Complete Intelligence

Week Ahead

Inflation 2.0, Bullish Metals & Oil, and Russian Supply Caps Discussed

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The Week Ahead with Tony Nash brings together experts Tony Greer, Albert Marko, and Tracy Shuchart to discuss the key themes affecting the markets. In this episode, the focus is on Inflation 2.0, Market Chaos, and Russian Supply Caps.

Albert Marko leads the discussion on Inflation 2.0, and explains his view that inflation will re-accelerate this year. He talks about how various factors such as the Federal Reserve, a potential recession or slowdown, and war could impact his thesis. He also mentions the upward revision of December Consumer Price Index (CPI) and the upcoming release of the January CPI.

Tony Greer then takes the lead on Market Chaos and explains why he is bullish on metals and oil. He discusses his views on copper and explains his outlook on crude oil, which he tweeted about in January.

Tracy Shuchart focuses on Energy and the Russian supply caps. She talks about Russia’s announcement to cut production to 500k barrels per day and what this could mean for crude quotas and price caps. She also discusses the impact on natural gas.

Finally, the experts provide their expectations for the Week Ahead.

Key themes
1. Inflation 2.0
2. Market Chaos: Bullish Metals & Oil
3. Russian Supply Caps

This is the 52nd episode of The Week Ahead, where experts talk about the week that just happened and what will most likely happen in the coming week.

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Listen to this episode on Spotify.

You can also listen on Apple Podcast using this link.


Tony Nash

Hi, everyone, and welcome to the Week Ahead. I’m Tony Nash. And today we’re joined by Tony Greer. Tony is with TG macro. He does the morning navigator newsletter. He’s an OG with RealVision and he’s just very, very popular and we’re really lucky to have him today. We have Albert Marko, of course and Tracy Shuchart. We’re very fortunate to have both of them today. So thanks guys, for taking the time to talk with us today. I really appreciate it.

Tony Greer

My pleasure. Thanks for asking.

Tony Nash

Great. So we’re going to start today with Albert. We’re going to be talking about inflation. Albert, you’ve said several times over the past several months that we’re going to have kind of a re-acceleration of inflation this year. And we just had an upward revision of the December CPI. And of course, we have another CPI, the Jan CPI is out on Tuesday. There was a viewer question talking about kind of your Inflation 2.0 thesis.

Can you talk us through that? What are you thinking of when you think through that and when do you think it’ll materialize?


I’m looking at multiple variables at the moment. Russia probably reactivating some of the military operations in Ukraine, which I think we started to see the last couple of days a little bit. We have China reopening. The Europeans have been in a zombie state, so they’re technically reopening, so their demand is coming back. All that’s going to be inflationary, in my opinion. But the biggest factor that I see has been Yellen’s use of the TGA to offset QT.

Tony Nash

What’s the TGA?


Well, the treasury general account. So she has a big slush fund of money where she can place wherever she wants. And what that’s been doing has been helping rally the markets purely out of political reasons. And when you have a net zero quantitative tightening cycle, it’s like, what do they expect that to happen at the moment?

Tony Nash

Let me back up just for people who aren’t… So we had a Fed meeting last week. They raised by 25, they’re continuing QT incrementally. Right. And so what you’re saying is that Yellen is offsetting that QT with spending from the TGA?


Yeah, it’s exactly what I’ve been saying. I’ve been at this for quite a long time. She’s gone hog wild on the treasury bills in the recent months and that’s pretty much the reason we got a stock rally. You’re looking at the duration of liquidity, which is very, very important and nobody really wants to talk about that at the moment. So I mean, these stock rallies have gives a perception of a solid market and overall economy aiming to help the Biden administration for purely political reasons. Right. And this revision, yeah, it was revised and people think it’s an incremental revision, but it’s a 33% rise and CPI from the for the previous data, so it’s not incremental whatsoever.

Tony Nash

Yeah, month on month it’s, it’s a little bit elusive for people to understand how big of a revision this is. Whenever economic data come out, anybody who follows me knows I always say wait for the revision. Right. Especially with OECD countries, wait for the revision because they hide stuff and they leak it out in previous data, other things. And so, as you just said, Albert, there was a 33% revision in the December CPI. That’s massive, right?


Yeah. Wage inflation is spiraling out of control. We have not just the United States, but now you have the Bank of Japan reporting more inflation from their side. In fact, the Australians did the same thing. They’re having hot CPI numbers. I mean, if we have a hot CPI number coming Tuesday, I mean, it’s just not going to be pretty for equities, in my opinion. And I think that’s why Jerome Powell would soft last week, just because he sees the data and he knows what’s coming.

Tony Nash

So what is a hot CPI number to you?


I think anything above what the consensus is, whether it’s even 0.1 or .2, anything that’s sticky in the core CPI is going to be hot.

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Tony Nash

Tony, you’re wincing there. Why do you do that?

Tony Greer

No, I mean, I was hoping for a specific magnitude, you know what I mean? As a trader, I’m like, how much higher is he expecting? And he was anything higher and I was like, 8%, 9%, 10%, what do we like? That’s all. I’m very interested. I think he’s on the absolute right track.


It’s hard because the VLS has been using different calculations and methodologies to calculate CPI. They just changed the way they weigh it, so they’re trying to keep it within a reasonable amount. But when you’re looking at fertilizers and fertilizer companies like Mosaic, and then you have nat gas spiking and then wheat spiking today, either that’s Russia ramping up military affairs in Ukraine, or there’s a hot CPI number coming, my opinion, or both.

Tony Nash

Okay. How much of a factor is like the earthquake in Turkey? Or is any of that a factor?


That’s a huge factor, Tony, because that’s going to start cutting off, that’s going to start up cutting oil supply, and that’s one of the prime components of inflation. And I’ll let Tracy get onto the details of that. But that’s one in many variables that we’re going to start looking at.

Tony Nash

Okay, when you say inflation 2.0 is coming, are you looking at say, Q2 or something when that will kind of reemerge or what’s your timing on that?


I’m thinking Q2 at this point. Originally I thought it would be in September or October, but I think the timeline definitely come faster.

Tony Nash

Okay, so what’s driving that is largely kind of energy and ag? Is that..


Energy, ag, and specifically just the market just being just rallying relentlessly, it just won’t go down. And that’s spurring commodities. Copper, oil, you name it, wheat, grains, everything.

Tony Nash

Okay, if I understand you correctly, just to reiterate what you said. We have more money going into the money supply because of the spending from the TGA that’s offsetting QT. And that money in the money supply is going to people who are driving up commodity prices, driving up equity markets, and potentially driving up real estate. Right. Because we saw some real estate numbers this past week that were not discouraging. Right. I mean, real estate isn’t dying like many people thought right now. And mortgage rates are generally kind of going down. So it seems like we have money going into those things, which is kind of the opposite of what the Feds here are trying to achieve.


Yeah, the mortgage rate ticks down just a little bit and all of a sudden the spurs on buying. So everything that the Fed has been trying to do is just not happening. Labor, housing, stocks, everything, literally everything.

Tony Nash

Okay, and so how much longer can Yellen use the TGA, does she have unlimited capacity there?


No, she doesn’t. And Congress can definitely put on oversight on that. But she started off in… Well started off, but she had about 160 billion per month just prior to the midterms. But now she’s down to about 50, 60. Yeah, but that’ll get replenished in April when the tax money comes in for the use.

Tony Nash

Okay, so it will be muted in Feb-March. But she can go guns blazing again in April.


And this is part of the negotiations with the budget, with the Republicans and the Democrats is trying to limit what she can do with the TGA at the moment. They won’t say it publicly, but they’re certainly trying to.

Tony Nash

Okay, very interesting. Okay, so for those of you guys out there, check out the treasury general account and just see what’s out there, I think that would be really interesting to look into. Okay. Anything else on this, Albert? Is inflation 2.0? Is it going to hit the US or hit, say, Europe or Asia or where do you think?


I think Asia and Australia is up first for inflation and then leaking over the United States. Obviously I don’t think we’re going to see 9.9 prints on the CPI, but steady 6-7. We definitely see that.

Tony Nash

Okay, great. All right. And then do you think that tapers off in say, Q4 or something like that?


I think so. I think it’ll start tapering off again. I think it’s going to be in a cycle.

Tony Nash

Okay, great. All right, so we just put out our I just tweeted out our Complete Intelligence CPI print expectations for the year and we think on average we’re going to be about 5.3% for the year. So we’re probably a little bit below your expectations. All right, Albert, thanks very much. I really appreciate that.



Tony Nash

Tony, let’s move on to you. When we spoke before this discussion, you talked about market chaos like you enjoy it. Are you having fun with this?

Tony Greer

Yeah, I am. This is the kind of trading that benefits, a more active trader, I think, like me, and somebody that’s not afraid to get flat things and take advantage of what looked like absurd price opportunities in the immediate term and things like that. So, yeah, I’m having a good time with this, Tony. I really am.

Tony Nash

That’s great. Can you talk us through kind of… You seem to indicate that you’re pretty bullish on metals and oil, so can you help us through that? And let’s look at metals first. I’ve got a chart for copper up and that price has obviously come down recently. But why are you so bullish on metal? Is copper included?

Tony Greer

Yeah. So let’s go right into it, Tony. The copper is definitely included. What got me so bullish was last year, I remember spending the whole entire second half of 2022 watching copper pound 6500 on the LME. Right? And for me, that equates to the 2017 and 2018 peak in copper, from which point it failed and faded lower and then traded down below 5k during the lockdown. So we saw the big spike to 11k, where everybody thought copper was going to the moon.

Tony Greer

All of that was essentially the lead in to the Biden Administration. That was the lead into the Biden administration. The pivot to electronic vehicle was that big copper rally to 11k and it consolidated there for the entirety of 2021. Then in 2022, copper backed off and pounded the highs from 2018 at 6500, held, and got back up above its moving averages. So when you see that and it coincides with another fairly tight physical market, another backward dated commodity, another commodity where inventories are nosediving, so you’ve got the supply side really on your side. The sort of argument against that is that China is storing and taking a lot of copper off of inventory.

Tony Greer

And my response to that is if they’re taking it off inventory, they’re probably not going to sell it anytime soon, so I don’t have to worry about it. That’s kind of the sort of one basic slant of my metal bullishness, right?

Tony Greer

And the other side of it I have in my mind, I’m fairly convinced that the dollar is going to be on a path lower this year. If you notice last year, she peaked at the Bank of England intervention when the guilt market came apart, and then she formed a lower high when Dollar-Yen got to 150 and the Bank of Japan showed up and said, “hold on, hold on, hold on. You guys kill it.” You know what I mean? That was an absolutely inexplicable FX rally that people haven’t seen in decades.

Tony Greer

So with those two central banks at the top, Tony, a curl down below the moving averages, and coincidentally, with the backdrop of two stories, number one, central bank digital currency story seems to be gaining traction. Whether we like it or not, whether it’s good for us or not, I feel like we’re going to have those and that’s going to detract from the purchasing power of the dollar again.

Tony Greer

And then you’ve got the story where it seems like Russia, Saudi Arabia, China, the rest of the BRICS are very interested in starting their own commodity markets, priced in their own currencies.

Tony Nash

Don’t get Albert started on that.

Tony Greer

Yeah, exactly. I was going to say, I don’t know if that’s a fair topic for discussion and maybe he may be a perma petrol dollar and that’s fair too. I don’t know. But I see that as a story, as sort of deteriorating credibility in the dollar, certainly. And that’s just the way I’m leaning. And it’s not something my money is where my mouth is. The dollar for me is a barometer that tells me how much wind am I going to have in my commodity sales. So I do not have any risk on in the dollar.

Tony Nash

Okay, we should actually come back and talk about that at some point in detail. Sorry, Tracy. You were saying?


I was going to say we should also factor into this conversation the fact that we’ve had the lack of capex in the mining industry as far as the metals are concerned. That is equal to the same lack of capex that we’ve had in, say, the oil industry. So that definitely factors into the situation as well when you’re trying to transition to EVs, EV charging stations and all of these metals, even windmills as far as copper is concerned, et cetera. The mining industry again, I don’t know how you feel about that, but I just want to kind of throw that in there.

Tony Greer

Couldn’t agree more.


The only thing I have to say about the dollar moved down and up is I do agree with Tony that I think the dollar will probably go down a little bit, probably 97, 98. Right. But unfortunately, if inflation comes back, they’re going to have to use the dollar to kick it in the rear so we could see a 97-96 and then go right back up to 105 as they try to fight inflation again. It’s certainly possible. This is going to be a topsy turvy of a year no matter which way you look at it, whether it’s going to be dollar up, dollar down, commodities up, down. It’s just going to be all about the Fed and what intervention they do with inflation.

Tony Greer

It’s nonlinear chaos. Right. The curve.




But this is great for a trader, for a trading. You want to see volatility.

Tony Nash

Very good. Okay, Tony, let’s let’s move into oil then. You’re also seem to be very bullish crude and and we have a tweet from you from Jan. 17 talking about crude going through its 50 day moving average and so on and so forth, talking about some serious muscle in crude markets. So can you talk us through that as well?

Tony Greer

Yeah, so that’s strictly a technical look. And to me, oil continues to make bottom formations and fail. Right? That’s what it keeps doing. We keep seeing an inverted head and shoulders, and then it kinda break the moving averages, and then we see another inverted head and shoulders. That’s even shallower than the last one because they can’t pound it any lower, and that can’t break the moving averages and we back off. And now we’ve got another situation where we’ve got another pattern that’s extremely bullish, where we just had the recent low fall between the last two lows, Tony.

Tony Greer

And that’s a little bit of tea leaves, but that formation is called a wiggle, and we haven’t traded lower since we put in that low. That was between those two lows, if you notice. And so now we’re attacking the 100 day moving average. I mean, this could be it. I walked into this year saying technically, I’m not going to miss out on the trade where crude oil goes through the 50 day, the 100 day, the 200 day, and keeps going, right? That’s the trade I’ve got a bullseye on. And if I have to stop myself out of it ten times, I’m going to be in the 11th time, I can guarantee you. So that’s how I’m looking at the world.

Tony Greer

From the supply side, the driver to me has been gasoline demand. Quite honestly, gasoline demand globally is sort of everybody’s concerned about the recession now. Not concerned about recession. I’ve traded through dozens of recessions and I have noticed that many of them don’t put a major dent in gasoline demand. So I feel like we’re set up for that type of move again, where we have steady gasoline demand. We’re able to keep this crack spread elevated at a $30 to $50 level, where they used to be eight to $12. Right. That’s the margin that a refiner makes for splitting barrels of crude into jet fuel and diesel. So with that crack spread and remaining elevated, the rest of the curve remaining backwardated, although that’s another trip that’s going to be non linear and wacky. But with inventories largely diving below five-year average inventories across the board, the demand for diesel, the demand for jet fuel. Demand for diesel was last year. This year, it seems like demand for jet fuel is really coming back quite a bit. So I just see a great supply side story, a fairly good demand side story, and I see resource nationalism everywhere I look, and that’s generally positive for crude oil.

Tony Greer

So when you line all of that up, the stars align with the technical picture. When we do eventually go skipping through those moving averages, the stage is set for it not to come back. I don’t know if that’s going to happen, but as a trader, I’m going to put my chips in that circle and see what happens.

Tony Nash

Sounds very solid. Tracy, I see you agreeing pretty violently. What else do you have to add there?

Tony Greer

Yeah, I want to hear what you’re adding, Tracy.


No, I absolutely agree. When we talk about the supply side and the demand side, we really have to take a look at China. And I know we keep talking about the China opening story, but if we do really look at mobility data and I posted a couple of charts on this today, mobility data is up. Right. And then you also have what I think is more important is if you look at flight data and jet fuel demand, which is up once again, because we know that for Chinese New Year, we had a lot of domestic demand increase, but what we’re really looking for is international demand increase. Right. And so we’ve recently seen China flights to Hong Kong increase in full because that flight pattern was shut down. And so I think this is going to be a major forecast, and we have to realize that China has been drawing down on their stocks locally. Right? And so eventually they’re going to have to rebuy on the international market. If they’ve been depending on the stocks that they accrued since they’ve been shut down over the last year, if they’re pulling down those stocks. China is one country that is not the US.


Let’s put it that way. They do not want their SPR to go to zero, all right? They really depend on this. And so because they’ve had to draw down on their domestic stocks, I would be looking for them to start buying on the international market again, especially when they’re getting really cheap crude oil right now from Russia. They would start buying.

Tony Nash

When do you think that is?


I think now. They are buying now. I’ll post some charts on Twitter again, but according to Bortex data, there is a lot of seaborne crude going to China right now. We know that they get a lot of natural gas domestically through pipeline, and they’re expanding those pipelines, but realistically, crude oil is still seaborne, and so we can track that.

Tony Nash

Okay, interesting.


Yeah. Tony a lot of people sit there and criticize it like, well, China has been open and they’re not doing anything, and blah, blah, blah. But it’s not a black or white thing with China. I mean, they’re staggering their opening. They’re not dumb, because if they open just full speed ahead, they’d have a commodity inflation issue even worse than the United States would. So they are buying. And I agree with Tony with the oil bull market case, and I agree with Tracy. The supply side demand side is heavy. The Chinese are reopening and buying still. And I think oil goes to minimum 110 this year. Minimum.

Tony Nash

I love it when ours says, I agree with Tony because I’m not used to hearing that. But I know he’s talking about you, Tony Greer.

Tony Greer

That’s fine looking, Tony. Beautiful part. Yeah. The beautiful part about this market, Tone, is that you can find the opposite side of your trade. You just got to open your eyes and ears, right?


That’s what you really need to do, because if you have a thesis, you really want to hear the opposite side. Right?

Tony Nash

Tell me about that. What is the downside thesis for oil? What is that downside thesis?

Tony Greer

Drill, baby, drill.


That’s not politically viable.


Which is not going to happen. Which is not going to happen.

Tony Greer

Right. So that’s why you say you can get annoyed at what’s going on or you can make moves in the market, right. You can buy the energy complex and buy oil because that’s the direction it’s naturally going to go if they’re going to try to put this electric vehicle squeeze on by 2030. Right? I mean, that’s almost necessary. And almost the necessary trade is for the Bloomberg Commodity Index to go up 40% from here. If we’re going to fill all these orders to build battery packs and battery power all over the world.


The only the only other downside for oil is if the government starts playing around in oil futures and trying to sell it down just to keep it relatively safe on the inflation front, which they did.

Tony Greer

It was remarkably effective. It was remarkably effective. What they did with the SPR, you have to say, whether we like it or not, they knocked 30, $40 off the price.


It wasn’t just the SPR, though. They were sitting there selling down in oil futures in the market.

Tony Greer

They have a president’s working group that’s allowed to do that. I’m sure they are.


They do.

Tony Nash

Free market capitalism. You got to love it, right?



Tony Greer

Well, free market, political-driven capital.


Well, this is what Tony was mentioned this is what Tony was talking about when he said nationalizing commodities and whatnot. Of course they’re inflationary effects, but the governments only care about short term. What’s going to make my voters happy for the next election in six months? That’s all they care about.


It’s kick the can theory, right? The Fed does this all the time. We see central banks do this all the time. Why not governments, right?

Tony Nash

Yes. Okay, guys, let’s move on to crude oil, specifically. Tracy, on Friday, we saw Russia announce plans to cut production to 500,000 barrels a day. Brent rose on the news. And I’m really curious. What is Russia producing right now? So are they at that volume capacity? And what does that mean for the crude quota and the price cap?


Well, Russia is already producing at their quota according to the OPEC. The thing is, their OPEC quota and I won’t get into the logistics of this, but their OPEC quota is a lot of condensate oil, not straight oil. But aside from those details, we have to go in fact, Russia Euros is trading literally between $40 and $45 right now as we are speaking today on Friday. The the what date is this? I just want to make sure some people the 10 February. And so I think that you have to you know, I think what Russia is trying to do right now is try to bump up the price of oil for themselves, because I think if oil prices are higher for them, even though they are supplying less, they’re going to make more money regardless. I also think that this puts a thorn in the side to the west, because they’re trying to bump up oil prices. When Western nations are trying to push down oil prices. Right. They don’t want to see inflation go higher. And energy is a big part of that, even though central banks don’t realize that. But we have to, you know, it is a big part of the inflation factor.


And so what I think they’re trying to do is basically say, I’m going to be a thorn in your side. We’re going to kick up oil prices. I’m also going to benefit myself because oil prices are going to go higher for me. And maybe they reach the cap $60. They’re well below then. You know, they’re still making more money with reduced volumes.

Tony Nash

Okay, so Euro trades at $20 discount, right, at this point.


To the price cap.

Tony Nash

Right. But who are they hurting, aside from, say, India and China and a few other countries that are their traditional allies?


Well, even if that price went up of your rails, at this juncture, China and India are still getting great deals, right? At $60 a barrel, you’re still getting a great deal. Right. You’re $20, $30 below what Brent and WTI are trading at. And so I don’t think that really matters to them. As far as am I going to lose China and India as customers, I don’t think that’s even a concern of theirs because they realize that their oil is trading well below everybody else.

Tony Nash

So I guess if they’re going to have the same customers, the China India customers generally, why does it matter? Aside from… Why does it matter to Brent that Russia has raised or capped off their production? If it’s going to go to the same markets anyway? I’m just curious. Why does it matter to the non-Euros crude?


Because you’re taking barrels off the market, and that is the only thing the market looks at. How many barrels are you taking off the market? If you’re taking 500,000 barrels per day off the market, then these other that’s 500 barrels per day off the market.

Tony Nash

Sorry, what do they have said this before? What are they producing now?


They’re at about 10.5, but again, that includes condensate. It’s not exactly 10.5 million barrels of oil per day.

Tony Nash



Basically, how’s the earthquake in Turkey affecting things on the supply side?


All right, so if we look at saline ports, we’ve taken 8885 barrels per day off the market as well. Almost a million barrels per day off the market from that specific port. That specific port was supposed to be down for two to three days. That’s looking like a lot longer at this junction.

Tony Nash



That’s also affecting global markets.

Tony Nash

Okay. So between Russia and the Turkey earthquake, there’s a real impact on markets?



Tony Nash



And of course they’d probably take advantage of it. Yeah, that’s the way things work in that part.

Tony Nash

Of course. Of course. Tracy, we had some viewer questions about natgas. There were probably four of them on Twitter. What new insights do you have in natgas over the last couple of weeks?


Well, as far as natgas is concerned, everybody’s asking when is this market going to bottom? Right? Because it’s been just a disaster since summer. We’ve seen like over 40% decline and in my opinion, really what we should be looking at right now, I think we’ll probably consolidate down here for a while. I think what we should be looking for is going into summer because what I think it’s going to happen is that we’re going to see China demand increase because they’re coming back online and cargoes that were bound for the EU will probably go to China now. They’ll outbid the EU because EU is basically full at this juncture, right. So they don’t really need the cargoes. Those cargoes can move to Asia. But during the summer, what we may see happen is increase. And we got very lucky with the EU as far as winter was concerned. And what I think will happen is during summer, if we have a particularly hot summer, air conditioning rises, that means nat gas increases. And so what I think we could see is somewhere this summer we see an increase in prices again because you have to realize that last year EU still had 50% of their capacity filled from Russia before everything went offline. That’s gone.

Tony Nash



I would be looking towards, more towards this summer if you’re looking for kind of price increase. And generally right now I think that we’re probably going to see some consolidation down in this 2, 2.50 area, which is where it’s traditionally traded.

Tony Nash

My neighbors in Texas need more money, so let’s get that pumping.


But the thing is that at this, the producers in Texas that their costs are higher, that production is going to drift if we stayed up long enough. So you have to think about that as far as production is concerned anyway, I mean, we are in surplus right now, but that may not last forever.

Tony Nash

Great. Okay. Very good. That’s really good. Thank you for that. Hey Tony, what does next week look like for you? I know we’ve got CPI coming out. What are you looking at for the week ahead?

Tony Greer

I’m thinking like Carl icon, to be honest with you. Tony. No, I’m serious. If you saw his options play, I guess he’s got, I guess it’s 5 billion notional of options that are struck at 40, 50 for next Friday. If you ask me, he’s looking at number, he’s looking at a couple of things. He’s looking first at I think the bond market, the credit markets in terms of the bonds and break evens in terms of yields and break evens trading higher in the last week, they have both vaulted off of the lows. So there’s been a clear turnaround in market based inflation perception. So I think that he sees that and looks on the calendar and sees CPI and PPI next week, knows that inflation is not linear in any direction and maybe is making a bet on and maybe it’s just a hedge, but maybe investing that money on the idea that we have an upside surprise in any of the economic data. The bond market tanks, stocks tank. If rates go higher, they’re going to mash big tech again and he’s probably going to be in the money and his 40-50 puts.

Tony Greer

So that’s how I’m looking at it. I’m looking to see if my portfolio of trades that I’ve got on can weather that type of storm and if I’m out of the way in certain places, if I should join him in certain places. That’s the way I’m thinking about next week, man. I’m trying to stay alive.

Tony Nash

Sounds very exciting. Tracy, what are you looking for next week?


Continue, obviously watching the commodities markets, metals, energy, watching China data, the mobility data, flight data, see how this is moving along and we’ll see how that.

Tony Nash

We see a higher CPI, what does that do for crude prices, do you think? Do you think there’s a direct impact?


I think you’re going to see crude prices go higher, yeah.

Tony Greer

Tone, what, the dynamics…


Counterintuitive, right?

Tony Greer

Yeah. It’s kind of like the market speak to each other, right. Like a dynamic that we definitely saw along the way of the commodities rally as rates went higher last year. Right. Call it the whole period going into the Russia Ukraine invasion, right. It was oil straight up, but it was kind of like the credit market. I called two year yields last year the bat signal, and I named them that because they were getting out ahead of commodity inflation. We were having weeks where the bond market was getting shellac and there wasn’t much going on in the commodity markets, but all of a sudden they would pick up at the end of the week. And I think it was a lot of the time, like the bond market signaling inflation here. The commodity markets are going to go up. And I think that that’s kind of a sort of a cadence that established itself. And so it’s going to be really interesting to see how that unwinds.

Tony Nash

Fantastic. Okay. That’s a really great explanation, Tony. Thank you. Thank you so much. I really appreciate your time. Thanks so much. Have a great weekend and have a great week ahead. Thank you.

Tony Greer

Thanks for having us. Be good. Bye.


Thank you.


Trapped With Upside Capped For US Markets

This podcast is originally published by BFM: The Business Station for their Market Watch show. Here’s the link to the original content:

Can the Federal Reserve engineer a soft landing for the US economy? Are the odds stacked against them especially if consumer spending stops suddenly. Tony Nash, CEO, Complete Intelligence gives us his views.


BFM: The business station BFM 89 Nine is seven. 6th Thursday, the 1 September, and we are in the final quarter of the year. But nonetheless, we don’t need to look so far ahead because in the next half an hour, I’ll be speaking to Hannah Pearson of the travel consultancy Pet Anderson on Asian tourism recovery.

But in the meantime, let’s recap how global markets closed yesterday. So the Dow was down 0.9%, S&P 500 down 0.8%, while the Nasdaq was down 0.6%. Meanwhile, in Asia, Nikkei was down 0.4%, Hang Seng was up very marginally by 0.3%, Shanghai was down 0.8%, Singapore Street Times was up 0.6%, and our very own FBM KLCI was of course close due to the medical holiday.

But for more in terms of where global markets are heading, we have on the line with us Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Now, the S&P 500, in fact, the US markets continue to slide, but the S&P 500 we know, is down by 4.2% on a monthly basis, even though US jobs and consumer numbers released this week were largely positive. So why is this bearish sentiment in the equity markets persisting?

TN: It’s pretty easy. Equity investors weren’t prepared for Powell to have the conviction to fighting inflation that he showed in last week’s speech. So everyone else, bond vestors, commodity investors and so on, understood Powell’s conviction.

But equity investors had expected the Fed to pivot. And by pivot, maybe coming close to loosening and maybe coming close to ending rate rises. But the Fed was never going to pivot. If anything, the pace of rate rises may slow, but the Fed’s ultimate destination is 4%. And they’ve said that for months.

So there really shouldn’t have been any surprise with that. But equity investors just didn’t want to believe it. And so they’re in price discovery, continuing lower now. So once they hit the valuation that will reflect getting to 4%, I think we’ll be back in decent territory. But until then, we’re in a downward price discovery mode.

BFM: Okay, Tony, the other thing that’s going to happen in next few weeks is of course, the Fed going to reduce their $9 trillion balance sheet. What kind of impact do you think this will have on markets?

TN: Well, it’s tighter. So it’s going to be more difficult. So in September, the Fed will double quantitative tightening. So they’ve been tightening at about 47.5 billion dollars per month. They’re going to more than double that to 95 billion in September. So it will definitely add upward pressure on interest rates.

And when there is upward pressure on interest rates, that means the cost of money is higher and the cost of buying a house is higher, and so on and so forth. And with respect to buying a house, the Fed is about $50 billion behind on shrinking their mortgage-backed securities portfolio. So they do have some catching up to do, but they’ve got time on their side. They can do it at whatever pace they want.

BFM: Okay. In the meantime, right, let’s look at the US consumer. Super important in the US. Economy, but at least 60% of GDP. Do you have a sense of what’s happening there? Are they still very confident? Are they still buying, especially discretionary spending? Has it been robust?

TN: I don’t necessarily think. You have a separation. You have luxury buyers who are very confident. But I think your average buyer, I don’t necessarily think there’s a lot of confidence behind their buying. I think they’re just trying to maintain their pace of spending.

So spending continues to grow, but consumer credit has also expanded. Visa, I think, two days ago said that their payments volume grew by 11%. So that’s not the value. I mean, you could say with inflation, of course, the value is going to go up, but they saw their payments volume go up by 11%. Part of that is due to things like back to school here in the US. The school year starts in late August, early September.

But until consumers stop growing their spending, the Fed will keep raising because the Fed, part of what they’ve been trying to do is what’s called demand destruction. And until consumers and businesses stop raising the pace of their spending, the Fed will continue raising interest rates in tightening conditions.

BFM: But doesn’t this then just mean that the US is officially in a recession? Because you’re basically sending out signals to the market that the economy needs to slow down. And if we continue to do so, we’ve already seen two-quarters of it, right, which means it’s a technical recession. How bad will this recession really be? I mean, it will be official at some point.

TN: Yeah, I really honestly don’t care if we’re in a recession or not. If two quarters is the rule of thumb, then we’re in a recession. And we’ve been in a recession since Q1. So it’s really just a matter of labeling.

I think the difficulty is, as you say, what’s the impact on, say, business growth, job growth, spending growth? And we’re seeing that the job market has remained pretty strong, spending growth has remained pretty strong. And the concern is, will that stop? When will that stop? And I think we have seen things slow down, at least in terms of economic growth, but a lot of that has been around government spending as well.

So things will likely become dramatically slower in 2023 if the Republicans take over the US. House of Representatives, which controls the budget. So if Republicans take over the House, they will put a stop on a lot of the spending bills that the Biden administration continues to want to pass, and they’ll be more budget conscious. So government spending may not necessarily decline, but the pace of the rise will stop. And so government spending has been what’s been keeping, say, GDP and other things moving, but that will likely stop if Republicans take over Congress.

BFM: Okay, but what about the Fed, the actions of the Fed? Because so far it seems like markets are looking to them for engineering a soft landing in the US. Do you think they’ll succeed, though, or are we going to look at the politicians for doing so?

TN: It all depends. Well, not all. A lot of it depends on the Fed’s actions this month, in September. So if the Fed slows the pace of rate rises, let’s say to 50 basis points instead of 75, they’re signaling that they’re willing to slow down a bit with the destination remaining 4%.

So if the Fed were to come and say, a 25 basis point rise, then that would be a real signal that, yes, they’re definitely committed to getting to four, but they’re willing to slow down to get us to four by, say, Q1, maybe late Q1 of ’23. And I think that would be a signal to equity investors that the Fed understands and they’re okay if some of these valuations continue to be stretched.

If we see a 25 basis point rise, which I don’t think anybody is really calling for in September, then that would be a real kind of green light from the Fed. I think we’re likely to see 50. 75 is also likely, but I think 50 is slightly more likely. So we’ll likely see 50 and then a few 25s. And that’ll get us to four in, I think, December or January. And at that point, the Fed is just going to reassess and figure out kind of which strategy to pick after that.

BFM: So is it too optimistic to say that maybe we might have a year-end rally for US. Markets? What do you think?

TN: It’s possible. I wouldn’t necessarily count on it. Again, I think the upside is capped for a period because of the uncertainty of the Fed, at least until we have clarity on the September signaling. So if they do raise 75 in September, then that likely means we have a couple of 25 rises in October, November, something like that. But it doesn’t necessarily mean they’re going to stop. All it means is that they’re going to reassess and the beatings will continue effectively.

BFM: What about oil, though? It’s now $89 a barrel for WTI. Why have prices come under pressure so much?

TN: Well, the Saudis came out with a statement last week around the gap between the paper value of oil and the physical market. And they have been talking about cutting their output because of the difference, the broad difference between the physical market and the paper market. And so I think when we see falls like this, it just convicts the Saudis more. Unless there’s political pressure put on them, it just convicts them more to cut their output.

The Saudis, the Emiratis and others have come together and said we’re likely going to slower output. Part of this is also putting pressure on the Iran deal, assuming that there’s more capacity from Iran. So if exports from Iran are normalized, then that could put downside pressure on the price. So the Saudis are just trying to keep the price up.

Within that context, we also have to look at the Strategic Petroleum Reserve releases in the US. So that will end in October unless they slow down the pace of the SPR release, but that effectively cuts off supply to the market. And so when the SPR release ends and if the Saudis cut their output, we could have a spike in crude prices, say in Q4.

That’s kind of what we’re expecting is for crude prices to rise into the end of the year. The US midterm elections will be passed as Saudis will likely cut their output. Other OPEC countries will likely cut their output. And the US SPR release will be done. Unless the Russia-Ukraine war ends, which would put crude in the open market, we do expect to see crude price rises towards the end of the year.

BFM: All right, thank you for your time. That was Tony Nash, CEO of Complete Intelligence, telling us that we can expect Brent crude prices to actually perhaps go up for the last quarter of the year as there are more output cuts despite some of the demand destruction we are seeing because of the global economic slowdown.


FOMC Minutes Hint at 50bps Hike

Markets ended their 5 day winning streak but result season has so far been very positive. So where are markets heading since inflation is still high. Do the FOMC minutes give us any hint? Tony Nash, CEO of Complete Intelligence tells us.

This podcast is originally published at



This is a podcast from BFM 89 Nine. The business station BFM 89.9. It’s seven seven thursday the 18 August. And of course, you’re listening to the Morning Run together with Keith Kam and I’m Wong Shou Ning. Now. In about 30 minutes, we’ll be speaking to our own pie from Mong’s Hill Ventures on the Asian carbon market outlook, or the lack of one. But let’s recap how global markets closed yesterday.


Wasn’t such a good day for Wall Street. It ended a five day winning streak with the Dow down 0.5%. The SNP 500 down 0.7%. Net site was down 1.3%. All these follow the release of retail data and the Fed July meeting minutes earlier today. Asian markets, it was a bit mixed. Nikkei was up 1.2%. Hong Kong’s Hang Seng and Shanghai’s Composite were up 0.5%. Singapore’s STI was up 0.3%. Back home, the FBM KLCI was marginally lower, 0.4% down.


So for where markets are heading, we have on the line with this Tony Nash CEO of Complete intelligence. Good morning, Tony. Now, US stocks did dip last night, but we are still far higher than what we saw in June. Earning season show that four out of five companies are either meeting or beating street expectations. But does that matter? Or is the Fed still dictating market direction.


Dynamics first is we’re in the last weeks of thinly traded summer equities in the States and Europe. And so you are seeing movement on not a lot of volume. So that’s one thing we really need to consider. The other is, yes, companies have reported fairly well, but the Fed really is what people are thinking about. And the Fed, if you want to know what’s in the Fed’s mind, they’ve really been looking at the University of Michigan survey quite a lot lately, which is kind of a mainstream economic item, but it’s a little bit obscure. But there’s some conflicting data there.

So if you look at the Michigan survey, they survey current financial condition of consumers and it’s as bad now as it was in, say, 2009. So the current financial condition for consumers is not great. And then when you look at inflation uncertainty, which is also what consumers look at or the University of Michigan looks at, is very high. It’s the highest it’s been since the 1980s. So the Fed is looking at those gauges and if you looked at the Fed notes that came out today, they were a little bit dovish.

They were leaning dovish, I’ll say I won’t say they were dovish, but they were leaning more dovish than people thought. So I think traders are looking more to the Fed their September meeting, what their intentions are, rather than any specific earnings call, although Walmart was a good call, and we’ll talk about that in a second, but there are some earnings that are coming through that are helping some portions of markets.


So, Tony, are you expecting a 75 basis point hike or maybe a 50 basis point hike because swaps now are indicating or at least increasing odds of that half point hike next month.


I’m leaning towards a half point hike because we are seeing things slow down. I don’t necessarily think we’re going to be in a recession that’s at the depth that people are fearing. But consumers are laden down with worries, businesses are cutting staff and so on and so forth. So I think the Fed is likely going to slow down the rate of rise of rates,.


Meanwhile, all prices have come under pressure in last few days. Is it more due to demand destruction or increasing supply coming on stream and what sort of impact do you see going forward at least in the short term?


It’s both actually. There has been demand destruction and people have slowed down some of their purchases because of demand destruction. But the SPR release in the US has really provided supply that has curbed some prices. And so if you look at year on year, US. Imports of crude are down 1.7 million barrels per day and US exports are up 1.5 million barrels per day. So that’s a gap of 3.2 million barrels a day that has been added to the market. So we’ll likely see crude trade in a range or the price will be capped until that SPR release stops, which is the end of October, which is coincidentally just before midterm elections here in the US.


Okay Tony, let’s go back to the conversation early. So it was kind of mentioned which is consumer. So consumer stocks like Walmart and Home Depot reported better than expected profits. But on the flip side, Target numbers weren’t so positive. So help us make sense of this. I mean where is the consumer, US consumer? How do they feel? How are they doing?


Yeah, I think a big part of that is expectations. So Walmart’s Q2 earnings, or the ones they came out with three months ago, they were really negative. They had overbought. They had overbought because of supply chain issues and a lot of other issues. Walmart has since laid off a bunch of headquarters staff, really cleaned up their supply chain issues. And so their report yesterday or two days ago was fantastic. Target’s report yesterday on a relative basis was pretty terrible because Target didn’t prepare markets as negatively three months ago. So markets were still relatively optimistic on Target. And then this morning it opened, I don’t know, 6% down or something and it recovered a lot of that loss but markets were relatively negative.

What’s interesting to note on retailers is this: retailers are pushing price hikes across to consumers. So you’ll see say a 10% rise in revenues or something on quarter for example, but only a 1% rise in volumes. So what that translates to is retailers are passing along price hikes to consumers. So for those retailers who have the power to pass along price hikes, they will do well. Those who can’t pass along price hikes, they will have a really hard time.


And then the tech heavy Nasdaq has jumped 23% from June’s lows, perhaps driven by cheaper valuations and optimism that growth is back in fashion with inflation in check. Are you like the street, which believes the story except for Intel, which is still underwater?


Well, I wish growth was back in vogue. I mean, we can look at everything from, say, VC to Meta to see that there’s still a lot of skepticism around growth in tech and chip firms like, say, Micron, which are still way down compared to a few months ago. So Meta, as I mentioned, Meta is still underwater from June, and it’s trading about half the level it did a year ago. Amazon is up 40% from its June lows, which is huge, but it’s still down from a year ago.

Although things are in a relatively better place than they were a few months ago, they’re still down on year, and that’s really hurting. A number of the tech. Valuations still seem stretched. I think some things really need to play through the economy. And if you look, for example, at ad space with, say, Netflix soon to be offering ad based business model and a number of other kind of ad supply coming on the market, a lot of the tech plays like Meta and Twitter and other guys who are ad based models. They will have headwinds as they try to raise if they try to raise their revenue guidance.


All right, thank you for your time. That was Tony Nash, CEO of Complete Intelligence, warning us that growth may not still be invoked at the moment and that he’s expecting a 50 bps hike at the next FOMC meeting, actually, as opposed to 75 basis points because it looks like the US. Economy is beginning to slow.


Well, the Feds did say that they’re still committed to raising interest rates because, well, let’s face it 8.5%.

In a distance, big, far off distance by talking about us without cisco, which is actually the biggest maker of machines that run the Internet, did have a pretty good set of results for fourth quarter, and it beat street expectations and provided better than expected forecast for the coming year. Earnings were at $83 per share. Net income decreased, however, by 6% to $2.8 billion.

And revenue was at $13.1 billion, which was slightly higher than what analysts had been expecting. Cisco’s numbers generally topped estimates the company is still struggling to grow. The tech world is rapidly shifting to cloud and subscription software and away from buying physical boxes, which is what Cisco is known for. Right now, Cisco stock price is down 24% this year.

Yeah, but if you look at the street, right, I think that’s reflecting why the share price hasn’t done well. It’s somewhat mixed 14 buys, 16 holes, one sell. Consensus target price for the stock, $52.91. Close at 05:00 P.m. In us at 46.66. Now, something that we mentioned just a few seconds ago, it’s Target. Now, they released their second quarter results. Profits fell nearly 90% from a year ago. But I get the sense that the market is all about expectations, right? So if you guide early and you guide well, then the street doesn’t get disappointed. But it doesn’t remove the reality that your set of numbers are actually bad.

Yeah. They still have quite a huge backlog of stock inventory for them. What we are looking at is that there was deep markdowns on unwanted merchandise, which is now what everybody is worried about because eventually it’s going to bite them, right?

Yeah. They’ll have to write it off. 22 buys on this top ten holes, no sales consensus. Target price for target $187.67. It closed at 05:00 PM. At 175. USD $34. But up next, we’ll be speaking to David Thio on DBKL’s new housing renovation rules. Stay tuned for that. BFM 89.9 you have been listening to.

News Articles

How AI-based ”nowcasts“ try to parse economic uncertainty

This post was published originally at

This month, the S&P 500 officially hit bear-market territory—meaning a fall of 20+ percent from recent highs—and investors everywhere are looking for some way to predict how long the pain could last.

Machine learning startups specializing in “nowcasting” attempt to do just that, by analyzing up-to-the-minute data on everything from shipping costs to the prices of different cuts of beef. In times of economic volatility, investors and executives have often turned to market forecasts, and ML models can offer a way to absorb more information than ever into these analyses.

One example: Complete Intelligence is a ML startup based outside Houston, Texas, that specializes in nowcasting for clients in finance, healthcare, natural resources, and more. We spoke with its founder and CEO, Tony Nash, to get a read on how its ML works and how the startup had to adjust its algorithms due to market uncertainty.

This interview has been edited for length and clarity.

Can you put the idea of nowcasting in your own words—how it’s different from forecasting and the nature of what you do at Complete Intelligence?

So Complete Intelligence is a globally integrated machine learning platform for market finance and planning automation. In short, we’re a machine learning platform for time series data. And nowcasting is using data up to the immediate time period to get a quick snapshot on what the near-term future holds. You can do a nowcast weekly, daily, hourly, or minutely, and the purpose is really just to understand what’s happening in markets or in a company or whatever your outlook is right now

And what sort of data do you use to fuel these predictions?

We use largely publicly available datasets. And we’re using billions of data items in our platform to understand how the world works…Macroeconomic data is probably the least reliable data that we use, so we use it for maybe a directional look, at best, at what’s happening. Currencies data is probably the most accurate data that we use, because currencies trade in such narrow bands. We use commodities data, from widely traded ones like oil and gold, to more obscure ones like molybdenum and some industrial metals. We’re also looking at individual equities and equity industries, and we track things like shipping times for goods—shipping times…are usually pretty good indicators of price rises.

Who are your clients, and how are the nowcasts used in practice?

Our clients range from investors and portfolio managers, to healthcare firms and manufacturing firms, to mining and natural resources firms. So they want to understand what the environment looks like for their, say, investment or even procurement—for example, how the current inflation environment affects the procurement of some part of their supply chain.

In fact, we’re talking to a healthcare company right now, and they want to nowcast over the weekend for some of their key materials. In an investment environment, of course, people would want to understand how, say, expectations and other variables impact the outlook for the near-term future, like, days or a week. People are also using us for continuous budgeting—so revenue, budgeting, expenses, CFOs, and heads of financial planning are using us…to understand the 12- to 18-month outlook of their business, [so they don’t have to have an annual budgeting cycle].

Tell me about how the AI works—which kinds of models you’re using, whether you’re using deep learning, etc.

There are basically three phases to our AI. During the pre-process phase, we collect data and look for anomalies, understand data gaps and how data behaves, classify data, and those sorts of things.

Then we go into a forecasting phase, where we use what’s called an ensemble approach: multiple algorithmic approaches to understand the future scenarios for whatever we’re forecasting. Some of those algorithms are longer-term and fundamentals-based, some of them are shorter-term and technical-based, and some of them are medium-term. And we’re testing every forecast item on every algorithm individually and in a common combinatorial sense. For example, we may forecast an asset like gold using three or four different forecast approaches this month, and then using two forecast approaches next month, depending on how the environment changes

And then we have a post-process that really looks at what we’ve forecasted: Does it look weird? Are there obvious errors in it—for example, negative numbers or that sort of thing? We then circle back if there are issues…We’re retesting and re-weighting the methodologies and algorithms with every forecast that we do.

We’ve had very unique market conditions over the past two years. Since AI is trained on data from the past, how have these conditions affected the technology?

You know, there’s a lag. I would say that in 2020, we lagged the market changes by about six weeks. It took that amount of time for our platform to catch up with the magnitude of change that had happened in the markets. Now, back then, we were not iterating our forecasts more than twice a month. Since then, we’ve started to reiterate our forecasting much more frequently, so that the learning aspect of machine learning can really take place. But we’ve also added daily interval forecasts, so it’s a much higher frequency of forecasting and in smaller intervals, because we can’t rely on, say, monthly intervals as a good input in an environment this volatile.


Fed Giving Mixed Signals

This podcast is originally published on BFM: The Business Station, which you can see in this link:

Macroeconomic data and the bond market are signaling that the US economy is heading for a slowdown but yet equity markets remain robust. Tony Nash, CEO of Complete Intelligence explains why whilst giving us his views of Asian equity markets.


BFM: And you’re listening to the Morning Run with Keith Kam and I’m Wong Shou Ning.

Now in about 30 minutes, we’ll be speaking to William Passet from Nikki Asia on Nancy Pelosi’s Asian trip. But let’s recap how global markets closed yesterday. 

Yeah, on Wall Street, the US markets are looking quite green. The Dow ended up 1.3% the S&P500 was up 1.6%, while the Nasdaq was up 2.6% earlier in the day. Asian markets, we are looking at the Nikkei which ended up 0.5%. Hong Kong Hang Seng closed 0.4% higher, but Shanghai’s Composite was down 0.7%. Singapore’s STI was up 0.4%, while back home burn, Malaysia’s FBM KLCI ended 0.3% lower. 

So for more on international markets, we have on the line with this Tony Nash, CEO of Complete Intelligence. Good morning, Tony, always good to speak to you. Now, we’re still in the midst of well, it’s the tail end of earning season, which hasn’t been too bad. And of course, last night there’s an influx of economic data coming out of the US. But can you tell us what actually determines the direction of markets because it’s just been so volatile in the last few days?

TN: Yeah, I think there has been a growing view in the last week or so that the Fed may change direction in September. And I think markets are becoming optimistic that the Fed may ease or at least stay neutral in September instead of raising. At this point, I think that’s a little bit over optimistic, but I think it depends on how economic data, say, inflation particularly come out over the next, say, 40, 45 days. 

BFM: So your view we are far from peak inflation? 

TN: I don’t necessarily think we’re far from peak inflation. I think there are a number of things that could potentially over the next, say, four to six months, actually ease inflation. If for example, the Russia Ukraine war stops, which I think that is a potential over the next six months, those types of things really could help to ease inflation. Something that could hurt inflation is, let’s say, China decides to actually let loose some of this fiscal spending it’s been talking about for so long. If they do, that could really put upward pressure on things like energy and precious metals. So there are some major kind of forces that could swing markets one way or another.

BFM: Another data that came in, Tony, it was July US PMI manufacturing index. And that came in lower than June at 52.8, but it still indicates expansionary activity. What was responsible for this upbeat reading? 

TN: Yeah, it’s above 50, which means things are growing. But I don’t know that I’d necessarily call it upbeat because the economy is decelerating right now. So we saw new orders and employment, both contracting, manufacturing backlogs are growing. 

On the positive side, supplier delivery times are improving. So that tells me that kind of supply chains are improving, which is great. Raw materials inventories are growing, which is great, and prices are rising at a slower rate. 

So inflation, at least PPI, according to this survey, things are slowing down. So I think if this continues to slow that with the services PMI, we could potentially have another quarter of negative GDP growth. So I’m not saying it’s going to happen. I’m saying with this and the services PMI, that raises the prospect of that happening. 

BFM: Can we say that we are actually over blowing fears of an economic downturn? That, I mean, it’s not as bad as some analysts put it. 

TN: Well, it’s definitely slowing. I think the downturn I don’t know that it’s necessarily being overblown. I think those fears are well founded. But if you look at the way, say, consumers and businesses continue to spend, what we don’t have is, let’s say, volume growth, necessarily of markets, but we do have price growth. So if you look at some of the consumer companies, like food manufacturers, consumers have accepted double digit price growth in the most recent quarter. But volumes from manufacturers, from, let’s say, food manufacturers, have grown by kind of 0% to 1%. So their revenues may have grown by double digits, but their volumes have stayed pretty steady.

BFM: Another thing, Tony, is the bond market, right? So we’ve seen the shorter tenor yields rising, but longer, maturity rates decreasing depending on key yield curve, inversion signaling a recession. So we have many indicators of a recession, but yet markets seem to be holding relatively well, especially if you look at it from a year to day basis. Still negative territory, but isn’t so bad. So why the confusing messaging?

TN: Well, I think part of it is the Feds not being clear about what their next actions are. Powell in the Q and A of the most recent meeting said basically, look, there’s a long time between now and September, which is the next Fed meeting, and there’s a lot of data that’s going to come out. So we actually don’t know what our policy is going to be in September. And they stopped forward guidance. So when you stop forward guidance and markets need information to set price expectations for securities, markets are searching for a pricing level. Is it higher or is it lower? They’re always searching for that. So without guidance, it’s really hard for investors to understand where those prices, meaning stock prices or commodity prices or whatever, will be.

BFM: What’s your view in terms of Asian equity markets in the last two, three days? Of course, North Asian markets like the Hong Kong and the Shanghai have seen sharp corrections on the back of Nancy Pelosi’s visit to this region. Do you think actually it’s a buying opportunity? Very well could be.

TN: Again, I think the Chinese government could kind of as a way to frustrate the Biden administration, they could actually launch a massive stimulus program and get money into the economy very quickly. If they did that, it would raise commodity prices and it would really make the Biden administration look bad just before the midterm elections in November. It could be bullish for Chinese securities and North Asian securities. It would also be bullish for commodities. So it wouldn’t surprise me because Chinese government is very smart. It wouldn’t surprise me if they did something like that in order to frustrate the Biden administration and have his party lose both houses of Congress.

BFM: All right, thank you for your time. That was Tony Nash of Complete Intelligence giving us

his views on where markets are. And it’s rather confused because we also aren’t getting much signaling coming from the Federal Reserve, which is the key, I think, if you ask me, the key driver in terms of where markets are hitting.

I think everybody who is questioning whether peak inflation is here, it probably is very close. But is this the end of this normalization of monetary policy? How many more rate hikes are the Fed going to implement before the end of the year? But very quickly, we’re also looking at some results.

First off is Ebay. They reported second quarter revenue that beat street expectations and an upbeat profit outlook, evidence that a new focus on luxury items and collectibles is helping offset slowing sales and customer traffic. It shares rose about 5% in extended trading and back to the sales, it decreased 9% to 2.42 billion. Rigid analysts. On average we’re expecting $2.37 billion not ring gate earnings per share was ninety nine cents per share, beating estimates of Ebay shares rose to a high of $55.4 $55.4 in extended trading after closing at 50 and a half in New York.

Well, there are ten buyers on this name, only 18 homes and two sells. So not a big buy on Wall Street by any measure. Consensus target price for this stock is 53 USD $46. Like he said, it actually closed. This is not after hours trading, but closed at 05:00 p.m.. US. Time it was $50.48. It was up 2.5 cents. Now, another company that reported results is They reported bookings in the second quarter, pun intended, that top street analysts and forecast record revenue in the current period, confirming what we already see a very strong start to what was expected to be a blowout summer travel season.

Anecdotally we can also see that generally people are out traveling a lot more and recorded gross bookings, which represent the total value of all travel services booked.

It came at $34.55 billion. And this beat and endless expectations of 32.8 billion. Total sales nearly double to $4.29 billion, less than analysts’average projection of 4.33 billion.

Not that far off its net income came in at $857,000,000, compared with a loss of $167,000,000 last year. But that was Colbyte. Yeah, I would expect less from them. The street likes the stocks. 23 buys ten holes. One sell consensus target price for the stock.

Am I looking at it correct? $2,524. Last time price $1,966.48. It was up ten point $18.

But Abdic will be speaking to Doctor Jeffrey Williams on Malaysia’s move on MNC tax implementation.

And what does this mean for foreign direct investment?

News Articles

China’s Belt And Road Has Failed. TONY NASH In Conversation With Daniel Lacalle

Tony Nash joins Daniel Lacalle in a discussion on the rise of the machines in a form of AI and machine learning and how Complete Intelligence helps clients automate budgeting with better accuracy using newer technologies like now casts. How GDP predictions are actually very erroneous yet nobody gets fired? And how about China’s GDP as well, and why it’s different from other economies? All these and so much more in markets in this fun discussion.


The video above is published by Daniel Lacalle – In English.


Show Notes


DL: Hello everyone and welcome to this podcast. It is a great pleasure to have somebody that you should actually follow in social media on Twitter, Tony Nash. He is somebody that you definitely need to need to look for because it has very very interesting ideas. Tony, how are you?


TN: Great, thanks Daniel. Thanks so much for having me today.


DL: It’s a tremendous pleasure as I said I was very much looking forward to to have a chat with you. Please introduce a little bit yourself. A little bit to our audience and let us know what is it that you do.


TN: Sure, thanks Daniel. My name is Tony Nash. I live in Houston, Texas. I’ve spent actually most of my life outside of the U.S. I spent most of my 20s in Europe, North Europe, the UK, Southern Europe and from my 30s to almost the end of my 40s I was in Asia. And so you know being in the U.S., Europe and Asia has really given me personally an interesting view on things like trade economics markets and so on and so forth.


During that time I was the global head of research for the economist out of London, I was based in Singapore at the time. Led the global research business. I moved from there to lead Asia consulting for a firm called IHS Markit which is owned by S&P now.


And after that I started my current firm Complete Intelligence which is a machine learning platform. We do global markets currencies, commodities, equity indices, economic concepts. We also do corporate revenue and expense forecasting so we’ll automate budgeting for large multinational firms.


DL: Wow! amazing. Truly amazing. You probably have a very interesting viewpoint on something that a lot of the people that follow us have probably diverging views. Know the situation about the impact of algorithms in the market the impact of high frequency trading and machines in markets.


We had a chat a few months ago with a professor at the London School of Economics that he used to invite me to his year-end lectures to to give a master class. And he mentioned that he was extremely concerned about the almost the rise of the machines. What is your view on this?


TN: I think so an Algo is not an Algo, right? I mean, I think a lot of the firms that are using Algo’s to trade are using extremely short-term algorithmic trading say horizons. Okay? So they’re looking at very short-term momentum and so on and so forth. And that stuff has been around for 10 plus years, it continues to improve. That’s not at all what we do we do monthly interval forecasts, Okay?


Now, when you talk to say an economist they’re looking at traditional say univariate and multivariate statistical approaches, which are kind of long-term trendy stuff. It’s not necessarily exclusively regression, it gets more sophisticated than that.


When we talk to people about machine learning, they assume we’re using exclusively those kind of algorithms. It’s not the case. There’s a mix we run what’s called an ensemble approach. We have some very short-term approaches. We have some longer-term traditional say econometric approaches. And then we use a configuration of which approach works best for that asset or that revenue line in a company or that cost line or whatever for that time.


So we don’t have let’s say, a fixed Algo for gold, Okay? Our algorithm for the gold price is continually changing based upon what’s happening in the market. Markets are not static, right? Trade flows economics, you know, money flows whatever they’re not static. So we’re taking all of that context data in. We’re using all of that to understand what’s happening in currencies, commodities and so on, as well as how that’s impacting company sales. Down to say the department or sub department level.


So what we can do with machine learning now. And this is you know when you mentioned should we fear the rise of the machines. We have a very large client right now who has hundreds of people involved in their budgeting process and it takes them three to four months to do their budgeting process. We’ve automated that process it now takes them 72 hours to run their annual budgeting process, okay? So it was millions of dollars of time and resources and that sort of thing. We’ve taken them now to do a continuous budgeting process to where we churn it out every month. So the CFO, the Head of FP&A and the rest of the say business leadership, see a refresh forecast every month.


Here’s the difference with what we do, compared to what a lot of traditional forecasters and machine learning people do, we track our error, okay? So we will as of next month have our error rates for everything we forecast on our platform. You want to know the error for our gold price forecast, it’ll be on there. You’ll know the error for our Corn, Crude, you know, JPY whatever, it’s on there. So many of our clients use our data for their kind of medium term trades so they have to know how to hedge that trade, right? And so if we have our one, three month error rates on there, something like that it really helps them understand the risk for the time horizon around which they’re trading. And so we do the same for enterprises. We let them know down to a very detailed level to error rates in our forecast because they’re taking the risk on what’s happening, right? So we want them to know the error associated with what they’re doing with what we’re doing.


So coming out of my past at the economist and and IHS and so on and so forth. I don’t know of anybody else who is being transparent enough to disclose their error rates to the public on a regular basis. So my hope is that the bigger guys take a cue from what we’re doing. That customers demand it from what we’re doing. And demand that the larger firms disclose their error rates because I think what the people who use information services will find is that the error rates for the large firms are pretty terrible. We know that they’re three to seven times our error rates in many cases but we can’t talk about that.


DL: But it’s an important thing. What you’ve just mentioned is an important thing because one of the things that is repeated over and over in social media and amongst the people that follow us is well, all these predictions from the IMF, from the different international bodies not to the IMF. Actually the IMF is probably one of the one that makes smaller mistakes but all of these predictions end up being so aggressively revised and that it’s very difficult for people to trust those, particularly the predictions.


TN: Right. That’s right.


DL: And one of the things that, for example when we do now casts in our firm or when with your clients. That’s one of the things that very few people talk about, is the margin of error is what has been the mistake that we have made in the in that previous prediction. And what have we done to correct it because one might probably you may want to expand on this. Why do you think that the models that are driving these now cast predictions from investment banks in some cases from international bodies and others? Are very rarely revised to improve the prediction and the predictability of the of the figures and the data that is being used in the model.


TN: It’s because the forecasters are not accountable to the traders, okay? One of the things I love about traders is they are accountable every single day for their PNO.


DL: Yeah, right.


TN: Every single day, every minute of every day they’re accountable for their PNO. Forecasters are not accountable to a PNO so they put together some really interesting sophisticated model that may not actually work in the real world, right? And you look at the forward curves or something like that, I mean all that stuff is great but that’s not a forecast, okay? So I love traders. I love talking to traders because they are accountable every single day. They make public mistakes. And again this is part of what I love about social media is traders will put their hypothesis out there and if they’re wrong people will somewhat respectfully make fun of them, okay?


DL: Not necessarily respectfully but they will.


TN: In some cases different but this is great and you know what economists and industry forecasts, commodity forecasters these guys have to be accountable as well. I would love it if traders would put forecasters up to the same level of criticism that they do other traders but they don’t.


DL: Don’t you find it interesting? I mean one of the things that I find more intellectually dishonest sometimes is to hear some of the forecasters say, well we’ve only made a downgrade of one point of one percentage point of GDP only.


TN: Only, right. It’s okay.


DL: So that is that we’ve grown accustomed to this idea that you start the year with a prediction of say, I don’t know three percent growth, which goes down to below two. And that doesn’t get anybody fired, it’s sort of like pretty much average but I think it’s very important because one of the things. And I want to gather your thoughts about this. One of the things that we get from this is that there is absolutely no analysis of the impact of stimulus packages for example, when you have somebody is announcing a trillion dollar stimulus package that’s going to generate one percent increase in trendline GDP growth it doesn’t. And everybody forgets about it but the trillion dollars are gone. What is your thoughts on this?


TN: Well, I think those are related in as much as… let’s say somebody downgraded GDP by one percent. What they’re not accounting for, What I think they’re not accounting for is let’s say the economic impact kind of multiplier. And I say that in quotes for that government spending, right? So in the old days you would have a government spending of say you know 500 billion dollars and let’s say that was on infrastructure. Traditionally you have a 1.6 multiplier for infrastructure spend so over the next say five years that seeps into the economy in a 1.6 times outs. So you get a double bang right you get the government spending say one-to-one impact on the economy. Then you get a point six times that in other industries but what’s actually happened.


And Michael Nicoletos does some really good analysis on this for China, for example. He says that for every unit of say debt that’s taken out in China, which is government debt. It takes eight something like eight units of debt to create one unit of GDP. So in China for example you don’t have an economic multiplier you have an economic divisor, right?


DL: Exactly.


TN: So the more the Chinese government spends actually the less GDP growth which is weird, right? But it tells me that China is an economy that is begging for a market. A real market, okay? Rather than kind of central planning and you and Europe. I’m sure you’re very familiar with the Soviet Union. I studied a lot of that in my undergrad days very familiar with the impact of central planning. China there’s this illusion that there is no central planning in China but we’re seeing with the kind of blow-ups in the financial sector that there is actually central planning in China.


And if you look at the steel sector you look at commodity consumption, these sorts of things it’s a big factor of china still, right? So but it’s incredibly inefficient spending. It’s an incredibly inefficient way and again it’s a market that is begging for an open economy because they could really grow if they were open but they’re not. They have a captive currency they have central planning and so on and so forth.


Now I know some of the people watching, you’re going to say you’ve never been to China, you don’t understand. Actually I have spent a lot of time in China, okay? I actually advise China’s Economic Planners for about a year and a half, almost two years on the belt and road initiative. So I’ve been inside the bureaucracy not at the high levels where they throw nice dinners. I’ve been in the offices of middle managers for a long time within the Chinese Central Government so I understand how it works and I understand the impact on the economy.


DL: Don’t you think it’s interesting though that despite the evidence of what you just mentioned. And how brutal it has been because it’s multiplied by 10. How many units of debt are required to generate one unit of GDP in a little bit more than a decade? Don’t you find it frustrating to read and hear that what for example the United States needs is some sort of central planning like the Chinese one. And that in fact the the developed economies would be much better off if they had the type of intervention from from the government that China has?


TN: Sure, well it’s it’s kind of the fair complete that central bankers bring to the table. I have a solution. We need to use this solution to bring fill in the blank on desired outcome, okay? And so when central bankers come to the table they have there’s an inevitability to the solution that they’re going to bring. And the more we rely on central bankers the more we rely on centralized planning. And so I’ve had so many questions over the last several years, should the us put forward a program like China’s belt and road program, okay?


We know the US, Europe, the G20 nobody needs that, okay? Why? Because Europe has an open market and great companies that build great infrastructure. The US has an open market and although European infrastructure companies are better. The US has some pretty good companies that build infrastructure in an open market. So why do we need a belt and road program? Why do we need central planning around that? And we can go into a lot of detail about what’s wrong with the belton road and why it’s not real, okay? But that type of central planning typically comes with money as the as kind of the bait to get people to move things. And so we’re already doing that with the FED and we’re already doing that with treasure with money from the treasury, right?


And if you look at Europe you’re doing it with the ECB. You’re doing it with money from finance ministries. The next question is, does the government start actually taking over industries again? And you know maybe not and effectively in some ways they kind of are in some cases. And the real question is what are the results and I would argue the results are not a multiplier result they are a divisor result.


DL: Absolutely. Absolutely it is we saw it for example. I think it’s, I mean painfully evident in the junk plan in Europe or the growth and jobs plan of 2009 that destroyed four and a half million jobs. It’s not easy to to achieve this.


TN: You have to try to do that.


DL: You have to really really try it, really try.


I think that you mentioned a very important factor which is that central banking brings central planning because central banks present a program of monetary easing of monetary policy. And they say well we don’t do fiscal policy but they’re basically telling you what fiscal policy has to be implemented to the point that their excuse for the lack of results of monetary policy tends to be that the that the transmission mechanism of monetary policy is not working as it should. Therefore because the demand for credit is not as much as the supply of money that have invented. They say, well how do we fill in the blank? Oh it has to be government spending. It has to be for planning. It has to be so-called infrastructure spending from government.


You just mentioned a very important point there is absolutely no problem to invest in infrastructure. There’s never been more demand for a good quality infrastructure projects from private equity, from businesses. But I come back to the point of of central banks and a little bit about your view. How does prolonging easing measures and maintaining extremely low rates affect these trends in growth and in these trends in in productivity?


TN: Well, okay, so what you brought up about central banks and the government as the transmission mechanism is really important. So low interest rates Zerp and Nerp really bring about an environment where central banks have forced private sector banks to fail as the transmission mechanism. Central banks make money on holding money overnight, that’s it. They’re not making money necessarily or they’re not doing it to successfully to impact economies. They’re not successfully lending out loans because they say it’s less risky buying bonds. It’s less risky having our money sit with the Fed. It’s less risky to do this stuff than it is to loan out money. Of course it’s less risky, right? That’s goes without saying.


So you know I think where we need to go with that is getting central banks out of that cycle is going to hurt. We cannot it… cannot hurt, well I would say baby boomers in the West and and in Northeast Asia which has a huge baby boomer cohort. Until those guys are retired and until their incomes are set central banks cannot take their foot off the gas because at least in the west those folks are voters. And if you take away from the income of that large cohort of voters then you’ll have, I guess I think from their perspective you’ll have chaos for years.


So you know we need to wait until something happens with baby boomers. You tell central banks and finance ministries or treasuries will kind of get religion and what will happen is behind baby boomers is a small cohort generally, okay? So it’s that small cohort who will suffer. It’s not Baby Boomers who will suffer. It’s that small cohort who will suffer. It’s the wealth of that next generation that Gen x that will suffer when central banks and finance ministries get religion.


So we’re probably looking at ten more years five more years of this and then you’ll see kind of… you remember what a rousing success Jeff Sax’s shock therapy was, right?


DL: Yeah.


TN: So of course it wasn’t and it’s you know but it’s gonna hurt and it’s gonna hurt in developed countries in a way that it hasn’t hurt for a long time. So that kind of brings to the discussion things like soundness of the dollar, status of the Euro that sort of thing. I think there are a lot of people out there who have this thesis. I think they’re a little early on it.


DL: Yeah, I agree.


TN: So economists you know these insurance people see it from a macro perspective but often they come to the conclusion too early. So I think it’s a generational type of change that’ll happen and then we start to see if the US wants the dollar to remain preeminent. They’re going to have to get religion at the central bank level. They’re going to have to get religion at the fiscal level and really start ratcheting down some of the kind of free spending disciplines they’ve had in the past.


DL: Yeah, it’s almost inevitable that you’re in a society that is aging. The net prison value of bad decisions for the future is too positive for the voters that are right now with the middle age, in a certain uh bracket of of age. Me, I tried the other day my students I see you more as the guys that are going to pay my pension than my students. So yeah…


TN: But it’s you and me who will be in that age bracket who will pay for it. It’s the people who are 60 plus right now who will not pay for it. So they’ll go through their lives as they have with governments catering to their every need, where it’s our age that will end up paying for it. So people our age we need to have hard assets.


DL: Absolutely.


TN: You know when the time comes we have to have hard assets because it’s going to be…


DL: That is one of one of the mistakes that a lot of the people that follow us around. They they feel that so many of the valuations are so elevated that maybe it’s a good time to cash in and simply get rid of hard assets, I say absolutely the opposite because you’ve mentioned a very important thing which is this religious aspect that we’ve that we’ve gotten into. And I for just for clarity would you care to explain for people what that means because…


TN: I say get religion? I mean to become disciplined.


DL: I know like you because that is an important thing.


TN: Yes, sorry I mean if anybody but to become disciplined about the financial environment and about the monetary environment.


DL: Absolutely because one of the things that people tend to believe when you talk about religion and the the state planners religion and and central bank’s religion is actually the opposite. So I wanted to write for you to very make it very clear. That what you’re talking about is discipline you’re not talking about the idea of going full-blown MMT and that kind of thing.


TN: No. I think if there is if there is kind of an MMT period, I think it’s a I don’t think it’s an extended period. I think it’s an experiment that a couple of countries undertake. I think it’s problematic for them. And I think they try to find a way to come back but…


DL: How do you come back from that because one of the problems that I find when people bring the idea of well,  why not try. I always, I’m very aware and very concerned about that thought process because you know I’ve been very involved in analyzing and in helping businesses in Argentina, in Hawaii, in Brazil and it’s very difficult to come back. I had a discussion yesterday with the ex-minister of economy of Uruguay and Ignacio was telling me we started with a 133 percent inflation. And we were successful in bringing it down to 40 and that was nine years.


TN: Right. So, yeah I get how do you come back from it look at Argentina. look at Zimbabwe. I think of course they’re not the Fed. They’re not you know the EU but they are very interesting experiments when people said we’re going to get unhinged with our spending. And we’re going to completely disregard fundamentals. Which I would say I would argue we are on some level disregarding fundamentals today but it’s completely you know divorced from reality. And if you take a large economy like the US and go MMT it would take a very long time to come back.


DL: Absolutely.


TN: So let’s let’s look at a place like China, okay? So has China gone MMT? Actually, not really but their bank lending is has grown five times faster than the US, okay? So these guys are not lending on anything near fundamentals. Sorry when I say five times faster what I mean is this it grew five times larger than the bank lending in the US, okay? So China is a smaller economy and banks have balance sheets that are five times larger than banks in the US. And that is that should be distressing followers.


DL: Everybody say that the example of China doesn’t work because more debt because it’s growing faster what you’ve just said is absolutely critical for for some of our followers.


TN: Right, the other part about China is they don’t have a convertible currency. So they can do whatever they want to control their currency value while they grow their bank balance sheets. And it’s just wonderland, it’s not reality so if that were to happen there are guys out there like Mike Green and others who look at a severe devaluation of CNY. And I think that’s more likely than not.


DL: Yeah, obviously as well. I think that the the Chinese government is trying to postpone as much as it can the devaluation of the currency based on a view that the imbalances of the economy can be sort of managed through central planning but what ends up happening is that you’re basically just postponing the inevitable. And getting a situation in which the actual devaluation when it happens is much larger. It reminds me very much. I come back to the point of Argentina with the fake peg of the peso to the dollar that prolonging it created a devastation from which they have not returned yet.


TN: Right. And if you look at China right now they need commodities desperately, okay? Metals, they need energy desperately and so on and so forth. So they’ve known this for months. So they’ve had CNY at about six three, six four to the dollar which is very strong. And it was trading a year ago around seven or something like that. So they’ve appreciated it dramatically and the longer they keep it at this level. The more difficult it’s going to be on the other side. And they know it these are not stupid people but they understand that that buying commodities is more important for their economy today because if people in China are cold this winter and they don’t have enough nat gas and coal then it’s going to be a very difficult time in the spring for the government.


DL: And when you and coming back to that point there’s a double-edged sword. On the one side you have a currency that is out to free sheet are artificially appreciated. On the other side you also have price controls because coal prices are limited by the government. And therefore you’re creating on the one hand a very big monetary hole and on the other hand a very big financial hole in the companies that are selling at a loss.


TN: That’s true but I would say one slight adjustment to that things like electricity prices are controls. When power generators buy coal, they buy that in a spot market, okay? So coal prices have been rising where electricity prices are highly regulated by the government this is why we’ve seen blackouts and brownouts and power outages in China. And why it’s impacted their manufacturing base because they’re buying coal in a spot market and then they’re having to sell it at a much lower price in the retail market.


And so again this is the problem with central planning this is the problem with kind of partial liberalization of markets. You liberalize the coal price but you keep the electricity price regulated and if you don’t have the central government supporting those power plants they just blow up all over the place. And we’ve seen the power generators in the UK go bankrupt. We saw some here in Texas go bankrupt a couple years ago because of disparities like that and those power generators in the UK going bankrupt that’s the market working, right? So we need to see that in China as well.


DL: Yeah, it’s a very very fascinating conversation because on the other hand for example in Europe right now with the energy shortage we’re seeing that a few countries Spain, France, etc. are actually trying to convince the European Union, the European Commission to try to get into a sort of intervened market price in the in the generation business. Which would be just like you’ve mentioned an absolute atrocity very very dangerous.


TN: This creates a huge liability for the government.


DL: It creates a massive liability for the government. This is a key point that people fail to understand the debate in the European union is that, oh it’s a great idea because France has this massive utility company that is public. And therefore there’s no risk it had to be bailed out twice by the taxpayers. People tend to forget that you’re paying for that.


TN: But again this is what’s that block of voters who doesn’t really care about the impact 10 or 20 years down the road. That’s the problem. There’s a huge block of voters who don’t really care what the cost is because the government’s going to borrow money long-term debt. And it’s going to be paid back in 10 or 20 years and the biggest beneficiaries of this and the people on fixed incomes they actually don’t care what the cost is.


DL: Yeah, yeah exactly, exactly. There’s this fantastic perverse incentive to pass the bill to the next generation. And that obviously is where we are right now. Coming back to the point of the infrastructure plans and the belt and road plan. What in your view are the the lessons that we must have learned or that we should be learning from the Belgian road initiative?


TN: So here’s a problem with the Belton road and I had a very candid discussion with a senior official within China’s NDRC in probably 2015 which was early on, okay? And this person told me the following they said the Belgian road was designed to be a debt financed plan. What’s happening now, and again this was six or seven years ago, very early on in the in the belts and road dates. They said the beneficiary countries are pushing back and forcing us to take equity in this infrastructure, okay?


Now why does that matter well the initial build out of infrastructure is about five percent of the lifetime cost of that asset, okay? So if you’re if China is only involved in the initial build out they’re taking their five percent, it’s a loan and they get out. If they’re equity holders in that let’s say they’re 49 equity holders in an Indonesian high-speed rail then they become accountable for part of that build-out. And then they have to maintain the other 95 of the cost for the next 30 to 50 years. So they thought they were going to be one and done in and out. We do this infrastructure we get out they owe us money and it’s really clean what’s happened is they’ve had to get involved in the equity of those assets.


And so I’ve since had some uh government officials from say Africa ask me what do we do with the Belton road with china? Very simple answer force them to convert the debt to equity, okay? They become long-term involved on a long-term basis. They become involved in those assets and then they’re have a different level of interest in them in the quality maintenance and everything else but they’re also on the long-term basis accountable for the costs.


So they don’t just build a pretty airport that and I’m not saying this necessarily happens but they don’t just build a pretty airport that falls apart in five years, okay? They then have to think about the long-term impacts and long-term maintenance costs of that airport, right? And so but you know the original design of the Belton road was debt financing. Mobilizing workers and so on and so forth what it’s become is a mix of debt and equity financing. And that’s not what the Chinese government has wanted.


So I’ve been telling people for three or four years the Belton road is dead, okay? And people push back me and say no it’s not, you know think tank people or whatever. But they don’t understand the fundamental fact of how the Belton road was designed it was designed as a one-and-done debt financed infrastructure build out it’s become a long-term investment all around the world. So it’s a different program. It’s failed, okay?


They’re not going to make the money they thought yes they’ll keep some workers busy but they’re not going to make the money they thought. All of those assets, almost all those assets are financed in US dollars, okay? So they’re not getting their currency out. It’s not becoming an international unit like they had hoped. They’re it’s not they’re not clean transactions and so on and so forth. So this is what’s happened with the Belgian road. So the lesson learned is they should have planned better. And they should have had a better answer to you become an equity owner. And uh


I think you know if any western governments want to have kind of a belt and road type of initiative. They’re going to have to contend with the demand from some of these countries that they become equity owners. And I think that’s a bad idea for western governments to be equity owners in infrastructure assets so you know this is this is the problem.


Japanese have taken a little bit different because of where the Yen is and because of where interest rates are in Japan. Japanese have basically had kind of zero interest or close to zero interest on the infrastructure they’ve built out. And so they haven’t gone after it as aggressively as China has. They’ve had a much cleaner um structure to those agreements. And so they’ve been, I think pretty successful in staying out of the equity game and staying more focused on the debt financing for their infrastructure initiatives.


DL: Oh, absolutely big lesson, big lesson there because the we see now that the vast majority of those projects are impossible to the debt is impossible to be repaid. There’s about 600 billion dollars of unpayable debt out there. And we also have the example from from the internationalization of the French, Spanish, Italian companies into Latin America that they fell into the same trap. They started with a with a debt-financed infrastructure build type of clean slate program that ended up owning equity. And in some cases with nationalizations hopefully that will not…


TN: And watch for debt to equity conversions in these things. It’s good. There’s going to be huge pressure because the Chinese say the exit bank the CDB. A lot of these organizations are going to be forced to convert that debt to equity and then unload it on operating companies in China. They’re not going to want to do it but we’re going to start to see more and more pressure there over the next couple of years.


DL: Great! Well I’m absolutely convinced that will happen. Tony, we’ve run out of time so it’s been an incredible conversation lots of things that are very very interesting for our followers. We will give all the details to follow you and to get more information about your company in the details of the of the video. And thank you so much for your time. I hope that that we will be able to talk again in a not too distant future.


TN: Thank you Daniel. Anytime. Thank you so much.


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Ag’s Perfect Storm: Tight Supply, Strong Demand and Weather Uncertainty

Joining QuickHit for the first time is the commodities expert Kevin Van Trump of The Van Trump Report, helping us understand ag’s supply, demand, and clarifying uncertainties. Why are we seeing so much attention to agriculture right now? What’s contributing to the tightness in the ag market? How long will the corn rally last? How about wheat? What can we expect for the foreseeable future? And protein, how delicate is this with all that’s happening with ASF, cyber attacks, etc.?


The Van Trump Report, a very large agricultural newsletter and analysis service. Kevin Van Trump started trading in the 90s in Chicago. Switched over, traded Notes, 10 years, five years. And then really got more heavily into ag. He’s from a small rural town outside of Kansas City and I was really interested in corn, beans, wheat, cattle, livestock. They started putting together a newsletter 10, 15 years ago when ethanol started to become more prominent and it started to travel around the circuits with some of the bigger hedge funds and some of the bigger money managers.


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This QuickHit episode was recorded on June 2, 2021.


The views and opinions expressed in this Ag’s Perfect Storm: Tight Supply, Strong Demand and Weather Uncertainty QuickHit episode are those of the guest and do not necessarily reflect the official policy or position of Complete Intelligence. Any contents provided by our guest 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: There’s a lot of attention on ag right now. And can you just kind of give us a little bit of a set up of what’s happening in the ag markets, everything from the volatility of corn to, you know, what’s happening in wheat, a little bit of kind of protein, a little bit of beef activity. And that sort of thing. Can you tell us just generally why are we seeing so much attention on ag right now?


KVT: Well, I think you see the funds take a more proactive risk on approach. You know, just in commodities in general, we’re seeing location from Covid and things of that nature. And most people thought as we ramp back up, we’re going to have a pretty strong demand for, like you said, proteins bring in some of the livestock back on, just demand in general.


So we’ve seen more fund interest and more money flow into the space. Like you’ve seen the rebound in crude. You’ve also seen this rebound and in the ag and the commodity world. So China’s got a big appetite. They’ve been a huge, huge buyer of corn and have led the way. Beans as well on the protein side, as you and I will discuss here in a little bit. But yeah, basically, you know, we’ve we’ve gone from a oversupplied market for the last four, five years to all of a sudden we’ve got tight supplies. We’ve got record strong demand and some uncertainty into weather. So, you know, everything all said ripe for a possible rally.


TN: And is that tightness? Is that on, say, processing? I know with some of the protein, it’s processing concerns. But what is that tightness? Is it say, weather, drought in Brazil, that sort of thing, too much weather, too much rain, in the Midwest or what’s contributing to that tightness in the market?


KVT: Yeah, I think you had, you know, we really rarely get good numbers out of China from a supply or demand, especially a supply standpoint. They were supposedly sitting on a ton of corn and a ton of supply. All of a sudden they come online as a big, big buyer, you know, whether it’s maybe lack of quality with the storage of their corn, maybe the numbers just weren’t there all along. Maybe the supply wasn’t there. But it feels like they want to import the corn down into the southern part of China, maybe get away from.


We think Covid really exposed the rail dislocation. And when they had that rail shut down and dislocate, it probably crimped a lot of movement of corn supply and the Chinese government is looking at that and saying, hey, we can’t have that happen again if we’re going to see more possible problems. So they want to be a big buyer of corn from the US. They want to buy as much beans as they can from South America. And so so here we sit trying to juggle that. I think the world wasn’t really prepared for the size of buying that they were going to step in and do.


TN: OK. And how long specifically with corn, how long do you think that buying lasts? Is that kind of a three month phenomenon or does that go, say, for years?


KVT: Well, Tony is kind of how it played out for us in the soybean market years ago. China was what we would call a price buyer of beans. They would buy beans on the breaks and then they became a quantity buyer of beans, where it didn’t matter if soybeans were traded in five or six dollars a bushel or sixteen or eighteen dollars a bushel. They were going to buy beans every month. And so we see China as a quantity buyer of soybeans.


And we’ve predicted… Now, I hate to say this because we’ve made this call before. It’s OK. Own it. That China was going to become a quantity buyer of corn eventually. And like I said, we’ve heard guys in the market say this for the last 20 years and it never really came to fruition. They’ve continued to be a price buyer of corn.


We feel we’re at a tipping point and we believe they’re going to continue to be a quantity buyer of US corn for the foreseeable future as they try to transition, open more ethanol facilities, try to transition to cleaner energy. And some of those types of place, I think they’re buying corn longer term.


TN: So we’ve hit. It sounds to me like we’ve hit almost a semi-permanent new price level. Is that, would that be fair to say?


KVT: Probably not, I would say, how would you say? The grain markets in general and farmers in general. They’re going to plant from fencerow to fencerow. They’ll be planting acres on their back patio if they can, and they’re going to roll out more acres in South America. And so you’re going to see a lot of supply really come on with technology changes that can come on fairly quick.


 Even though I think China, you know, is going to be a continued buyer and demand is going to remain strong. I bet we really start to increase some of this production and we’ll probably balance it back out here. So that’s you know, they’ve caught us a little offsides right now. You got the price of corn at seven, close to seven dollars. And then we, barring any weather incidents or craziness that would really upset production, we probably trade here well, and then we start to ramp up supply and balance or back out.


TN: Very good. OK, interesting. Can we move on to wheat for a little bit? There’s been you know, we saw wheat come on strong and then come off and there’s expectations of wheat prices rising again. And you’ve covered this in detail in your daily newsletter. Can you talk a little bit about the wheat market dynamics and kind of what you’re seeing there?


KVT: Yeah, you know, wheat has become a big follower of corn, so to speak. We’ve seen, especially in China, you’re seeing a lot more wheat substituted into feed rations. So you’re getting a, you’re getting a bigger demand for wheat as a feed ration, but of corn, more to fizzle out. We probably see wheat drop off as well just because its demand is kind of correlated right now to being substituted in for the higher prices and corn. There are some pockets where we have some weather stories.


Spring wheat seems to be in short order here in the US. Some of those acres didn’t get planted, probably were planted to corn. You’re seeing those conditions problematic in, say, North Dakota, which is our biggest spring wheat producing state. They’re having problems with the drought and dry conditions. You’re having some pockets of some concern in parts of Canada, Canadian prairies, southern prairies, where also big spring wheat producing areas. So that, you know, spring wheat, maybe a little hot right now. But we see wheat is mainly a follower to corn at the moment.


TN: Very interesting. OK, let’s move on to proteins, because I think that’s a really interesting story. We had this cyber attack on the largest beef or one of the largest beef processors in the US this week. And we already had some tightness in the beef market. The inventories, the frozen inventories, from what I learned from your newsletter, were already low, other things. So how delicate is that market and will we see that follow on effects come later into the market or will that be sooner?


KVT: No, I think, you know, there’s going to be, there’s massive dislocation right now across the board still, and I think you can see that and we could talk about. I’m sure your follow up into the hog space. But I mean, you’re seeing that with both cattle and hogs. If you recall, back early in Covid, they had to shut down a lot of processing plants because workers were getting sick and they had to take precautions.


Now, on the hog and poultry side, as I’m sure as we were going to discuss, those shutting of the plants, whether it be a Tyson or whoever it may have been at the time. I mean, that really backed up supply or the herd. Now, you had producers had to call the herd and they pulled back and reduced the size of the hog or quite a bit or with cattle or things of that nature. Well, then all of a sudden, corn prices and feed prices take off to the upside. And you have a producer or rancher who just really doesn’t want to expand his herd because he’s not certain about the processing plant if they’re going to stay in his local area because it Covid and now he sees corn take off and the feed take off to these extreme highs. You’ve got them caught where there were a little bit short supply and all of a sudden demand coming back like gangbusters.


All the restaurants, or people around the world are starting to try to get out and about more. And so, like you said, you guys, you got surging demand right here and you got the supply pipeline dislocated a little cut off size.


TN: And then when we see things like ASF, African Swine Flu in China and the calling of the even the breeder hogs, that sort of thing, how global is that dynamic? Does not present pressure on, say, US pork prices or or is that really just a regional Chinese pork price phenomenon?


KVT: No, we think it does. I mean, we’ve seen as it creates ripples in China and they try to get on top of it. I mean, it’s a crazy dynamic. They cut their hog order in half. But as they tried to get on top of it, they’ve had to be bigger buyers of importing of pork and the United States has been a beneficiary. And I think that could continue to be the case. You know, God forbid that we were to get a case here in the United States that’s always kind of the last few years, the big wild card in the mix.


If we were to spot something like that here in the US, know probably the knee jerk immediately as to the downside. Just because prices probably break because people are going to want to eat the hogs. You’re going to kill a lot. But I think longer term, that creates a supply shortage and we rebound back in the opposite direction. So it could be a double edged sword.


TN: OK, so we’ve seen a lot of volatility in these markets. What are you looking for kind of for the remainder of 2021. Do you see these prices elevated, say, until Q3? Do they come off in Q4 or do you see these, the kind of the volatility and elevated prices continuing through the end of the year?


KVT: You know, kind of like we talk in crude, we probably see demand outpace supply through Q3, Q4, maybe even a little later if you get some dislocation. In our sector, if you’re talking corn, beans, wheat, things like that, it’s really right now about US weather.


In Brazil, they’ve had some real rough patches of dry, dry and hot weather and we continue to see their corn crop get smaller in size. The USDA was talking they had lowered it down to one hundred and two million metric tons for corn. Now they’re talking some guys in the 95 to 90 million metric tons. And so that that’s going to take more corn out of the supply pipeline or are available for exports. And now here in the US, we’ve got the drought that’s lingering and could, it just sit, we’re just right here on this tipping point, Tony, where if it turns hot and dry within the next 60 days, corn, beans and we take off. I’m talking we’ll probably go all time record highs. If you see what I’m saying.


So and you remember back to the 2012 drought, the USDA had the crop rated about the same condition as it does right now. Things were similar, but all it takes, Tony, and corn, is for you to get really hot and dry right around the pollination period, which will be the end of June, first week of July somewhere in there. And boy, I tell you what, the market will add a ton of risk premium and, you know, a lot of fireworks take place.


So that’s kind of what we positioned ourself for. If we get that story, we take off to the upside because demand’s so strong. OK, so we’re looking for hot and dry potentially in late June, early July. And that would really set things on fire and in ag markets.


TN: Right. Very good. Kevin, thank you so much for your time. I really appreciate this. This is a real pleasure to have you here. You know this stuff inside and out and we’re really grateful for all of the insights you’ve given us today. Thanks so much. For everyone watching, please like the video, please subscribe. That helps us out a lot. And we’ll see you on the next one. Thanks very much.


KVT: Thanks, Tony. Appreciate it.


Crude oil: New super cycle or continued price moderation? (Part 2)

This is the second part of the crude oil discussion with energy markets veteran Vandana Hari. Tony Nash asked if the political tensions in the Middle East will affect oil prices in this environment, and how soon can we see the effect in oil prices if the Iran agreement is made? She also discussed her views on the Texas shale industry and when can we see a bounce back, or if we’ll ever see one.


The first part of this discussion can be found here.


Vandana Hari is based in Singapore. She runs Vanda Insights and have been looking at the oil markets for about 25 years now. She launched Vanda Insights about five years ago. The company provides timely, credible, and succinct global oil markets, macro analysis, mostly through published reports.


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This QuickHit episode was recorded on May 19, 2021.


The views and opinions expressed in this Crude oil: New super cycle or continued price moderation? 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


VH: And then, of course, we have Iranian oil and we could talk about that separately. So there’s plenty of supply.


TN: Let’s move there. So let’s talk a little bit about the Middle East with. First of all, with the political risk around Israel Palestine. Is that really a factor? Does that really impact oil prices the way it would have maybe 20, 30 years ago?


VH: OK, so with regard to the Israeli-Palestinian conflict that we’ve seen flare up in recent days, the short answer is no. Oil, it’s not even a blip on the radar of the oil complex. Now, obviously that’s because those two countries are neither major producers or consumers of oil. It is also not affecting shipping, the kind of fear that was in the markets, for instance, when ships were attacked in the Strait of Hormuz or the Red Sea.


But having said that, generally the oil market is keeping an eye on how that region, the tensions have been escalating. The Iranian and Arab tensions have been escalating. We have seen more attacks over the past few months. It seems to have died down a little bit recently, but more attacks from by the Houthi rebels just managing to miss white facilities in Saudi Arabia. So, yes, it is an area of concern. But somehow the oil market, maybe because there is enough oil available against demand, but the oil market has sort of almost gotten into this pattern of, that’s a knee jerk reaction. Every time, it looks like a supply might be affected from that region. But the oil complex has just been generally reluctant to price in on a sustained basis of geopolitical fear premium.


TN: Yeah, I can see that. That’s very evident. With the JCPOA, with the Iran agreement, how much of a factor would that be to supplies and over what timeframe would it be a factor? Would it be an immediate factor? Would it be something in six months time from if an agreement is made?


VH: We know the indirect talks that have been going on between the US and Iranians the past few weeks, and then there’s been a bit of confusing signals as well in terms of news emanating earlier this week. We had a Russian diplomat say that, oh, it’s on the verge of a breakthrough and then retracted so it doesn’t help the oil market of anybody as opposed to have that adding to the confusion. The oil market has made its calculations.


First of all, Iranian oil production as well as exports have been edging up. That’s a fact. Now, obviously, there’s no clearly transparent data, but there’s plenty of ship tracking companies, all of which have very clear evidence that there’s more oil going into China.


So to some extent, you could argue that crude prices today have factored in a little bit of extra Iranian oil coming back into the market. Just to remind our viewers that it never went down to zero. There was always Iranian in oil flowing into and we’ll not go into the details of that. But basically it’s sort of bypassing the US sanctions. So the question now is how much more Iranian oil can come into the market and when it could come into the market?


And I would add a third point to that is that what will OPEC+ do to that if it ends up pressuring prices? So how much more oil could come into the market? An estimated 1.2 million barrels per day additional oil could come if the sanctions are removed. When it could come back into the market? I’m no more privy to what’s going on behind closed doors in the discussions than the next person. But my personal feeling from reading what’s coming out of these talks is that it’s a very complex set of issues.


There’s a lot of politics going on when people come out and say, oh, we’ve made progress and so on. But it’s a complex web. It’s multilayered. I personally don’t expect sanctions to be removed before next month’s Iranian elections. So sometime this year, yes. But not right away.


And here’s the point I would make as well, is that I don’t think OPEC-non OPEC alliance will sit on their hands and see, especially if crude starts spiraling downwards with the Iranian oil more than Iranian oil coming back into the market. I think they will make adjustments accordingly. If the market can absorb it without a big hit to oil prices, well then good, you know, which is what was the case with Libya last year. But if it can’t, I think they’ll just redistribute that sort of cut back a little bit more or taper less basically. So either way, I don’t see that putting a huge downward pressure on crude.


TN: I’m in Texas and so we haven’t really seen a lot of new capacity come online with the with the Texas plays over the past few months as prices have risen. So what will it take for Texas to kind of install new rigs or re-open rigs and get things moving here? What are you looking for and what do you think the magic number is? I mean, if it hasn’t been hit already? What do you think needs to happen for Texas to kind of reopen some of these fields?


VH: Yes, we saw oil rigs across the US, which is a very crucial measurement of the activity in the shale patch, especially. We saw that number crash last year. And I look at the fracturing fleet count as well, which tells you exactly how much oil is being drilled out of those wells. But not just how many wells are being drilled. So both of those have been creeping up from from the crash of last year. I think since about August last year, they they have been moving up. But if you compare year on year still, that the total rig count is just half of the levels before Covid last year. Overall, US oil production and shale is the lion’s share of it has dropped from about nearly 13 million barrels per day to about 11. Two million barrels per day of capacity has basically disappeared from the shale patch.


And for OPEC, as well as for the oil market, I think it’s a key area to keep an eye on because we have seen in the previous boom and bust cycles and oil price up and down cycles, that shale was very quick to respond to oil price recovery. I think the story is very, very different this time. There’s a few influencing key factors, which are all pulling in the same direction.


So first of all, on a very sort of global level, we know that generally, funding is drying up in fossil fuels. OK, so that’s a baseline. That’s affecting conventional fuel. It’s affecting shale equally. The second is that we see and this has been an ongoing trend over the past few years, more and more majors have made inroads into majors are now independent players still produce the majority of the tight oil from the US shale. But the majors have become quite significant players as well. And almost every major that you tune into is saying that we are going to be very, very cautious in… We’d rather return money. We’d rather pay down debt, cash discipline, essentially. We would rather return money to our shareholders than invest in just growth at any cost. That’s happening.


When it comes to independence. I think they’re going their own ways, basically. You can’t say all independents have the same philosophy. But again, when I listen to the major independent players, they pretty much are also into cost discipline strategy. If you aren’t, are going to just have a tough time, far tougher time than than the previous down cycles in getting funding. So we generally see that funding for the shale sector is also starting to dry up.


I suppose banks and lenders and shareholders probably just seen enough of that, how sales fortunes go up and down. If you’re a long term investor, it’s not really an area of stability. So all of these put together to lead me to conclude that the EIA thinks shale production will creep up a little bit this year. But of course, compared with 2019, they’ll still remain low. It’s predicting quite a big bounce back in ’22. But I’m not that sure about it. I have a feeling that it’s probably going to sort of plateau from here on.


TN: OK. Really interesting. So it sounds like kind of that marginal barrel that would come from shale to be honest, isn’t really that necessary right now given the cost that it would take to reopen the rig. Is that fair to say?


VH: Yeah. And then you have to remember that the OPEC is sitting on that marginal barrel of supply as well. And that has to come back into the market. And you have to see prices supported, let’s say WTI, well above sixty dollars. And then ask yourself that have any of these, the three conditions that I outlined earlier changed substantially enough for shale to go into a boom again? So I think the answer is pretty clear.


Crude oil: New super cycle or continued price moderation? (Part 1)

Energy markets expert Vandana Hari is back on QuickHit to talk about crude oil. Brent is nearly at the $70 psychological mark and is also a 2-year high. However, demand has not picked up to the pre-Covid levels. Vandana explained what happened here and what to look forward to in the coming year. Also, is crude experiencing supply chain bottlenecks like in lumber and other commodities and how oil demand will pick up around the world?


Vandana Hari is based in Singapore. She runs Vanda Insights and have been looking at the oil markets for about 25 years now. The majority of those were with Platts. She launched Vanda Insights about five years ago. The company provides timely, credible, and succinct global oil markets, macro analysis, mostly through published reports. They are also available for ad hoc consultations and research papers.


💌 Subscribe to CI Newsletter and gain AI-driven intelligence.

📺 Subscribe to our Youtube Channel.

📊 Forward-looking companies become more profitable with Complete Intelligence. The only fully automated and globally integrated AI platform for smarter cost and revenue planning. Book a demo here.

📈 Check out the CI Futures platform to forecast currencies, commodities, and equity indices


This QuickHit episode was recorded on May 19, 2021.


The views and opinions expressed in this Crude oil: New super cycle or continued price moderation? 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: I want to talk about crude oil, because if we looked a year ago and we saw where crude oil prices were a year ago because of the Covid shock and we look at where crude is today, it’s something like two-year highs or something like that today. And we still have kind of five or six million barrels, we’re consuming about five or six million barrels less per day than we were pre-Covid. Is that about right?


VH: Yeah, absolutely. So we have had a Brent flood with the $70 per barrel psychological mark, it has not been able to vault it in terms of, you know, in the oil markets, we tend to look at go-buy settlements. So we’re talking about ICE Brent Futures failing to settle above 70 dollars a barrel? But it has settled a couple of times so far this year, just below, which was two-year highs.


And the man on the street, as you quite rightly point out, does end up wondering. And I’m sure people at the pump in the US looking at three dollars a gallon prices that hang on like the global demand is yet to return anywhere close to pre Covid. So why are prices going to two-year highs?


So two fundamental reasons. If you talk about supply and demand in the oil markets, the first one is the OPEC – Non OPEC Alliance is still holding back a substantial amounts of oil from the markets. If you hark back to last year when they came together in this unprecedented cutback, almost 10 million barrels of oil per day, cumulative within that group, they said they’re going to leave it in the ground because of the demand destruction.


Now, starting January this year, they have begun to so-called “taper.” Yes, people borrowed that as well in the oil market. All over the place. Yeah. So they’re tapering. But they’re doing it very, very cautiously.


So where do we stand now? They are still holding back almost six and a half million barrels per day. So basically two thirds of the oil that they took out of the market last year is still, they’re still keeping it under the ground. So that’s one main reason.


The second one is a bit, of course, demand has been picking up as countries and globally, if you look at it, I mean, we can talk about individual countries, but globally, you know, the world is starting to cautiously emerge out of Covid-related restrictions.


Economies are doing better. So oil consumption is moving up. But but some of, it’s not entirely that. I would say some of the the buoyancy in crude of late, and especially when it was, you know, Brent was a two-year highs, is because of a forward looking demand optimism. And when it comes to that, I think it’s very, very closely connected or I would say almost entirely focused on the reopening of the U.S. economy.


TN: OK, so. So this is a forward looking optimism, is it? I know into other areas, like, for example, lumber, which has been there’s been a lot of buzz about lumber inflation is because of the sawmills and with other, say, commodities, there have been processing issues and with, you know, meat and these sorts of things that have been kind of processing issues and bottlenecks in the supply chain. But with crude oil to petrol, it’s not, it’s not the same. Refineries are doing just fine. Is that, is that fair to say?


VH: That’s a very good point, Tony, to to just kind of unpick a little bit. Because what happens is when you hear talk of super cycles, commodities, bull run, and then, of course, we have a lot of indexes and people trade those indexes, commodity index, we tend to lump together, you know, commodities all the way from copper and tin, lumber and corn all the way to crude oil and gasoline and gas oil and so on.


But, you know, here’s what. You know. We could spend hours talking about this. But, but just very quickly to dissect it, I would say look at it in terms of you have commodities. And I would sort of lump metals and to some extent agricultural commodities in this one Group A and Group B.


So as I mentioned earlier, Group B, which is which is oil. Well, crude oil and refined products, to a large extent, the prices are being propped up by OPEC, plus keeping supply locked out of the markets. It’s very different from, as you mentioned, what’s happening in metals and ags and these kind of commodities where it just can’t be helped. So there’s supply chain issues, this production issues all the way from from Chile, where copper production all the way to even here in Malaysia, you know, palm oil, because workers are unable to return fully. Or in terms of even the the packaging, the storage and the delivery of it. So I think there’s a major difference there.


Now, the commonality here is, of course, all of these are seeing demand rebound. You know, that I agree as a commonality. Demand is rebounding. But I think it’s very important to remember. And why is it why is this distinction important is that you could argue that, well, if demand continues to sort of go gangbusters in terms of copper, tin, lumber, it will, for the foreseeable future, meet against supply constriction. So you cannot.


So accordingly, you can assess what might be the prices of these commodities going forward. They may remain elevated, but it would be wrong, I think, to sort of draw a parallel between that and oil, because in oil, I do believe OPEC non-OPEC are waiting. In fact, I don’t think they can hold their horses any longer, waiting to start putting that oil back into the market. So, you know, keep that distinction in mind.


TN: So there’s an enthusiasm there. So let’s say we do see demand kind of come back gradually, say, in the U.S., a little bit slower in, say, Europe. But China is moving along well and say Southeast Asia, east Asia is coming along well. The supply from the OPEC countries will come on accordingly. Is that fair to say?


VH: Absolutely. And when you talk about demand, again, I think there’s a sort of a bias in the crude futures markets, which tend to be the leading the direction for the oil complex in general, including the Fiscal markets, is that there’s definitely a bias to looking towards what’s hot right now, at least looking towards what’s happening in the US and getting carried away a little bit. Because when you look at the US, it’s a completely positive picture, right?


You base that, you see things around, you see how people are just kind of moving away. You’re removing mask mandates, people are traveling. And, of course, we’re getting a lot of data as well. The footfall in your airports. The other thing about the US is you have good data, right. Daily, weekly data. So that continues to prop up the market. But if you just cast your eye, take a few steps back, look at the globe as a whole. And, you know, sitting here in Asia, I can shed some light about what’s happening here.


No country is opening its borders in Asia, OK? People are, for leisure. If people are even not even able to travel to meet their family, you know, unless it’s in times of emergency, unfortunately. So nobody’s traveling. The borders are sealed very, very tight.


There is an air bubble, travel bubble between New Zealand and Australia. But, you know, nobody’s bothering to even check what that’s doing to jet demand. What do you think it will imagine? You imagine it will do.


And then you have Europe in between, which is, yes, again, it is reopening very cautiously, though. We’ve had the UK Prime Minister, Boris Johnson, cautioning that the travel plans for the Brits might be in disarray because of this so-called Indian variant. I don’t like to use that term, but this virus more transmissible virus variant. So it’s a very patchy recovery. It’s a very mixed picture, which is why I’m not that bullish about global oil demand rebound as a whole. You know, at least the so-called summer boom that people are talking about.


TN: Do you do you see this kind of trading in a range for the next, say, three or four or five months or something? Demand come, supply come, demand come, supply comes something like that.


So there’s not too much of a shortfall for market needs as kind of opening up accelerates?


VH: Very much so. I think, first of all, unfortunately, I mean, as individuals, of course, we like to be positive and optimistic. But with an analyst hat on, we need to look at data. We need to use logic. We need to overlay that with our experience of this pandemic, the past one and a half years.


Somehow, we’ve had a few false dawns, unfortunately, during this pandemic. We’ve seen that right from the start. When you remember the first summer, 2020 summer, some people said, oh, the heat and all that, the virus will just die away.


So, again, I think we need to be very, very cautious. I do think, unfortunately, that this variance and as you and I were discussing off air earlier, this is the nature of the virus. So I think there’s going to be a lot of stop, start, stop, start. The other thing I see happening is that it’s almost like, I imagine the virus sort of it’s moving around. And even if you look at India now, it’s just gone down in the worst hit states of Maharashtra and Delhi. But now it’s sort of moved into the rural area.


So I think sort of, unfortunately, is going to happen globally as well. The other important thing to keep in mind is, is vaccinations, of course, is very, very uneven. You know, the ratio of vaccinated people in each country so far, the pace at which the vaccinations are going and, you know, not to mention the countries, the poorer, the lower income countries.


So we’re probably going to see, you know, maybe a bit of start. Stop. Definitely. I don’t think we’re going to see national boundaries opening up to travel any time soon. And then exactly as you pointed out, we have this OPEC oil and then, of course, we have Iranian oil and we can talk about that separately. So there’s plenty of supply.


TN: So let’s talk a little bit about, let’s talk a little bit about the Middle East with, you know, first of all, with political risk around Israel Palestine. Is that really a factor? Does that, does that really impact oil prices the way it would have maybe 20, 30 years ago?

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