Tag: Dow Jones

Softer Fed Tone But Don’t Get Too Excited

Post author By admin
Post date November 24, 2022

This podcast is originally published on https://www.bfm.my/podcast/morning-run/market-watch/fed-rate-hikes-earnings-downgrade-outlook-for-2023

The released Fed minutes show that most officials are backing a slower pace of interest rate hikes. Markets reacted positively but this is false optimism as the terminal Fed Funds Rate may eventually be higher. The 3Q reporting in the US is also coming to a close and 75% of corporates experienced downgrade in earnings. Have the cut in earnings by analysts been adequate or will there be further downside, with 2023 outlook still uncertain? For answers, we speak to Tony Nash, CEO, Complete Intelligence.

Transcript

BFM

BFM 89 Nine. Good morning. You’re listening to the Morning Run at Thursday. It’s Thursday, the 24 November November Friday, junior, as we like to call it. Here. I’m Shazana Mokhtar with Wong Shou Ning and Chong Tjen San. As always, let’s kickstart the morning with a look at how global markets closed overnight.

All key US markets showed gains as most members of the Fed said the pace of rate hikes will slow down. So the Dow was up 0.3%. The S&P500 was up 0.6%, and Nasdaq was up 1%. In Asian markets, the Nikkei and Hang Seng was up by 0.6%. The China Composite was up by 0.3%. The Straits Times Index was down by 0.1%, and our very own FBMKLCI was up by 0.2%.

Joining us on the line now for more on what’s moving markets, we speak to Tony Nash, CEO of Complete Intelligence. Hi, Tony. Good morning. Now, let’s start with just some reactions on the Fed minutes that were released. It showed that most officials are backing a slower pace of interest rate hikes, but that the terminal rate might need to be higher. What do you think? Are we seeing a relief rally? And is that sustainable in the short term?

Tony

Yeah, I think the ultimate destination is probably the same, but the pace of getting there is slower than many people thought a couple of weeks ago. So I think what it means is we’ll see more, say, 50 and 25 basis point hikes. That’s the expectation. It’s still possible we’ll see a 75 if Powell really pushes hard for December, but we’re still going to see a 5, 5.5 terminal rate, depending on really how things end up for CPI and PPI next month. But it’s just the pace and markets are more comfortable with a gradual adjustment to higher rates than the continued kind of shock treatment.

BFM

And Tony, the US reporting period is coming to a close. How would you assess the quality of corporate earnings release so far? How well have they tracked market expectations?

Tony

They’re OK, they’re pretty weak, actually. Compared to 2021, we had, I think, 25% earnings growth in ’21 about this time last year. They’re just over 3%. So it’s not even near where it was last year.

Something like 75% of companies are seeing estimates for their downgrade. So people expecting inflation to endure longer than they thought. If you remember a year ago, people were saying inflation was transitory, so they’re saying inflation will endure longer and rate hikes will continue.

So with credit tighter, businesses and consumers are not expected to spend as much.

So going forward, there is a fear that wallets will be more closed than they are now and earnings will continue to be tight.

BFM

Which just confuses me, Tony, because if the Fed stops their rate hikes at least decelerates the pace of it. And at the same time, corporate earnings aren’t going to be as robust as ever. Then why is the S&P500 above 4000 and the Dow Jones at 34,194 points? I mean, they’re just in fact, the Dow is only down 6% on a year to date basis and the S&P down 15%. Shouldn’t markets be actually more bearish than they are now?

Tony

Well, I think there are a couple of things happening there. I think first, there really is consumers have continued to spend and businesses have continued to spend in the US. Although we’ve seen economic growth slow dramatically, we’ve had spending continue to push forward. So if the Fed slows its tightening cycle, and keep in mind, they haven’t really started quantitative tightening, meaning getting things out of their balance sheet. They’re only, I think, $200 billion off of their high.

But if the Fed continues to tighten at an accelerated pace, then markets are worried. But again, if they slow it down, the feeling is that spending will move in stride. It won’t necessarily be too shaken up.

Also, on inflation, don’t forget inflation didn’t really start on an accelerated basis until November of ’21. So we had inflation, but fairly muted inflation then. And so what we get after November, well after this month, is what’s called a base effect.

So we’ll likely continue to see inflation rise, but not necessarily at the pace that it’s been over the past, say six to nine months. So does that mean inflation is peak? No, not at all. But it means the pace of the rise of inflation is likely going to slow on base effects.

So if that happens, we’ll have a lot of people declare victory over inflation, but I think that there is an expectation that that rate will slow as well.

BFM

Can you look at the prospects of retailers like Best Buy? We see Abercrombie and Fitch. These names are defying inflationary trends and higher rates to post better results than expected. So why has this sector been the exception to the norm?

Tony

Yes, the quick answer is most of those guys have been pushing price. So they’ve been passing along their higher labor and goods costs onto consumers.

Now they’ve been pushing price while sacrificing volume. So they’ve been pushing 8 to 10 to 15% price hikes in many cases. But they’ve had fewer transactions between one and say 6% fewer transactions.

Regardless, they’re earnings have risen. So they’re not as worried about fewer transactions. They’re focused on keeping their margins up.

And so when you look at retailers like Walmart, which has mixed, say, general goods and food, they’ve done very well. They had a very difficult Q2, but they did very well this past quarter.

Home Depot, which is a DIY store, has done very well because they pushed price Cracker Barrel has done very well.

Cracker Barrel. These are not these are not retailers that are at the high end of the market either. These are mid and even, say lower end companies, but they’re pushing price on the middle and lower end of the market.

Higher end of the market? They’re doing great. So it’s tough to be a consumer in this market because price definitely continues to be pushed and we expect price to continue to be pushed through probably Q2 of next year.

BFM

And Tony, with potentially slower pace of interest rate hikes, how do you expect the technology sector to do? Is there more pain to come for the likes of Amazon and Meta?

Tony

For sure. Amazon, Meta and technology companies generally do very well in very low interest rate environment, where the money is effectively free or negative real interest rates.

As you have to pay for that money, it becomes tougher for those companies to do well because their core investment is in technology. And we had things like Mark Zuckerberg at Meta really went off the rails with some of his spending and investment.

It’s not to say that the Metaverse investment is not ever going to happen, but much of that stuff really went way overboard. Same thing with, say, Amazon with some of their infrastructure investments and delivery investments.

So we do expect HP today, I think announce 6,000 jobs to be lost over the next, I don’t know, twelve months or something. So we do expect much more pain in tech. We expect that to continue until at least the end of Q1, if not a little bit further.

BFM

And Tony, let’s talk about oil because WTI for futures delivery in January, $77 a barrel. And we know that there’s an upcoming OPEC meeting in December. What are your expectations in terms of oil price then?

Tony

Yeah, it’s tricky, right? Because oil prices are kind of in that zone where a lot of people are comfortable. And so the question is, is this acceptable to OPEC members? So Saudi Arabia, UAE, Iraq and Kuwait have already come out and said they’re going to stick to the current plan, the current cuts that were already announced last month.

But we have things like the Russian price caps coming into play. And you know, our view is the price caps are pretty meaningless actually, because Europeans are pretty good at circumventing the kind of emotional embargoes they put in place.

I’m sorry to put it that way, but they put these laws in place and then they circumvent them pretty well. A lot of this is theater. So that’s not the price caps are not going to have as much of an impact as many people thought. So it’s possible if we get into next week and crude prices start coming back pretty strongly, or sorry, if we get into next week and crude prices are as weak as they are now, we may see a 500,000 barrel per day cut. I think that’s a possibility, but it’s likely they’ll stay on what’s already been announced.

BFM

Tony, thanks very much for speaking with us. And since it’s Thanksgiving eve. Happy Thanksgiving to you. That was Tony Nash, CEO of Complete Intelligence, giving us his take on the trends that he sees moving markets in the days and weeks ahead.

All eyes, of course, on that all-important inflation number and how that will affect how the Fed raises hikes moving forward.

I think the key takeaway for me was he mentioned that 75% of corporates in the US had downgrades, which I feel it’s a good thing as it brings expectations lower and more in line with future expectations and it also gives perhaps some room to surprise on the upside.

Yeah, well, markets seem to be at crossroads, but a little bit cheered by the fact that the Fed isn’t going to raise rates as aggressively as they have in the past. But I want to keep my eye on corporate earnings. I think that if you see continuous downgrades by the analyst community, you see the messaging coming out of US corporates that things aren’t looking as rosy as they are, then it’s just going to be hard for the Dow, S&P500 to actually break through their current resistance levels. So I think it’s something we have to keep an eye on.

Podcasts

Nasdaq Breaks 3-Day Winning Streak

Post author By admin
Post date October 27, 2022

This podcast was originally published on https://www.bfm.my/podcast/morning-run/market-watch/nasdaq-tech-stocks-sell-off-meta-alphabet-apple-amazon

Investors were not impressed by results from Meta and Alphabet leading to a sell-off in tech stocks on Wall Street. We speak to Tony Nash, CEO of Complete Intelligence, to find out how results from Apple and Amazon set to come out soon might impact overall market sentiment.

Transcript

BFM

This is a podcast from BFM 89.9, The Business Station.

BFM

BFM 89 Nine. Good morning. You’re listening to the Morning Run. I’m Shazana Mokhtar with Keith Kam. It’s 7:06am on Thursday, the 27 October a rather overcast Thursday morning. For now, perhaps we’ll see the sun come out a little bit later. As always, we’re kickstarting the morning with a look at how global markets closed overnight.

BFM

It was a bit of a mixed day for what generally red though the Dow Jones on Wall Street, the Dow Jones ended marginally higher, that’s 0.01% barely changed. S&P 500 was down 0.7%. But the action was on the Nasdaq that closed 2% lower because of disappointing results from Meta and Alphabet. We’ve just got to wait for the Apple and Amazon results that will be out tonight US time. So we’ll be discussing that tomorrow. Early in the day, Asian markets were generally green. The Nikkei was up 0.7%, the Hang Seng was up 1%. The Shanghai Composite and Singapore’s STI, they were both 0.8% higher. And back home the FBM KLCI closed 0.7% up.

BFM

For some thoughts on what’s moving international markets, we have on the line with us Tony Nash, CEO of Complete Intelligence. Good morning, Tony, thanks for joining us today. Now, notwithstanding overnight results, global equities led by US stocks have extended gains over the last week, avoid by the expectations that peak inflation has been reached. What do you think? Are they being too sanguine about inflationary pressures?

I don’t necessarily think they’re being too sanguine. There are cases to be made that housing prices and wage growth have turned the corner. Goods price inflation has likely peaked, but there doesn’t necessarily mean that we’ll see prices decline. Regardless of what’s happening in the inflation environment. The Fed is going to raise rates in November, likely by 75 basis points and again in December. So the Fed typically lags inflation on both sides on the way up and on the way down and so they’re likely going to over tighten. Markets have largely factored in a 75 and 50 basis point hike over the next two months. So are they sanguine? I don’t know. I think if we start to see inflation really take a downward turn, then it could be a very good thing for all of us.

BFM

But Tony, the 75 basis point expected hike by the Feds comes at a time when a lot of analysts are also expecting recession to hit the US sometime sometime next year. Would there be some reassessment as we go along?

Well, we’ve already had kind of negative economic growth for half a year, so we do need to see jobs come down. And with the tech earnings coming out, as you guys mentioned in the news segment, we expect tech companies to announce some pretty major layoffs before the end of the year.

BFM

Let’s get into that a little bit, Tony, in terms of tech results, I mean we did see Meta overnight, we’ve seen how Microsoft also came in below market expectations. What do you think this tells us about the direction of the tech sector moving forward, especially with this environment of rising interest rates and a looming global recession?

Yeah, well, tech companies have overhired. They were hiring based on valuation, not necessarily based on revenue. And so now that their valuations have come down, they have excess staff and they need to clear the decks. And the productivity within the technology sector, although it sounds a little weird, the productivity is pretty low because they’ve had too many people. So as these companies come out and give pretty sad earnings reports, there’s going to be pushback from investors that they need to lay people off, and that will come out in the next couple of months. So we’ll see some of that. Now, if you compare that to, say, companies like Coca Cola and GM who beat the street, those companies have been able to pass on cost rises to their customers, so they’ve factored in cost rises to their price. Now, many of those companies saw volumes decline, but price rises more than made up for the volume decline. So they’ve beat expectations by raising price, in many cases by double digits.

BFM

Tony, we’re expecting Amazon and Apple results to come out tonight, and what we’ve seen from the previous results have sort of, well, dampened market sentiment, if you may, what are your expectations going forward?

Yeah, I don’t think they’re going to be stellar results. I think Amazon had this, at least in the states, they had this kind of second prime day a couple of days ago to goose sales revenues for the quarter, which tells me that things are not stellar at Amazon, and so there are signs that things aren’t working out. The new iPhone is kind of a yarn for a lot of people, so it’s not necessarily pushing out. And so I think the expectations are for pretty mediocre results. So if they report in excess of expectations, then tomorrow will be a fantastic day in markets. But I don’t think that’s necessarily likely at this point.

BFM

All right, something we’re going to be keeping an eye on. Another thing to keep an eye on is the slew of indicators that are going to be coming out. We’ve got US GDP, durable goods, and initial jobless claims numbers. Which indicator are you paying the most attention to in terms of being a gauge of how well the economy is going?

Yeah, one of the things that I always tell people to be careful of with some of these macroeconomic numbers is things like GDP. What’s being announced is what’s called a preliminary release. So they kind of have a sketch of what’s happening in the economy, but it’s not detailed. So when these GDP announcements come out and it’s the first release, it’s not really accurate. And those things can change by 50% or more in some cases. So GDP is not really something I look to. It’s kind of a headline, but it doesn’t really mean a whole lot.

Durable goods is interesting because that tells me that people are investing in things, buying things that last a long time so that they can deliver new services or new products in, say, three to six months time. So that would tell me people are looking forward. So if durable goods is a bad number, then it tells me people are really just trying to take care of today and not investing in the future.

Jobless claims. I don’t know. Sometimes it’s meaningful, sometimes it’s not. I think the sentiment around jobless claims is overhyped. The Fed is definitely watching jobless claims because they want to see wages and jobs come down. So with jobless claims, it’s one of those good news and bad news types of things. So we’re kind of hoping for a poor jobless claims so that the Fed can kind of tick off the box and say, mission accomplished.

BFM

Tony I just want to pick your brains on this. We’ve seen three straight days of market gains on Wall Street and this morning, or rather last night for you or today for you. We’ve just seen a reversal of that. Is this an indication that maybe fortunes might be changing going forward?

I think it’s a good question, and I think it’s hope that the Fed is changing course. And I think regardless of what comes out, say, this month, and I think probably next month, I don’t think the Fed is going to change course. They were caught flat footed. They said that inflation was transitory, they messed up, they’re embarrassed, and they’re going to make people feel it. And people are going to lose jobs and homes and all sorts of things because regional Fed governors don’t want to be embarrassed again. So I think at least over the next two months, they’re probably not going to change course. They’re going to continue to tighten. I don’t think there’s been a dramatic change in everything. I think this is a little bit of hope, and I think it is some earnings that have been reported that are better than expected. But I think in general, people are being very cautious about trades they make.

BFM

Tony let’s end the conversation with a look at oil prices. They are taking a breather on news that US stock bells have risen. How will that translate in terms of energy prices as the Northern Hemisphere moves into winter?

Yeah, the SPR, the Strategic Petroleum Reserve release, it’s put a lot of volume in the market in recent months. And of course, that’s lowered crude prices and it’s lowered the price of refined products. So after the election, and it’s no secret we expect the SPR releases to decline dramatically. And we’ve talked for a few months about how we expect crude prices to kind of spike towards the end of the year. And that would be spikes in crude prices and downstream products like, say, petrol. So we do expect that to happen in the North American market, kind of in Q4 and through Q1 out of the effects of that SPR release wear off.

BFM

And meanwhile, OPEC has also forecasted that China’s oil demand will decline by 60,000 barrels per day. Is that something that you see could cap further spikes in prices?

It could. I mean, 60,000 barrels isn’t a lot, but it could. I think if China were simply to end COVID Zero, it would really drive consumption of crude. So OPEC must expect further dampening of the economy in China, and that’s no surprise. I mean, China is really having a hard time right now, and whether or not they can come back in ’23 is questionable, so it’s no surprise. But 60,000 barrels a day really isn’t a lot, and I don’t think it would affect prices dramatically.

BFM

Tony, thanks as always, for speaking with us this morning. That was Tony Nash, CEO of Complete Intelligence, giving us his take on some of the trends that he sees moving markets in the days and weeks ahead.

BFM

Yeah, so we did see Meta shares plummet 17% on week fourth quarter forecast. And earning miss. It basically came up well short of Wall Street’s expectations. Earnings per shares earnings per share was $1.64 versus a $1.89, which was what was expected. Revenue was at $27.7 billion. Daily active users did meet expectations at 1.98 billion users, and the monthly active users came in at 2.96 billion versus 2.94 billion.

BFM

I mean, Meta is contending with a broad slowdown in online ad spending, challenges from Apple’s iOS privacy update and increased competition from other players like TikTok. It’s getting more expensive to run the company as Meta’s costs and expenses rose 19% year over year to $22.1 billion. And that’s something that Tony alluded to earlier, the fact that they’re likely going to see more layoffs moving forward. Tech companies have just been on a hiring spree that they cannot afford at this point. And I bet the WhatsApp outage the other day didn’t help a Meta’s fortunes either, at least in terms of its reputation and image. It could see a lot of people try to migrate elsewhere from using WhatsApp as their main communication source to another platform that is more stable, perhaps.

BFM

I must say we could wait until to see what happens towards the end of the year. Well, November actually, just next month when the midterm elections come, and we see if there’s any pick up in usage then.

BFM

That’s true. All right, it is 7:18 in the morning. We’re heading into some messages, and when we come back, we will be covering the top stories in the newspapers and portals this morning. Stay tuned. BFM 89.9. You’ve been listening to.

BFM

A podcast from BFM 89 Nine, the business station. For more stories of the same kind, download the VFM app.

Podcasts

Tech Crumbles as Spigots Close

Post author By admin
Post date January 20, 2022

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

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

Show Notes

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

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

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

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

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

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

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

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

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

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

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

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

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

PS: I think that’s a technology issue.

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

I apologize.

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

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

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

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

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

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

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

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

Podcasts

IPO Season Has US Investors Agog, Again

Post author By admin
Post date December 14, 2020

Tony Nash is back in the BFM podcast to break down what´s happening in the US Market with IPOs like Doordash and AirBNB selling at a higher price than expected. What´s up with the tech stocks? It´s obviously IPO season, and what should investors do. Should they buy? Also discussed is the current oil price rally to the high 40s. What is the expectation or forecast for oil in the last month of 2020 and the first quarter of 2021 for oil?

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/ipo-season-has-us-investors-agog-again on December 10, 2020.

BFM Description

Produced by: Mike Gong

Presented by: Khoo Hsu Chuang, Wong Shou Ning

It’s IPO season again in America and Doordash is first out the, well, door with a pop and wallop, while Airbnb is next, also with a higher price range, like Doordash. Which of the debutantes will be a Buy and which a Sell? And whither oil prices?

Tony Nash, the CEO of Complete Intelligence, discusses.

Show Notes

WSN: On global markets, we got to the line with us tonight, the chief executive of Complete Intelligence to break it down for us. Tony, thanks for talking to us. Nasdaq closed in the red after a 10-day rally. What’s your view? Is this just a technical correction?

TN: Well, Nasdaq still up 36 percent year to date. Things are still pretty good with tech stocks. But it’s been a lot of retail investors so far this year focused on fang stocks. Part of this decline today may be related to the stimulus talks. There are a number of other things involved, but if there is more stimulus, we may see more investment, especially in tech stocks. If you remember, the tech rally started in Q2 of this year really on people investing via Robin Hood in small increments. There were other institutional and retail investors, but Robin Hood investors really led to a lot of the run ups in these tech stocks.

KHC: And I want to pivot this conversation to an IPO, which is closed last night. So Doordash it debuted with an 80 percent jump to close at $189 from an IPO price of 102. Does that make you a buyer?

TN: It makes me a wait-and-see-er. Tech stocks have done really well. Stocks like Palantir are up 200 percent or something since their IPO. A lot of people are looking at those as an opportunity, which is quite possible. But tech IPOs tend to settle shortly after. We saw this with Palantir for a few weeks after the IPO. It declined, then it meandered. And then it really only started coming up over the past couple of weeks.

Doordash seems to have risen very quickly. I think it’s really on hopes, unfortunately, that a lot of the work-from-home stuff continues. Without work-from-home orders or stay-at-home orders, it’s really hard to see Doordash continuing at these levels. I think with a somewhat normal return or return to normal, people start going out again. Some of the people would at least rather go out than order in.

KHC: The other IPO is Airbnb, which is supposed to be priced later today. Is this a name you’re excited about?

TN: Sure I am. What’s interesting about Airbnb is it’s been very resilient with Covid. We’ve seen long-term rentals via Airbnb. We’ve seen people travel using Airbnb. When travel starts up again in a big way, they benefit as well. So it’s a really interesting name for me. It depends on what were the prices and where it goes. But on the face of it, it’s a very interesting name.

WSN: Yeah, it really is IPO season, isn’t it, Tony? I mean, what’s driving the liquidity? Is it still a retail market, institutional or a bit of both?

TN: A lot of it is retail. The retail investors are looking for the quick upside. People are trying to close out the year with as much juice as they can. I think a lot of the institutions were in very early. They take quick profits and then they just wait and see what happens. But if you look at the distribution, the allocation of some of these recently IPO tech companies, it’s a lot of retail investors.

KHC: With virus cases rising in the states, it’s almost certain that the FDA will authorize the emergency use of the vaccine today. So this brings back the question, do you think that the stimulus package that everyone is waiting or expecting, will they still be in the quantum of 908 billion or would it actually be downsized?

TN: I think it’ll be around the current level. The problem is, this is something that should have happened two months ago. And you’ve seen over the past two months, the U.S. economy really start to stall and sputter out. The employment picture is looking grimmer. The demand picture is looking a bit grimmer. If the U.S. wanted to keep things moving at the pace it had been in Q3, it really should have happened in late October. But it didn’t for political reasons.

And I think it’s really critical for these guys to come out with something before Christmas. The politicians look really stingy, like the real economy doesn’t affect them, which is true. And if they come out with something, they have the likelihood of looking like heroes before Christmas. So this is likely political theater so that they can build up some drama for a last minute agreement before the Christmas holiday.

WSN: Sliding over to oil, Tony, with crude inventories starting to build up, can prices break through the fifty dollar resistance level, do you think? And what are the catalysts needed to carry it across the threshold?

TN: Yeah, we think they can. So we’ve seen inventories build up. You know, they built up 15 million barrels over the past week, which is quite a lot well ahead of expectations. But, you know, we’ve expected oil to cross the 50 dollar mark in January, late December or in January. When we started saying this a few months ago, people really pushed back on this. We said we saw a spike in January in the crude price. And so we still believe that. NYNEX crude is trading at forty seven dollars right now. So even with the supply glut right now, we’re still seeing a forty seven dollar WTI price. So we think we’ll see high 40s, low 50s by January. Brent, of course, will be slightly higher than that. So we think breaking through fifty dollars is quite likely, especially at the start of Q1.

WSN: Hey, Tony, thanks so much for your time with us. Tony Nash, the chief executive of Complete Intelligence. And just to make a couple of remarks. And while we just discussed with him. The higher oil prices go, obviously the better it is for Malaysia because we are generally an oil country. West Texas is at 46, 47 right now is about 49 dollars, definitely, too.

He also talked about the Doordash and how he’s waiting to see Doordash. The numbers are not huge. They’ve only got like five million subscribers and they charged off the food guys 30 percent commissions to just deliver the stuff.

WSN: It’s not like they’ve had a choppy fiscal quarterly performance some months at some quarters up, some quarters down. And, you know what is so it’s so frothy. I mean, they nearly double the reference price on IPO day itself, already increased from two bucks, 100 to close 182 crazy, crazy days.

KHC: Well, I think, you know, at the end of the day, what is causing this one is that tech seems to be, you know, the darling darling on Wall Street. That’s when the second is that that clearly there still is a lot of cheap money flowing everywhere and nowhere to go.

WSN: Yeah, of course. Tony was talking about the Robinho traders, right?

KHC: Yeah. So as long as interest rates remain close to zero, I think people are willing to watch. And I used the funds, all investors, you know, regardless of whatever valuation. So it doesn’t really matter what your valuations are anymore. Exactly. So even like for Airbnb, you don´t even talk about earnings, you’re talking about price to sales because there is no earnings.

WSN: OK, well, talking about tech Facebook, right. The U.S. Federal Trade Commission in 46 states, 46 states, that’s just fall short of the full 50 complimented America. They’ve all brought antitrust cases against Facebook and accusing the company of using the social media dominance to crush competition. They’re calling for penalties that include a forced breakup and they are accusing Facebook of conducting a years long course of anti-competitive conduct.

KHC: Well, in particular, the FTC highlighted the acquisitions of Instagram in 2012 and WhatsApp in 2014 as designed to neutralize any competition, because the argument is that they are a monopoly and they cut off services to squeeze rival developers. So the FTC said it was seeking a permanent injunction in federal court that could potentially require Facebook to unwind its Instagram and WhatsApp acquisitions. Now, if I looked I remember correctly this morning, Facebook closed down, I think, close to two point six percent based on this news. So it doesn’t seem like, you know, markets are really concerned about this. Or maybe the point is any dispute with the government takes forever and ever and ever so maybe for the moment, I think people are just shrugging it off.

Podcasts

BFM: Of Trade and Tech

Post author By admin
Post date November 16, 2020

In this discussion with BFM 89.9, Tony Nash shares views on the latest on trade and tech. How will the US-China trade relations look like under a Biden administration and what is China hoping to accomplish with the recent antitrust regulations on its tech giants? Also, is now a good time to rotate on cyclicals with the successful vaccine trials? And is it possible to have a double-dip recession?

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/of-trade-and-tech on November 12, 2020.

BFM Description

What will US-China trade relations look like under a Biden administration? What is China hoping to accomplish with the recent antitrust regulations on its tech giants? We speak to Tony Nash, CEO of Complete Intelligence, on these and more.

Produced by: Mike Gong

Presented by: Lyn Mak, Wong Shou Ning

Show Notes

WSN: To help us make sense of this, we have on the line with us Tony Nash, CEO of Complete Intelligence. Biden has not outlined any concrete policy plans for the U.S. China trade relations. But do you think both countries will resolve some of the issues this time around, or will competing interests continue to dominate the narrative?

TN: I think it’s going to be hard. Obviously, the Biden family has deep ties to China, but I think the political environment in the U.S. isn’t really amenable to an easy fix. I know the foreign policy community in the U.S. really wants to just revert back to 2015, 2016, but the voters in the U.S. just won’t let that happen. So whether the administration likes it or not, they’re saddled with much of the positioning that the U.S. has taken over the last few years.

WSN: Now, what about China’s end game, you know, behind the new regulations targeting the tech sector? What are the potential impacts behind those changes, actually?

TN: Well, I think, you know, there’s nervousness both in the U.S. and China over the power of big tech. And I think China is nervous about the information that these tech companies are tracking, about the power they have over markets and behaviors. And I think they’re cracking down. There will be a perception that it will limit things in for Chinese companies in the short term. It certainly hurt the U.S. IPO and other things. But I think there’s a move globally to crack down on big tech. So I wouldn’t be surprised to see moves to crack down on big tech in the U.S. as well. It won’t happen until next year, probably. But there is a move globally and nervousness globally around a power that big tech has.

WSN: Yeah, but, Tony, if you look at the share price of big tech, especially in the U.S., so the likes of Facebook, there has been actually no change to the share price is still continues to do extremely well.

TN: Yeah, absolutely. But that is there are a number of factors that go into that. Part of that is Central Bank activity. Part of that is micro accounts and small investors moving into to these things. Part of that is a perception of things that may or may not happen within the next administration. So we look at Twitter, for example, it’s up 2.8 percent today. But, you know, there’s a lot happening that we believe there will be downside on that going into the end of the year.

So a number of things have changed with the expectation that we’ll have a vaccine relatively soon and that we’ll have continued stimulus and questions around where that stimulus will go. We can look at companies like Palantir, which are up, I don’t know, 60 percent since their IPO six weeks ago. So there are you know, that’s a twenty five billion dollar company now. It’s incredible. So, you know, there are companies like Facebook, Twitter, other companies that that there is a lot of nervousness about in the U.S., Google and so on.

And so I think what the Chinese government is doing and what the U.S. government is doing, although they’ll take different forms, I think they reflect similar concerns.

WSN: And, Tony, you did highlight the vaccine. So do you think now is a good time to rotate into cyclicals like aviation and banking? Is it too early?

TN: I think it’s a bit early. I think we you know, we had expected this stuff to come earlier, but I’m not necessarily we expect there to be a lot of excitement to going into January, but we’re afraid that we might have a false start going into the middle of Q2. So it’s probably a bit early to go in as aggressively as people have gone in. Obviously, it depends on expectations and the terms of their investment in a number of other things. But we would be really patient here. And, you know, we expect things to come a little bit later, although even a small opening is very exciting at this point.

WSN: Yeah, but related to this, Tony, is the fact that Covid-19 cases, especially in the U.S., are increasing every day and it’s the same case in Europe. So I see a new elford, the alphabet being used to describe the economy, a W, which is on the back of a face of a double dip recession. Do you think that’s a possibility?

TN: I think it’s a possibility. But I you know, at least in America, I don’t go to Europe. I haven’t been there for a year. But at least in America, most people aren’t really worried about Covid anymore. They just want to move on. And what people are worried about is hospitalization and death. They’re not actually worried about the virus itself. So the incidence is a bit of in the eyes of, you know, a number of people who I talk to, the incidence of Covid is less concerning than the hospitalizations and deaths. And so the number that people are really keeping an eye on is the hospitalizations and deaths, not necessarily the broad incidence number, which may or may not show may or may not have an impact. It’s really when things get hospitalizations and death. And so the treatment of Covid has taken huge strides in the past six months.

WSN: All right. Thank you for your time. That was Tony Nash, CEO of Complete Intelligence, giving us his views on the US economy, whether it’s as a possibility for a double dip recession, which he thinks is highly unlikely because it’s not the number of Covid cases, but unfortunately, the number of deaths and hospitalizations.

LM: Yeah, Tony’s a little also a little bit more cautious when it comes to whether or not it’s time to rotate into cyclicals. Right. Because we have seen a lot of excitement, even as he points out, a lot of excitement going into other stocks as we have seen news of vaccines coming out of Pfizer and an optimism vaccine, optimism has started to creep up again that we might see something by early next year. So he’s of the opinion that it’s going to that the rise in cyclicals is going to come a little bit later. So it means he’s going to hold off for the time being.

Tags bfm, biden, Chinese companies, Dow Jones, Kelsi, Phase 1 us-china trade agreement, S&P 500, U.S. government, US China

Podcasts

The Dow – Exxon out, Salesforce in

Post author By admin
Post date August 26, 2020

Dow Jones index booted out energy giant ExxonMobil and replaced it with Salesforce. What does it mean to the world economy? Will Tesla be added to the S&P 500 next? The Phase One deal trade went smoothly between China and the US — will conflict like in tech be resolved? And with the recent optimism on COVID-19 vaccines, will transport and hospitality recover and how soon? Our CEO and founder Tony Nash joins the BFM 89.9 team in Malaysia to share his outlooks on these issues and more on the global economy.

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/the-dow-exxon-out-salesforce-in on August 26, 2020.

BFM Description

Phase 1 US-China trade discussions, Salesforce displaces Exxon in the Dow Jones, Tesla’s fundamentals, and is it time to buy airlines? Tony also gets into his expectations from the Federal Reserve out of Jackson Hole this week.

Produced by: Mike Gong

Presented by: Roshan Kanesan, Noelle Lim

Show Notes

Noelle: The S&P 500 and the NASDAQ notched fresh highs. Facebook rallied after unveiling a series of tools designed to expand shopping on its social media platforms.

Roshan: The S&P was up 4%, The Nasdaq was up 0.8%. Only the Dow was down. It was down 0.2% and that’s the first day decline for the first time in four days. We take a look at Facebook was up a 3.5% actually overnight in Asia. The Nikkei was up 1.4%, Shanghai was down 0.4%,. Hong Kong was 1.3% and Singapore was up 0.8%. Malaysia, on the other hand, closed down 0.9% yesterday. So let’s take a look at how it open up later today.

But right now, we’re taking a look at global markets with Tony Nash, CEO of Complete Intelligence. Tony, thanks for taking the time to speak with us this morning. Discussions between the U.S. and China on their Phase One Deal, a trade deal went smoothly even as other tensions cement in the background. Is this a sign that other disputes, such as the tech conflict, can be worked out between the two nations?

Tony: I’m not necessarily sure it means the tech conflict can be worked out. I think it’s possible, but I think it’s more of a sign of the floods that happened in China and the ag supply needs that China has as a result of flooded crop land in China over the summer. There’s been something like $21 billion of economic damage done as a result of the floods. If you look at China’s commitments for US corn, soybeans, soy was up last week. They’re all up more than 100% on last year.

Noelle: Looking at the markets, Dow Jones Industrial Average, Exxon was booted out. Is this the beginning of the end for big oil majors or will energy companies catch a second wind as demand recovers?

Tony: I live in the town where ExxonMobil is headquartered, and I just don’t see an environment where ExxonMobil necessarily comes back into things like the Dow. Crude oil for the rest of the year, we see it, gradually grinding higher. In 2021, we see some supply issues which would push prices higher. But we’re not necessarily seeing equities like ExxonMobil all that appealing. ExxonMobil’s equity performance over the last four or five years has been terrible. You can’t really blame the Dow and the S&P for booting them out.

Roshan: Tony, let’s take a look at the whole replaced Exxon on the Dow Jones — Salesforce. Their stock rose about 3.5% overnight. Now, what’s your outlook on Salesforce?

Tony: Salesforce is a very interesting company. There are some client concerns about cost and kind of the necessity of sticking with Salesforce for so many activities. But I think as a shareholder, it’s positive. And the capability that Salesforce has is very good. So it seems like an appropriate add to the index.

Noelle: Do you think Tesla is likely to be added to the S&P 500?

Tony: It’s possible. I was just looking at the the PE ratio for Tesla. It’s over a thousand. It’s 1,047. You’re typically looking at maybe 15 to 20 or something like that, maybe expanding a bit more. It’s 1,047. Is it possible that Tesla started? Yes, but I think the volatility risk there is quite high. Just since August 11th, Tesla has gained about $700 per share. I think it’s great when it rises. Will it fall? I don’t know. I’m not necessarily calling that. But the volatility risk there is quite high for these indexes that like to be pretty stable industrial gauges.

Roshan: I think with those gains, no one wants to bet against Tesla at this point and or even chart the stock at this point. That’s why we’re talking about transport. This sort of airline shares seem to be trending upwards on the last few days based on news positive news around COVID-19 vaccines and treatments. But is it too early to be bullish in the transport sector?

Tony: It depends on how bullish you are. I see people saying that within four to six to eight months, there’s an expectation that things will be closer to normal. And I think part of the bullishness is people wanting to get in. There is not necessarily belief that monetary policy like central banks will reel in and will reduce their balance sheet. With this much money in the system and potentially more, it’s possible that, airlines might be something interesting as we get closer to normalization. Assuming that happens, I’m positive about that. Business in the States is slowly normalizing. Kids are slowly going back to school. The normal school year starts about this time. In some states like where I live, kids are going back to physical school, which is kind of a big change from the last six months. So we’re slowly starting to see normalization. And I’m optimistic about things like travel and hospitality.

Noelle: All eyes will probably be on what the Fed will cover on Thursday. What do you expect to be in their statements?

Tony: I hate to say this because everyone says that we’re kind of in uncharted territory. Right? It’s very cliche by now, but we are in danger of the US economy slowing. We’ve seen some of the initial excitement we saw in July and early August start to slow with jobs. The jobs numbers last week were over a million again. And so I think the Fed is worried because employment is one of their mandates.

We may see additional aggressive intervention by the Fed to make sure that the economy continues to come back. I think they have to be careful because it is an election year and they don’t want to be seen as being political. But I think the economic reality is that they have to. I think both the Fed and the Treasury, there are programs in the States like the Paycheck Protection Program, which helps small businesses get through the worst days of kind of COVID and that’s run out. And I think a lot of small businesses are really in trouble now because we haven’t seen things normalized. I think the Fed will come back with a bit more. I think the Treasury, once Congress is back in session, Treasury will come back with a bit more as well, support for individuals and for small businesses.

Roshan: All right, Tony, thank you so much for your time this morning. That was Tony Nash, CEO of Complete Intelligence, giving us his view on the inclusion of a Salesforce into the Dow Jones, among other things. Interesting times. I mean, Exxon, I think the Dow Jones is a price weighted index. So it does work differently from the S&P 500. But it is a milestone, right? It is. It is something to note the fact that Salesforce also is a very enterprise driven solution.

So that’s an interesting addition there. But Tesla. Tesla has been a very interesting stock to watch. I think it was what I was listening to a podcast yesterday about how even the shorts that still used to be a favorite among short sellers. And they’ve just I mean, if you are short seller of Tesla earlier this year, you would be deeply, deeply in the red at this point.

Noelle: Yeah. So I think that a lot of questions are whether it should be included in the S&P 500. Granted, the value of his stock has risen really significantly. I think questions about the quality of earnings, whether they can be sustained, you know, if the share price to frothy. So these are some questions that the committee will still need to confront. And I guess like what you know, what Tony’s saying at S&P 500 Committee, they will look for stability, right? They wouldn’t want to keep kicking out the stock in and out. So, yeah. So maybe, OK, set up. The Tesla may not be added.

Roshan: And of course, we’re all paying attention to what’s going to happen in Jackson Hole this weekend on the virtual Jackson Hole.

Tags 2020 election, Dow Jones, Dow Jones Industrial Average, economy, Election 2020, Exxon, Financial Services, Government/Regulatory/Policy Making, Jackson Hole, markets, Phase 1 Deal, S&P 500, Salesforce, tesla, The Fed, Trade Tensions, US-China Trade

Visual (Videos)

Deflation (and falling demand) is Still The Main Problem Globally Now?

Post author By admin
Post date June 7, 2020

This video is originally uploaded on Youtube at https://youtu.be/0D0IxTnufoo.

Jason Burack of Wall St for Main St interviewed returning guest, founder and CEO of Complete Intelligence, Tony Nash.

Tony’s company helps many companies solve their global supply chain problems and he has also lived and worked in Asia for 15 years in the past and advised the Chinese government on their economy and trade in the past. Tony’s company also uses AI predictive analytics software to predict stock market and commodity price movements.

During this 40+ minute interview, Jason asks Tony about China’s economy, the global chain, the threat of much worse stagflation and volatility in markets like stocks. Tony thinks that the main problem is still deflation and a lack of demand now regardless of the amount of currency, stimulus and bailouts governments do.

Show Notes

JB: Hi everyone. This is Jason Burack of Wall St for Main St. Welcome back to another Wall Street from Main Street podcast interview today’s special guest is a returning guest he is founder and CEO of Complete Intelligence, Tony Nash thank you for joining me.

TN: Thanks Jason.

JB: now Tony, I know you’ve lived in Asia for 15 years you’ve done a lot of work with the Chinese government consulting them on their economy. You’ve worked with a lot of companies all over Asia — Singapore, China, Hong Kong — helping them with their supply chains. So let’s talk about the Chinese economy and if you think it’s recovered post coronavirus.

You put out a survey about a month or so ago talking about unemployment rates in China with factory order…

TN: 50 million because at the time I think China had said that there were five million unemployed as a result of coronavirus and I put out survey saying “is it 0-5 million, 5-25 or something and then over 50.” And the vast majority of people responded over 50 million people. Not vast majority, but majority of people responded over 50 million.

I’ve since seen data that estimates unemployment in China alone as a result of coronavirus at 120 million or more. I think it’s safe to say nobody actually knows the real number. But it’s probably big. And it’s probably tens of millions rather than single millions. I think it’s a safe bet to say it’s probably north of 50 million. A number of economists watching China are still assuming that the government number holds.

JB: I’ve been reading articles quoting some factory owners and some factory owners in China. I don’t know if this is all the factory owners. But at least a few of them that have been quoting articles have been saying that their orders are down 70 percent. So exports are down a lot so there are not purchase orders for a lot of different companies right now is that what you’re also hearing?

TN: Sure there was just a piece out today saying that a survey in China has exports for May down 7 to 8 percent year-on-year. Imports are down almost 10 percent year-on-year. That survey data Is possibly under under waiting what the fall is. I don’t doubt that exports are down double digits and there has been some lag. As you remember from the kind of early mid Corona period, there were these supply chain issues of just getting stuff out. So initially, there was this wave of pent up export requirements just to get stuff out of China. But now things are starting to settle in because you have those demand in May, especially with the US and Europe closed, you have real demand depression. I think the main numbers may be overstated a bit and I think the exports may be down even more. Of course, it’s highly unlikely we’ll see that in the official data but it’s terrible.

I think things may be recovering a bit. I don’t think that China is in for a V-shaped recovery like we’ve seen, but I do think that they’ll come back maybe not to as much as they had thought they would but I don’t think it’s going to be a long-term depression.

My concern with China is in industrial production declines and the employment declines that come as a result of that and then the wage pressure that comes as a result of that.

JB: what is the percentage of GDP for exports right now because there’s a lot of people that are I would call them China trolls that tell me that it’s a lot lower amount but the numbers I’ve seen for exports as a percentage of GDP are still very high for the Chinese economy.

TN: It’s not as high as I once as I once knew. It’s definitely, I believe as a percent of GDP it’s it’s smaller than it was like five years ago. You do have that growing services economy component you do have growing domestic demand so but I don’t think it’s it’s definitely not as high as it was. Sorry I don’t have the number to hand but it’s really not what it once was>

JB: It seems that China has like astagflation problem right now in food prices and rent they’ve had to import an enormous amount of pork last year. All of 2018, they were having the African swine flu problem so the report shortages in China food prices were rising long before the coronavirus, and there’s a lot of videos online of shop owners protesting either rent not being reduced or rent prices going up by their building owner. So would you say that that’s why the Chinese government and the People’s Bank of China has been very hesitant about how much stimulus and QE to inject into their economy right now because they are worried that if they put too much in it will accelerate like a stagflation problem in their rural economy?

TN: I think that’s a concern. I think there’s also just concerns about the fiscal resources if the Chinese government has. Of course, they can print as many fun tickets as they want as long as it’s in CNY. But I think that is a concern.

I’m quite frankly more concerned about about deflationary pressures in China and just just on the face of it naked deflationary pressures through obviously the rest of Q2 and into Q3 and then how they potentially get out of it. I think China really hasn’t had an issue or had a problem with contriving inflation when needed. But if we do have the industrial production issues and the wage issues that I’ve been concerned about, I do think that deflation is more the overall and more serious concern there.

JB: That’s interesting because you’ve been predicting that the Chinese yuan against their exchange rate against the dollar it gets devalue down 7.2, right?

TN: That’s right.

JB: How would that jive then with deflation if they’re trying to devalue their currency?

TN: I think you’ve got both of those trends moving in the same direction. Unfortunately with energy prices down into the 30s, of course you have into the 40s. Yesterday or today, you have Brent move into the 40s. Sorry WTI. With the resources depressed, again, this is on a year-on-year basis.

But I think there’s serious downward pressure and will be continuing a series downward pressure on resources and commodities so the secondary impacts will also show a bit of producer price deflation. And then you have just the function of overproduction in China and having to sell those inventories. You don’t necessarily have the take off from the US. Partly I mean, this is a two or so year-old trade war, but because of our discussion, but because of the trade war, and then you have the issues in Europe with demand as a result of COVID, so I think you’re looking at more supply in China of manufactured goods.

They’re looking at commodity prices that I don’t believe we’ll come back dramatically. It’s it’s an ongoing issue. At the same time, you have the what I believe ongoing concerns for industrial production as a result of this and then there are the jobs and wages issues. If you have wages declining, then people just can’t pay for those goods so that’s disinflationary. Again I’m worrying about this where I think a lot of other people aren’t worrying about this. But it is something that I’m actually quite concerned about in China.

JB: It looks like the government can create even more distortions with what they try to do with intervention and central planning with the currency. We’re recording this interview right now in June 5th, the currency is that the Chinese Yuan is at 7.081 to the Dollar.

I’ve been reading articles that a lot of Chinese manufacturers are producing but there’s not really demand. So they’re stockpiling a lot of stuff. I’ve been reading a lot of articles lately too about a lot of oil companies in China importing more oil. I think they built another or the atleast announced another Strategic Petroleum Reserve. How many is that what five or six now? They are buying more oil. I don’t know if they’re using the oil because my friend tracks Chinese auto traffic data and he says it’s nowhere near the pre-coronavirus 2019 levels and there’s almost no traffic whatsoever on the weekends in the major cities. Only at rush hour is there actually like anywhere close to normal traffic levels and the other data throughout the day and night and on the weekends is nowhere is way way off.

TN: It’s not surprising at all. What it reminds me of is the kind of quotas for stockpiling for Soviet production and the kind of deflationary impact that had in many ways on certain goods in the former Soviet Union. In China, over production and stockpiling, I mean we’ve known about this and things like steel for years. But as it comes to finished goods, that’s hugely problematic given the volume that I suspect overproduction is happening and given the disappearance of demand in overseas markets and obviously domestic markets. Areas like automotive auto parts electronic goods these sorts of things that just people are not going to be renewing. Of course that’s not an absolute statement. It’s an incremental statement, but these things really hurt the manufacturing complex in China. We’ve all taken a pause generally from consumption in Q2 globally. In China it’s been a bit more stark.

JB: I think the factory orders are not coming in like you said in the stockpiling is just increasing the amount of credit that I think the Chinese government is injecting I’ve seen from China beige but they put an article out on their Twitter it was like 400 billion in a month pace. But I think a lot of that’s just going to keeping the factories running right now so they don’t go bankrupt.

TN: Yeah and that’s not surprising. I mean they don’t want people to be unemployed because they don’t want to see civil unrest. We’ll see more and more social controls in China so that there isn’t civil unrest because people are just bored out of their minds.

JB: Speaking of social unrest you know all the rules changes and stuff going on with Hong Kong. We’ll talk about U.S. and China trade relations in a couple minutes, but do you think that China one of the main reasons they’re going into Hong Kong is economically? Do you think that the Chinese government is eyeing that $400 billion that the Hong Kong Monetary Authority has to protect their dollar pay?

TN: Of course they are. I think the US was really smart to take away Hong Kong status very, very quickly because the incentive was that Hong Kong would continue to be this buffer zone and that China would continue to be able to benefit from that buffer zone and it’s fine if it’s a buffer zone and it really is a free market because in its heyday, and this is not that long ago like months ago, Hong Kong was the freest market in the world. But as you have the mainland authorities take over things like the judiciary, then Hong Kong no longer become the freest market in the world. So I think that was the reason or there are a lot of reasons but that was one of the reasons for them to grow assertive. China is looking for reasons to distract from the economy, which i think is extremely dangerous, but I think Hong Kong is one way for them to distract from their domestic economic issues.

JB: I completely agree. I think there was multiple reasons for what they did with Hong Kong and then what Trump does they gonna blame it on Trump.

TN: Right of course and that’s fine and that’s easy. Anything to distract, whether it’s incursions in India or whether its South China Sea or its Hong Kong or whatever it is. The Chinese ambassador to the UK making stupid statements about the Tiananmen, well kind of circumventing that. They’re doing anything they can to distract from their own domestic economy.

JB: I think yesterday was the anniversary of Tiananmen.

TN: that’s right

JB: For our listeners are not familiar, I think one of the tricks that what not the a lot of Chinese companies were getting around to not pay the tariffs last year was they were exporting their goods from mainland China to Hong Kong and then they were taking advantage of that. So they were re-exporting out of Hong Kong to avoid the tariffs that the US had put on. I think that was quite common practice, right?

TN: Sure yeah. Any sort of third country trans-shipment, but Hong Kong was as viable as any other, and because it had this relationship with the US, it was a very easy solution. But I think that’s becoming more and more difficult. Regardless of the goods, I think it’s becoming more and more difficult. Even things like exporting components or knocked down goods for assembly and their locations even that stuff is becoming more and more difficult.

JB: So now I want to transition to the US and China trade relations. We still occasionally get a tweet out from Trump or one of his representatives in the Trump administration or White House about how the US-China trade deal is progressing. But really, there’s been very little positive actions on China’s end about the trade deal. I think they made one purchase of soybeans. The trade announcement was in October 2019. So we have October, November, December, January, February, March, April and May. Finally, the Chinese government buys some soybeans in May. It was a fairly decently large order. But look at all the months that they didn’t really buy anything, it didn’t comply with phase one. So do you think the phase one trade agreement is dead?

TN: I don’t think it’s necessarily dead, but I think China is very good at negotiating agreements and very bad at going through on them. This is why the Americans were very focused on the enforcement mechanism within the phase one agreement. So I think the real question is, will the US follow through with enforcement? If the US doesn’t follow through with enforcement, then it’s just a piece of paper. It doesn’t really matter that much. But if the enforcement mechanisms come through, then I think it’s possible. Again, I’m skeptical. I was pleasantly shocked and surprised when the agreement was made in Q4. At the time, I was like most people skeptical about the ability to have that enforced because what are you gonna do? You can’t force people to buy stuff from you. That’s the real problem. Now with Hong Kong coming into the picture and with the US has action on Hong Kong coming into the picture, I think it’s going to be harder and harder for those for those the agreement terms to be exercised.

JB: My contracts in China, when the phase 1 deal was announced, they were really happy for the Chinese government. They were celebrating because no more tariff hikes. That was the main goal for the Chinese government for phase 1 announcement the trade deal was to make sure there was no more tariff hikes.

TN: Right. Evidently some of the state-owned buyers have started to look at soybeans and other products more recently. I’m just not sure that that’s real. I mean, this is some stuff that we’ve been hearing some transactions in the market. But stopping the tariff hikes is the first thing but actually getting them to buy is the more interesting part on the US side of course.

JB: But did Beijing just almost now for the last month or so there’s been press release announcements back and forth, back and forth between the US and China like Trump is now blocking the retirement savings I think of a lot of military and government employees from being invested in China, China then threatened to remove Chinese companies listing from US exchanges. Those are just a couple examples but back and forth back and forth back and forth. This is going. It doesn’t seem like this is Trump’s crazy way of negotiating from the art of the deal but this just doesn’t seem like it’s productive towards a trade agreement.

TN: I think it’s more of a recognition that these things haven’t been happening anyway. We may very well see more purchasing later in the year but I think this stuff is that there has to be well, there is tension between the US and China. China has become more aggressive in South China Sea in Hong Kong and other places, India. I think part of this is maybe not necessarily a direct hit on what may seem to be a problem it may be related to actions that China has been taking toward relationships that the US is becoming closer to. I don’t necessarily see trade as a single issue. I see trade as a multi-layered issue.

JB: Interesting. How important do you think what’s happening with Huawei and how the Huawei CFO, her extradition process in Canada is continuing, how important do you think that is?

TN: It’s very, because Huawei is kind of a crown jewel in China and I think as the UK starts looking to other technology as Huawei technology becomes an issue for Germany and they start looking at other sources, I think that removes China’s centrality to the deployment of these types of networks. Of course, that’s obvious. But the services, the information and other things that you can sell off of owning that network equipment is huge. So it’s not just a one-time sale. It is a long relationship. Now that doesn’t just have impacts on Huawei. It has impacts on places like China export-import bank or CDB. It’s not just the equipment, it’s the financing of the equipment. These centrally planned economies or heavily centrally influenced economies, it’s a game of musical chairs. Once you stop the music, it has knock-on effects for many, many other players. I think the Huawei issue with Canada and the US is that on its own is an embarrassing issue. But stopping the purchase of Huawei equipment in Europe and the US and other places has long-term commercial effects with Huawei, but also the whole value chain including places like Export Import Bank and other places that are supporting those purchases or supporting the financing of those activities, whether it’s Exim Bank or another bank doesn’t matter, but it’s the overseas financial services impacts in China is also stopped or slowing dramatically.

JB: Do you think then if the Huawei CFO, if the charges aren’t dropped, if this doesn’t stop with what’s going on with Huawei, that that’s a deal-breaker for the US and China trade relations? Are they going to be able to figure out a workaround?

TN: There are a number of layers here. First of all, it shows that the law is not the law in China, that you can be of a certain class and rank and the law doesn’t really apply to you, if in fact she broke the law, right? If she broke the law and China is still upset then, it’s a very clear indicator to Chinese citizens that the law doesn’t apply to people of Ming stature. That’s a problem for China. While they fight for her return, I think a very bad development for them would be that she has found guilty yet China still wants her let free and they let her go. That’s a real perception problem in China for Chinese citizens. But do I think it will impact the US-China trade war? I think every issue is connected when you’re talking to China. So now from the US side, the way Trump thinks is he bundles issues, and so the way American administration’s typically think is they think in an unbundled way. So the State Department typically cannot walk and chew gum at the same time. We’ve seen that for decades State Department will be happy about finishing one agreement when another agreement that should be linked isn’t and they can never get it done or something like that. What Trump and what his administration actually does very well from my perspective is they bundle things extremely well and so I don’t think the Trump administration itself sees that trade agreement as discrete and different from the main issue or from Taiwan or South China Sea or Hong Kong or any of these issues. I thing the administration sees everything is bundled which is not dissimilar from the way the Chinese diplomats and central government see things. They see everything is bundled.

JB: I see Huawei is one of the most important things for China because they have such long-term plans for it like you said like it’s their main cornerstone company, it’s their main technology company and then once Huawei has control over the 5g networks and all the other infrastructure there for communications, then the other Chinese companies the financing companies and all the others start to follow suit after that.

TN: Yeah. I think that’s fair.

JB: Let’s talk then about the global supply chain. It seems in January and February, the global supply chain started to break. Do you think that it’s being fixed now?

TN: Do I think it’s fixed? I don’t. Our US supply chains fixed. I don’t think they’re fixed. Is the Chinese supply chain infrastructure moving again? Yes. I think what’s happening is a number of important US importers and US manufacturers and even global manufacturers are trying to find places to reduce their risk and exposure to China. And not because they want to abandon China. I don’t believe that’s the case at all. I think we see people who are say super nationalist or whatever who want to act like these guys are interested in leaving China completely. I don’t believe that’s the case at all. I think global manufacturers are looking for incremental manufacturing capacity to reduce their risk if there is a second wave of Corona, if there is political unrest in China, if there is some sort of retribution or something. I think they want incremental manufacturing for that. And for that, they’ll look to places like Mexico, parts of the US parts, or Europe or somewhere else, other place in Latin America. I don’t necessarily see a wholesale substitutional effect for supply chains out of China at least for the first two to three years. I think over time, there may be more substitutionality. But right now, I think it’s more of an incremental discussion.

JB: Do you think India is gonna benefit from this because we’ve seen headlines where India is talking about subsidizing, trying to get more Apple supply chain out of China? I think they’ve gotten one company to move from China to India but they’re going after a lot more than that. They see this as an opportunity and the sentiment online, Tony, I don’t know if I’ve ever seen this before where lots of people here in the West in the US and Europe are talking about boycotting Chinese products. Now that’s easier said than done because a lot of stuff that’s partially made in China is finished assembling here in the US and then it’s stamped made in the US but it’s all the components that go into it are not fully made in the US.

TN: Do I might think India will benefit from this? I love India. I really wish India would benefit from this. But I think there’s so much corruption in India. I think it’s very, very difficult. I think it’d be a very difficult thing for any manufacturer to make a significant commitment to India. While I would love for India to benefit from this, and while I would love for manufacturers to move to India, I think the reality is from a bureaucratic, from a corruption, from a just sheer logistically difficult position, again, you know I spent a lot of time in India in the same way I spent a lot of time in China. I just don’t see that happening. I wish it would, but I just don’t see it happening.

JB: That’s sad.

TN: Yup.

JB: it’s sad, they have an opportunity to do it too.

TN: They do, but I think the institutional issues are so great that it’s gonna take them years and years to root that out. Look, having services functions moved to India? No problem at all. This is why the BPO sector started booming in India 20 years ago. But actually having physical Manufacturing, and physical logistics, I think it’s probably still a very difficult proposition.

JB: In some of your answers, you said that the large corporations don’t want to leave China said they don’t really care if some of their intellectual property or research and development or forced technology transfer or a forced Chinese silent partner they were okay with that?

TN: No, I’m not saying they don’t want to leave China. But they already have a large amount of investment there and so moving wholesale from China over the next two to three years presents a big risk for them. So I think, what they’ll do is initially move incremental production away from China. Let’s say it’s a new model or a new product line or a regionalised product line. Let’s say they do something just for North America or something, I think they’ll move that stuff first because those are new supply chains that they would be building out. New manufacturers or expanded with existing manufacturers and then they look at either new physical transport or expanded physical transport. All these things are things that they have to be careful of not just the risk in China, but the risk within the new supply chains that they’re developing in other places.

So I don’t think any major US manufacturer will rush out of China unless they’re absolutely forced to. I think they’ll develop parallel supply chains and incremental supply chains first. Test them out for a couple years and then gradually, some of that may be rapid some of that may be slow, but gradually move stuff out.

Before the financial crisis in 2008-09, many manufacturers, particularly Japanese manufacturers, but many manufacturers were looking at something that they called their “China plus one” or “China plus 2“ or “China plus 3 strategy”, where they were looking at manufacturing goods in China but having other locations as backups. Now when the financial crisis came about, all these manufacturing firms wanted to just get rid of risk and they saw these other supply chains as risk so they doubled down on China and they continue to build out in China for all the new equipment and hiring and everything else in China as well. So they saw it as de-risking or at least not growing risk, but actually by concentrating their activities it actually became riskier. Now with a place like Japan, we saw with the 2012 riots and protests and other things that the Chinese did against Japan, this was over the Senkaku Islands, we saw a lot of Japanese manufacturers move their manufacturing out of China. Initially it was slow, and then it became much faster. I think people looking to exit China will look at that as a template. It wasn’t that long ago. It was 2012, 13, 14 when this stuff started and then it moved. So I think they look at that as a template rather than China try to invent something wholesale.

JB: I think it could take years for more factories to leave China. Could take a significant amounts of the supply chain to move. There’s billions of dollars of investment. Some of these factories now are not cheap to build. It’s a lot of technology involved, a lot of investment. And given the global economy right now, and how the consumer has not come back, some of these investments may be delayed.

TN: Yeah, I don’t think I’ll take as long as a decade. But I do think it’ll take years. But having said that, I don’t think many of these manufacturers will completely want to remove their operations from China either. It’s a big market and the Chinese spend money just like anyone else. So they’ll have their China operations for China and maybe they’ll build for other parts of Asia or they’ll build especially parts or something like that. But I don’t think many of them will have global manufacturing based in China. I think we’re going to see re-regionalization of supply chains and we may have talked about this before, but the move away from say the NAFTA and Euro area around 2000, it was a zero sum where most of the stuff went to China over the next 10 years, 15 years, particularly in the first five years. But then it kind of bled over the next five to eight years and then it became completely concentrated in China and then with the centrality of China, kind of the regionalization complete now we’re starting to see the re-regionalization even if it is a higher manufacturing price because the risk associated with closing again with an event like COVID is so high that people just need to have supply chains closure at home.

JB: Yeah. You told me to call it localization and not de-globalization like Peters Ayhan has been calling it regionalization.

TN: Regionalization, yeah. I think the globalization is a bit of a, it’s charged first of all but I also think it’s not really accurate. I think we’re still globalized. We still have globalization. But I think we’re Re-regionalizing. Things were pretty regionalized in the 90s and then they de-regionalized, they globalized with China as the epicenter but I think we’re going through a phase of re-regionalization and I think we’ll dip into globalization as needed, we’ll dip into regionalization as needed because people can run pretty sophisticated supply chains now and so whereas 20 years ago it was harder to do that.

JB: Yeah, I totally agree. I’ve been reading articles and also my last interview with you where you talked about it, our listeners can go back I think in December 2019, where you’re talking about your company Complete Intelligence and the supply chain management software, the improvements it’s had just in the last couple decades. So in the past, when there wasn’t good supply chain management software, it might take a purchasing manager or manager, even a senior manager at the company, might take them days or weeks with phone calls and tracing to trace orders and exact amounts of the supply chain. Now they can do it on their on their iPad.

TN: Sure, yeah. Just the track and trace stuff, the location of stuff, that’s old technology and it’s very easy. I think what’s harder for people is to understand the true cost and cost scenarios for manufacturing a good. What is the cost at the element level or the component level of that phone that you’re building or that electronic equipment or that food item or whatever. What we’re able to do and I think things are moving is much more precision around taking those costs, breaking them out, understanding where they’re going over the next one to say 24 months so that you can really plan where the best location is, what the right price is, all this stuff. The geopolitics and the trade policy around trade, I don’t think that stuff will ever leave us. The precision with which you can plan around cost and price and other things, I think those things are allowing manufacturers to adjust really, really quickly and really have a bottom line impact within say 90 days something like that.

JB: I think a lot of these governments are talking about trade so much because they all are seeing that they want to bring back manufacturing for jobs.

TN: That’s right. Whether it’s Europe or the US or South East Asia. You look at a place like Malaysia. A lot of Malaysian manufacturing was transitioned to China between say 2000 and 2012, 2015. And now global manufacturing companies or for the past couple years they’ve been looking at places like Malaysia and Thailand again because it’s simply not China and so it’s not just localizing manufacturing in North America it’s looking at other regions and arbitrage in the regulations and the tariffs instead of arbitrage say the electricity price, which is one of the reasons people after Mexico, or regulatory in taxes, which is part of the reason people of the US. So, this isn’t just say a Western or European US issue. It’s regionalization in the truest sense.

JB: So these governments and central banks, it’s not just the US and the Federal Reserve. The European Central Bank, the Bank of Japan, the People’s Bank of China is doing some but nowhere near the amounts because I think they are really worried about the stagflation component, but they are flooding in general the global economy and asset markets with currency. Some people are getting what twelve hundred dollar checks. There’s SBA loans. Is this going to put a lot higher costs in the global supply chain? Are you seeing higher cost yet?

TN: I don’t necessarily foresee that, but I do think we’ll see incremental costs. So what you’re talking about is so much money is out there that chasing those goods will become more expensive. I think you’ll see that maybe in futures markets or in financial trading markets. But I think in terms of demand-led consumption, actually people buying tangible things, I think we’re in an environment where prices are hard for us to rise. Granted you see oil trading like I said earlier WTI broke I think $40 today, which is great. It’s healthy. But when that actually transitions into physical demand and how that transitions into other areas, I’m not really sure. Meaning, that $40 or how much price pressure is that going to have on downstream goods? Because $40 is much less than it has traded even though we had negative 37 and 20 and 28 and 32 for a long time, those prices are still pretty far depressed from where they have been historically. So I don’t see that. Typically when we have this type of stimulus that cash makes its way into things like real estate and equities and that sort of stuff. Will there be inflation there? Probably. But will we see it in supply chains? Probably not as much as one would think initially.

JB: So you don’t see a stagflation scenario where people in the US are going to be given more $1,200 or more checks per month and then because the global supply chain is not functioning at pre coronavirus levels, that there’s going to be less goods and services to purchase, so there’s going to be more currency creating less goods and services which would be stagflation airing that in my opinion?

TN: Certainly that’s possible. Not necessarily my central view. I think once you see these, the benefits and this $600 a week extra for unemployment, I think once you see that end at the end of June, I think we’ll see people really try to get back to work as quickly as possible. I think we will see some wage deflation among kind of white-collar workers especially in places and things like oil and gas. I’m based in Houston, Texas so I think you’ll see that stuff as those jobs become more competitive. But I don’t necessarily see a fully stagflation airy environment in the US.

JB: I think one of the main points though is the distortions that all these government interventions and the central bank intervention is creating because look at the stock market now that the stock market the Dow is over 27-thousand and I we haven’t seen any examples really of a recovery in the US economy yet.

TN: Again, markets are trying to find their levels and what I’ve been explaining to our clients is we will likely see quite a lot of volatility between now and say August, where we’ll see markets rise and we’ll see markets fall.

In hindsight, if we look let’s say on a monthly average basis, they may look like pretty boring markets. But in reality, we’ll see things rise and fall quite a bit until those markets, whether it’s say a copper price or whether it’s sp500 ETF. They’ll bounce around quite a lot. So again nobody really knows this is this is the problem it’s price discovery. When we talked with say procurement people, our supply chain people, even revenue planning people within companies, they’re all kind of making their best guesses. But they don’t really know and I think whether it’s somebody allocating a portfolio or whether somebody buying for a product, the planning, the precision of planning, the tools that people you are using really are not that precise and they really don’t incorporate a number of scenarios. We do have a lot of planning teams and let’s say portfolio strategy teams who are really kind of guessing and that’s why we see and we believe we will see the volatility in markets because it’s easy to look at the Dow or the S&P and say, “wow that’s too high” and then next week it swings 5% lower and then the week after it swings up 3% and so we see these things go up and down until we find that price where market participants agree that it should be in general region. I think we’re gonna be having that debate in markets for the next two to three months.

JB: I expect a lot more volatility even though the VIX is down below 25 that was below its support levels at 28. It was in a new trading range a higher trading range now it’s below that. But the Fed has talked about Powell and the Fed have talked about wanting to reduce volatility. Temporarily, they have reduced stock market volatility. But I’m looking for data out of the real world economy especially in the US economy where there’s improvement and I haven’t really seen improvement yet, now they are gonna we’re hopefully gonna restart the economy, but who knows if we’re gonna get a second wave of the coronavirus soon.

TN: Well if you look at driving right now, it’s at like 80 percent of pre corona. And this is part of what’s giving strength to crude oil markets. People are getting back on the roads. Not really getting back into planes that much yet. But they are getting back on the roads and I’m optimistic about that. When we start to see some of these basic signs of life at say 80% level, I think that’s positive. I do understand why markets were up today given the unemployment data and things like the road data that sort of stuff. Are they at the right level? I don’t know that anybody really knows but I think there is growing optimism that things may be coming back. The rate at which they’ll come back? Again, I think markets are going to debate that for at least a couple more months and then we’ll see real tangible, sustainable activities say late July August and people get an idea of where things will land for the rest of the year.

JB: Do you think the US economy is gonna have to make some really radical changes as in a lot of the bricks and mortar retailers, a lot of a lot of these casuals sit down in restaurants, they’re going to go away and the transition to e-commerce and online sales is gonna, it was already happening before the coronavirus, but now it’s gonna be a rapid acceleration than in the coming years?

TN: I think in general, I would say no. But I do think that a lot of your marginal businesses in strip malls or your marginal franchises or whatever that we’re just barely making it, I think it’s like this is a good time to cut those losses. I think things like real estate obviously you’ll see some changes there. But you know I think most people just want to go back to normal whatever that is. If we look at say pre 9/11, everyone said the world was going to change. It ended up being kind of a TSA check and so I think yes it’s easy. It’s been pretty easy over the past couple months to kind of extrapolate today into the future and today is forever. Normal is not normal anymore. But I think most people just want to get back to normal. Of course there’s going to be changes, but we’ve seen from some from some of the say protest activity over the past week, people will get out and they’ll go in public for whatever their right reasons are. Do I think the dining experience is going to change dramatically? I don’t. Do I think the shopping experience is going to change dramatically? I think it’ll change a little bit, but I don’t think it’s going to be some new normal of every single thing being done online and everything being delivered to house. Of course, people want that especially that’ll take off or continue likely in urban areas in a big way. But I think at the end of the day most people just want to get out of the house right now. They’ve been there for so long that they’re just trying to trying to get out and do something else aside from eat another meal in their house.

JB: The food delivery companies, they’re way overcharging on fees. I’m paying for a couple of my deliveries I think I ordered like a pizza and a couple other things and it was fifty bucks. It’s way more than than the normal cost.

TN: It’s very inflexible demand, very inelastic so if they can charge it, they will and I don’t blame them. I wish I was in that position.

JB: They still can’t make money if you look at their earnings report. Jim Chanos like put out a he posted an interesting article on his Twitter about like there’s an the Pizza arbitrage. Did you see that article?

TN: no

JB: Yeah. So him and his buddy who’s a restauranteur, they figured out that GrubHub was under-pricing pizzas so they bought ten pizzas at the GrubHub subsidized price and then they were able to basically make $100 per order risk-free, 80 to 100 dollars cash for is free. There’s an article that I could send you. It’s pretty funny.

TN: They could sell it to other people.

JB: They could resell it, but it was basically, they were there was an arbitrage trade because of like doordash and GrubHub were intentionally under-pricing the menu items and so people would order from them and their call centers so they could sell to Wall Street that there was growth that there was revenue growth for deliveries so the stock would still go up.

TN: Wow fantastic, what a game, huh?

JB: well I’m not the CEO of a publicly traded company like that but yeah it’s a bad and said there’s a lot of added incentives right now in society.

TN: Yeah.

JB: Well, Tony, I really enjoyed our discussion today. We live in very interesting time. One last question here about the dollar. So you think the dollar shortage is real and that the dollar is gonna start rolling soon?

TN: “Soon” is relative. So do I think the dollar shortage is real? Yes. Do I think the dollar is going to rally soon? I think it’s inevitable, but I think it really all depends on several things. But I do believe that emerging markets will continue to try to devalue their currencies because their exports especially China, I think that the dollar is in demand because there is so much debt globally, and they have to have dollars to pay down their their US dollar denominated debt. I do believe that Brent Johnson, his view his milkshake theory, I think is very solid and I think there’s a level of patience behind that theory and I don’t see the fundamentals changing that much. I think it’s a pretty elegant in the way he’s put that together.

JB: It’s a sound theory, but I think the US government the US Treasury President Trump who’s tweeted a lot about the dollar in the last two years, there’s a lot of ways that Congress and Trump and the Treasury can spend, can hand out checks, can do a plaza court agreement, if things get bad enough, they can do what FDR did in 1934. And if the dollar does get to those levels that Brent Johnson is predicting at 120 and the dollar index I mean that would collapse everything.

TN: Maybe. I don’t know that it would collapse everything. But I think it would certainly put strains on emerging markets. I don’t know that it would collapse everything, but I think it would certainly harm and I think emerging markets would have to live within limits that they haven’t had to for probably 30 years. So, and this is the basis of the end of the Asian century is they borrowed against the next 30 years to pay for the last 15, right. It’s just not sustainable since they don’t have a global currency and I think if you get a dollar north of say 105 close to 110, I think Asia just starts having serious serious problems.

JB: Yeah, I agree. And emerging markets have an interesting business model since China joined the WTO. So they set up to export to China either luxury goods or commodities and then they started borrowing in dollars especially around what after 2009, when the dollar index in what 2011 to some of the all-time lows there with Ben Bernanke just doing the QE programs. They basically started shorting the dollar at the worst possible time when the dollar was already relatively low and they were doing a lot of exports to China but then borrowing in dollar so it was a dangerous game that the emerging markets had set up.

TN: Very dangerous. I think being in those markets, betting against the dollar is a really hard proposition especially right now because the relative strength of the US, the US is in pretty good position compared to a number of these markets. It’s in a good position compared to say Europe. I’m not just talking like this month, I mean we’re all hurting this month. I think over the medium and long term from demographics to resources to other things, the US is in a is in a pretty good position it’s not in an excellent position I don’t think anybody globally is but I think it’s in a pretty good position.

JB: I want to thank you so much for your time today, Tony. If my listeners want to follow you more on Twitter or take a look at your company Complete Intelligence and the work you do, how did they do so?

TN: Sure, our company website is at completeintel.com on Twitter the company URL is or the company tag is @complete_intel. My personal twitter is @TonyNashNerd.

JB: Putting out a lot of good surveys and a lot of good stories, too, about the global trade in China as well.

TN: Thanks Jason. Thanks so much for your time.

Podcasts

How long can the bull run?

Post author By admin
Post date June 4, 2020

Now that the bull run has started, Tony Nash CEO and Founder of Complete Intelligence joins BFM 89.9 in another global markets discussion. What’s behind this rally and will it be sustained? They also discuss OPEC, the Brent price and its future, Europe’s fiscal stimulus, the ECB, and the resumption of trade war between the U.S. and China.

Listen to the podcast on BFM: The Business Station.

BFM Description:

On the back of an emerging bull run in Asia and the U.S., we reach out to Tony Nash, CEO of Complete Intelligence, for his thoughts on whether or not this momentum can be maintained, oil prices, as well as the ECB’s bond purchase programme.

Produced by: Michael Gong

Presented by: Wong Shou Ning, Lyn Mak

Show Notes

BFM: U.S. stocks extended their rally into the eighth straight day as investors clung to optimism for quick recovery from the pandemic. So the Dow Jones closed up 2.1 percent. The S&P 500 closed up 1.8 percent, and NASDAQ was up 0.8 percent. In fact, NASDAQ in the intraday trading did touch an all-time high. It’s as if COVID-19 never happened.

Meanwhile, Asia also had a very good run. Nikkei 225 closed at 1.3 percent. Shanghai was barely up, though. It was flat at 0.1 percent. Hang Seng was up 1.4 percent. Singapore was the big surprise here. We talked about it yesterday. The banking stocks were up and this caused the Straits Times Index to go up by 3.4 percent. Meanwhile, on the FBMKLCI, our market was up 2.1 percent. Also on the back of banking stocks, public bank RHP saw almost a pulping double-digit gains.

Pandemic? What pandemic? Never happened.

So this morning, for more insight into global markets, we have on the line with us Tony Nash, CEO of Complete Intelligence. Thanks very much for joining us this morning, Tony.

Now, equities have recently exhibited strong bullish momentum in both Asia and the U.S.. What’s behind this rally? And is it sustainable?

TN: I think a lot of it is the monetary policy expectations and the stimulus expectations washing through. It’s a lot of hope around activity in the summer, say, for crude prices, driving and consumption. There’s an expectation that there’s been some pent up consumption because of COVID. Some of this is coming back. It’s key to know that the U.S. markets are still 10 percent below where they were pre-COVID, 10 percent or more. So it’s not completely as if things never happened, but it has come back relatively quickly. The S&P, for example, was at around 2300. So we’ve climbed about 700 points in the S&P 500 since the nadir of COVID.

BFM: I always ask our commentators this, and I’m going to ask you also. Why the disconnect between what is happening on Main Street versus what’s happening on Wall Street.

TN: There’s an expectation that most publicly traded companies are going to pack as much bad news into Q2 as possible. And so they’re just throwing the kitchen sink into Q2. So that should mean pretty clear sailing for the rest of the year, assuming that it is 2020 and all. So anything can happen. But assuming that there isn’t another major catastrophe, things should be pretty clear for the rest of the year if every- and anything that could go wrong goes into Q2 data.

BFM: Brent has also erased some of its recent gains and is back below the $40 a barrel mark with the OPEC meeting now in doubt. What do you think oil prices will be heading?

TN: Our view is that things have been pretty range traded. We don’t see things going up to, say, $50 anytime soon. It’s possible. But we’ve expected things to stay pretty range traded until probably August or so.

We’re going to see daily rises and we’re going to see falls. But prices have come back a little bit on some drawdowns we’ve seen in storage and expectations around driving. Although, It’s not a perfect substitution for flying. And those volumes will still be down until we start to see people get back on planes. And until we start to see commuters back on their daily drives, we really don’t expect to see things come back above, say, $50 for Brent.

BFM: Shifting to Europe. The ECB is expected to expand its bond repurchase program this Thursday. So they’ve got a currency 750 billion euros outlay. Is that enough or do you think they need to increase it?

TN: It’s not enough. But I don’t know that Europe really has the financial wherewithal to do much more. They are not a fiscal union. And so they’re really having to contort their mandate to make sure that they can do this. This is really pushing Europe and the ECB and the concept of a quasi-fiscal union under the E.U. is putting real pressure on that.

So the limits of the monetary, not fiscal union are really pressed. And when you look at things like the insolvencies we saw in Greece and Italy and other places in southern Europe over the last 10 years, places like Germany are just tired of fiscal stimulus of other countries in the EU.

BFM: And if you look at the equity markets in Europe, that’s been also the lag out. Do you think there’s any opportunities there or is it a similar situation whereby the corporates there are going to not perform up to par?

TN: No, we don’t think they’ll perform up to par. Until we see countries beyond Germany really lift some of these lockdowns in a big way, it’s going to be really slow going. It’s strange how we’ve seen these protests really go against the lockdown. We may actually see some of these countries rip the Band-Aid off, because if you have tens of thousands or hundreds of thousands of protesters out there, it may be a situation where you can just say, “Well, lockdown’s over,” and you may start to see consumption patterns come back to normal. That would be a good thing for markets. That would be a good thing for companies. But European companies, especially European banks, remain troubled. And I think this crisis has really forced those banks to look in the mirror. And if markets are functioning well, then we’ll start to see some consequences, particularly for European banks.

BFM: Thank you very much for speaking with us this morning, Tony. And that was Tony Nash, CEO of Complete Intelligence.

He made some comments there about Brent crude, which he doesn’t really expect to come above the fifty dollars per barrel mark until perhaps we see planes start flying again. But the Trump administration has just made an announcement to that effect, saying that they are suspending passenger flights to the U.S. by Chinese airlines effective June 16th.

So the U.S. government said in a statement that it was responding to the failure of the Chinese government to allow U.S. carriers to fly to and from China. Now, this hasn’t, of course, been good for the tensions that have already been flaring between the two countries over the handling of COVID-19, as well as the treatment of Hong Kong.

China recently paused some agriculture imports after Trump threatened to limit the policy exemptions that allow America to treat Hong Kong differently than the mainland.

And that was done. The global economy was cheering and it looks like they’ve started fighting again. I think I’m just curious, what else is there to fight over? Because there’s been soybeans, beef, pork imports, corn, and now airlines.

U.S. airlines did see a bit of a share surge amidst the broader market rally and signs that travel demand is starting to rebound. Boeing was up 13 percent at one point after a report from IATA indicated that recovery was underway for global airlines.

So looks like we’re going to be watching that space as well, quite closely.

Podcasts

Worse GDPs, Market Expectations, Chinese Manufacturing, and the Rising US Dollar

Post author By admin
Post date April 3, 2020

BFM speaks to Tony about corporate earnings as worse GDPs, market expectations, and the Dow and S&P 500 extended losses after their worst quarter since 2008 as Trump warned of a “painful two weeks ahead”. They also get into Tony’s expectations for markets in April, the shortage of US Dollars globally and Chinese Manufacturing data.

Produced by: Michael Gong

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

Listen to the podcast at BFM: The Business Station

Podcast Notes

BFM: But right now. Let’s take a look at global markets, a deeper look at global markets and to do that, we speak to Tony Nash, CEO of complete intelligence. Tony, thank you for joining us on the line this morning. Now the Dow and the S&P 500 extended loss after their worse quarter since 2008, as Trump warned of a painful two weeks. I think, for the Dow, this was the worst quarter since 1987, if I’m not incorrect there. Now, how badly is this going to hit US corporate earnings across the board?

TN: It does really depend on the energy sector, but generally it’s hitting things pretty bad. I guess the good news is it’s only part of Q1. So the last few weeks of Q1, but I guess the big question mark and the reason markets are really saying negative is nobody is sure how long we need to endure?

It is another couple of weeks, is it another few months? And that’s why we’re seeing markets in the red because nobody really knows. And so I live in Houston, in Texas. So it’s the energy capital of the world. Malaysia’s feeling a similar pressure with the oil and gas and a lot of my neighbors, thousands of my neighbors have been laid off from their jobs. So it’s not just the stores being shut and things that are not happening. It’s actual incomes not coming in as well.

So that consumption part of the GDP calculation will be decimated for at least a single week. And this is why you’ve seen the big government intervention come in with the 2-terms plan, which allows government spending. That ‘G’ part of the GDP calculation, it allows that to replace some of the consumer spendings and that’s one component that’s been displaced over the last few weeks and will be displaced for the part of Q2. So, our view is it the last fiscal plan in the U.S.?

We expect at least one more, if not two, five to six trillion dollars of fiscal spending from the U.S. government. The real question is whether other governments can afford to match a similar proportion of their GDP. I’m skeptical that none of them can. So what matters right now to consumers is fiscal health, fiscal spending. For central banks do not matter as much. What matters is getting hands into the consumers.

BFM: U.S. right now has over 200 thousand COVID-19 cases and the situation does not look like it’s improving, and we might see even more lockdowns in the U.S. So do you expect markets will perform even more badly in April? And how might markets land in April?

TN: No, I think what’s affecting markets really is the uncertainty not necessarily the case count because, you know, not all tests are created equally. And what really matters in the case count is the denominator.

What we found is, yes US test is actually pretty accurate, unlike a number of other tests out there. And so the number of false positives and false negatives are a lot lower that’s my understanding of the US test. And the portion of population that’s been tested in the US is growing pretty rapidly. So although we see those cases counts growing, we see it as a fairly good example of the real picture in the US. Now, what we have seen on the ground here in the U.S. So the governor of Texas came out a few days ago and said that 99 percent of the bed space allocated for covered patients is empty. So we’re not seeing people in hospitals here. We are seeing things in other parts of the country. And of course, there are cases here. But what we’re doing again and again and again is that people will come in with other ailments that will be diagnosed as COVID. So COVID is a secondary or tertiary infection to something that is really, really ailing them.

So and that’s the question that people need to start peeling back is, “Is COVID the primary cause of that fatality or is was there already a number of other ailments in place and COVID was somewhat incidental?” Until we start asking these questions, you really won’t understand how deeply dire the problem is.

BFM: Tony, there’s a shortage of US dollars in the world today obviously as a safe haven. The Fed has introduced a new repo facility for foreign central banks to draw down on what you know about this facility and how effective has it been?

TN: Well, it’s been pretty effective. I mean, we see the trade weighted dollar down 99 with a 99 handle on it now it was up 103 or something, which makes it very difficult for people outside of the U.S. needing dollars. There’s a lot of U.S. dollars denominated debt. There’s a lot of trade conducted in U.S. dollars. So if the US dollar is expensive and if governments are having to buy medical equipment and other things in U.S. dollars, it makes it even harder for them to address some of these quality concerns. So the US government has been working very hard to help other countries by pushing the value of the U.S. dollar down. So these facilities and it’s easy for countries to put up pretty low quality assets in exchange for U.S. dollars. So that the U.S. can churn more U.S. dollars out into the global economy to grain that supply up and, of course, bring the value down. So I’m not really optimistic that they’ll be able to keep it down for long. I think the flight to kind of safe haven currencies is going to persist. So I think the dollar value is going to rise, continue to rise. But I think it’s really important for the Fed to focus on this and to take these efforts in the short term to help countries get the equipment they need and transact in dollars at a lower rate.

BFM: There’s a report forecasting a severe contraction for China this year, however, the latest PMI data beat market expectations. What is your current outlook on China’s economy?

TN: You know what’s interesting forecast, because the world’s economies can’t have a very downbeat China forecast without China’s permission. So, somebody is trying to get bad news out there, okay? So I think what we may be seeing, because we saw the PMIs came out a couple days ago that weren’t that bad. But we’ve also seen a lot of government spending to try to offset the lack of business and consumer activity. So there’s no doubt there’s going to be a bad reading in China this year. And I think the World Bank report is a way for the Chinese government to allow us to get out into the market first so they’re not seen as disappointing on their deliverable of 6 percent. So we’ve, you know, Complete Intelligence had believed that China’s been growing at 4 to 5 percent for the past couple of years. So with this, I believe it’s a 2.7 percent rate been said for continuous something, I can’t remember. But it allows China to deliver under 6 percent to deliver over whatever the World Bank forecast was so that they can start to notch down those expectations. So I think the World Bank report is probably credible. I don’t know that it’s necessarily that dire, but it might be, that I think it gives NBS and China an excuse to clock significantly under 6 layer.

BFM: Tony, how about your comments changed as the context of a couple of reports overnight suggesting a) that China has been doctoring the data on coronavirus the last couple of months and b) that a county in China, other reports suggesting that parts of the country is not under a new lockdown because of a further outbreak.

TN: Well, first, I don’t think it’s crazy that anybody that China’s been doctoring the data, but I don’t think China is unique. I think there are many, many countries out there that are doctoring the data. I think political leaders are afraid that corona would be seen as a political failure. And so I think many, many numbers. And China, usually have been singled out in this kind of data doctoring, which they’re guilty, but they’re not the only ones. So, you know, is there a resurgence of this? I don’t know if there’s a resurgence as much as maybe it didn’t pale off in the way the Chinese authorities said it did. So whether it’s a statistical resurgence, you know, maybe that’s the case. But these were you know, these were always there and they didn’t see the decline that was expected several weeks ago. I think that’s likelier than the fact that there’s just some crazy resurgence in COVID in China. But, you know, I don’t think anybody should be shocked. I don’t think China is angry or guilty than anybody else. They’re known for this. A lot of statistics ministries are known for its reporting and health agencies on this reporting. So it’s just the nature of reporting national level data that can be seen as politically sensitive.

BFM: Thank you so much for joining us on the line this morning. That was Tony Nash, CEO of Complete Intelligence.

Tags bfm, bfm 89.9, China Manufacturing, Chinese Manufacturing, Corporate Earnings, Dow Jones, GDP, market expectations, S&P 500, the business station, us dollar, US Dollar Shortage, USD, worse gdps

Recent Posts

Recent Comments

Archives

Categories

Complete Intelligence is in partnership with:

Products

Resources

Company