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Australia Goes To The Polls

This podcast first appeared and originally published at https://www.bbc.co.uk/sounds/play/w172ydpc5c4cl26 on May 21, 2021.

Millions of Australians decide whether or not to vote back in the Conservatives after nine years under the party’s rule. BBC’s Katie Silver and Australian economist Tim Harcourt tell us more. Rising fuel prices have led food delivery drivers to strike for days in the United Arab Emirates, where industrial action is banned. BBC’s Sameer Hashmi explains their struggle from Dubai. Adi Imsirovic from the Oxford Institute for Energy Studies gives us his views on the former German chancellor Gerhard Schroeder’s recent resignation from the board of directors of Russia’s state-owned oil company, Rosneft. In Korea, president Joe Biden begins his five-day Asia trip with a visit to a Samsung semiconductor plant. We talked to Carolina Milanesi, president of analyst and market research firm Creative Strategies, about this. Vivienne Nunis is joined throughout the programme by guests Tony Nash, Chief Economist at Complete Intelligence in Houston, Texas, and Karen Percy, Senior freelance reporter in Melbourne.

Show Notes

VN: Tony Nash, who’s the chief economist at Complete Intelligence in Houston, Texas, is one of them. Welcome back to the program, Tony.

TN: Hi, Vivian. Thank you.

VN: Thanks for joining us again, Tony Nash. Listening to that. It’s interesting, isn’t it? It doesn’t matter where you are in in the world. The energy crisis triggered by the war in Ukraine is forcing drivers to fill the pinch wherever they are.

TN: Yes. I live in Texas, and we produce a lot of oil here.

VN: What’s the situation there?

TN: Oil is rising pretty quickly. The price of gasoline is rising pretty quickly. So both regard to the UAE. I spent a bit of time in the region, and the prices are always lower. They’re very cheap. But what’s interesting about the delivery business is if the cost of petrol is impacting the delivery business, that could be a real issue for that business model. I think we’ve been in an era of relatively low petrol prices, and if those prices remain high, it could be a real challenge for that business model at some point.

VN: So you’re saying that fuel prices are already cheaper compared to, say, global averages in the US, and I guess they are in the US as well. They’re heavily subsidized, aren’t they? I guess the question is, should governments be stepping in where they can to ease that pressure on drivers and everyone facing various cost of living pressures?

TN: Well, with UAE, actually, the prices in May for fuel are lower than they were in April. They’re still elevated, but they have come down a small amount, like 2% or something. But I think if the government is to help people, all that will do is I think we’ll only have higher crew prices or higher sorry, fuel prices. So it’s a hard thing to say, but I think more money toward it will only make those prices higher as more people consume kind of at the same levels, but with the subsidies. So it’s a very hard time. And I think it’s something that maybe the companies should help their drivers with, not necessarily the governments. These people are working on behalf of the company. And so perhaps the company should help their drivers a little bit with fuel.

VN: Tony, this story is moving all the time, isn’t it? We’ll get to some of that in a moment. But firstly, it was rather extraordinary, wasn’t it, that Gerhard Schroeder didn’t resign from that position on the board of Rosneft until today?

TN: Yeah. It’s weird that he took up the position in the first place. I remember when it happened 20 or so years ago, and it just seemed like a strange appointment at the time. But it took him 20 years to make the decision. So, yeah, it’s well overdue and it seemed fishy from the start. And I think Germans have been extraordinarily patient in putting their pressure on him to get it done.

VN: Well, we don’t know there was anything fishy, of course. I mean, perhaps the pressure only really came on to him since this invasion by Russia into Ukraine, given that before that, Russia and German energy relations were pretty tight.

TN: Sure. Yeah. But Germany had at some point looked at, say, taking LNG from other parts of the world, Qatar, US, other places, and they chose not to do that and really have Russia as their only source, I believe, largely because of lobbying that Schroeder participated in. So had Schroeder not worked with Gasprom, there’s a feasible scenario that Germany would have multiple sources of natural gas and oil and not really just looking at Russia.

VN: I mean, Tony, I guess what is fairly obvious that it was a very lucrative position there, and that’s probably one of the reasons why he stayed so long.

TN: Sure. And as a former Prime Minister, it is awkward for him to lobby to single source energy from one country. I get it. Of course, it’s lucrative and everybody has to pay the bills somehow. But this was particularly odd.

VN: Okay. Let’s leave it there. Thank you both for your thoughts on that. Tony. It was interesting, wasn’t it, how President Biden almost made a beeline to that Samsung plant straight off the plane after he landed in South Korea, obviously underlining that relationship with South Korea, but also the importance of semiconductors in today’s economy.

TN: Sure. So I live in Texas, and Samsung last year announced a $17 billion chip Fab investment just north of Austin, Texas. And Texas Instruments is also building a new chip Fab in North Texas. So there are three new chip fabs that have been announced or major new chip fabs that have been announced in the US over the past couple of years. And two of them are in Texas. And so that $17 billion of investment that Samsung is making is really the reason for the trip. So that chip Fab that’s in Texas, there’s got to be a lot of thank yous to Samsung for making that investment in the US.

VN: So it’s not a wider move then by the US to really try and encourage that kind of thing in its own shores. We talk about onshoring we’ve seen so many delays in global supply chains throughout the pandemic. We’ve seen shipping crises. Is this an idea to try and prevent any of that from happening in the past and get those made in the country closer to some of those big companies like Apple and intel, for instance.

TN: That has been underway for probably five years. The movement to getting technology firms, particularly semiconductor and defense related technology firms, building more either in the US or in the NAFTA or the North American Trade Agreement area. So that started particularly after the 2016 election, and it’s continued in the Biden administration trying to get more of that technology development and technology manufacturing in the US.

VN: And right where you are in Texas. Well, not exactly where you are, but somewhere in Texas we’re hearing not just about these semiconductor plants, but also, of course, Tesla moving a Gigafactory there as well, out of California and into Texas.

TN: Right. Tesla, Oracle, HP, many firms have decided to relocate to Texas. It’s a great workforce. I’m here. I run an artificial intelligence company here, and people here like to work. And so it’s a really good location for technology companies.

VN: It’s not just the hard work, though, isn’t it? Also about tax rates, if I recall.

TN: It’s about tax rates. It’s about research dollars. So the universities here get a massive amount of research dollars and spend a lot of money on research. And it’s the quality of education that’s here. So all of those things combined, of course, Samsung got subsidies for building its Fab and Taylor, but I think they could probably get subsidies from anybody. They’re kind of really looking at the whole environment that they plant their business in.

VN: It’s interesting because we always think, well, originally we thought about California dominating the tech industry. Now we’re hearing about Texas, as you’ve just mentioned. I spoke to Carolina, who we heard from earlier. She’s actually moved out of California into Atlanta. And she told me that’s a growing tech hub, too, used to be a kind of base for telecoms companies, but now it’s attracting some of those tech firms, too.

TN: Yeah, I think there are a lot of kind of mini tech hubs around the US, and you can find them in different clusters around the US. And so it’s really just a matter of what critical mass can you get and what specialization can you get, and then how do you build around those specializations? So, for example, Tesla moves to Austin, and their vendors are then required to move to Austin as well. Right. And that creates a cluster around what Tesla does. So really getting those bigger fish to move their vendors and build that whole system is pretty critical. And the Texas governor, Greg Abbott, has actually done a really good job of recruiting those firms here because it’s only the last four or five years that a lot of that’s happened.

VN: Okay, well, thank you, Tony, for all of that insight from Texas. Do you take ketchup and mustard on your hot dogs?

TN: You’re supposed to only eat mustard on hot dogs. I’m sorry, but this is the law of the land.

KP: It’s an abomination. I have a Canadian Hudson who does the same thing.

VN: Okay, so just mustard, you said. Okay, Tony asking you in watching along in the US. I mean, Boeing getting into this private space race. Now, Boeing has been in the news for all the wrong reasons over the last few years. Those two very serious fatal crashes. There’s a lot riding on this venture, Tony. Have I still got you there?

TN: Yeah, I’m here. Can you hear me?

VN: Yeah. So just talking about Boeing, they’ve had a pretty rough ride, given those two facial crashes. A lot riding on this venture into space.

TN: Absolutely. And they need some good news stories. And if this is a good news story for for them, that’s great. I hope it ends up well.

VN: Okay. Thank you, Karen Percy in Melbourne and Tony Nash in Texas. You’ve been listening to business matters with me, Vivian Nunes. Thanks for the team in Manchester here as well. Bye for now.

Categories
Podcasts

Rotating Permanently into Cyclicals

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

 

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

 

❗️ Check out more of our insights in featured in the CI Newsletter and QuickHit interviews with experts.

❗️ Discover how Complete Intelligence can help your company be more profitable with AI and ML technologies. Book a demo here.

 

BFM Description

 

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

 

Produced by: Mike Gong

 

Presented by: Lyn Mak, Wong Shou Ning

 

 

Show Notes

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

What will he take? Reasoning?

 

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

 

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

 

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

 

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

 

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

 

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

 

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Visual (Videos)

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

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

 

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

 

Show Notes

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

Categories
Podcasts

BBC Business Matters: President Trump announces new US sanctions on Iran

Tony Nash joins Fergus Nicoll at the BBC for Business Matters podcast where they discussed about US sanctions on Iran, the battle for the new head of World Trade Organization, Texas’s stand on green technology, and the coronavirus update right in Houston, Texas.

 

This podcast was published on October 9, 2020 and the original source can be found at https://www.bbc.co.uk/sounds/play/w172x18z44jxg52

 

BBC Business Matters Description:

 

The US has imposed sweeping new sanctions on Iran, this time targeting its major banks as the Trump administration continues its strategy of “maximum pressure.” We’ll hear from Barbara Slavin, Director of the Future of Iran Initiative at the Atlantic Council. Also in the programme, the selection of a new director general of the World Trade Organisation (WTO) is entering its final stage and with both the final candidates being female, whoever gets it, it will be the first time the job has been taken by a woman. We’ll hear from Annamie Paul, the new leader of the Green Party of Canada on her vision for how the economy can be overhauled to create sustainable jobs. And we’ll hear from one entrepreneur who has taken the pod-serving idea of coffee machines like Nespresso, and used it to serve different kinds of whiskey.

 

All through the show we’ll be joined by financial professional Jessica Khine in Malaysia and Complete Intelligence economist Tony Nash in Texas.

 

Show Notes

 

FN: On US sanctions on Iran: it’s damned if you do and damned if you don’t, I guess at this kind of fervid election time, you’ve got to have a foreign policy and yet you get a slamming if it comes up at what looks like a cynical moment.

 

TN: I just want to clarify something that your guest said. The U.S. Treasury Department made a specific statement about agriculture, food, medicine and medical devices and said that they specifically don’t apply to those commodities. This applies to 11 Iranian banks. The U.S. is working on peace agreements across the region. They’re working on withdrawing troops from Afghanistan by the end of the year. Saying that this is whipping up disagreement in the region, I actually don’t think is the case. The U.S. is proving with the actions that it’s really going to great lengths to bring peace to the region.

 

FN: So you would say presumably that when we heard Barbara say that Mike Pompei just kind of looking busy for busy’s sake, you’d say the State Department, Foggy Bottom is much more active, proactive.

 

TN: Well, if Mike Pompei wants to just look busy, there’s plenty of other stuff we can do. It’s not as if Iran is just something on the edge waiting to happen. There’s a lot going on with the US State Department, quite frankly, a lot more than has gone on for years.

 

As you know, I lived in Asia for 15 years. I lived in Europe for a spell before that. I’ve seen the U.S. State Department in action in these cities. Although the U.S. State Department has become quite assertive over the last two or three years, at least they’re doing something productive. There wasn’t much going on previously aside from upholding status quo, kind of rigid lines.

 

FN: OK, Tony, thanks. Great to have you with us. Now, I’m hoping are we going to bring you a first time appearance on Business Matters on the part of the financial professional? Jessica Khine’s with us from Nusajaya in southern Malaysia. Jessica, you’re hearing us okay? I know we’ve had a little bit of difficulty establishing connection. Good morning.

 

JK: Good morning, gentlemen. Glitches are over and delighted to join you.

 

FN: Well, that’s fantastic. Tell us a bit about Nusajaya. I had to admit I had to look it up, but it looks to me about perfect for commuting over the strait to Singapore.

 

JK: Yes. That is provided that the pandemic does not frighten the two governments, Singapore and Malaysia. And once upon a time, I was able to pop into my car, drive down with a special cash card to pay the Singapore Transport Authority as I crossed the causeway, you know, quickly flashed my passport at both customs and Immigration and pop into a meeting in the central business district in Singapore. But sadly, that has now been prevented and forbidden since March the 18th. And if you think that today where, you know, October the 9th in Asia, it has been an absolute business killer.

 

FN: In what sense? A business killer?

 

JK: No physical driving over a causeway for a meeting with a client, an institution, you know, a lunch with a friend. It’s quite frustrating to be a mere 10 kilometers north of Singapore. Tony, you have your Asian experience. I don’t know if you ever knew that the tip of southern Malaysia was so close to Singapore.

 

TN: Of course, I was actually in Nusajaya for one of the launch events years and years ago, and the intention was that it would be kind of a suburb to Singapore.

 

JK: Something like that, I think. Was it was it Mark Mobius who identified the state called Leisure Farmers as somewhere where, you know, the sultan had provided affordable land and wanted to have a lot of Singaporeans have a decent second weekend home?

 

TN: I’ve had a lot of friends who lived in that area and in those developments, and the plan was that they would commute into Singapore. Of course, that’s been very difficult in 2020.

 

FN: Jessica, what’s the state in Malaysia? Across Malaysia, if you look north to Kuala Lumpur, what is the state of the domestic fight against coronavirus? Because I’ve seen a spike in the last week or so, I think.

 

JK: Yes, indeed. They badly calculated the outcome after holding some elections in the state of Sabah, which you might know is to the east of the of peninsular Malaysia. And I think where you have a lot of people congregating together, insufficient ventilation. I actually even found out that a particular NGO had lured Sabah citizens to fly back by subsidizing their flight tickets, saying, come on, come back and vote for us, etc.. So that was slightly poorly planned. Numbers of new cases which had been, you know, a very proud single digit for a thirty four point six million population nation, suddenly got catapulted right up into 600, 400, 300. And it’s quite a sort of a, you know, quote unquote horror movie situation at the moment.

 

FN: Go on, finish that. And then just tell us quickly whether there’s been an impact within Malaysia on business and the way people travel around to do business.

 

JK: I think the complete lockdown in the first quarter was grim. And now interstate travel is not banned. But is business choked? Absolutely. And I think, you know, it’s such a global pattern that, you know, I couldn’t beg to differ in any way. But I think we we are already aware that many governments have not been able to implement, you know, the best policy. And the continuing discussion does seem to be, do we sacrifice growth or do we pander to the the virus?

 

And and it’s, you know, unique, unique nature.

 

FN: And a quick word. Bring us up to date. And in Texas, Tony, how do things stand since we last spoke?

 

TN: I think they stand pretty well. The governor here just started to lift even more restrictions here. We’re in the top five states in terms of the the lowest R0 contagion rate in the U.S. It’s very low here. We may hear case numbers, but the hospitalization and casualty numbers are very, very low here. So things here seem to be getting much, much better and have done so over the past six to eight weeks very much. And so it’s getting better. I just hope things move on.

 

FN: Tony Nash on Texas of course, you know, massively organized around the petroleum industries. What is the tolerance or or interest in Green Party as such a green new deal as such in Texas?

 

TN: I’m in Houston. It’s not very high at all. Obviously, that endangers a lot of jobs here. What’s happening in Canada is slightly different with the Tarzans and the cost of getting crude out of the ground there versus shale in west Texas, which is cheap on a relative basis. We produce much less expensive from a cost perspective, hydrocarbons in Texas. In parts of Canada, you have to have crude trading at relatively high levels for it to be economical. I can understand why it would be more interesting there. Here in Texas, we get out of the ground a lot cheaper. So it makes kind of less sense here.

 

FN: We’ve got to go to a break in a moment, Tony, but what’s been the impact. Has the coronavirus shut down earlier in the year? What happened with with fracking and so on in Texas?

 

TN: Coronavirus is one blow, but what we had about three or four weeks before coronavirus was, if you remember, the Saudis and the Russians did an OPEC deal where they really crushed the price of crude. The crude markets were oversaturated on the supply side and the price was down already. And then we had a second blow with a coronavirus. The oil and gas sector is really damaged this year, not only because of COVID, but also because of what the Russians and the Saudis did to prepare crude markets for this, meaning oversupply in a market where demand just evaporated.

 

FN: Tony, how on earth do you pick between two talented, experienced, clever people of this in a competition of this kind?

 

TN: Yeah, they’re both great. I think we have a trade expert against a reformer expert. And I think the question really is, what does the WTO need right now? Do they need trade expertise or do they need reform? Given that Azevêdo regime at Servicio has been pretty lackluster and so well, I would love to see an Asian head at the WTO. At this point, a reform is much more important because issues like nontariff barriers continue to allow countries to circumvent trade rules. And until there is reform to actually track and name the names of that stuff, we’re going to continue to see massive problems in trade.

 

FN: Will come to Jessica in a moment on that desire for an Asian head of the organization. But, Tony, just amplify that point about reform, because both candidates use that word. Everybody says the WTO is seriously wanting. But what are the most egregious problems and who’s standing in the way of this reform?

 

TN: I think it’s an institutional problem more than an individual problem. What is it? I think it’s the ability for countries to try to circumvent the rules. The WTO hasn’t necessarily kept up with technology and kept up with trade policies and the value buildup of goods. And this is why, like in the U.S., I moved to the U.S. three years ago. I spent most of my life in Asia.

 

This is why the U.S. has done things like the USMCA to really prepare for re-regionalization of trade patterns. What we saw from 1990, 2000 until 2015 was the clustering of trade power in Northeast Asia. And that has led to a lot of concentration of risk and supply chains. What we’re seeing, especially in the wake of coronavirus, is a desire for companies and countries to de-risk their supply chains by re-regionalizing, their supply chain.

 

So in the late 80s, early 90s, we saw regionalization of supply chains with the E.U., with NAFTA and with other regional agreements. It’s only when China came into the WTO that you saw this real dash for a hard centralized concentration in Northeast Asia.

 

FN: Very interesting, Jessica. I’m not sure what whether you want to add to that. But just let’s start at least with this point about maybe it’s a myth, Asian solidarity for an Asian candidate. Would you assume that across Southeast Asia, for example, there would be enthusiasm for the candidate presented by Seoul?

 

JK: I think the important point is that just to honor someone we have recently lost Ruth Bader Ginsburg. Women belong in places where decisions are being made. So I, for one, am absolutely over the moon about the two candidates. It is true that there is some tension from China and Japan regarding a union, his candidacy. But I think that it’s time to grow up. I fully concur with Tony that, you know, in. The whole organization called WTO, I think reform is crucial, the ability to track name and shame, you know, perpetrators who are consistently breaking rules and laws and policies is absolutely important.

 

But the other the counter weight to that is that I think we’ve also got to fight this big move, which has been reinforced post pandemic of kind of globalization. Tony used the word re regionalization. But I think the supply chain issues, I think there’s whoever comes in is going to have, in a way, a sort of a poisoned chalice. There’s got to be a lot of work that’s done to clean the house. I’m delighted that its two strong candidates, but I might agree with Tony that the reformer might possibly win over the candidate with a strong color and background in trade.

 

TN: And Tony, it’s worth noting that, you know, we should probably just stop. You know, it is no longer a remarkable thing for a woman to head such an organization. We have Christine Lagarde at the ECB. We have Kristalina Georgieva, the IMF chief economist, the IMF, Gitter Gopinath, and so on. We had the former head of the Fed, of course, was a woman. So is this now normalised?

 

TN: I think it’s great that we’re in this position. But I don’t think anybody is as shocked that there are two women battling to enter the WTO. I don’t think this is the 1980s. It’s in 2020. I think it’s definitely normalize.

 

FN: These guys do Martin and their colleagues. These are the dreamers who who just turn everything over, reinvent things and and who’s who’s to who’s to quibble about that centuries old tradition, whatever these guys are doing something radical and new.

 

TN: It’s a tough hill to climb because the whiskey drinkers that I know like the tradition and they like the process. Your comment about the chemistry set was pretty apt, actually, because it’s for anybody who has a taste for any certain kind of food, it doesn’t matter what can be done super quickly. The enjoyment is in the process. It’s in the refinement and it’s in the care that it takes for that stuff to come to market.

 

FN: That’s what they say about Business Matters. Thank you very much, guys. Great pleasure. Good to have you with us, Tony, as always.

 

Categories
QuickHit Visual (Videos)

QuickHit: China is not going to stop being China

Panama Canal Authority’s Silvia Fernandez de Marucci joins us for this week’s QuickHit, where explains why China is not going to stop being China. She also shares first-hand observation on the global trade trends — is it declining and by how much, what’s happening in cruises and cargo vessels, where do gas and oil shipments are redirecting, why June was worse than May, and what about July? She also shares the “star” in this pandemic and whether there’s a noticeable regionalization changes from Asia to Europe, and when can we see it happening? Also, what does Panama Canal do to be up-to-date with technology and to adapt the new normal?

 

Silvia is the Canal’s manager of market analysis and customer relations. She has 20 years of experience studying all the markets for them and is responsible for their pricing strategy, their forecasting of traffic and customer relations.

 

Panama Canal opened in 1914 with annual traffic of 14,702 vessels in 2008. By 2012, more than 815,000 vessels had passed through the canal. It takes 11.38 hours to pass through it. The American Society of Civil Engineers has ranked the Panama Canal one of the seven wonders of the modern world.

 

***This video was recorded on July 30, 2020 CDT.

 

The views and opinions expressed in this 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: Recently, the CPB of the Netherlands came out and said that world trade was down by double digits for the first five months of the year. Obviously that’s related to COVID. Can you tell us a little bit about what you’ve seen at the Canal and really what you guys have been doing? Everyone’s been in reactionary mode. So what have you seen happening in the market?

 

SM: There are some trends that had been present before COVID like the movement of production from China to Eastern Asia and we think this is going to be accelerated by this pandemia. But I don’t think that China is going to stop being China. It will keep the relevance and the importance in global trade as they have today.

 

We think that probably, yes, we will see more regionalization. We saw the signing of the renewal of the NAFTA trade between Canada, the US, and Mexico. So we think that there may be something happening in that area. However, we don’t see that trade is going to stop. I mean trade is going to continue growing after this pandemic.

 

This is something that I would say very different from anything that we have experienced before because once it is solved, I don’t know if the vaccine appears and people start going back to the new normal, there will be changes probably to the way we do things and the consumer is going to be very careful and probably will change his habits in order to prevent contagion. But I think trade is going to continue.

 

We see some of these trends becoming more and more important or at a faster pace. It is not an economic crisis per se. Once the people are going back to work, the industry will restart their operations, people are going to be rehired. The economy should start recovering faster. We are not sure because there is no certainty with this situation.

 

We first heard about it early in the year with the cases in China. But then, it looked so far away. It was happening to China. It was happening to Italy. We didn’t think about it as something that was so important or so relevant. The first casualty was the passenger vessels. The whole season for cruise ships at the Canal was cut short in March and Panama went to a total lockdown on March 25.

 

It really started for us when we received the news of a cruise ship arriving in Panama with influenza-like disease on board that wanted to cross, which was the Zaandam, and the first one that we had with the COVID patients on board.

 

TN: And how much of your traffic is cruise ships?

 

SM: It’s very small, to be honest. It’s less than two percent of our traffic. But still, we see it as an important segment, not only because of the traffic through the Canal, but also because of what it does to the local economy. We have a lot of visitors, a lot of tourism, and that is a good injection of cash coming to Panama. It was the probably the end of the season but it was shorter than what we would have wanted.

 

TN: When we saw the first wave of COVID go through Asia, did you see a a sharp decline in vessel traffic in say Feb, March? Or was it pretty even? Did we not see that much? Because I’ve spoken to people in air freight and they said it was dramatic, the fall off they saw. I would imagine in sea freight, it’s not as dramatic but did you see a fall off?

 

SM: It started in January, which is the very low season for containers, which is the most important market segments in terms of contribution to tolls. When we saw that there was this COVID happening in Chinese New Year, everything was closed. We were in a slow season. So we didn’t see much of an impact.

 

And for the Canal, there is a lagging effect because we are 23 days away in voyage terms. So whatever happens in China, we feel it probably one month later. We expected January and February to be slow because of the normal seasonality of the trade. But then after March, I would say that April was probably the worst month for us. We were hit April then May was worse than April and then June that was even worse than than May.

 

TN: June was worse than May? Okay.

 

SM: June was worse than May. We‘ve seen four percent, ten percent, fourteen or sixteen percent decline each month. It was like, “Oh wow! This is really thick. This is really getting worse.” We had reviewed our forecast in April. And I think so far, it is behaving as we expected back then. But there’s nothing written about COVID. We are learning as we go.

 

I would say that container vessels were also affected these three months of the year. We have LNG vessels that were supposed to deliver natural gas to Japan, Korea, and China. And LNG had been behaving very badly all year. That is kind of a peak season for LNG and LNG has been having a hard time because the market were supplied and the prices were very low, so many shipments that were supposed to end up in Asia, ended up in Europe or other destinations that were more profitable for the owners. But when the price of oil collapsed and went negative, the prices of LNG were affected in the Middle East and became more competitive than the US prices.

 

We saw a harsher decline in LNG shipments. We see, for example, 30 percent less than we expected to see and by COVID in April, it was probably 50 percent below what we were expecting. It was major and Iguess it’s a matter of demand because since the whole Asia was locked down, there was no demand.

 

TN: When industry stops, you don’t need energy. It’s terrible.

SM: Exactly. It’s really terrible. It was terrible. But we had some stars in our trade that supported the situation like LPG, the cooking gas and obviously people were cooking more at home so the demand was high and we saw an increase in trade for LPG. It’s a good market for us, for the neopanamax locks, so in a way we are grateful that our trade has not suffered as much as we have seen in other areas.

 

TN: You said you declined into June. How have things been in in July, so far?

 

SM: July seems promising. We came from a from a very bad June that was closed probably 16 percent below what we expected to have. But July is about maybe seven percent below our expectation. But we are very concerned about a potential W-shape recovery because of the new cases that we have seen in the US.

 

TN: When we saw factories close across Asia in the first quarter and in some cases stay until the second quarter, did you see some of the folks who were shipping through the Canal start to pivot their production to North America?

 

SM: It’s probably too early to say. We will see the effects of COVID probably in terms of near shoring maybe in two years. I don’t think that the companies or the factories are so quick as to move the production especially during this period in which everybody is still trying to cope with the situation.

 

TN: And manage their risks, right?

 

SM: Yes. So I don’t see that happening anytime soon. But it’s probably something that the factories and the companies are going to start speeding up and diversifying their production.

 

TN: And as you said earlier, China’s still going to be there. China’s not going to disappear as an origin, right? What I’ve been saying to people is it’s incremental manufacturing that may move. It’s not the mainstay of Chinese manufacturing that’s going to move or regionalize. They’re still going to do much of the commoditized manufacturing there because the infrastructure is there.The sunk cost is there, and they need to earn out the value of those factories. I like your timeline of two years before you really start to see an impact because we may see some incremental movement and maybe some very high value, high tech stuff or something like that move first but the volume of things probably won’t happen for at least two years. Is that fair to say?

 

SM: I would say so and I would add that we have seen these shifts to Vietnam and Malaysia and other countries in Asia, but we still see containerized cargo shipping from China. The volumes are still not high enough to be shipping directly from those countries. The container may come from Vietnam and or from Malaysia and they come to Shanghai or to another port in China. They consolidate the vessel there and the vessel departs from those ports. So in terms of Canal, for us that is good news. And I would say that probably Korea is trying to attract that tradition as well. So the long voyage will start in China or in Korea or in Japan instead of these other countries that are further away from our area of relevance.

 

TN: That makes a lot of sense. Just one last question. How do you see transit changing over the next five to ten years? What are you seeing from the Canal perspective in the way your operations will change?

 

SM: We are still adjusting to what is happening. We have always been very regulated in the best way. What I mean is that we have always had our protocols and codes for attending every situation. We have our protocol for infectious diseases that was the basis to start working with COVID. We think that at the canal probably, what we will see in the future is more technology to improve the operation. I’m not sure exactly how, but definitely there are machine learning and artificial intelligence that may help us be more accurate in our forecasts and probably organize our traffic in a way that is faster or we make better use of the assets. The canal is 106 years old. We have been adjusting every time to the new ways of the world, and we’ll continue to do so as a trade enabler.

 

TN: That’s right. Silvia, thank you so much for your time. This has been very insightful. I really do hope that we can connect again in some time and and just see how trade recovers and what we look like maybe going into 2021 or something like that. Okay. Thank you so much.

 

SM: Thanks to you.

Categories
News Articles

WSJ: China Loses Steam Because Of Trade War

This article is originally published at https://theschpiel.com/world/wsj-china-loses-steam-because-of-trade-war/

 

The mainstream experts stuck in their globalist mindset believed that President Donald Trump couldn’t take China on in a trade war and possibly win. Those naysayers are beginning to look rather foolish as China’s economic growth is falling without US cooperation. The parasitic relationship between the nations is no more!

The Wall Street Journal noted the progress that Trump is making as he uses his leverage to put the screws to the communist government of China:

 

An intensifying trade brawl with the U.S. is starting to take a heavier toll on China’s economy, as weakening foreign demand and sluggish domestic consumption cause Chinese manufacturers to significantly scale back production.

 

The manufacturing slowdown, detailed in reports released Sunday, raises the prospect that China’s leaders will step up economic stimulus measures to prop up growth.

 

The new data showed that privately owned makers of cars, machinery and other products stopped expanding in September, as export orders dropped the most in more than two years. At the same time, output by large, state-owned manufacturers continued to weaken.

 

The data, among the first major gauges of China’s economic performance for the third quarter, indicate that the U.S.-China trade fight is beginning to take a bigger bite out of the growth of the world’s second-largest economy.

 

After renegotiating NAFTA under more favorable terms with Canada and Mexico, Trump is now freed up to blast China with a united front throughout the North American continent. The master deal-maker’s grand plan is coming to fruition before our very eyes!

 

“China is having a fair amount of difficulty in their domestic economy … so I continue to believe China will come to the table with some significant concessions (although they may be downplayed) this month,” said Tony Nash, CEO of Complete Intelligence, to CNBC reporters.

 

Trump’s brilliance is playing out on the global stage, and his detractors have more and more egg on their faces as a result. The days of China becoming rich and prosperous while bleeding the US dry are quickly coming to an end due to the incredible leadership of 45.