Category: Podcasts

Tony Nash joins the BBC Business Matters podcast for a discussion around what’s happening in the world right now: Malaysia’s working class, Tesla’s new branch in Germany, Biden’s recent visit to Europe, lifting of tariffs imposed by the Trump administration, energy crises in Europe, and so much more.

This podcast first appeared and originally published at https://www.bbc.co.uk/sounds/play/w172xvqwxfg1cr7 on March 23, 2021.

Show Notes

ST: Tony Nash, economist in Texas, CEO of Complete Intelligence and host of The Week Ahead, a weekly YouTube show on markets and geopolitics. Hello. Good evening, Tony.

TN: Hi. Good evening. Good morning.

ST: Tony, let me bring you in here on this one as well. I mean, you may be living in Austin, Texas, at the moment, but is there anything you want to pick up on because you grew up in this area?

TN: Sure. Yeah. I think what Jessica says about the migrant labor is a key issue because it prices a lot of Malaysians out of working class jobs. So if those minimum wages apply also to migrant workers, then it presents a fairer playing field for Malaysians. Without that, it’s a labor arbitrage and it’s a domestic labor arbitrage. So I think the Minister has a tough job ahead of him in that respect. I do think, though, as you mentioned in your interview, it’s a good time for energy. And I think if Malaysia can swing the current energy prices into investment and technology, I think they could look at some seriously interesting opportunities.

ST: Yeah, indeed. As he said, he was being helped by the price of oil at the moment. All right, Tony and Jessica, for the moment. Thank you both very much. Tony, let me come to you on this one. You’re based there in Austin, in Texas. So is Tesla. Now, when are they opening their big factory there?

TN: First, I want to say I love the statement that Germany is not known for risk affinity. I thought that was a highlight, but the Tesla factory in Austin started production in December of 21, and they have a grand opening on April 6 of this year. So they’ll start rolling cars off the factory line. It should be in April.

ST: Okay.

TN: So it’s a hugely optimistic statement by Tesla to do all of these openings. It’s fantastic.

ST: Yeah. We have to wait and see where the plans are for the next one then. Tony Nash in Austin, Texas, what do you make of this? How is this going to go down with American producers?

TN: I think when these restrictions were put in by the Trump administration, the sense that I always got was that the UK got caught up within some of its Brexit and immediately post Brexit issues. My understanding of that time, that era was that the tariffs were really focused on countering subsidies and nontariff barriers. And the UK steel industry is not as reliant on subsidies and nontariff barriers as the European steel industry is. Of course, there are some, but my understanding was that that wasn’t as big of an issue for UK steel. So I was always confused why the UK got caught up in this. So since it’s out, I don’t think specifically UK steel is the issue. I think Chinese steel is the bigger issue by American producers, and the dumping of Chinese steel on global markets is really the main focus.

ST: Just as a quick aside, the other items that got caught up in this. I don’t know whether they’re sort of like a little footnote and almost like an aside to this, the jeans, the whiskey and the Harley Davidsons.

TN: Look, the UK is suffering on that side of the deal, right? I mean, if you can’t get American. I’m sorry. I’m just kidding. So anyway, once it’s done, all that stuff will go through, which is great. So a little bit of bourbon next time I visit London would be great.

ST: Oh, no, we need to take you to enjoy some Scottish whisky, I’m sure. But that is the other question that’s always in the background now of this one now coming through to the forefront is now this is out the way. Could there be talks again, restarted again on that sort of full scale free trade deal with the US? Do you see that as happening anytime soon?

TN: I think Americans would welcome it. Absolutely. I think there is a warm spot in many Americans heart for the UK, and I think Americans would absolutely welcome it. There would be almost zero opposition to it.

ST: All right, Tony, for the moment. Thank you. Tony. Let me bring you in. Now, President Biden is traveling to Europe in the next few hours. He’s starting with a NATO meeting, also meeting with EU, European Union and G7 leaders. They’re now to Poland for discussions about the humanitarian response. What do you expect from this felt that this is more of a signal that he’s actually there. He’s made the trip or something more significant?

TN: Well, I think he has an opportunity to do something very significant when he speaks to the European Council. The EU right now is developing a defense plan and putting together plans for hundreds of billions of euros worth of spending on defense. And if Biden were to endorse that at the European Council, it would send the message that the US is very supportive. Unfortunately, within US government, within State and Department of Defense, there are career bureaucrats who are opposed to Europe defending itself. So if Biden were to make a very clear statement at the European Council that he supports Europe putting this debt package together to put its own very strong defense together, it could be a significant trip.

ST: How is this playing back at home for him? I was looking at his approval ratings earlier. He’s a new low of 40% as according to a poll conducted or in the last couple of days. Is that as a result of what he is saying or what he is doing at the moment or anything else?

TN: The biggest thing that’s dragging him down right now is inflation. And the White House has really tried to say that inflation started when Russia invaded Ukraine, and Americans know that it started much earlier. And so Americans have been very skeptical since the White House has tried to say that inflation lays at the feet of Russia. They’re very skeptical. His polling has really declined over the past, say, two months, partly because Americans feel like they’re being misled on that, and it hits people’s petrol tanks and it hits their pocketbooks and everything else. That’s the biggest issue that can make him unpopular.

ST: But I mean, just staying, though, with his stance on Russia and Ukraine, how is that particularly playing out at home? Would people like him to get more involved or less involved? And is it purely just domestic matters that they have on their minds at the moment?

TN: I think people see the news and hear the news on it and kind of the headline, Putin is a bad guy. It’s hard to disagree with that. But I think many Americans that I speak it to and many who I see say in social media and other forums, they just don’t want to get directly involved. Americans are happy for Europe and happy to support Europe to solve this problem. But Americans generally, from what I can tell, just don’t want to get involved. So we’re happy to send aid, we’re happy to send materials and so on and so forth. But most of the Americans, at least that I talk to, maybe I’m only talking to a minority of people, but they really don’t want to see American personnel on the ground there.

ST: Yeah. There are suggestions that he will announce measures to end European reliance on Russian energy, or at least some sort of plan or ideas or opinions on that. What could he possibly suggest? What could he put on the table, throw on the table for that?

TN: Texas where I’m living, we have a lot of gas in Texas, a lot. We flare a lot of it, which means we burn it at the well, that will require many more vessels to transport liquefied natural gas, sure. But we’re very happy in Texas to support the energy to Europe. So I would think that part of a plan has to include US energy going to Europe. It may not be all of it, but it surely should be part of it.

ST: Not just the tankers, but obviously the ports that are able to take that on board and then the infrastructure that would be needed there. Tony, it’s cost of living that’s dominating the headlines for you, isn’t it?

TN: It is, yeah. I’m really curious to see what Jessica is going to say after that. So we live in Texas for the energy capital of at least the Western Hemisphere, if not the world. So seeing, say, WTI and Brent at the prices they are is really helpful to my neighbors. It’s really helpful to the state government here and the taxes that we raise. Unfortunately, there has also been a massive influx of people into Texas over the past year or two years. So I have a friend who’s selling a house right now in Houston, and the price has risen by 30% in the past six months or something like that. So real estate inflation here. It’s not just petrol or gasoline, it’s not just energy, it’s real estate. It’s everything. As I said, we’re seeing an influx of people from outside California, New York, other places coming into Texas and they’re used to paying a lot more for things. So people moving here will find a house online without seeing it and buy it. And the prices are relatively cheap to what they’re paying in wherever they’re from. So Texans are facing what people in Idaho and Oregon and some of these other States where Californians have moved in the past.

We’re starting to face some of those issues and the cost of living is becoming a real issue here.

ST: Totally cutting out people who now can no longer afford to buy them where they’ve been born and grown up. Tony Nash. Joining us from Austin, Texas and you, wherever you are in the world, listening to us today on Business Matters. Thank you very much for your company. This is Business Matters here on the BBC. See World Service. Until next time, thanks for listening. Bye.

The Fed has finally increased interest rates hikes for the first time since 2018 by 25 basis points, but what are the implications for the market? Tony Nash, CEO of Complete Intelligence shares his thoughts on this

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/could-stagflation-be-a-worry on March 17, 2022.

Show Notes

SM: BFM 89 Nine. Good morning. You are listening to the Morning Run. It’s 706:00 A.m. On Thursday, the 17 March. I’m Shazana Mokhtar in studio today with Tan Chen Li and Wong Shou Ning. It’s looking quite foggy outside our studio windows here. So if it’s raining out there, we hope you stay safe on the road as always at this time of day. Let’s recap how global markets closed.

WSN: Yesterday in US, Dow was up 1.6%, SMP 500 up 2.2%, Nasdaq up 3.7%. Asian markets actually quite happening there. Nikki up 1.6%, Hong Kong and up 9%, and Shanghai Composite up 3.5%, STI up 1.7%. FBM KLCI up zero 9%.

SM: So I think we can see that the Asian markets are really rallying on the back of some news coming out of China, the fact that Chinese authorities are going to intervene to kind of support the market after this historic route that we’ve seen over the past few years.

TCL: So basically they came out with a statement with very positive market measures, one of which is that they’re going to emphasize financial stability. They’re not going to go after the technology companies. So as a result, all US China listed stocks actually sought the most. In fact, NASA Golden Dragon jumped 33% on Wednesday.

SM: All right, well, not only are we seeing announcements coming out of China, but we also saw the Fed make an announcement yesterday about the raising of rates. So joining us for some thoughts on where markets are headed, we have on the line Tony Nash, the CEO of Complete Intelligence. Tony, good morning. Thanks for joining us today. So let’s talk about the Fed announcement. After much anticipation, the Fed has finally increased rates for the first time since 2018 by 25 Bips. They also signaled six more hikes for this year. So markets seemed really relieved. We see the green rally across US markets. But has this truly been priced in?

TN: Well, I think people feared worse, but what you need to know is they raised by 25, but it was a range of 25 to 50, so there will be movement in that range over time.

TCL: Okay. But the Feds also said that they will be starting to shrink its US. 8.9 trillion billion balance sheet. Do you think that’s going to shape markets more than the height which have been talked about a lot?

TN: Yeah, I think the shrinking the balance sheet will have a big impact on the available currency in the market. Inflation is already killing available money. It’s eating people’s purchasing capability. But shrinking the balance sheet takes money out of circulation and so that will make the economy feel higher.

WSN: The US PPI numbers jumped 10% while the New York State manufacturing index recorded a steep drop in economic activity. Are we looking at possible staff stationary signs in the US economy?

TN: Yes, I think that’s a very real worry with the labor market where it is with elevated salaries, with inflation, the 10% CPI there or the PPI there. Sorry. And with manufacturing sluggish, really, supply chains are hurting manufacturing still, and that’s hurting available inventory. So we are really looking at a stagnationary environment.

SM: And Tony, oil prices have been on a roller coaster from a peak of $130 to below $100 a barrel. Now, can you give us some insight into the current supply demand dynamics underpinning these price levels?

TN: Yeah. Obviously, things are tight with the embargoes on Russia, not necessarily as tight in AMS, as crude as being sold in China and other places, but it’s certainly tight in Western markets. And we don’t necessarily see that alleviating anytime soon.

TCL: And just curious, right. About the Russian bond situation. Do you see that deteriorating? Perhaps.

And even the rubber coming under increasing pressure. It’s already down more than 40%.

TN: Yeah. And the rubber appreciated just a little bit. But the debt issue is a real problem, and I think that’s going to get worse before it gets better.

TCL: But will there be a contagion effect on global markets if the Russian bonds actually default?

TN: There would be. You’re already seeing impact on European banks, which are the banks that own the most Russian debt. So we’ve seen a lot of pressure there, but some of that has been alleviated in recent days, but still, that real debt pressure is there mostly for European banks.

SM: Tony, thanks very much for speaking to us this morning. That was Tony Nash, CEO of Complete Intelligence, giving us some quick takes on some of the trends that are affecting markets, from the Fed raising of rates to what’s going to happen to Russian bonds, whether they’ll be able to make those payments.

TCL: Yeah, but staying on the topic of the Fed, I think the 25 Bips was pretty much anticipated. It was probably priced in. But what I find interesting is that they are continuing on their policy normalization, which is six rate hikes for the rest of the meetings this year. And they’re also launching a campaign to tackle the fastest inflation in four decades, even though I think there are concerns that global growth might be slowing down as a result of this Ukraine Russian war, not helped by the fact that China is actually some key cities like Sunshine and Shanghai are in lockdown. So clearly impacting the global supply chain.

WSN: And the Fed also said that they are going to allow the 8.9 trillion balance sheet to shrink at the coming meeting, but they didn’t elaborate more about this.

TCL: Yeah. The question is, can they engineer a soft lending to the world’s economy? Because you always have this concern that the Fed will over tighten, and when they over tighten, that might cause global markets to kind of crash. It’s a very delicate balance because inflation is extremely high, so it’s probably going to come in above 8% at the next reading.

WSN: Yes. CPI is about I think the last one was 7.9% in terms of inflation. Fed actually have a projection on it, and it’s 4.3% this year, which is still coming down to 2.3% in 2024.

TCL: I think this 4.3% is a bit like Malaysia CPI official figure of 2.5%. If you tell anybody that, they’ll start laughing.

WSN: Yeah, I think this is an inflation number, not the CPI number, though.

TCL: No, I know. But you have official numbers and unofficial numbers, right?

SM: That’s right.

TCL: But other I think interesting news Is coming out of China because we mentioned earlier the NASA Golden Dragon index hit a high of actually went up 32%, closing and even hang Seng yesterday closed up 9%. That’s a Whopper jump on a one day basis. And that’s very much driven by the fact that China came up with some key announcements to keep the markets going. And this was on the after a top financial policy committee Led by Vice President Yuha, who is the top economic official. So he made some promises, Stabilized better financial markets, Ease regulatory crackdown, Support property and technology companies While stimulating the economy.

WSN: But a lot of investors are also wondering, are they just words? What exactly are they going to do? They need more than just words. They need more action.

TCL: Yeah, but you just want to say this to calm markets down. It’s not the first time he’s done it. In 2008, this exact official said the same thing. It wasn’t really followed by a lot of action, but it’s a signal to the market that maybe they will ease off in terms of any crackdowns, which they did last year, Especially for the technology companies, Gaming companies, Healthcare companies, Education companies, when trying to pursue this common prosperity model. So I think they said, okay, we’re done with what we want. So you investors, maybe you don’t have to worry so much about policy risk.

SM: I think.

TCL: Yeah.

SM: So it’s going to be interesting to see whether this will actually put an end to the route. This could just be the calm before the storm, as some analysts say.

WSN: But they actually address all the five major issues that’s actually plaguing the market. They want to keep the stock market stable. Tech crackdown will be nearing an end, which you said resolve property risk support, overseas listings and also on us goods dialog on ADRs. So these are the things that have been plaguing investors, and they try to address all these concerns.

TCL: We will be asking Brock silvers These exact questions. He’s the chief investment officer Of Kayan capital to do tune in at 915. Maybe he might give us an indication of what to buy, actually, in regards to anything China related.

SM: All right. Well, it’s 7:14 in the morning. Stay tuned to BFM 89.9.

What should we expect from the FOMC meeting minutes in the US and also the latest CPI and PPI figures from China? Will oil prices continue to rally or slump with the latest development near Ukraine? And will it be another IPO year in India this year? Tony Nash, CEO of Complete Intelligence tells us more.

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/rate-hikes-in-the-us-and-rate-cuts-in-china on February 17, 2022

Show Notes

SM: BFM 89 Nine. Good morning. It’s Seven five in the morning on Thursday, the 17 February. You’re listening to the morning run with Shazana Mokhtar, Philip See and Tan Chen Li but first, let’s recap how global markets closed yesterday in US.

TCL: Dow was down zero 2%. S&P 500 was up zero 2%. Nasdaq down. .1% Asian markets Niki up 2.2%. Hong Kong’s up 1.5%. Shanghai Composite up 6%. Sti up 5%. FBI KLCI up zero 2%.

SM: All right, so all green and Asia, but some red coming in from the US markets. For more on where 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. Can we start with just the FOMC minutes that came out overnight? What did you make of them? And do you think this raises the possibility of a 50 bits rate hike in March?

TN: Yeah, I don’t think it raises the likelihood of a 50 basis point hike in March. I think it will likely be a measured approach. We have a pretty complicated central bank system in the US right now. We’re still easing until March, meaning the Fed is still buying securities and stuff until March. That doesn’t stop until March. So we need to start quantitative tightening, which means we sell off some of those assets because there’s too much currency in circulation and then raising interest rates will unlikely to be 50 basis points. The thing to remember is the US hikes in bands. So zero to 25 basis points, 25 to 50 basis points. So even if they come out saying it’s a 25 to 50 basis point hike, it doesn’t mean it goes straight to 50 basis points. They could hike at 32 basis points. And so it’s likely some sort of calibration like that that will happen.

PS: So then if you look at it, maybe not on this specific occurrence, but cumulatively, in 2022, what was originally expected to be 75 basis points for a whole of 22 people are expecting it to go as much as 150 basis points. Now, do you agree with that assessment?

TN: Yeah, I’m not sure that 150 is correct. I think it’ll be north of 75 and we expect it to be around 100. So around a 1% hike by the end of the year. Keep in mind that the Fed does need to tighten. That’s a reality because of inflation. But we also need to remember that it’s an election year in the US, and the party in power never wants the Fed to be too aggressive in an election year. So the Fed will make motions, but they’ll probably also let it run a little bit hot because they don’t want to upset the politicians in power regardless of party.

TCL: Ahead of the Russian following through and announced troop withdrawal near Ukraine.

West Texas crude has up to around $90 a barrel. Even so, the oil market remains tight. How do you think this will play out in the weeks to come?

TN: Yes, we expect crew to really trade sideways for the next several weeks, and we’ve been saying this for about the last two weeks, and so it’s kind of proving to be that. And so it will be volatile, but it will trade sideways. The thing to remember is that crude typically rallies during tightening cycles. So we’ll likely see crude rise a bit from here. There are certain people who say it’ll be 120 or $150. I don’t necessarily subscribe to that. There has to be a certain things aligned for that to happen. But there is underlying medium and long term strength for crude oil because of the underinvestment that we’ve had over the last decade and well under investment in exploration and in production capacity. So we need an investment cycle to have the capacity to reduce long term prices.

PS: Yeah. That’s why I’m wondering whether she’ll come into the picture. Right.

As you say, there is this medium long term upside potential still happening. There’s still that pent up demand won’t shall come into the picture then?

TN: It should yeah. I live in Texas, so I love Shell, but, yeah, it should come into the picture and it should help to reduce some of those prices over time. Absolutely.

SM: Tony, if I could get your thoughts on where you think supply will increase. I think Iran is coming up in the headlines again. There seems to be discussions on the nuclear deal. How do you see that playing out?

TN: I think Iran is already preparing to start exporting. So I think Iran is already exporting something like a million barrels per day, whether it’s official or unofficial. And they put $115,000,000,000 into their next fiscal year budget from oil revenues. And they’re already marketing, especially around Asia. They’ve been in South Korea recently and other places. So Iran will export oil. I think whether or not the nuclear agreement is agreed.

I think there is a skepticism that the US will enforce any embargoes.

TCL: Moving to China after last month’s ten basis points cut. The PBOC has refrained from cutting interest rate this week on the back of the slowing inflation in China. Should PPOC have adopted a more aggressive approach, you think?

TN: No. I think they need to signal I think it’s a fine path. You and I, we’ve discussed this several times since probably Q three of 2021, that I’ve expected the PVoC to start loosening in late Q one of 22. So I think the PVoC is actually listening to BFM, which is pretty awesome. A big part of this is really to weaken CNY, so it’s to stimulate the Chinese economy domestically, but it’s also to weaken the currency because they’ve had a really elevated, really strong currency over the past year and a half. And that’s partly been to fight inflation and commodity prices. Now that a number of those commodity prices, not oil, of course, but some of those commodity prices have come down off of those very high levels. It’s time to weaken their currency, which will help their exports.

PS: Which comes back to the question about China being the world’s factory, I think breathing as far as relief when we saw factory gain, inflation ease a bit to about 9.1% in January. What’s your take likely scenario of PPI moderating?

TN: That’s a good sign. So PPI peaked at 13% and so that is a good sign that the PPOC can start to moderate in ease. So I think aggressive moderation could potentially contribute to PPI. But if they’re moving in that direction gradually, as PPI eases, they’ll start becoming more aggressive about their intervention. So China is also entering potentially a slow period for the economy. So PPI will likely flow as a result of that. But as China had an appreciated CNY, they also accumulated a lot of things like industrial metals like copper and so on and so forth. So it’s not as if they need to continue to buy this stuff in huge quantities. They have a lot of storage of those commodities right now.

SM: Tony, let’s have a conversation with a quick look at what’s taking place in India in markets. India’s new stock listings are losing their edge. I think they’ve been calamitous IPO of PTM, Ecommerce, Domato and Nica. I mean, what do you make of this? Are the IPOs in India all hype and hoopla, but no substance?

TN: Yeah, I think these particularly have been a lot of hype. I think they’ve kind of peaked too early. Firms like tomato. I think every middle class urban Indian has used tomato. So it’s not as if they don’t have market penetration, but they’re really burning cash. And I think investors at this point in the cycle are already rotating out of technology. So they’re wary of firms that either don’t make money or burn cash or are very expensive in a share price perspective. So it’s the rotation out of tech. These companies need to show profitability and they need to have a more appropriate valuation. So I don’t think there’s necessarily Indian IPOs are out of favor. I think it’s really value with these companies.

SM: Tony, thanks very much for speaking to us today. That was Tony Nash, CEO of Complete Intelligence, giving us his thoughts on some of the trends affecting US markets. Also some developments in China and India as well.

PS: Yeah, I think India has a long term potential, but I think this is a bit of aberration, I believe. I think the IPOs that have come out have really been not stellar for sure. I think it’s causing a lot of people to rethink one of them being all your rooms, which is planning to IPO by saying that put on hold. So, yeah, let’s hope to see some long term gains in the future for Indian market.

TCL: I am quite curious to see and watch the US market, especially on the oil and also the inflation because has the inflation really peaked already or are we going to see higher numbers coming up in the next month inflation report? That’s something that’s unknown for now.

Tony Nash from Complete Intelligence explains whether the US market’s biggest 4-day rally since November can sustain?

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/will-the-rally-sustain on February 3, 2022.

Show Notes

SM: BFM 89.9. Good morning. You are listening to the Morning Run. I’m Shazana Mokhtar together with Wong Shou Ning and Philip See. It 7:05am on Thursday 3rd of February. But first, let’s recap how global markets closed yesterday.

WSN: Well, the US had a pretty good day. That was up 0.7%, SP 500 up 0.9% while Nasdaq was up 0.4%. And for Asia, the only market that was really open with the Niki, and it was up 1.7%. Hong Sung, Shanghai, Singapore and our very own FPM KLCI.

SM: We were all closed for celebrating the Year of the Tiger. Speaking of meta, I think the results came out and they were not within forecast essentially.

WSN: Well, actually after hours, right. The trade actually the share actually tumbled more than 20% in extended trading earlier. And I think it’s on the back of like what you say, Charles. It’s disappointing earning results. And added to that, they are giving weak guidance and said that user growth has stagnated. Now that’s kind of scary for a company the size of matter.

PS: Yeah.

Just to break down the numbers, earnings per share was at $367 versus the expected 384. Revenue was at $33.67 billion. The expected was 33.4, which wasn’t so bad. But Facebook also missed estimates with user numbers with his daily active users at one point 93 billion versus the expected one point 95 billion.

WSN: Now, I think why the markets are nervous is because when you think about it. Right, this company is at a critical juncture at this point. It’s fighting a regulatory battle on multiple France. And it’s also, remember, guys, it’s trying to shift into the Metaverse. And this shift is costing them an extremely a lot of money. So whether they can translate these KPCS that they’ve already kind of agreed to in terms of $2 and cents, that’s the question mark when your core business is not growing.

PS: I guess a big question of how do you monetize from meta and that pathway has not been articulated very carefully, isn’t it? But that’s a long term expectation. As you said, Shannon, there’s so much regulatory pressure on them. And I wonder with the whole discussion about your revenue source, whether you can rely on advertising revenue now going forward. That’s a big challenge for Facebook going forward and better.

SM: I mean, that’s going to be one of the major headwinds to them. I mean, Apple’s iOS changes affected ad targeting and measurements. That’s already a headwind. There’s also the fact that a lot of people are sort of flocking to other options when it comes to social media TikTok, YouTube. I think the advertising rates for Metsa’s own Reals on Instagram, that’s a lot lower than what’s available on other unfeeding stories.

WSN: No rewind, a few earning season rewind. Let’s go back a few quarters. And I think what has happened is that 18 year olds to 29 year olds were flocking to Facebook. Right. So the question is better, is it going to attract them? And what progress are they going to make? So that’s another thing that the markets are looking at.

SM: Joining us on the line now for analysis on what’s moving global markets, we have Tony Nash, CEO of Complete Intelligence. Tony, good morning. Thanks so much for speaking with us today. Can we get a quick reaction from you then on the disappointing results from Meta and Spotify? Does this mean something for tech bargain hunters?

TN: Well, I’d be really careful here because tech is really a deflation play. It’s not an inflation play. And so as we’re in the midst of the inflation cycle, there’s more movement to other sectors. So I don’t necessarily maybe it’s a short term opportunity, but again, if I was investing, I’d be really careful here with the Spotify and other misses.

PS: And can we get your perspective on the energy and financial sector? They helped the US Equities stage a mini rally over the last few days. Why are these economic sectors being buoyant while others like tech creating?

TN: Yeah, well, energy, commodities, finance, those are deflation plays or those are inflation plays. I’m sorry. And so that’s why more money is moving into commodities and energy and so on and so forth. So the market seems to be indicating that it doesn’t believe at least the equity market seems to be indicating that it doesn’t believe the Fed will fight inflation effectively. So they seem to be indicating that we’ll keep ripping on inflation.

WSN: So, Tony, how should we allocate our cash? Let’s say we have cash. Where would you be putting your money?

TN: Oh, gosh. Well, you really have to that’s an individual question. I just want to be really careful. So there’s a lot of money moving into commodities because there’s a belief that inflation is here to stay for a while. So if I were looking around, that’s really where I would look, of course, you have to have a risk allocation and you have to have some money and things like tech. But I would focus on companies that actually make physical stuff rather than, say, the work from home plays that we had over the last two years.

SM: And, Tony, let’s take a look at the US yield curve. It’s flattening even before the Fed has fired the first shot on rate hikes. What could possibly be causing this to happen? And do you see a short or long cycle of rate increases?

TN: Yes, I think to answer your last question first, I think what would be best is a short and abrupt cycle because it would really put a stop on the threat of inflation and so on and so forth. So like a 50 basis point hike in March would probably be the best solution we could find. But when we look at the yield curve flattening first, it is a traditional signal of a looming recession. So if you look at today’s employment data in the US, there was a loss of 300,000 jobs. So we’re in this weird place where we have booming inflation and a loss of 300,000 jobs. So it’s like the late 1970 stagflation. I’m not going to say we’re necessarily there, but if you just look at today, it seems like right. So what the yield curve flattening means is bond traders are pretty nervous and stagnation is ugly. So they seem to be saying that they don’t believe that the Fed will take the necessary action on inflation in the short term. So JPOW is not Volker is really what they’re saying. Paul Volcker from the 1980s. So bond traders can really make things difficult on both the Fed and equity markets.

So the Fed has a real balancing act to do. They don’t want equity markets to crater, but they don’t want bond traders to kind of extract their vengeance on the Fed and equity market. So if we don’t see rates rise, if we don’t see the balance sheet reduced, then bond traders are not going to be happy and it could get ugly in safety, too.

PS: I wonder what all this means for the US dollar. Where does the US dollar hit going forward and how do you see Euro and Yen perform against the greenback?

TN: Yes, again, that depends on which direction the Fed takes. If the Fed’s approach is weak and if fiscal support from Congress is weak or it doesn’t come, as many in equity markets seem to be implying, then the dollar will likely level out or even depreciate a bit. That would mean a stronger Euro and yen versus the dollar in a relative sense. And currencies are all relative. If the Fed resumes the hawkish talk that they started last week in Jpow’s comments and then on Sunday and Monday through some of the regional presence, then the dollar will strengthen and the Euro and the yen will weaken. Obviously on a relative basis. There’s not a lot of strength in Europe. And especially when you look at some of the geopolitical issues around, say, Ukraine and Russia, there’s a lot of risk in Europe. So people are really nervous about Europe and then Japan. Yeah, it’s stronger than Europe, but that’s really not saying a lot. So the yen will strengthen on a relative basis, but it’s not necessarily an endorsement of the strength of the economy.

SM: Tony, thanks so much for speaking with us this morning. That was Tony Nash, CEO of Complete Intelligence, talking to us about some of the trends that will be moving markets in the weeks and months ahead.

WSN: Yeah, it looks like markets are headed towards a very volatile period for the moment. So the Nest did really well. But what we do know is the results of Spotify and also Meta were disappointing. And after hours trading, these stocks took a huge hitting. Even PayPal, which results came out the night before, also is down 20 over percent. It looks like markets are seeing this glass as half empty rather than half full so the minute you disappoint right you really get whacked down because everyone basically was already making money the year before so their patience in terms of like writing out this maybe dip in earnings is just not there.

PS: It’s a consequence of so many issues, isn’t it? Because we saw this dip even before the real earnings came out, isn’t it? Because that was when JPY in the earlier minutes said that they were going to raise interest rates and also accelerate tapering and then I think these really disappointing earnings I think just compounded the matters worse but you do see some pickup going forward so whether they’re selective opportunities you don’t play the sector, you don’t play the themes but you really go stock by stock now, isn’t it?

WSN: Yeah, you have to take a very bottom up approach. The easy money is clearly made but you can see a shift of money and this is what Tony is saying is there’s a shift towards commodity prices right? So brand crew this morning is close to $90 barrel. It’s close to seven year high. This is despite the fact that OPEC has said that they are going to raise output but there’s a lot of judges because of the geopolitical tensions that we’re seeing coming out of Ukraine but maybe it’s also due to the fact that oil is truly an inflation play and inflation is here. It’s not transitory at all.

PS: Yeah, and I just think I do see some improvement also in Bitcoin right? If you can see across ECM and Bitcoin up actually marginally just one and a half percent you see some good news there but I wonder if this is a sign of whether that the pressure is really on the equities market going forward but the rest are still holding resilient.

Tech stocks on Nasdaq and NYSE are being pummelled as momentum behind the Fed’s unwinding policy continues. Tony Nash, CEO, Complete Intelligence, discusses.

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/tech-crumbles-as-spigots-close on January 20, 2022.

Show Notes

KHC: BFM 89.9 20th of January 2022, 7:06 in the morning with me Khoo Hsu Chuang with Philip See. Now let’s look at how global markets closed yesterday.

PS: Oh, it was terrible. I think that was a lot of downward pressure in the US. Down S&P500 were down 1%, Nasdaq was down one 2%. Asian markets were relatively mixed. The Nikkei was down two 8%. Hung Seng up marginally zero 6%, Shanghai Composite down zero 3%, STI up zero 1%, and back home, FBM KLCI down zero 8%.

KHC: And to discuss what’s happening in global markets, we now welcome Tony Nash, the chief executive of Complete Intelligence. Tony, Nasdaq down 8.3% year to date. It’s been a bit of a bloodbath. How concerned should equity investors be at this point in time, especially those that are heavily into tech companies?

TN: Yeah, if they’re heavily invested in tech companies, they should be very concerned when interest rates rise. It’s a signal that there should be rotation out of technology. And that’s clearly what’s going on. So if we look at Apple, for example, Apple was down over 2% today. They’ve had a really hard time recovering the kind of $180 share peak they hit in early December. So people have known for a month and a half now. Well, definitely over a month that there’s been a rotation out of tech. So we expect headwind for several months until we get a clear indication of the path that the Fed’s going to undertake and how steeply they’re going to raise rates and start to tighten their balance sheet.

PS: Do you think the markets are priced in all the hikes planned?

TN: I think markets are trying to figure out what rates they’re going to do. I mean, there’s gossip right now that they’re going to raise 50 basis points in March, which would be probably an overshoot. But that’s part of the reason you’re seeing such volatility in equities right now is people aren’t really sure. And it’s a debate. It’s an ongoing debate. So where do you put your money? Well, you look at commodities, you look at commodity companies, energy companies, more traditional say manufacturing, not durable goods. People really stocked up on durable goods over the last two years, but other types of manufacturing companies could be interesting.

KHC: And Tony, we’ll talk about oil in just a second. But where do you think the funds are flowing? I know it’s a liquid activity, but where are the funds flowing away from tech into?

TN: Well, if you look at Walmart, there’s some very reliable, say, retail names that they’re going into. If you look at some of the resource plays, like Goldfields was up almost 13% today, volley was up 4.5%. So some of these commodity plays are really intercepting those games.

KHC: That’s right. And of course, talking about commodities, oil is on a tail 13% higher for Brent at $88. West Texas is up 15% to $87. What are the key drivers behind this upper trajectory beyond obviously this market driven flows, Tony?

TN: Yeah. I mean, part of it is the rotation in the market. There are some supply constraints that have been talked about and kind of been undertaken over the past week with some activities in Iraq between Iraq and Turkey, Libya. And there are some political risks, of course, Kazakhstan, Ukraine and other places. But our view is that oil is really kind of topped out for this run. There’s potentially a little more upside, but we don’t necessarily expect oil to take a run at, say $100 right now. We expect a little bit of a pullback certainly later in the year. We expect much higher crude prices.

PS: Do you think this will have any short term impact on the travel industry then and Airlines particularly?

TN: Yes, of course, it depends on what happens with jet fuel and the magnitude of the rise with jet fuel. But Gosh Airlines are contending with enough problems already as it is. So I think for them it’s just kind of another headwind to kind of throw in their pocket.

KHC: And Tony moving into China, and of course, they are pursuing a zero covet policy. They’ve locked down key shipping ports like Nimbo. Obviously, global supply chain problems have been exacerbated by that. So what measures can countries outside China do, for example, nausea, to alleviate these issues in the short, long term?

PS: I think that’s a technology issue.

TN: Sorry, guys. No, that’s my technology issue.

I apologize.

We’ve had these Covid issues for about two years now, and I think the real problem there is policy uncertainty, and some of these policies are becoming quite dangerous. They were very understandable early in the pandemic. But as we’ve started to recognize the issues, these things really need to be tightened down. So, for example, I think the best thing or we think the best thing countries outside of China could do is accept COVID as endemic and convince China that it’s now endemic. Why is that important? Well, we’ve really been in a bunker mentality, and we can’t really stay in that for another two, five or ten years. So if we look over the past day or so, the UK and Denmark have both announced normalization over the next week, and that’s ending things like work from home, ending vaccine requirements and passports, that sort of thing. The impact will be social, it will be economic, and of course, there will be political benefits. So the only reason these politicians are moving in that direction is because they’re getting such political pressure to unwind the requirements that they’re finally doing it because China is the center of global supply chains.

There has to be political pressure for China to normalize because supply chain constraints are affecting every country. And so this is something that really needs to happen. Now if China will not normalize, if they continue to close factories and ports, then companies just need to move their supply chains closer to their consumption countries. And I say just it’s a very complicated activity, but they’ve certainly had two years to start preparing to move those things. So they should accelerate those plans.

PS: And, you know, Tony keeping on the theme of unwinding and going back to normal, I guess many would say increasing interest rates would be kind of normalizing. But I wonder what their applications will be for countries like Brazil, Egypt, Argentina, South Africa and Turkey Who are potentially vulnerable to rising US rates. What’s your assessment on that?

TN: Yeah, it’s going to be hard for them. These are countries with weak and volatile currencies. Turkish Leira, Brazil riyal in Asia, I work particularly about the Tai Baht and the Rupia and Indonesia, I think they’re both vulnerable to rate hikes. I think part of what we’re witnessing is a transition from government led, say, planning. And for the last two years we’ve all looked to government for leadership on this stuff. And I think we’re starting to see a transition toward private sector leadership, at least in developed countries, at least in the west, those private sector companies will feel that currency volatility in their operations in countries like Indonesia, Thailand, Turkey and so on and so forth. So it’s not going to be painless for those governments, for the people in those countries or for the companies that operate there.

KHC: Tony, delightful to have you on again. Thank you so much for your time. That was Tony Nash, chief executive of Complete Intelligence. I don’t know if you’re an investor this year. I mean, what do you do? We’re just literally 20 days into the new year and it’s been tumultuous, right?

PS: It’s choppy waters. I mean, look at year to date, right? All down. I think S&P, Dow Jones, Nasdaq, Nasdaq down 8% year to date.

KHC: Yes, but then my dad a humongous last eleven years, right? So they’ve seen the market capital explode. A bit of correction isn’t bad for the soul sometimes, but you just wonder Where’s the end inside, right?

PS: Correct. I mean, the debate is I think earnings expect to be robust, but the issue is your evaluations.

Our CEO and founder, Tony Nash, joins the BBC Business Matters podcast to discuss mainly the anniversary of the US Capital riot — and why most Americans don’t really care anymore. Also discussed are the patent-free Covid vax and the CES 2022 and the coolest thing in the event.

This podcast first appeared and originally published at https://www.bbc.co.uk/programmes/w172xvqrxgznjw6 on January 7, 2021.

Show Notes

FN: Let’s go to Tony and the view from Texas. And I’m just wondering, Tony, we talked about, you know, viewing this from outside the nation’s capital. What have people been talking about today?

TN: Fergus, I gotta be really honest. No, nobody cares. I talked to students. I talked to business people. I talked to people across the country, and this is a DC event, and it’s drama that DC has conjured up and nobody in the rest of the country really cares. It’s just not a big deal for people.

FN: Okay, I’ll tell you why. I find that interesting. One thing. People travel to DC, right? For this event, whether they attended the rally or whether they actually went to the capital and took part. They weren’t DC residents, all of them. And the second thing is it’s a political thing right now, surely, across the country, there are politicians running on this event as a mandate. No?

TN: I don’t think so. No, I don’t think there are politicians running on this. You may have some politicians who are trying to run on this, but honestly, I just spoke to a couple of College students an hour ago and asked them what they thought about it. They didn’t care. I spoke to business people today and they just didn’t care. And they shrug it off as just something that’s in DC, and they shrug it off as the administration trying to distract attention. That is in the middle of the country.

That is the view from Chicago down to Texas and across the middle of the country. Nobody cares. And even in the capital building. So if these guys really wanted to overthrow the government and harm Congress people, they would have gone to the administrative buildings. I mean, these aren’t stupid people, but nobody else cares.

KA: I’m sorry, that’s not accurate. They were in the capital building.

TN: It is. Absolutely. We were in the administrative building.

TN: There were Congress people who weren’t even close to the administrative building.

FN: So, demonstrators sitting in the Speaker’s chair. Right.

TN: The demonstrators were there. The Congress people weren’t there at the end of the day. Fergus, look at the end of the day here’s what we’re talking about. We’re talking about trespass and we’re talking about property crime. Okay. That’s why people don’t care.

FN: There were five fatalities.

TN: Yeah. The Capitol police shot a woman. Right.

FN: Tony, I want to pick up on your point about people in Chicago down to Houston, not caring. This is what you’re reflecting to us about. Hang on. Let me please ask. Does that mean that nobody from Houston up to Chicago, et cetera, in the middle of America believes the message that was behind this campaign because it strikes me that 48% of the Republican Party believe the message behind what happened a year ago.

TN: What message is that, Fergus?

FN: That the election was stolen. This is the message that President Trump continues. A former President Trump continues to put out and the message that those demonstrators sought to enact as they see it. When you say people don’t care, you’re suggesting that it’s done and dusted. And I’m suggesting to you that’s far from the case.

TN: I think it is done and dusted. And I think if you look at people like Ashley Babbitt, who was shot in the back as she was entering like she was unarmed and shot at the back, these were not people who were fighting for something. Right.

FN: All right. Tony, come in. You want to jump in there?

TN: Yeah. I think Rachel is absolutely right. With the Pelosi’s support of the storming of the entry into Ledgeco in 2019, I think the Apathy in the US is really just more exhaustion than anything. I think Americans are just tired of the partisan nonsense. They’re just exhausted by it. And I think people don’t care because they don’t see this coming to an end. And DC is a world unto itself. And most of America just doesn’t care anymore. Honestly.

FN: But at that point and Rachel’s point, I was just reflecting on some of Carrie Lam’s comments exactly a year ago. And this phrase double standards, she said foreign audience should set us. Do Americans recognize that as double standards?

TN: Oh, absolutely. Yes, absolutely. They do. Well, most do not all, of course. But I think most do. If you were to rewind to 2019 and show those tapes to many Americans, they would completely get it. We’re not the Cretans that everyone tries to make us out to be. We understand that.

FN: Tony Nash is with us from Houston, may well be familiar with many of the names we’ve been discussing in the last five, six minutes. Tony, let’s focus on the philanthropy first. Presumably, that’s something you recognize that when you don’t get federal funding, you don’t get the big sort of specific targeted funding that a lot of big Pharma got back at the beginning of the pandemic. You reach into donor sections.

TN: Sure. Yeah, absolutely. And I think the Baylor College of Medicine did fantastic work here with the resources they had, and everyone here is proud of them. Texas is a huge force in medical like in public health, in oncology in many areas of healthcare. And this is just a very public view, public way of doing it. I love what they’re doing. It’s hard not to love what they’re doing.

FN: In terms of the generic issue. We’ve heard a lot about big Pharma is, I guess, easy to demonize, because a lot of the companies are making some very big returns on vaccines, and these people seem to be ready to maybe not give up the whole game, but essentially go for the generic version so that it can be spread more quickly and more cheaply.

TN: Well, all of the private sector vaccine developers, I think they got $20 billion from the US government in 2020, so those medicines have been paid for. They should give them out for free. All their IP should be open source. There should be nothing secret. The American people paid for the ones that were developed in the US. And I think as a foreign policy, we should open source that and let every country develop it at whatever cost they can.

FN: It would be a fantastic kind of diplomatic soft power, too. Wouldn’t it be?

TN: Absolutely would.

FN: And, Tony, I’m not sure how much you heard. There a quick thought from you as we end the program on the survival of Tech despite the pandemic?

TN: I think tech has thrived in the pandemic. And I’m glad to see shows like CES happening where people can go in person or be remote. I think it’s great to be in person. So I’m really happy to see it. And the coolest thing I saw at CES was a car that could change color because of nanotechnology in the paint. That was the coolest thing I saw there.

FN: Yeah, I saw that one online as well. That’s the purple thing I was referring to. Kind of Sci-Fi is real, I guess. All right, Tony, thank you very much. Indeed. Glad we got you back. Briefly. Sorry we lost the line halfway through there.

Markets are tanking on concerns that rate hikes might occur sooner than expected, hence the possibility that heightened volatility and a flight to value havens could be in store for 2022, according to Tony Nash, CEO, Complete Intelligence.

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/expectations-of-higher-rate-are-crushing-markets on January 5, 2021.

Show Notes

KHC: Good morning. This is BFM 89 nine, five minutes past seven in the morning, 6 January 2022. I’m Khoo Hsu Chuang and I’m joined by Philip See. Okay, let’s also recap how global markets closer today, Phil.

PS: Yeah. Markets in the US really didn’t enjoy the fair minutes. So the Dow is down 1% SMP 500 down 1.9% Nasdaq also down 3.2% across over in Asia mixed the Nikkei was up zero 1% Hang Sing down 1.6% Shanghai Composite down 1% Singapore STI down 6%. But back home as FBMKLCI was up zero 4%.

KHC: Of course, markets are being rented all over the world because of the Fed minutes, which disclose that JPowell might introduce higher rates as early as March. So for some thoughts on what’s moving these markets, we now talk to Complete Intelligence Chief Executive Tony Nash. Tony, good morning. Now we are talking about how financial markets are being crushed everywhere, including in the US by the Fed minutes, which is just faster and higher rate hikes. Maybe as early as March. Do you share the same sentiment?

TN: Yeah. I think it’s a little bit weird. So it makes sense for the Fed to stop buying things. So they buy, like mortgage backed securities so that they can put money into the market. So those are things that go onto their balance sheet. So they’ve acquired trillions of dollars worth of assets in order to support markets and get money into the system. So it makes sense to taper off the things they buy. But it doesn’t make sense to raise interest rates because people are complaining about inflation.

Right. And so if people can’t afford stuff, the major issue is stop putting money into the market don’t necessarily raise the cost of money, which is what interest rates are. So the markets feel like Powell has things a little bit out of order and that he needs to just stop putting money in the market before he raises rates. It may be appropriate to raise rates later in the year, but not just yet. So people think this is a little bit preemptive. So I would expect to see statements to walk back this Fed meeting over the next couple of days or week.

KHC: Well, the thing, Mr. Tony, according to the Bloomberg and markets being the forward indicators, that they are the Bloomberg, that there’s going to be a 71% chance that there’s going to be a rate hike as early as the March 16 meeting for the FOMC. What do you make of that?

TN: I see that. But that’s a forecast by economists. So I’d love to see the error rates of the economists. So I think that the real expectation is around the market welcoming of that. So is it possible they raised by March? Yeah, it’s possible. I think they need to start the paper first to see how likely it is, because again, the major issue is inflation and raising interest rates is a very old school way of fighting inflation before we had the tools that we have right now brand QE QE and other things.

PS: So getting a perspective. Clearly, what we saw in the nest was 3% down. I think interest rate sensitive stocks like tech stocks, I think were biggest hit. Is it time to take some money off the table after a good run?

TN: Sure. Yeah. That’s definitely part of the calculation. Absolutely.

PS: And then the question is, do you rotate it into value?

TN: Well, I think what we’re expecting probably sooner rather than later. We saw some big moves today, but yeah, there is expected irritation out of tech. We’ve seen people load up on tech and durable goods over the past two years. They’re way overstretched. So we do expect tech to see some serious downside over the next quarter, two quarters. And we do expect a rotation more into traditional industries, what people would consider boring industry. So people who make stuff like actually make stuff, even things like tourism and those sorts of things.

So we expect to do some rotation there.

KHC: Yeah. Tony, the other spectre is obviously the covered variants. IHU and of course Florona as well. Assuming that you are right in the possibility of the Fed walking back comments about the March rate hike or the possibility of a March rate hike. Right. What would the smart money be doing now in terms of possibly buying to the dip and getting a nice bounce from a short term trading perspective?

TN: Well, I think you have to look at things like energy, which has gotten a lot of attention over the past week. I think you have to look at what opportunities will there be if the variant slows down and money remains cheap. Okay. So if we’re not going to see a dramatic rise in interest rates from the Fed, then you may have some legs on some things like real estate. I’m not sure. But you may I’d have to do some research there, but I think you really need to look at things like tourism and people getting out Airlines.

Those sorts of things really have to think about when people start to get out in force, what kind of difference can be made in markets?

KHC: I think you quite rightly pointed out that increasing interest rates is a very old fashioned way of dealing with inflation. What, in your opinion, are possibly alternative solutions to addressing higher costs, which is definitely a reality today.

TN: Look, a lot of the issue is on the supply side. So you raise interest rates when the issues are on the demand side and the demand side peaked in 2020 after the Fed just released a huge amount of money on to US citizens. So a lot of the issues are supply chain issues, and they’re on the supply side. So better to reduce or taper off the supply of money going into the system and focus on building out supply chain so if there were an infrastructure bill that came and said, we’re going to focus on these supply chains and make them more robust.

And we’re going to focus on near shoring manufacturing to reduce the length of the sophistication of those supply chains. I think that’s really all that they can do right now to focus on that supply side. So in short, interest rates aren’t going to help. There has to be a more medium and long term investment in Shoring up the supply side. Yeah. I agree with you.

PS: I think that’s a very medium long term outlook. And I just wondering how earnings will look like this year.

TN: Well, certainly not going to look like 20 or 21. A lot of the 21 interest earnings were up until, say Q3, there were effects based on expenses that were cut in 20. There was a lot of headcount reduction and real estate reduction in 20 because of work from home and staff reduction, those sorts of things. So 22 is going to be harder. It’s going to be a much more disciplined old school efficiency, automation and top line growth type of environment.

KHC: Well, Tony, given that we are only six years, six days into the new year, how should asset allocation strategies look like for the conservative investor in 2022?

TN: You know, you’ve got to really be careful of volatility and you’ve got to be careful of risk, even things like political risk, which is what’s happening in Kazakhstan today. We really have to be careful of political risk in market. So with the events in Kazakhstan, then I think you’ll start to see people really take another look at Em and try to figure out how much risk are in those investments. You may see people steer away from em because of that risk. So I think you’re going to see more consideration for developed markets.

You may even see more consideration for Europe. I think Europe may have a good year this year.

PS: And I wonder if there’s a consideration for traditional safe havens like gold, US dollar and treasury spend.

TN: Yeah. Well, that certainly supports the dollar, Treasuries and so on. Gold. I’m not so sure about gold may have some upside, but the focus on developed markets may will definitely support the US dollar and Treasuries.

KHC: All right, Tony, thank you so much for your time. And that was Tony Nash, the chief executive of Complete Intelligence, talking about the Fed minutes, which I have perturbed markets in a significant way.

PS: I think markets are factored in the tapering, but not the interest rate moving earlier.

KHC: Yeah.

PS: That’s why you saw the tech heavy Nasdaq really hit quite badly with 3.2% decline.

KHC: Yes. And of course, we saw the Bloomberg indicators surveying economists a 71% chance that there’s going to be a rate hike at the March 16 meeting.

PS: Incredible.

TN: Right.

PS: You know, you talk about just four or five months ago, we were talking about only two hikes at best, in June. And now we’re seeing things shift very fast.

BFM 89.9 asks Tony Nash from Complete Intelligence on how China’s PBOC adoption of looser monetary policy will affect the yuan and the broader Chinese economy. 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/impact-of-pboc-chinas-loose-monetary-policy on December 24, 2021.

Show Notes

SM: BFM 89 nine. Good morning. You’re listening to the morning run. I’m Shazana Mokhtar are together with Philip See. It is Christmas Eve, Friday, the 24 December 9:06 in the morning. But in the meantime, let’s take a look at the activity on Bursa Malaysia.

PS: It’s flat like Coke without any bubbles.

SM: Oh, no, that’s the worst kind of flat.

PS: Yes, the foot sabotage. Malaysia is flat slightly down .09% at 1515.

SM: So still above 1500.

PS: Still above 1500.

But it’s been yoyoing a bit green and red so far. But the rest of the markets across Asia are in green territory. The Straits time is up at 3100. Cosby also up 58% at 3015. Nikkei also up zero 6%, 28814. Now, just to bring your attention, looking at the crypto Bitcoin 5998.65 above the 50,000 mark. Theorem also uptrend 4114115.184. Now, if we shift over to the currencies, ring it to US dollar 4.11988. You’re seeing some strengthening there. But across the other two currencies pound and sing dollar, we’re seeing some weakness there.

Ring it to pound 5.62967. Ring it to Sing dollar 3.0922. Now, looking over to the value board. Really. Smattering of small caps actually driving it, but cost number one Ata IMS at .72 cent unchanged, followed by SM Track up 13% at .13, followed by Kajura Tran asphas flat at .26%.

SM: Okay, so that is the snapshot of Bursa Malaysia at 9:09 this morning. We’re taking a look now at how global markets closed yesterday.

So if we look at the US markets, they closed in the green. The Dow was up 0.6%. The S&P P 500 was up zero 6% as well. The Nasdaq was up zero 9%. So a lot of optimism going into the Christmas weekend. Joining us on the line for analysis on what’s moving markets. We have Tony Nash, CEO of Complete Intelligence. Tony, good morning. Thanks for joining us today. Now 2022 is just a week away. And given the triple headwinds of Fed tapering, Omicron and a China slowdown, will there be a difference in how developed and emerging markets in Asia are going to be impacted?

TN: I think with the tightening in the Fed and with what emerging markets are going to have to do, meaning in the near term, like China is going to have to loosen. So I think you’ll have a strengthening dollar and more of a rush for capital into the US, so that should at the margin, kind of help US markets stay strong across debt and equity. Other things. I think in emerging markets it could eventually China loosening. The PVC loosening could help demand in emerging markets, but it’s going to be hard to get around the hard slowdown that started in China around Omicron.

PS: I see.

And so when you contrast that to the Fed tightening, right. You said China PBOC is adopting a looser monetary policy. How will this affect the UN in relation to those Asian currencies in which there’s a lot of trade between these two countries?

TN: Yeah. CNY has been strong for a protracted period, and it’s made sense on one level, so China can import the energy and food, particularly and some raw materials that it needs in a time of uncertainty. So the PVC has kept it strong through this period. What we’ve expected for some time. And what we’ve shown is that after Lunar New Year, we expect the PPOC to begin to weaken the CNA. We don’t think it’s going to be dramatic, but we think it’s going to be obviously evident. Change of policy, Chinese exporters, although they’ve been producing at not capacity, but then producing pretty.

Okay. China is going to have to devalue the CNY to help those exporters regain their revenues that they’ve lost over the last two years. So we’re in a strange period globally of moving from kind of state support back to market support, whether it’s the US, Europe, Asia, we’ve really had state supportive industries, state supportive individuals as we move beyond covet. Hopefully we’re moving more into a market orientation globally, and there will be some volatility with that.

PS: Yeah, but I was wondering for China, especially, I’m interested to know what the state of the Chinese consumer will be in 2022 because the government is worried for slow down. Right. And wouldn’t they want to expedite and give a bit more ammunition to the Chinese consumer?

TN: They would. But the problem is with Chinese real estate values declining, a lot of consumer debt is secured against real estate. And so the ability of Chinese consumers to expand the debt load that they’re carrying. Is it’s pretty delicate? It’s a fine balance that they’re going to have to run. So either the economic authorities in China push real estate markets up to allow Chinese consumers to keep debt with their real estate portfolios, or they make other consumer debt type of rules that allow Chinese consumers to hold more debt.

Real estate is the part that’s really tricky in this whole equation in China, because if real estate values are falling, the perceived wealth of those consumers is falling pretty rapidly as well, and the desire to consume excessively, it’s just tempt out.

SM: And I suppose still sticking to our view of China looking at metal commodities, what metals have been affected by the slowdown of demand in China? And do you foresee a recovery for them in early 2022?

TN: Yeah. We’ve seen industrial metals like copper and steel, and those sorts of things really slow down dramatically compared to where they were earlier in 2021. We’re seeing reports of, say, copper shortages at the warehouse level at the official warehouses in China, but that’s not real. What we’re seeing and I speak to copper producers in Australia and other places. What they’re telling us is that those copper inventories are being shifted to unofficial warehouses to create a perception of shortage. So we may see a run. We may see an uptick in, say, industrial metals prices in early 22, but we don’t expect it to last long because the supply of constraint is not real.

So until demand picks up for manufacturing and goods consumption. And the other thing to remember is we’ve had a massive durable goods wave through covet. Everyone’s talked up on durable goods. Okay, so there is almost no pent up demand for durable goods. And this is the stuff that industrial metals go into on the demand side, there are some real problems on the supply side. There seems to be plenty of supply in many cases. So we don’t necessarily see the pressure upward, at least in Q1 of 2022 on industrial metals.

PS: And that’s why I’m quite interested where you say that this demand is, I think slowly going to dissipate because yesterday key US inflation gauge sharpest rise in nearly 40 years, right? Personal consumption expenditure surged 5.7% in November. How long do you think this elevator level will last?

TN: Well, US consumers are pretty tapped out. So I think inflation happens for a couple of different reasons. Some people say it’s only monetary. Not necessarily true. We’ve seen real supply constraints that contribute to inflation. We’ve seen demand pulls because of overstimulating economies, and those two things together have accelerated inflation. And so we have to remember at the same time in 2020, we saw prices. If things go down pretty dramatically around mid year, say a third of the way through the year to mid year to just after mid year.

Some of these inflationary effects have been a little bit base effects because prices fell so hard in 2020. But we have seen consumption ticking up because of government stimulus. And we have to remember if the Fed is tightening things like mortgage backed securities, their purchases of mortgage backed securities will slow. Okay, so if people can’t refinance their house or buy new houses again, those wealth effects dissipate if you have a home. If your home price is rising, whether it’s the US or China or elsewhere, the wealth perception is there and people have a propensity to spend.

But if the Fed is pulling back on mortgage backed securities, then you won’t necessarily have that wealth effect that will dissipate. So government spending will decline marginally because build back better didn’t pass. We won’t have that sugar rush of government spending flowing into the economy early in 2002, although we may see something later. I believe governments love to spend money. So I believe the US government will come with some massive package later in the year to bring government spending back up.

SM: Tony, thanks very much for speaking to us. And an early Merry Christmas to you. That was Tony Nash, CEO of Complete Intelligence, giving us a quick take on what he sees moving markets in the final year. In the final weeks of 2021. Looking ahead to 2022.

Our CEO, Tony Nash, talks about inflation’s and Omicron’s role in US shares sinking, as fears spread over their non-transitory nature. And how will Asia react to the ‘non-transitory’ nature of inflation and the new Covid variant? Is Gold a good asset to use to hedge against inflation?

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/be-warned-high-prices-are-here-to-stay on December 02, 2021.

• Check out more of our insights in featured in the CI Newsletter and QuickHit interviews with experts.

• Discover how Complete Intelligence can help your company be more profitable with AI and ML technologies. Book a demo here.

Show Notes

PS: Markets in the US were down across the board. The Dow is down 1.3%. S&P 500 down 1.2% Nasdaq down 1.8%. Now over across in Asia, everyone was up. Nikkei was up .4% Hang Seng up .8% Shanghai Composite also up .4% and STI Singapore up 1.9%. And as I was saying early on, FBM KLCI was down 1.1%.

TN: Yeah. Thanks for having me, guys. I think the biggest consideration really is Powell’s comments on inflation, saying it’s kind of no longer transitory. So people should expect inflation to stay. What that means generally is we’ve hit a new pricing level is his expectation. So meaning prices are not in his mind, in many cases, going to go back to the levels that we saw before this inflationary stairstep. And what we’ve seen, particularly in the US, is consumers have accepted this and consumers accepted it, thinking that it was a temporary rise in prices.

But what he delivered today is some bad news that it’s likely a permanent prize in the level of prices. And the kind of short term cost rises that people thought they were going to endure are more permanent.

KSC: Yeah. So, Tony, try and give us a bit of a perspective here, because obviously the last twelve years and the last accelerated two years of monetary easing have induced this inflation. How does it all end? And does it stop the weak economic growth we’ve been seeing in the US the last few months.

TN: Yeah. So US economic growth, we don’t see a rapid acceleration of US economic growth. And so we have the US, China, Japan, and the EU, all at very subdued growth rates. And that’s bad. Those are the four largest economies with elevated price rises. Earnings are growing in some areas. I’m sorry, wages are growing in some areas, but they’re not necessarily growing across the economy. And part of that, particularly in the US, is a shortage of staff. So people have opted out of the workforce. We’ve lost, like 6 million workers in the US since Covid.

And so there are fewer workers. And so we have wages rising in certain areas. But it’s not necessarily across the board. So people are really going to have to start taking a look at their disposable income to understand what of these ongoing price rises that they can continue to accept. And I think we’re at a point where, since it’s no longer viewed as temporary, people and companies are going to have to start making trade offs. This is really the bad news is when people have to, when it’s no longer temporary, companies and people have to start making trade offs of what to do with their resources.

And that’s where the real problem is. So it’s not ongoing expansionary spending. And even I think it was Biden who said today we don’t expect a stimulus package for the current variant. Again, people are having to look at trade offs, and this is the real problem. When companies have to look at trade offs, they’re looking at their operating costs, they’re looking at their capital expenditure, they’re looking at their investments, they’re looking at other things. So down to Earth type of environment where we’re starting to enter Realville, we’re starting to exit the kind of fantasy environment we’ve been in the monetary induced sugar coma that we’ve been in for the past year and a half.

PS: So that’s a very interesting point, because I’ve always felt like in 2021, we saw this huge divergence in recovery right between the developed world led by the US and emerging markets, which are still really struggling to contain the virus and such. So when we talk about Asia, how do you think markets will react to this tightening of monetary policy by the Fed?

TN: Yeah. We think that Southeast Asia generally will stay pretty muted. We don’t expect early breakout at least over the next quarter or two. We don’t expect really breakout moves in Southeast Asia. We expect China to have a fair bit of volatility, but we do expect China to be generally positive over the next quarter to quarter horizon. We do expect Japan to continue to rise pretty well in India as well. Japan largely on the back of monetary policy automation, other things. So Asia is not one market, of course.

So we do expect different parts of Asia to react differently. Korea will be a mix between China and Japan like it always is. So we’ll see some volatility there reflecting China, but we’ll see some, I guess, acceleration and equities like we would see in Japan to make some both.

KSC: Well, Tony, in truth, inflation has been with us for some weeks now. But what hasn’t been with us for some weeks has been on the Omicron that’s the other big roadblock posing an obstacle to markets. How does Asia behave? How does Asia react, especially since we’re going to be opening in a few hours time?

TN: Yeah, I think Asia generally. You guys know I lived in Asia for most of my life, and Asia generally takes these things in stride with more vaccines available with the typical kind of weathering, the storm kind of approach that people have, particularly in Southeast Asia. I think people will generally take it in stride. This is really the first pandemic. Let’s say in the west that people have had for probably 50 years where they’ve really been kind of freaked out and worried in Asia, we’ve seen these types of pandemics for 2030 years.

It’s a bit different. People are more conservative, people are more used to these types of volatile, say, public health and market and other type of environments in Asia. So of course, we’ll see things shake up, but we won’t necessarily see the dire kind of messages that we’ve seen, say in the west. I don’t think we will. We’ve seen dire messages come out of, say, Germany and Italy and Austria, particularly over the past week with full lockdowns with 100% vaccine mandates, with really dire messaging. I don’t necessarily think we’re going to see super negative messaging in Asia like we’ve seen there.

PS: We won’t freak out as much as what you’re saying then essentially.

TN: No. Come on, man. It’s Asia, right? People are used to volatility in Asia and the developed markets. Developed markets are highly calibrated. Right? 0.2% change. Either way is people see as dramatic in Asia a small they’re not as calibrated. So people are accustomed to more ups and downs, and people just generally take it in stride.

PS: And I said that generally it’s quite calming. Is gold with inflation basically consigned away from this trend trade term? What’s your view in terms of gold? That’s a hit against inflation then? Because if I look at the data, the method is down 6% year to date.

TN: Right. And a lot of the inflationary rise has already happened. A lot of the stuff happens in stairstep fashion, and a lot of the mitigation efforts are already under way. So while we’ll continue to see inflation and we’ll continue to stay at an inflated level, I don’t necessarily. Or we’re not seeing dramatic price rises going forward. Okay. You’ll see it in pockets where there are, say, supply issues or something like that. But gold is more effective when everything is well, gold is a barometer for finding value.

I’ll say that much. It’s a tangible metal and people see it as worth something. And so what used to happen is gold and say the dollar as the dollar do value the gold would appreciate. But now we have crypto and people treat crypto kind of in the same way they used to treat gold. The gold market is really trying to find itself. So I think we’re going to have to see some fallout in crypto if it is to happen. We’ll have to see some fallout in crypto before we start to see gold being the safe haven again or being the preeminent safe haven.

So until Bitcoin and the other crypto assets really deteriorate in value and people go flocking back to gold, which I think will happen eventually. I don’t think it’ll happen overnight, but until we see a lack of faith in crypto, I don’t think we’ll necessarily see dramatic price pressure on gold.

KSC: Tony, you talked about Asia, right? And now China is moving to banners via structure, which is the loophole that allows its companies to list in New York and other foreign exchanges. What does this mean in terms of China’s overall strategy to go its own way to quote Fleetwood Mac?

TN: Sure. Yeah. So I think, of course, it hurts Western banks, and it hurts the Western banks that are in Asia because they don’t necessarily have those fees to take things public in the west. But I think the bigger problem is this those companies going public don’t have US dollar denominated resources to access, and so they have to get CNY or Hong Kong dollar or Japanese yen or other Sing dollar other denominated assets. Okay. But the US dollar is 87% of global transactions. So it helps those companies to have US dollar reserves, especially as they’re newly public.

Because why do you go public? Because you want to buy another company, you want to use that cash for a big investment or something, you want to expand in a big way. So if you don’t have the US dollar assets that come from going public, say, in New York or somewhere in the US or whatever, it’s really hard to have a big source of cash to do a massive international expansion or undertake a big international project or do a big international buy that’s I guess the biggest downside I would see from the decline of that type of structure in China.

KSC: All right, Tony, thank you so much for your time, Tony Nash there chief executive of Complete Intelligence. And just to hang on this last point, Phil, if you don’t list in the US, you don’t get US dollars necessarily. But that doesn’t matter if you are China, and you believe that the real market is domestically or within ASEAN, where you’ve got to combine, I don’t know, 2.1 trillion people or 2.1 billion people. That’s quite a fair few heads. Yes.

PS: Correct. I think it’s a question of whether you see a convergence between where you list versus where you operate.

KSC: Absolutely.

PS: And I think in the past we thought, okay, you could tap financial markets globally to serve your local markets. But I think China is kind of proving the point. No. I think it’ll be closer together.

KSC: Yeah. And what he was talking about in response to your question on gold, Phil, how gold hasn’t responded to all this uncertainty, which has been traditionally the case. And Bitcoin is somewhere hovering around in the mid 50s, which is a bit weird because you would expect some kind of flight to what was seen as safe havens, right.

PS: Ironic is considered Bitcoin a flight to safe havens.

KSC: Well, because it’s finite in nature. So it’s a bit like gold, right. It seems interesting, because in the last few weeks, we’ve seen a move among corporates like Mark Zuckerberg of Facebook and now Jack Dorsey, formerly of Twitter, who has left his job at Twitter. Still, at the same time was CEO of Square fintech platform financial platform. He’s moving to turn Square into a company called Block, and it’s a bit like it would make Mr. Miyagi proud because martial arts moves from square to block, but he’s going all in.

PS: But this is a very interesting thing because he’s going all in on crypto. And I think you’re referring to Blockchain blockchain reference to Blockchain, which is the distributed platform for data used by Crypto.

But it’s interesting, right? This whole name shift.

I think Jack Dorsey, I think, is trying to evolve away from just being a pure payments provider to offering solutions that are anchored on blockchain as a solution.

Tony Nash gave the BFM 89.9: The Morning Run his thoughts on how the sooner-than-expected Fed rate hikes could affect global markets. Will inflation derail hastening of the tapering talk? How does crude oil look like in the next few months? As the Christmas season is coming, how much of a concern supply chains will be for the consumers and the economy? When the Fed begins normalizing rates, which currencies will be vulnerable if or when this happens?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/bottlenecks-to-ease-with-xmas-coming on November 25, 2021.

 

❗️ Check out more of our insights in featured in the CI Newsletter and QuickHit interviews with experts.

❗️ Discover how Complete Intelligence can help your company be more profitable with AI and ML technologies. Book a demo here.

 

Show Notes

 

SM: BFM 89.9 good morning. You are listening to the Morning Run. I’m Shazana Mokhtar together with Khoo Hsu Chuang and Philip See. It’s 9:07 in the morning. Thursday, the 25 November. If we look at how the US markets closed yesterday, the Dow was down marginally by 0.3%. The S&P 500 was up 0.2%. Nasdaq was also up 0.4%. So for some thoughts on where international markets are headed, we have with us on the line Tony Nash, CEO of Complete Intelligence. Good morning, Tony. So the Fed minutes revealed that the pace of tapering may be hastened, while macro data points from personal spending to job data suggest that the US economy is in quite the sweet spot, but will inflation derail this?

 

TN: Yeah. There was a statement from one of the Fed governors today talking about that inflation is not transitory in their mind or could potentially not be transitory in their mind. That’s a real danger to people who are thinking that we’re really in a sweet spot right now because it could mean Fed intervention, meaning tightening sooner than many people had counted on. So I think people had counted on some sort of intervention, maybe in Q2, but it may be happening sooner. That would have a real impact on the dollar. The dollar would strengthen, and that would have a real impact on emerging markets all around Asia, all around Africa. People would feel it in a big way where there is US dollar debt.

 

KHC: We are seeing that strengthening US dollar in our currency now. But I just want to get your perspective on crude oil because various countries from the US to China are now tapping into their strategic crude reserves to alleviate the present energy crisis. But if you look at crude now, it’s not really being responsive, right to these actions?

 

TN: Right? That’s right. So what the US agreed to release is about two and a half days of consumption. Not much. The releases agreed in the UK and India, for example, were really token releases. They weren’t really major portions of their consumption. So these countries are kind of giving a nod to the Biden administration, but they’re not really alleviating the supply concerns that are spiking prices. So it really has been a dud for the White House. It’s been kind of an embarrassment because crude prices haven’t fallen, really. They fell initially, but they really came back after the release announcement was absorbed.

 

PS: Yeah. Tony, that trickling in oil supply releases from the US government hasn’t done much to alleviate the supply concerns. Gas prices in America have been on a massive uptrend as well, just in terms of inflation and not being as transitory as people expected, as we enter Christmas season, how much of a concern is it for consumers as well as the economy?

 

TN: It’s a real concern. I have to tell you, I’ve driven halfway across the US for our Thanksgiving holiday, which is tomorrow morning. It’s Thursday here, and we’ve seen a lot of trucks with cargoes on US roads, and I make this drive pretty regularly. So it seems like a lot more on roads than I normally see. So that’s good in terms of the domestic supply chain.

 

I think it’s the international supply chain that is really concerning, and we still have those backups in the Port of Long Beach. That is the real main constraint for supply chains in the US. So I don’t think we’re going to see major disruptions outside of other ports. But through Long Beach, we definitely see issues.

 

The semiconductor supply chain is the main impact for, say, electronics and automobiles in the US. We did see semi manufacturers start to produce more auto related semiconductors, say mid-Q3 and into Q4. We should start to see those automotive supply chains, the semiconductor dependent issues and automotive supply chains alleviate, probably in Q1. So that will help.

 

But for the Christmas season, I’m not sure that there’s a whole lot that’s going to help with electronics and say automobiles.

 

PS: Yeah, Tony with JPowell still back and still in the fair chair in terms of his reappointment. And he does hike rates earlier than expected to address inflationary concerns. How much of a dangerous is to slowing down the economy in America and as  the rest of the world.

 

TN: Sure, it is a risk in America. I think it’s really hard to hire people in the US right now. There’s a lot of job switching happening and people haven’t come back into the workforce. We lost about 5 million people in the workforce in the US through the Covid period. So that’s a real issue. Anything that raises the cost of doing business is problematic for the US and will inhibit growth. The main problem in the US is that the environment right now, it continues to crush small companies. It’s very difficult for small companies. And while it may seem that small companies don’t matter that much, they are the main employer in the US and the main growth engine in the US. And the Biden administration hasn’t helped this with a lot of their policies. Their policies have been very favorable toward big companies. If the Fed pushes inflation, it will make borrowing a little bit harder. I’m sorry if the Fed pushes the interest rate, it’ll make borrowing a little bit harder. But the collapsing, say, the tapering of the Fed balance sheet will have a bigger impact on liquidity in the US.

 

SM: And if I could just touch on large US dollar debt and what happens to emerging markets when the Fed begins normalizing rates, which currencies do you see as going to be particularly vulnerable if or when this happens?

 

TN: Well, I think one that I’m really keeping an eye on is the Chinese Yuan because it’s a highly appreciated currency right now. And the Chinese government has kept the CNY strong so they can continue to import commodities and energy for the winter. And they’ll likely keep it strong through Chinese New Year. We expect CNY to really start to weaken, say, after Chinese New Year to help Chinese exporters. So winter we mostly pass. They want to help kind of push a Chinese export, so they’ll start to really devalue, seeing why probably end of Q1 early Q2.

We do see pressure, the Euro, as you’ve seen over the last three weeks, there’s been real pressure on the Euro as well. Other Asian currencies. We do think that there will be pressure on other Asian currencies. Sing Dollar will likely continue to stay pretty consistent. But we’ll see some pressure on other Asian currencies simply because of the US dollar pressure. The US dollar is something like 88% of transnational transactions. So the US dollar as a share of transnational transactions actually come up over the past two to three years. So there’s much more pressure with an appreciated dollar and it’s coming.

 

KHC: Just like the one. Tony, India Indian equities record high. Have you reached to speak considering PTM’s IPO failure?

 

TN: Yeah. I think there’s been a lot of excitement there, and I think it’s at least for now. I think it has I don’t think you can ever really claim that an equity market has hit its peak, but I think for now, a lot of the excitement is dissipated. It may come back in a month, it may come back in six months. But I think that momentum is really important. And as you see, failed IPOs, I think it’s really hard for equity investors to kind of get their mojo back.

 

SM: Tony, thank you so much as always for speaking to us and happy Thanksgiving to you and your family. That was Tony Nash, CEO of Complete Intelligence, giving us his thoughts on how the sooner-than-expected Fed rate hikes could affect global markets.