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Inflation, Just Transitory Not Hyper

The Fed just announced that hyperinflation is not happening in the US. Is this a transitory inflation and how long will this last? Where is the market headed now, then? What sectors and industries will be greatly impacted and how will they react to the vulnerabilities? Also, where is oil headed now that it reached $75 per barrel. Lastly, China’s clamp down on Bitcoin — how much impact does it have to crypto’s volatility? All these and more in this quick podcast with our CEO and founder, Tony Nash.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/inflation-just-transitory-not-hyper on June 24, 2021.

 

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Show Notes

 

WSN: So to give us an idea of where global markets are headed, we have on the line with us Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Now, the big question, where do you think markets are heading? Which direction are they going to take after Powell’s House testimony that the specter of hyper inflation in the US is unlikely?

 

TN: First, I think hyper inflation in the US isn’t really possible because the US is a global reserve currency. It’s really, really hard to have hyperinflation in the US. Powell knows this. Everyone in the Fed knows that. But I think in terms of the importance of his speech with the House, it wasn’t really all that significant, partly because he came across as unnecessarily hawkish.

 

People have been trying to back off of that ever since his speech. Janet Yellen coming out today bringing things back to a middle ground on Friday. So we think we’ll see upside from here. We’re not going to see major upside. We do expect things to get a bit rocky later in the third quarter. But short of dump trucks of cash out on every corner or a major new breakout of Covid, I think we are on a gentle glide path for the next couple of months.

 

PS: So, Tony, can you help us distinguish the difference between temporary transitionary inflation and what is permanent inflation? Because Janet Yellen is in that transitionary stage. But at what point does it become permanent, in your view? Are the triggers there?

 

TN: Well, what’s misleading a lot of people today is we have what economists call these base effects. Last year, you saw really prices falling, right? You saw economic decline. So when you’re looking at prices today, people are giving you a price in year on year percentage terms. So things are up 30% year on year. Things are up 50% year on year. Actually, when you compare them to 2019 prices, depending on the asset, of course, plywood is different, these sorts of things.

 

But things are not really all that inflated given where they were in 2019, which was the last normal year that we had. And then when you look at the supply chain issues we’ve had, you do have some uptick in that. But some of this perceived inflation really is mostly a base effect more than anything else. And then when you layer the supply chain issues on top of that, then it’s really created a mess.

 

SM: All right. I hear you, Tony. That’s fair enough. However, rising prices in the US seem to be feeding into pockets of the real economy. Which sectors or areas do you see as most vulnerable to this?

 

TN: Housing, we’ve started to see people put off housing decisions as a result of this. It’s hitting food prices in a big way, especially protein. So pork, beef, chicken, these sorts of things. But we’re seeing corn, soybean and other crop prices rise pretty dramatically as well. Wheat prices are up pretty huge over the past week or so. And then automobiles, when you drive by a car lot, an automobile lot here, they’re really only half full because automakers have had to slow down for a number of reasons, whether it’s the metals prices or whether it’s the chip shortages, the auto manufacturers have had to slow down. So it’s really hit those three sectors very hard.

 

SM: These companies who are in these sectors, have they been able to actually pass on the rising cost to consumers?

 

TN: Some they have. But we’ve seen, some food companies or other folks pass them on in housing. Definitely, it’s been passed on directly and in automobiles, yes, but I think it’s a bigger supply chain issue than it is actually inflation issues. So they’ll pass on those costs in one certain form. But I don’t know that they’ll be able to get 100%  or recuperate 100% of those costs.

 

SM: So are we potentially seeing some margin squeeze from these companies who are impacted in the coming quarters when we look at the earnings?

 

TN: Oh, yeah, absolutely. I think for companies who are complaining about the costs, but if they don’t see their margins squeezed, then we’ll know this is definitely temporary. But talking to almost any manufacturer here from polypropylene or polypropylene to ordering, industrial metals to wheat or something, everyone is feeling the pinch. But again, it’s as much access to supply as it is the cost of supply.

 

PS: So, Tony, you go upstream from propylene to actually Brent crude, and I think that’s hit $75 highest in 2 years. OPEC is meeting next week to decide whether they’re going to increase production. What’s your take?

 

TN: The U.S. crude prices are up a bit based on the drawdowns from storage in the U.S. and that’s on economic activity. States are finally kind of the states that had been holding back or finally opening up fully, which is good news for consumption. But with this Delta variant, there’s a real risk. It’s possible that Europe starts to lock down again as possibly parts of Asia start to lock down. Of course, we’ll have certain states in the U.S. that will probably move toward lock down again as well if it starts to impact.

 

So that’s a real risk on the consumption side. But for the OPEC+ group, they’re sitting on about 5.8 or 6 million barrels a day of production that they had before Covid. So they decided to cut this production so that prices wouldn’t go too negative or too far down. So they have that capacity that they can bring back online any time. If they discuss that next week, I don’t think OPEC wants to see oil prices because of the resentment it creates and the damage it does to consumers.

 

So I think there’ll be a lot of pressure on OPEC members to open up supply and bring prices down just a little bit. It’s not as if we need to see prices down in the 40s again, of course. But I think there’s a lot of fear that we’re going to see $80, $90, $100 oil and it is giving people a lot of reason for concern.

 

SM: All right. Well, we’ll be watching that meeting next week, Tony. And in a little bit of time that we have, one last quick question. What are you making about the volatility in Bitcoin that’s been happening this week? How much of it can be attributed to China’s crypto clampdown?

 

TN: Oh, sure. A lot of it can. About 70% of crypto mining globally happens in China. So as China clamps down, it really brings down the demand for Bitcoin and it brings down a lot of the pressure on the market. So it’s a little bit of regulatory and tax threat in the West, but it’s mostly the supply in China. And so a lot of that’s on the back of electrical grid pressures. So once the summer passes, the enforcement of that will likely lighten up and we’ll likely see more pressure on bitcoin, upward pressure on crypto markets.

 

SM: All right. Thank you for your time. That was Tony Nash, CEO of Complete Intelligence, giving us his views on markets. And I think what was interesting is that we can potentially see some companies being impacted by a margin squeeze because prices of certain goods, like you mentioned, meat in particular, lumber, corn or even, you know, all these downstream materials or byproducts of oil have gone up incredibly. And not all this price increase can be passed on to consumers because face it, the economy is just beginning to recover.

 

PS: Yeah, you know, because the these shubha transition. Right. Is it an issue of demand and demand is very high. Right. So maybe that when you can pass the price, but if it’s things like supply chain logistics as a result of, you know, breakages and, you know, it’s just all screwed up because of covid. Yeah, I think that’s very hard to pass on to the consumer. And that’s where the margin squeeze is going to take place.

 

SM: That’s right. And Tony mentioned automobiles as one of the areas where you’re going to see price rises. And I listen to this really fascinating podcast not too long ago on Planet Money, where they were talking about the used car sector. And the fact is that the they don’t have enough used cars to fill up the lots right now. So it really has that trickle down effect when you can’t, you know, produce more cars. Yeah, the second hand market will also suffer.

 

WSN: Apparently, Malaysia, our second hand market has also seen an uptick because of covid-19. There’s a reluctance for people to take public transport. So in the past, maybe you were you know, you hadn’t decided whether you want to buy a car, but now you’re kind of in that zone where you’re like, I need I need it because, you know, public transport, I’m not comfortable. Maybe this, you know, you think at the end of the day, why don’t I just get it rather sooner rather than later?

 

Plus, actually, interest rates are rather low. It’s only whether the question of whether you still have a job or whether how you feel in terms of sentiment.

 

PS: It’s fascinating because we talk about rising car prices and it’s also a lift to many things, lithium, SEMICON chips and all that. But on the flip side, we also talk about high oil prices coming through at the pump.

 

WSN: So we’re not so much for us because we are still subsidizing you run 95 Batla.

 

PS: Yeah, some of it’s going to be some of us. Pomerol 97.

 

SM: OK, I’m not one of those there.

 

PS: Well I do admit I do because my Volvo requires it. OK, in any case that is a challenge. I think in the long term it will hit the paycheck. Yeah. And the pocket later.

 

WSN: Well up next, we’ll be taking a look at the papers and the pottle. Stay tuned for that BFM eighty nine point nine.

 

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Podcasts

What’s Next For Crude Oil, Gold, And Cryptos?

As US and other markets decouple in terms of recovery trajectories, should investors adjust their portfolio? BFM spoke to Tony Nash, CEO of Complete Intelligence, on the major selldown of cryptocurrencies, as well as his thoughts on oil, gold, and inflation.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/whats-next-for-crude-oil-gold-and-cryptos on May 21, 2021.

 

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Show Notes

 

RK: Well, choppy waters, to say the least. There is a little bit of a mixed day yesterday over in Asia. But right now, to talk more about global markets, we have Tony Nash CEO for Complete Intelligence for more insights here. Tony, good morning and thank you for joining us on the line. Now, it looks like the U.S. and other markets are beginning to decouple in terms of recovery trajectories. How do you think investors should allocate their portfolios according to this scenario?

 

TN: Well, obviously depends on the time, but I think that some action was taken yesterday in the U.S. around Fed comments as people were trying to decipher whether those comments were positive or negative. And today, I think they realized they were actually fairly dovish comments. So the U.S. is positioning itself to grow and other parts of the world say Europe and parts of Asia are still very conservative about opening until, you know, I think with the places that are being fairly conservative about opening, it really depends on investment, really depends on government assistance, monetary policy, you know, these sorts of things.

 

So investing in those markets depends on support that those companies are going to get and how how those investments will perform.

 

LM: Yeah, I’m just wondering, there has been increasing fears about inflation. Is that influencing or changing your views right now?

 

TN: Well, so, you know, we’re realizing that things like like lumber prices, which a lot of people talk about, that’s been a processing issue in sawmills. There’s a lot of raw lumber out there. Those prices in many cases are the same as they were like, say, 10 years ago. OK, it’s the process into their bottom and making issues in a number of other areas. One area that we’re keeping an eye on is crude oil, which I know is important later, of course.

 

And we’re not we don’t expect a dramatic rise in crude oil prices, partly because I still have six million barrels a day on the sidelines right now. So even if we saw a dramatic uptick in travel and other activity, power generation and so on, there’s spare capacity on the sidelines for a lot of countries to be holding down. So we don’t expect to see and short of having production cuts, we don’t expect to see dramatic oil price rises because that that supply will come on the market as needed.

 

RK: Right. And beyond crude, Tony, do you know crude oil in general is quite correlated to inflationary pressures and prices, but beyond crude oil, are you paying attention to any other commodities out there? Because, you know, we’re seeing a surge in all of them. Which ones particularly catch your eye?

 

TN: For industrial metals are the ones that have really rallied from, say, November or December through this month? What we expect is not pricing to continue to stay strong, but the rate of rise will will slow down.

 

OK, so we’ll continue, for example, to see high copper prices, but we don’t expect copper prices to rise at the same rate as they had been for the past five or six months. We see that across the board in a lot of commodities where we have seen really dramatic rises based on, you know, government spending, monetary policy and also uncertainty about the direction of the dollar when these things are positioned in or denominated in U.S. dollars. We’ve also seen over that same time, because it’s so going that in China we saw the Chinese renminbi appreciate pretty dramatically, which made the dollar denominated commodities really cheap.

 

And so there’s been accumulation of those commodities in China, whether it’s food or whether it’s industrial or metals. And we’ve seen that stuff accumulated in China because these things are really kind of pretty cheap for them in China in terms.

 

RK: And one more commodities. Want to get your views on here, Tony, is gold because it’s seen some strengthening over the last few weeks. In fact, you know, it was more towards the high single digits. Now it’s at the one percent range. Do you expect it to break into the green? And what kind of range do you expect for the year?

 

TN: You know, we do expect gold to continue to rise at least through August, August, September. We think that there’s kind of a sweet spot and people take a pause on, say, cryptocurrency. And as people look at some of these other metals and other commodities where the growth opportunity has slowed, we do expect attention to gold as well as kind of other inflation and currency risk type of focus will turn to gold as well. We expect there to rise through those then kind of a pause late Q3 and then we expect that to continue toward the end of the year.

So we’re not looking at a doubling of prices or looking at a know, low double digit type of price rises in.

 

LM: And Tony, twenty twenty one was supposed to be a bumper year for U.S. IPOs. Is it still buoyant or has sentiment turned more south?

 

TN: No, no, even seems like like Robin Hood starting to offer fractional IPO shares on their platform. So where IPO are typically restricted to a select few? We’re starting to see some things happen where where smaller investors are given opportunities in some of these IPO. So we do expect that to continue as long as investors are there to invest in IPO. And we don’t necessarily expect that that will taper off dramatically. We may see some hesitation if we see markets turn south in June, July, but we won’t necessarily see a dramatic taper off to the end of the year.

 

NL: So we have seen the major sell down of crypto currencies. How is the volatility affecting crypto companies like Coinbase and market confidence to gain legitimacy with institutional investors?

 

TN: Yeah, no doubt it’s hurting their credibility because cryptocurrency has kind of become a bit of a mockery over the past week or so, we assume on tweets and a number of other things. But I don’t necessarily believe that crypto currencies are a thing of the past. They haven’t been retired yet, but we do expect to see cryptocurrency is more regulation, more explicit regulation and kind of soft infrastructure around cryptocurrency like Coinbase that goes along with it. They’ll have the infrastructure to be able to help in that crypto investors who along with regulation and do just fine.

 

TN: So I don’t think crypto her dad the new not necessarily realize that they thought they may, but but I do think it’s still something that’s viable within the broad based interests.

 

RK: Thank you so much for your time this morning. That was Tony Nash, CEO of Complete Intelligence. And let’s take a quick look over at the coin prices right now. Bitcoin thing, a little bit of a recovery. It’s up two point six per cent now, forty one thousand dollars and on a year to date basis, up to forty one point six percent year to date, still far off from the 100 percent or 90 percent year to date gains we saw earlier this this year.

We take a look at Etha. It is now two thousand seven hundred and seventeen dollars, or seventy two thousand two hundred eighty dollars a coin up a little bit, point four percent year to date, up 275 percent.

 

NL: Yeah, very quickly as well. Taking a look at a piece of news, the first quarter of 2021 doesn’t appear to be working out in a week’s favor. According to the F.T., Quarterly losses almost quadrupled on year to over two billion dollars.

 

RK: We work not working. Yeah, that’s a headline in the making right there. The losses incurred as so far this year, three point two billion dollars in 2020. Revenue fell almost 50 percent on year from one point one billion to six hundred million dollars. And the company lost around 200000 customers from a year ago. And this, of course, all information, according to the Financial Times, because this is not a public listed company just yet. In fact, they’re looking to try and go public again later this year after their first failed attempt a year to be eighty nine point nine.

 

 

 

Categories
Podcasts

Synthetic Economy

Tony Nash joins the BFM Morning Run podcast from Malaysia and explained why we have synthetic economy and how to navigate through this. Also discussed are tech stocks — is this the end for them?

 

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

 

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Show Notes

 

WSN: Nasdaq closed sharply down last night, continuing a trend that sees it almost erased all its year-to-date gains led by declines in Apple, Amazon and Tesla. Is this the end of big tech?

 

TN: I don’t think it’s the end of big tech. I think investors are taking a pause. We saw tech jump a lot in the wake of Covid. Investors are really starting to wonder how much additional growth is there over time. We’ve seen the work-from-home stocks and other things really get lifted through Covid. But how much immediate rapid growth is left is where a lot of the investor questions lie.

 

WSN: Is this also the beginning of a trend where we really see the rotation from growth into value?

 

TN: “Value” is a scary word right now. It has been for a long time. We have a ways to go, but I think we could get there. We’ve been talking for a few months about a pullback in March and we expect the pullback to continue and will begin to recover in late March, April. So we think this has a little ways to go unless there’s dramatic intervention by central banks and other things. But we think this pullback is not ideal but it’s necessary given stretched valuations and stretched expectations. So this is healthy for us. We just need to figure out what to do with it.

 

PS: Just give me another angle that instead of looking at it from values about sector specific, because yesterday, energy and financials did do relatively well. But was the energy upside due to the rising prices? And how does that correlate with OPEC’s decision coming soon with respect to oil production?

 

TN: I don’t think it gets really much more complicated than rising oil prices. These energy companies generally are still extremely bloated, extremely inefficient. Aside from the crude pressurizing, there really isn’t a lot that we see driving it. So we do expect commodities to take a pause. We’ve expected this for some time. We’ve seen copper come down by five percent or something.

 

Over the past few trading days, crude oil has leveled off in general. It’s not rising as fast as it was. Some of this has to do with CNY starting to weaken a bit. Chinese and the U.S. Dollar to start to strengthen their sort of related, but they’re not necessarily one and the same. So as we see some of that, an unraveling of some of that, Kerry, we’ll see some commodities start to come off of it as well.

 

WSN: BDA shows that the U.S. manufacturing grew at its fastest pace in three years. So are we really on the road to recovery?

 

TN: I don’t necessarily think that the economic growth expectations that we’ve seen from economists saying seven percent growth or something like that are necessarily the right way to go. When we look at the growth that we saw in Q4 and the growth that we’ve seen in Q1, I’m not sure we’re already back, at least in the U.S., to where we were before the virus. And so it’s really questionable for an economy that’s been growing one to three percent, depending on the year. Is a seven percent growth rate really warranted? Additionally, when you see things like deflation and the Chinese CPI, those two growth engines, we’re not necessarily seeing the rapid growth that some people have been claiming.

 

PS: Just another angle then, which is employment data, because December, January data didn’t meet expectations. What’s your outlook for February then?

 

TN: It’ll probably be OK. I think if the employment data is extremely positive. The US is susceptible to politicization of macro data just like everyone else. If we see a pop in employment data, I think they would be revised out. All of these macroeconomic indicators are revised three or four times. If we see a pop in a sample of employment data, which they look at a subset of houses and companies, they don’t look at the entire economy. If we see a pop, which we’re not necessarily seeing, we think that would be revised out over time. So I would say be really careful about optimism here. OK, it’s great. I live in Texas. We just announced that Texas one hundred percent open yesterday. All this stuff. It’s great to be optimistic, but we’ve really had synthetically driven growth. It’s not necessarily real growth. It’s all subsidized growth in many, many countries over the last, say, nine to 12 months.

 

WSN: That’s very true because this the twin Goldilocks effect of monetary and fiscal stimulus but somewhat related to unemployment numbers is that if the number is better on Friday, do you think markets might get nervous? Because that’s one of the indicators the feds are looking at to raise rates.

 

TN: We’re in that place where bad news is bad news and good news is potentially bad news. So we really have to be careful. What’s going to happen to Treasuries? Is the Fed going to raise rates? How does all that work if we start going to hot? I think it’s the right question that you’re asking. When we have an equity market and global equity markets that are so stretched, if the cost of money, which is what interest rates are, starts to rise, then we really have to be careful about equity valuations.

 

PS: During a deep dove into a specific sector, which is basically all this office collaboration companies like Zoom and Slack, what’s your outlook for those kind of sectors in the short term and mid-term?

 

TN: It’s good. They’ve grown a huge amount over the past year, but I really think we have to look at what growth is. They’re likely going forward, meaning there is growth. But is it as fast as what we’ve seen over the past year? I think the answer is probably no. They are probably also working on their revenue models to monetize some of the things that they’ve been giving away for free for the past year. Like a Zoom call is free. How do they monetize those things? That’s a serious question, but what are they substitution for and what do they enhance?

 

They’ve been substitution for meeting face to face people in the same office. But as more places go back to work, albeit slowly, they won’t necessarily need that for day to day, although it’ll still be used. Again, my question is the growth will be slower, but I would hope it’s better growth, meaning more monetized growth.

 

WSN: All right. Thank you for your time. That was Tony Nash of Complete Intelligence, giving us his views on markets and a very important point in that all these work from home teams may be the easy money is made because we did see stellar growth. Right, as everyone switch to zoom calls and all these kind of new technology. But now the question is, are we going to really see profit coming in? Is there going to be margin expansion?

 

PS: I want to know how they’re going to monetize and whether they’re going to expand the services beyond what they do. As Tony, you see, a lot of it is kind of free of charge. So what is the business model going to evolve to deliver sustainable profit? It’s a big question mark for me.

 

WSN: Yeah, and one company which hasn’t impressed is actually Snowflake, and that’s a data cloud company. Now, they announce a revenue for fourth quarter, which came in at one hundred and ninety million U.S. dollars, slightly better than the one hundred seventy eight million dollars that was expected. So this represents I mean, it is impressive when you just look at the headline numbers. It represents one hundred and seventeen percent growth year on year. But like as Tony highlighted, this company actually suffers a net loss.

 

So their net loss widened to one hundred and ninety nine million U.S. dollars. That’s more than double that 83 million in the. The same period a year ago.

 

PS: Yeah, I mean, the markets didn’t like it because the stock dropped eight percent on Wednesday. I mean, just a reminder to all of you guys, Snowflake was the largest IPO in 2020. Right. So with respect to guidance, snowflakes specs 185 to 200 million U.S. dollars in productivity in the first fiscal quarter, which is will be up about 90 to 96 percent year on year.

 

WSN: So, yeah, you can be hard on a stock that has a fantastic concept data. Right. Everybody wants that in the clouds. But in a day, patience with investors will run thin if you don’t make money. And that’s the reality of any business. So I think, like you sit like what Tony highlighted those companies where you see stellar revenue growth, but not profit after a while.

 

Market’s not going to tolerate it for that long. And when they issue like a set of results, which are below expectations and widened widening, no losses, no end to that, you know, no no sense of when are they going to turn around. I think you then see that sharp sell down again.

 

PS: And take, you know Tony, said something really interesting. Bad news is bad news. Good news could be potentially bad news.

 

WSN: Is that there is the cup half full or is it half empty? Sometimes the market is like this, the same set of data. Depending on the mood, the sentiment can be viewed either very positively or negatively. So if you get a better data but you’re in a positive mood, you can say, oh, the worst is over, let’s look forward.

 

But if you’re in a bad mood or you think the market’s being pessimistic and resolve, everyone’s like, oh, no more to come. So who knows? But up next, we’ll be speaking to on JinMing MP for Bungay about Malaysia’s economic recovery. Stay tuned. BFM eighty nine point nine.

 

Categories
Podcasts

Rotating Permanently into Cyclicals

In this Morning Run BFM episode, Tony Nash shares his views where equities are heading now that the 2020 Election has concluded. Will the new administration reverse China policies by Trump? Also, what is the implication to the world exports with a weaker USD and stronger CNY? Lastly on oil: what is its future? Will the rally continue? Does it have enough support?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/rotating-permanently-into-cyclicals on January 7, 2021.

 

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BFM Description

 

With a blue wave in Georgia, what does this mean for the US economy and equity market? Tony Nash, CEO of Complete Intelligence, tells us that the rotational play is now here to stay while giving us his view on oil prices.

 

Produced by: Mike Gong

 

Presented by: Lyn Mak, Wong Shou Ning

 

 

Show Notes

 

WSN: Joining us on the line for his take on where markets are headed is Tony Nash, CEO of Complete Intelligence. Equity and currency markets were waiting for the Georgia election results, which have just come out. Given that outcome, where the Democrats have won, where do you see U.S. equities heading?

 

TN: We don’t see major upside for U.S. equities without significant short-term intervention by the Fed or by some stimulus or infrastructure package. Given where Congress is, I’m not sure that there would be the ability to get much through Congress so it would have to come from the Fed. It’s possible, but we see more the hard assets like gold and commodities. And then you see crypto currencies rising pretty fast as well. But the risk really with equities is to the downside more than to the upside.

 

WSN: But if we just look at last night’s flows, there was some rotation into cyclicals like banks and small caps with less fund flow into big tech, perhaps over concerns of increased litigation action against them. Do you think this will change into a more long-term kind of rotation?

 

TN: We’ve expected that for some time. That rotation is long overdue. But the Fed have enabled tech and crypto to have a longer run. That rotation has been put off a bit. So if now is the time, great. We would definitely welcome it. We’re just overexposed in certain sectors.

 

WSN: And meanwhile, last night, US 10-year treasuries top two percent. What does that tell us?

 

TN: The U.S. is having a harder time raising money? They need to pay a little bit more to get money. I don’t necessarily think it’s a harbinger of inflation. Although it’s possible with a weaker dollar. I would say higher import prices. Chinese yuan on the run, strengthening. You may have higher import prices, but people have been warning about inflation for years now and we just have not seen it register. I think it just means that that the U.S. Treasury has to pay more to raise money.

 

WSN: And with Biden coming in on January 20th as the next US president, I would like to see a reversal of Trump’s more adversarial policies with China?

 

TN: Biden will be very accommodating to China. I think you’ll see different parts of the House and the Senate not be happy about it. But he’ll be absolutely extremely accommodating. More accommodating than Obama was.

 

WSN: What impact do you think that might have on the U.S. economy? Because in the past there was some shift into more U.S. based manufacturing. Will that then reverse?

 

TN: With the USMCA, the NAFTA number two agreement, I think there’s more incentive for companies to have facilities in the NAFTA zone. China obviously is more expensive and with an appreciating CNY, that makes it more difficult to invest while you get less for your money in China. China is becoming an increasingly hard sell. That has been the case since 2017, 2018. It’s not going to turn back. Until there is a reciprocal and enforceable investment agreement in place with China, I think China is where it is. I don’t think you would see a mad rush of direct investment going to China.

 

WSN: What are your views in terms of where the U.S. dollar is hitting? Because you just mentioned that the Yen is likely to appreciate?

 

TN: It already has. The Chinese officials are becoming a little bit nervous about how strong CNY has become because it’ll put a real damper on their their ability to export. You have the Euro versus CNY weakening. You have the Dollar versus CNY weakening. It’s coming to a point where it could be somewhat problematic for China. So they will push to weaken their currency, maybe not immediately, but say in first quarter. As you see more stability, post Brexit with the new normal Europe. As you see more stability in the US with the new administration, I think you’ll see a bit of relative strengthening of those two currencies versus CNY.

 

WSN: And shifting our attention to one of the commodities: oil. Yesterday, Saudi Arabia’s cutting oil output while Russia is increasing theirs. What’s the rationale for this? And OPEC members then divide it on production quotas?

 

TN: OPEC members may verbally agree to things. Whether or not they comply with that has been a burden for OPEC for decades. So what they all want is more volume export and the prices is the real issue.

 

So I think there’s an intention to present mixed messages so that there’s uncertainty in the market so that we see Brent price that’s sustainably above 50 dollars. That is is good for OPEC. That’s good for some of the producers like Malaysia and Texas where I live. I think consumers, we don’t necessarily to expect to see a sustainably strong oil price because we don’t necessarily expect to see a dramatic recovery in 2021. But we don’t expect to see a dramatic recovery that would spike oil prices up to 70, 80 dollars.

 

WSN: Do you expect oil prices to be where it is, which is currently around 50 U.S. dollars per barrel for WTI?

 

TN: For six plus months, we’ve expected a spike in January. And we’ve been telling people since July, August that we would see a spike in oil prices in January. And this is exactly what our artificial intelligence platform has told us for quite a long time. So we’re seeing what we’ve expected. We’ve also expected a fall going into February. Like I said, this is great. This is very much in line with what we thought would happen. But we expect there to be some downside to this and downward pressure within the next 30 to 60 days.

 

WSN: All right. Thank you for your time. That was Tony Nesh, CEO of Complete Intelligence, giving us his views on where markets are heading. And it seems like it’s not surprising that there’s a bit of a market correction or at least a market rotational flow out of tech, which valuations have kind of hit all time high and some rotation into the cyclicals like banks and small caps. But I think his views on oil are pretty interesting that it’s you know, we are going to see maybe a bit of downside from here.

 

What will he take? Reasoning?

 

LM: I think his comments about particularly what we can expect out of a Biden administration were quite interesting because commentators now kind of are kind of split over how they believe Joe Biden will kind of stack up compared to Barack Obama once he is inaugurated as president of the U.S. And the idea of Joe Biden being more accommodating than Obama, particularly with Trump also still continuing his crackdowns on China. It’s almost enough to give you whiplash, isn’t it? Because once January 20 is rolls around, how much of Trump’s measures will be rolled back?

 

I mean, only recently he’s just signed an executive order as well, banning several Chinese payment apps over security concerns. So this affects eight payment apps and it’s supposed to take an IT take effect in 45 days after Trump has left office.

 

WSN: Yeah, and what’s interesting is these eight p.m. apps are very well known to include the likes of ADP, Tencent, Cucu and even WeChat P now in the executive order, said that these apps captures swaths of information, including sensitive, personally identifiable information and private information. Now, how much of this an impact will have is unclear, since it’s understood that the usage of these apps outside of China remains limited. For example, the ALP has roughly one billion users, but they are mostly in China.

 

However, it does have deals with merchants in the U.S. such as Walgreens, and claims to work with more than two hundred and fifty overseas partners. Now, separately, the New York Stock Exchange has made another U-turn on its earlier U-turn to delist three Chinese telecom companies, which be. Going round and round and round, yeah, it’s like a mini roundabout now, so and these three companies are China Mobile, China Telecom and China Unicom.

 

LM: So the NYSE first announced that it would delist the companies on New Year’s Eve before changing course four days later. And the delisting complies with Trump’s executive order banning investment in Chinese companies with purported ties to the military. So the exchange said its latest decision is based on new specific guidance received on Tuesday provided by the Treasury Department. Treasury Secretary Steve Mnuchin reportedly called the NYSE president, Stacie Cunningham, to voice his displeasure with the decision to allow these three companies to remain on the big board.

 

WSN: Well, I think this story will just get the plot will get thicker and thicker, and whether the roundabout will get bigger and bigger, we’ll just have to find out. But up next, we ask the question, what can you do to attract more foreign direct investment for us? Ross, the senior economist with Mark, will be joining us for that discussion. Stay tuned for that BFM eighty nine point nine.

 

Categories
Podcasts

What’s Supporting This Risk-On Market?

In this discussion with BFM 89.9, Tony Nash speaks about the Dow breaking past 30,000 and what’s supporting this risk-on marketing? Also discussed are the stuttering economic recovery in the US, Janet Yellen as Biden’s Treasury Secretary and what that could mean to the world economy, and whether oil has more legs to rally right now.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/whats-supporting-this-risk-on-market on November 26, 2020.

 

 

Show Notes

 

 

WSN: To help us make sense of where international markets are heading, we have with this Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Now, it’s a bit confusing when it comes to markets because yesterday the Dow broke 30,000. But there’s a bit of correction this morning. So do you think this rally has legs? Is it a risk on or risk off for equities at the moment?

 

TN: Well, I think people really just took a breather today. I don’t necessarily think we’re seeing a fundamental shift or risk off environment. Equities are definitely a risk on environment, especially if you look at certain techs like Palantir. They were up almost 20 percent today. But, you know, when you look at things like the stimulus, we’ve had and the vaccine environment, you almost have a double accelerator environment where you’ve got this windfall of vaccines and all the same monetary and fiscal stimulus and potential new packages coming out. So there’s a lot of hope in these numbers. Valuations are really extended, assuming best case all around, which is what people do in situations like this. So it’s risk on at the moment, but we don’t necessarily expect this to be sustainable over a long period.

 

WSN: We look at the data that’s come out just on the eve of Thanksgiving, and it’s not positive at all because you’ve got higher unemployment claims and also weak consumer sentiment suggesting that the actual economic recovery may take longer than anticipated. So how do you reconcile all this with the actual market performance?

 

TN: What’s happening is we’ve had some state and local governments who are starting to shut things down again, worried that Covid will spread over Thanksgiving. And so, we get these legs to recovery coming and then the local, state and local bureaucrats who have absolutely no consequences to the decisions, they really kill economies that start coming back. And so Americans are really starting to push back and really starting to complain. So I think this is probably the last round of hard Covid lockdowns you’re seeing in different jurisdictions in the US because Americans are just fed up.

 

Maybe there may be something going into Christmas, but I doubt it. But I just don’t see much patience for this, because just as we have some sort of recovery coming, local governments come in and just suffocate any sort of recovery. So the jobless claims rising again. It’s more and more of the same where we have legs to recovery and then local governments come in and kill it.

 

I guess on a good note, orders for kind of good nondefense good rose almost one percent, which is pretty good news. It’s not terrible. They’re our collapsing consumer spending rose half a percent. So, again, it’s nothing to shout out, but at least we have growth there. So there is still positive news, but it’s slowing dramatically. And if these local government officials continue to suffocate local economies, we’re going to see things get much, much worse.

 

WSN: And what do you think about Janet Yellen as possible appointment as Treasury secretary? Do you think it’ll be good for markets.

 

TN: Markets like it. Some of the legislators like it. I think when she was the Fed secretary, she talked about fiscal stimulus not happening at the rate that it needed to happen. So if she’s a Treasury secretary, I think we can expect a big push for fiscal stimulus. We’ll see. My worry is, will the US become Japan with this kind of endless loop of debt being issued that then gets bought by the central bank? And there’s this circular economy that happens at the level that really doesn’t do much aside from a wash from the Treasury to the central bank. If that’s the case, then it could be problematic and it could be somewhat inflationary. But I just don’t think we’re going to see inflation here for at least a few years.

 

WSN: Meanwhile, does all look overbought to you at current prices? I mean, this morning, when I look at this Bloomberg screen is 45 U.S. dollars for the WTI delivery in January next year. Do you see any short term resistance? And what are the support levels we’re looking at?

 

TN: Right now, I think it’s because we’re seeing a lot of airline travel going into this Thanksgiving weekend. Airports here are packed. It’s the first time we’ve seen that in a long time since Covid. So people are a bit excited. I think jet fuel has been one of the main missing components for refined products in terms of demand. So I think there’s hope that maybe air travel is back, but I think that’s a bit early.

 

We really do expect some acceleration in the crude price in late December. And Jan, this is a bit early, but I don’t think this will last. Support prices, low 40s, 40 to something like that, which is right around where we’ve expected and where we’ve seen it. So things are a little bit ahead at the moment, but it’s not too far. We’re not seeing a six at all price, which we’re well ahead of demand.

Categories
Visual (Videos)

CNA Asia First: How the US Foreign Trade Policies will Change after the US Election

Founder and CEO of Complete Intelligence, Tony Nash joins CNA Asia First to give insights around the 2020 US Elections and how the possible turnout will affect US’s foreign policies, economy, and trade. Was the delay in stimulus affected the voters’ decisions? Can oil companies be greener without causing a lot of disruptions? And did Trump’s trade strategies yield results?

 

This video segment was published on November 5, 2020 and is originally from Channel News Asia’s videos on demand, which can be found at https://www.channelnewsasia.com/news/video-on-demand/asia-first

 

Show Notes

 

CNA: Now for more on the markets, the US elections, and economy including trade policy from whoever takes place in the White House going forward, Tony Nash founder and CEO at Complete Intelligence joins us from Houston, Texas.

 

So Tony, it’s been a very divisive election and I don’t know at this point is it worth looking back at how there was gridlock and was difficult for congress to push forward any form of stimulus leaving a lot of Americans out in the cold. I don’t know if there’s weight on the minds of voters that maybe the whole of congress was complicit in this issue. But where do you think paving the way forward for the American economy needs to start.

 

TN: It really depends on where in America you are. There are parts of America that just can’t wait to get out and work and there are restrictions. There are other parts of America where people want to stay in under restrictions and generally that’s the red-blue divide in the US.

 

What we’ve seen is more people wanting to push out demonstrations and say California and other places where people just want to get out. The stimulus issues with congress, there were a number of windows where stimulus could have come out. But it didn’t. And that was a lever that was pulled largely by the house of representatives before the election. They wanted to hold off from it. Especially business owners, very frustrated by that. People who have been laid off, very frustrated by that. Certainly, some of this has been a part of the voting consideration.

 

CNA: Both sides red and blue are blaming each other on why stimulus was difficult and not being pushed forward before the election. But I want to get to the issue of the backbone of some of the sectors of the economy in this election. Climate change featured very heavily. You come from an oil state. The bigger question now going forward is because of this increasing climate consciousness, can these sectors actually pivot away from oil without causing huge disruption, political and economic?

 

TN: That’s fine in terms of climate change. The US actually performed very well in terms of emissions and efficiency. The bigger issue for these oil companies is actually the inefficiencies of their organizations and we’ve seen a lot of oil companies come out to say that they’d be laying off 16 percent of their global workforce. They’re realizing that with oil prices where they are and gas prices where they are,
they just can’t sustain the bloated workforces that they’ve had to date.

 

So, yes climate change is an issue and that’s a consideration. But with the fossil fuel companies, they’ve had bloated workforces that they’re having to contend with now that oil prices are lower.

 

CNA: As we look back at what the Trump administration set out to achieve with its very aggressive trade policy based on the metrics of leveling or gaining leverage to negotiate better terms for trade deals, do you think it has achieved this?

 

TN: What the current administration has been doing is a long game. It’s not something that is a short-term plan. To get factories to move, to get capital investment, to get say supply chains to move, that’s a three to five to ten-year process and can be even longer for industries that have super heavy capital investment. It’s making progress. If you look at investments say in electronic supply chains going into Mexico, I think both the aggressive nature toward China and the USMCA have really helped.

 

The electronics industry come back to Mexico and to the US. Those are some of the faster moving industries where we’re starting to see some real traction. But it is a long game. It’s something that if that’s dialed back now, you won’t necessarily see that continue or you may not see that continue.

 

CNA: The way that the Trump administration up and NAFTA, it does seem that it antagonizes some of its closest security partners including Canada. Is that counterproductive trying to form an alliance to counter the rise of China?

 

TN: There are two things with the USMCA, the kind of NAFTA part two. There was an agreement among the partners that it was a much better agreement. Getting them to the negotiating table was the first hurdle. But once they realized what the US wanted to do, what I understand is all sides were very happy especially Mexico. But in terms of getting a coalition against China together, I don’t think the US has necessarily tried to do that. The US has understood that where there are multilateral organizations or multilateral relationships countering China, that China will peel off one or two or three to create division. And so the US has taken China on one on one. This was a strategy from the very beginning and it’s yielded some of the results. But again, it’s a longer term strategy that they’ve tried to undertake.

Categories
Podcasts

Signs of Broader Recovery

Tony Nash joins BFM 89.9 The Business Station to discuss possible broader recovery. Where are the markets heading? In which direction will U.S. equities likely trade for the rest of the month? How much will that impact the ongoing debate on further fiscal stimulus? And how about the US unemployment data and is China on the recovery path?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/signs-of-broader-recovery on October 1, 2020.


BFM Description

 

US jobs data will be released tomorrow but are we expecting better numbers? Tony Nash, CEO of Complete Intelligence sees a stronger pace of recovery for the US economy with improving macroeconomic data. He however does not expect a recovery in oil prices as demand remains weak while there are no supply shocks.

 

Produced by: Mike Gong

 

Presented by: Wong Shou Ning, Roshan Kanesan

 

Show Notes

 

 

WSN: But the question is where our markets are heading? So to help us answer that question, we have on the line with us Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Now the question, in which direction will U.S. equities likely trade for the rest of the month? Is risk aversion making a comeback to financial markets given the political and economic uncertainties?

 

TN: We expected a down month in September and that’s what we got. We’re also looking for a pretty difficult month in October, not quite as far down as September has been. But I think you’re right on the uncertainty side, one of the big unknowns is stimulus coming out of the US government. And obviously that would help move markets in other countries as well.

 

We should know by the end of this week if there will be more stimulus or the magnitude of that stimulus coming out of the U.S. So the real question around whether things will rally or fall is when the US will open up and when other countries will kind of fully open up, not partially open up. We look at, you know, Europe’s doing pretty well actually in opening up. Asia is doing pretty well. The U.S. is still kind of a patchwork.

 

So we won’t really know the near-term direction. But I guess I think over the next month we’re looking at at a bit of a fall.

 

WSN: And meanwhile, the Fed is extending the dividend by that limit with Wall Street banks till 2021. The announcement came out last night. So what does it tell us about the finance sector?

 

TN: We’ve been expecting a rotation into financials for some time, and that tells us that if dividends and buybacks are limited, those banks, obviously there’s a risk factor there, meaning that the regulators want those banks to hold on to their cash. But it also means that that the regulators also aren’t sure about when things will be back to normal. So that conservative approach forcing banks to hold on to their liquidity tells us that there’s not a lot of confidence in the next quarter or two. So we’ll really have to see the pace of recovery here in the U.S..

 

WSN: And Tony, just one more question on the U.S. and that’s the job data that’s coming out later today. Right? So there is out on Friday and it’s going to be the last one before elections. Are you expecting a good number? And how much will that impact the ongoing debate on further fiscal stimulus?

 

TN: You know, we do expect it to be a good number, the ADP number was out today and it kind of usually comes before the U.S. government’s non-farm payrolls number. The labor number. It was 750000 jobs added. That was one hundred or more thousand greater than was expected. Now, the U.S. Labor Department typically is higher than ADP. We expect the Department of Labor report on Friday to be about 900,000. So this is really good. Companies are coming back online. They’re employing there are fewer people out of work. That’s good for the recovery.

 

We keep hearing hesitation about the pace of recovery. We’re not sure of the pace. But from an employment perspective and even things like retail sales, the indications are good. So, you know, we’re hoping for the best. And unemployment is telling us that things are moving in the right direction.

 

WSN: And if you look at the recent EPA and EIA inventory reports are telling us that all demand tells us about the oil demand projections for the rest of the year. So what do you think? Do you think recovery’s a long way off?

 

TN: We do, actually. So production is up about 15 percent or so. Demand is still down 20 to 30 percent. So, you know, it’s not a good pricing environment for crude or for petrol. Downward pressure will still remain in those markets. We won’t see, say, Brent, north of 50 for some time. We won’t see WTI north of 45 for some time. There is a possibility we keep hearing we’ve heard for months about the possibility of a supply shock as demand comes back, which would push prices up. We’re just not seeing that at this point. And it’s going to be several months. If that does happen, it’ll be several months before it happens.

 

WSN: And one last question on China. The manufacturing PMI for September came in at 51.5 higher than market forecast. How much should investors consider a place in this figure? Does this number suggest that China is well and truly on the recovery path?

 

TN: I would be really careful of I’m looking at a China PMI. I’m aware of PMI generally, but I’d be I’d be careful of the China PMI. I haven’t believed it well, for years, if it really is ever, partly because it’s a kind of a second derivative of real data. It’s an opinion survey of future expectations and it’s an index of that opinion survey.

 

I know that sounds confusing, but you’re really far away from real data when you’re looking at a PMI number. And with China, the uncertainty and murkiness around Chinese economic data is something to be careful of.

 

So I would say if I’m investing in China, if I’m looking at data in China, the stuff that I’ve always found more important was first-hand information. What’s actually happening on the ground with your vendors, what’s actually happening in cities on the ground?

 

I’m not saying that China is suffering. I’m not saying China’s experience a massive pullback. I’m just not sure about the rate of recovery in China.

 

WSN: All right. Thank you for your time. That was Tony Nash, CEO of Complete Intelligence, giving us a somewhat optimistic view of the U.S. economy, saying that all the indicators are that recovery is their unemployment numbers should improve.

Categories
Podcasts

Is The Rally Ending?

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

 

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


BFM Description

 

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

 

Produced by: Mike Gong

 

Presented by: Roshan Kanesan, Lyn Mak, Noelle Lim

 

Show Notes

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

I think markets are pretty upset.

 

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

 

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

 

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

 

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

 

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

 

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