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Cold Front on Oil Prices?

Tony Nash is back in the Morning Run, hosted by BFM 89.9, as he points out the crude oil price and how long to expect the rally, considering factors like weather, demand, and supply. Tony also mentioned about a potential pullback and snap and how you can better be prepared for it. Should you continue buying tech stocks or move elsewhere? Also, they discussed crops and where the prices are going this year.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/cold-front-on-oil-prices on February 18, 2021.

 

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BFM Description

 

Tony Nash from Complete Intelligence, from freezing Texas, shares with us the current supply constraints in the US impacting oil prices in the short- and medium-term.

 

Produced by: Mike Gong

 

Presented by: Philip See, Wong Shou Ning

 

 

Show Notes

 

WSN: For some color on where global markets are heading, we have in the line with us Tony Nash, CEO of Complete Intelligence. Tony, are you freezing out there in Texas?

 

TN: Yes, we are. We haven’t had it this cold air for decades. So it’s it’s been a really interesting week.

 

WSN: That has had an impact on oil prices. Bloomberg showing Brent crude at $64 per barrel, WTI at $61 per barrel. So how badly impacted our energy markets at the moment? Where do you think oil prices are going?

 

TN: A lot of this is very short term. What you’re not seeing that the traders really pay attention to right now is that a lot of refineries are closed because of weather and they’re starting to close for annual maintenance. There’s this presumption that there’s a demand pull, which we’re not really seeing from anywhere in the world right now, and that the winter storm issues will pull energy prices. But again, the fact is the refineries that would take this stuff are closed. We expect this to be short lived. This is an extension of a crude price rally that we saw that we expected to come in Jan, it’s lasted into February and we really don’t expect this to have a lot of legs to it.

 

PS: What do you think the outlook looks like then for the mid-term like quarter to quarter three?

 

TN: We would see 10 to 20 percent off of this price? We don’t necessarily think that this is a sustainable level short of some sort of supply cuts. But the weather in Texas, for example, we’re going to be kind of in normal weather ranges in two days. What we’ve seen this week and the close down, as we’ve seen this week, it’ll take people a couple of days, maybe a week at most to get things back on line. So this perceived supply shortage will be back on line fairly soon.

 

WSN: How about yields on U.S. 10 year bonds? Because they’ve hit a new high one year high. What what is that trying to tell this? What a market try to tell us?

 

TN: U.S. is trying to raise money and they’re willing to pay more for it. I think that is is really it. I think there is a growing fear that equity markets are as high as they’ll get. We’ve started to see more of that tension come in into chatter over the last few days. People are willing to pay to get out of markets, to park their money in debt.

 

So I’m sure it helps the U.S. as they’re raising more money for stimulus and for operations. But as we creep up to four thousand, that is just unimaginable for a lot of people. And it’s not as if we are doing better as an economy than we were in 2019 or the first quarter of 2020. This is built on stimulus, as we’ve talked about before. It’s built on central bank activity.

 

And you can only stretch that so far before things have to snap. We’ll see some of these things that are at double and triple and quadruple kind of the standard multiples. And P is the only way to measure this stuff. But we’ll see things that are really, really stretched, snap into a more reasonable region. But it’ll happen any time tomorrow, three weeks from now, a month from now, whatever. It’ll just happen. It’ll happen any time. And it’s best to be prepared for it.

 

PS: So are you expecting some pullback eventually? Right. What is the tipping point where investors will essentially do that exodus or flock to U.S. Treasuries then?

 

TN: One of the tipping points is going to be the resolution of stimulus. I’ve been saying for weeks that stimulus will not be what the administration wants it to be. There are such high expectations put on that stimulus right now and they’re not going to get it. They’ll get a lot of it, but they’re not going to get all of it. Expectations are sky high. And when it doesn’t hit, I think that will be one of the catalysts.

 

But there are other things like when the crude price starts to fall because this supply constraint isn’t there anymore. These sorts of things, these things add up and then they snowball and and then you start to see markets really, really take a dove. We’re not necessarily calling for a 2008 generational type of decline in markets. It’s just a bit of a pullback so that people can just say, “OK, wait a minute, let’s check, take stock how businesses are doing. Take a look at our investments and our allocation and then reallocate.” That’s really what it’s about.

 

WSN: Where would you relocate to and what are the safe haven assets? Because almost every asset class on a year to date basis is up. Right. And maybe except for Google, which is down six percent on the year today.

 

TN: What you’re likely going to see is a pretty serious rotation out of technology where people have focused on because of the work from home activities. This may not be immediate, but I think you’ll see a rotation out of a lot of the work from home stuff as people start real life again and you’ll see people move into. This is not really my the basis of our outlook. But you may see more of a regional move into things like tourism.

 

These things have just taken real hits. A lot of them have had speculative rises, some of the cruise lines. But some of them are still way down. All of this depends on gradual normalization. But I can tell you, Americans are really tired of being locked in, really tired of not socializing. And some of these things are going to have to start up again.

 

PS: What about not all out commodities then, like agriculture and precious metals?

 

TN: We had some real pressure. And part of the reason of that pressure was because there was a perception that a lot of the Chinese corn crop didn’t come in last year. But a lot of the drought was outside of that zone. Some of that pressure was alleviated.

 

But still, we’re seeing some pressure on wheat right now in the U.S. It really all depends on how much the current cold snap impacts the output later in the year or the ability to plant. Right now it’s not terrible.

 

Until we start seeing real demand come back in entertaining and in consumption and these sorts of things, we’re not going to see a major demand pull on food because people are already buying their standard cook at home type of things right now as they’ve rebuilt their behaviors over the last year. We’ll see that change. But unless we see a drought or unless we see an issue in a high consumption part of the world, we’re not necessarily going to see a boom in those places.

 

WSN: All right. Thank you for your time. That was Tony Nash, CEO of Complete Intelligence, giving us his views on global markets and saying that, hey, oil prices are going to come under pressure probably in the next two to three months, because this is not really driven by real demand, is just probably weather patterns which are going to normalize anyway in Texas in a few days.

 

PS: He also made a point about oil, where this, I think, a slight surge in prices is actually a short term because supply is going to get back on quite soon.

 

WSN: Yeah, but other interesting news is actually the ongoing saga of big tech versus Australia, because it looks like Facebook has defied Australia’s push to make big pay for news by banning the sharing of content on its platform in the country. And this is the most far reaching restriction is ever placed on any publisher in any part of the world.

 

PS: So the extreme step to remove Australian news came as Google separately struck a global deal with Rupert Murdoch’s News Corp diffusing a long running dispute between the two companies. The dramatically different approaches could mark a pivotal moment for the media industry, which had hoped Australia’s tough regulatory approach would help reset its terms of trade with Google and Facebook worldwide.

 

WSN: So the moves by Google and Facebook came on the day Australia begin debating laws that would force big online platforms to license news. Now Facebook’s action will have a global impact. Under the provisions, news from Australian publishers will be blocked on the platform for all Facebook users, regardless of where they are based. The Australian government said it will continue to engage with Facebook. Press ahead with legislating the code, Canberra also warned that withdrawing news from Facebook’s platform in Australia could dent its credibility with users.

While this is quite big stuff. Actually, yes.

 

PS: Yes. I mean, Australia wasn’t the first country to, you know, get into this spat. I think you really was in having discussions. And France and Spain already had deals with a lot of with Google and Facebook with respect to media purchase. But it’s a question about publishers.

 

WSN: Yeah, I mean, at the end of the day, right. We do know media companies are suffering. Right. Álex has come under pressure. Subscriber growth has come down. How a media company is going to generate the revenue. So in the past, all these big tech companies, the argument was that they got to earn super normal above what is the what super normal profits without paying the likes of the media companies because they were using these media companies content to their benefit.

 

So some countries like Australia and even if you try to kind of diffuse the situation and have, I suppose maybe in their mind, a fairer playing field. But the Google deal nonetheless, if you look at it, the Google deal with News Corp announced on Wednesday goes beyond the Australian market, extending to Murdoch’s titles such as The Wall Street Journal and The New York Post in the U.S. and The Times and the Sun in the UK. No other news publisher has reached a single deal with Google across multiple countries.

 

Now, critics say the deal would benefit News Corp. rather than the rest of the news industry.

 

PS: Yes, well, we’ve been talking about the price. And since you looking at Google’s valuation, I suspect Google’s to be the winner because they have just really this unique access to this quality content. So. So why not?

 

WSN: Well, they’ve pledged so far to spend one billion over the years on buying news content and reach agreements with publishers in about a dozen countries.

 

But we’ll be watching this space because we do a media outlet.

 

But up next, we’ll be discussing the recently announced national unity blueprint. Stay tuned for that. BFM eighty nine point nine.

 

Thank you for listening to this podcast. To find full great interviews, go to PFM Goodbye or find us on iTunes, BFM eighty nine point nine. That is the station.

 

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American Carnage

In this Morning Run BFM podcast episode, Tony Nash justifies his pessimistic outlook of the US political environment on markets and the transition of the Reddit Army into a full-blown populist movement. Will this be a common theme in the US markets? And what does he mean about the 97% correlation between Bitcoin and gun sales?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/american-carnage on February 4, 2021.

 

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

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

 

 

Show Notes

 

WSN: To find out where global markets are heading, we have on the line with us Tony Nash, CEO of Complete Intelligence. Let’s have this little bit of discussion. Will the tussle between the populous investors and institutional shareholders lead to any real structural change in the way Wall Street behaves? Do you think this is going to be a common phenomenon?

 

TN: I do. I don’t think we’ll see much change politically because the funds themselves are very large donors for politicians. There really isn’t an incentive for politicians and regulators to change things. But the populism that we’ve seen in U.S. politics over the last four to six years or even 10 years, it’s growing into financial markets and people are really angry with Wall Street. They’re really angry with bailouts for funds and for banks.

 

This type of populist activism and distributing investment are going to continue and it’ll get more aggressive if the government doesn’t respond or if the funds respond aggressively and arrogantly. This could turn into an aggressive political movement. The funds and the regulators have to be really careful here.

 

PS: You really hit the nail on the head because if you see the backlash, you see the right wing with Ted Cruz, Alexandria Ocasio-Cortez on the left, both asking for investigations and reviews to this. Do you think the US government and the politics of both sides will be able to reconcile and find a solution to regulate, monitor this?

 

TN: They may have an “investigation.” I think nothing will happen. Again, these funds have deep pockets. They invest a lot of money, either directly or indirectly through shadow organizations and corrupt means. So zero will happen on this. Unless there is dramatic…

 

You guys have heard of Antifa in Malaysia, right? If Wall Street needs turned into an Antifa-like organization, and had violent protests, then maybe we would see some results. But there is absolutely no way short of violence in the streets that the US government… You will have Ted Cruz, you will have AOC talk about this. But this government will not respond to this because it’s in their interest to defend these funds.

 

PS: Tony, I’m gobsmacked. In just last month, we had an insurrection and impeachment and inauguration in the space of two weeks. Isn’t that like a big paradigm shift in the politics? Don’t you see any changes there?

 

TN: Here’s what I learned today and I’ll get to your point in just a second. There is a 97% correlation between the sale of guns and the price of Bitcoin in the U.S.. What does that tell us? It tells us there is an absolute lack of trust in institutions. People can’t trust law enforcement. They can’t trust politics. They can’t trust the central bank. Americans feel like they just can’t trust institutions. So they’re investing in Bitcoin and they’re buying guns. So there is a real frustration among Americans. They just absolutely don’t trust the government.

 

WSN: That’s an interesting point, Tony. But on the flip side, if I look at Biden’s administration. Let’s talk about his stimulus plans, because originally the target was a $1.9 trillion plan. But I think that’s probably likely to be scaled down, especially with the vaccination rollout. So what do your gut feel in terms of what the figure will be?

 

TN: The administration, unfortunately, has lost a lot of credibility because they two million or 20 million vaccines over the past week. They’ve come in saying that they had a better plan and then they’ve actually lost 20 million vaccines. This is supposed to be a Covid relief bill with more money for vaccines and more money to address Covid. But they can’t manage the resources they have today. People are really frustrated with that as this stupid $600 they’ve been promising for six months. Nobody even wants it now. People are so frustrated over this whole thing.

 

So will it be scaled back? Probably. You have Republicans in the Senate especially, who are being really stupid politically by pushing back on this. And you have Democrats who are pushing for stupid spending programs. Again, there is frustration. This is not just in Texas. This is across the country. Americans are so upset with government and so frustrated that they just want something passed and they want the least damage possible. They know it’s going to be a dumb bill. They know there’s going to be pork and they know there’s going to be corruption, but they want the least damage possible done with this.

 

WSN: But if I look at markets, it doesn’t seem like, you know, that that there’s any negativity or disappointment, right? Yeah. Because we are looking at, you know, the index also NASDAQ closed to an all time high. So are you saying that markets are reflecting this or, you know, there’s just too much optimism in terms of forward earnings?

 

TN: No, the markets are reflecting a bet on the central bank. They’re betting on the stimulus coming from the bill, passing through consumers and passing through businesses. And they’re betting on the the bailouts for different industries, on a weaker dollar, on a lot of things. That’s what they’re betting on. They’re not betting on earnings or on corporate health.

 

We suspect that the stimulus won’t be as strong as many had hoped and the central bank won’t be as accommodating as many hope and that there will be a pullback. We think there’s going to be something this quarter in terms of a pullback. But again, nobody is betting on companies or sectors.

 

WSN: All right. Thank you for your time. That was Tony Nash of Complete Intelligence, giving us his views on where global markets are heading and in particular on the U.S. government.

 

Some interesting points. Right Philip?

 

PS: I’m kind of lost for words for that. He really is pushing for this decade implosion of the once vaunted American institution.

 

WSN: He’s saying that there’s a lot of dissatisfaction with regards to the roll out of the stimulus plan. That it is very, very delayed. And people just like, hurry up, just sign the bill and  hand out those 600 U.S. dollar checks. The longer you wait after a while, people just don’t seem to care about it.

 

But when I look at the markets, I’m somewhat still conflicted because I’m not in total agreement with him. I think markets are pricing in vaccine optimism. And on the back of that, there will be some corporate earnings, especially when you come to the tech companies. So is the whole of America unhappy? Well, we do know from the way the vote, is a very divided nation.

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Podcasts

Work-from-home stocks a defensive play in 2021?

In this BFM episode, Tony Nash explains the defensive play of the WFH company Keane and how it compares to other tech stocks like Tesla? Also, will the good days for the financial and energy stocks continue? And how about the outlook for Sterling as the Brexit deal is being ironed out? Will the Pound appreciate or decline? And why there seems to be a never-ending trade war against China — now recently with Vietnam and Malaysia imposing tariffs on the Chinese steel?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/work-from-home-stocks-a-defensive-play-in-2021 on December 24, 2020.

 

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

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

 

BFM Description

 

As we head into 2021, will we see more work-from-home stocks being used as a defensive play? The Morning Run speaks to Tony Nash for his perspective on this, as well as his views on financials and energy stocks, the Sterling, and tit-for-tat trade wars.

Produced by: Mike Gong

 

Presented by: Roshan Kanesan, Wong Shou Ning

 

 

Show Notes

 

WSN: With volumes on U.S. equities drying up ahead of the holiday season, are you expecting investors to hit the sell button or to keep this whole positions over the period? Because the market’s somewhat a little bit more happy today, a little bit more green?

 

TN: I’m not sure, but I’m sure there is not a conviction either way right now. Investors aren’t really sure that they’re ready to pull the plug on things. People are waiting to see what’s going to happen with the stimulus funds. They’re waiting to see how smoothly the transition goes with the US government. They’re waiting to see how companies Q4 earnings come in. So in the next few weeks, aside from some commodities play, I’m not entirely convinced that we’ll see dramatic movements in one way or another.

 

WSN: And I’m just curious following up on that. So for the moment, it still seems that even though the Nasdaq corrected a little bit today, the work-from-home, Keane is here to stay as a defensive play?

 

TN: Sure, that is an effective play, but the benefits or the upside to that play is really questionable. The Nasdaq has over 40% this year. When you look at the valuation multiples on some of these tech companies like Tesla, you’re looking at over a thousand percentage. For some of the tech companies, you’re looking at fifty to 200 to revenue.

 

Some of these tech companies are being played out. That’s not to say they’re going to see necessarily downside. But the upside? I don’t believe it’s necessarily as high as it has been in 2020. We have these moments in markets where you see serious upside in different sectors and then it comes down for a bit. We’ve seen that in 2020. Are we going to see that in 2021? We’re not convinced. That maybe  possible. But we’ve seen some pretty hard closed down for people who’ve had their quickly transition to work from home. A lot of that valuation are largely played out.

 

WSN: If we look at the performance of the S&P 500, it was really the day for financials and also the energy stocks. Do you think these themes will continue into 2021?

 

TN: Certainly, that kind of stock are partly a result of the expectation of stimulus — whether that’s $600 to $2000 per person. There should be more transactional activity in terms of services with energy. There’s an expectation that people will start flying a bit more.

 

What’s positive is the expectation on a  margin within oil and gas firms as they refine their products. I think that’s a bit higher as the margins of the percentage go up as the normal values go up. We’ve been saying for several months that the oil prices will rise in the end of December and early Jan, and that’s playing out. We’ve expecting that for about six months. But we do expect crude prices to fall going into February. So while those margin plays are there now, we don’t expect that to be there at the end of Q1.

 

WSN: Moving to the UK, the Sterling appreciated this morning on the back of the news that Brexit deal might be ironed out. But where do you see the currency heading?

 

TN: We’ve expected the Sterling to weaken a bit by the immediacy of the news. But over time, we expect the Pound to re-appreciate because we really value the U.K. There’s a lot of wishful thinking within the EU that Britain would suffer as they exit the EU. We’ve done a lot of analysis on this over the last three years and there’s really just a lot of upsides for the U.K. to separate. That’s not a political view. That’s purely an economic view. We have expected the Pound to take a bit of a pounding in the short term. But we do expect it to re-appreciate as that separation gets in pace.

 

WSN: Malaysia and Vietnam, they recently placed higher tariffs on Chinese steel. And although unrelated, this comes after China imposed some additional duties on various Australian imports. Do you see this tit for tat tariffs going to continue to be the norm in 2021 and no end to it?

 

TN: We’ve been saying for a couple of years that we expect trade to turn from these fairly invisible activities like subsidy to non tariff barriers, which is really regulatory into direct tariffs. It’s like going back to 1980s pre-WTO where there’s more of a fiscal benefit for the country than the protectionist benefit in a non-tariff barrier regulation.

 

Many countries are a bit tapped out on subsidies, so they’re not necessarily going to be able to pay their industry as much to protect them. So they’re going to have tariffs to generate revenue. Specifically, the Chinese steel, there’s a global glut of Chinese steel, of the Hang Seng, for years. It wasn’t surprising that these tariffs have been levied because they have a little bit of it’s own steel industry. They’re protecting themselves from the glut of Chinese steel.

 

WSN: All right. Thank you for your time. And that was Tony Nash, CEO of Complete Intelligence, giving us his views on global markets.

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Podcasts

Markets Pause As Wells, BOFA Miss And Stimulus Remain Distant

In this discussion with BFM 89.9, Tony Nash shares views on the recent bank earnings, update on Brexit and why it’s stalled, the future of Hong Kong and how vaccine news play for markets.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/markets-pause-as-wells-bofa-miss-and-stimulus-remain-distant on October 15, 2020.

 


BFM Description

 

The diminishing likelihood of stimulus and poor bank earnings have paused stock markets for now, as electioneering ramps up ahead of November polls, according to Tony Nash, CEO of Complete Intelligence, who discusses bank earnings, market expectations as well as Brexit.

 

Produced by: Mike Gong

 

Presented by: Khoo Hsu Chuang, Wong Shou Ning

 

Show Notes

 

KHC: On the line with us now is Tony of Complete Intelligence for some clarity on markets. Tony, thanks for talking to us. Now, obviously, the Wells Fargo, Bank of America, Goldman Sachs have all reported results so far. What is your take on the financial sector earnings thus far?

 

TN: Goldman obviously reported really well, Bank of America is down five percent. There was a huge disappointment there. Could get worse. A lot of that had to do with these penalties that were levied several weeks ago. But it looks like the investment banks are doing much better than the consumer banks. And until we get a next round of stimulus and we start to see money moving into the accounts of those guys who are unemployed, which is not a small number in the US, I think consumer banks will continue to suffer.

 

KHC: On that particular issue of the impasse in terms of a stimulus being introduced before elections, what is the biggest deterrent to consensus being reached on that front?

 

TN: One of the biggest issues is that you have a lot of states, all of them that are Democrat states that are heavily indebted. So what the House majority leader is pushing is a bailout program for those Democrat states like California, New York, Illinois, that have have billions of dollars in debt that have been racked up over the last 10 or 20 years. What are typically Republican states typically have balanced budgets. It would effectively be the Republican states bailing out the Democrat states. It’s a problem here in the US.

 

The other item is the House majority leader, Nancy Pelosi, wants to give stimulus checks to illegal immigrants in the US. She wants to give a few thousand dollars to people who are in the US illegally. And the Republicans are saying, no, why would we do that? So those are two of the things that are really holding things up in terms of the stimulus plan. And it’s electioneering. Democrats want to give money to the party faithful in their heavily indebted blue states. And they also want to try to get some votes from the illegal aliens who aren’t legally allowed to vote. But they want to get some loyalty from those illegal immigrants who are in the US.

 

WSN: Another thing that seems to be having an impact on markets is vaccine news. So every time we hear of a vaccine trial feeding, markets correct. Is it possible at all to quantify how much of this is in the markets really in terms of optimism?

 

TN: Remember, in 2019, every day, whenever we needed a bump in markets, Trump would tweet, a trade deal is near. And then we finally had the phase one deal in December. It seems like whenever there’s a tweet or some news about a vaccine, it’s because a bump in markets is needed. There’s a lot of cynicism among traders about vaccine. Until we see something actually proven and actually in a market, you’re not going to see a real firm belief in the difference it can make. So it’s going to be at least Q1 or so before we see things deployed.

 

We don’t necessarily expect the benefits to happen until 2021. But the problem, at least here in the US, is that nobody wants to be the guinea pig. At least half of Americans surveyed don’t want to be the first one. They’re going to have to see some high-level politicians go in, roll up their sleeves, get the job and and really face the consequences, if there are any negative consequences, because a lot of Americans just aren’t believers and they’re really worried about the effects of it.

 

KHC: OK, switching to the UK, if the UK fails to negotiate a Brexit deadline deal today, how should investors position themselves? And would you recommend shorting sterling assets?

 

TN: I think it’s a possibility. I don’t know if I’d necessarily recommend it, because I think the status quo is baked in to expectations. We haven’t necessarily had a positive outlook to negotiations for two or three years now. I think the expectation is that things will continue to muddle through and markets will fold that end. So I don’t know. Outside of a very positive agreement for the UK, I don’t necessarily think there’s huge upside anywhere.

 

And outside of a very negative concession given by the UK, I don’t think there’s huge downside anywhere because the EU is just intransigent there. They’ve been embarrassed by this whole process. They don’t want to negotiate and they’re not moving at all. So I think we’re in the range of where things will be outside of a major announcement somewhere.

 

WSN: Looking at China yesterday or a few days ago, his speech has outlined a comprehensive vision of for Shenzhen. What does this mean for Hong Kong’s economic future? Do you see a bright, a bleak one for the city street?

 

TN: Hong Kong’s fate was sealed in 2014 with the demonstrations. And I’ve been saying this since twenty fifteen. At that time, the MDC and the folks in the central government were planning on other options for the activities that were happening in Hong Kong. What we saw with the announcement in Shenzhen yesterday was simply cementing Shenzhen’s place, the central city at the end of the PRD, right at the end of the Pearl River Delta.

 

And so Hong Kong is no longer the central location. It is a place to get hard currency. But it’s no longer an industrial location. I believe we’ll start to see financial services move to other places over the next ten years. Not an overnight activity, but it’s something that certainly the central government wants to happen.

 

KHC: OK, Tony, thanks so much for your time. That was Tony Nash of Complete Intelligence.

 

His comments in terms of of China also resonate because we’ve got certain diplomats, a top ranking government officials coming to the Asian region for a charm offensive, but also his comments on banks, a tale of two halves, really, consumer banks that well said Bank of America really failed to meet expectations. They did beat expectations, but they felt some way of sort of you and your performance numbers. But then the investment banks like Goldman Sachs have done really well because of the trading desks and the stimulus checks that were written in the third quarter.

 

WSN: Yeah, actually, 2020 is the reverse of 2008 during the great financial crisis. If you remember then American banks itself, all the investment banks. Right, because of the derivative losses in the books exposed to the shuffle in equity markets. But this time around, actually, the volatility has really helped them. So for a change, they’ve seen incredible jumps in trading investment income. But it’s the main street banks which are feeling the pinch. So, yes, there’s an increase in deposits for these banks.

 

But for the consumer banks, for the main street banks, nobody or less people are taking out loans, is less credit cut usage as a result. So, you know, no such not such good times for the consumer banks. Better for the. And bad guys out there.

 

KHC: Now, of course, and Morgan Stanley reports tomorrow we saw net interest margin set wells and Bank of America really being crushed as well. And not many, not many companies reporting earnings are giving outlook statements.

Categories
Podcasts

Is The Rally Ending?

Tony Nash joins BFM 89.9 The Business Station for another look at the global markets and to get a sense of whether this is the end of the bull run. Also discussed how September is expected to be a volatile month. Will there be a fiscal stimulus for small businesses? Will banks and other financial institution get the next round of stimulus? And how about the oil prices — where is it going?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/is-the-rally-ending on September 24, 2020.


BFM Description

 

Speculation is rife over whether US lawmakers will be able to come to agreement over a new stimulus package, as deadlines loom. Federal Reserve Chairman Jerome Powell also warned that more stimulus will be needed, and all the uncertainty took its toll on US equities overnight. To get a sense of whether this is the end of the bull run, we speak to Tony Nash, Chief Economist and CEO of Complete Intelligence.

 

Produced by: Mike Gong

 

Presented by: Roshan Kanesan, Lyn Mak, Noelle Lim

 

Show Notes

 

LM: BFM eighty nine point nine. You’re listening to the morning run with Lyn Mak, Roshan Kanesan and Noel Lim, 707 a.m. Thursday, the 24th of September. And in round about 15 minutes, we’re speaking with Paul McManis, chief enterprise business officer at Maxus, to discuss how companies can best adapt to a post covid-19 business environment. But before that, we’re taking a look at the markets.

 

RK: Well, the markets were in the red, actually. The Dow was down two percent. The S&P 500 was down two point four percent, and the Nasdaq was down two point seven percent. How did Asia do?

 

NL: Well, Nikkei index down point zero six percent. The Shanghai Composite was up 22 percent. Hang Seng marginally point one percent of the Cosby eight point zero three percent stay up point seven percent. The FBI. CIA, however, was down one point six percent. And I guess that’s on the back of some very important news at 12:00 p.m. yesterday.

 

RK: Yeah, it’ll be interesting to see how all these markets open today on the back of the US market closing.

 

LM: Absolutely. So for more on international markets this morning, we have Tony Nash’s chief economist and CEO of Complete Intelligence on the line with us this morning. Tony, thank you for joining us. Now, U.S. equities retreated sharply last night as Jerome Powell warned that more stimulus is needed. While it seems more likely that lawmakers will be able to agree to this. Is this the end of the rally and perhaps the reality check that market’s needs?

 

TN: Well, I don’t know if it’s the end of the rally, but I know we had a conversation on August twenty sixth. I think it was when I caution you guys that September would be a really rough month and very volatile. And I think we’re certainly in the middle of that. So how much further will it go? We think it has a little ways to go, but so we don’t necessarily think there’s a huge rally coming. But the caveat to that is stimulus.

 

So if stimulus comes out this week from the U.S. Congress, which there has been a bill going through and there may be some reconciliation in in some of the committees to get some stimulus out, that could help. But I think the Fed I think what what the Fed has said is, you know, they’re out there doing their work. They’re getting loans out to larger companies. But really, fiscal stimulus has to take place for smaller companies until we have that.

 

I think markets are pretty upset.

 

RK: And if we take a look, sorry, OK. And as we take a look at some of the banks like HSBC and others, they’ve taken a bit of a beating from the Vincent report. Will this have a an impact on the rotation of play into the finance sector, do you think?

 

TN: I think it will certainly for those banks that have had issues around laundering money and other things, allegedly. Yeah, I think it’s a big problem because investors don’t want to invest in risk. There’s enough risk in their daily life. But for those banks who aren’t flagged, I think there’s a real opportunity for them. Unfortunately, the sector itself is having difficulties today. But you did see some movement in things like insurance and other things where you do see money moving in and looking at oil prices rising.

 

NL: U.S. oil inventories are keeping oil prices fairly subdued. Where do you see oil prices heading in the short term?

 

TN: We don’t see a lot of movement. You know, we see WTI in the high 30s, low 40s. We see Brent around the mid 40s. The problem is we just haven’t had that consumption rebound that’s needed to drive oil prices higher. There is a lot of discussion about a supply side issue going into the first half of next year that might push prices higher. I’m not entirely sure that that may happen. But even when we look at things like petrol prices, they’re probably 30 percent off of where they were a year ago.

 

And we really don’t expect that to change for six to 12 months.

 

LM: Thank you very much for speaking with us this morning, Tony. That was Tony Nash, chief economist and CEO of Complete Intelligence

Categories
Podcasts

Gold & Silver, Nature’s Bitcoin

Tony Nash joins BFM Malaysia for another look at the global markets, particularly discussing the “nature’s bitcoin,” which are gold and silver, the US Dollar outlook, if Tesla is a good buy right now, Microsoft, and others.

 

Listen to this podcast at https://www.bfm.my/podcast/morning-run/market-watch/gold-silver-natures-bitcoin

 

BFM Description

 

Tesla and Microsoft results were released last night but which company actually met expectations upon a closer look?

 

Tony Nash, CEO of Complete Intelligence helps us dissect the numbers while weighing in on the sharp rise on gold and silver’s which is defying the historical correlation between asset classes.

 

Produced by: Mike Gong
Presented by: Khoo Hsu Chuang, Wong Shou Ning

 

Show Notes

 

BFM: For more thoughts on what’s going on with markets, we speak to Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Now, markets had a choppy day last night, but still closing in the green on optimism of this spending bill and, of course, the vaccine. Now, are investors choosing to ignore the realities of what is clearly a weak, broader economy at their peril?

 

TN: Well, no. I think generally they’re trying to figure out how fast things will come back and when we look at some of the earnings, like Microsoft, they’re really, really good. And when we look at some things, like the rate at which people are coming back, say on the roads and other things, it’s looking positive. So have things got a little bit ahead of themselves? It’s possible, but I don’t necessarily think people are kind of ignoring the issues around COVID and other items.

 

BFM: Just to stay on that point a little bit, Tony. How much money do you think really will be put into the system as a result of this new spending bill? More importantly, Trump talked up, and I think allocated about two billion dollars to Pfizer for the COVID vaccine. Those two elements there, what kind of numbers in quantums can you throw into the mix here, Tony?

 

TN: I think you’re you’re looking at least at trillions. I don’t think it’ll be as large as the initial spending. I think it’ll be a bit of a tapering of the initial spending. But with the magnitude of spending to join with Pfizer and other vaccine manufacturers, they just want to be able to put a cap on this and say, “okay, as of a certain date, right now, it’s expected to be December. We’ll have a vaccine that‘ll put a limit on the risk and we can kind of set all of this stuff aside.”

 

BFM: And Tony, talking about the two bit results that came out last night. So there was Microsoft, which kind of mistreat, but Tesla, which beat. Are you a believer on Buford? Or do you actually have a preference?

 

TN: Tesla announced they’re building a factory in Texas, which is where I sit. So I’m very excited about it. But on a serious note, Tesla’s positive EPS report happened largely because they sold 428 million dollars of regulatory credits. So they’re not positive because of car sales. They’re positive because of selling regulatory credits. Investors have to look at that reality. Now, the other consideration for Tesla is it’s their fourth consecutive gap profit. So they’re now eligible for S&P 500 including. That may be a factor to pull some demand along for the stock if they are, in fact, put into the S&P 500.

 

BFM: For the benefit of the Tesla day traders. I think that’s nearly half a million of them on Robinhood. Tesla is now worth nearly 300 billion dollars, more than the entire European and American car sectors. Did you think this is a collapse waiting to happen, or do you think this going to be more upside?

 

TN: Do you know what? It’s yes. The problem with that kind of statement is it’s like there’s not even close to trading on fundamentals at Tesla. So the real question is, how excited will people get and when will that taper off? The real problem is wondering how long that excitement will be there because it’s fully sentiment. I mean, anybody who thinks Tesla trades on fundamentals. It’s really what are the expectations for next quarter’s earnings? That’s what Tesla’s trading on now.

 

Plus, a lot of excitement and a lot of Robin hood fiz. It really is sentiment based. When we see that sentiment subside, I think that’s when, I don’t think we can continue north of a three, four, 500 billion dollar valuation for a company like Tesla. As cool as it is, I think it’s very hard to continue with it.

 

BFM: And Tony, talking about things that have gone up, it’s gold and silver. Both precious metals have seen sharp rises in price levels. So what’s the reason behind the focus on these commodities? And the question, again, is this sustainable?

 

TN: Is it sustainable? Gold and silver are kind of nature’s cryptocurrency, right? They really are where sentiment goes if people are skeptical about the dollar or skeptical about risk. We saw the VIX down like two percent today. So we saw gold and silver kind of about even by end of the day. When risk is going down, gold and silver typically aren’t doing great. The dollar will stay weak for the next couple of months. But we do see bit of a dollar strength coming back later in the year. Those aren’t perfectly inverse relationships. But there really is question around what will the Fed do? If the Fed continues to expand the money supply, there is an expectation that more people will flock to gold and silver. I’m just not quite seeing that much left. But it’s possible that there is.

 

BFM: I’m not sure whether your software looks at this necessarily, but it shows for silver that the technical resistance is at 21 dollars an ounce and now it’s gone past that 22 and 3 quarters. They’re talking about twenty five dollars an ounce though. Would you agree with that prognosis?

 

TN: Yeah, we see serious resistance. I mean it’s possible. So we’ll hit 25, but we don’t necessarily see the incentive there for silver to continue to rise. We do see strong resistance at these levels. And it’s, you know, from our perspective, it’s fairly risky looking at those at the moment.

 

BFM: And Tony going back to the U.S. dollar, right? I mean, we are seeing weakness now. But you say you have expectations of it recovering towards the end of the year. What is that premise on, though?

 

TN: When the Fed and the Treasury slow down, when we start to see stability around COVID. Things like ICU beds in East Texas, there’s so much more availability. That’s like 20 percent more availability this week than there were last week. When we start to see more stability around what’s actually causing the risk in markets and there’s less of a need for the Fed and the Treasury to intervene, then we see stability in money supply.

 

And as the market recovers, we start to see or we would expect to see more velocity of the U.S. dollars. That’s kind of how quickly do people spend it, right? If we see stability in the money supply and more velocity in American spending, then that could be dollar strength. If there’s instability in, say, emerging markets or Europe or something like that, if the finance ministers could ever get it together in Europe, we’d see more strength in the Euro.

 

But there’s disharmony there and there are questions in some emerging markets. So if we see stability and velocity rise in the U.S., then we could see more investment come from overseas into the U.S., which would accelerate Dollars. We don’t necessarily expect strong dollar strength for a turn before the end of the year, but we do expect moderate dollar strength to come in before the end of the year.

 

BFM: All right. Thank you for your time, Tony. That was Tony Nash, CEO of Complete Intelligence, saying that Tesla looks like something very scary at this moment, right? It looks like the stock, at six hundred times P is extremely, I would say quite expensive. I mean, you would never think that a company that isn’t it only makes less than thousand cars could be valued at six hundred times.

Categories
Podcasts

Economies are sputtering, which means trade war will intensify

Here’s another guesting of our founder and CEO Tony Nash in BFM Malaysia, talking about trade war between US and China. Can these two countries actually decouple? Or is the current supply chain too dependent to do that? Can the economy have the V-shaped recovery that everyone is dreaming of, or is it just an illusion? What can the policymakers do to improve the economic outlook for this year? What can his firm Complete Intelligence see happening based on the algorithms and AI?

 

We also discussed regionalization of supply chain as a result of the Trade War in this QuickHitQuickHit episode with Chief Economist Chad Moutray of National Association of Manufacturers.

 

BFM Description:

The trade wars between the US, China and the Eurozone seem to be gaining momentum. Tony Nash, CEO, Complete Intelligence, offers some insights, while also discussing European industrial activity.

 

Produced by: Michael Gong

Presented by: Wong Shou Ning, Khoo Hsu Chuang

 

Listen to the “Economies are sputtering, which means trade war will intensify” podcast in BFM: The Business Station.

 

Show Notes

 

This is a download from BFM eighty nine point nine. So is the station. Good morning. This is BFM eighty nine point nine. I’m considering that I’m with one shotting bringing you all the way through the 10:00 o’clock in the morning and Rano 76. We are talking about markets, but well above 50 bucks sort of because of that with about 15 minutes time, we’re talking to call you. Ling was an independent panel, a political economist at Ciggy and I’m advisers will be discussing palm oil.

 

BFM: So last night in America, the stock market slumped. Investors are cautious, right How did the markets do?

 

Not so well, because there’s been clearly a resurgence in virus cases in multiple states, which puts into question the economic recovery. So, unsurprisingly, the Dow closed down three percent and S&P 500 closed down 2.6 percent, while the Nasdaq closed down 2.2 percent. Meanwhile, in Asia yesterday, only Shanghai was up, which was up 0.3 percent, while the Nikkei 225 closed down marginally by 0.07 per cent. Hang Seng was down 0.5 percent, Singapore down 0.2 percent, and KLCI was down 0.3 percent.

 

So for more clarity into the whys and wherefores of markets, we’ve got it on the line with us Tony Nash, who is the CEO of Complete Intelligence. Now, Tony, thanks for talking to us. Trump’s getting tough on China rhetoric highlights, well, obviously, the American’s concerns about being too reliant on China. And, of course, we can see that being manifested in the list of 20 companies, which is deems suspicious. In your opinion, can the two economies decouple or other interests in supply chains too heavily aligned?

 

TN: Well, I don’t think it’s possible to completely decouple from China. I think the administration are really being hard on each other. And I think the hard line from the US, you know, it’s relatively new. It’s a couple years old. But I don’t think it’s possible, regardless of the hard line for those economies to decouple and for the supply chain to decouple. We had some comments over the weekend out of the U.S. saying that they could decouple if they wanted to. But that’s just the hard line and unaware of the possibilities. We’ve been talking about, for some time, probably two and a half, three years, is regionalization of supply chains. And what we believe is happening is the US-China relations have just accelerated regionalization. It means manufacturing for North America, moving to North America. Not all of it, but some of it. And manufacturing for for Asia is largely centered in Asia. Manufacturing for Europe, some of it moving to Europe. And that’s the progression of the costs in China. And some of the risks are relative risks to supply chains highlighted by COVID} coming to the realization of manufacturers.

 

BFM: U.S. markets corrected sharply last night. So is the market actually now waking up to the reality that COVID 19 is going to be a problem for economic recovery? And this V-shaped that what many investors thought is probably a pipe dream?

 

TN: I think what markets are realizing is that it’s not a straight line. Well, we’ve been saying for a couple months is that end of Q2 or early Q3, we would see a lot of volatility. Then people started to understand how the virus would play out. Until we’ve had some certainty around the path, we will have days like today. And we’ll have a danger with an uptick as optimism comes back, what’s happening is markets are calibrating. People are trying to understand not only the path of COVID, but what those actors mean—the governments, the companies, the individuals—will do to respond, how quickly the markets come back. But what are people going to have to do? What mitigations that we’re going to have to take? What monetary and fiscal policies will governments take as well? We’re not done in that respect. So more of that’s to come, but we don’t know what’s to come there exactly. Markets have moved a lot on new case count. I don’t believe that it’s the case counts itself because a lot of these are are really mild cases. It’s just the uncertainty around how long it will last. The magnitude and the mitigation that people will take around it. There’s more of this volatility to come.

 

BFM: Tony, you might have seen the IMF‘s growth forecast, which was just announced a few hours ago. They’ve now said that global growth will shrink 4.9 percent for 2020. That’s nearly two percent worse than what they originally thought. And I think the U.S. also marked by an expectation of a negative 8 percent, down from negative 6o.1 percent. Do you think this might cause the policymakers to have an even more vigorous policy response and liquidity into the system?

 

TN: It might. I think the U.S. has shown that it’s not really afraid to be pretty aggressive. I think you may see more aggressive policy responses in other places. Obviously, Japan is very active on the monetary policy side. But we need to see more actual spending and more direct support of individuals and companies to make it through this. So, I do think that, obviously, IMF’s forecast concern people and get policymakers attention. I do think that they’re probably a little bit overblown to the downside, though. So I wouldn’t expect 8 percent decline. I wouldn’t expect a global decline as acute as they’ve stated today.

 

BFM: If you look at oil prices declined last night and I think this is on the back of U.S. crude inventories increasing. But is this also a function of COVID-19 fears in terms of how that may impact the economy’s going forward and consumption of oil again?

 

TN: Yeah, that’s interesting. The oil price is our… I think there are a number of things. The storage, of course, as you mentioned. But there’s also how much are people starting to drive again? What do traffic patterns look like? Also, how much are people starting to fly again? We really need to look at like Google Mobility data. We need to be looking at flight data. We need to be looking at looking to really understand where those indicators are headed. So when we compare a $40 a barrel of oil at $39 s barrel for WTI today, compared to where it was a month ago. The folks in oil and gas are really grateful to have that price right now. And it’s a real progress from where we were a month or two months ago. So I think what people are looking at today is the progress and then the expectation. They’re not even necessarily looking at the real market activity today. It’s all relative to a couple of months ago and it’s all expectations about a couple of months from now.

 

BFM: Last question on perhaps the data that your algorithms generated, Complete Intelligence. What kind of signs and indicators does our technology and the AI tell us about the direction the market’s going forward?

 

TN: Yeah, well, this is where we we pulled our assertion of volatility. We we really expected things to be pretty range traded for some time. So, you know, crude oil is a good example. We were saying back in February, March, the crude oil would end the quarter in the low 40s. This is WTI and here we are. So, with volatility, we’re not necessarily trying to capture the high highs and the low lows. We’re just recognizing that the markets are trying to find new prices. So it’s interesting when you look at things like the dollar. The dollar is a relative indicator for, say, emerging market‘s uncertainty and troubles as well. We did expect a dollar rise toward the end of Q1, early Q2, as we saw. But we haven’t expected the dollar to come back to strengthen until, say, September. So there are a number of indicators around trade or on currencies. And what we’re finding generally with our client base, for global manufacturers generally, are the algorithms… We’ve found that our average-based forecasting has an error rate that is about nine percent lower on average than consensus forecasts. So when we had all of the volatility of the last three, four months, consensus forecasts in many cases were 20 to 30 percent off. Ours were about nine percent better than that. Nobody expected the COVID slowdown. If we look at that from a few months ago, the bias that’s in normally of doing things, negotiating, procurement, supply chain, the revenue, that sort of thing. We take that out and this passionate… I would suggest that there is a lot of passion in the analysis from day to day when you look at three percent fall in markets today, but you can’t extrapolate today into forever. And what we can do with AI is taking emotion out of this, take a rational view of things. And really remove, not all of the error, of course, nobody can remove the error. There area a lot of the error from the outlooks in specific assets, currencies, commodities and so on.

 

BFM: All right, Tony, thanks so much for your time. And that was Tony Nash, chief executive for Complete Intelligence talking from Texas, USA. Interesting that this kind of stuff that he does at his business, tries to remove the emotional, the emotive side of the markets and give something a predictor over the future. But I think that sometimes you can’t discount too much of human emotion because it’s all driven by essentially two emotions, right? Greed and of fear.

 

But you know, basically his nugget is it’s going to be volatile. Right. Hang onto your seats. Right. Because we really don’t know. There’s too much uncertainty out there at the moment. This is a scene where it’s for oil prices or even for equity markets.

Categories
Podcasts

Mo’ Money, Mo’ Honey

Tony Nash speaks with the BFM team in Malaysia to explain what’s going on in the US markets and economy after the FOMC announcement. What it means for gold and other assets, if businesses actually spend the excess cash for capital reinvestment, how this adds to wealth inequality in America, and how do tech stocks and traditional stocks compare?

 

BFM Notes

 

In the US, the FOMC left interest rates unchanged, pledging to continue with their quantitative easing till 2022, indicating that America’s markets will continue soaring on the back of this wall of cheap liquidity.

 

Tony Nash, the CEO of Complete Intelligence in Texas, discusses the implications of what commentators are calling the Fed’s ‘yield curve control’ policy.

 

Produced by: Michael Gong

Presented by: Roshan Kanesan, Noelle Lim, Khoo Hsu Chuang

 

Listen to this podcast in BFM: The Business Station.

 

Show Notes

 

BFM: Let’s talk about the markets in the U.S. Markets whipsawed as all attention was on the FOMC meeting. The Dow closed down one percent. The S&P 500 closed down 0.5 percent. But the Nasdaq closed up in the green. 0.7 percent. What about Asia? Asia was rather mixed. The Shanghai Composite ended down 0.4 percent. The Hang Seng was marginally down by 0.03 percent. The Nikkei 225, I think they closed up about 0.2 percent. And FBM was up 0.01 percent. Just barely in the green — 0.01 percent. Now for more on global markets, we speak to Tony Nash, CEO of Complete Intelligence. Tony, are you down the line with us?

 

TN: Yes, sir. Morning.

 

BFM: Good morning to you. Now, the FOMC left interest rates unchanged of the meeting, pledging to continue with quantitative easing till 2022. What does this tell you about the state of the economy there?

 

TN: The Fed is really just trying to create stability. We see them, like you said, the next three years, they’ll keep them the same. We think that they’ll just reinforce some of the policies they’ve already put in place. One of the areas we see them focusing on is on yield curve control, although that’s not explicit. We really see that as an area that they’re moving in to encourage capital investment.

 

We’ve really seen capital investment fall here in the States, especially since the COVID time. Oil and gas companies have trimmed billions of dollars of capital investment, for example. So if they can have low-cost borrowing through a yield curve control, it could help that.

 

BFM: What are the implications of doing this? Yield curve control that, for example, on gold?

 

TN: The environment generally with both QE, which is meant to provide liquidity, and yield curve control, which is meant to provide low interest rates, what that does is it really pushes the Dollar down. Although it’s not perfectly inverse, there is generally inverse relationship between the Dollar and gold. So if it’s intended to push the value of the Dollar down, one would expect gold to rise.

 

BFM: Tony, yield curve control can also be called money printing, which has been happening for the last ten, twelve years from an evidence shil standpoint. Have corporations actually spend some of that excess cash on capital reinvestment or have they done it in terms of paying dividends to themselves and their shareholders or even worse, share buybacks?

 

TN: Mostly share buybacks. But share buybacks and dividends, one can argue are similar. It’s just a different form of paying back shareholders. So share buybacks have really been made to be evil over the last, say, five, 10 years or something. But it’s really similar to a dividend that it brings value to the investors themselves. So is it a good thing? I don’t necessarily think so, but it is just one form of getting money back to investors.

 

It’s not necessarily helping capital investment. It hasn’t necessarily helped capital investment. And so, you know, looking at things like yield curve control, what we’ve seen is a lot of QE, but we haven’t seen as much yield curve control. So yield curve control could be one way to provide more incentive for capex.

 

BFM: Well, that hasn’t happened clearly. And to what extent do you think that that policy has exacerbated the wealth inequality in the country, in the United States, which some say has manifested themselves in some of these demonstrations you see all over the country?

 

TN: That’s a very complicated question. And we can spend a lot of time on it. So I think whether a yield curve control has done that, I can’t necessarily argue for or against it. Has QE done that? Oh, surely. I mean, QE has definitely contributed to inequality. It’s definitely contributed more to capital concentration itself than overall inequality. Capital is concentrated with the investment class rather than, say, the working class. Although that sounds very Marxist and it didn’t really mean it to sound that way, but it’s really helped to concentrate capital.

 

BFM: Well, let’s take a look at last night. The U.S. markets were mixed overnight. Is this a reality check that the recovery may not be as soon or as sharp as anticipated by investors?

 

TN: The kind of the relief rally we’ve seen over the past few weeks has really been one of really just excitement that COVID is ending and really hopeful that things will open, as well as recognition of the Fed’s activity and the Treasury’s activity of getting trillions of dollars into the economy. As investors realize how slow those openings are going to be and the impact that it will have on Q2 earnings, but potentially Q3 earnings. I think we’ll see some of this enthusiasm fall away. So markets are trying to find that level. What is that level? And because there is so much uncertainty, we don’t really know that level. This is why we’ve expected volatility through Q2 and into Q3 until there’s more clarity about the pace of opening, how that will affect different industries, and the severity of, say, a second wave. And to be honest, whether people really care about the second wave.

 

BFM: Well, NASDAQ has passed ten thousand and valuation is at the highest in the last 15 years. Where do you think tech stocks will go from here?

 

TN: It really all depends on how companies focus on things like productivity. If we continue to see layoffs and unemployment, companies may decide to invest in technology. We may see some real broad-based investment in productivity like we did twenty five to 20 years ago when companies really started to invest in computing and Internet and all these other productivity shows, it’s quite possible that we see that across large companies.

 

It’s really questionable. Have we expanded valuations as far as we can or is there further expansion there?

 

BFM: Just following up on that. We’ve seen the market recover in the U.S., but there’s definitely a divergence between how the tech stocks have performed and how the larger S&P 500 has performed. Do you think there’s a lot more room for tech stock? Do you think these two indexes will actually going to diverge at this point?

 

TN: We may see a little bit of divergence, but I don’t see that much divergence. I think there is a lot of synchronization within those indexes. We may see a bit like we saw today, but I don’t think that will continue in a massive way.

 

BFM: So when you mean synchronicity, you mean that they will track each other in a parallel? But there is a gap between something like the NY Fang index and the S&P in general. Is that due to the S&P just being weighted down by other classes of assets there?

 

TN: Sure, yeah. It’s looking at traditional businesses that have physical assets and a lot of legacy employees and retirement commitments. These sorts of things really weight down old traditional businesses. The Fang’s, for example, they don’t have a huge retirement commitments than, say, a large manufacturer that’s maybe a 100 years old has. As those things play through and this really has to do with the aging of baby boomers, really. Those retirement commitments will age with them and then they’ll phase out eventually.

 

But a lot of this is around again, those companies are not as efficient as they could be. And until they get to a level of efficiency that they need, we’re gonna see a drag on their earnings. So, of course, with guys like the Fang’s, since they have kind of virtual software related businesses, they will have valuations that are much more generous than traditional, say S&P 500 businesses.

 

BFM: All right, Tony. Thank you so much for your time this morning. That was Tony Nash, CEO of Complete Intelligence.

I think just ending that point is how this divergence between traditional industries and tech industries had been even more highlighted by what we’ve seen.

Yeah, I think that’s really quite concerning because the alternative point of view is that of the Fed’s money printing policy, which has really accelerated exponentially the last three months. There really is no indication from Trump, from Jay Powell, that he has an exit strategy in mind or has any exit strategy at all. Because how do you unwind this much? You basically dopamine the markets without having some kind of pain. It’s very clear, I mean, even though he was quite tempered in his response, this inequality has been really exec-abated for the last 10 years.