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The Death of Growth: Old & rich vs young & poor in 2030 & beyond (Part 1)

Our guest is Clint Laurent from Global Demographics, an amazing demographer, businessman and observer of global trends long before they really take hold. He shares surprising observations that he believes will happen in the next 5 to 10 years.

 

This is the first of a two-part discussion. Watch the second part here.

 

Clint started Global Demographics in 1996 and cover 117 countries throughout the world and China. They do that right down to county level of 2,248 counties. Clint believes that demographics are better than financial data from the point of view of forecasting  because they tend to be stable trends.

 

Global Demographics is able to come up with reliable forecasts at least 15 years out. After 15 years, reliability goes down and they are typically never more plus or minus 5% error in our long-term forecast. Their clients are mainly consumer goods companies, infrastructure backbones and things like that.

 

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This QuickHit episode was recorded on June 17, 2021.

 

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

 

Show Notes

 

TN: Over the last year or so, we’ve seen the pandemic. We’re now having this bullwhip effect with inflation and other things. But I guess this capping off in the last 20 years where we’ve seen China as the global growth market and the marginal consumer for almost everything. And it’s really forced me to think what’s next. You and I published a piece about a year and a half ago around China’s population topping out around 2023, 2024. And so I’m really curious, what do you see happening in the next 5 to 10 years that will really come as a surprise to people? What are some of your observations over the next decade?

 

CL: The world is actually as bizarrely almost on a bit of a cusp at the moment. The pandemic is almost irrelevant to what was going to happen. I mean, I know the pandemic caused a lot of economic disturbance, obviously affected some people’s lives quite significantly. But really, there was a lot of change that was about to start to happen anyhow, irrespective of whether or not the pandemic came along.

 

From a demographic point of view, the pandemic is not really very relevant. I’m currently based in the UK and the people who have unfortunately died from it, most of them would have died in the next two years anyhow because they had severe underlying health situations. And so, its effect on death rates has actually been very, very marginal.

 

Secondly, most deaths being over the age of 60, that means it doesn’t affect the labor force, it doesn’t affect the propensity to have children. So really, it will be a horrible little blip in the history of mankind. And hopefully we move on from it and the vaccines keep working. And so a little bit of hope there. But that aside, it was going to be a big change.

 

And if I can explain the change in the following ways.

 

Up to now, the world has perhaps been a little bit lucky in the sense to be, first of all, had what I call the Older-Affluent countries, and that’s Western Europe, North America and what I call affluent Asia — Japan, Taiwan, Australia. All of those countries, which are actually only 14% of the world’s population, account for a very significant proportion of the global consumption. As you know, it grew quite rapidly, which was really quite good. And that is really the first big change is going to  come into effect.

 

What’s already started to happen is people. The only growth in these countries is people over the age of 40. Every age group below that is in absolute decline. So even if they’re going up in affluence, the young affluent market is no longer a growth market. It’s more or less stable. Even if you add in increased incomes, which still occur, but at a slower rate. So you’re now looking at a 40+ age group, and in some countries, obviously, Japan is one, it’s 60+ that are the age group that’s growing.

 

So all of those societies, to some extent, are in a lot of trouble. They’re flattening out. They’ve moved from a pyramid population to a square, and that’s actually very good.

 

A lot of people say you should have a pyramid population with young people coming through and looking after the old. That’s actually the poverty trap. Because if young people come through, the dependance, first of all, will keep driving the society down. With a square, then the same number of people need education each year, the same number of people need health care each year. The capacity is there and it’s an improvement of quality rather than an increase of quantity.

 

TN: So you’re saying with these wealthy developed nations, Japan is an extreme example, consumption isn’t really the worry. It’s the growth that’s falling off. So the consumption is stable. It’s just not growing.

 

CL: Exactly. There’s one other big change to appreciate is what people say because they’re getting old, they’re going to run out of labor force. And here’s a statistic for you: In Japan, 25% of males, 70 to 74 are still in full-time employment. And you’re saying, “yeah, well, that’s Japan. It’s different everywhere else in the world.” You know, it’s exactly the same statistic in the United States.

 

The aged worker is a new phenomenon. In fact, the age worker is the fastest growing demographic. So these countries actually are not running out of workers. And the assumption that we all go decrepit and work after age 64 is just wrong. I am over 65, as you can probably guess. I don’t have a single friend who’s not in full-time employment at this point in time, enjoying it. It raises lots of issues.

 

So the labor force keeps going in these countries as well. So they don’t even need migrant workers to sustain these countries. So they are nice, comfortable niche. Growing steadily, not phenomenally. You’re talking about 1%, less than 1% growth in total consumer spending. Households are getting a little more affluent. Number of households is flattened out, which would have implications for the housing market. But it’s not going down, so it’s actually not too bad.

 

TN: So you say GDP is pretty stable, but what’s happening to GDP per capita in those countries? Does it continue to grow?

 

CL: It does, but just at a much slower rate. You’re talking 1% or even less than 1%, but it’s positive. And do remember, 1% of a hundred thousand US dollars is more money than the total income of households at the other end of the spectrum. Much of their spending power is quite significant. But a really important point to keep in your mind right now is that consumption expenditure will start to level out. It won’t hit that high growth rate anymore. It drops back to about 1% or even slightly lower.

 

Then the other big change you’ve got is what I call the next group of countries, which is older but not so affluent. And that obviously includes China. Now, let’s just put China to one side for the moment and look at the other countries in that group. You’re talking about Russia and the Eastern European countries. All of which have huge potential because like the previous group that I just talked about, they score really well on education.

 

And countries that score well on education, with the right capital investment, can lift the productivity. The countries that have weak education, it doesn’t matter how much capital you throw into them, they don’t lift their productivity. And there’s plenty of statistics to prove that. So these countries actually have a resource. I mean, Latvia, Romania. It doesn’t really matter. And that actually got the one thing that’s really hard to do. Good education.

 

Why is it hard to do? India has been really bad on education up to now. It finally has universal education. Every kid, 5 to 12 is now supposed to be in school. But it takes another 10 years before some of those kids come out of school and get into work. And it takes another 10 years before the workforce has become sufficiently skilled that the capital investment comes and lifts the productivity.

 

So these Eastern European countries and Russia are actually interesting from the QuickHit point of view. They start getting the fixed capital investment right, got the education right. They could actually be the next growth area. Only warning to you is they also are relatively old. So it’s a growth area of 40 pluses and 60 pluses. That is going to happen because they’re under earning at the moment. They can lift their incomes, obviously, buy bit of car, bit of clothing, all of those sort of things. But it’s a growth area of an older population, not a young population.

 

TN: And it’s something that nobody’s watching, Clint. Like, I don’t think anybody is really looking for that even as a possibility. A lot of people have written Russia off, see it as a petro state or whatever, and central and Eastern Europe is kind of just kind of a no man’s land in many cases. So some manufacturing there. There’s some services there in terms of globalization. But I don’t think there’s a lot of expectation to see rapid growth there and high productivity there. So I think that’s a really interesting question mark that most people aren’t even thinking about.

 

CL: That’s right. And if you go into these countries physically, you start to see some of the big brands starting to look at them. And you come across someone from XYZ Corporation there. We just have a little look. So some people are starting to see that it’s there. It’s just as you say, it’s not visible yet.

 

Let’s switch to China briefly. China slightly different and also very similar. First of all, remember 1989, China introduced the one child policy. That came under a huge amount of criticism. But ignoring how you feel about that, is one very simple thing it achieved. It levelled off the number of young kids needed to be educated. And subsequently started, it was 1979, they introduced. Such that by 1984, when they introduced compulsory education for all six to 12 year olds, they were talking of a relatively stable number of kids. So they could focus on the quality of education. And so every kid’s been going to school in such when you go to the year 2000, you’ve got this population still living in the rural areas. But who could read, write and do sums and all of those sort of things. Could get on their bike, go into town and get a job in a factory or an office or whatever.

And the differential between an urban worker and rural worker in China is 3.6. And that’s actually how China drove its growth and its productivity per worker and its influence. What it did is, it said, take all these people who are nice people, but not well-educated, not earning very much money, educate them, put them into job, let them earn lots of money, and have a good lifestyle. And that drove up the productivity and the whole success story of China.

 

 

TN: So urbanization and wage arbitrage, productivity gain for China. But is that running out in the next ten years or does that continue over that period?

 

CL: We’ve got it going through actually. It’s 20 million a year at the moment, which is a phenomenal number. That’s Australia, every year. It’s 20 million at the moment. We have it dropping down to about 11 million by 2040 because it’s still a lot of people moving there.

 

Now, this is the other big trick. Because some people have been saying, China’s population’s leveling out. And, you know, we thought it was 2023, where even the Chinese government agrees with us. Now, it’s 2023, and it’s leveling out. The working age population is starting to shrink. Oh, dear. That can have a decline in the workforce. No. They’re having a decline in the rural workforce. The rural workforce have in the next 20 years.

 

The urban workforce keeps growing for the next 10 years to 2030. The number of people working in urban jobs, which are highly productive, keeps going up. So for the next 10 years, China’s GDP growth still chugs along reasonably well. After 2030, the growth rate drops away and we have it down to about 1.3% by 2045, because it just isn’t the extra workers to keep growing the total GDP. So that’s the story there.

 

But again, coming back to the consumption side, China in the last 10 years in the urban area had this huge group of people, 220 million of them urban, aged 40 to 64 years of age, educated, earning quite good money by turning a stand and spending money on holidays and trips and things like that. And between 2010 and 2020, that went up to 100 million people. Think about it, a 100 million extra people with disposable income. It was no surprise that the retail side of China took off and tourism and all of that. It was those people. They’ve got a house. They’ve got a fridge, they’ve got a refrigerator. Let’s have some fun. That’s really what’s happening right now.

 

Now, the bad news is that now it flattens out. Every age group under 40 in China is already declining and will continue to decline in size. So don’t go after the kid market in China except on the wealthy and those sort of areas for education. The 40 to 64 age, what I call the working age optimist, it grows for a little bit, and then it flattens out. And it’s named the 65 plus, which in China is not like the other countries. The 65 plus at the moment doesn’t have great health, doesn’t have a great life expectancy. You get some extension of the workforce, but not a lot.

 

So China’s consumption is healthy as well. It’ll chugging along quite nicely. And to digress slightly, but I think we need to recover quickly here. The one child policy, it’s moved to three now. That’s totally and absolutely irrelevant.

 

TN: Yeah, it doesn’t seem like it’s going to do much. They’re too rich to want to have more kids, right?

 

CL: Exactly. And actually, it’s the birth rate that’s not the important point. It’s the number of women of childbearing age. And that goes down by a third. It drops 330 million now to about 220 million in 20 years time. And the birth rate can’t give up fast enough to compensate there. So births in 2019 are 14 million. It dropped to 10 million last year because of the pandemic, waiting to come back up a bit about to 14. It’ll be down to 11 million by 2030. And they can’t change that even with the three child policy. That won’t change.

 

TN: It’s not the three child policy, it’s the fact that there are not enough women to have babies. And those women are wealthy enough that they don’t want to have three kids.

 

CL: That’s really basically it. Just look at Singapore. They tried everything to get the birth rate up.

 

TN: I was there. They were paying people to have babies and it still didn’t work.

 

CL: Even send them on cruises. I mean, I volunteered.

 

And then you have, so that’s the second group. And the key point by the first group is nice and stable now, chugging along nicely, but no longer super growth in consumption. Nice growth in consumption is how I call it.

 

The third group, what we call the family stage. And that’s obviously dominated by India, Brazil, Indonesia all there. The bulk of populations is in that 25 through to 39, having children, at work, that sort of stage. So the working age population is still growing a bit, but not a lot. Education’s improving. It varies quite a lot across this group. India is at the weaker end. Indonesia is probably one of the better ends.

 

So, you’ve got a bit of a dichotomy there. But they’re generally in a position to be able to attract capital and generally in a position to be lifting their total consumption, but not dramatically. We’re still talking of relatively low incomes under 10 thousand USD for the average family per annum. So the growth is there.

 

TN: So Indonesia, India, Brazil and so on, the capital formation, capital investment is the real weakness there. And it seems to me that’s a function of, largely, education. Is that fair to say?

 

CL: That’s exactly what it is. As they get the education right and they’re working on it, most of these countries have been quite responsible in that area. And as they get that right, so the investment comes in, so the consumer gets more affluent and becomes a virtuous circle.

 

TN: And what time scale are we talking about for that consumption to come in a really notable way to take the place of the under 40 Chinese consumption or the under 40 Western Europe or American consumption?

 

CL: Well, that’s the bad news.

Categories
News Articles

“Take a tooth for a tooth”: Is it possible to use the “American version of the Belt and Road” to counter China?

This article originally published at https://www.voachinese.com/a/beat-china-at-its-own-game-will-us-belt-and-road-work-20210224/5792031.html on June 3, 2021.

 

WASHINGTON — The former U.S. Secretary of the Navy and former Senator Jim Webb recently issued an article in which he put forward an interesting proposal in which he called on the Biden administration to launch the “American version of the Belt and Road Initiative” to counter China’s influence in the world. Weber believes that the United States can do better than China. This proposal has sparked a lot of debate. Some scholars believe that the United States encourages free competition and that the “Belt and Road” initiative is not the way the United States does things.

 

Weber published an article in the Wall Street Journal on February 17 advising the Biden administration to consider launching the “US version of the Belt and Road.” “China invests in large-scale infrastructure projects all over the world to increase its influence, and the United States can do the same,” he said.

 

Weber pointed out that as an important part of China’s global strategy for hegemony, the Chinese government has established economic and diplomatic ties with developing countries in Asia, Africa and Latin America through the “One Belt, One Road” project, and conducted military infiltration on the grounds of protecting the interests of these projects. However, public discussions in the United States have not paid enough attention to this.

 

Weber believes that the Chinese government’s escalating military, diplomatic provocations and human rights persecution in recent years have made many developing countries hesitate to participate in the Belt and Road Initiative. He called on the Biden administration to seize this opportunity and begin to attach importance to the “often neglected countries” in U.S. foreign policy, and to give these regions the opportunity to choose the U.S. in order to counter China’s influence and prevent the world system from being coerced by authoritarianism. This is conducive to the “diplomatic and economic health” of the United States.

 

“This is not a doomed career, but an unrecognized opportunity,” Weber said.

 

Weber proposed that the Biden administration implement a comprehensive and coordinated policy in Asia, Africa and Latin America, integrating thoughtful diplomacy, security commitments, and project investment and participation by the American business community to fill the vacuum.

 

Weber also believes that the United States can do better than China. “The U.S.’s major investment in this—without colonial motives and based on a more credible and more time-tested business model—will forcefully start developing economies, and at the same time boost the U.S. economy, and inspire further progress in a global free society. Pre-development,” Weber said.

 

The United States encourages free competition, “One Belt One Road” is not our way of doing things

 

As soon as the article came out, supporters called Weber a “visionary pragmatist”, and the United States urgently needed to implement it, and it was not too late. Jose Manuel, a student of international relations at King Juan Carlos University in Spain, said on Twitter: “If the United States wants to prevent China from winning the title of world superpower, it will be able to retaliate and support the Asian and African countries. Investment projects in Latin America.”

 

However, American liberal economists urged that the United States should not follow China in its competition with China.

 

Tony Nash, founder of the data analysis company Complete Intelligence, told VOA: “The Belt and Road Initiative or the Made in China 2025, this is not an American way of doing things.”

 

Nash believes that the best way for the United States to deal with competition among major powers is to encourage free competition. The United States’ world influence should come from an international system that advocates transparency and free competition.

 

On February 23, John Tamny, editor of RealClearMarkets, a US economic news website, pointed out that “the influence of the United States is freedom.” He believes that projects such as the “Belt and Road” highly dependent on government regulation will only waste huge amounts of resources. , And damage the United States’ world image of advocating free competition.

 

In an interview with VOA, Michael Kugelman, director of Asian projects at the Wilson Center in Washington think tank, said that the United States’ number one strategic competitor, China, is exerting its influence on a global scale through the Belt and Road Initiative. It is true that the United States has increased its investment in overseas infrastructure projects. There is strategic value, but now is not the time. Currently, the focus of the Biden administration is to revitalize the US economy.

 

However, Joyce Mao, a professor of history at Middlebury College in Vermont and an expert on U.S.-Asia relations, supports the United States’ overseas infrastructure investment. She told the Voice of America that the US foreign policy that integrates mature diplomacy and strategic intervention is inseparable from the domestic development of the United States. But she also pointed out that it is a challenge to obtain sufficient American public support and bipartisan consensus on this point.

 

Whether the proposal can be supported by the American public

 

Henry Blodget, the founder of the news website Business Insider, said on Twitter: “Good idea, but the United States has not yet reached an agreement on investment in domestic infrastructure.” Independent media “Chinese “Non-projects” also said on Twitter: “U.S. taxpayers’ own roads, bridges, and airports are in a state of disrepair. It is hard to imagine that they will support huge investments in infrastructure construction in developing countries to compete with China.”

 

Nash of Complete Intelligence believes that the American public cannot accept spending trillions of dollars on overseas projects right now. Under the impact of the epidemic, there are too many places to spend money in the United States. If the US government spends money and energy on this knot to form a global infrastructure investment plan, it will certainly make many taxpayers angry.

 

Kugelman of the Wilson Center said that the top priority of the Biden administration is obviously to restart the motor of the US domestic economy. Investment in overseas infrastructure is a strategic issue worth considering in the future, but at least it will have to wait a few more months. “If you do this at the same time, Two things become a situation where you have to keep the cake and eat the cake,” Kugelman said.

 

“People who are struggling in the’rust zone’ due to industrial decline will not have a good response if they hear that their government will launch such a huge plan to develop infrastructure projects thousands of miles away,” Kugelman said.

 

Professor Mao of Mingde College said that Weber’s proposal while the U.S. economy is still trapped by the epidemic is worthy of scrutiny. She pointed out that there are many debates about where the health and well-being of the American economy come from. This has always been a classic political issue that has divided opinions between conservatives and liberals in the United States. At this special moment of the epidemic, this disagreement focuses on what kind of economic plan is the one that will enable the United States to recover from the epidemic.

 

Weber said in the article that US investment in infrastructure projects in developing countries not only helps to counter China, but also benefits the US economy. But Professor Mao pointed out that Weber’s proposal seems to “assume that most Americans can understand and agree that the future of the US economy depends on the existence of internationalism and interventionism”, but the reality is not the case. She said that although there is a lot of political support in the United States, especially within the Republican conservatives, in the fight against China, investing in large-scale overseas infrastructure projects may not be consistent with their political priorities.

 

“What benefits will the U.S. version of the Belt and Road Initiative bring to ordinary U.S. citizens? How will employment opportunities be realized? To what extent can it help develop overseas markets and other resources for U.S. goods?” Professor Mao believes that this proposal is necessary Get enough support. These are the basic questions that need to be answered to the American public and policymakers.

 

Kugelman: There are ready-made investment frameworks available

 

Kugelman pointed out that although a large-scale plan such as the “US version of the Belt and Road” should first give way to the restoration of the domestic economy, Biden’s policy can make good use of the relevant institutions and tools that have been established during the Trump administration to implement Related investment commitments.

 

In 2018, Trump signed the “Good Use of Investment Guidance and Development Act” (referred to as the BUILD Act), which merged the Overseas Private Investment Corporation (OPIC) and the Development Credit Administration (DCA) under the United States Agency for International Development (USAID) to form a new establishment The United States International Development Finance Corporation (IDFC) was established to enhance the United States’ international development financing capabilities, and expanded financing and financing tools to coordinate and promote the participation of the U.S. private sector in the economic construction of developing countries.

 

Under the “Free and Open Indo-Pacific Policy”, the Trump administration signed a memorandum of cooperation on a trilateral infrastructure investment partnership with Japan and Australia in 2018 to jointly encourage and support domestic private companies to build high-tech projects in the Indo-Pacific region that meet international standards. Quality infrastructure construction project.

 

In 2019, the United States, Japan and Australia jointly launched the Blue Dot Network (Blue Dot Network) to counter China’s “One Belt One Road” initiative in Asia. The plan unites the government, enterprises and civil society to evaluate and certify infrastructure projects under “common standards” to promote high-quality projects for sustainable development.

 

David Dollar and Jonathan Stromseth, fellows of the Brookings Institution’s China Program, also called on the Biden administration to implement a series of infrastructure investment commitments in Southeast Asia during the Trump administration. They pointed out that nearly 42,000 U.S. companies export products to 10 member states of the Association of Southeast Asian Nations (ASEAN), supporting approximately 600,000 jobs in the U.S. However, the U.S.’s economic position in the region is facing the erosion of China, and Southeast Asia has become Beijing. A hotbed of strategic competition with Washington.

 

Nash: Government-supported projects shouldn’t be a way of American competition

 

Nash, who had provided consulting and assistance to China’s National Development and Reform Commission on the “Belt and Road” project, told VOA that China’s “Belt and Road” operation principle is to transfer funds from banks that carry out overseas business in China to China, which invests in infrastructure projects around the world. Among state-owned and semi-state-owned entities, it is a way of financing overseas and domestic debt. Although the United States also has international financing institutions such as the International Development Finance Corporation (IDFC), its scale of operation is unlikely to support large overseas investment projects such as China’s “One Belt, One Road” initiative. In addition, China can provide loans with negative interest rates for certain projects, but US financial institutions that have always focused on risk management standards are unlikely to do so.

 

Nash also said that the best way for the United States to compete among major powers is to compete freely. Whether it is China’s “One Belt, One Road” or “Made in China 2025” industrial policy, it should not be the way the United States follows. These projects are highly dependent on the role of the government, and the government has invested heavily to support the technology industry or support domestic companies to invest in overseas projects. Doing so may nourish a group of companies and industries whose actual competitiveness is not up to the standard.

 

“The best way is to let American construction companies and infrastructure companies go out to compete for projects. If they can’t compete, then they should fail because they are not competitive enough,” Nash said.

 

At a seminar last month, Clyde Prestowitz, a well-known American expert on globalization and Asian issues and director of the Institute for Economic Strategy, said that the Biden administration should have a far-reaching industrial policy. “China has their Made in China 2025, and we should have our Made in America 2025,” he said.

 

Nash believes that the way for the United States and China to maintain influence and leadership on a global scale is to uphold the values ​​of transparency and free competition. He believes that the United States previously required NATO allies to be open and transparent in defense spending as a manifestation of leadership.

 

He believes that the United States should also continue to pursue transparency against government subsidies and non-tariff barriers, so as to ensure that the World Trade Organization can effectively perform inspections in this area, so that the world can see how the industries of various countries are protected. of. At the same time, the United States should also call on the international community to pursue transparency in foreign aid. Where does the money go?

 

“The United States has come forward to demand transparency in multilateral organizations, transparency in foreign aid, and a free competition environment for international bidding for infrastructure projects. This is the best way for the United States to demonstrate and maintain leadership,” Nash said.

 

How to do the “US version of the Belt and Road Initiative”?

 

Kugelman believes that the United States is still gaining the upper hand in the competition between the United States and China, whether it is military strength or a leading advantage in high-tech fields. Like Weber, he also believes that although the United States has faced some setbacks in soft power in recent years, it is still ahead of China.

 

Kugelman therefore emphasized that the United States should have its own pace and expectations in terms of overseas infrastructure investment, and there is no need to equalize with China in the order of magnitude. After all, China has already led too many steps in this area. “With some progress in the field of infrastructure investment, instead of investing heavily in this to catch up with China in vain, why not focus more on maintaining the United States’ competitive advantage and comparative advantage in its traditionally leading field?” Kugelman said.

 

Kugelman partially agrees with Weber’s view that the United States can do better in infrastructure investment. He said that the quality of many of China’s Belt and Road projects has been criticized, such as financial opacity, the breeding of corruption, damage to the local environment, and the substandard rights of workers. The United States can provide a higher standard and high-quality options for these issues. China has built surveillance systems through infrastructure projects in some areas to export authoritarianism. The United States obviously can also provide less intrusive options in this regard.

 

Like Weber, Kugelman also believes that China’s “wolf war diplomacy” in recent years has opened up opportunities for the United States. Kugelman cited, for example, that China’s aggressive strategy of flexing muscles in the South China Sea has sounded the alarm for many countries in the region, and began to question whether the consistent attitude of “asking the United States for security and asking China for money” should continue. He believes that the United States should focus on investing in countries like the Philippines that hesitate to China and are a key regional ally of the United States.

 

华盛顿 — 

前美国海军部长也是前参议员吉姆·韦伯(Jim Webb)最近发文，提出一项有意思的建议，他呼吁拜登政府启动“美国版的一带一路”来抗衡中国在世界的影响。韦伯认为，美国可以做得比中国更好。这项建议引发不少议论，有学者认为，美国鼓励自由竞争，“一带一路”不是美国的做事方式。

 

韦伯2月17日在《华尔街日报》上发文倡议拜登政府考虑启动“美版一带一路”。“中国在世界各地到处投资大型基建项目以增强影响力，美国也可以这么做，” 他说。

 

韦伯指出，作为中国争霸全球战略的重要部分，中国政府通过“一带一路”项目与亚非拉发展中国家建立经济和外交联系，并以保护这些项目利益为由进行军事渗透。但美国的公共讨论对此重视不足。

 

韦伯认为，中国政府近年来不断升级的军事、外交挑衅和人权迫害已让许多发展中国家开始对参与一带一路产生迟疑。他呼吁拜登政府抓住这一时机，开始重视在美国对外政策中“常被忽视的国家”，给这些地区选择美国的机会，以此抗衡中国影响力，防止世界体系为威权主义所胁迫，这有利于美国的“外交和经济健康”。

 

“这不是败局注定的事业，而是没被认识到的机会，” 韦伯说。

 

韦伯提议拜登政府在亚非拉地区实施一项各领域通力协调的全面政策，融合深思熟虑的外交、安全保障承诺和美国商界的项目投资和参与，填补真空。

 

韦伯也认为美国可以比中国做得更好。“美国在这上面的重大投入——不带殖民动机且基于更具信誉度、更久经考验的商业模式——将强力启动发展中经济体，同时提升美国经济，激励全球自由社会的进一步向前发展，” 韦伯说。

 

美国鼓励自由竞争 “一带一路”不是我们的做事方法

 

文章一出，支持者称韦伯是“有远见的实用主义者”，美国急需践行，为时不晚。西班牙胡安卡洛斯国王大学国际关系专业学生何塞·玛努埃尔(Jose Manuel)在推特上表示：“美国若想阻止中国夺得世界超级大国的头衔，就得以牙还牙，支持在亚非拉国家的投资项目。”

 

然而，美国自由派经济学家呼吁，美国不该在与中国的竞争中效仿中国的做法。

 

数据分析公司Complete Intelligence创始人托尼·纳什(Tony Nash) 告诉美国之音：“‘一带一路’或‘中国制造2025’，这不是美国式的做事方式。”

 

纳什认为，美国应对大国竞争的最佳方式是鼓励自由竞争，美国的世界影响力该来自于倡导透明和自由竞争的国际体系。

 

美国经济新闻网站RealClearMarkets编辑约翰·塔姆尼(John Tamny)2月23日发文指出，“美国的影响力就是自由”，他认为“一带一路”这类高度依赖政府调控的项目只会浪费巨额资源，并损害美国倡导自由竞争的世界形象。

 

华盛顿智库威尔逊中心亚洲项目主任迈克尔·库格尔曼(Michael Kugelman)在接受美国之音采访时表示，美国的头号战略竞争对手中国在全球范围内通过一带一路施展影响，美国增强海外基建项目投资固然有战略价值，但现在不是时候。疫情当前，拜登政府的重心是重振美国经济。

 

不过，美国佛蒙特州明德学院(Middlebury College)历史系教授、美亚关系专家乔伊斯·毛(Joyce Mao)支持美国的海外基建投资。她对美国之音表示，融合成熟外交和策略性干预的美国对外政策和美国国内的发展密不可分。但她也指出，要在这一点上获得足够的美国公众支持和两党共识是个挑战。

 

提议能否获美国公众支持

 

新闻网站商业内幕(Business Insider)的创始人亨利·布拉吉(Henry Blodget)在推特上说：“好主意，但美国都还没能在投资国内基础设施上达成一致。” 独立媒体“中非项目”也在推特上称：“美国纳税人自己的道路、桥梁和机场处于年久失修状态，很难想象他们会支持巨额投资发展中国家的基础设施建设以与中国竞争。”

 

Complete Intelligence的纳什认为，美国公众现下不可能接受花几万亿美元在海外项目上。疫情冲击下，美国国内有太多地方需要花钱。美国政府如果在这个节骨眼上花钱和精力组建一个全球基建投资计划，肯定会让很多纳税人生气。

 

威尔逊中心的库格尔曼表示，拜登政府的当务之急显然是重启美国国内经济的马达，投资海外基建是今后值得考虑的战略议题，但至少也得再等几个月，“若此刻同时做这两件事，就变成又要留住蛋糕又要吃蛋糕的局面，” 库格尔曼说。

 

“因工业衰退而挣扎在‘铁锈地带’的人们，如果他们听说自己的政府将启动如此庞大的计划，以发展千里之外的基建项目，不会有好反响的，”库格尔曼说。

 

明德学院的毛教授表示，韦伯在美国经济仍为疫情所困之际作出这样的提议有一定值得推敲之处。她指出，有关美国经济的健康和福祉从何而来有很多争论，这历来是个让美国保守派和自由派意见分歧的经典政治问题。在疫情这一特殊时刻下，这种分歧就聚焦在到底怎样的经济计划才是能让美国从疫情中恢复的计划。

 

韦伯在文章中说，美国在发展中国家投资基建项目不仅有助于抗衡中国，而且也有利于美国经济。但毛教授指出，韦伯的这一建议似乎是“假设了大多数美国人能理解和认同美国经济的未来依赖于国际主义的存在和干涉主义的存在”，但现实并非如此。她说，尽管在对抗中国方面，美国国内尤其是共和党保守派内部有很多政治支持，但投资海外大型基建项目可能与他们的政治优先项并不一致。

 

“美国版的‘一带一路’会给普通美国公民带来哪些实惠？就业机会将如何实现？能在多大程度上帮助开发美国商品的海外市场和其他资源？” 毛教授认为，这份提议若要获得足够支持，这些是需要向美国公众和政策制定者回答的基本问题。

 

库格尔曼：有现成投资框架可用

 

库格尔曼指出，虽然“美版一带一路”这样大规模的计划该先让位于恢复美国国内经济，但拜登政策可以利用好从特朗普政府期间已经设立的相关机构和工具，落实相关投资承诺。

 

特朗普于2018年签署《善用投资引导发展法》(简称BUILD法)，将海外私人投资公司(OPIC)和美国国际开发署(USAID)下属的发展信贷管理局(DCA)合并，新成立了美国国际发展金融公司(IDFC)，以增强美国的国际发展融资能力，对融资力度和融资工具都进行了拓展，统筹并促进美国私营部门参与发展中国家的经济建设。

 

在“自由开放印太政策”下，特朗普政府在2018年与日本和澳大利亚签署了三边基础设施投资伙伴关系合作备忘录，共同鼓励和支持本国私营企业在印太地区建设符合国际标准的高质量基础设施建设项目。

 

2019年，美国与日本和澳大利亚共同推出蓝点计划(Blue Dot Network)，在亚洲地区抗衡中国的“一带一路”。该计划联合政府、企业和民间社会，在“共同标准下”评鉴和认证基建项目，助推可持续发展的高质量项目。

 

布鲁金斯学会中国项目研究员杜大伟(David Dollar)和周思哲(Jonathan Stromseth)也在2月17日呼吁拜登政府将特朗普政府期间一系列针对东南亚地区的基建投资承诺落实。他们指出，近4.2万家美国公司向东南亚国家联盟(ASEAN)10个成员国出口产品，支持美国约60万个就业机会，但美国在该区域的经济地位正面临中国的蚕食，东南亚已成为北京和华盛顿之间战略竞争的温床。

 

纳什：政府扶持项目不该是美国的竞争方式

 

曾在“一带一路”项目上为中国国家发改委提供咨询帮助的纳什告诉美国之音，中国“一带一路”的运行原理是将资金从中国开展海外业务的银行输送到在世界各地投资基建项目的中国国有和半国有实体中，是一种为海外和国内债务融资的方式。美国虽也有像美国国际发展金融公司(IDFC)这样的国际融资机构，但其运行规模不可能支撑像中国“一带一路”这样庞大的海外投资项目。此外，中国能向某些项目提供负利率的贷款，但一向注重风险管理标准的美国金融机构不太可能这么做。

 

纳什同时表示，美国进行大国竞争的最佳方式就是自由竞争。不管是中国的“一带一路”还是“中国制造2025”这样的产业政策，都不该是美国效仿的方式。这些项目都高度依赖政府角色，由政府出巨资扶持科技产业或扶持本国公司进行海外项目投资。这样做有可能滋养一批实际竞争力并不达标的公司和产业。

 

“最好的方法是让美国的建筑公司和基础设施公司自己出去竞争获得项目。如果他们竞争不到，那他们就该失败，因为他们没有足够竞争力，” 纳什说。

 

在上个月一场研讨会上，美国知名全球化和亚洲问题专家、经济战略研究所所长普雷斯托维茨(Clyde Prestowitz)曾表示，拜登政府该有一个影响深远的产业政策。“中国有他们的中国制造2025，我们应该有我们的美国制造2025，” 他说。

 

纳什认为，美中在全球范围内维持影响力和领导力的方式是秉持透明和自由竞争的价值理念。他认为美国之前要求北约盟国在国防开支上做到公开透明就是领导力的体现。

 

他认为，美国也该继续针对政府补贴和非关税壁垒等现象追求透明化，确保世界贸易组织能够切实做到这方面的督查工作，以让全世界都能看到各国的产业是如何被保护的。同时，美国也该呼吁国际社会在对外援助方面追求透明化，出去的钱到底流向何方？

 

“美国站出来要求多边组织的透明度，要求对外援助的透明度，要求基建项目的国际竞标有自由竞争的环境，这才是美国展示和保持领导力的最佳方式，” 纳什说。

 

“美版一带一路”怎么做？

 

库格尔曼认为，美国目前仍在美中竞争中占上风，不管是军事实力还是高新科技领域的领先优势。和韦伯一样，他也认为尽管美国近年来在软实力上面临一些挫折，但仍然领先于中国。

 

库格尔曼因此强调，在海外基建投资方面美国该有自己的步调和预期，没必要非得在数量级上和中国平分秋色，毕竟中国在这上面已经领先太多步了。“在基建投资领域取得一些进展的情况下，与其在这上面投入巨资徒劳追赶中国，何不更加专注于保持美国在其一贯领先的领域的竞争优势和相对优势呢？” 库格尔曼说。

 

库格尔曼部分认同韦伯对于美国可以把基建投资做得更好的看法。他说，中国不少一带一路项目的质量收到批评，比如财务不透明、腐败滋生、破坏当地环境、工人权益不达标等等。美国可以针对这些问题提供一个更高标准高质量的选择项。中国在部分地区通过基建项目大造监控系统，输出威权主义，美国在这方面显然也能提供侵入性更小的选择项。

 

和韦伯一样，库格尔曼也认为中国近年来的“战狼外交”给美国开创了机会。库格尔曼举例说，中国在南中国海愈加秀肌肉的蛮力战略给该区域的许多国家敲了警钟，开始质疑“向美国要安全，向中国要钱”的一贯态度是否还该继续。他认为，美国该重点投资像菲律宾这样又对中国产生迟疑又是美国关键区域盟友的国家。

Categories
QuickHit

QuickHit: The Anglosphere and the Multi-Speed Recovery

Macro specialist, geopolitics and history commentator Nick Glinsman joined us for the first time on QuickHit to discuss how the Anglosphere compares to the world in this multi-speed recovery in the wake of Covid.

 

Nick is based in Brazil and he brings decades of experience to macro, markets, and politics. His background is basically London and New York with a bit of Europe and, Australia and Hong Kong. He worked with the Salomon Brothers and Merrill Lynch. He’s doing a lot of advisory work and the ability to express views on the markets, geopolitics and macroeconomics in the market.

 

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This QuickHit episode was recorded on April 8, 2021.

 

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

 

Show Notes

 

TN: Nick, for a while you’ve talked about this concept called the anglosphere. Can you help us understand what you mean by the anglosphere?

 

NG: I’ll dig into it. I like the fact that you’re talking about the link between geopolitics and economics because with Trump and Brexit, that’s where what was a very boring macro environment suddenly started to become differently exciting. The politics would start to drive some of the macro markets and actually what’s interesting is  Brexit and Trump, part of the anglosphere. Not the formative part of the anglosphere.

 

So what we mean by the anglosphere is looking at countries that are historically tied via culture but critically also via common law, legal system, because that defines how the economy and how commerce can run. If you go back in history, there is a big difference between common law countries and roman law countries. Common law countries think of European Union countries and that construct. So what we mean by the anglosphere is being, better start with the UK because it is the mother country, it’s still the mother country for where you are currently still. If the US were now part of the commonwealth. You’re looking at an anglosphere. Now typically when I refer to it, I’m talking about UK, US, Canada, Australia, New Zealand. Five Eyes.

 

You could loosely add two countries. One of which has an anglo-saxon common law — India. The other one works much closer as a defeated entity country in World War II — Japan. So you’re getting the quad, which I would maintain is part of an angular influence, at least, if not anglosphere entity.

 

Let’s stick with that grouping. You’re looking at countries that have a similar legal system, similar financial structure, they have banks, central banks that are lenders of last resort and traditional backups, concept. Remember the European Union doesn’t have banks.

 

Back to common law. Common law also in this environment. This is where it’s getting critical. So Five Eyes is I would posit it’s the ultimate defense alliance.

 

TN: Even New Zealand, still? Ah, you know. Long discussion. That’s so much sarcastically.

 

NG: I know what you’re saying. Although she has the relation in the State of Victoria in Australia, who is actually not known as Kim Yong Dan. But if you look at what they’ve just done with the central bank, there is still a similarity there. And of course the travel corridor that’s about to open on the 16th I think it is, is between Australian and New Zealand. So as much as she kowtows to the panda in Beijing, they are still part of that structure.

 

So back to the common law and the financial. So you’ve got countries with central banks that act as lenders of last resort with independent monetary policy, you have independent fiscal policy and I would include of course in both these, Bank of Japan, RBI in India and so on so you’ve got independent fiscal policy, independent monetary central bank, which you don’t have in Europe.

 

There’s been no Hamiltonian moment there. So you have that flexibility and you can see that flexibility. You also have much more, common law enables Schumpeter’s creative destruction and thus reconfiguration. Much easier chapter 11 in the US or bankruptcy and start again. Right. Not so easy to either stop or start on the roman law. So that when you think of where we are now, you’ve gone through a pandemic where inexplicably a lot of countries have remained closed, the reopening is going to need that reconfiguration.

 

You’ve also been the countries that are advancing with the vaccine quickest of those that took a very commercial view as governments in terms of getting them… so you had operation walk speed in the US and you had a vc person take over the procurement policy and the vaccine policy in the UK. Private Sector innovation. And in fact, in the UK, you have that triangle, Oxford, Cambridge, London, that’s without biotech and so on and so forth, very flexible. You even have a situation where the famous Astrazeneca factory in Holland was financed by the British. Not by the Dutch.

 

We can get into that on another episode of the great vaccine debacle. But I think that’s part of the precautionary Roman Law System that the EU runs versus the go get innovative system that comes with the anglo-ceric countries, the common law system and the structure of finance business so and so forth.

 

TN: Okay. So it sounds to me like when you talk about the anglosphere and you look at it kind of post pandemic or at least post first wave of disaster in the pandemic as we enter a recovery, it sounds like you see a widening divergence between those with say common law and relatively independent central banks versus the other law formed be it roman and in independent fiscal policy as well.

 

So help me understand the… so we just had this IMF report come out earlier this week about 5.1% growth or whatever this year and everything’s amazing and which we know, given, it’s all base effects and if you do a three-year average, it doesn’t look good at all. In Europe, the only one, over that three years, the only one with positive growth is The Netherlands. Not even the UK. But I would argue there, they lean toward you know more of a British style than other styles.

 

So if we’re having a two-speed or multi-speed recovery, would it be fair for me to say that you believe the anglosphere will recover faster than the other spheres?

 

NG: Absolutely. Absolutely. You’re better expert on sinosphere than I would be. But I think the growth is going to disappoint because they’ve pushed so hard on the string of debt. Okay.

 

In terms of the Euro, Europe, I think there’s a very simple way of looking at things. It’s extent of vaccination and compare those and what does that mean? It’s now being said out of UCL, University College of London. UK’s herd immunity on Monday, 73%.

 

You can see there’s data coming out of the UK that is explosive as there is in the US. People are looking at the European and thinking, okay let’s close until August or beyond because this vaccine debacle is even worse. Everybody’s going to take Astrazeneca in Europe even though for the young women of age below 30, the chance of getting a blood clot is 1 in 600,000. Where the child’s getting Covid is substantially greater.

 

Because Europe and the Roman legal system has this precautionary black bent. It’s clear that this whole debacle in Europe has delayed that coming out of meltdown. The European summer season as the Germans would say is kaput.

 

TN: If we have this kind of two-speed recovery or multi-speed recovery, and let’s say Japan is part of the anglosphere, would you say Japan would be leading Asia out instead of China? Now I’m talking about real data. I’m not talking about Chinese 8.1% growth numbers like fictional. I’m talking about actual real performance with actual real usable output and you know all this other stuff.

 

NG: I’ve got so that’s going to be the case actually. I really do have that sense and I also, given the belligerence of the Chinese regime right now. You’ve got vocal and slightly belligerent actions against Taiwan, of course, which I’m with Albert on that. They’d have already invaded if they were going to do it. And you’ve got what’s going on in the Philippine islands with all these ships tied together.

 

I remember a very famous situation where chief ancient China economist from HSBC came into the office and talking about China and then we asked coming into that particular office, name unmentioned, always an aggressive to and fro Q&A, and then we have one of us asked about China, how’s the recovery going after Fukushima. Blood was coming out of this chad’s mouth having to talk a bit about China.

 

And we know that there is a much more passionate… we have passion against Germany or France as a Brit or as an Englishman come soccer. But, we love each other.

 

TN: Maybe that’s a bit strong. But we’ll use that.

 

NG: Maybe strong for Germans but with the French, there is a deep passion there and somebody keeps reminding the agent. But in the Far East, there has been that, you see that tension with the South Koreans and Japanese. However, the Chinese are forcing people out away from some of this stuff.

 

Japan with Australia and India will enable a lot of these countries to look elsewhere. Isn’t it ironic going back to the anglo-sphere link and that publicly is United Arab Emirates who are being given credit for getting India, Pakistan talking together. I have no doubt behind the show, the English are very active there because you’ve got a cricketer in charge. She made this game… So there’s stuff going on that gives you signals as to what could be happening.

 

It was rather like a mutual friend of ours, we were discussing India in terms of trade and I was saying, the UK and India are going to have a free trade deal as soon as it’s possible once they’ve overcome some of the agricultural stuff. And that person said India will do a trade with the EU well before they do it with the UK. And I’m saying hold your horses. No way!

 

TN: It’s familiar.

 

NG: One, it’s familiar. Two, one of the problems that the EU’s have with trade deals with anglospheres countries is legal interpretation thereof. And you know, I think they’ve been discussing it for 8, 10 years, EU and India, they’ve got a sub agreement already in the UK after several months.

 

TN: Just coming back to this kind of overall topic of the anglosphere and the multi-speed recoveries, so it does sound like you almost have this triangulated recovery from your perspective from India, Japan and Australia that’s leading the way in Asia. You have the UK, which is leading the way for Europe and then you have the US that’s kind of leading the way for the Americas. Is that kind of how you see things?

 

NG: I tend to think that’s the case. But I wonder whether one can justify the idea of UK leading the way for Europe given the tensions between the UK and the EU.

 

TN: I think the EU will play through… The EU will feel pain until they get tired of it and then they’ll relent, I think.

 

NG: There’s one big problem and this came up yesterday there was a meeting of the EU commission about article 122 vaccine export ban. Belgium, Holland, Sweden and Ireland said no way. All the others were saying we’re okay with it. With Germany covering itself with a few conditions. The damage to Europe’s role in the global supply chain is irreparable. They will not be able to go back to this.

 

And there’s another little fact of it which makes me wonder what will happen with Ireland because there’s tension building up in Northern Ireland again. Article 122, that export ban is specifically aimed at UK, US, Canada, Australia. They’ve stopped shipping to Australia already. US, UK, they’re saying well you’re not exporting anything. Paid for everything but not exporting everything. Canada just gets lumped in with the US and the UK.  So I think that’s really shattered the role of Europe in the global supply chain.

 

You’ll have people producing goods for Europe from European input but how can you possibly? Now going to Ireland where the UK has already said we’ll give the Republic of Ireland 3.7 million vaccines because it’s secures Northern Ireland in the coming out of lockdown. That’s an interesting overthought process.

 

Because you have a situation where Ireland is under attack like the Netherlands and Switzerland from Joe Biden’s global tax. If they come out, I would not be funny.

 

TN: It seems to me that what you’re also saying is there’s likely some kind of regionalization or re-regionalization that may emerge from this. Am I putting words in your mouth or is that?

 

NG: I would go and say US and commonwealth EU for as long as it stays stable, which may be problematic and then as you say Asia.

 

TN: Okay. Yeah, I mean I think that we’re coming to a place and I’ve been talking about this since about 2015, where you have global supply chains for goods that are long-term commoditized goods and then you have regional supply chains for the higher value goods.

 

NG: And that’s consistent with the decoupling that’s got to take place against China. And then you have that floater which you and I touched on before we got online, which is Russia and I have a slightly different view of where I can go, which will be, you know.

 

Categories
Podcasts

Could This Be The Tail End Of The Bull Run?

In this BFM The Morning Run episode, Tony Nash explains what’s happening in the US markets, particularly the tail end of the bull run. Will value stocks improve now as compared to the growth stocks? How about stay-at-home stocks VS cyclicals? Also discussed are currencies, USD against the Japanese Yen and Chinese Yuan, and the labor market.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/could-this-be-the-tail-end-of-the-bull-run on April 1, 2021.

 

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Show Notes

 

WSN: Good morning, Tony. Now, is it likely that the U.S. indices will run out of steam for the moment? I mean, pausing to take stock of the earnings, are equity markets gravitating to what’s stay at home stocks or cyclicals?

 

TN: The problem with where we are now is that all value was stretched. Monetary policy and stimulus have really pushed money into equity markets as the remaining stimulus checks are distributed, meaning a lot of those stimulus checks are in the mail right now in the post going to homes in the US. So there’s a lot of investment expected and pushing against maybe the downdraft in equity markets. So I don’t think it’s really a question of stay at home versus cyclicals. It’s really a question of where is that value?

 

I don’t think it’s a sector question. It’s really an individual stock picking question. And that’s the problem. It’s not a sector market. It’s not a market wide phenomenon. We really have to understand where there is value because we’re in the very tail end of a bull market.

 

PS: Previously, it was the long and now five year Treasury treasuries are inching up. What impact will an upward shift of the whole yield curve have on equities?

 

TN: I think we’re seeing equities try to climb higher, but we’re not quite getting. The five year is up over five percent today on an incremental basis was up five point six percent. The 10 year is up two point three percent today. So, you know, there are a lot of risks out there. Ongoing Covid risk. France just closed down again today. There are geopolitical risks with the US and China and other geopolitical risks, of course, Syria and so on.

 

Iran, business supply chain risks. So, you know, with yields rising and the pressure on equity markets to rise as well, we believe that there’s going to come a point where equity markets break and we’re going to start to see see a decline in equity markets. So yields will rise in the U.S. and equity markets will inevitably decline, and that will likely bring some other global markets with it.

 

WSN: OK, Tony, let’s shift the conversation to currencies, because the U.S. dollar has really made some strident gains against both the Chinese yen and the Japanese yen. I just want to know, why are these two currencies taking such a beating in particular?

 

TN: Well, both currencies strengthened quite a bit in Q3 of twenty twenty and stayed strong until recently. CNY had been below seven and a bit well actually just above seven and it climbed to almost six point four versus the US dollar. So there’s been a lot of strength in both, as you say, Chinese and Japanese currencies. What’s happened while we’ve had those depreciated currencies is an accumulation of inventories of commodities like industrial metals. We’ve seen the copper price rise dramatically, for example.

 

And so as we see treasuries rise in the US, and that brings dollar strength, we’re seeing those manufacturers and those guys who’ve been building their commodity inventories in East Asia really slow down on those purchases and their future commitments. So we’ll likely see a lot of those currencies stabilize and weaken a bit more we don’t expect. A dramatic weakening from here, we don’t expect the US dollar to appreciate dramatically more, say, for the next few months. So we’re kind of in a range, we believe, for both.

 

We do see the CNY, for example, devaluing to say six point six to six point seven. And then, you know, we’ll kind of stabilize in that range unless there’s a dramatic impact.

 

PS: So a correction is in inventory levels readjust. Can I just shift your attention to oil? Because oil prices are at levels near the break even point for US shale producers. Are you expecting to see a resumption of shale activity this year?

 

TN: Well, yeah, we you know, living in Texas, we see a lot of shale activity here. So we do expect it to start slowly. But that business runs in a way where if we’re chasing price, more of those shale firms will come online pretty quickly, actually. So, you know, with the ability for shale to turn off and turn on so quickly, we believe that the prices will be range bound if there’s upward price pressure, you know, all things held equal.

 

If there’s you know, if there isn’t a major geopolitical issue in the Middle East or isn’t a major geopolitical issue in Asia or something, we think that will be fairly wrage range bound as those as those guys come back online. The shale producers.

 

WSN: Meanwhile, Tony, U.S. numbers, job numbers excuse me, are out on Friday. Are they expected to show a robust recovery in labor markets, in your opinion? Like what sectors grew the fastest in terms of employment?

 

TN: Well, you know, we’re starting to see quite a lot more capacity in airlines, although we don’t expect a lot of hiring there. The services around, say, travel and hospitality, they were devastated in twenty twenty. And we expect some of those jobs to come back online. We expect to see some restaurant jobs, some of those services jobs to come back online. That’s where we typically see these things come back first, relatively kind of lower wage, but more flexible workforces.

 

And so we’ll see activity there first. Tourism in the US obviously still isn’t up to what it was, but we have started to see some impact back in tourism. So I would expect to see some some interesting numbers there.

 

WSN: OK, thank you for your time. That was Tony Nash, CEO of Complete Intelligence, sadly reminding us that this is maybe the tail end of the bull run that we had been enjoying.

 

It was a very short one, is that it honestly, in March 2020 when markets collapsed and then because of the concerted, synchronized monetary policies that we saw around the world, central banks really pushing rates to ultra low equity markets rallied and rallied till now.

 

So he thinks we’re in the tail end and we should stop beginning to look at value stocks as opposed to growth stocks.

 

PS: And I think specific sector specific stocks, in fact, actually.

 

WSN: Yeah.

 

PS: It’s kind of very good.

 

Go for the jugular on specific things.

 

WSN: Yeah. I think you really do need to take a very bottom up approach as opposed from the top down approach. If you’re talking about the tail end of a bull cycle, what is also worrying is that he does say that with increasing yields in the U.S. and even on the shotted to bonds, which is the five year bonds, lightly equity markets, those are going to face another round of correction. And it’s not just going to be the U.S. it’s going to be other global markets as a result, because let’s face it, we take the cue from the U.S., right?

 

PS: Yeah.

 

WSN: If there is a shock there, there’s a shock around the world.

 

But what does it mean for Malaysia markets? Because yesterday we had a really terrible, terrible day.

 

And when I look at Bloomberg now and I’m trying to understand what caused the decline, it was really very much glove driven. Topcliffe hoteling, super Max, all coming under selling pressure as a result, took the index along with it, saying it was also the case for the telco sector. Zaatar was also down. Maxi’s was also down. There was actually no stock among the IBM, Kilsyth, the three component stocks, none were in the green. So clearly bad day.

 

We were down two point to two percent. And on original, on a year to day basis, we are actually down more than three percent.

 

PS: It’s incredible. I think also the conversation about currency is going to play. So we were talking to Tony about Japan and China. You heard and we saw disconsolately in Turkish I now emerging market currencies are going to all kind of a fall out in the short term.

 

WSN: Is there going to be a question of, you know, shift from emerging markets into developed markets? That’s the big question. But in about a few minutes, in light of April Fool’s Day, we’ll be speaking to resolve. Then Gizzle, comedian and the co-founder of Crack House Comedy Club. Stay tuned for that BFM eighty nine point nine.

Categories
Visual (Videos)

Why legacy car brands, IT giants are rushing to make electric cars

This article originally published at http://www.arirang.co.kr/News/News_View.asp?nseq=274827 on April 1, 2021.


Can Hyundai, Kia, Volkswagen, GM make better electric cars than Tesla? Last year, sales of electric cars surged 44.6% despite the general downturn of car sales in the global market. In early 2021, a number of automobile giants announced plans to go fully electric within the next ten years. Can they beat the likes of Tesla and offer innovative rides for consumers?

 

Show Notes

 

SO: Last year sales of electric cars surged 44.6 despite the general downturn of car sales in the global market and that trend looks set to accelerate in early 2021. A number of automobile giants including Volkswagen, General Motors and Volvo announced plans to go fully electric within the next 10 years but can they beat the likes of Tesla and offer innovative rides for their customers?

 

For insights on this we turn to Tony Nash, CEO and founder of Complete Intelligence based in Houston, Texas and Jason Salvucci, national manager of the Overseas Military Sales Group based in Seoul but currently in Okinawa. Well, a very warm welcome to you both and well Tony good to see you again.

 

I think it’s our first time connecting this year but well we’ve seen we’ve heard some very exciting news coming from these automakers and the likes of Volkswagen and General Motors. They’re going all electric they’re really moving away from this at the main business that they’ve been building over the decades based on combustion engines.

 

What’s led them to take this risk and do you think it’s the right move?

 

TN: I think, it’s a move that they have to make. Whether or not it’s a move that they want to make. I don’t think there’s really a lot of debate there but I think their equity market valuation they have to catch up well.

 

I don’t know that they will but they’ll try to catch up with say Tesla or something within terms of the equity market valuation but the customer perception they’re actually making viable EVs that they want is really critically important especially with younger customers. But from a balancing perspective at least in the US for example there are emission standards and the more electric vehicles they produce that also allows them produced to produce other larger vehicles SUVs and other high polluting vehicles. So as long as on an average basis they keep it down to the emission standards.

 

They can produce EVs to allow them to produce say the SUVs that other say consumers want. So, it’s both perception and equity market valuation as well as balancing out the regulatory aspects.

 

SO: So, they’re wearing the different sort of costs and risks here. Well, Jason, what’s your thoughts on this? I mean the world’s biggest legacy automakers scrapping their combustion engines. Do you think they’re making the right move?

 

JS: You know, I kind of got to agree with Tony that this is electric is the future. I mean, they have no choice. It’s not just the standards. Electric cars are easier to maintain. They’re quieter. They’re cleaner. They’re more efficient. I mean, the power is better it’s the way everything’s going. I mean, we don’t really have much choice in the matter. While it may not be 100 electric tomorrow. We’re getting there.

 

The big manufacturers if they want to, they want to play with you know companies like Tesla, they have no choice. That’s where the future is.

 

SO: And the force Tony, Tesla is without a doubt the world’s most iconic electric car company but do you think it’s leading the global market is going to last with all these other competitors now coming into the market these giant auto businesses? And are these car makers catching up quickly enough in terms of battery technology and other key technologies?

 

TN: Well obviously, they have a lead but will they be able to keep it as the real question. I think they may be able to keep it for a few years but I’m not sure that they can keep it say over the medium to long term.

 

So, Tesla has a lead but that gap is closing. And with technology they can use external, say sources to either acquire or develop the battery technology that they need to compete with Tesla. So, I think really at the end of the day it comes down to: can you produce a quality vehicle? Can it perform like consumers want and does it drive like consumers want?

 

So, the novelty of an EV is wearing off. And as it goes broad-based that first user advantage or first user interest wears off. And the broad market really just wants a functional car that is electric. And so, you have the segmentation and other things but I think Tesla is going to have a tougher job going forward to keep the lead that it’s got.

 

SO: Well, Jason is it as straightforward as one might think for these giant automakers to transition into all EV?

 

I mean, what are the major differences that traditional car makers are going to have to adapt to and really face as they transition into all electric?

 

JS: Well, the manufacturing process for one, you know, the number of components in a combustion engine vehicle, compared to an electric car, it’s night and day. I mean it goes beyond the manufacture of the vehicle. It’s the maintenance of the vehicle it’s really everything.

 

The shell may look the same but when you transition to, you know even a mild hybrid to a all-electric vehicle. It’s completely different. Not only will the way the cars are sold have to change but also because how the customers buy the cars. How they maintain. How they operate the cars everything changes. It’s not as simple as just shifting from one to the other.

 

So, I think that the manufacturers have quite a task ahead of them. They are really playing catch up, if they want to grow in this and be industry leaders as they have been for years like Volkswagen, Toyota, Ford. They were industry leaders for years and they’ve surrendered that position to a startup company like Tesla.

 

SO: Right and there was some news this week that Volkswagen might be changing its name in the US to Voltswagen. So, really goes to show. It’s not as easy or straightforward as simply changing the name and probably…

 

JS: That’s an April fool’s joke by the way. Yeah, it was April fool’s joke. I fell for it too. Voltswagen is their April fool’s joke.

 

SO: It was a bit too early for April fool’s day but well thankfully yes, they’re retaining the Volkswagen brand. And well Tony, internet companies like Apple and Google and apparently Xiaomi now and Huawei. They’re working on electric vehicles as well and it’s clearly not going to be such an easy ride. So, what’s really in it for them? And what kind of innovations do you think they’re going to bring to the market as tech companies?

 

TN: Well, that’s a great question. Jason brought up a great point about the business models and as you move into the more software-based business models that EVs are you move into a different ability. In a different way for consumers to pay for things. And you know, I think it’s possible for kind of that big expense of a car that a consumer would buy instead of it being financed. It could be a service fee that’s put over a period of time. I don’t really know what that model looks like but these software companies are companies that really balance out especially Apple. A hard asset like a phone plus monthly recurring software fees.

 

And so, these guys will come into the market. Understanding the risk associated with making hardware and balancing that out with software fees. Whereas automakers traditional automakers at least are accustomed to one big transaction that gets financed by a third party. So, it’s a fundamental change in the business model.

 

SO: And Jason, now South Korean car makers, Hyundai and Kia. They currently set fourth place in the global EV markets and of course Kia having unveiled its EB6 this week. And Honda continuing to expand this EB lineup, of course.

 

So, how competitive are these South Korean car makers products? And do you think they’re really going to have to step up the game? Now as market leaders global market leaders Volkswagen GM they’re going out all electric?

 

JS: I’ve been in South Korea 20 years and the way cars have improved in the last 20 years is phenomenal. When I first got to South Korea. Korean cars were far behind but now the fit, the finish, the quality is amazing.

 

I think the larger auto manufacturers are going to get a run for their money by the likes of Hyundai and Kia when it comes to electric vehicles. I really do.

 

SO: So, what kind of… I suppose, what kind of advantages or what kind of features do you think they offer Jason that might really help them really engage in the competition especially as all these car makers go electric?

 

JS: It seems to me the… not just the quality but the design of the Korean cars is a little more exciting than some of the other manufacturers. That’s what I’ve noticed over the last couple of years, is that they’re good-looking cars and they’re reliable. And the price points are, well, I mean they’ve significantly come up in cost in the last 20 years, that’s for sure but they’re nice. And I see a future of like a subscription type of service for electric cars because you know the United States every three years to 39 months. Americans are trading their vehicle up trading in one car for another car. And we have a traditional dealer manufacturer, dealer model that we have to require our customers to go through a subscription service in the future.

 

It is definitely, in the makes for electric cars because you’ll trade out of them much more frequently.

 

SO: So, it’s not just the hardware but also the software that’s going to bring about a lot of changes in how we consume electric vehicles, as well. And of course, everyone cares about the design too. And well Tony, it seems that EVs really are the future but it looks like for now the stock market is quite confused about the prospects they’ve been fluctuating. They’ve been declining over the last few weeks. And of course there was a boost on Wednesday after the Biden administration announced its plans to really ramp up green vehicles and infrastructure but what do you make of these market fluctuations? And how does Complete Intelligence really project the demand or market for electric vehicles in the near future?

 

TN: Sure, obviously there’s a healthy market ahead. I think the equity market fluctuations over the last few weeks are really just, that its markets searching for the right price. And there are so many different variables with bond prices. And currencies. And equity markets that are going into the calculations around the stock market prices for these companies but I do think that those companies that will not only crack the battery technology. And the value proposition for the market but also the business model, as Jason mentioned. Those companies are the ones that the equity analysts. And the investors will really want to follow.

 

So, Tesla is a high visibility leader, early leader in electric cars. And I think they’ll remain a leader but the volume of cars that they produce compared to say a Volkswagen on an annual basis is tiny. And so, the scale that a Volkswagen or a Hyundai or somebody can bring to this market can overwhelm almost an artisan car maker like a Tesla.

 

That’s I don’t mean that as an insult to Tesla at all they’ve done some amazing groundbreaking work but they just don’t have the scale that a Volkswagen or Hyundai has.

 

SO: Well, the likes of Volkswagen and Volvo. They’re going all electric Jason but Hyundai seems to be putting its eggs in multiple baskets. It’s been betting on hydrogen cars as well. Which right now are considered a bit less economical. And there’s also a lack of supportive infrastructure in most parts of the world.

 

Do you think this investment is going to pay off for the company?

 

JS: I think the future is multi-faceted. I don’t necessarily see the entire replacement of the combustion engine, anytime soon. I mean, they’ll definitely be hybrid vehicles, will be mild hybrid plug-in hybrids. There’ll be some hydrogen fuel cell vehicles. I think that there’s multiple avenues that manufacturers will have in the future.

 

So, that we can kind of have something for everybody. I don’t know that the investment in the infrastructure for hydrogen pays off because right now extracting the hydrogen requires fossil fuels. That’s a bit of a problem until they can crack the hydrogen extraction of via solar or something like. That it’s a bit of an… it’s not there yet. I don’t think.

 

SO: And Tony, before we go now there’s a massive EV market in China. And recently, Huawei technologies. They’ve come out and said they’re going to invest billions into that market.

 

How do you see the prospects and do you see China sort of leading the global market in terms of EVs just with the massive number of consumers they have?

 

TN: Sure, I think, Yes. I think China’s challenge is moving their vehicles beyond China and beyond Asia. There’s so much intense competition from Korea, Japan, the US, Germany and so on and so forth, that I think their challenge will be taking an electric domestic, electric vehicle market that will be massive. And moving that into other countries whether it’s safety standards or features or business models.

 

I think, there is something especially with technology that is specific to China that is very difficult to move beyond Asia. And so, if there is a Chinese EV maker, who can move beyond China and beyond Asia. I think they’ll do very very well.

 

SO: See, well, this is all we have time for today but that was Tony Nash, CEO and founder of Complete Intelligence and Jason Salvici, national manager of the Overseas Military Sales Group.

 

Thank you both so much for your insights today. And to our viewers, as always, thank you for watching.

 

Categories
QuickHit

QuickHit: Will China Invade Taiwan? (Part 2)

This is Part 2 of the QuickHit episode on “Will China invade Taiwan?” with Chris Balding and Albert Marko. In this second part, the guys discussed Hong Kong, the semiconductor industry, and possible actions by the Biden administration. Tony Nash is hosting this show where the two experts discuss likely possibilities for China, Taiwan and other countries that may be affected by the conflict between the two countries like the US, Japan, and South Korea.

 

In Part 1, we looked at the plausibility of China invading Taiwan and what that might look like. In Part 2, we look at is Hong Kong a precedent for China potentially taking over Taiwan? We also look at the global semiconductor industry and firms like TSMC. What kind of impact would Chinese action on Taiwan have toward TSMC and also how would we expect the US to react and what would the different reactions do to US credibility in East Asia?

 

You can watch the Part 1 here: https://www.completeintel.com/2021/01/27/quickhit-will-china-invade-taiwan-1/

 

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This QuickHit episode was recorded on January 26, 2021.

 

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

 

Show Notes

 

CB: What you’re saying about body bags makes perfect sense. Is Xi that directly rational? Because it would seem like there would be a better way to handle Hong Kong than what has taken place?

 

AM: Hong Kong was a little financial center with no military, no nothing. There’s just a bunch of woke millennials running around, thinking they can hold off the PLA. That doesn’t work like that in real life. You got to come at them with guns to earn your freedom. It was a circle by China. It was inevitable.

 

TN: Since ‘97, there hasn’t been a question as to whether Hong Kong is China. Hong Kong is China. And people have shrugged their shoulders since ‘97 and said look, it’s China. It’s a matter of time. It’s a special zone.

 

CB: Maybe my meaning was lost a little bit. The cost-benefit of what Xi has done in China or in Hong Kong, he clearly probably could have reaped more benefit by saying we’re gonna let Hong Kong continue to be Hong Kong for another 10 years or something. There wasn’t really a need for him to move. It’s probably going to create bigger problems internationally. There’s probably assets that are going to move out of Hong Kong and other places, Singapore. So what if we look at a strict cost-benefit, there wasn’t really a reason for Xi to do that.

 

TN: There was. The protests that would come, first every five years, then every two years, and so on, it was becoming increasingly embarrassing to Beijing. The official channel to as an inward or outbound investment lane through Hong Kong, it’s still there. But Beijing couldn’t take the embarrassment of this and what they didn’t want is to have some rogue police brigade kill a bunch of 25-year-olds on accident. I believe they had to pull the trigger and I think this has been planned and architected over years and it seems like something sudden that people are like “wait, what’s going on?” They’re rolling military and this has been planned for years.

 

CB: What you’re getting at is this was embarrassing domestically and he basically said to hell with the consequences internationally? If we apply that same basic line of thinking to Taiwan, the question would then become, well, they’re willing to deal with the international consequences. We know that in colossal range barriers. What other domestic issues are at play here about Taiwan?

 

TN: I think it’s backwards. It was more embarrassing internationally because the CCP plays international media like a fiddle. Xi Jinping goes into Davos or speaks at a WEF event. Everyone walks away, enlightened and they play international media like a fiddle. They were less worried about what international media would think and even less worried about what domestic populations would think over time.

 

They just needed to rip the band-aid off so that kind of righteous reporters in Hong Kong wouldn’t keep raising this story because it’s inconvenient. They knew that at some point, they were going to take over, and so they just did it and that it’s inevitable that’s going to happen. They just did it.

 

And global media? They’ve fallen in line over the last nine months. Nobody talks about Hong Kong anymore and the rights and being trampled upon and all that stuff. International media have fallen in line on this. They don’t care. They want to make China happy. Why? Because the CCP and their companies are going to buy supplements in their newspapers and in their online forums and they’re going to pay for their think tank pieces and all that stuff.

 

CB: There are specific media outlets that are decidedly less critical of China than they used to be as an editorial line.

 

AM: I agree and I love that analogy of like ripping the band-aid off because Hong Kong was ripping a band-aid off but Taiwan would be like ripping duct tape off a Greek guy’s chest. That’s the problem here, and that’s what we think we have to understand that not only is it economically damaging, it’s politically damaging internationally, militarily. The risks, just in my opinion, way outweigh the benefits of trying to take over Taiwan.

 

TN: Let’s say this happened. Let’s say six, nine months, something happens. What happens economically? I know there’s cross holdings with CCP princes and stuff but let’s look at say semiconductors, TSMC. The otherfoundries are disrupted for a period of time.

 

AM: I know where you’re going with this and this would actually make me flip my position if I was advising China. If they wanted to hit the West and create even a bigger semiconductor shortage, then you absolutely destroy Taiwan. This is where I’m going. You absolutely would do that.

 

TN: Right. So, does it make SMIC relevant and does it make the Chinese foundries relevant? What is in that gap? TSMC, all the execs are moving to Phoenix. What happens then?

 

CB: Taiwan and TSMC are in the very awkward space. At this point, they’re probably like THE manufacturing firm. The other places do the design and stuff like that. There’s a lot of firms that are in the mid and low end. But when it comes to your high-end stuff, it’s pretty much TSMC. I think you could make a case that Beijing says, “screw it!” Forget about Taiwan. If we can capture TSMC, we’ve got it all.

 

TN: We just invade Hsinchu, right?

 

AM: The Chinese, for all the negative things that I have to say about them, are really good asymmetrically combating the West especially the United States where they’ve weaponized Caterpillar, weaponized multiple American companies within China to hit the United States politically and economically. That would make perfect sense from the Chinese perspective to just cut off the semiconductors specifically because those semiconductors go to Apple, to the big three automobile sector, which is the only thing right now that’s going to be able to get unemployment back down to a decent level for the Biden administration.

 

TN: If that did happen, would that present an opportunity for Japanese, Korean firms to fill that void to circumvent Chinese control or has that ship sailed years ago and there’s no way they can recover that?

 

AM: I don’t think that they’d be able to recover especially in the near term. I think the chip shortage would be so, so damaging to the entire global economy that it would be pretty devastating for a while.

 

CB: And the people I talk to in chips basically say, when it comes to manufacturing of higher end chips, it’s basically TSMC. Not even Intel these days is manufacturing their own chips. So even if TSMC is Chinese tomorrow, it would probably take five years before Korean and Japanese firms at the earliest would be producing high-end chips that could compete with TSMC.

 

TN: If China threatens to invade Taiwan and the West is like “look, do whatever you want, we just want to make sure we have our chips.“ Is that really a plausible negotiating point?

 

AM: I don’t think the West could even trust China in that respect. Has the Chinese ever given us assurances and anything like that ever?

 

TN: Let’s act like this happens. Something happens in June, July whatever. What does the US Navy do? Will they protect Taiwan or will they distance and reevaluate?

 

AM: The US would probably let Taiwan defend itself for a certain period of time and float in a carrier strike group just to deter China at some point. They’d have to walk defense there. That’s not an easy solution. You’re talking about going up against China within proximity of their borders, which they would have an advantage of.

 

CB: They’re not going to do something like this just launching a couple volleys of low-grade missiles. This is moving all your chips to the center of the table. And so basically, the question that the US Navy would have to ask is are we going to move all our chips to the middle of the table otherwise, let China have it.

 

TN: If the US says, “fine, we’re not going gonna move our chip to the side of the table. Let China have it,” then does that destroy US credibility in East Asia because the obligation of the US to defend Japan, Korea and so on, those are gone then, because US has an obligation to defend Taiwan.

 

AM: The South Korea would be the biggest problem immediately after that.

 

CB: One of the first comments about by the administration foreign policy was the Japanese defense minister saying China is a real problem, you boys need to get your big boy pants on. That was a month ago or a couple weeks ago. That was pretty much the Japanese saying, “you know this isn’t 2008 boys. We’ve got to be ready.”

 

The other thing was, is over the past couple years, there’s been a shift in the US Military. Basically, all the US Military in Korea is now way far down the peninsula. And South Korea knows that. The US Military is in a position where if the North Korea decides to stream across the border, they can pretty much pack up their personnel and be gone in a couple of hours. If something happens, Tokyo and Seoul are absolutely going to be paranoid. Doesn’t stand right there and start firing back.

Categories
News Articles

Time To Rotate

Tony Nash joins BFM 89.9 The Business Station for another look at the global markets particularly discussing the “Japanese equity market”. Is it the time to rotate into value or maybe it is a sign that the broader economy is recovering?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/time-to-rotate on August 26, 2020.


BFM Description

 

With technology stocks hitting all time highs, there has been some inflow into the finance and utilities sectors. We ask Tony Nash, CEO of Complete Intelligence if it is time to rotate into these names. We also ask his views on the Japanese equity market and if there is still money to be made with the change in leadership.

 

Produced by: Mike Gong

 

Presented by: Khoo Hsu Chuang, Wong Shou Ning

 

Show Notes

 

WSN: So far, deeper dive in global markets today. Joining us is Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Now, last night, U.S. tech stocks will slump relatively while laggards like finance and utilities saw some inflows. So do you think this is the time to rotate into value and maybe a sign that the broader economy is recovering?

 

TN: I think it’s certainly a time to to that that that rotation is starting. I don’t necessarily think it’s in full swing yet, but but we’ve received signals for the past week or so that that rotation would start sort of seeing some of the techs off.

 

Today is not really all that surprising, given especially some of the Fed and Treasury statements over the past couple of weeks.

 

KHC: Yeah. So in terms of cyclical stocks, Tony, what is your point of view in terms of which sectors might benefit?

 

TN: Well, I think, you know, we’ve seen tech with companies like Nvidia, Tesla, and these guys have just had amazing gains over the past, say, four months. I think, you know, the rotation into some of the finance stocks, into some other more mainstream, broader market equities is likely. I think the indices are assuming that tech stays at elevated values. That rotation will only help the indices if tech comes off. Given the concentration of waiting within those stocks, it could really hurt some of the overall indices.

 

WSN: And, Tony, let’s focus on one of these, you know, super winners in the last few months. And it’s Tesla, right? They have a decision to sell five billion worth of shares. Is that smart or overly ambitious? Move now. And what more what kind of growth can we expect from this company?

 

TN: Well, the I think the the growth in the stock price is very different from the growth of the company, so Tesla’s trading at a PE ratio of almost 1200.

 

OK, the stock’s more than doubled since March. So, you know, the company itself isn’t doubling. You know, I think it has. I think what the management is doing is making a very smart decision to sell equity while they know the price is very high. So from a management perspective, I think that was a very smart decision. In terms of a buyers perspective, I’m not so sure it’s possible that Tesla stays at these elevated level. People have been trying to short Tesla for years and it just hasn’t worked.

 

So it’s possible there’s growth there and it’s possible they stay at these elevated levels.

 

WSN: So, Tony, are you a big fan of Tesla? This level…

 

TN: It’s hard not to be whether I’m a buyer, personally or not, I would hesitate here. But, gosh, you know, I think there are other places to look that are better value.

 

But it really, you know, part of it really all depends where the stimulus is going. So since the Treasury and Fed are intervening in markets, if they’re targeting specific equities or specific sectors, then you kind of have to follow that money.

 

And so it’s it all depends on how much further these things are going to run and where that stimulus is targeted.

 

KHC: OK, based on PMI data, most of Asia remains contractionary. But for China, of course. You know, Tony, in your opinion, why is recovery not yet forthcoming? And is there a main catalyst needed for manufacturing to take off?

 

TN: Yeah, I mean, look, in terms of manufacturing PMI, as you have Indonesia, Thailand, South Korea, Taiwan, you know, they’re all growing, which is great. Myanmar is actually growing faster than China.

 

But what we don’t have really is the demand pull. And that’s been a real problem. And, you know, we’ve been talking about that since February and we’ve been really worried about deflation. And, you know, what we see even in Southeast Asia is government intervention in markets is really what, propping up a lot of the activity. And I think, you know, the big question I have is, will we see steam come out of recovery in Asia in the same way we’ve started to see steam come out of recovery in the U.S.?

 

I think the answer is unfortunately, probably yes. And I think until the demand from both consumers and companies comes back and the fear of covid wanes, I think we’ve got some some volatility ahead.

 

We’re expecting some real trouble in September. I think it’s great that markets are doing well today, but we’re starting to see the the momentum really slow this month.

And without additional help from the Fed or PEOC or other folks, it really slows down. The problem is the efficacy of that support really deteriorates the more you add to the system.

 

WSN: And Tony, look at Japan, right?

 

I mean, are trading the equities. They are trading at a steep discount to their historical premiums. Do you see any value in yen based assets? After all, Warren Buffett himself just dipped his toes into it by six billion dollars worth of trading companies did. What do you think?

 

TN: Well, that’s the answer. I mean, it’s hard to it’s hard to bet against Buffett. He’s obviously seeing real value there. And I think the Japanese trading companies are really, really interesting because they’re you know, they’re a very good play right now. So is there a value? Sure. I think there’s value there. I think with Japan, a lot of the story is around productivity and automation. If if Japan can continue to raise its productivity through automation, I think it will be a very good play.

 

If that productivity and if the level of automation slows down, then it becomes questionable because everyone knows about the demographic story in Japan, but the economy continues to grow, which is really amazing.

 

WSN: So it seems like you’re quite a believer in that this can overcome some of the structural issues. But what about the fact that Abe has resigned for health reasons? Does it change at all the economic and monetary policies in Japan that might change your decision?

 

TN: Yeah, I think when someone like Abe steps down,  there’s always momentum. So it last for several months. The real question is, how long should the next leadership last? And is there enough structural stability to continue the momentum in Japan, meaning it’s not growing leaps and bounds, but it’s stable growth and it’s healthy growth. So I like Japan a lot. We have had reform under Abe. We have had structural reform under Abe. I think it’s much more healthy today than it was in 2011 or 2010. A lot’s been done.

 

Japan has the capability to continue to improve, but it all really depends. There are regional dynamics and there are domestic dynamics. But again, I think if demand regionally and globally doesn’t return, which is likely COVID induced, then I think Japan, like everywhere else, will have issues.

 

WSN: All right. Thank you for your time. That was Tony Nash of Complete Intelligence, speaking to us from Houston, Texas.

Categories
Podcasts

Policy Action Kicks In As Bull Market Officially Ends

Various central banks are implementing emergency rate cuts to respond to the coronavirus and as the bull market ends. Meanwhile, it remains to be seen whether peak infections in China and South Korea are a light at the end of the tunnel.

 

Presented by: Wong Shou Ning, Lyn Mak, Julian Ng

 

 

The UK has launched a stimulus plan. Do you think the ECB will be pressured to do the same?

 

I’m sure they will. I don’t think they have that much power into interest rate cutting area – the rates are already right around zero. What they’ll most likely do: buy more government bonds, ease up on the reserve ratio, loan incentives, etc.

 

Europe is in a pretty bad position partly because COVID really attacks older people more aggressively than younger people, and the demographic profile of Europe is pretty terrible. So the ECB has to do something to help the economy. What they’re trying to do is to make sure the consumers don’t totally close their wallets and the banks don’t totally close lending. They’re really trying to stimulate banks to keep money moving.

 

 

In China and South Korea, there are indications that the infections have peaked. Pres. Xi visited Wuhan. Is this the light at the end of the tunnel?

 

I think it’s a natural progression and it’s quite possible that things are dissipating in China and things are improving. We see road traffic congestion gradually building back. That’s good for everybody. 2/3 recovered. We’re getting there. There may still be quite a lot of bounce back in March. Hopefully, in Q2, we’re back to an almost normal level.

 

 

Japan’s economy seems to be bordering on the recession. Do you think even the Bank of Japan has assisted on the current downward cycle? Have they got any more policy options left?

 

Central banks can do for the ending bull market. The BOJ really has been focused since 2012 on Abenomics to try to raise the inflation rate to 2%. They never achieved that. But they have helped some other things to stimulate the economy.

 

Japan’s in a very tough place because it’s tied to the Northeast Asian supply chain and it has the same demographic problem that Europe has. They really need to start circulating money. They can use these tools on reserve rates and loans, but how much further can they push it?

 

 

The fall in crude prices has also negatively affected shale oil producers. What’s your near and long-term outlook for the industry?

 

Shale for the US is energy security. Americans are tired of the political issues that they face in the Middle East to secure their energy supply chain. The current administration help the shale producers to survive including backing up their loans, working with banks to extend the payback period, etc. Shale is seen as a national asset by the current administration as they work very hard to make sure that those companies continue to be competitive and have the resources.

 

 

Listen to this podcast on the bull market at BFM: The Business Station.