen so far is really just interest rate rises. They really haven’t even started quantitative tightening yet. I mean they’ve done a little bit maybe a couple hundred billion dollars. But they have nine trillion dollars on their books give or take.

They haven’t even started QT yet. And they’re starting to see inflation and some of these pressures on markets at least slowed down a little bit. So I think they’re saying “hey guys we’re still going to get to a terminal rate of five percent or five and a half percent but we’re going gonna slow it down from here unless we see things accelerate again.”

CNA: When do you think we will actually see that five to five and a half percent?

Tony: You’ll see it in the first quarter. You know if we do say 50bps in December and maybe another 50 in January, we’ll see some 25bps hikes after that but I think what markets the cyber leaf that markets are giving right now is just saying. Okay, we’re not at 100 or 75 in December.

I think that’s a big size that you saw today and you know. It raising at 75bps per meeting just put some real planning challenges in front of operators people, who run companies. So if they slow down that pace and people know we’re still going to get to that 5 to 5.5%, it allows people to plan a little bit more thoughtfully, and a little bit more intelligently.

I think this does relieve some people of the worries of the Fed over-tightening too quickly and it also relieves worries that the Fed is only relying on monetary policy. They’re not relying on interest rates I’m sorry and they’re not relying on quantitative tightening. so the Federal balanced approach sometime in Q1.

CNA: Okay, you also mentioned before in our past conversations, the concern that the market has been having for this week especially since it’s China’s lockdowns and you see these restrictions ending gradually. What is that going to mean for Energy prices and inflation?

We see Energy prices say now they’re what high 70s low 80s somewhere in that range. We do see a rise of say crude oil prices by about 30 percent once China fully opens. We could easily be 110-120 a barrel once China fully opens. And so there will be pressure on global energy markets once China opens. Other commodity prices will see the same because we’re just not seeing the level of consumption in China that we expect.

What we also expect is for Equity markets to turn away from the U.S. and more toward Asia. So the US has attracted a lot of investment over the past year partly because of the strong dollar partly because of kind of a risk-off mentality consolidating in U.S markets. As China opens and there becomes more activity in Asia than we would expect, some of that money to draw down out of the US and go back to Asia.

CNA: Can you look at the jobs market in the US even as we expect this potential pivot towards Asia for stock market investors? The jobs market and the picture on wages there because the ADP data shows that there seems to be a cooling in demand for labor how soon do you think we can see a broadening out to the broader jobs market?

Tony: You would have broader cooling of demand in the jobs market I think, that’s definitely hidden tech. You’ve seen a lot of layoffs in technology over the past say three weeks. And that will cascade out. I don’t necessarily see think that you’ll see that in places like energy, but you will see that in maybe finance, some aspects of financial services. You’ve seen some of that and say mortgage brokers and this sort of thing so you’ll see that in some aspects of financial services. Some aspects of say manufacturing at the edges. but I do think there’s a lot of growth in U.S manufacturing as this reassuring narrative really takes uh gets momentum in North America. And so even though we may shed some manufacturing jobs in one area I think we’ll see growth in manufacturing jobs in other areas.

CNA: Okay, Tony. We’ll leave it there for today. Thanks for sharing your analysis with us. Tony Nash is founder and CEO of Complete Intelligence.

This podcast is originally published on https://www.bfm.my/podcast/morning-run/market-watch/fed-rate-hikes-earnings-downgrade-outlook-for-2023

The released Fed minutes show that most officials are backing a slower pace of interest rate hikes. Markets reacted positively but this is false optimism as the terminal Fed Funds Rate may eventually be higher. The 3Q reporting in the US is also coming to a close and 75% of corporates experienced downgrade in earnings. Have the cut in earnings by analysts been adequate or will there be further downside, with 2023 outlook still uncertain? For answers, we speak to Tony Nash, CEO, Complete Intelligence.

Transcript

BFM

BFM 89 Nine. Good morning. You’re listening to the Morning Run at Thursday. It’s Thursday, the 24 November November Friday, junior, as we like to call it. Here. I’m Shazana Mokhtar with Wong Shou Ning and Chong Tjen San. As always, let’s kickstart the morning with a look at how global markets closed overnight.

All key US markets showed gains as most members of the Fed said the pace of rate hikes will slow down. So the Dow was up 0.3%. The S&P500 was up 0.6%, and Nasdaq was up 1%. In Asian markets, the Nikkei and Hang Seng was up by 0.6%. The China Composite was up by 0.3%. The Straits Times Index was down by 0.1%, and our very own FBMKLCI was up by 0.2%.

Joining us on the line now for more on what’s moving markets, we speak to Tony Nash, CEO of Complete Intelligence. Hi, Tony. Good morning. Now, let’s start with just some reactions on the Fed minutes that were released. It showed that most officials are backing a slower pace of interest rate hikes, but that the terminal rate might need to be higher. What do you think? Are we seeing a relief rally? And is that sustainable in the short term?

Tony

Yeah, I think the ultimate destination is probably the same, but the pace of getting there is slower than many people thought a couple of weeks ago. So I think what it means is we’ll see more, say, 50 and 25 basis point hikes. That’s the expectation. It’s still possible we’ll see a 75 if Powell really pushes hard for December, but we’re still going to see a 5, 5.5 terminal rate, depending on really how things end up for CPI and PPI next month. But it’s just the pace and markets are more comfortable with a gradual adjustment to higher rates than the continued kind of shock treatment.

BFM

And Tony, the US reporting period is coming to a close. How would you assess the quality of corporate earnings release so far? How well have they tracked market expectations?

Tony

They’re OK, they’re pretty weak, actually. Compared to 2021, we had, I think, 25% earnings growth in ’21 about this time last year. They’re just over 3%. So it’s not even near where it was last year.

Something like 75% of companies are seeing estimates for their downgrade. So people expecting inflation to endure longer than they thought. If you remember a year ago, people were saying inflation was transitory, so they’re saying inflation will endure longer and rate hikes will continue.

So with credit tighter, businesses and consumers are not expected to spend as much.

So going forward, there is a fear that wallets will be more closed than they are now and earnings will continue to be tight.

BFM

Which just confuses me, Tony, because if the Fed stops their rate hikes at least decelerates the pace of it. And at the same time, corporate earnings aren’t going to be as robust as ever. Then why is the S&P500 above 4000 and the Dow Jones at 34,194 points? I mean, they’re just in fact, the Dow is only down 6% on a year to date basis and the S&P down 15%. Shouldn’t markets be actually more bearish than they are now?

Tony

Well, I think there are a couple of things happening there. I think first, there really is consumers have continued to spend and businesses have continued to spend in the US. Although we’ve seen economic growth slow dramatically, we’ve had spending continue to push forward. So if the Fed slows its tightening cycle, and keep in mind, they haven’t really started quantitative tightening, meaning getting things out of their balance sheet. They’re only, I think, $200 billion off of their high.

But if the Fed continues to tighten at an accelerated pace, then markets are worried. But again, if they slow it down, the feeling is that spending will move in stride. It won’t necessarily be too shaken up.

Also, on inflation, don’t forget inflation didn’t really start on an accelerated basis until November of ’21. So we had inflation, but fairly muted inflation then. And so what we get after November, well after this month, is what’s called a base effect.

So we’ll likely continue to see inflation rise, but not necessarily at the pace that it’s been over the past, say six to nine months. So does that mean inflation is peak? No, not at all. But it means the pace of the rise of inflation is likely going to slow on base effects.

So if that happens, we’ll have a lot of people declare victory over inflation, but I think that there is an expectation that that rate will slow as well.

BFM

Can you look at the prospects of retailers like Best Buy? We see Abercrombie and Fitch. These names are defying inflationary trends and higher rates to post better results than expected. So why has this sector been the exception to the norm?

Tony

Yes, the quick answer is most of those guys have been pushing price. So they’ve been passing along their higher labor and goods costs onto consumers.

Now they’ve been pushing price while sacrificing volume. So they’ve been pushing 8 to 10 to 15% price hikes in many cases. But they’ve had fewer transactions between one and say 6% fewer transactions.

Regardless, they’re earnings have risen. So they’re not as worried about fewer transactions. They’re focused on keeping their margins up.

And so when you look at retailers like Walmart, which has mixed, say, general goods and food, they’ve done very well. They had a very difficult Q2, but they did very well this past quarter.

Home Depot, which is a DIY store, has done very well because they pushed price Cracker Barrel has done very well.

Cracker Barrel. These are not these are not retailers that are at the high end of the market either. These are mid and even, say lower end companies, but they’re pushing price on the middle and lower end of the market.

Higher end of the market? They’re doing great. So it’s tough to be a consumer in this market because price definitely continues to be pushed and we expect price to continue to be pushed through probably Q2 of next year.

BFM

And Tony, with potentially slower pace of interest rate hikes, how do you expect the technology sector to do? Is there more pain to come for the likes of Amazon and Meta?

Tony

For sure. Amazon, Meta and technology companies generally do very well in very low interest rate environment, where the money is effectively free or negative real interest rates.

As you have to pay for that money, it becomes tougher for those companies to do well because their core investment is in technology. And we had things like Mark Zuckerberg at Meta really went off the rails with some of his spending and investment.

It’s not to say that the Metaverse investment is not ever going to happen, but much of that stuff really went way overboard. Same thing with, say, Amazon with some of their infrastructure investments and delivery investments.

So we do expect HP today, I think announce 6,000 jobs to be lost over the next, I don’t know, twelve months or something. So we do expect much more pain in tech. We expect that to continue until at least the end of Q1, if not a little bit further.

BFM

And Tony, let’s talk about oil because WTI for futures delivery in January, $77 a barrel. And we know that there’s an upcoming OPEC meeting in December. What are your expectations in terms of oil price then?

Tony

Yeah, it’s tricky, right? Because oil prices are kind of in that zone where a lot of people are comfortable. And so the question is, is this acceptable to OPEC members? So Saudi Arabia, UAE, Iraq and Kuwait have already come out and said they’re going to stick to the current plan, the current cuts that were already announced last month.

But we have things like the Russian price caps coming into play. And you know, our view is the price caps are pretty meaningless actually, because Europeans are pretty good at circumventing the kind of emotional embargoes they put in place.

I’m sorry to put it that way, but they put these laws in place and then they circumvent them pretty well. A lot of this is theater. So that’s not the price caps are not going to have as much of an impact as many people thought. So it’s possible if we get into next week and crude prices start coming back pretty strongly, or sorry, if we get into next week and crude prices are as weak as they are now, we may see a 500,000 barrel per day cut. I think that’s a possibility, but it’s likely they’ll stay on what’s already been announced.

BFM

Tony, thanks very much for speaking with us. And since it’s Thanksgiving eve. Happy Thanksgiving to you. That was Tony Nash, CEO of Complete Intelligence, giving us his take on the trends that he sees moving markets in the days and weeks ahead.

All eyes, of course, on that all-important inflation number and how that will affect how the Fed raises hikes moving forward.

I think the key takeaway for me was he mentioned that 75% of corporates in the US had downgrades, which I feel it’s a good thing as it brings expectations lower and more in line with future expectations and it also gives perhaps some room to surprise on the upside.

Yeah, well, markets seem to be at crossroads, but a little bit cheered by the fact that the Fed isn’t going to raise rates as aggressively as they have in the past. But I want to keep my eye on corporate earnings. I think that if you see continuous downgrades by the analyst community, you see the messaging coming out of US corporates that things aren’t looking as rosy as they are, then it’s just going to be hard for the Dow, S&P500 to actually break through their current resistance levels. So I think it’s something we have to keep an eye on.

This podcast was originally published by the BBC here: https://www.bbc.co.uk/sounds/play/w172ydq57tyy2z0

The midterms decide who controls Congress as well as state legislatures and governor’s offices. Rahul Tandon is joined by Dianne Brady, assistant managing editor of Forbes from New York and Tony Nash, the founder of Complete Intelligence in Texas.

Billions of US dollars are being spent on the election campaign adverts that voters will be seeing and hearing in the run-up to the elections – but is it worth the investment?

And has the economic situation in the US overshadowed the overturning of Roe v Wade?

Transcript

Rahul

Hello, and welcome to Business Matters here on the BBC World Service. I’m Rahul Tandonin-depth. On the program today, we’re taking an in depth look at the US midterms. As millions of Americans get ready to vote, we’re going to be looking at the economic factors that are going to have a huge impact on their decisions. I’ll be joined throughout the program, as always, by two guests on opposite sides of the world. We have Dianne Brady, assistant managing editor of Forbes, who’s in New York, was on the program just a couple of days ago, but she did so well, we decided to bring her back. Diane, is it exciting in New York? Are people gripped by election fever?

Dianne

Well, yes and no. Let’s just say New York is considered a flyover state by some, so I don’t think this would be considered a swing state. But yes, lots of excitement, of course, as we look around the country, and everything feels high stakes.

Rahul

It does indeed. The laugh you heard there was from Tony Nash, who is the founder of Complete Intelligence, who’s in Texas you need quite a lot of intelligence to understand the midterms. I think, Tony.

Tony

I’ve never heard of New York described as a fly overstate.

Dianne

All right, well, I’m a Canadian turned American citizen, so forgive me all listeners who think I’m being cavalier here, but I think it’s not inaccurate.

Rahul

But I don’t think there’s no need to ask for forgiveness so far in the program.

Dianne

The election is over.

Rahul

Yeah, maybe by the end of it you might need more than forgiveness, but who knows? Tony, for our listeners who will have heard of the midterms, can you try and explain what happens here? Because there’s lots of terms that we’re going to use. The Senate, the House, governors. I mean, what are people voting for?

Tony

Sure. So every four years we have a presidential election where you vote from the president on down to, say, local offices. Like in Texas, it’s people who run your waterboard and judges and your local commissioners. So it’s from the president on down. In between presidential elections, we have what are called the midterms.

Tony

So every two years so in the US. House of Representatives, those representatives have to campaign and be reelected every two years. Senators are reelected every six years. So not every senator is up for election in every election cycle. And then you have governors, and those governor’s terms change by state. They’re not always the same. In some cases, it’s four years. In some cases it’s five years. And I don’t know if there’s other places, but Americans are now voting on kind of everything except the president, and those, say, Senate seats and governorships that are not up for vote.

Rahul

Well, I tell you what. That was pretty impressive, actually. If you ever see a job as a sort of political correspondent, I think you might get one, Tony, I think we’re done here. Real quick.

Dianne

Tony, summer up beautifully.

Rahul

There we go. Should we all go? No. Oh, probably not, Dianne. And this is important, isn’t it? Because at the moment, the Democrats, which is the party of President Biden, they control the House and the Senate, there is a strong possibility that they may lose both, which will have huge implications for President Biden’s ability to pass legislation.

Rahul

I think Diane said there’s a lot to get through and we’re going to try and get through some of that. Let’s start by looking at the key economic issues.

Rahul

Cost of living, Tony, is something that people around the world want tackled. I’m sure that as people begin to cast their votes in a few hours time, when those polls do eventually open up on Tuesday for the midterms, that will be close to the top of the agenda. When we talk about the Democrats and the Republicans, the left and the right, what are the big economic differences between them and tackling this problem?

Tony

Well, I think there was a bill passed about a year ago, the Inflation Reduction Act. Diane, tell me if I’m wrong. I think it was $3 trillion in spending, and I think that was one that many Republicans didn’t want because there was a feeling that that was going to contribute to inflation. And so I think there was. The irony of it is just a year earlier, in the depths of COVID there was a massive stimulus package passed under the Republicans that everyone was happy about. So I think it’s easy to say, while the Democrats are the ones who spend and the Republicans are the ones who don’t, it’s not really the case. It really just depends on what they spend on. Republicans tend to spend on things like defense and security and law enforcement and these sorts of things. Democrats tend to spend on things like social programs. So I don’t know that one is necessarily more disciplined than the other. They just have different spending priorities.

Rahul

When we think of Texas, we think of gas, gas prices. We’ve seen President Biden releasing those strategic reserves of oil to try and bring down the price of gas. Is it that crucial a factor, do you think, in these elections? Will Americans just look at the cost of putting it in their vehicles and say, it’s too high, I don’t want to vote for this government?

Tony

Well, I think I saw a poll earlier today and I think it said that 65% of Americans believe that Biden is responsible for high gasoline prices. And I thought that was really surprising. I think it was from Pew. I can’t remember who it was from, but it was credible polling group. So Americans do see that and they do see that on Biden’s first day, he killed the pipeline, a potential pipeline from Canada, which would have brought heavy sour crude from Canada to fill US refinery.

Rahul

But these are global factors really, aren’t? I mean, of course, there are individual factors that will impact that.

Tony

No, they’re not global factors because the fact is, the sources of the crude that we need for American refineries is heavy sour. And there’s places like Venezuela or Saudi Arabia or other places where we could get it. But the most accessible is Canada. And so Americans do pay attention to that stuff, and they do pay attention to what is impacting gasoline prices because it’s such a huge portion of their budget. And so I think policy does lead to the cost of living, and I think it is a big factor. And I think people are looking at the way the different parties have reacted to this. And when that pipeline was canceled, republicans were very unhappy and voiced it. So I think that’s the case. And like I said, I think 60, 65% of Americans believe that Biden does have responsibility for the gasoline price in the US.

Rahul

Tony, one thing that often happens after midterm elections in the US is we begin to get an idea of who the presidential candidates are going to be. Do you think that we are likely to see in two years time a rerun of President Biden against Donald Trump, or do you think it will be other candidates for both parties?

Tony

To be honest, I think it’s too early to tell. I think even if Donald Trump starts campaigning Tuesday or Wednesday, I don’t necessarily think that it’s a done deal because people like Ronda Santos have taken a national profile.

Rahul

That’s the governor of Florida, isn’t it?

Tony

Governor of Florida. That’s right. And so I don’t think that Trump kind of as the Republican candidate is a done deal. I also don’t think that Biden as the Democrat candidate is a done deal. I think we’re very much things are very much in play, and really, anything could happen. I wouldn’t want to put money on, say, Trump or Biden right now because I think two years is a long time.

Rahul

Is it a bit harder for the Democrats? Because we know that with the Florida governor, there is, it seems, a candidate that the Republican Party can get behind if it isn’t President Biden, is there an obvious Democratic candidate at this moment in time? Tony.

Tony

I think there are a lot of people who believe they are, but I think maybe Gavin Newsom in California, but I think his politics are a little bit too far left for most of those independent votes that both Republicans and Democrats really try to get in order to get elected. So I think people like Gavin Newsom in terms of, like, political consultants do, because he looks good on television and all this other stuff, but I just don’t think he’s electable for a nationwide office.

Rahul

What we’re seeing here, Tony, and there’s a large Hispanic community, isn’t it, in Texas who play a significant role in elections there. Are we seeing these communities, whether it’s the Latino voter, whether it’s the black vote saying, don’t take my vote for granted, and that’s a message for all parties.

Tony

Sure, absolutely. If you look, say, on the border in the US. Part of my family lives in Del Rio, Texas, and they’ve never seen the quantity of people crossing the border that they’ve seen before, traditionally Democratic voters. And they’re really questioning their voting intentions because of the things that they’re seeing on the border. We’ve seen Texas border counties really start to swing right because of that. These communities that are small and safe and other things have really had an influx of people, and it’s really threatened, I guess, their way of life on the border. So some of these places that were very, very securely Democratic locations have started to move away from that.

Rahul

Tony, have you been flooded with lots of different political adverts as well across TV, across social media, across everything?

Tony

Yeah, I saw more during the World Series than I had seen in other places, but I just kind of ignore them, to be honest.

Tony

Yeah, I think it can I think a couple of dances on TikTok are probably worthwhile as well, but I think TV advertising is probably worth it.

Rahul

Are there any dancers of Tony Nash on TikTok, by any chance?

Tony

No, but I’ve seen some comments about different candidates kind of dancing on TikTok, and it was kind of silly. But it does get people talking about the candidate, and who knows if it works. I’m not 22 anymore, so it may work on me if I was 22.

Rahul

And when we’re looking at turnout here, we touched on it briefly before we heard John Sadworth saying to us that it was going to be a good turnout here. But the simple fact is, in the midterms, the majority of voters never vote, do they?

Dianne

That’s usually the case. I don’t think that will be the case this time. Tony, what do you think?

Tony

So I went to early vote last week, and I had to stand in line for quite a while to vote. So I think people are really, really engaged this time around, and I think it’s mostly because people’s pocketbooks are hurting and they’re just tired of it. So I think you’re hugely engaged because of the economy.

Rahul

That is interesting. Let us see what those numbers are. We will get them very, very shortly. Tony, if you believe the polls, and often that may not be a sensible thing to do nowadays when we talk about elections, they do seem to indicate that this is not going to be as important an issue. Clearly it’s a very difficult issue for many Americans, but it’s not going to sway voters as much as maybe people thought it was going to sway voters a few months ago.

Tony

It definitely won’t, I think. Look, all the Supreme Court said is that they’re leaving it up to the states, and so there’s no issue for mobility in the US. So people can go to another state to have an abortion if they want. So I think we had the initial emotion after the Supreme Court judgment, but I think when people really realized it’s a state issue and many of the things in the US. Constitution are really devolved to the states, and so this just takes that same issue and puts it up to the states unless the states decide. And so I think most adults, when they read it and they consider that if they really want to have an abortion, they can drive or get on a flight and go to another state, it’s really actually pretty simple.

Rahul

It’s a communicated economy, the US. Isn’t it? Because you look at it and we hear this talk of recession, we hear this talk about the incredible rises in inflation, cost of living, and at the same time, you sort of hear still about a very strong jobs market. Still.

Tony

Yes. But what we are starting to see there was an announcement yesterday, I think, that Meta, Facebook will soon be announcing major job cuts. And so job cuts are starting to hit the tech sector. Companies like Stripe laid off, I think, 18% of their workforce. Twitter had some big layoffs last week, and so tech is really starting to be hit hard with layoffs. So a lot of the discussion about job vacancies and unemployment, say, out of the Fed and the White House, that will start to even out. And the job market by the end of the year will likely be much less strong than it is right now.

Rahul

Yeah, I knew Twitter was going to make its way into the program at some particular point. Okay. Prediction diane. What is what’s going to happen?

Dianne

I think the House will go to the Republican. Senate, will hold Democrat, and Biden will have a tougher time the next two years.

Tony

Tony, Republicans get the House, they get 52 in the Senate, and they pick up a couple of governorships.

Rahul

Okay, well, thank you to both of you for your insights and thoughts on the American midterm elections. Americans will vote on Tuesday for the Senate, for the House, for governors as well. We’ll bring you all the results here on the BBC World Service. You.

This podcast was originally published on https://www.bfm.my/podcast/morning-run/market-watch/nasdaq-tech-stocks-sell-off-meta-alphabet-apple-amazon

Investors were not impressed by results from Meta and Alphabet leading to a sell-off in tech stocks on Wall Street. We speak to Tony Nash, CEO of Complete Intelligence, to find out how results from Apple and Amazon set to come out soon might impact overall market sentiment.

Transcript

BFM

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

BFM

BFM 89 Nine. Good morning. You’re listening to the Morning Run. I’m Shazana Mokhtar with Keith Kam. It’s 7:06am on Thursday, the 27 October a rather overcast Thursday morning. For now, perhaps we’ll see the sun come out a little bit later. As always, we’re kickstarting the morning with a look at how global markets closed overnight.

BFM

It was a bit of a mixed day for what generally red though the Dow Jones on Wall Street, the Dow Jones ended marginally higher, that’s 0.01% barely changed. S&P 500 was down 0.7%. But the action was on the Nasdaq that closed 2% lower because of disappointing results from Meta and Alphabet. We’ve just got to wait for the Apple and Amazon results that will be out tonight US time. So we’ll be discussing that tomorrow. Early in the day, Asian markets were generally green. The Nikkei was up 0.7%, the Hang Seng was up 1%. The Shanghai Composite and Singapore’s STI, they were both 0.8% higher. And back home the FBM KLCI closed 0.7% up.

BFM

For some thoughts on what’s moving international markets, we have on the line with us Tony Nash, CEO of Complete Intelligence. Good morning, Tony, thanks for joining us today. Now, notwithstanding overnight results, global equities led by US stocks have extended gains over the last week, avoid by the expectations that peak inflation has been reached. What do you think? Are they being too sanguine about inflationary pressures?

TN

I don’t necessarily think they’re being too sanguine. There are cases to be made that housing prices and wage growth have turned the corner. Goods price inflation has likely peaked, but there doesn’t necessarily mean that we’ll see prices decline. Regardless of what’s happening in the inflation environment. The Fed is going to raise rates in November, likely by 75 basis points and again in December. So the Fed typically lags inflation on both sides on the way up and on the way down and so they’re likely going to over tighten. Markets have largely factored in a 75 and 50 basis point hike over the next two months. So are they sanguine? I don’t know. I think if we start to see inflation really take a downward turn, then it could be a very good thing for all of us.

BFM

But Tony, the 75 basis point expected hike by the Feds comes at a time when a lot of analysts are also expecting recession to hit the US sometime sometime next year. Would there be some reassessment as we go along?

TN

Well, we’ve already had kind of negative economic growth for half a year, so we do need to see jobs come down. And with the tech earnings coming out, as you guys mentioned in the news segment, we expect tech companies to announce some pretty major layoffs before the end of the year.

BFM

Let’s get into that a little bit, Tony, in terms of tech results, I mean we did see Meta overnight, we’ve seen how Microsoft also came in below market expectations. What do you think this tells us about the direction of the tech sector moving forward, especially with this environment of rising interest rates and a looming global recession?

TN

Yeah, well, tech companies have overhired. They were hiring based on valuation, not necessarily based on revenue. And so now that their valuations have come down, they have excess staff and they need to clear the decks. And the productivity within the technology sector, although it sounds a little weird, the productivity is pretty low because they’ve had too many people. So as these companies come out and give pretty sad earnings reports, there’s going to be pushback from investors that they need to lay people off, and that will come out in the next couple of months. So we’ll see some of that. Now, if you compare that to, say, companies like Coca Cola and GM who beat the street, those companies have been able to pass on cost rises to their customers, so they’ve factored in cost rises to their price. Now, many of those companies saw volumes decline, but price rises more than made up for the volume decline. So they’ve beat expectations by raising price, in many cases by double digits.

BFM

Tony, we’re expecting Amazon and Apple results to come out tonight, and what we’ve seen from the previous results have sort of, well, dampened market sentiment, if you may, what are your expectations going forward?

TN

Yeah, I don’t think they’re going to be stellar results. I think Amazon had this, at least in the states, they had this kind of second prime day a couple of days ago to goose sales revenues for the quarter, which tells me that things are not stellar at Amazon, and so there are signs that things aren’t working out. The new iPhone is kind of a yarn for a lot of people, so it’s not necessarily pushing out. And so I think the expectations are for pretty mediocre results. So if they report in excess of expectations, then tomorrow will be a fantastic day in markets. But I don’t think that’s necessarily likely at this point.

BFM

All right, something we’re going to be keeping an eye on. Another thing to keep an eye on is the slew of indicators that are going to be coming out. We’ve got US GDP, durable goods, and initial jobless claims numbers. Which indicator are you paying the most attention to in terms of being a gauge of how well the economy is going?

TN

Yeah, one of the things that I always tell people to be careful of with some of these macroeconomic numbers is things like GDP. What’s being announced is what’s called a preliminary release. So they kind of have a sketch of what’s happening in the economy, but it’s not detailed. So when these GDP announcements come out and it’s the first release, it’s not really accurate. And those things can change by 50% or more in some cases. So GDP is not really something I look to. It’s kind of a headline, but it doesn’t really mean a whole lot.

TN

Durable goods is interesting because that tells me that people are investing in things, buying things that last a long time so that they can deliver new services or new products in, say, three to six months time. So that would tell me people are looking forward. So if durable goods is a bad number, then it tells me people are really just trying to take care of today and not investing in the future.

TN

Jobless claims. I don’t know. Sometimes it’s meaningful, sometimes it’s not. I think the sentiment around jobless claims is overhyped. The Fed is definitely watching jobless claims because they want to see wages and jobs come down. So with jobless claims, it’s one of those good news and bad news types of things. So we’re kind of hoping for a poor jobless claims so that the Fed can kind of tick off the box and say, mission accomplished.

BFM

Tony I just want to pick your brains on this. We’ve seen three straight days of market gains on Wall Street and this morning, or rather last night for you or today for you. We’ve just seen a reversal of that. Is this an indication that maybe fortunes might be changing going forward?

TN

I think it’s a good question, and I think it’s hope that the Fed is changing course. And I think regardless of what comes out, say, this month, and I think probably next month, I don’t think the Fed is going to change course. They were caught flat footed. They said that inflation was transitory, they messed up, they’re embarrassed, and they’re going to make people feel it. And people are going to lose jobs and homes and all sorts of things because regional Fed governors don’t want to be embarrassed again. So I think at least over the next two months, they’re probably not going to change course. They’re going to continue to tighten. I don’t think there’s been a dramatic change in everything. I think this is a little bit of hope, and I think it is some earnings that have been reported that are better than expected. But I think in general, people are being very cautious about trades they make.

BFM

Tony let’s end the conversation with a look at oil prices. They are taking a breather on news that US stock bells have risen. How will that translate in terms of energy prices as the Northern Hemisphere moves into winter?

TN

Yeah, the SPR, the Strategic Petroleum Reserve release, it’s put a lot of volume in the market in recent months. And of course, that’s lowered crude prices and it’s lowered the price of refined products. So after the election, and it’s no secret we expect the SPR releases to decline dramatically. And we’ve talked for a few months about how we expect crude prices to kind of spike towards the end of the year. And that would be spikes in crude prices and downstream products like, say, petrol. So we do expect that to happen in the North American market, kind of in Q4 and through Q1 out of the effects of that SPR release wear off.

BFM

And meanwhile, OPEC has also forecasted that China’s oil demand will decline by 60,000 barrels per day. Is that something that you see could cap further spikes in prices?

TN

It could. I mean, 60,000 barrels isn’t a lot, but it could. I think if China were simply to end COVID Zero, it would really drive consumption of crude. So OPEC must expect further dampening of the economy in China, and that’s no surprise. I mean, China is really having a hard time right now, and whether or not they can come back in ’23 is questionable, so it’s no surprise. But 60,000 barrels a day really isn’t a lot, and I don’t think it would affect prices dramatically.

BFM

Tony, thanks as always, for speaking with us this morning. 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

Yeah, so we did see Meta shares plummet 17% on week fourth quarter forecast. And earning miss. It basically came up well short of Wall Street’s expectations. Earnings per shares earnings per share was $1.64 versus a  $1.89, which was what was expected. Revenue was at $27.7 billion. Daily active users did meet expectations at 1.98 billion users, and the monthly active users came in at 2.96 billion versus 2.94 billion.

BFM

I mean, Meta is contending with a broad slowdown in online ad spending, challenges from Apple’s iOS privacy update and increased competition from other players like TikTok. It’s getting more expensive to run the company as Meta’s costs and expenses rose 19% year over year to $22.1 billion. And that’s something that Tony alluded to earlier, the fact that they’re likely going to see more layoffs moving forward. Tech companies have just been on a hiring spree that they cannot afford at this point. And I bet the WhatsApp outage the other day didn’t help a Meta’s fortunes either, at least in terms of its reputation and image. It could see a lot of people try to migrate elsewhere from using WhatsApp as their main communication source to another platform that is more stable, perhaps. 

BFM

I must say we could wait until to see what happens towards the end of the year. Well, November actually, just next month when the midterm elections come, and we see if there’s any pick up in usage then.

BFM

That’s true. All right, it is 7:18 in the morning. We’re heading into some messages, and when we come back, we will be covering the top stories in the newspapers and portals this morning. Stay tuned. BFM 89.9. You’ve been listening to.

BFM

A podcast from BFM 89 Nine, the business station. For more stories of the same kind, download the VFM app.

This podcast was originally published at https://www.bfm.my/podcast/morning-run/market-watch/us-fed-reserve-inflation-rate-down-slowing-car-homes-sales

All eyes will be on the US CPI data as it gives us an indication of the quantum and pace of rate hikes. But is the Federal Reserve too slow to see if inflation is coming down when there is anecdotal evidence of slowing car and home sales? Tony Nash, CEO of Complete Intelligence tells us.

Transcript

BFM

This is a podcast from BFM 89.9. The Business Station BFM 89 Nine. Good morning. You are listening to the Morning Run. I’m Shazana Mokhtar with Wong Shou Ning and Chong Tjen San. 07:00 a.m on Thursday the 13 October. Let’s kickstart the morning with a recap on how global markets closed yesterday.

BFM

Looking at US markets, all three key indices close in the red S&P 500, down zero 3%. The Dow and Nasdaq down zero 0.1%. And I think that the S&P has been down for six consecutive days already. Moving to Asian markets, and the Nikkei down marginally 0.02%. Hang Seng down 0.8%. The Shanghai Composite Index back the trend. It’s up 1.5%. Straights Times Index down 0.7%. And our very own FBM KLCI is down 0.5%.

BFM

So for some thoughts on where international markets are heading, we have on the line with us Tony Nash, CEO of Complete Intelligence. Tony, good morning. Thanks as always for joining us. Now, US CPI data is due out on Friday. What are your expectations for that figure? And how much of this do you think will determine the quantum of the next Fed rate hike?

TN

Everything rests on CPI right now. So I think if it comes in line or higher than expected, it’s just bad news for markets for the next few days. So people are hoping for a lower number because it would provide some relief and some proof that inflation has maybe peaked or is at least slowing down. I think it’s possible that we have it come in slightly under, but given the PPI reading that came today, it’s not a good a sign. So we may see CPI continue to rise in tomorrow’s trading day in the US.

BFM

Okay, Tony, we have a history of the Fed being late to the game, right, when it came to inflation. They kept saying “transitory, transitory,” and we know it wasn’t transitory at all. Do you think that they are also late to the game in recognizing that inflation has been brought under control? Because when I look at some of the data points, one of which is used car sales, that’s dropping. New car sales are also dropping. House sales, home sales are also dropping. Is it possible that inflation is being overstated?

TN

Well, you’re 100% right on the Fed being late to the game, both to recognize inflation and to impact it. The problem that we’re seeing with, say, used cars is, although the unit volume is slowing, the unit price is still rising for, say, used cars, for eating out, for these sorts of things. There’s still been upward pressure on these because of the factor input costs and supply chains and labor and others. So it does feel in the US like things have not that prices have gone back down, but that the rate of rise has slowed. That’s what it feels like at the consumer level, except for petrol, gasoline, which has started to rise again over the past week.

BFM

Let’s take a look over at the UK, where George Bailey, the Bank of England Governor, said that the BoE would end support for UK Gilts by the end of this week. What does this mean for the Pound specifically and other sterling-denominated UK assets like equities?

TN

Oh gosh, we’re likely to see more devaluation of the Pound. There’ll be pressure on the Pound. Well, maybe not devaluation, but depreciation of the Pound. UK pension funds and other guiltholders will likely have to sell assets if the BoE is stopping their intervention in that market. They’re likely to likely to see downward pressure on those prices. So holders of those assets, like big pension funds, will have to use other assets to pay for their collateral for those investments. So it’s going to be ugly all around once the BoE stops because the market for guilt is so weak.

TN

And we’ve seen for the Bank of Japan, we’ve seen for the Fed, for different auctions, different government debt auctions, there have been zero takers for government debt auction. And that tells me they’re not paying enough. The interest rates for that debt has to rise because people feel like inflation and interest rates are going to rise. So these governments need to offer their debt out at a higher rate so that people can make a profit with it, given the inflation environment.

BFM

And Tony moving on to China with a Party Congress meeting happening very soon, and with Xi Jinping set to win an unpresented term, what economic implications would that have for China? And with growth slowing down across the world, how will they aim to achieve the goal of common prosperity?

TN

Yeah, Common Prosperity as a definition can be really taken as raising people up, or it can be taken as pushing kind of those achievers down. Okay. And if you look at China’s history in the late 50’s and the 60’s, as you know, Mao Zedong really pushed those achievers down through the great famine and all this other stuff. So my fear is that as Xi Jinping has consolidated his power, he’s going to start well, he’s already started a couple of years ago, pushing some of those economic overachievers down like Jack Ma and other people.

TN

So I really do worry coming out of this Party Congress that we get a much more restrictive Chinese economy. We’ve already seen foreign investor sentiment sour on China, and we’ve already seen with code lockdowns, with supply chain lockdowns and other things, there has been a functionally more restrictive environment and with sentiment souring as well.

TN

I’m not optimistic, at least in the short term. The Chinese government, whether it’s Xi Jinping or other elements of the Chinese government, they’re going to have to do something to reassure the world that they are a good faith partner in global supply chains and for manufacturing. It’s not going to make them happy to do that. But if they want to continue growing at the rates they have grown, they’re going to have to do that.

TN

So when I say I’m not optimistic about China, I’m not saying China is going to crash. I’m saying I think they’re going to have some pretty mediocre growth rates in the coming years because of the economic environment, regulatory environment and market environment that they’ve cultivated of late.

BFM

OK, Tony, I want to stay in Asia and I want to look specifically at Japan because the Yen weakened to a fresh two-decade low, hitting 146 to the US dollar. What do we make of this? Is this really on the back of Corona vowing to maintain its very accommodative monetary policy?

TN

Well, they have a choice. They can either support the yen or they can buy government bonds. And they’ve continued buying their bonds. So I think they’ve made a choice not to support the currency. And with the strong US dollar position and Janet Yellen made some comments today saying, again, saying that it’s really not the US’s responsibility to maintain the currencies, economies of other parts of the world. It wasn’t those exact words, but it was similar. That will likely push the dollar even stronger and we’re likely to see even more depreciation of the Japanese yen.

TN

So there is a lot of pressure on Japan right now, and the Bank of Japan really has some decisions to make about how they’re going to approach that. Maybe they’re okay with depreciating their currency, but it will fundamentally change things like their imports of energy. They’re very dependent on imported energy. They’re very dependent on imported, say, raw materials like metals for their manufacturing. So this really changes their approach to managing those imports.

BFM

Tony, thanks very much for speaking to us this morning. 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

Yeah, I like his comments on the yen. Right. At what point does it then become really painful for the Japanese economy? Net energy imported, clearly LNG from Malaysia is one of the key imports. What does this then mean for inflation? But it’s one country where inflation has been ultra low, almost as low as ours, I think barely 2-3% for them. But for them it’s a bit of a shocker because they’ve been in a deflationary period for more than ten years.

BFM

Yeah, and his comments on China, I think he said that growth would likely be slow over the next couple of years, and I guess Xi Jinping and China will unlikely dial back on its Zero Covid policy next week. It looks very unlikely at this point.

BFM

I mean, everyone’s hoping to see some kind of announcement to that vein. But again, lots of things to look out for in the weeks ahead.

BFM

We just heard headlines coming out Shanghai, parts of it under even more lockdown.

BFM

Well, very quickly, let’s take a look at some good news. I guess that’s coming out of Australia. We have contest airways. They said their first half year profit will jump to as much as 1.3 billion Australian dollars as travel demand accelerates and the airline stabilizes operations after a prolonged and bruising period of cancelations and delays. This ends a streak of five consecutive half yearly losses totalling 7 billion Australian dollars.

BFM

It said that the frequency of scrap flights, late departures and loss backs are all improving. CEO Alan Joyce said it’s been really challenging time for the national carrier, but the announcement shows that how far the airline has actually improved, and they’ve seen big improvements in their operational performance and acceleration in financial performance as well. And this takes some pressure off Joyce.

BFM

Well, if I look at the street, they like this stock. Twelve buys, three holes. One sell. Contest at close was $5 and 17 Australian cents. Tucker price, 653.

BFM

All right, 718 in the morning. We’re heading into some messages. Stay tuned. BFM 89 Nine you have been listening.

BFM

To a podcast from BFM 89 Nine, the business station. For more stories of the same kind, download the VSM app.

This podcast was originally published at https://www.bbc.co.uk/sounds/play/w172ydq1zf6tjvb

The IMF says the risk of a global recession has increased as it lowers its growth forecast for the coming year. Its managing director, Kristalina Georgieva, said the gloomy outlook was fuelled by Russia’s invasion of Ukraine and the continuing impact of the Covid pandemic.

Hong Kong has relaxed several of its coronavirus restrictions in recent weeks. Now it’s giving away 500,000 airline tickets worth $250 million in a bid to boost visitor numbers. Will it succeed?

The Rooney Rule was adopted by NFL teams in the US in 2003, with the aim of creating equal opportunities for Black coaches. But there’s criticism that it hasn’t achieved what it set out to do. Gus Garcia Roberts from the Washington Post has been investigating and shares his findings with us.

Sam Fenwick is joined by Tony Nash, chief economist at Complete Intelligence in Houston, Texas and Zyma Islam from the Daily Star in Dhaka, Bangladesh to discuss these stories and the other big money and work issues of the day.

Transcript

Sam

Hello. You’re listening to the BBC World Service. I’m Sam Fenick, and this is Business Matters. Welcome to the program. Today we’re going to be talking about the risk of a global recession. It’s apparently creeping close. It’s the stark warning from the International Monetary Fund. We’ll be talking about what it might mean for businesses and consumers around the world. Why the price of oil affects more products than just the petrol in your car.

Tony

So natural rubber has gone up, oil prices have gone up, and therefore the tire industry margins, margins have come down.

Sam

And have you ever quit your job? Is it liberating? We’re going to be talking about that. We’ll be joined throughout the program with two from my two guests on opposite sides of the world. And pleased to say that Tony Nash joins us. He’s in Houston, Texas in the USA. He is the CEO at Complete Intelligence. Hi, Tony.

Tony

Hi, thanks for having me.

Sam

And Zyma Islam is a journalist at the Daily Star newspaper in Dakar in Bangladesh. Hi, Zyma.

Zyma

Good morning, Sam.

Sam

Hi. Good morning. It’s Friday morning with you. It’s Friday morning with us, but it’s still Thursday with Tony.

Tony

Yes, it is.

Sam

And have either of you ever quit a job?

Tony

Yes.

Sam

Have you?

Tony

Yes.

Sam

Was it liberating? Worrying?

Tony

Well, I had a better opportunity in both cases, so I guess it was liberating.

Sam

Zyma, have you?

Zyma

Oh, I’m terrified by the very thought, even when I’ve had better opportunities.

Sam

Yeah, I’m with you. Maybe it’s a female thing. Well, we’ll be talking about that a bit later in the program. But first, shall we look at the global economic outlook? Because the International Monetary Fund warned on Thursday that the risk of a global recession is rising because of Russia’s attack on Ukraine and shocks caused by the COVID pandemic.

Sam

Tony, I think we should start with you on this because you are an economist. Some of the quotes that I was reading in the speech, which she gave greater uncertainty, higher economic volatility, geopolitical confrontations, more frequent and devastating natural disasters. It doesn’t sound great, does it? It makes for quite grim reading.

Tony

Yes. And if it’s going to be more volatile than the last two years, look out. I think part of this is obviously post pandemic. Part of this is the backside of a lot of the stimulus that we saw over the last two years. Part of it, of course, is because of the war. Part of it is because of the other side of supply chains. There’s so much that’s happened over the past couple of years and there’s always the other side of it. Right. And I think that’s what we’re seeing right now is the other side of all of this drama that we’ve all lived through over the past two years.

Sam

The IMF is going to downgrade the economic forecast for next year, 2023. Explain what that means.

Tony

Well, in civil terms, it just means things will grow slower or they’ll do the opposite of growing and they’ll contract. So that’s really what they mean by contracting economic growth.

Sam

And energy prices are a big problem here, aren’t they? You mentioned them. The war in Ukraine is really causing a problem with gas into Europe, but also oil prices.

Tony

Sure it is. Yeah. I mean, Russia has been selling that to Asia primarily, but it has disrupted, obviously, the flow of oil to Europe, and that’s just dislocated global prices. Of course. In the US, the president opened up the Strategic Petroleum Reserve, which put millions and millions of barrels on the market and alleviate prices somewhat. That will end in November. And so we should see some at least in the crude market, we should see energy prices rise toward the end of the year once that slack is cleared from the market.

Sam

We’ve discussed some of those inflationary pressures come from the rising cost of crude oil. Crude oil derivatives make up nearly half of the cost of producing vehicle tires. About seven gallons of the black stuff is used to produce a single tire. Apollo Tires is India’s largest manufacturer of tires. Their annual revenue is $2.6 million. But over the past couple of years, their prices have gone up by about 30 or 40%. The vice chairman and managing director of Apollo is Near Edge Canoe, and he told me that he’s had to put his prices of his tires up.

Sam

Tony, I just wanted to come briefly to you just off the back of that. Mr. Kamwa there was talking about how they try and reduce costs. But it takes a lot of infrastructure to get those costs down, isn’t it? A lot of capital expenditure. And then it’ll be a while before these businesses start to see the reduction in cost because of the investment that they’ve made.

Tony

Well, it could. I mean, some of it could just be changing processes. I think when things like the input costs like crude oil or natural rubber are cheap, there’s very little incentive to refine your processes. Right? And so I think those first steps, him talking about going to the factories and getting, say, the same output with less input in the factories, that sort of thing, those are obviously the first steps. And I think every business, if they’re honest, can probably ease out productivity gains. I don’t know. I wouldn’t estimate what percentage they could, but those are obviously first. But part of it could potentially be, as you say, investing in equipment, investing in automation, other things which could produce a lot more. But I think what I found really interesting about what he was talking about was you’re seeing the primary impacts of inflation, which is crude oil and rubber. The secondary impacts of inflation is the tire price, and that the tertiary what we call the tertiary impacts of inflation are the freight costs that he talked about. So in that interview, we saw three different phases of inflation impacting the economy. It was really interesting.

Sam

Great. Well, thank you very much. Well, we are going to now move to another update on Twitter. Billionaire Elon Musk, he says he aims to complete his purchase of Twitter by the end of the month, but the company will not take yes for an answer.

Sam

And Tony, I mean, so many countries have no travel restrictions for COVID at all now. That you tend not to go to places where there are restrictions, because why would you?

Tony

I’ll be honest, I really miss Hong Kong. I used to go there once a month when I was at The Economist. Our original headquarters was there and I was there a lot. But even with small restrictions, it’s just an inconvenience. And so there would have to be a serious incentive to go and put up with really any restrictions.

Sam

I was looking at the various different restrictions that have been kind of removed over the past few weeks. So, Japan, so from next Tuesday, the 11 October, there will be no border controls in Japan similar to the US. But the thing with Japan is that China was the largest source of tourism revenue before the Pandemic, and of course, people can’t leave the other parts of China.

Sam

Welcome back to Business Matters on the BBC World Service. We are live in Salford in the UK. I’m Sam Fenix. Thank you for your company. We’ve got Tony Nash with us. He’s in Austin, Texas. He’s an economist. And Zyma Islam is a journalist from Dakar and she joins us from Bangladesh. We’re going to start the second half of the program by talking about whether it’s a good idea to quit your job. It’s often seen as a negative thing to do, but it doesn’t have to be. One in five of us are expected to quit our jobs this year, according to PwC’s Global Workforce Survey.

Sam

So, Tony, you said earlier in the program that you have quit a job. Tell us about what happened.

Tony

So I got a job at one point with a company that I thought was fantastic. After a couple years there, I realized that kind of everyone who had worked there for more than five years had really just kind of settled and they stopped being excellent and the best at what they could do. So I told myself at the time that I would stay there for five years and then I would find another job. And I did. And I moved on to a job with quite a lot more money and less work to do, which was really nice.

Sam

Did you listen to your body like we heard in that clip?

Tony

I guess so. In a kind of a silly way, I guess so. I just knew that I wasn’t comfortable being mediocre, but I didn’t want to leave the job right away, so I had to stay there for a period of time, do my time, and then find something where I could do great work? 

Sam

It doesn’t always look good on a CV, does it? To have lots of different jobs in very short space of time.

Tony

I don’t necessarily think that’s the case anymore. Look, my company is a tech company and in tech you stay at least in the US, you stay for a year and you move on. That’s pretty common with, say, developers in tech. So I think it depends on the industry. But I don’t think moving around jobs, say, every few years is necessarily seen as negative as it once was.

Sam

But you felt in that job you did have to stay there for a certain amount of time.

Tony

I did, and I wanted to stay there for a period of time because I wanted to make sure that my initial feeling wasn’t wrong. And I also wanted to make sure that I could get the most out of the job. You know, good experiences, great people, all that sort of thing. And I did. I enjoyed the next few years, but I also realized that it was time to go. And that’s something kind of early career, mid career, I think people need to do is when they come into a job, understand why they’re at that job, and then understand when it’s time to move on. And it’s not necessarily emotional, it’s just part of a growing process.

Sam

That’s the truth, isn’t it? Tony perhaps in the US, people are more likely to move around because there’s more job security, there are more jobs.

Tony

Possibly. I think especially in the US. Through the pandemic, there is so much work from home and so many people would switch jobs because it was just arbitrage. They could do the same work for more money and stay in their home. So I think that was a big factor in a lot of the job leaving in the US over the last couple of years. As things slow down, it’ll be really interesting as we enter recession or as things continue to slow down, it will be really interesting to see what happens with job leavers and job switching in the US to see if that slows down and what the expectations around jobs really are.

Sam

Well, I’m going to speak Tony.

Tony

It’ll happen. My company automates finance jobs, so highly educated professional workers in developed countries. So automation is going to happen to a lot of jobs where they’re not innovated. That’s just a fact. And so the entrepreneurs and the planning officials in Bangladesh should better get busy because automation of garment jobs is coming pretty quickly. And so.

Zyma

Absolutely, but there’s going to be a gender component to that, Tony. So when you start training garment workers for these more highly technical jobs, what happens is that women, they get cut out of the picture because they’re not as skilled graduating.

Tony

I spent most of my professional life in Asia. My son is South Asian. I understand the cultural issues around many of the workforce debates that happen in Asia. Deeply. I understand them deeply. And so that is a cultural issue that can only be solved by Bangladeshis in Bangladesh. It can only be solved by Bangladeshis in Baghdadesh. And so that’s not something that anybody else can solve. And I hope that there are people in Bangladesh who have the courage, your President is a woman. So I hope that people have the courage to solve that in Bangladesh.

Zyma

We’ll actually need to get our woman to start going to university. Because what happens here is that after high school, they drop out, they get married. When it comes to high school, we do have like an equal there’s, like a 50 50 balance when it comes to graduates. But the minute you go off to the treasury sector, you see fewer female graduates. So with fewer female graduates, they’ll be less eligible for the automated jobs. It’s easier for them to get these brick and mortar jobs involving, say, sitting in a supply chain line of some sort.

Tony

I’ll tell you what will happen with the automation around the garment sector. That won’t happen in Bangladesh. Because of supply chain issues, those automated garment factories will be put in Europe, or they’ll be put in the US or somewhere else closer to where they’ll be consumed. So, to be very honest, those jobs will disappear in Bangladesh if those higher level skills aren’t taught, and now is the time for that innovation to happen.

Sam

Do you see that happening? Any of that innovation, that education that Tony mentions?

Zyma

No, not at all. Absolutely not at all. I simply see women getting replaced in the menial workforce.

Sam

Well, Tony, we are actually on the eve of a big jobs data day, aren’t we? It’s a big day tomorrow in the US on Friday. Indications show that the jobs market might be slowing.

Tony

Yes, and we’re in a position in the US where kind of bad news is good news, I think, because the Fed is hoping that the rate of job growth slows so that they can ease up on interest rate rises. So Americans are kind of hoping that it’s a down number so that there’s less expectation or lowered expectations that the Fed will raise rates. So bad news is good news with that particular print.

Sam

Well, that’s a good thing for our listeners to look out for. Bad news is good news. When did you ever hear that? Thank you both very, very much for joining us. Tony Nash, economist with Complete Intelligence in Austin, Texas, USA. And Zyma Islam, a journalist with the Daily Star in Bangladesh. My name is Sam Fennick. You’ve been listening to Business Matters on the BBC World Service. Thank you to the producer, Hannah Mullane, and the team in the studio here in Salford. Join me again tomorrow at the same time, midnight GMT.

This podcast was originally published at https://www.bfm.my/podcast/morning-run/market-watch/uk-qe-outdated-government-bonds-calm-markets-british-pound

The Bank of England surprised markets by announcing that it would buy long dated government bonds in order to stabilise capital markets. Tony Nash, CEO of Complete Intelligence explains why and what does this mean for the Pound.

Transcript

BFM

Good morning. You’re listening to the Morning Run on Thursday the 29 September. I’m Shazana Mokhtar with Wong Shou Ning. Now, in half an hour, we are going to discuss the political future of Crown Prince Mama bin Salman, or MBS of Saudi Arabia, now that he’s been named the Prime Minister of the country. But as always, let’s kick start the morning with a look at how global markets closed.

BFM

Yesterday, US markets had a very good date was at 1.9%. S&P 500 up 2%, while Nasdaq was up a whopping 2.1%. Meanwhile, in Asia, it was all red. Nikkei was down 1.5%, hong Singh was down a whopping 3.4%. Shanghai and Times Index both down 1.6%, while our very own FBM KLCI was down 0.6%.

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. Thanks for joining us. I want to start off with moves by the bank of England that said it would move to buy long dated government bonds in order to stabilize capital markets. Can you talk us through what the BoE is trying to do and whether this will ultimately be successful?

Tony

Yes. So here’s what happened. You had some pension funds who bought debt, debt instruments called Guilt, and they used those gilts as collateral to borrow more money to buy more debt instruments. And they use that as collateral to borrow more money to buy more instruments. So they were many times leveraged on these government debt instruments. And when the value of those gifts declined, they had to provide collateral against the loans they had taken out to buy that debt. So it’s a very circular kind of series of events that’s happened. So because these pension funds got in trouble, the UK, the bank of England wanted to prevent their insolvency, of course, because many of them are government pension funds. So since the bank of England has nearly endless currency, they can help the government come to a relatively orderly decline. So is it ideal? No, but there was some messaging out from the new Prime Minister in Whitehall that was very disturbing to government bond investors and that triggered the sell off and then that triggered a multibillion pound rescue from the bank of England.

BFM

Okay, I want to stay on the topic of the United Kingdom, but us about the currency. They must be the only G seven countries still doing quantitative easing in some way. Where do you think the pound is heading? Dendu?

Tony

Well, because of the energy environment, they’re going to be spending more money on subsidies to help the British people through the winter and more pound? Denominated spending actually makes the pound stronger, but you have aggressive quantitative easing and you have a relatively stronger US dollar. It’s possible that we see the pound decline, say, 35% more, unless something dramatic happens, like another event like today or another event by the government that really erodes credibility, I don’t see a lot more decline happening, but it’s a weird year. It’s a weird few years that we’re having right now. Right. So I think on some level it’s really hard to tell. And the problem with losing credibility is that you lose credibility. And if they erode even more credibility, it could be worse than anybody thinks. So I think that’s a small chance. I think we’re probably in a range at this point.

BFM

And if we take a look over at the US, we have seen federal officials reiterate the very hawkish stance that they have. But San Francisco Federal Reserve Bank President Mary Daly said that the bank is resolute by bringing down high inflation, but wants to do so as gently as possible so as not to drive the economy into a downturn. Do you think it’s possible at this point to engineer a soft landing, or is a recession inevitable?

Tony

I think it’s possible to engineer a softish landing. I think the problem with the Feds facing as they were very slow to respond to inflation, and so now they’re trying to respond as quickly as they can, and they’re responding in a very kind of brutal kind of way. Mary Daily coming out with these as gently as possible comments are good. And that’s new. Neil Cashari yesterday said he’s another Fed governor. He said there is the risk of overdoing it on the front end, meaning that the Fed could raise rates too quickly. So some of these governors are getting out with messaging, trying to soften the Fed’s hard message over the last couple of months. So the wording from the Feds, ongoing wording generally from especially JPOW, has said that they’re going to be ongoing aggressive hikes, and that’s scaring people. So, like, the Fed needs to be less aggressively hawkish in their language. So that doesn’t mean they turn dovish. That doesn’t necessarily mean they start doing QE. They just need to be less aggressively hawkish. And that’s just toning down the language. I think it’s a little bit too little too late in as much as markets have fallen by, say, 23%, I think, since the highs.

Tony

But I think if they start inserting some less aggressively hawkish language, we can have a smoother glide path to balance, meaning higher interest rates, more moderate equity markets at a slower pace.

BFM

Okay, Tony, can you help us understand what happened today in markets? Because I’m a little bit confused in the sense that US ten year treasury yields fell the most since March 2020. On a day like this, equities shouldn’t go up, but it did. Why?

Tony

Well, I think equity investors are seeing what the bank of England did, and I think on some level they see equity markets versus central banks as a bit of a game of chicken. And the bank of England blinked. And I think equity investors are hoping that the Fed will slow down or blink. This is not a pivot. Meaning when people talk about the Fed and say a pivot, they mean pivoting to quantitative easing and pivoting to dovish language. I don’t see that at all, but I think equity investors are seeing a chance of the Fed becoming less aggressively hawkish, as I was saying. So I think that’s really what happened is just a quick breath think, oh gosh, maybe they’re going to slow down a little bit, which would be positive for equity markets.

BFM

And if you take a look at the Nordstream gas pipeline disruption, that does seem to have changed the energy calculus in Western Europe. How do you think it’s going to affect the dynamics of energy prices over there, especially with winter looming?

Tony

Yeah, I think it will affect, but there isn’t a lot of gas coming by Nordstream. There are other pipelines bringing gas to Europe, so it’s really, at the moment, more perception than reality. So Europe has a fair bit of gas and storage for winter. It’s 87% of their goal, so they’re in pretty good shape. They’re not in great shape, but they’re in pretty good shape. They can make it all the way through winter with what they have in storage, but they aren’t reliant on Nordstrom to fill their reserves further. So I think the kind of the gut punch on this is that it’s a pretty damaging leak and so it would be really hard to get it back online. If Russia say something happened with a resolution of UK, sorry, Ukraine, Russia, and there was optimism that Russia could turn on the taps again, that would be really hard to achieve. So it’ll be an expensive winter for energy in Europe. But Nordstream doesn’t really impact it all that much. It’s more, say, the long term hopes and expectations for Nordstream.

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 assessing what’s happening over in the UK with the actions by the bank of England overnight. That has helped somewhat to calm the plunge in the pound sterling that we’ve seen over the past few days. I think this pound has rallied, but how long this equilibrium will last, I think, is anyone’s guess.

BFM

Well, this morning pound against ringgate is 5.0260 at the lowest in the last two days, if I’m not wrong, 4.8. Right. So it has truly, truly recovered. But volatile markets ahead, I think still question marks about whether this trust economic policy makes any sense. Confusion over the tax cuts, how they’re going to pay for it, reverberating around global markets because we’ve seen actually global bond yields peak. Question about whether there will be more activities by central banks to intervene, to prop up their currencies or to restore come to their own respective markets, because we saw that in Japan. And apparently even South Korea says it plans to conduct an emergency born buyback program.

BFM

Indeed, we do see also that the yuan is coming under pressure, and China central bank has issued a strongly worded statement to warn against speculation after the currency dropped to its lowest versus the dollar since 2008.

BFM

I love the language. The language is released yesterday. Do not bet on one way appreciation or depreciation of the yarn, as losses will definitely be incurred in the long term. Can’t spell it out more clearly than that, right? Indeed.

BFM

716 in the morning. We’re going to head into some messages. And when we come back, what does long or need more? Another quarry or preservation of its forests? Stay tuned. BFM 89.9 you have been listening to.

This podcast is originally published in BBC World Service in this address: https://www.bbc.co.uk/programmes/p0d0yx50

The ride-hailing company said it was responding to a ‘cybersecurity incident’ and that several internal systems had been affected. Margi Murphy is a cybersecurity reporter at Bloomberg News and updates us on the story.

Why do we have such an attachment to some of our favorite brands? We know brand loyalty is a marketing executive’s dream – but how have some of our kitchen cupboards seemingly become even more than that – more like old friends? The BBC’s Dave Reid investigates.

The UK competition authority intervened after Facebook’s parent company Meta applied to buy out the gif platform Giphy. Technology reporter Ryan Broderick gives us the background.

Will Bain is joined throughout the program by Tony Nash, founder of the AI firm Complete Intelligence, in Houston, Texas, and by Shuli Ren, Bloomberg Opinion reporter in Hong Kong.

Transcript

BBC

Hello and welcome to Business Matters on the BBC. World Service will be with you today. Thanks so much for ending your week with us. Most linking off today, though, for our two guests, tony Nash, founder of the AI firm Am Complete Intelligence, joining us from Houston, Texas. Tony, welcome back.

TN

Hi, Will.

BBC

Ending the week with us, and you can tell BBC Sport have been in the studio here before because I just saw flash through on one of the panels here, the Houston Astros, your beloved Houston Astros getting underway in momentarily the baseball and joining us.

TN

That’s right. They’re doing well.

BBC

Thank you, they are. And putting in your Yankees under a lot of pressure, too, which I know will give you even more pleasure, tony, absolutely, yes. Tony Nash in Houston, because this is right in your wheelhouse, Tony. I want to pick up that point that Margie made right at the end there. First of all, these companies, A, specialized in technology, b are some of the richest companies on the planet. How on earth does this keep happening?

TN

There are always new ways to hack you’re as strong as your weakest employees. Temptation, I guess. And it sounds like they got in through a phishing attack. And it’s hard to make things 100% secure. If people want access to the outside Internet, if they want access to emails, these sorts of things, you have to have some ways for people to get in, unfortunately. And it’s just not surprising everyone gets hacked whether they admit it or not. And so this was just a very visible hack on Uber.

BBC

Yeah, Uber have been doing something interesting, certainly, tony, in my reading around this, I didn’t know quite as much about this. Perhaps you could explain more to people, but they were using ostensibly kind of a team of their own hackers to kind of test for vulnerable points in their system over and over again. And actually, bizarrely, that might have proved to be one of the vulnerabilities here. Just explain first that how it works and then how that might have happened.

TN

Yeah, I mean, it’s good practice to have people trying to hack your system. It’s probably good to have contractors doing it and also alternate them from time to time because you have to have different thinking about your security because there will always be people thinking differently about your security. And so it’s a challenge, and you have to be very careful. So it’s really easy to second guess Uber and say they did the wrong thing, but I’m sure they are industry best practice and more. It’s just a matter of, on some level, bad luck.

BBC

No, really interesting point, actually. In our earlier sister show, World Business Report, we were talking to Chris Low, one of our financial analysts, who were saying actually the share price was reacting on perhaps exactly that, actually, maybe you were better prepared for this than others. So an interesting kind of wrinkle to that element of it. She’s the blessing and the curse of new technology that we always want something new and shiny to sell to investors and to customers when actually investing, ensuring what we’ve got might actually be better long term for the business. Yes, Tony, I could hear you agreeing with that too.

TN

Yeah, it’s not an easy balance. Right. And Uber is in kind of a weird place, coming out of Covet and trying to get their business at the same place as it was and more. It’s difficult for everyone. And again, everything you do to remain secure can potentially hamper your ability to get revenue. Those are not different sides of the same coin. But I think you have to be careful about your security kind of overwhelming your business needs. So it’s a real hard one.

BBC

So you don’t become too cautious, I guess, going the other way.

TN

That’s right. Exactly. So it’s a real hard one to look at Uber and go, oops, they did something wrong. There’s always something done wrong on the security side within businesses. Right. And so they’re no different. And like I said earlier, they’re probably better than most people.

BBC

I’m a sucker for a good deal. Shirley, don’t get me wrong. Tony, you wanted to come in.

TN

Well, they don’t have people as full time employees, and this isn’t really to defend Uber, but they do give people a lot of flexibility. Again, it’s really hard to look at that and say, oh, they’re such a terrible company. I don’t believe that. I mean, they’re a very popular company.

BBC

Absolutely. That was just only in the past life. Stock markets was very much your bag as well.

TN

Oh, yeah. And also servicing global curry companies. When I was at The Economist, we did work for those guys in 2007. I remember one of them calling me with a situation just like this, and they said, It’s not public. We saw this. What’s your view on this? So I called the chief economist at the time, and I said, hey, this is happening. Should we worry about this? He said, no, it’s probably just a blip. So these are very serious things. We all know what happened in 2007 and 2008. So these are very serious things, especially when a company like FedEx says it. And so we have to pay attention. And if they say it’s already happened or this is old information, then, great, we’re already well into it. That’s the relief that I come out of this with is if they say that it’s happened some time ago, even if it’s a few months, great, that stuff happened. We’ve seen China closing down, and we’ve seen the number of the impact on the supply chains. And the US already had two quarters of negative GDP growth, and we see what’s happening with energy prices, other things in Europe.

TN

So it’s no mystery that we’re in a recession, right? It’s no mystery at all. I’m glad that we’re seeing things like this. FedEx report come to confirm it.

BBC

Tony taking us neatly to exactly one of those issues, the sort of extra pillar putting the pressure on here, energy. Big development on that in Europe today because there have been dramatic developments in Europe’s largest economy. Germany has taken over local branches of Russia’s biggest oil company, where you raised it. It’s all of this that’s in the mix, isn’t it? This sort of mess around where energy is coming from, how people can get it, how much is going to cost.

TN

Yes, it’s a very big problem, to say the least. And energy is going to cost a lot this winter in Europe. There is no debate about that. And we see coal plants reactivated, we see more oil, we see desperation for natural gas. I’m in Texas. That makes us happy. But it’s going to be very difficult in Europe. The saving grace of this is the following. Countries like Germany have plenty of room within their national account to subsidize a lot of energy so they can subsidize something like one time their entire GDP. So there is room to spend at least with the German government and a few others. So northern Germany generally can help their people or northern Europe sorry, generally can help their people with some sort of subsidy to get through the supply type of issue.

BBC

And Tony, obviously in a sentence or two, interesting pressure on the US. To pump more reopen pipeline. Difficult politics, isn’t it?

TN

Yes. Please call DC and tell them to reopen pipeline.

BBC

So speaks of Texas Republican. That Tony Nash with us from Houston, Texas, the energy capital of the US. Of course, sheli ran also with us from Hong Kong. Pay more from both of them in the second half of business matters right after we get you up to speed with the latest worldviews two rapidly middle ageing men discussing gifts there you can see the problem in a nutshell. Ryan Broderick of the content minds podcast helping us out with that. Tony, that’s the issue, isn’t it? Something starts off being cool, and then we’re talking about it in our defense on business matters late at night on a business show on the world service and radio four. That’s when it stops becoming cool. Perhaps.

TN

Perhaps. I sent a gift yesterday and today on twitter. Here’s the thing. I know I’m not cool, so I’m not trying to be cool. I’m just trying to contextualize something that I said. So whether it’s cringey or not, I don’t think it matters. I think people do it. Some of them are a little bit annoying, but a good Austin powers gift every so often is kind of fun.

BBC

Well, this is where I wrestled with it in that interview, tony, because he’s actually from an American advert. I think he’s from a geico insurance advert. But I like the pig who sticks his head out the window and he’s got kind of sort of a toy fan that whizzes in kind of excitement, and I like to use that one pretty regularly. And then listening to Ryan’s interview back, I thought, probably going to have to retire that Shelley bluntest submissions I’ve ever seen in what is normally a fairly dull area, competitions and markets, authorities submissions. Would you maybe advise if you could perhaps be a little less honest in the future?

TN

It’s worth it. Not cool enough. Defense, right? Yeah, I don’t know. I think it sounds like they like Meta headquarters and they like the free meals and the massages and all that stuff, and they don’t want to have to go out in the cold again. I don’t know why else you would do that.

BBC

And in a wider sense, we see it in some of the sectors, don’t we? We were talking about it in the office, actually, about things like craft beer. You get to a certain stage, actually, and that none of your fans or the people who love your product necessarily want you to sell out to a big company, a giant company, but actually, they’re the ones who can facilitate growing more, getting more eyeballs, getting more users on your products.

TN

I’d love to sell it. To.

BBC

Come find complete intelligence, call Tony. We’ll link you all up. Well, we’re going to stick talking brands. Complete intelligence, obviously an excellent one. Surely if you’ve got a plug, you’ve got about 20 minutes left in the program as well that we can get to. Tell us about what the magic of Tabasco is. Louisiana’s pride and joy.

TN

Well, obviously you don’t know about the enemy between Texas and Louisiana.

BBC

Of course.

TN

It’S great, and Louisiana is fantastic. We love that stuff here and it’s really a Louisiana thing, but Texans really love kind of spicy Louisiana food and of course, Texas barbecue.

BBC

In terms of brand loyalty, what is it, Tony? What makes a customer exactly like Shirley says? Because most people are driven by price. So why is it just ease and comfort? Or is there something more hooky about it, something cleverer in the marketing?

TN

Yeah, I think it’s comfort and as much as it’s a feeling, right. I mean, there’s a particular type of condiment that I like that I’m not going to mention on here, but I like that my family knows that I don’t take anything else. I’ve been in since I was a kid, right. And we don’t get any other brands because they just taste different, and my palate is just articulated for that taste. But we grow up with these things and they give us a level of comfort. And I think about my kids grew up in Singapore. We spent 15 years there. So there’s a particular brand, for example, of soy milk that they like from Singapore that reminds them of Singapore. They don’t want Japanese soy milk or whatever. They want this particular brand of Singapore soy milk.

BBC

Play that piece a little bit, because obviously it’s a huge constitutional and historic moment here in Britain. But it’s interesting the kind of global grab that the story and the event has had for days now. Do you think perhaps some of those silver screen portrayals are part of that story, part of that reason why sure, yeah.

TN

I lived in London when Diana died, and I remember being in London when the Queen Mother died, and not so much Queen Mother, but these previous events really did get certainly Western attention, if not world attention. And I think there’s a fascination with the Royal family, but I think there’s also kind of a confusion of, like, what do they actually do? I don’t mean that in a disrespectful way. I think that’s a lot of the.

BBC

Rest of the world no, we’ve seen some pretty quirky constitutional stuff this week, haven’t we? Things that we’ve never seen in this country on the tele before, some of the sort of announcements and Privy Council meetings and things that television is giving us a view into.

TN

Right. And I think that is something that is interesting. It’s puzzling and people romanticize a lot of that.

BBC

Of course, Tony in the US is going to be a huge global television event come Monday with US networks, I imagine, are all piling on the plane as we speak.

TN

Yeah, I’m sure they are. I don’t really know, but I’m sure they are very well.

BBC

But there’s going to be an appetite for it is, and it’s going to do big numbers there. And TV news has become a lot about big events like that.

TN

It is. And all sorts of non expert experts will come up to talk about the Royal family to fill that time. I think what I would love to see is people just take it in, whether it’s on video or whether they’re there. This type of event obviously rarely happens, right? So don’t give me commentary talking over the live events, just kind of show us what’s actually happening and occasionally explain what’s happening, but really just let people take it in more than have this kind of rambling commentary about it.

BBC

Well, of course, if people do want to take it in, the BBC website, BBC TV and right here on the World Service is going to have plenty of coverage of that on Monday. Tony Nash, Shuli Ram, been a real pleasure to have you with us on business matters. As always, both of you, have a great weekend. And to all of you listening, the same, thanks so much for being with us. Bye.

With stronger inflation data suggesting that the Federal Reserve will continue with their hawkish stance, what then does this mean for markets? And will inflation be exacerbated by the potential rail strike. Tony Nash, CEO of Complete Intelligence tells us whilst diving into the impact of a strong greenback.

Produced by: Michael Gong

Presented by: Wong Shou Ning, Shazana Mokhtar

Transcript

BFM

Good morning. You are listening to the Morning Run. 7:06 am. On Thursday, the 15 September. I’m Shazana Mokhtar with Wong Shou Ning. In half an hour we’re going to be speaking to criminal lawyer Srikant Pillay on the criminal defamation charges filed against the edge. But as we always do, let’s kick start the morning with the recap on how global markets closed yesterday.

BFM

It’s the tale of two halves because the US markets all closed up in the green. The Dow was up 0.1%, S&P500 up 0.3%, and Nasdaq was up 0.7%. Albeit actually it was a very choppy trading session with US stocks actually sometimes swinging violently between gains and losses throughout the day. Meanwhile, in Asia, it all closed in the red. Nikkei was down 2%, Hang Seng down two 5%, Shanghai was down 0.8%. Straight Times Index in Singapore down 1%, while our very own FBMKLCI was down 1.3%.

BFM

So first, some thoughts on where international markets are headed. We have on the line with us Tony Nash, CEO of Complete Intelligence. Tony, good morning. Thanks as always for joining us. Now, we saw equities plunged this week in response to worries over US CPI numbers. But if we take a closer look at the numbers itself, headline inflation only rose about a .1% month over month, which doesn’t seem like a lot. Do you think markets are over reacting and making much ado about nothing?

TN

Well, kind of. But what’s really happened is it’s about expectations for the terminal rate, which is basically the terminal rate is when does the Fed have to stop hiking at what rate? Right? So the terminal rate expectations change from 4% to about 4.3%. And with that expectation, that means that the Fed would have to hike more and maybe hike faster. So investors were reacting to that because consensus had become 75 basis point hike in September, then two more 50s before the end of the year, and then maybe a 25 and boom, we’re at the terminal rate. But with a rise in the terminal rate, we could have a 75 in Sep, 75 in October, and then who knows after that if inflation doesn’t slow down. Now, what I see and what you mentioned is a zero 1% rise month on month in August. That tells me that the rate of rise of inflation is slowing. So on a year on year basis it still looks bad, but the rate of rise of inflation is slowing. That’s good news. Okay, let’s see what happens. And we could have some positive unexpected things like, let’s say for example, the Russia Ukraine war ends or something like that, right?

TN

But what I’m expecting are things like a continued deceleration of inflation. It doesn’t mean we’re going back to pre 2020 pricing levels, it just means that the rate of inflation is slowing and spenders get used to paying higher prices over time.

BFM

So, Tony, what then is your feel in terms of what the Fed will do at their meeting next week? Are you expecting a 75 basis point hike? I even hear some houses saying a 100 basis point hike.

TN

Yeah. So I think there’s a 20% to 30% likelihood of 100 basis point hike. And everyone loves to kind of freak out about the Fed. So it’s possible that we have 100 basis point hike. I think what they’ll end up doing is hiking 75 and they’ll try to sound really bearish about things or sorry, not bearish, really hawkish about things. That’s what I meant to say. So they’ll hike 75. They’ll basically say, if you don’t slow down, we’re going to hike more, and then there’ll be another 75 where we hit expected or where the market generally hit expected at 50 for the next meeting.

BFM

Two year US treasury yields continue to spike, worsening the inversion that already existed prior to this. In what time frame can we expect to see some equilibrium return to fixed income markets?

TN

Yeah, I think that’s largely happening because of uncertainty about inflation expectations. I think there had been a hope that inflation would moderate more on a year on year basis in August, which it didn’t. And so that added some uncertainty into the mix. And so you’re seeing those short yield spike based on that uncertainty. And so when we see more certainty, a lot of this stuff really started to rise in October, November of ’21. Okay. And so as we get into those months, what we expect to see are some base effects. So we already started to see things rise in October, November of ’21. As we get to October, November of ’22, we will have already started getting at a higher pricing level in Q4 of ’21 anyway. So we expect to see the observed inflation slow as we get to those months and we’ll see a little bit more predictability, a little bit less uncertainty about inflation.

BFM

Tony, I want to pick your brain on this talk of a potential rail strike in the US. How detrimental will it be to the economy? Or is it just a blip?

TN

No, everyone goes back to the supply chain bottlenecks that we saw, and of course the union is playing on those fears and the consumers are worried about more supply chain bottleneck. Is it a problem? Yes, it’s a big problem. So I don’t think anything you’re seeing in media at this point is kind of too shrill. It could be really bad. And so this stuff will come down there’s brinksmanship it’ll come down to the last minute and will likely, I’m sure it will be solved somehow. Right. And again, that’s a secondary impact of inflation. Right. So we’ve seen things rise. Dock workers are saying we’re not being paid enough. And then it’s that wage price spiral that you hear about. So wages rise. I know in Asia people are a lot more aware of this than people in the US are. Where we typically have say, one or 2% inflation, you don’t really see a wage price spiral here. I think you see it in spurts in Asia a lot more frequently than we see it here in the US. So yes, it’s a real problem. Yes, they’ll get their raise or a significant portion of it.

TN

It could be ugly until it’s settled, but I don’t expect it to be a protracted issue. Sorry. The other thing I’m not to think about is we’re starting to enter kind of the pre holiday import period. So the guys who are negotiating against the dock workers know that if this goes out a month or two months it’s going to hurt all that stuff on the shelf at Walmart, all that stuff on the shelf and all the stores, Amazon, all those guys.

BFM

Yeah. So some people might not get their Christmas presents on time. Right. But do you think the other headwind is the US dollar strength, which it has come down slightly last night, but even if we look at the Bloomberg Dollar spot Index on a year to date basis, it’s 11% and Oracle used that as an excuse to explain why earnings were a bit soft. How much more of these announcements are we going to see from US corporate?

TN

US dollar is going to be the Pinata. It’s going to get the bashing this quarter and earnings reports, everybody is going to blame weak earnings on the US. Dollar. Everybody. So it’s 11% year to date. So people are going to say if they missed by 11%, they’re going to go it’s the dollar is fault, regardless of what operational issues they have, regardless of what inventory issues they have, they’re going to blame it on the dollar. Wall street analysts know better, but they’re going to accept that as an excuse and that’s just the game that everyone’s going to play this quarter.

BFM

Tony, thanks very much for speaking with us this morning. That was Tony Nash, CEO of Complete Intelligence, talking to us about some of the trends that he sees moving markets in the days and weeks ahead. I really like the comment he made about the US. Dollar becoming the Pinata in next season’s quarterly report.

BFM

I’m going to bang it, try to hit it to get all the sweets out.

BFM

Right. We could probably do a game like a bingo game how many corporates mentioned US dollar as the reason for faltering earnings perhaps something to look for.

BFM

I mean even in Malaysia we’ve got corporates doing that all the time.

BFM

Right.

BFM

And it’s a non cash item but clearly an excuse. So we’ll be watching this space, lots of headwinds. I think the other news coming out of Asia, which is interesting, is actually and this is of course according to people familiar with the matter as opposed to unfamiliar with the matter, SoftBank Group founder Masayososhi’s Son has revived discussions of setting up a third vision fund. And what’s ironic about it is because just a few weeks ago, he apologized for the disappointing performance of his first two funds.

BFM

You know how they say there’s that saying goes, insanity is doing the same thing over and over again, but expecting different results. I wonder if that’s what this third vision fund is in a way. If the first two haven’t really performed, is setting up a third fund really the answer?

BFM

But it’s amazing. People do give him cash, right? It’s not like he doesn’t get new injections of cash all the time.

BFM

It reminds me very much of Adam Newman, actually the founder of WeWork. And even though he had such an infamous fall from grace, he is back in the corporate scene now with a new venture and people still continue to give him money. So go figure. Some people are just really good at getting cash.

BFM

Selling themselves in the brand.

BFM

7:16 in the morning, we’re heading into some messages and when we come back, we are going to be taking a look at the proposal to expand the parliamentary seat allocation for Sabah and Sarawa. Stay tuned for that conversation. BFM 89 nine you have been listening to a podcast from BFM 89 nine, the business station. For more stories of the same kind, download the VFM up.