Complete Intelligence


US-China tensions: Beijing hits out as Pelosi arrives in Taiwan

This podcast is originally published in BBC Business Matters with the link here:

US House of Representatives Speaker Nancy Pelosi has become the most senior US politician to visit Taiwan in 25 years, despite China warning that Washington would “pay the price” if she visited the island. Beijing warned it would respond to any potential visit from Pelosi, who has not been backed by the White House to visit Taiwan.

The first grain ship to depart Ukraine since Russia’s invasion – The Razoni, has arrived at Turkey’s Bosphorus strait. The vessel which is carrying 26,000 tonnes of corn, will be inspected on Wednesday morning before continuing its journey to Lebanon.


Roger Herring: Tony. Well, let me come to you because you know this part of the world extremely well. You live there, of course, for a while. You know the ins and outs of it. What do you make of the US position on it? Because Biden has said he doesn’t support what Nancy Pelosi is doing. But is there a bit of, give and take, I mean, underneath, is he perhaps quite glad that it’s been brought to a head like this?

Tony Nash: I think both sides are glad it’s been brought to a head. So bear with me for a few seconds, Roger. The economy in China is pretty bad. The political situation is pretty bad. There are a lot of difficult domestic issues in China. So a galvanizing event before the November senior political meeting is helpful for China domestically. And in the US, with the economy the way it is, with a number of kind of political issues, this is helpful for Pelosi and potentially for retention of the House representative. So this is, yes, on the front there’s a lot of conflict, but in the back, this really helps the politics of the ruling parties in both countries.

RH: Yeah, that’s a really interesting insight actually, the real politique, I suppose, is a terrible cliched word does seem to be there. In fact, maybe, Tony, President Biden, at the moment, he’s already had a hit on Al Qaeda, which I guess he probably likes, might help his ratings. But certainly a major crisis in Asia and a war isn’t going to help, is it?

TN: No, I don’t think it would help anybody just given where the world economy is and given where some of the lingering kind of post-COVID problems are, I don’t think anybody would find it helpful. I don’t think it serves China or the US. 

RH: Because apart from anything else, of course, we’re in the middle of another crisis in another part of the world, and many think they are related, that we are seeing confrontations with the two biggest and most powerful authoritarian regimes on the planet and confronting the west in all kinds of ways. And what, of course, I’m alluding to is what’s going on with Ukraine and the difficulties there with the Russian invasion, the consequences, one of the big consequences for the world from that, of course, has been the lack of grain coming from Ukraine, because it’s effectively borcaded now that…

I’m not much of a sailor, but I have to take my hat off to the crew who steered through that area of the Black Sea. It must have been absolutely hair raising.

TN: Yes, they definitely are in their pay. It sounds like.

RH: Well digested, literally, of course, when it gets to wherever it’s going, we hope, because that’s the whole point of it. But Tony, let me pick up on this, because it’s something that puzzled me. I’m interested your view on it. Why is Russia allowing this to happen? Because I can’t see how it plays into Vladimir Putin’s endgame? 

TN: I think, on some of it, it’s Middle East relations in the US, from Russia. Russia doesn’t want to be seen as starving out people in Lebanon, Egypt, other parts of the Middle East. And I think that is probably a clear consideration for them.

RH: Yeah. And I mean, it also exposes hugely the fragility. During COVID, we learned about the fragility, of course, of supply chains. 

But Tony, this means that food globally, it seems almost on a hand trigger. One thing in a country far away from an awful lot of people changes everything. 

TN: But this is what happens with global supply chains, right? As we concentrate sourcing of food, manufactured goods, commodities, so on and so forth, we concentrate risk in supply chains and they become very fragile, and we realize they’re COVID exactly how fragile global supply chains are.

RH: Yes. A lot of rethinking, I think, going on in a lot of countries and also a lot of companies as to where it all comes from. Tony, how solid is US backing now for Ukraine in the midst of all this? Because there are lots of crises. We’re talking about Taiwan, of course, taking up a lot of bandwidth, if you like, in the State Department. But is it still solid behind Ukraine, do you think and unmoving? 

TN: Roger, it’s $40 billion solid. So there’s quite a lot of financial backing. So I don’t think there’s much doubt that there’s US back in there.

RH: Yeah, okay. Well, it’s solid and remains. And hopefully the food issue in all this could be moving towards the solution. But we’re going to talk about a wider problem in the moment in the next part of the program. Tony, what about you, just on that principle, the idea. In the States, I imagine federal workers get paid the same whether they’re working in California or Idaho, don’t they?

TN: I don’t know, but I don’t think they should. Obviously, they need to be paid according to the costs around where they live.

RH: That’s interesting. So you back the idea, really? You think it makes sense?

TN: Absolutely. Look, I’m a pretty rational, data driven economic mind. And so if somebody is paid for a salary, if they’re based in DC, but then they move to, say, Texas, where the house cost is a third or somewhere around there what it would be in DC, should they make the same wages they made in DC? I don’t think so. 

RH: But I suppose the argument we had there from Jagged at Chad was actually it attracts when you put money into an area like this, a, you get the best people, I suppose, working in difficult areas, and also they will fuel the local economy anyway when they spend.

TN: Well, it’s very… That kind of clustering theory, used to economic development consulting around

clustering about 20 some years ago, and there are a lot of dependencies there. So you don’t necessarily just attract kind of the best people just because you pay the most or something like that. There’s a lot of social infrastructure and other things that are required to capture kind of the talent that you need. So I do think the reality is private sector companies don’t really work that way. People are paid according to kind of where they live. It’s kind of indexed. And I think if I don’t really follow UK politics

and I don’t really have opinions on UK. 

RH: Lucky you. I think most people feel at this stage. 

TN: But I think it would have been smarter to say, hey, we’re going to appoint a private sector HR advisory firm to index salaries based upon things. Outsourcing, that type of expertise, rather than saying you have regional boards of bureaucrats deciding the stuff is probably sounds a little bit better.

RH: I have to say, Tony, with some experience that they do have such advances and consultants, they’re not popular at all. Of course they’re not. As you can imagine, that doesn’t always get. Our was Michelle Ferry in New York.

Come on, Tony, I’m going to ask you, what would $5,000 a month get you in Houston?

TN: Roger, I’m looking at a listing right now for $4900 a month you get a four bedroom house. 3500 square feet. It looks beautiful.

RH: That’s a rental. We’re in a different world, aren’t we?

TN: Yes, sir.

RH: I got to take a fly here and say that each of us in the past, perhaps when we were younger, has rented. I bet you rented, didn’t you, Jessica? At some point.

Jessica Kind: I currently rent now. My balance sheet light and I can tell you that an average semi detached house in a delicious, delightful quiet estate is 1100 US for 3800 sqft.

RH: That is a lot of space. Yes. That’s nice. That’s good. If I were in Kuala Lumpur somewhere like that, right in the center of the fashionable areas, obviously be a lot more. But because you’ve got a lot of people in the financial I mean, this is maybe the problem in Manhattan. You’ve got people with large amounts of money forcing all this stuff up. I mean, that would be true, Jessica, wouldn’t it? Places Singapore, I guess. 

JK: Actually no big gap between KL and Jahor, really. Singapore is now artificially inflated by a lot of escapees from Hong Kong. Refugees from Hong Kong are pushing up the Singapore property market. Rental and purchase.

RH: Yeah. The point in all this, I suppose, is these are unregulated markets. There was an issue a little while back, I think, in Berlin, where there was a strike because regulated rent strike because regulated rents were coming to an end or being lift or being abandoned, and that makes a big difference to people. Is there a case, do you think, for regulating rent? 

TN: Gosh. It makes things really hard. There are a lot of economic case studies on that, but rent control in New York was notoriously problematic. So as I heard the story and I heard the woman talk about a 48% rent rise. I spent most of my adult life in Singapore and a 48% rent rise you would have to take in stride every so often. That’s just the way it was. There were years you say, take in. Stride, but you had to be earning a hell of a lot to do that, didn’t you? You would figure out how to get it done and there were years, I think, in 2007, eight, where rent would double. There have been times in Singapore, and I’m sure Hong Kong is similar, where rent would just simply double. Yeah, and there have been times when you found it,

you’ve had to make big changes, you’ve had to take deep breaths. Well, that’s what pushed us to buy a house in Singapore and we had to scrape together the money to buy a property so that we could get out of the path of that because it’s too volatile, life is too risky without that.

RH: That’s interesting. Jessica, you say you travel like you rent, you must have had must have been times when you found rent difficult I guess everybody does, and you have to cut back and I suppose think about other ways of doing it.

JK: Once upon a time, when one was young, Roger and Tony. I remember it vaguely. It was a long, long time ago in my case. A little internal benchmark that I never let rent go above 25% of my take home. So for the New Yorkers, with an average salary of $70,000 pre tax, that five grand, I think bites. I think it’s hard. 

RH: Well, we heard in Michel Flores report that 30% was the kind of working rule I mean, Tony, if you were renting, you’re not, but is that a sensible a third of your income effectively? I think people say also the same which you’re paying, if you’re paying a mortgage, should be around that.

TN: Well, it depends on where you are in life, right, Roger? I lived in London when I was in my 20s and my rent was way too high and I could barely afford it, and after a year and a half in London, I left with debt because it was so expensive. So I think it depends on where you are in life and can you really afford it or will you just make ends meet or get roommates or something like that? So we’ve all had to make those trade offs. But I suppose we’re talking about perhaps normal economic times.

RH: But Jessica, I mean, an awful lot of people have gone through COVID when certainly here in Britain, there were lots of rules went in, including people weren’t allowed to be evicted because obviously they couldn’t work, they couldn’t earn, therefore they couldn’t pay rent. Should we perhaps post-COVID take a rather more, I don’t know, involved view of private renting and see if there are ways in which to avoid people who are really vulnerable being put in a really difficult situation like this?

JK: It’s so difficult. I think Tony mentioned earlier in our conversation, didn’t he, that rent controls and those sort of committees and sort of pricing, having foundations for pricing, I think it is all extremely difficult and I have no idea what is the best solution.

But I know that in Singapore now, if you try to rent a flat, you think you’ve sealed a deal with the landlord

in the morning, in the afternoon, you pop back with the deposit you’ve been gazumped. Yeah, well, of course that happens. Property buying as well. I mean, it’s simply another version of that.

RH: But, Tony, what about the principle of social housing? We have quite a lot of it in this country, not perhaps enough, but where there is, it is provided by the local authority in Britain, mostly at a controlled level and affordable level. Is that the real answer to real deprivation, as we’ve heard about in New York?

TN: I don’t have a problem with that. I think there is room for that in society and I think we have to provide for some people, and some people just haven’t had the right opportunities. So I don’t have any issue with that. I think the problems remain when people become, say, you come to an earning level where you can

afford more, but you remain in those places. So I think it can lead to some difficult, say, trade offs. But I do think that… Singapore has that, and again, I was there for a long time. There is housing in Singapore for people who can’t afford more expensive housing. So it’s something I’ve seen work. It doesn’t work well here in the US. It’s a big difficulty and one that we’re not going to come up with an easy answer for a course on a program like this, but it’s always good to talk it through and to get experiences we’ve all had in that market.

RH: So I hope that has been helpful and indeed elucidating, and we hope, entertaining as well. My thanks to Tony Nash, Jessica Kind and to all you for listening.


United Airlines’ biggest ever order

Back in the BBC Business Matters, Tony Nash shares his thoughts on matters like United Airlines order of Boeing planes and how important is this order for the US economy? Also, will travel be back to normal and how soon will that be? How about pork prices becoming super cheap, and what’s the outlook for the agriculture commodities in general? And is the work-from-home people be lured back to go and work in the office?


This podcast was published on June 30, 2021 and the original source can be found at


BBC Business Matters Description:

United Airlines makes its biggest ever order of aircraft in a bet on a post pandemic travel renaissance; the BBC’s Theo Leggett gives us the full details and how safe the bet might be. As many people abandon the office for working from home, property companies say they need to lure us back to the office by making us want to go back – Liviu Tudor is the President of the European Property Federation and tells us how he plans on making office spaces more alluring. As some companies introduce leave from work for women in menopause, the BBC’s Ivana Davidovic speaks to women about why it’s so hard to talk about menopause in a corporate landscape. Plus, cheap pork has flooded the market as China’s pigs recover from the African Swine Flu – Kirk Maltais from the Wall Street Journal explains how the oversupply of pork has forced US producers to cut their prices to very low levels. We discuss all this with guests Shuli Ren, Bloomberg Opinion columnist in Hong Kong, and Tony Nash, chief Economist at Complete Intelligence in Houston, Texas.


Show Notes


JR: How are you, Tony? Before we get on to the sort of impact on the trumpet or the importance of the travel industry, I just want to think about the importance of this order for Boeing. And I’m remembering that old phrase about GM. What’s good for GM is good for America. I mean, you can’t say about GM anymore. You could perhaps say that about Boeing, couldn’t you? I mean, that’s why this order is important.


TN: It’s important. And I’m pretty sure there’s some sort of subsidy for United to buy it, especially since a lot of it’s being spent in the U.S.. It’s in listening to some of the analysis, it’s pretty easy to be critical of United since they’ve been on government support. But really, the market was pulled by the government, the travel restrictions and everything else. So it’s really hard.


And I’m no defender of United for sure, but it’s really hard to blame them when their market was really pulled because of public health restrictions. So I do think that they’re making the right call here. I do think that travel will come back faster than the fears of many. I don’t think it will immediately react by September. But I do think that they’re making the right call.


JR: You’re not one of these people who thinks that travel will never quite go back to where it was. Actually, there have been certain changes in the way we regard moving around this planet in terms of we can do video conferencing, we don’t have to go to business meetings, we don’t have to go to those international conferences anymore. Is it not a permanent change or is it a temporary one?


TN: I think it’s probably permanent for maybe 30% of people. But if you think about the people who have to see each other face to face, the 30% who it won’t be required for, they will aspire to do that because they want to be like their peers who are actually getting deals done and who are actually meeting people that they need to meet face to face. I used to travel, you know, twice around the Earth every four weeks or something. And if I don’t ever get on a plane again, I am a happy man. But I don’t think I’m most people. I think most people are very happy to get on a flight and go for for a holiday or for business.


JR: Okay. I just want to know, have you traveled actually, and spend time in the last year or two by plane?


TN: I haven’t. But it’s not because there haven’t been business opportunities. I just really don’t like to fly anymore. So I’ve done way too much of my life.


JR: Yeah, Tony, the United’s last order actually involved Airbus aircraft as well as Boeing. And that has been this truce between the US and the EU on Airbus and Boeing over the trade war between the two. Do we feel that actually aircraft production is going to get back on track now?


TN: Well, I think that European and Asian airlines will be slow to make capital commitments. I think American Airlines in the U.S. have old fleets and so they have to renew them and their tired fleets, too. So but I think in Europe and Asia, the Asian fleets generally a little bit newer, of course. But I think they’ll be a little bit slower to order. I think we’ll have to say some European countries that subsidize their airlines, like I don’t know if United was subsidized, but I wouldn’t doubt if they were. But European countries that will subsidize their national airlines to help out Airbus, I mean, that’s its fiscal stimulus. It’s all over the place. It wouldn’t surprise me in the least.


JR: We can come to, you know, about the impact it’s had on the American producers and also on Chinese US trade relations, because that’s where it really starts to get interesting, because the China was importing a huge amount of hogs and also corn and soybean in order to be able to support their industry, which was really under in dire straits.


TN: Right. So there are three layers here. So first, you have the news about the hogs. And I think the the commodity prices sold off on the news, I personally don’t believe it. I think the herd is improving in China, but I don’t think it’s back to normal. You also have commodities like corn and wheat that are elevated on really bad corn crops in China and bad feed crops in China. So there’s been a lower corn crop in the U.S. than usual this year.


And Chinese pig farmers have started to feed them wheat, which is not a normal feed for hogs in China at least. So that’s affected with corn prices and wheat prices, which are which are continue to be elevated partly on the demand in China, but partly on, say, weather and supply and other things in the U.S..


So I do hope for China’s sake that the herd is healed and back to normal. I’m just skeptical of it. But I do think that we are seeing pretty hot and dry summer in the Dakotas and other parts of the U.S. that produce significant part of the U.S. corn crop. And until we start to see rain in the Dakotas and elsewhere, I think there’s going to be pressure on those prices. So U.S. farmers are you know, they’re struggling just to grow. Of course, the ones who are growing are doing well. Those who have crop to sell are doing well because the prices are elevated.


But it’s put pressure also on U.S. consumers because what we saw in the U.S. was a lot of accumulated frozen meat, pork, beef, chicken. And with the shutdown of the meat processing plants in the U.S. with the pandemic, it wasn’t manufactured in the U.S. So we had a large stock of frozen meat in the U.S. that’s now drawn down. And so the supply chains around meat are are pretty tight, actually. So we’re seeing real upward pressure in the U.S. on meat prices. And so that’s part of the reason I don’t necessarily think that the news in China is what they say it is, because there’s still there’s still draw of pork to China now.


JR: That’s really interesting. A whole lot of confluence of different influences that are pushing in different directions. We have seen these very dramatic falls. But you think they may actually be just temporary and just the sort of the market volatility of the last couple of weeks, you think?


TN: Well, I think part of it is weather, part of it is supply chains. I think we’ll see things come back to normal in probably four to five months in terms of U.S. commodities. But I think the summer is going to be pretty volatile still. So if China does continue to have the demand, it’ll put more pressure on the volatility in the U.S..


JR: OK, Tony, what about in Texas? What’s happening there? I mean, you still got supply chain problems, still got sort of the difficulties of actually getting stuff or is there no problem in that?


TN: I don’t think there’s a problem in actually getting stuff, I wouldn’t say it’s the supply chain itself. I think it’s the after effects of the supply chain problems. We also had things like I’m sure you’ve heard of the freeze that we had here in Texas in the spring. That freeze actually killed three generations of chickens. It killed the the chickens that would be sold to market and it killed the eggs.


So we had a several state area where where all of the chickens died because of the freeze that happened in this part of the U.S.. So while people made fun of us for our windmills not working, there actually was real impact. And, you know, we really had an impact here. So we’re seeing an impact on chicken prices. And, of course, meat is substitutional generally. So it’s really pressuring all of the all the proteins. But again, we are seeing vegetables and other things. It’s not necessarily availability per se at the cash register. It’s really the pressure on the price. So whoever pays the most will get it. At least that’s Texas.


JR: Has it got to the point of the poor people it’s a problem. I mean, it’s of a wages keeping up. I mean, is this a real issue or is it just one of these things people say, oh, gosh, prices are going up. It’s, you know, what a nuisance.


TN: Well, because of the the programs that the federal government has had here, I think the minimum salary of someone who actually stays home and collects unemployment is something like 48000 U.S. dollars a year. So for the past, I think 15, 16 months, the people who would be the poorest and who are unemployed are actually making almost 50,000 dollars a year based on a kind of the federal kicker because of the virus. And so while it’s hitting, the people who would normally be the most affected are actually getting more money from the federal government. So the hope is that they’re not feeling it.


JR: Okay, Tony, thank you.


I was talking to my colleague, Rob Young. Now, what I think is really interesting here is the sort of power play between the various people involved, the employee, the employer, the property company. And basically, if the employee has to come back, has to come back to the office, no one’s going to bother to give them fantastic facilities and sort of going to gyms and all the rest of it, if they’ve got to come back. And it’s really depends on that part played between the two. So do you think actually, Tony, we’re going to see any change in the way property companies or employers actually treat their employees?


TN: No.


JR: I’m quite doubtful, too. I mean, it always sort of blue sky thinking about how marvelous our offices are all going to be in the future. I don’t think it’s going to be different.


TN: No. And in fact, I’ll go even further than that. All of the talk over the last year about how work will change. I don’t believe that’s going to happen. You know, here’s what it really comes down to. People need to be in the office. Why? Because work is a couple of things. First, it’s about achievement and what you do. It’s about how much you know, but it’s also about how you politic. OK. You have to be in the office to politic with people. Otherwise, when the next retrenchment comes around, your head is you know, you’re out the door. So people will have to go back to the office and the ones who scream the shortest about not wanting to go back will be invited eventually to go elsewhere.


JR: The only thing I would say possibly is that actually if there is a demand and there’s a shortage of supplies, it’s supply and demand. There’s a shortage supply of certain workers. Employers will put better facilities in place to lure them in and treat them better and give them these kind of privileges, some of which will be the privilege perhaps of working from home if they want to.


TN: Interesting. I actually spoke with the U.K. demographer last week talking about this very issue, and he said there will not be a shortage at all. In fact, over the next 10 years, in 10 years time, there will be something like 600 million people who cannot get a job. Sorry. 420 million people who cannot get a job globally. So there will be people will be competing very aggressively for those jobs globally.


JR: Tony, isn’t that really important for them to be able to see stuff, hands on whatever job that doing really?


TN: Especially for you, surely because the Bloomberg office in Hong Kong is spectacular, according to the office, everything. So I’m surprised you didn’t just move in.


JR: Yeah. Do you get free food at the Bloomberg office as well? I remember that was one of the things where I used to work for Bloomberg a long time ago. And you did get free food in the office. I remember that.


SR: Yes. Bloomberg is very generous. So so these days, like there is free lunch, they have like that the vegetarian option that the vegetarian option with the calorie counts, very healthy food, absolutely free food.


JR: They are making an effort to lure you back in from your pajamas until your comfortable bedroom. Thanks for joining us. Business matters.


Investors Pause to Ponder as Markets Near Records and Prices Rise

This week in markets it’s all about the rising spectre of inflation in the US, and how it informs and shapes the markets, especially in the context of jobless claims and GDP data due out later today.


This podcast first appeared and originally published at on May 27, 2021.


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

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


Show Notes


KHC: So to discuss markets, we’ve got on the line with us Tony Nash, the chief executive of Complete Intelligence. And Tony, let’s start with the recent stimulus measures and, of course, the rising specter of inflation. In your opinion, what is your sense of whether the inflationary numbers are transitory or rather more permanent in nature?


TN: I think it really depends on the products you’re looking at. So if we look at products like lumber or corn or some of the eggs, the non protein, meaning hogs and cattle, if you look at the plant type of eggs, that inflation seems to be coming off. It seems to be at least off of the peaks for now if we’re looking at the protein stocks. So pork and chicken and beef, the storage of protein products is pretty low.


In some cases, it’s 20 some percent below the product that we had a year ago. So I would expect an ongoing rising prices for things like meat over the next three to six months. But oil, I think we’re range trading in oil. I don’t necessarily see a spiking up in oil. We haven’t seen inflation in oil like we’ve seen in other commodities.


PS: Still in U.S. With respect to the stimulus, I think that’s resulted with individuals having a much higher level of personal savings. How do you think that is going to be utilized in the coming months?


TN: Sure, yeah. The personal savings in Q1 of this year was around 21% of Americans income. So there’s almost a lot of fiscal stimulus in the US. Normally, if we look 20 years ago in 2001 and the same quarter, the savings rate was 5%. So it’s more than four times normal. So how do we think it’s going to be spent? Probably on services, probably on things that people haven’t been able to do while they’ve been locked down for things like travel, restaurants.


I would expect to see a lot more spending at restaurants later in Q2, Q3 and Q4 of this year travel. Well, we definitely expect that to come back. But the hotel spending we think may be more regional rather than national or international.


WSN: So, Tony, does this mean that we should start looking at these kind of stocks? And so you’re talking about hospitality, aviation, even restaurants. Should we be buying these companies?


TN: No, I think it depends on the stock. It really is the type of market where you have to look at the individual stocks because valuations and really almost any other gauge for measuring the value of a company is pretty stretched right now. So you’d really have to identify the type of investing on it to make and really look at where you think that’s going over time. So will these valuations hold? Will the different metrics that people are looking at going to hold? A lot of these things are already baked into to the price of equities. So I’m not sure how much more we can juice out of these equities right now.


WSN: And this is not just the the sectors that we talked about. You’re talking about generally the broader market overall be over everything. So then how should we determine our asset allocation? I mean, should we move back into cash or should we look at other markets, for example, not just US?


TN: Well, yes, I think you really have to look at it on an opportunity by opportunity basis. I think we’re at that point in the market, in the cycle where you really have to evaluate every single opportunity individually. I think a lot rests on the upcoming Fed meeting on June 15. So we’ll know on June 15th as the Fed signaling that they’re going to tighten a little bit is going to be a little bit of taper. Are they going to continue running down the street with their hair on fire, just throwing cash out to everybody? If it’s the latter, then sure, we have some ability to stretch these values even more. If not, I think there’s going to be a lot of care taken and we’ll see a little bit of rotation into some things like gold and other things.


KHC: So more immediately, Tony, this week we’ve got jobless claims data and of course, GDP. How, if at all, with those data points, shape your investing decisions going into the weekend.


TN: Well, I think unemployment is a big one because last month’s number was so terrible, so if we have another terrible unemployment rate, it’s easy. If last month was terrible and it was a one off, then fine. But if it’s another terrible number, then I think that’s a really bad sign. But the Fed and the Treasury are wrestling with the fact that there’s really too much stimulus out there. So people are paid an extra twelve hundred US dollars a month to stay at home instead of go out and get a job.


So a lot of small business owners, restaurants and shops and these types of hourly workers, those employers can’t afford to hire people or the people making who would normally take those jobs are literally choosing to stay home and collect unemployment instead of get a job, because, again, they’re making more than a thousand dollars a month, literally by refusing to take a job. So that’s a disincentive for people to join the workforce, but to stay actively unemployed.


Supposedly, they’re looking for a job, but to not really take a job because they can make so much more money. Now, you have something like twenty seven states in the US that have now said they no longer want the federal unemployment kind of accelerator, which is that three hundred dollars a week extra on top of the normal unemployment people would get because the states are seeing that their companies are having a really hard time finding work.


And so if they no longer take federal money, then those small companies and those change will have an easier time finding workers.


PS: And Tony, can we give you a perspective on the current crypto volatility in your view, whether it will cause the contagion effect on price levels of traditional assets like equities or bonds?


TN: That’s a good question, you know, crypto came off big time, right, last week and over the last couple of weeks, and then it is interesting that there really hasn’t been a contagion to speak of. And a couple of notable things. When we’ve seen equities fall that much or commodities or something, there’s always a contagion. Right. And what always happens is central banks come in to intervene and help the markets. And what I’m wondering is that expectation that central banks are going to intervene, does that accelerate the contagion effect so the central banks would bear save the market, the potentially contagious markets with those markets because of falling and it hasn’t gone over to other markets?


Nobody expected central banks to intervene in crypto. So it’s a really interesting study on how markets function and also what people’s allocations were. I mean, a lot of people have money in crypto. They may not have a lot of money in crypto, but it’s a widely distributed asset that people have. It’s also seen as kind of a lottery ticket and gamble.


WSN: So Tony, do you have money in crypto?


TN: I don’t know if you guys follow me on Twitter, but I talk about my 19, 20 year old daughter who put, fifty dollars in crypto, and I think she was up six times at one point. I think now she’s up. Well, she’s probably still up six times. She was up, I think 15 times at one point.


PS: But she stood up.


WSN: So, yeah, you’re still the richest in the house.


TN: You know, your student, right. I got in with a little bit just after her, so. But it’s not a big bet. I’m just really curious to see how this asset performs. One of the learning she’s had is take out your principal as soon as you can, and she’s done that. So everything she’s playing with is profit. And I think that’s the guy that a lot of crypto investors are using is, hey, take out your principal when you can. Everything else is profit. And let’s just see where it goes.


KHC: Well, thanks, Tony. She has a good teacher. That was Tony. That is the chief executive of Complete Intelligence. Just on the back of what he was talking about with the stimulus checks. I mean, I’m rereading one of Jim Rodgers’s book, which got it to that last night. And when he was traveling through China, he noticed that in China, 30 percent of income is typically going to a savings rate in America. That number in the 90s when he wrote this book was around about two percent.


So Americans don’t have a culture of saving. They have a culture of spending. And because they get the stimulus checks, I think there’s a longer term discussion about what this is going to do on the job market because the Americans getting more money than they used to get in their previous jobs by sitting on their backsides in the couch. Right.


WSN: But it’s just not correct. They are going through and. Correct.


KHC: Yes, but they don’t behave this way. Right. They don’t save it for the long of the. And rub it Robinhood or they couldn’t buy an iPhone. Right.


WSN: I think this is the Robin Hood in the iPhone. You know, I want to put this into context. Yes. I’m sure some spend their money that way. But there were also some people who really need it, of course, check. So like in any economy in the recovery, you’ve got this case shape. So, you know, but I think what does this mean for the U.S. economy in terms of inflation? Pressure is the job market as well?


PS: Yeah, I think the question was whether they should have been more targeted, the stimulus, because he was quite overreaching and basically touched, I think, about 80 percent of people. That’s the challenge in question here.

QuickHit Visual (Videos)

QuickHit: How do we use up all the corn now?

This QuickHit episode, we talked about agriculture commodities with focus on corn ethanol. We are joined by Chris Narayanan with INTL FCStone in their Capital Markets. Chris held several different roles in the commodity space and was formerly a commodities and equity analyst for investment bankers. He explains why we have surplus of corn and other ag commodities and that this problem started way before the global pandemic. What will be the solution, and with crude in trouble, does it mean trouble for corn ethanol as well?


Our previous QuickHit talked about the military and the U.S. defense’s biggest supply chain problem: its dependence on the enemy. Watch it here.


If you want to be notified about new QuickHit releases, be sure to subscribe to our Youtube Channel here. Or sign up to the CI Weekly Newsletter for more insights on the economy, markets, and trends.



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



Show Notes


TN: I wanted to talk a little bit about ag commodity markets. With all of the COVID-related issues, we’ve seen demand really fall. We’ve seen things like potatoes stacking up and milk being poured out. It’s deflationary, it’s wasteful. How is that impacting markets in terms of the expected supply coming on, and how long do you expect this demand issue to be there?


CN: First, I think it’s important to take a step back. When you look at the commodity space, especially at agriculture, in a lot of areas, we’ve been flooded for several years. And then when the Trade War hit, that was another hit to the system. And now the Coronavirus is here, it’s another hit to the system. We’re trying to chew through this as quickly as possible.


People are shifting from eating out to eating at home. The buying patterns are changing. The foodstuff needs are changing. You go all the way back through the supply chain, back to the farmer and the rancher, it changes the dynamic.


USDA came out, with their monthly ag supply and demand report and they’re pretty optimistic for the new crop year. Now, that’s going take some time, and obviously these are just projections.


Looking at my screen right now, the market is a little lukewarm to it. As we get to the growing season, we what kind of supply we can expect, and then once the harvest hits, we’ll know, in terms of the global economy, how much we actually need.


TN: We saw some freezes over the weekend as well in the Midwest. Is that hurting things or is that late freeze something that just happens occasionally and markets just work that in?


CN: It depends on where it is and what stage they are. Planning is all over the place in a lot of areas and it depends on what crop you’re talking about. I don’t think you can make a blanket statement on that. But certainly, depending on the damage and the intensity on the area, there could be some damage. That might be supportive to prices at some point. But I think it’s a little early to say.


TN: What about things like corn? When we can move into talking about ethanol or fuels or some of the downstream products? Do you see this freeze hurting the corn crop, so it would tighten up the demand environment a little bit? Or is it all fine and it’s not really going hurt supply?


CN: It depends on where they are in planning. We’re in the middle of May. A lot of people hope to be done by now. If they didn’t get it in the ground, they might delay for a couple of weeks. If they did have it in the ground, they had some early emergence in some of the southern areas. But where the freeze really didn’t hit, it shouldn’t have that big of an impact.


I think the big thing is how do we use up the corn that we have? In the last decade, we’ve seen a huge increase in corn supplies. I look at the amount that’s left over at the end of a crop year divided by how much we used in that particular year. That’s been on the rise, and I think ethanol is a big portion of it. When people talk about ethanol, they say we need an increase in blend or go from E10, E15, or even higher.


In my opinion, that’s just kicking the can down the road. You’ll see an uptick for a little while — five, seven years or whatever that number is, and then it’s going to level off again back to where we are. You’ve just reset the base, but you don’t really solve the problem in a more long-term fashion.


I think there are two big things that we’re seeing in this current situation. First, driving fuel efficiency on vehicles has increased over the last 15-20 years. We’re driving more miles per gallon of gasoline. So incrementally, you need less ethanol to blend with the gasoline. The second part of efficiency is we are producing more gallons of ethanol with less bushels of corn. You need less corn than you did before. And now with the Coronavirus, people aren’t driving. We have a lot of stay-at-home orders that are starting to expire in some parts of the country. But again, you’re not driving, so you just don’t need to buy as much gasoline. I mean, my truck tank is half-full, and I think the last time I filled it was about a month-and-a-half or two months ago. 


What we needed to look at is how can we best work ethanol into global trade and where are the export markets. For example, we have the RFS and the RFS2 – biofuels and advanced biofuels. We can bring in Brazilian ethanol made from sugarcane and export corn ethanol to them. It’s just one example of a symbiotic relationship where the blenders here would get credits.


TN: How is that different? Are there differences between sugarcane ethanol and corn ethanol in terms of the end use?


CN: In terms of the end use, no. It’s the same. It’s really the process in which it’s made and how the EPA and other organizations look at the efficiency, the cleanliness, and the process of producing it all. At the end of the day, it blends, and specs will dictate. But theoretically it’s going to be just another substitute of each other.


TN: I’m just curious just to dig into that, why would the U.S. import Brazilian ethanol and export corn ethanol? Are they substitutional? 


CN: To an extent they are substitutes. So that makes it a little bit more practical. Back when we had blending credits, there were different credits that you can get depending on the stage. Corn ethanol was the most basic.

From a completely economic standpoint, if you’re a blender that has to purchase this ethanol to mix in with your gasoline, there was, at the time, an incentive involved for the added cost of doing this. So if we can work through this policy, maybe update the policies, look at our global trade where in any given year, you might have a surplus in one country and the other, why not introduce some kind of a trade scheme where you help each other out, right?


Because if you go to Brazil for example, you can go to a pump and they literally dial in E0 to E100. They can run their engines on most. And they run that mix depending on the economics, I think it was like 70. If the price of ethanol was 70% of gasoline or less then, it was more economic to use ethanol.


Some people say that you see a slight loss in fuel efficiency and so there’s that kind of scale that you can apply and use to your advantage. Look in the fact that you can increase the blend wall and maybe go to E20 or E25. And the tests from the engineers show that that’s not gonna do anything to the vehicle, then that’s great. But again, it’s a temporary fix — temporary meaning in the next ten years versus what I’m looking like 30, 40 years ahead in the future.


TN: So with crude oil prices depressed, how hard will it be to get those refiners to include ethanol? Are those blenders to include ethanol if crude and gasoline are super cheap?


CN: So here’s the thing that nobody talks about. We have the Clean Air Act, which introduced the cafe standards for fuel efficiency. In 30 different partners around the US, you have to introduce some kind of an oxygenate to basically treat the gasoline. MTBE was the preferred substance at the time but it was found to pollute groundwater. 30 some-odd different states banned it, so that effectively made a de facto nationwide ban on it. So to meet the Clean Air Act in those cafe standards, you had to introduce something. Ethanol was what came in. It burned clean. It was renewable. It didn’t pollute groundwater and it helped make that standard.


When I was at a previous job, going back about seven years ago or so, I was working with one of my other commodity analysts and we did a joint paper on corn gasoline and ethanol. If memory serves, it was like E6.2 or something where when you look at the different summer blends versus the winter blend the different metropolitan areas and you distill down to what do we actually need.


Until you find another additive to take the place of ethanol that’s cheaper, safer, or at least
safe, you still have some incremental demand that needs to be put into the gasoline that’s just required by law.


TN: Chris, thanks so much for your time today. I really appreciate it. I’d love to circle back and talk about other ag commodities in a couple of months to see where things are at.