Complete Intelligence


Countries differ on ending coronavirus lockdown

Countries and governments around the world are starting to feel the strain of coronavirus lockdown, with some showing signs of easing up restrictions. But the World Health Organisation is urging serious care, saying it cannot be done in a hurry.


Also in the programme, the EU competition commissioner Margrethe Vestager has advised governments to prevent companies being taken over by Chinese firms.


Amazon’s share price surged after the company announced it would take on another 75,000 workers amidst increased demand, after already hiring some 100,000. Professor Scott Galloway at the New York University Stern School of Business discusses how we should interpret the move.


The world’s oil producers under OPEC and allies have agreed a record oil deal that will slash global output by about 10%. Paul Hickin, Associate Director at Platts, explains what this means for the future of oil prices.


Plus, with the internet full of memes and videos to help us get through uncertain times, the BBC’s Vivienne Nunis speaks to some of those creating internet content to make us smile during the long lockdown days. All through the show we’ll be joined by Rachel Cartland, author in Hong Kong and Tony Nash, chief economist at Complete Intelligence in Houston, Texas.


Listen to this podcast at BBC Business Matters.



Podcast Notes


BBC: What kind of restrictions are you subject to in Houston?


TN: Really it’s just mass gatherings, and there is a state home order. There are a lot of people outside. There are exceptions to essential businesses. And so a number of people going to work. Not many people to be honest.  I’ve never seen a lot of my neighbors outside, where they were out all the time.


BBC: That’s a positive of it, isn’t it? WHere you are, the restrictions aren’t as tight as they are in California and New York


TN: Texas has a pretty low death rate. So haven’t really put… there are restrictions. Dallas is on lockdown. Houston is on lockdown but not as stringent as Dallas. San Antonio and Austins are on lockdowns. But some people do get out of work. Some people, not a lot.


BBC: Is there a talk in Texas when it will be lifted given that the state is not as badly affected as other parts of America?


TN: The governor said that this week, he would announce when he would put an order together to get people back to work. I think you’re starting to see a real movement in the US. People are tired of being at home, they’re tired of being worried about their income, claiming unempoyment, seeing their friends being laid off or their friends claiming unemployment. It’s a scary time for people and regardless of the fiscal stimulus that’s coming out from DC, people just want to work.


BBC: Are people are scared that if they won’t catch the virus, their loved one will?


TN: They are. People are nervous about it. Some people are wearing masks. But I think what we’ve seen generally is it’s largely older people or people with tertiary, secondary conditions. It’s a worry. But people are adults and they can take precautions.


I think part of what may come about is a reverse action where people who are at risk may be advised to stay in and take precautions, while people who want to go to work are adivsed to go to work and take precatutions. What’s the difference in Texas is that we don’t have mass transit like New York does or San Francisco or some of the other places that are affected. Although some of those don’t like Seattle doesn’t have that mass transit. We don’t have those things here because we’re not densely populated. There is not much intermingling as you would get in London, Hong Kong, Singapore, or Beijing.


BBC: Do you see any evidence of this kind of thing is already happening or is this a fair of China kind of xenophobia in a way?


TN: I think there’s truth on both sides. It’s taking awhile to figure it out.


BBC: Should governments be buying stakes in companies whether that be in Europe, US, or whatever to make them American, or French, British or whatever?


TN: It depends on the company. If you look back in the Piraeus supporting Greece or the hydroelectric company in Portugal, Europoean governments were happy to sell those that 10 years ago. Was that the right thing to do? I’m not sure. But they’re quite happy to sell at that time. But now that the nationalistic environment has changed, I think European countries are being a bit more protectionists. So should Chinese capital be allowed to come in to buy European companies, it depends on how strategic those companies are to Europe’s economy and to Europe’s stake. If they are deemed strategically important, then they should be protected. If not they are not, then they shouldn’t be allowed to come in and buy.


BBC: Do you think this is the moment where 3D printing will enter the public conciousness and end up with people buying their own printers?


TN: It’s possible. I think it’s probably so early. But I think what’s interesting about this is the distributed nature of this. You can do small production run, it’s distributed, so you can make exactly what you want. The concern I have is affordability. The people with 3D printers, so if they have the funds, do it.


BBC: How is the state being affected by this plunge in oil?


TN: That’s pretty terrible. Houston is one fo the global centers for energy and a lot of the leading gas firms here are laying people off. It’s pretty terrible the way it’s affecting Texas.


BBC: You still work in the office. I’m broadcasting from my bedroom. Do you think we could see a change in a way people do work? Companies might decide they don’t need much office space because people can work from home?


TN: No. I think it’s nice to talk about this. I don’t think people are going to do less leisure travel. I don’t think companies are gonna have their staff travel less or people are gonna go to the office less.


We’re human beings. Once this is passed, it’s going to take some time for people to normalize. Things are going to go back because we like what we have. We like to take a holiday somewhere, we like to see the grandparents in another state. Things aren’t gonna change that much.


This economic downturn, it’s a government-mandated downturn. It’s not a market failure by anybody else. It’s government-mandated, so once the government mandates that we can go back to work and resume our life, we go back to it and we do what we do for the most part.


Our baseline expectation is that we’ll see deflation over the next year, and it’s already starting in China if you look at real estate prices and car prices because people don’t have as much money as they have a few months ago.


It’s a global phenomenon. We will see deflation in 2020. That is a fact. It’s a problematic fact. And it’s gonna force airline tickets, hotels, and other folks to lower their prices. Deflation isn’t just lowering prices, but it will force that, because people will have less money for a period of time.


BBC: What do you make about this concern about the role of Amazon? Amazon is not really having a good time. It’s stuck, closing almost at record level.


TN: I think, you know Amazon bought a company Pill Pack a few years ago. They already have health data on a lot of people. If there was a concern, why people didn’t raise it when we were in a different economic position?  I think many people are just happy earning on Amazon stock and subscribing to Prime at that time.


It’s concerning, but I don’t understand how this is different because it’s all health data on Americans. We all know that Amazon, Google, all these guys are going to monetize the data that they have on us. I’m not saying I love it and that I am perfectly at peace with it. It’s just strange that people wouldn’t be upset with their of Pill Pack a few years ago. But now they’re upset that Amazon is going to build organically facilities. And then there’s Bill Gates saying that he’s doing testing or planning to do the same stuff. Why are we comfortable with these corporate titans doing this stuff in one form when it’s as a foundation and not when it’s another form. I think it’s a little bit protective.


Could COVID-19 Finally Kill the EU?

The fallout from COVID-19 might result in the disintegration of the European Union while the flight to safe havens like the USD is yet another headache for the financial markets to stomach, according to Tony Nash, CEO of Complete Intelligence.

Produced by: Michael Gong

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


Listen to the podcast in BFM: The Business Station


Show Notes:


BFM: So for more on global markets right now, we speak to Tony Nash, CEO of Complete Intelligence. Welcome to the show, Tony. Now U.S. markets closed down sharply again last night, erasing all gains from the time President Trump was elected. So what’s your outlook for markets? Is it still too early to buy?


TN: Gosh I don’t know. Actually, we don’t really know if it’s a really good time to buy. At this point, it’s really hard to catch that kind of falling knife. But what we don’t see is a V-shaped recovery. We think we’re in the zone where the fall may start slowing down. But we believe the equity markets will trade in a pretty low range for the next couple of months. And that’s because we’re not really sure of the economic impact of the slowdown in the West.


This COVID-19 is a government-driven recession that countries have lawfully gone into. So a lot of the recovery has been how quickly the fiscal stimulus is put into the hands of consumers and companies, and how quickly those individuals will get back to work.



BFM: Well, oil continues to fall last night to record lows with the Brent at $26 per barrel. What’s your view on oil? I know you are seeing the stock market. We do not know where the bottom is. But for oil, are we hitting the bottom yet?


TN: We may not be, but we’re pretty close. Our view is that crude will bounce once the Saudi-Russia price standoff is resolved. So we actually see crude moving back into the 40s in April.


But after that, we expect a gradual fall back into the low 40s to the high 30s in May. So, you know, we’ll see the next several months’ prices will be depressed. And we think it’s going to be quite a while before we see oil at 50 bucks again.



BFM: Yeah, Tony, you would have seen the stock futures point in green, obviously quite buoyed by the ECB’s whatever-it-takes policy. In Asia this week, four central banks are meeting. I’d like to go off a piece of possible talk about Australia, Thailand, Philippines, Indonesia. Our central banks are expected to meet this week. What do you expect them to do in terms of responding to the market turmoil?


TN: So it can’t just be central banks. I think central banks will do whatever it takes. But you really have to get finance ministries involved because, again, this is a government-induced recession.


Governments have demanded that people stay at home due to COVID-19. They’ve demanded that places of business close. And so until finance ministries and treasury departments get involved to get money in the hands of consumers and companies, we’re in a pretty rough place and there’s a lot of uncertainty.


So I think the central bank activity is fine. But I think getting a fiscal stimulus out there right now and not waiting is what they need to do. The US is talking about doing something in mid-April, that is just not good enough.


We have to get fiscal stimulus out right now because the governments have brought this on. The markets did not bring this on. The governments brought this recession on.



BFM: Yeah, Tony, obviously the helicopter money is going beyond the conceptual stage right now. But from a fiscal standpoint, how many central banks in Asia can afford, you know, the financial headroom to pay these helicopter money solutions?


TN: Well, whether they can afford it and whether they need to afford it are two different questions. And so I think we have real issues with a very expensive U.S. dollar right now.


Dollar strength continues to pound emerging market currencies. And emerging markets and middle-income markets may have to print money in order to get funds in the hands of consumers and companies.


So I think you have a dollar where appreciation continues to force the dollar strength. And you also have middle income and emerging market countries who may have to turn on printing presses to get money into the hands of consumers. So I think for middle income and emerging markets, it’s a really tough situation right now. The dollar, I think, is both a blessing and a curse for the U.S. But the U.S. Treasury and the Fed have to work very hard to produce the strength of the dollar.


There is a global shortage of dollars, partly because it’s a safety currency, partly because of the debt that’s been accumulated in U.S. dollars outside of the U.S.. And if those two things could be alleviated, it would weaken the dollar a bit. But the Treasury and the Fed are going to have to take some drastic measures to weaken the dollar.



BFM: Well, how much higher do you think the green buck can go?


TN: It can be pretty high. I mean, look, it depends on how panicked people get. And it depends on how drastic, I’d say, money supply creation is in other markets.


I think there are real questions in my mind about an environment like this and around the viability of the euro. The EU is in a very difficult place. I’m not convinced that they can control the outbreak. I think they have a very difficult demographic position. And I don’t think Europe within the EU, have the fiscal ability to stimulate like it is needed. The ECB cannot with monetary policy, wave a magic wand and stimulate Europe.


There has to be fiscal policy, and the individual finance ministries in every single EU country cannot coordinate to the point needed to get money into the hands of companies and individuals. So I think Europe and Japan, actually, have the most difficult times, but Europe has, the toughest hole to get out of economically.



BFM: It really sounds like Europe has its work cut out for it at this point. What do you think? What could we see coming out of Europe in terms of any fiscal policy? Or will this pressure the EU, put more pressure on the EU?


TN: ECB doesn’t really have the mandate for fiscal policy, so they would have to be granted special powers to develop fiscal policy solutions. It has to be national finance ministries in Europe that develops that.


So the ECB can backup as many dump trucks as it wants, but it just doesn’t have the power for fiscal policy. So, again, our view is that there is a possibility that the Euro and the EU actually break up in the wake of COVID-19.


This is not getting enough attention. But the institutional weakness in Europe and the weakness of the banking sector in Europe is a massive problem and nobody is really paying attention to it.



BFM: Do you think this has been a long time coming?


TN: Oh, yeah. I mean, look, we’re paying for the sins of the last 20 years right now. And for Asia, you know, Asian countries and Asian consumers and companies have taken on a huge amount of debt over the past 20 years to fund the quote unquote, “Asian Century.” And I think a lot of Asian governments and countries will be paying the price over the next six months. The same is true in Europe. But the institutions there are very, very weak.


The U.S., of course, has similar problems, not because the U.S. dollar is so dominant, the U.S. can paper over some of those sins, although those problems are coming from the U.S. as well.


So, again, what we need to think about is this: The people who are the most affected by COVID-19 are older people. Those people are no longer in the workforce generally, and they’re no longer large consumers, generally.


OK. So all of the workforce is being sidelined or has been sidelined in Asia, is being sidelined in the West now, and consumption is being delayed for a portion of the population that is no longer consuming and is no longer working.


And so getting the fiscal stimulus out is important because those people who are contributing to the economy can’t do anything, right?


So and this isn’t to say we’re not caring about the older populations. Of course, we all are. But it’s a little bit awkward that the beneficiaries of this economic displacement are largely people who are not contributing to economies anymore.



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


Listen to the podcast on COVID-19 in BFM: The Business Station