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Santa’s Rally Ends Before Xmas

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

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

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

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

Transcript:

BFM


For some thoughts on what’s moving international markets, we have on the line with us, Tony Nash, CEO of Complete Intelligence. Tony, good morning. Thanks for joining us. Very quickly, can maybe you help us understand why US markets are down quite significantly this morning? I thought it was a Christmas rally all the way up to the end of the year. What explains the markets being in the red?

Tony Nash


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

BFM


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

Tony Nash


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

BFM


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

Tony Nash


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

BFM


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

Tony Nash


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

BFM


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

Tony Nash


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

BFM


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

Tony Nash


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

BFM


Tony, thanks so much for speaking to us. And Merry Christmas to you. We look forward to catching up in the new year. That was Tony Nash, CEO of Complete Intelligence, giving us his take on some of the trends that he sees moving markets in the days and weeks ahead, commenting there on the shipping disruptions in the Red Sea, as well as what the impact might be on oil prices also coming up out of COP28 and just the developments that could happen in the energy landscape.

BFM


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

BFM


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

BFM


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

BFM


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

BFM


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

BFM


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

BFM


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

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USD-Euro Parity Offers Opportunities

This podcast first appeared and was originally published at https://www.bfm.my/podcast/morning-run/market-watch/usd-euro-parity-currencies-euro-monetary-policies on July 21, 2022.

Currencies have been in a flux with the US dollar gaining strength on the back of the rising Fed fund rate. Our CEO and founder, Tony Nash tells us if there are actually investment opportunities from this.

Show Notes

SM: BFM 89 nine. You are listening to the morning run at on Thursday the 21 July I’m Shazana Mokhtar with Wong Shou Ning. In half an hour, we’ll discuss the emerging market economies that are at risk of going the way of Sri Lanka. But as we always do, let’s recap how global markets closed overnight.

WSN: While I haven’t seen this in a very long time because every market that we’re going to report pond is actually in the green. So the Dow was up 0.2%, the S&P 500 up 0.6%, Nasdaq up 1.6%. Meanwhile in Asia, Nikkei was actually up 2.7%, hong Kong up 1.1%, shanghai up 0.8%, Singapore street times up 1.7% and our very own FBM KLCI was up 0.6%.

SM: These days are far and fewer between indeed when the board is completely green. But for analysis on what’s moving markets, we speak to Tony Nash, CEO of complete intelligence. Tony, good morning. Thanks as always for joining us. So another choppy session on wall street, but the SP 500 posted its first back to back gains in two weeks. Do you think markets have bottomed and is there a sense of relief that results season so far has been pretty decent?

TN: I think the result season has been okay. It’s still a slowdown from the previous quarter. I think it’s really people taking a sigh of relief about the Fed. They’re was fear last week that the fed was going to raise 100 basis points for a few days and that really led to dramatic falls. And what we’ve seen is a sigh of relief that that’s unlikely to happen. We’re likely to see 75, which although that’s elevated, it’s less than a 400 basis points. So I think it’s more that than earnings right now because there’s not a specific sector that’s necessarily doing dramatically better or dramatically worse. Of course tech, we have some tech gains, but we also had other areas where things gained, so it’s more broad than anything else.

WSN: Tony, what did you think of Netflix? Sorry, Tesla’s results that came out just a few moments ago. Did it surprise you in terms of how well they’ve done considering the shutdown that they experienced in China?

TN: Yes, it did. And they banked a billion dollars on bitcoin. So I think that I’m hoping that Tesla starts to get more focus on their performance and their actual market rather than speculating on cryptocurrency. I think every business, at least in America is having to come back down to earth and focus on their own operations now and Tesla is one that really needs to do so. The results were good and that’s great, but I think more focus is needed, especially with the opportunity they have right now in the US.

WSN: And another thing I want to ask you about is some of these leading tech companies. So we see in Google, we’ve seen Apple actually coming out to say that they’re stopping. They’re hiring. At this current juncture, does this make you nervous about the state of the US. Economy or is it actually pretty good because the job market was too high and inflation was a major concern?

TN: Does it make me nervous? Yes or no? I’ll tell you what’s been happening here in the US. If you’re under 30 and you work for a tech company, you know that if you work for a company for twelve months and you jump to another job, you’re going to get a 20% to 30% pay rise. So for the last few years, if you’re under 30 or say under mid thirty s, you would work for a tech company for a year, then switch jobs and get a significant pay rise. So because of that, these tech companies have over solicited jobs. We’ve heard about these millions of unfilled jobs in the US. Those aren’t real jobs, okay? Those are jobs that tech companies have been waiting for people to move on from because they know their employees are going to move on after twelve to 15 months. And so they’re prepacking the employment queue so that they don’t have disruption in their business. That’s what that’s all about. So Microsoft, Google, Netflix, all these guys saying, we’re taking all these jobs out of the market. It’s really just them seeing that the market is slowing down and their staff aren’t going to jump jobs as much as they have been.

WSN: And one other thing I want to ask you about is the aviation sector. So last night, United also reported numbers that were below street expectations a lot due to capacity constraints across the industry. Do you think it’s time to buy this if we really believe in the reopening theme, because these are just temporary blips.

TN: Oh, the time to buy airlines was like three, four months ago. I would be really careful right now if I were to go on airlines. I’d want to know the summer travel season, it’s halfway behind us. So I think if you were buying airlines, you should have done it excuse me? You should have done it a few months ago and then seen the rise as we went into the summer season and sold just before earnings. But as we’re seeing some of their earnings come in somewhat disappointing, I think that’s the real kind of warning for, say, Q Three. So these disruptions, they’re not necessarily getting any better. Disrupted flights are not necessarily getting any better. So corporate earning or stock market prices are about expectations. They’re not about actual performance. So we saw the expectations in Q Two disappoint. So that’s going to really erode expectations for Q Three. So I would be really wary of looking at airlines right now.

SM: Okay. And if we take a look at Europe, the European Central Bank meets today to decide on whether or not to raise rates. What do you think they’re going to do?

TN: Look, Europe is pretty rudderless the ECB is pretty rudderless. They’ve got negative real interest rates and they don’t have a way out. So they’re kind of either already entered or about to enter a recession. So if they raise rates or tightened too much, they’ll steepen the negative slope of the recession. They’ll make it worse. If they don’t raise rates, then the recession will be a bit easier. But they’ll weaken the euro. And as they’re importing all of this power gas and oil and same natural resources, it’s just making those things more expensive in euro terms. So if they tighten, it’s likely about the purchasing power of the Euro more than anything else. The other part that they’re likely to do is look at things like demand destruction, which is what the Fed has been focusing on for about four, five months. They’ve been raising rates so fast that people feel less purchasing power and they stop buying as much. And so if the ECB raises, say, 75 basis points, which I doubt they will, what they’re really signaling to people is they want them to stop buying so much. But we really think the ECB is going to kind of have a moderate tone to the meeting and really not surprised the upside.

WSN: Okay, I want to stay in Europe and I want to talk about the week euro. I mean, at one point you said parity with the US. Dollar. But do you think that actually a weak Euro does provide some stock picking opportunities?

TN: Yeah, it can. I mean, if you look at those European companies that export a lot, let’s say to the US. That would give those companies opportunity to expand their margin in local currency terms while keeping their US. Prices either constant or raising them right. So I would look really hard at European countries who are exporting to places, dollar nominated locations to where they can absorb some of the same gains. For example, not a European company but Pepsi, okay, they make snacks and drinks and this sort of thing. Last quarter they raised their prices by 12% and they had a 1% volume expansion. So American consumers are accepting price rises, double digit price rises and they’re continuing to buy. Okay, so European companies could look that European companies that export a lot to the US. Could really look at this market and put that into their strategy for US. Exports. The problem in Europe right now, a big part of the problem is the expansion of energy prices. German producer prices rose by 30% last month and so they have a real problem with productivity or with profitability. Their costs are rising so fast they have to find a way to raise prices.

And they can only do that into a strong dollar market. It’s very difficult for them to do that elsewhere.

SM: Okay. And speaking of energy, currently, how much correlation is there between oil and natural gas prices and which one do you see undergoing more price volatility in the coming months.

TN: It’s almost zero, actually, over the last month. The correlation is zero point 607, to be precise. Okay.

WSN: It’s a real number.

TN: No, I actually did the calculation. I did the math. So that’s what I do all day long. So normally that’s kind of a zero seven to eight, which is a significant correlation. Right. What we’ve seen is that we’ve seen crude prices, downward pressure on crude prices over the past month. There’s been a lot of pressure, especially in the US. With the Biden administration really kind of bullying crude prices down now that gas prices have been pushed up because of the issues of gas exports out of Russia. Okay. And so you’ve had a disintegration or disconnection sorry. Of those correlations. Where do we expect more volatility? Well, we expect crude oil to be kind of range traded, say, between 95 and $115 for the next few months, that gas can continue to rise, especially if Russia does not turn the gas back on the pipelines. Which decision is, I think tomorrow or the next few days? If they decide not to turn those prices back on, the price of gas continues to rise pretty dramatically.

SM: All right, Tony, thanks very much for speaking with us. That was Tony Nash, CEO of Complete intelligence, giving us his take on some of the trends that he sees moving markets in the days and weeks ahead. Ending the conversation there with just a look at how natural gas and oil prices are expected to trend in the coming months. Crude oil to trend within the range of natural gas. Now, that’s where we could really see some price volatility if geopolitical situation in Russia and Europe doesn’t, I guess, stabilize.

WSN: Yeah. All this is going to feed into inflation. Right? And we are already seeing that in UK numbers. So it came out yesterday, hit a new four year high as food and energy prices continue to so. The consumer price index there rose 9.4% annually. It’s a lot, and it’s mainly due to fuel and food prices, which were the most significant contributors to the rising inflation rate that we’ve seen. So as a result, the bank of England might actually consider a 50 basis point high at its August policy meeting.

SM: Something to keep an eye on, and I’m sure something that the incoming prime minister, whether it’s Rishi Suna or Liz Truss, will need to start strategizing from now 718 in the morning. We’re heading into some messages and when we come back, does the antisexual harassment bill that was passed in parliament yesterday pass muster? Stay tuned. BFM 89 nine.

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More Cryptocurrency Firms in Danger

This podcast first appeared and was originally published at https://www.bbc.co.uk/sounds/play/w172ydpfbz0vnx1 on June 30, 2022.

As markets tumble, users are left unable to withdraw from some exchanges, and a leading hedge fund prepares to enter liquidation. Is crypto in terminal decline? Scott Chipolina, correspondent for the Financial Times, says investors are well used to challenging conditions.

Sri Lanka is among the countries to be worst hit by inflation, and living standards are falling. Joseph Stalin of the Ceylon Teachers’ Union, and Steve Hanke from Johns Hopkins University, tell us why a solution may be some way off.

It’s a host’s worst nightmare: an out-of-control party in your Airbnb. As the platform cracks down on gatherings, we hear the story of a rental gone wrong in the Bahamas.

Also on the programme, a boss at H&M explains why leaving Russia was a tough decision; and it’s happy 15th birthday to Apple’s iPhone.

We’re joined throughout Business Matters by financial consultant Jessica Khine in Malaysia, and economist Tony Nash in Texas.

Show Notes

BBC: Tony Nash, the CEO at the finance forecasting platform, complete intelligence in the US. State of Texas. How’s your day been, Tony?

TN: Great, thanks very much.

BBC: Good to hear. All right, well, thank you for joining us too. Tony Nash in Texas. I wonder what’s your overview of all this? I mean, it’s obviously bad news for crypto investors, but is it also a warning for other people who might have been entertaining the idea of getting into the crypto market?

TN: Yes, it is. The whole kind of crypto fallout that’s happening right now, it’s not the funds that I worry about. It’s the individual investors who have been investing in crypto that really worry me. And that’s the really kind of sad part of this crypto kind of drama is you have crypto assets that have fallen by 70%. People have put their savings and their hard earned money into crypto. And so I do worry about those guys because there are a lot of people, individuals who have lost a lot of money because they believed the narrative about crypto.

BBC: And I think during the pandemic, we saw a lot of people sitting at home starting to think, oh, maybe I’ll give this a go. They’re the most recent entrance into the market. I guess they’re the biggest losers.

TN: They are. So I did have a crypto journey where I invested in something called dogecoin, and I bought it at like four cents, and I ended up selling it at like 68 or $0.70, something like that. So it was just a small amount of money I didn’t want to put very much at risk, but I did, I wanted to understand what that was like, so I put like $50 into it or something like that and then just saw it go up to $70 or something and then sold it. But I think a lot of people thought that it would continue going up not just dogecoin, but a lot of the cryptos. So it’s not like your guest said, I don’t think this is the end of crypto. It is what they call crypto winter, and it’s probably going to last a couple of years. I don’t think we’re going to see crypto bouncing back immediately.

BBC: Presumably that experiment was enough for you. You’re not tempted to get back in, given the latest news?

TN: I don’t like volatility that much. At least with those assets, like your guests said, there’s nothing underlying those assets. There’s not a company, there’s not a physical commodity. There’s nothing underlying them. It’s just trust. And so I can sell sales in my excel workbook and have the same amount of assets underlying as any crypto asset does.

BBC: Listening to that in Texas, do you agree? Did governments like the US. Government make a mistake with all those support programs?

TN: I think they did, but I respect Steve. Thank you a lot. I follow him on twitter. I think they did make a mistake, but I honestly think that governments at the time were just afraid. I don’t think it was necessarily intentional that they overstimulated. I think they were not aware of what was going to happen around the corner, and I think they panicked. They were just afraid. It’s easy to look back from this point in time and say what they did was wrong and other stuff, but I actually think giving them the benefit of the doubt and saying they just panic, they were afraid and they didn’t want people to starve or suffer or lose jobs or whatever, and they stimulated way too much in hindsight.

BBC: Tony is this enforceable from Airbnb, do you think? Can they really stop people having parties? What if they just clean up really well the next day?

TN: Well, I think part of what happened through the pandemic is a lot of Airbnb hosts started charging exorbitant cleaning fees. And no matter how clean or dirty you left the place, the cleaning fee was applied to your Airbnb fee. I stay in Airbnb, or did stay in Airbnbs pretty regularly, but the cleaning fees became so large that I won’t stay in them anymore.

BBC: I didn’t realize the cleaning fee was at the prerogative of the host. I imagine it was like a blanket 10% or something.

TN: No, they’re huge. And so I have no issue with Airbnb enforcing a no party’s rule, but they really have to have a trade off and put a cap on the cleaning fee for Airbnb hosts because they in some cases are as much as the nightly rental.

BBC: Oh, wow.

TN: And these are things that you don’t see when you do a search in Airbnb and you see a nightly price, it does not include the cleaning fee. So if Airbnb is to put on this ban on parties, they really need to put some pressure on their hosts to reduce the cleaning fees.

BBC: It is a kind of fine line, though, isn’t it? I mean, I’ve had friends rent Airbnb and there’s been a few of us and there’s been drinking, but I guess what they’re talking about is when you invite strangers, or not necessarily strangers, but people who are not staying the night or booked in to stay, that’s when it becomes a party. Is that how they’re going to define it, do you think? Tony

TN: Yeah, I don’t know. If I’m staying in an Airbnb and I want to have some people over for dinner, is that a party if I want to cook for some friends and have them over? I don’t know. I think it could be, obviously loud music, drunk people, that sort of thing. Of course that’s a party, right? So they have to define it. I’m not a lawyer. I’m sure they can find a way to define it legally so that fees can be kept or whatever.

BBC: Tony you’re in Texas, not far from California. Have you heard of this issue before of land being seized from African American owners? I must admit it’s the first time I’ve heard of it.

TN: I’ve probably seen it in movies. I’ve seen it elsewhere. I think I’ve run across it, but I don’t remember it. But when I read this story today, it was great. It was great to hear and really interesting to dig into the story. And it was terrible that people had to suffer with that for 80 years.

BBC: It does say a lot, though, doesn’t it? If neither you nor I, you’re there in the States, have heard of this issue, I mean, from what Alison was saying, this wasn’t the only case. Has it been underreported, do you think?

TN: I don’t know. I don’t know how much property African Americans were allowed to hold before a certain point in time. I’m just not really sure. My family that settled in New Amsterdam when the Dutch still ruled America, had some property that was seized by the British in 1671. So it happened.

BBC: How did you find that out?

TN: We know our family history pretty well, but this was land in lower Manhattan, right around where Wall Street is, and so it was seized. These things happen. I’m not in any way trying to take away from the racial injustice that was done in California, not at all. But these things happen occasionally, and I’m just glad that these guys could get their land back and benefit from it eventually.

BBC: Tony, you’ve been looking at hmmm. We’ve been hearing there about its planned expansion into Latin America, but at the moment you’ve been looking at where their product is sourced. And we were just speaking about Myanmar. It’s Myanmar, sure.

TN: Yeah. Asian sources quite a lot in Myanmar. And part of the problem they’re facing is a lot of the manufacturers in Myanmar are being driven to insolvency because of energy prices. And so H and M doesn’t only have a problem generating revenue to replace Russia, but they do have a supply chain sustainability problem with matching the costs they can get in Myanmar, but also replacing that manufacturing pretty quickly as those manufacturers are driven to insolvency.

BBC: Tony, listening to that, how much has the iPhone changed your life, do you think?

TN: I have never owned an iPhone.

BBC: Smartphone. Do you own a smartphone?

TN: I do. Yeah. Of course I do.

BBC: So do you think iPhone opened the door to that?

TN: Of course it did. But I just never got into the Apple ecosystem. And I just haven’t owned an iPhone anti Apple. I just haven’t been I’m just waiting for it to get a little better. But of course, it’s influenced phones and it’s influenced the way we engage with technology. And it was a great product at the time. It was revolutionary. I remember I was using a Nokia phone at the time. Keep in mind, this is 2007, and you could play your music on that phone and have conversations, and I thought that was pretty cool. But that was before the iPhone came out. The navigation the interface. Everything just really changed the way people interact with phones. It’s great.

BBC: I think that’s all we have time for on this edition of business matters. Thank you so much to Tony in Texas and Jessica in Malaysia. And thanks to Joanna Stern from the Wall Street journal, who brought us up to date on iPhone’s 15th birthday as well. This has been business matters with me, Vivian Nunes. Thanks for listening. Bye.

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Are Central Banks Moving Too Little Too Late?

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/are-central-banks-moving-too-little-too-late on April 28, 2022.

With inflation being the main concern in global markets, are central banks reacting quick enough to hike rates to contain inflation? And how will tech stocks perform amidst the volatility that we have seen year to date so far? Tony Nash, CEO of Complete Intelligence shares his insights with us.

Show Notes

KSC: Good morning. This is BFM 89, five minutes past seven in the morning on 28th April, 2022. I am Khoo Hsu Chuang with Wong Shou Ning and Tan Chen Li. In the meantime, let’s recap how global markets and the It yesterday.

WSN: US Market down 0.2%, SMP 500 up .2% Nasdaq close flat Asian Market Nikay down 1.3%, Hong Kong up .6% Shanghai Composite up 2.5%, SDI closed flat FBM KLCI down .7% pretty interesting trend over there. You can see I think the Shanghai site went up a bit because of the possibility of maybe cases eating in China.

KSC: Yes, foreclosures and more openings. So to join us on the line for some analysis on what’s moving markets, we now turn to Tony Nash, the chief executive of Complete Intelligence. Tony, good morning. Now, let’s start with tech stocks, and they’ve had a bit of a bumpy ride the first quarter and into the second quarter. What’s the situation report in terms of where that risk on asset class is concerned?

TN: Well, check so far in the earnings season hasn’t performed well except in the last few hours when Facebook announced their earnings. So Tech’s really disappointed. Up until about two or 3 hours ago, Facebook announced that ads to their users, their earnings were up and so on and so forth. So after hours, they’ve popped by $30 a share or something like that. And Qualcomm also after hours reported really good earnings. So what we saw early in the earnings season with tech down, hopefully Facebook and Qualcomm have changed things a little bit. But that’s not to say we’re out of this. Just because we’ve had a couple, it doesn’t necessarily mean that we’re out of the woods with tech. So Pinterest reported and they were negative. And so we’re really separating the kind of the viable tech businesses from those that really aren’t viable and who are really struggling. Part of the problem with tech also is that we have a lot of ad space coming online now with Twitter now sorting themselves out and with other tech firms having new ad space like Netflix is adding ad space and ad based subscriptions. So we’re going to see a glut of ad space going forward, which will challenge some of these technology guys in, say, two to four quarters time.

TCL: So, Tony, how do we know what is good and what is not such a good tech stock? What differentiates it? Is it going to be margins? Is it going to be market share? What is it management?

TN: Yeah, I think people are looking at earnings. People are looking for, say, online companies. They’re looking at users. So let’s compare, say, Netflix and Facebook. Netflix had a net loss of users. Facebook had a net out of users. Netflix’s earnings went down. Facebook earnings went up. Netflix versus Facebook, their earnings went up. People are really looking at what is the core business of that tech firm. And are they succeeding at that. So you can’t necessarily make a broad sectoral play. Right now, markets are really in flux as interest rates rise and money supply is kind of reined in. So you really have to understand the companies and you have to understand what the advantages and how they’ll play, at least over the next quarter, if not more kind of medium term.

KSC: Yeah. Tony talked about earnings. Right. What’s earnings season been like so far? It appears to be a mixed bike. Bad at Boeing. Okay. At Visa. Robin Hood is laying off people. What’s your take on earning season so far?

TN: It’s very mixed. And I think you’re seeing the companies that are well run versus the companies that have been just kind of posting. So during the Pandemic, we saw the Fed buying a lot of these Fang names and Tesla and other tech names. So it was pretty easy for tech firms to just kind of move along with that wave and not really get their management in place and not actually manage the business and the operations. These ones like Qualcomm and Facebook that are reporting well, they’re getting their operations in place regardless of what’s happening in the external environment. The guys like Pinterest and some of these other guys, they’re not managing well and it’s showing in their earnings.

WSN: Let’s talk about inflation. As we know, this is the key concern of the global markets. So are central banks around the world a little too late? Too late already in trying to hike rates?

TN: Yes. Central banks are always too late because nobody he wants them to be the buzzkill on a Bull market. And so if they had come in earlier, although it would have been appropriate, they would have been blamed for killing the Bull market. So the pressure on a central banker is such that they really don’t want to be blamed for killing it. Now they have to come in for a lot of different reasons and raise rates. So I would say they’re definitely too late. They’re always too late. Is it too little? That remains to be seen. We expect a 50 basis point hike in May and another 50 basis point hike in June. That would really recalibrate some expectations. And we’ll have to see what happens in markets there. When you look at the ECB, they can’t raise at that rate. They’re stuck in a really bad place with energy and food prices. So they’ll move much more slowly.

TCL: And I guess the same for the bank of Japan that’s supposed to be meeting in the next two days. You don’t expect them to move? I mean, look at the yen. It’s like two decades low. Do you think this will continue?

TN: Yeah. BOJ and ECB have a lot of similar issues, and they’re really kind of pedging into a corner. They can either support their bond markets or they can support their currencies. They’re in that bad of a position. They can’t do both so both of them have to support their bond markets right now. They can’t mind their currencies. Now, when we look at the PBOC really has to just drop helicopter cash across China right now. They have to get incredibly aggressive to support the Chinese economy. If they don’t and if China doesn’t open soon, there are major problems in China. So the PVoC has to be very aggressive going forward.

KSC: Yeah. Just think of the PVC. Tony, do you expect that the Chinese government maintains its very strict zero covered policy, especially since in the context of a rapidly declining local economy.

TN: think China cannot stay closed. Okay. The rest of the world has come to a position where COVID is endemic. That’s the view of the governments. People realize that they have to have an active economy to feed their people. China is making these very active, say, policy changes for a number of reasons. But what’s happening is it’s starting to really bite. They’re starting to impoverish their people because of food prices, because of fuel prices, because there are no exports and so on and so forth. So the Chinese government is in a really sticky position. And if they don’t change policies soon, there will be major difficulties both politically and economically in China.

KSC: Yeah. And lastly, Tony, just want to get your view in terms of rushes and systems are being paid in rubles with its energy supplies. How do you read that move in the context of it being taken off the Swift financial system? It’s freezing of dollar assets in the context of the US dollars utility in the global economy.

TN: Yeah. I think look, Russia, this is a negotiating position for them, and it’s something that they’re insistent on. They know that countries like Germany are way too dependent on Russian oil and gas. So they know that Germany will pay in rubles if they’re pushed to do it. They don’t have a choice. So Russia is right now showing Europe who is boss, and Europe has unfortunately put themselves in this position. Poland hasn’t worked on diversifying their energy of late, and a lot of their energy mix comes from domestically mined coal. But for oil and gas, they’ve been working feverishly on getting alternate supplies, but other parts of Europe have not. And also they’re much more dependent on Russian oil and gas. So Putin is flexing. They have to kind of count out to him and they have to do what he says because he’s their main source.

KSC: Absolutely. Okay. Tony, thank you so much for your time. That was fantastic, as always. That was Tony Nash, complete intelligence chief executive, talking to us about markets. And just in the context of China’s insistence on staying closed, I think if the Chinese government doesn’t about turn even in the slightest, it might just be the biggest fill up for capital markets going forward.

TCL: Well, we’ll find out later at 730. Right. Because you’re going to be talking to Gary, he’s an economist and he’s going to be telling us what’s the situation like on the ground, whether the GDP target of 5.5% is going to be achievable at all, because it looks like the lockdown might even extend all the way to Beijing.

KSC: Yes. And of course, our Foxconn’s factory is bigger supply to Apple also is close in Kunshan, two of them. So global repercussions. Let’s turn to Facebook, now known as Meta, which did report earnings before they reported the shares actually did soon, considerably on the expectation that they would report a bad set of numbers. But actually, Facebook Meta surprised.

TCL: I think there was a lot of negative news even before this. And they were already receiving regulatory headwinds from the EU with regards to whether their dominance questions of their advertising, questions of how much are they involved in our daily lives. But I think the results were better than expected. Yeah.

WSN: So I think adding on to what Shannon was saying, there was also a concern about user base that’s not growing for the first time. The revenue that came out yesterday, it was reported their shares jumped 15% because their revenue jumped 6.6% to $27.9 billion. And this is the first time in Facebook’s ten year history as a public company that they landed in a single digit growth. And if you look at it, is that better?

TCL: Good.

WSN: Well, slower, but still growth.

KSC: Yeah. Because with this kind of platform, it’s all about Dows and Miles. Right. Daily active users and monthly active users now.

TCL: And what they found is that people have been spending a lot of time. So maybe the number of users hasn’t increased as much as they should, but the duration in which you spend on Facebook has increased. So you’re looking at maybe people spending as much as an hour versus other social media platforms where, yes, you might have an increase in users, but the duration is actually shorter. So that’s the justification as to why the share price has bounced today. And this is what Meta is telling the analyst community out there.

KSC: And we saw Snap also report a good set of numbers, surprisingly. Right. So actually doubling daily active users beat expectations, one point 96 billion versus one point 94. And Mouse monthly active use is two point 94 billion. Missed expectations of two point 95. So not a big mess. But actually they did also guide for revenue that was weak because of three things. Right. First of all, the military situation in the Ukraine. The second one, of course, the Apple Privacy changes, which made it more difficult to target ads. And of course, then the supply chain affecting advertisers now very quickly Spotify.

TCL: How many of us have subscriptions? Me, yes, me, I. But the share price fell more than 12% despite reporting first quarter earnings that beat both top and bottom line. Looks like markets still not happy with that number. I think exiting Russian market led to a loss of 1.5 million subscribers. Although monthly active users went up by 19% year on year to 422,000,000 users I think ad supported revenue did also grow 31% but I think basically ending subscriber subscriber base like Netflix seems to have come under pressure in the last few months.

KSC: Yeah sign of the Malays affecting streaming sites. Stay tuned. BFM 89 nine

Categories
Podcasts

Tech Crumbles as Spigots Close

TECH CRUMBLES AS SPIGOTS CLOSE

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.

Categories
Podcasts

Apple To Scan Phones For Child Abuse Imagery

This is another Business Matters episode at the BBC with Tony Nash as one of the guests. They discussed about the possible problems if Apple starts scanning phones for child abuse imageries, electronic vehicles and their future especially in the US where President Biden targets 50% total sales in the next decade, and should vaccines from developed countries be sent overseas to help developing countries?

 

 

This podcast was published on August 6, 2021 and the original source can be found at https://www.bbc.co.uk/programmes/w172xvqgghw0rpz.

 

BBC Business Matters Description:

Tech giant Apple has said that all of its smartphones and tablets in the US will soon scan them for images of child abuse and report those found. The move has already alarmed some, who are concerned devices could now be spied on. We speak to Matthew Green, a cryptographer and professor at Johns Hopkins University in the United States who revealed details about Apple’s plans before they were officially announced. President Biden has said that by 2030, half of the cars produced in the US will be zero emission vehicles. But is this realistic and does it go far enough? We ask Becca Ellison, deputy policy director at the environmental campaign group Evergreen Action. Vaccine maker Moderna has reported net income of $2.8bn for the three months to June 30th. Rasmus Bech Hansen is chief executive of the life sciences data analytics company Airfinity, and tells us how the company’s coronavirus vaccine has boosted its prospects. Plus, in the wake of the saga of office sharing company WeWork, the BBC’s Ed Butler explores whether technology startup founders have become the latest wave of cult leaders. And after the news that Lionel Messi will leave Barcelona, we ask his official biographer Guillem Balague, why money is the reason the world’s greatest footballer is leaving his club of 20 years.

 

All this and more discussed with our two guests on opposite sides of the world: Tony Nash, chief economist at Complete Intelligence in Texas and Zyma Islam, journalist for the Daily Star in Dhaka, Bangladesh.

 

Show Notes

 

BG: Tony, what’s your view on this? Do you wonder why the technology companies can really control how this software is used around the world and in years to come? Because there is a real risk that it is the thin end of the wedge? And what do you do on your phone is no longer private?

 

TN: Yeah, I share all of the concerns that Zyma mentioned. I have three kids. I have the same worries as the person you interviewed. But these things always start with good intentions. Here’s the problem. The biggest problem of the interview that I heard him say is it’s under development. They haven’t even tested this stuff. They’re going to put it on everyone’s iPhone to snoop in their photos too. And what I worry about, there are planned layers of review in this. But what about that person, man or woman who is labeled a pedophile on accident? They will never get their life back ever. So all of this stuff starts with good intentions, but I guarantee they will ruin people’s lives with this.

 

BG: But if illegal material is being stored, passed around on people’s phones, surely tech companies do have a responsibility to do something.

 

TN: No I don’t. I run an artificial intelligence company. Computer vision is very good. That’s the technology generally that they’re using for this. But there are always anomalies. There are always problems. Tech companies have a responsibility to be tech companies. Tech companies are not the police. If we get pulled into an investigation, then we in all of our contracts, it says we will cooperate with the police. But it is not our responsibility, nor is it any other tech company’s responsibility to play the role of a police officer, unless they know that something’s going on. But this is going above and beyond, and I guarantee you they will label people pedophiles who are not pedophiles and they will ruin their lives.

 

BG: What kind of incentives do you think might be needed to try to get half of car sales to be electric or some other type of zero emission vehicle by the end of the decade?

 

TN: I think one of the things they really need to do is respect the intelligence of drivers. And they really need to look at the total emissions of the manufacturing process and the operation process of vehicles. Electric vehicles produce massive emissions during their manufacture with battery technology and so on. Once they’re alive, they plug into the grid. And depending on what your local power plant is generating from coal or gas or nuclear or whatever, there are other issues associated with those emissions, other indirect emissions.

 

What I would love to see is a side by side comparison with petrol based cars and electric vehicles through the lifecycle of their manufacture and use. How do they compare drivers in America? They like to have cars just like people in other places, although a little bit bigger here. I live in Texas. People here, though, are are getting wise to electric vehicles and the damage that the batteries that electric vehicles do just in the neighborhood, aside from mine here in Texas, a Tesla car caught on fire and melted the street, killed both people in the vehicle.

 

Consumers are becoming much more aware of the dangers of electric vehicles and they want to understand what’s going to happen. So those types of considerations as this transition happens, and I believe it will, but those types of considerations have to be taken into account and consumers have to be made aware or have to be told this information. Truly, the problem with these fuel efficiency standards is they only look at carbon and petrol vehicles. They don’t look at electric vehicles. So electric vehicles will look like zero when in fact. They’re not.

 

BG: This target that Joe Biden announced today is voluntary. What do you think it will be met this target of 50% of sales by 2030? You seem pretty skeptical that it will indeed, perhaps that it should be.

 

TN: I don’t think it will because I don’t think EVs can make that target without a subsidy for the buyer. So there’s these standards, but there are also massive subsidies for SUV buyers. What you’re doing is you’re penalizing low income people who pay taxes through sales tax or other things to subsidize. Let’s be very honest, highly educated cosmopolitans who buy EVs. You get fairly wealthy people who are subsidized by poor people with the subsidies they get when they buy a car. It’s a real problem.

 

BG: Tony, when you hear about the almost total lack of vaccine supplies there in Bangladesh, and we had the comments from the World Health Organization earlier in the week saying that they should wait in developed nations where pretty much every adult has been vaccinated. What do you think countries like the United States should be doing?

 

TN: I think we should make them aware. I think we should make them available globally so that people can catch up. Giving the boosters there is there is a sufficient portion. I know it’s not what the federal government wants, but there is a large portion of the U.S. population that has been vaccinated. Older people, people with complications who wanted to get vaccinated have been vaccinated early. So I think it’s time to move these into South Asia and other countries like Africa to make sure that there is enough for those countries. I’ve actually been pretty vocal about that.

 

BG: Presumably, though, there are an awful lot of Americans who say the US helped fund the research effort and they want their kids to be vaccinated.

 

TN: But kids under 12 can’t get the vaccine now. It won’t be approved by the FDA until the end of the year. So send it overseas. I just don’t understand what the problem is with sending this stuff overseas if they’re needed overseas. Again, I’m very supportive of sending this stuff overseas because kids can’t get the vaccine until it’s approved at the end of the year.

 

BG: Tony, in business, is the cult of the leader or of the entrepreneur really a bad thing?

 

TN: I think it can be a good thing. But specific technology, I founded our firm, I’m a tech CEO and I speak to a lot of investors. And no venture capitalist thinks that any of their companies are. We work. No venture capitalist believes that can happen to them.

 

BG: Which is a problem, right? Because, of course it can

 

TN: It’s an absolute problem. And when I listen in out of nowhere and pitch, gosh, I wish I could pitch in as well as he does because venture capitalists are suckers for a great pitch. They will fund anything that has a great pitch. And again, they’ll tell you they’re not OK, but they are. I meet so many entrepreneurs, founders who can pitch, but what is there to their business? Well, they get funded and that’s it. I think the pitch is something that that every tech founder really, really focused on learning how to do. They don’t actually learn how to run a business. Very few.

 

BG: Is there is there a cult of Tony Nash at your company?

 

TN: I wish there was. I wish that was the case, but it’s not. I’m sorry.

 

BG: It’s such a shame. This is Business Matters with my thanks Tony Nash and Zyma Islam. And join us again same time tomorrow bye bye.

 

 

 

Categories
Visual (Videos)

Why legacy car brands, IT giants are rushing to make electric cars

This article originally published at http://www.arirang.co.kr/News/News_View.asp?nseq=274827 on April 1, 2021.


Can Hyundai, Kia, Volkswagen, GM make better electric cars than Tesla? Last year, sales of electric cars surged 44.6% despite the general downturn of car sales in the global market. In early 2021, a number of automobile giants announced plans to go fully electric within the next ten years. Can they beat the likes of Tesla and offer innovative rides for consumers?

 

Show Notes

 

SO: Last year sales of electric cars surged 44.6 despite the general downturn of car sales in the global market and that trend looks set to accelerate in early 2021. A number of automobile giants including Volkswagen, General Motors and Volvo announced plans to go fully electric within the next 10 years but can they beat the likes of Tesla and offer innovative rides for their customers?

 

For insights on this we turn to Tony Nash, CEO and founder of Complete Intelligence based in Houston, Texas and Jason Salvucci, national manager of the Overseas Military Sales Group based in Seoul but currently in Okinawa. Well, a very warm welcome to you both and well Tony good to see you again.

 

I think it’s our first time connecting this year but well we’ve seen we’ve heard some very exciting news coming from these automakers and the likes of Volkswagen and General Motors. They’re going all electric they’re really moving away from this at the main business that they’ve been building over the decades based on combustion engines.

 

What’s led them to take this risk and do you think it’s the right move?

 

TN: I think, it’s a move that they have to make. Whether or not it’s a move that they want to make. I don’t think there’s really a lot of debate there but I think their equity market valuation they have to catch up well.

 

I don’t know that they will but they’ll try to catch up with say Tesla or something within terms of the equity market valuation but the customer perception they’re actually making viable EVs that they want is really critically important especially with younger customers. But from a balancing perspective at least in the US for example there are emission standards and the more electric vehicles they produce that also allows them produced to produce other larger vehicles SUVs and other high polluting vehicles. So as long as on an average basis they keep it down to the emission standards.

 

They can produce EVs to allow them to produce say the SUVs that other say consumers want. So, it’s both perception and equity market valuation as well as balancing out the regulatory aspects.

 

SO: So, they’re wearing the different sort of costs and risks here. Well, Jason, what’s your thoughts on this? I mean the world’s biggest legacy automakers scrapping their combustion engines. Do you think they’re making the right move?

 

JS: You know, I kind of got to agree with Tony that this is electric is the future. I mean, they have no choice. It’s not just the standards. Electric cars are easier to maintain. They’re quieter. They’re cleaner. They’re more efficient. I mean, the power is better it’s the way everything’s going. I mean, we don’t really have much choice in the matter. While it may not be 100 electric tomorrow. We’re getting there.

 

The big manufacturers if they want to, they want to play with you know companies like Tesla, they have no choice. That’s where the future is.

 

SO: And the force Tony, Tesla is without a doubt the world’s most iconic electric car company but do you think it’s leading the global market is going to last with all these other competitors now coming into the market these giant auto businesses? And are these car makers catching up quickly enough in terms of battery technology and other key technologies?

 

TN: Well obviously, they have a lead but will they be able to keep it as the real question. I think they may be able to keep it for a few years but I’m not sure that they can keep it say over the medium to long term.

 

So, Tesla has a lead but that gap is closing. And with technology they can use external, say sources to either acquire or develop the battery technology that they need to compete with Tesla. So, I think really at the end of the day it comes down to: can you produce a quality vehicle? Can it perform like consumers want and does it drive like consumers want?

 

So, the novelty of an EV is wearing off. And as it goes broad-based that first user advantage or first user interest wears off. And the broad market really just wants a functional car that is electric. And so, you have the segmentation and other things but I think Tesla is going to have a tougher job going forward to keep the lead that it’s got.

 

SO: Well, Jason is it as straightforward as one might think for these giant automakers to transition into all EV?

 

I mean, what are the major differences that traditional car makers are going to have to adapt to and really face as they transition into all electric?

 

JS: Well, the manufacturing process for one, you know, the number of components in a combustion engine vehicle, compared to an electric car, it’s night and day. I mean it goes beyond the manufacture of the vehicle. It’s the maintenance of the vehicle it’s really everything.

 

The shell may look the same but when you transition to, you know even a mild hybrid to a all-electric vehicle. It’s completely different. Not only will the way the cars are sold have to change but also because how the customers buy the cars. How they maintain. How they operate the cars everything changes. It’s not as simple as just shifting from one to the other.

 

So, I think that the manufacturers have quite a task ahead of them. They are really playing catch up, if they want to grow in this and be industry leaders as they have been for years like Volkswagen, Toyota, Ford. They were industry leaders for years and they’ve surrendered that position to a startup company like Tesla.

 

SO: Right and there was some news this week that Volkswagen might be changing its name in the US to Voltswagen. So, really goes to show. It’s not as easy or straightforward as simply changing the name and probably…

 

JS: That’s an April fool’s joke by the way. Yeah, it was April fool’s joke. I fell for it too. Voltswagen is their April fool’s joke.

 

SO: It was a bit too early for April fool’s day but well thankfully yes, they’re retaining the Volkswagen brand. And well Tony, internet companies like Apple and Google and apparently Xiaomi now and Huawei. They’re working on electric vehicles as well and it’s clearly not going to be such an easy ride. So, what’s really in it for them? And what kind of innovations do you think they’re going to bring to the market as tech companies?

 

TN: Well, that’s a great question. Jason brought up a great point about the business models and as you move into the more software-based business models that EVs are you move into a different ability. In a different way for consumers to pay for things. And you know, I think it’s possible for kind of that big expense of a car that a consumer would buy instead of it being financed. It could be a service fee that’s put over a period of time. I don’t really know what that model looks like but these software companies are companies that really balance out especially Apple. A hard asset like a phone plus monthly recurring software fees.

 

And so, these guys will come into the market. Understanding the risk associated with making hardware and balancing that out with software fees. Whereas automakers traditional automakers at least are accustomed to one big transaction that gets financed by a third party. So, it’s a fundamental change in the business model.

 

SO: And Jason, now South Korean car makers, Hyundai and Kia. They currently set fourth place in the global EV markets and of course Kia having unveiled its EB6 this week. And Honda continuing to expand this EB lineup, of course.

 

So, how competitive are these South Korean car makers products? And do you think they’re really going to have to step up the game? Now as market leaders global market leaders Volkswagen GM they’re going out all electric?

 

JS: I’ve been in South Korea 20 years and the way cars have improved in the last 20 years is phenomenal. When I first got to South Korea. Korean cars were far behind but now the fit, the finish, the quality is amazing.

 

I think the larger auto manufacturers are going to get a run for their money by the likes of Hyundai and Kia when it comes to electric vehicles. I really do.

 

SO: So, what kind of… I suppose, what kind of advantages or what kind of features do you think they offer Jason that might really help them really engage in the competition especially as all these car makers go electric?

 

JS: It seems to me the… not just the quality but the design of the Korean cars is a little more exciting than some of the other manufacturers. That’s what I’ve noticed over the last couple of years, is that they’re good-looking cars and they’re reliable. And the price points are, well, I mean they’ve significantly come up in cost in the last 20 years, that’s for sure but they’re nice. And I see a future of like a subscription type of service for electric cars because you know the United States every three years to 39 months. Americans are trading their vehicle up trading in one car for another car. And we have a traditional dealer manufacturer, dealer model that we have to require our customers to go through a subscription service in the future.

 

It is definitely, in the makes for electric cars because you’ll trade out of them much more frequently.

 

SO: So, it’s not just the hardware but also the software that’s going to bring about a lot of changes in how we consume electric vehicles, as well. And of course, everyone cares about the design too. And well Tony, it seems that EVs really are the future but it looks like for now the stock market is quite confused about the prospects they’ve been fluctuating. They’ve been declining over the last few weeks. And of course there was a boost on Wednesday after the Biden administration announced its plans to really ramp up green vehicles and infrastructure but what do you make of these market fluctuations? And how does Complete Intelligence really project the demand or market for electric vehicles in the near future?

 

TN: Sure, obviously there’s a healthy market ahead. I think the equity market fluctuations over the last few weeks are really just, that its markets searching for the right price. And there are so many different variables with bond prices. And currencies. And equity markets that are going into the calculations around the stock market prices for these companies but I do think that those companies that will not only crack the battery technology. And the value proposition for the market but also the business model, as Jason mentioned. Those companies are the ones that the equity analysts. And the investors will really want to follow.

 

So, Tesla is a high visibility leader, early leader in electric cars. And I think they’ll remain a leader but the volume of cars that they produce compared to say a Volkswagen on an annual basis is tiny. And so, the scale that a Volkswagen or a Hyundai or somebody can bring to this market can overwhelm almost an artisan car maker like a Tesla.

 

That’s I don’t mean that as an insult to Tesla at all they’ve done some amazing groundbreaking work but they just don’t have the scale that a Volkswagen or Hyundai has.

 

SO: Well, the likes of Volkswagen and Volvo. They’re going all electric Jason but Hyundai seems to be putting its eggs in multiple baskets. It’s been betting on hydrogen cars as well. Which right now are considered a bit less economical. And there’s also a lack of supportive infrastructure in most parts of the world.

 

Do you think this investment is going to pay off for the company?

 

JS: I think the future is multi-faceted. I don’t necessarily see the entire replacement of the combustion engine, anytime soon. I mean, they’ll definitely be hybrid vehicles, will be mild hybrid plug-in hybrids. There’ll be some hydrogen fuel cell vehicles. I think that there’s multiple avenues that manufacturers will have in the future.

 

So, that we can kind of have something for everybody. I don’t know that the investment in the infrastructure for hydrogen pays off because right now extracting the hydrogen requires fossil fuels. That’s a bit of a problem until they can crack the hydrogen extraction of via solar or something like. That it’s a bit of an… it’s not there yet. I don’t think.

 

SO: And Tony, before we go now there’s a massive EV market in China. And recently, Huawei technologies. They’ve come out and said they’re going to invest billions into that market.

 

How do you see the prospects and do you see China sort of leading the global market in terms of EVs just with the massive number of consumers they have?

 

TN: Sure, I think, Yes. I think China’s challenge is moving their vehicles beyond China and beyond Asia. There’s so much intense competition from Korea, Japan, the US, Germany and so on and so forth, that I think their challenge will be taking an electric domestic, electric vehicle market that will be massive. And moving that into other countries whether it’s safety standards or features or business models.

 

I think, there is something especially with technology that is specific to China that is very difficult to move beyond Asia. And so, if there is a Chinese EV maker, who can move beyond China and beyond Asia. I think they’ll do very very well.

 

SO: See, well, this is all we have time for today but that was Tony Nash, CEO and founder of Complete Intelligence and Jason Salvici, national manager of the Overseas Military Sales Group.

 

Thank you both so much for your insights today. And to our viewers, as always, thank you for watching.

 

Categories
News Articles

Time To Rotate

Tony Nash joins BFM 89.9 The Business Station for another look at the global markets particularly discussing the “Japanese equity market”. Is it the time to rotate into value or maybe it is a sign that the broader economy is recovering?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/time-to-rotate on August 26, 2020.


BFM Description

 

With technology stocks hitting all time highs, there has been some inflow into the finance and utilities sectors. We ask Tony Nash, CEO of Complete Intelligence if it is time to rotate into these names. We also ask his views on the Japanese equity market and if there is still money to be made with the change in leadership.

 

Produced by: Mike Gong

 

Presented by: Khoo Hsu Chuang, Wong Shou Ning

 

Show Notes

 

WSN: So far, deeper dive in global markets today. Joining us is Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Now, last night, U.S. tech stocks will slump relatively while laggards like finance and utilities saw some inflows. So do you think this is the time to rotate into value and maybe a sign that the broader economy is recovering?

 

TN: I think it’s certainly a time to to that that that rotation is starting. I don’t necessarily think it’s in full swing yet, but but we’ve received signals for the past week or so that that rotation would start sort of seeing some of the techs off.

 

Today is not really all that surprising, given especially some of the Fed and Treasury statements over the past couple of weeks.

 

KHC: Yeah. So in terms of cyclical stocks, Tony, what is your point of view in terms of which sectors might benefit?

 

TN: Well, I think, you know, we’ve seen tech with companies like Nvidia, Tesla, and these guys have just had amazing gains over the past, say, four months. I think, you know, the rotation into some of the finance stocks, into some other more mainstream, broader market equities is likely. I think the indices are assuming that tech stays at elevated values. That rotation will only help the indices if tech comes off. Given the concentration of waiting within those stocks, it could really hurt some of the overall indices.

 

WSN: And, Tony, let’s focus on one of these, you know, super winners in the last few months. And it’s Tesla, right? They have a decision to sell five billion worth of shares. Is that smart or overly ambitious? Move now. And what more what kind of growth can we expect from this company?

 

TN: Well, the I think the the growth in the stock price is very different from the growth of the company, so Tesla’s trading at a PE ratio of almost 1200.

 

OK, the stock’s more than doubled since March. So, you know, the company itself isn’t doubling. You know, I think it has. I think what the management is doing is making a very smart decision to sell equity while they know the price is very high. So from a management perspective, I think that was a very smart decision. In terms of a buyers perspective, I’m not so sure it’s possible that Tesla stays at these elevated level. People have been trying to short Tesla for years and it just hasn’t worked.

 

So it’s possible there’s growth there and it’s possible they stay at these elevated levels.

 

WSN: So, Tony, are you a big fan of Tesla? This level…

 

TN: It’s hard not to be whether I’m a buyer, personally or not, I would hesitate here. But, gosh, you know, I think there are other places to look that are better value.

 

But it really, you know, part of it really all depends where the stimulus is going. So since the Treasury and Fed are intervening in markets, if they’re targeting specific equities or specific sectors, then you kind of have to follow that money.

 

And so it’s it all depends on how much further these things are going to run and where that stimulus is targeted.

 

KHC: OK, based on PMI data, most of Asia remains contractionary. But for China, of course. You know, Tony, in your opinion, why is recovery not yet forthcoming? And is there a main catalyst needed for manufacturing to take off?

 

TN: Yeah, I mean, look, in terms of manufacturing PMI, as you have Indonesia, Thailand, South Korea, Taiwan, you know, they’re all growing, which is great. Myanmar is actually growing faster than China.

 

But what we don’t have really is the demand pull. And that’s been a real problem. And, you know, we’ve been talking about that since February and we’ve been really worried about deflation. And, you know, what we see even in Southeast Asia is government intervention in markets is really what, propping up a lot of the activity. And I think, you know, the big question I have is, will we see steam come out of recovery in Asia in the same way we’ve started to see steam come out of recovery in the U.S.?

 

I think the answer is unfortunately, probably yes. And I think until the demand from both consumers and companies comes back and the fear of covid wanes, I think we’ve got some some volatility ahead.

 

We’re expecting some real trouble in September. I think it’s great that markets are doing well today, but we’re starting to see the the momentum really slow this month.

And without additional help from the Fed or PEOC or other folks, it really slows down. The problem is the efficacy of that support really deteriorates the more you add to the system.

 

WSN: And Tony, look at Japan, right?

 

I mean, are trading the equities. They are trading at a steep discount to their historical premiums. Do you see any value in yen based assets? After all, Warren Buffett himself just dipped his toes into it by six billion dollars worth of trading companies did. What do you think?

 

TN: Well, that’s the answer. I mean, it’s hard to it’s hard to bet against Buffett. He’s obviously seeing real value there. And I think the Japanese trading companies are really, really interesting because they’re you know, they’re a very good play right now. So is there a value? Sure. I think there’s value there. I think with Japan, a lot of the story is around productivity and automation. If if Japan can continue to raise its productivity through automation, I think it will be a very good play.

 

If that productivity and if the level of automation slows down, then it becomes questionable because everyone knows about the demographic story in Japan, but the economy continues to grow, which is really amazing.

 

WSN: So it seems like you’re quite a believer in that this can overcome some of the structural issues. But what about the fact that Abe has resigned for health reasons? Does it change at all the economic and monetary policies in Japan that might change your decision?

 

TN: Yeah, I think when someone like Abe steps down,  there’s always momentum. So it last for several months. The real question is, how long should the next leadership last? And is there enough structural stability to continue the momentum in Japan, meaning it’s not growing leaps and bounds, but it’s stable growth and it’s healthy growth. So I like Japan a lot. We have had reform under Abe. We have had structural reform under Abe. I think it’s much more healthy today than it was in 2011 or 2010. A lot’s been done.

 

Japan has the capability to continue to improve, but it all really depends. There are regional dynamics and there are domestic dynamics. But again, I think if demand regionally and globally doesn’t return, which is likely COVID induced, then I think Japan, like everywhere else, will have issues.

 

WSN: All right. Thank you for your time. That was Tony Nash of Complete Intelligence, speaking to us from Houston, Texas.

Categories
QuickHit Visual (Videos)

QuickHit: “Perceived Recovery” and the Artificial Market

Political economic consultant Albert Marko joins us for this week’s QuickHit episode where he explained about this “perceived recovery” and how this artificial boost in markets help the economy. He also shares his views on the 2020 US Presidential Election and the chance of Trump winning or losing this year. What will happen if his scenario plays out, particularly to the Dollar, Euro, and others?

 

Albert Marko advises congressional members and some financial firms on how the machinations of what D.C. does and how money flows from the Fed, Treasury or Congress out to the real world. He is also the co-founder and COO of Favore Media Group.

 

This QuickHit episode was recorded on August 25, 2020.

 

Last week’s QuickHit was with independent trading expert Tracy Shuchart on the end of “buy everything” market and the unknowns and apprehensions.

 

The views and opinions expressed in this QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes

 

TN: We’ve seen a lot of intervention in markets from the Fed and the Treasury. I’d really love to hear what you’ve seen and what your assessment is of that activity.

 

AM: First off, we have to understand that politics and economics are tied to the head. You can’t deviate from the two of them. I don’t like when people try to disassociate the two from that. The Fed and the Treasury had to work on financial stability of the markets. That is the ground game right now. The only way to do such a thing would be to congregate all the market makers and select certain equities and pump those equities until the market had a perceived recovery at that point.

 

TN: So perceived recovery, that’s an interesting, interesting word. When you say market makers or strategists got together and plan this, what concentrations have you seen in markets? Is it possible to focus on a specific number of companies and make sure that the rest of the market moves based on their coattails?

 

AM: Of course. This is not a new strategy. We’ve done this in 1907, and done this in nineteen eighty seven with Buffett and Goldman and we’re doing it now. It’s just the way it is.

 

The way the strategy works is you take a couple equities, say a dozen of them, maybe a little bit less. Tesla would be one. Nvidia, Adobe, all of these companies that don’t really have international peers to compare with and valuations that they can pump and the market takes over and comes up with all sorts of fancy ideas of why Tesla is at a $400 billion valuation.

 

But the fact of the matter is, if you look at the pricing and you look at all the call options that have happened over the last four months, it’s pretty clear that this was completely done artificially.

 

TN: It seems the US markets lead global equities. Is there some linking of this? And again, are there international coattails that follow on to US equities coattails or is that what you’ve seen in recent months?

 

AM: That is absolutely correct. There are a couple of markets that would support the US market specifically. That obviously would be the U.K. But the one I like to look at is the Swiss National Bank. They have their minions and their people intertwined within US hedge funds and working with the Fed and the Treasury for years. So if something is going on, they would probably be the next people to hear about it. And you can actually see this by looking at their portfolio buys in Q1 and Q2, as opposed to the 2018. You’ll see that those certain equities like Apple and Tesla had just gotten ridiculous amount of eyes.

 

TN: How successful is that been? As we look at the depths of the pullback in April? Crude oil was at negative $37 in April and it fell $99 from January through April. WTI did at least, right? Equities obviously had a lot of problems. So from your perspective, how has that been executed? How has it been pulled off? Is it okay? Is it good? Are we seeing, at least in equity markets, are we seeing a “V” and do you think that translates into the real economy whatever that is?

 

AM: I use the word “perceived recovery” before as this is artificial. It does support the markets. They’ve done exactly what the Fed was mandated for financial stability. Loretta Mester says that quite often in her speeches. In that respect, yes, they absolutely stabilize the market. Now comes the challenge of rotating out into value stocks and the actual financials or retail or something that’ll actually create jobs later on. They’re going to have to do that. But again, this is basically to stabilize not only the markets, but also the political class that’s supporting it.

 

TN: When you talk about the political class… We’re in the middle of an election cycle. This is my first election to be back in the US since the first Bush election. I was overseas for a long time. So I’m seeing things I haven’t had a front row seat to for a long, long time. How does all the things we’ve been talking about with supporting markets and and really having this kind of quasi recovery, how does that segue into the election? How do you see the election playing out?

 

AM: The people that are in charge now are appointed by the political class in charge at the moment. So those two are going to protect themselves at all costs. Trump appointing Mnuchin. Mnuchin doing what he has to do for financial stability. Now we’re looking at Trump ”losing in the polls” — highly questionable when you look at the methodology about those polls. Right now, I would have Trump winning — about a 60 percent chance at the moment.

 

TN: But the president isn’t the only office, right? So do you have an opinion on the Senate and the House as well? Do you think we’re going to see a flip in either of those places?

 

AM: No, I think the Republicans will actually take back anywhere between eight and 10 seats in the House and they’ll lose possibly two, maybe three seats in the Senate. So they’ll still control the Senate, although that’s when the political calculations come into work where one senator, two senators can block an entire policy of the president. Trump is going to have to do more executive orders going forward, which I personally don’t like, and nobody really should actually advocate for that. But this is the time that we live in.

 

TN: If your scenario plays out, how does that impact US foreign policy for the next four years? What do you see is the major… I would say trade was a big issue in the first four years of Trump, right? And bringing China to the four was one of the big issues. What would you say would be the big foreign policy issues under a second Trump administration if it comes to pass?

 

AM: The big one is China. China is quite intelligent. They hire former congressional members to go and talk politics so they understand how it works. They’re going to start hedging their bets. If they see that Trump is possibly going to win, Phase One Agriculture deals will be flying. They’ll make some concessions on intellectual property rights and whatnot. So you’ll see some of that happening from China.

 

The Europeans are absolutely in denial of what can actually happen if Trump gets elected. The only reason I see the Euro at these levels is because they’re on vacation and the US has just negative news pounding us day in and day out with the Dollar dropping to the low 90s. But I don’t see that sticking around. I think that as soon as Trump gets re-elected, I think the dollar’s back up north of 97.

 

TN: I think you’re right. I think that’s feasible.

 

Well, thank you so much for your time. I really appreciate this. Obviously you have a lot going on and you have a lot of information. This is hugely valuable for us. So I’d like to check in maybe before the election, maybe after the election so that we can do an assessment of how would the changes, whether it’s Biden or Trump, how does it impact markets and how does it impact geopolitics? That would be a fascinating discussion. So thanks for your time. Really appreciate it.

 

AM: Thank you. Thank you, Tony.