Tony Nash joins BFM for another podcast where they discussed mainly the US meme stocks and what might the Fed do? Equities are trading in a range and what is the catalyst of that? They also discussed oil prices and inflation in China as China’s Producer Price Index surged to its highest since 2008.
This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/are-meme-stocks-just-relying-on-momentum on June 10, 2021.
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WSN: So to help us make some headway into why markets are in the red, we have on the line with us Tony Nash, CEO of Complete Intelligence. Good morning, Tony. U.S. equity markets seem to be trading in a rather tight range. What do you think the catalyst is going to be for markets to move either up or down?
TN: Sure. Everyone’s waiting for the Fed tomorrow morning to understand what direction and at what pace the Fed will tighten if they tighten or they twist or whatever they do. So it’s very much a fed and stimulus driven market. And people are waiting for the Fed to give them the sign for what’s next.
PS: And, Tony, the perspective on meme stocks like EMC, Clover Health, what’s happening there? Because yesterday there was a bit of downward pressure on them.
TN: They’re fun when you’re in the market with them, right? But you have to keep an eye on them all the time. I was talking to somebody earlier today who said they just bought one for fun. I think it was this morning. And 20 minutes later, they had made like 40 percent on their money and so they sold out. So, you just have to keep an eye on it minute by minute.
So if you’re in Asia, trading stocks is going to be a late night for you. But during the day here, people will buy in. They’ll see what happens. If they’re losing too much, they’ll sell quickly. If they’re making money, they’ll sell it once they hit their target.
WSN: So, Tony, you’re basically saying that all these treats have almost no fundamental basis in terms of valuations, is just momentum, is it?
TN: No, no. We’re at that point in the cycle where you’ve been on a small cap and make 40 percent. You’re not seeing much movement at all in the large cap stocks. You’re not seeing much movement at all in the indices. We’ve really gone to the long tail to see where the action is. And that’s really a scary time for the market.
The Fed knows this. They’re smart people, so they know that people are effectively gambling. So you’ve seen the kind of fears come out of crypto currencies over the past month. I wonder how that will happen. Or I expect the Feds to come out of equities or at least some of these more risky equities with some sort of Fed discussion.
WSN: So they fall dramatically like what we saw with Bitcoin. I mean, at one time, Bitcoin was up almost close to a hundred percent. And then on a year to date basis, it’s only up 20%. Is it all going to end in a bit of tears?
TN: It depends on which stock it is. Most of them are really just sentiment-based and very short-term sentiment-based. The Fed will suck money out of the economy or throw money into the economy. And if they do something to suck money out of the economy, then you can see that stuff. You could see those mean stocks really get boring really quickly.
WSN: So what are your expectations then in terms of the Fed and what they plan to do? I mean, how much of it is going to be driven by me, CPI numbers? Are you expecting inflation to be transitory or perhaps something more persistent?
TN: Yeah, I think well, you know, I think we’re going to see inflation to to be sticky for a few months, probably August, September. And we’ve been saying this for a while. But once once things are moving and there isn’t the kind of delightful surprise of reopening kind of at some point in the future. And it’s it’s happening already. You know, I think a lot of the excitement is going to fall out. There is not much more stimulus that can come out.
And so I think we’re going to hit a point where people kind of look at valuations and look at, say, revenue numbers and are just a little bit worried. So on the inflation side, things like eggs, the corn price, we expect the corn price to continue to rise in the summer. You know, soybean, these sorts of fundamentals, meats and proteins, they’re going to continue to rise on. Issues, but some of these other things like like some of the metals, these sorts of things, they may fall off.
TN: You’ve already seen copper start to stabilize. And so, you know, we see some of these things that have reached a point. We’re not sure that they’re necessarily going to go much higher, but we think they’ve kind of stabilized in a zone.
PS: And, Tony, you were mentioning just now about the defacing of equity does explain why treasuries rallied. Hot tenure yields are now at one point forty nine percent.
TN: Yeah, I think it does. I think people are you know, people are in a lot of cash right now. I mean, you see you see people worried, at least some of the the active investors that I know over the last, say, two months, more and more of them have moved to cash because they’re a little bit worried. So that’s not a big call on my part, saying we’re going to have market fallout. It’s just an observation of the more people I talk to, the more saying, look, we’ve really taken out of a lot of these speculative trades and really taken it to cash.
WSN: And let’s talk about oil. I mean, oil prices inching up or actually brought past the seventy dollars per barrel for WTI. Are we going to see U.S. shale producers return in a big way or will they take a wait and see approach?
TN: Do you know? You’ll see you’ll see an incremental return of shale producers. The real problem is that the OPEC plus group has about six point five million barrels sitting on the sidelines per month. So that’s accumulated. Right. And so they can turn that back on any time. So shale starts to come back in. They start to incrementally add barrels to the market and it pushes the oil price down. So I’m not all that worried about seeing, you know, a three figure oil price because there’s so much supply in the market and demand is coming on very slowly.
WSN: So do you think prices will be around this level? Can it break past 70 convincingly?
TN: It can. I mean, I think you can see you can see a little bit of upside from here, but I am not necessarily sure that we’ll see, you know, over 80 dollars or something like that on a sustained basis. There are a lot of people saying oil, the same people when oil was in the 30s, that it was going down a 20s and it would be there for the next two years. So, you know, I think you get the extremes in a lot of these commodity calls.
But but I don’t necessarily think we’re going there. It’s possible, but but it’s not within our outlook for sure.
WSN: All right. Thank you so much for your time. That was Tony Nash, CEO of Complete Intelligence, giving us his views on global markets. I think an interesting conversation about meme stocks because really that has grabbed headlines and a bit of question marks about what is driving price direction. And it’s actually not fundamental. It’s momentum. Maybe people just watching this and trying to make a quick buck out of it.
PS: If you’re in a different time zone, which I think Tony was alluding to, be prepared for very late nights at a roller coaster. Right. So if you’re doing the trading day and you can monitor and you can cut your losses, I think that’s the way to go. But if you’re based in Asia.
WSN: But I, I would I would put a caveat. I think this is not for everyone. Clearly, I think this is for maybe perhaps people who are a bit more sophisticated, willing to to stomach the risk reward because it could go either way.
PS: Well, we’ll think about it. Right. There is no theme in meme stocks.
WSN: You know, it’s whatever people like.
PS: Exactly. You’ve got Hertz a car rental. You’ve got GameStop a game gaming business. You’ve got AMC theater. There is no connection. There is no basis to see it as a collective theme. No one is going through. Maybe they all going through a hot time when some form or another. But it’s very hard to live on. That’s what you sit following the fundamentals.
WSN: Yeah, most of them actually in in the red. In the red, they’re all suffering from losses or they’re actually businesses, which like Blockbuster was one meems at one time, which is clearly going out of fashion. But, you know, there’s some for whatever reason, retail participation or interests.
PS: So it’s counter fundamental.
WSN: Yeah. Buy what you like.
It doesn’t have to make sense. But talking about something the markets like Singapore grab has has postponed the expected completion of its merger with the US. Back now, this ride hailing and food delivery giant Worx working on a financial audit for the past three years as the requirement, as per the requirement by the U.S. Securities and Exchange Commission. Now, according to a statement released yesterday, the deal is now set to be completed in the fourth quarter of this year versus earlier expectations of completion in the third quarter.
PS: I mean, grab post it really strong numbers. They’re consolidated. Group merchandise value rose 5.2 percent to USD three point six billion dollars. That’s equivalent to the total value of merchandise all over C2C extreme right now with strong food delivery growth offsetting a decline in rate, healing the companies that it didn’t provide revenue or profit. But grabs it in April, it’s set to have a market value of about 40 billion dollars after the combination with Altimeter Growth Corp., the spec of Brett Gutsiness, Altimeter Capital Management, now the combined entity stock will trade on the Nasdaq under the ticker Greb after the completion of the deal.
But I’m just going to be really curious, what’s the appetite going to be like? Maybe we’ll get some color in terms of really how well they’re doing financially, because a lot of these type of apps, I mean, super apps, as you know, they might have really, really very strong top line numbers, but profit might be non-existent or really dismal. Right. Because all of these apps were basically trying to create market share at the expense of anything else.
And this is the challenge with growth stocks, where you have this risk of higher interest rates, you may not get the valuations you want. So this is the challenge. And you see the contrast between China and us in China as we were talking a Jacuzzi yesterday, all the IPO for quite retail centric. But if you see what’s happening in the U.S., the IPOs are not so retail centric, you know, yes, they tend to be quite B2B driving enterprise growth and all that because it’s a different market in this market.
And they don’t really think about growth in the way maybe China thinks about it.
WSN: Yeah, but I’m just curious what kind of valuations at the end of the day they’ll get so but we definitely, definitely be watching this space very closely. I think this is clearly Southeast Asia’s big unicorn that everyone is keeping your eye on. BFM eighty nine point nine.