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Expectations Of Higher Rate Are Crushing Markets

Expectations Of Higher Rate Are Crushing Markets

Markets are tanking on concerns that rate hikes might occur sooner than expected, hence the possibility that heightened volatility and a flight to value havens could be in store for 2022, according to Tony Nash, CEO, Complete Intelligence.

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/expectations-of-higher-rate-are-crushing-markets on January 5, 2021.

Show Notes

KHC: Good morning. This is BFM 89 nine, five minutes past seven in the morning, 6 January 2022. I’m Khoo Hsu Chuang and I’m joined by Philip See. Okay, let’s also recap how global markets closer today, Phil.

PS: Yeah. Markets in the US really didn’t enjoy the fair minutes. So the Dow is down 1% SMP 500 down 1.9% Nasdaq also down 3.2% across over in Asia mixed the Nikkei was up zero 1% Hang Sing down 1.6% Shanghai Composite down 1% Singapore STI down 6%. But back home as FBMKLCI was up zero 4%.

KHC: Of course, markets are being rented all over the world because of the Fed minutes, which disclose that JPowell might introduce higher rates as early as March. So for some thoughts on what’s moving these markets, we now talk to Complete Intelligence Chief Executive Tony Nash. Tony, good morning. Now we are talking about how financial markets are being crushed everywhere, including in the US by the Fed minutes, which is just faster and higher rate hikes. Maybe as early as March. Do you share the same sentiment?

TN: Yeah. I think it’s a little bit weird. So it makes sense for the Fed to stop buying things. So they buy, like mortgage backed securities so that they can put money into the market. So those are things that go onto their balance sheet. So they’ve acquired trillions of dollars worth of assets in order to support markets and get money into the system. So it makes sense to taper off the things they buy. But it doesn’t make sense to raise interest rates because people are complaining about inflation.

Right. And so if people can’t afford stuff, the major issue is stop putting money into the market don’t necessarily raise the cost of money, which is what interest rates are. So the markets feel like Powell has things a little bit out of order and that he needs to just stop putting money in the market before he raises rates. It may be appropriate to raise rates later in the year, but not just yet. So people think this is a little bit preemptive. So I would expect to see statements to walk back this Fed meeting over the next couple of days or week.

KHC: Well, the thing, Mr. Tony, according to the Bloomberg and markets being the forward indicators, that they are the Bloomberg, that there’s going to be a 71% chance that there’s going to be a rate hike as early as the March 16 meeting for the FOMC. What do you make of that?

TN: I see that. But that’s a forecast by economists. So I’d love to see the error rates of the economists. So I think that the real expectation is around the market welcoming of that. So is it possible they raised by March? Yeah, it’s possible. I think they need to start the paper first to see how likely it is, because again, the major issue is inflation and raising interest rates is a very old school way of fighting inflation before we had the tools that we have right now brand QE QE and other things.

PS: So getting a perspective. Clearly, what we saw in the nest was 3% down. I think interest rate sensitive stocks like tech stocks, I think were biggest hit. Is it time to take some money off the table after a good run?

TN: Sure. Yeah. That’s definitely part of the calculation. Absolutely.

PS: And then the question is, do you rotate it into value?

TN: Well, I think what we’re expecting probably sooner rather than later. We saw some big moves today, but yeah, there is expected irritation out of tech. We’ve seen people load up on tech and durable goods over the past two years. They’re way overstretched. So we do expect tech to see some serious downside over the next quarter, two quarters. And we do expect a rotation more into traditional industries, what people would consider boring industry. So people who make stuff like actually make stuff, even things like tourism and those sorts of things.

So we expect to do some rotation there.

KHC: Yeah. Tony, the other spectre is obviously the covered variants. IHU and of course Florona as well. Assuming that you are right in the possibility of the Fed walking back comments about the March rate hike or the possibility of a March rate hike. Right. What would the smart money be doing now in terms of possibly buying to the dip and getting a nice bounce from a short term trading perspective?

TN: Well, I think you have to look at things like energy, which has gotten a lot of attention over the past week. I think you have to look at what opportunities will there be if the variant slows down and money remains cheap. Okay. So if we’re not going to see a dramatic rise in interest rates from the Fed, then you may have some legs on some things like real estate. I’m not sure. But you may I’d have to do some research there, but I think you really need to look at things like tourism and people getting out Airlines.

Those sorts of things really have to think about when people start to get out in force, what kind of difference can be made in markets?

KHC: I think you quite rightly pointed out that increasing interest rates is a very old fashioned way of dealing with inflation. What, in your opinion, are possibly alternative solutions to addressing higher costs, which is definitely a reality today.

TN: Look, a lot of the issue is on the supply side. So you raise interest rates when the issues are on the demand side and the demand side peaked in 2020 after the Fed just released a huge amount of money on to US citizens. So a lot of the issues are supply chain issues, and they’re on the supply side. So better to reduce or taper off the supply of money going into the system and focus on building out supply chain so if there were an infrastructure bill that came and said, we’re going to focus on these supply chains and make them more robust.

And we’re going to focus on near shoring manufacturing to reduce the length of the sophistication of those supply chains. I think that’s really all that they can do right now to focus on that supply side. So in short, interest rates aren’t going to help. There has to be a more medium and long term investment in Shoring up the supply side. Yeah. I agree with you.

PS: I think that’s a very medium long term outlook. And I just wondering how earnings will look like this year.

TN: Well, certainly not going to look like 20 or 21. A lot of the 21 interest earnings were up until, say Q3, there were effects based on expenses that were cut in 20. There was a lot of headcount reduction and real estate reduction in 20 because of work from home and staff reduction, those sorts of things. So 22 is going to be harder. It’s going to be a much more disciplined old school efficiency, automation and top line growth type of environment.

KHC: Well, Tony, given that we are only six years, six days into the new year, how should asset allocation strategies look like for the conservative investor in 2022?

TN: You know, you’ve got to really be careful of volatility and you’ve got to be careful of risk, even things like political risk, which is what’s happening in Kazakhstan today. We really have to be careful of political risk in market. So with the events in Kazakhstan, then I think you’ll start to see people really take another look at Em and try to figure out how much risk are in those investments. You may see people steer away from em because of that risk. So I think you’re going to see more consideration for developed markets.

You may even see more consideration for Europe. I think Europe may have a good year this year.

PS: And I wonder if there’s a consideration for traditional safe havens like gold, US dollar and treasury spend.

TN: Yeah. Well, that certainly supports the dollar, Treasuries and so on. Gold. I’m not so sure about gold may have some upside, but the focus on developed markets may will definitely support the US dollar and Treasuries.

KHC: All right, Tony, thank you so much for your time. And that was Tony Nash, the chief executive of Complete Intelligence, talking about the Fed minutes, which I have perturbed markets in a significant way.

PS: I think markets are factored in the tapering, but not the interest rate moving earlier.

KHC: Yeah.

PS: That’s why you saw the tech heavy Nasdaq really hit quite badly with 3.2% decline.

KHC: Yes. And of course, we saw the Bloomberg indicators surveying economists a 71% chance that there’s going to be a rate hike at the March 16 meeting.

PS: Incredible.

TN: Right.

PS: You know, you talk about just four or five months ago, we were talking about only two hikes at best, in June. And now we’re seeing things shift very fast.

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Podcasts

Be Warned: High Prices Are Here To Stay

BE WARNED: HIGH PRICES ARE HERE TO STAY

Our CEO, Tony Nash, talks about inflation’s and Omicron’s role in US shares sinking, as fears spread over their non-transitory nature. And how will Asia react to the ‘non-transitory’ nature of inflation and the new Covid variant? Is Gold a good asset to use to hedge against inflation?

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/be-warned-high-prices-are-here-to-stay on December 02, 2021.

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Show Notes

PS: Markets in the US were down across the board. The Dow is down 1.3%. S&P 500 down 1.2% Nasdaq down 1.8%. Now over across in Asia, everyone was up. Nikkei was up .4% Hang Seng up .8% Shanghai Composite also up .4% and STI Singapore up 1.9%. And as I was saying early on, FBM KLCI was down 1.1%.

TN: Yeah. Thanks for having me, guys. I think the biggest consideration really is Powell’s comments on inflation, saying it’s kind of no longer transitory. So people should expect inflation to stay. What that means generally is we’ve hit a new pricing level is his expectation. So meaning prices are not in his mind, in many cases, going to go back to the levels that we saw before this inflationary stairstep. And what we’ve seen, particularly in the US, is consumers have accepted this and consumers accepted it, thinking that it was a temporary rise in prices.


But what he delivered today is some bad news that it’s likely a permanent prize in the level of prices. And the kind of short term cost rises that people thought they were going to endure are more permanent.

KSC: Yeah. So, Tony, try and give us a bit of a perspective here, because obviously the last twelve years and the last accelerated two years of monetary easing have induced this inflation. How does it all end? And does it stop the weak economic growth we’ve been seeing in the US the last few months.

TN: Yeah. So US economic growth, we don’t see a rapid acceleration of US economic growth. And so we have the US, China, Japan, and the EU, all at very subdued growth rates. And that’s bad. Those are the four largest economies with elevated price rises. Earnings are growing in some areas. I’m sorry, wages are growing in some areas, but they’re not necessarily growing across the economy. And part of that, particularly in the US, is a shortage of staff. So people have opted out of the workforce. We’ve lost, like 6 million workers in the US since Covid.


And so there are fewer workers. And so we have wages rising in certain areas. But it’s not necessarily across the board. So people are really going to have to start taking a look at their disposable income to understand what of these ongoing price rises that they can continue to accept. And I think we’re at a point where, since it’s no longer viewed as temporary, people and companies are going to have to start making trade offs. This is really the bad news is when people have to, when it’s no longer temporary, companies and people have to start making trade offs of what to do with their resources.


And that’s where the real problem is. So it’s not ongoing expansionary spending. And even I think it was Biden who said today we don’t expect a stimulus package for the current variant. Again, people are having to look at trade offs, and this is the real problem. When companies have to look at trade offs, they’re looking at their operating costs, they’re looking at their capital expenditure, they’re looking at their investments, they’re looking at other things. So down to Earth type of environment where we’re starting to enter Realville, we’re starting to exit the kind of fantasy environment we’ve been in the monetary induced sugar coma that we’ve been in for the past year and a half.

PS: So that’s a very interesting point, because I’ve always felt like in 2021, we saw this huge divergence in recovery right between the developed world led by the US and emerging markets, which are still really struggling to contain the virus and such. So when we talk about Asia, how do you think markets will react to this tightening of monetary policy by the Fed?

TN: Yeah. We think that Southeast Asia generally will stay pretty muted. We don’t expect early breakout at least over the next quarter or two. We don’t expect really breakout moves in Southeast Asia. We expect China to have a fair bit of volatility, but we do expect China to be generally positive over the next quarter to quarter horizon. We do expect Japan to continue to rise pretty well in India as well. Japan largely on the back of monetary policy automation, other things. So Asia is not one market, of course.


So we do expect different parts of Asia to react differently. Korea will be a mix between China and Japan like it always is. So we’ll see some volatility there reflecting China, but we’ll see some, I guess, acceleration and equities like we would see in Japan to make some both.

KSC: Well, Tony, in truth, inflation has been with us for some weeks now. But what hasn’t been with us for some weeks has been on the Omicron that’s the other big roadblock posing an obstacle to markets. How does Asia behave? How does Asia react, especially since we’re going to be opening in a few hours time?

TN: Yeah, I think Asia generally. You guys know I lived in Asia for most of my life, and Asia generally takes these things in stride with more vaccines available with the typical kind of weathering, the storm kind of approach that people have, particularly in Southeast Asia. I think people will generally take it in stride. This is really the first pandemic. Let’s say in the west that people have had for probably 50 years where they’ve really been kind of freaked out and worried in Asia, we’ve seen these types of pandemics for 2030 years.


It’s a bit different. People are more conservative, people are more used to these types of volatile, say, public health and market and other type of environments in Asia. So of course, we’ll see things shake up, but we won’t necessarily see the dire kind of messages that we’ve seen, say in the west. I don’t think we will. We’ve seen dire messages come out of, say, Germany and Italy and Austria, particularly over the past week with full lockdowns with 100% vaccine mandates, with really dire messaging. I don’t necessarily think we’re going to see super negative messaging in Asia like we’ve seen there.

PS: We won’t freak out as much as what you’re saying then essentially.

TN: No. Come on, man. It’s Asia, right? People are used to volatility in Asia and the developed markets. Developed markets are highly calibrated. Right? 0.2% change. Either way is people see as dramatic in Asia a small they’re not as calibrated. So people are accustomed to more ups and downs, and people just generally take it in stride.

PS: And I said that generally it’s quite calming. Is gold with inflation basically consigned away from this trend trade term? What’s your view in terms of gold? That’s a hit against inflation then? Because if I look at the data, the method is down 6% year to date.

TN: Right. And a lot of the inflationary rise has already happened. A lot of the stuff happens in stairstep fashion, and a lot of the mitigation efforts are already under way. So while we’ll continue to see inflation and we’ll continue to stay at an inflated level, I don’t necessarily. Or we’re not seeing dramatic price rises going forward. Okay. You’ll see it in pockets where there are, say, supply issues or something like that. But gold is more effective when everything is well, gold is a barometer for finding value.

I’ll say that much. It’s a tangible metal and people see it as worth something. And so what used to happen is gold and say the dollar as the dollar do value the gold would appreciate. But now we have crypto and people treat crypto kind of in the same way they used to treat gold. The gold market is really trying to find itself. So I think we’re going to have to see some fallout in crypto if it is to happen. We’ll have to see some fallout in crypto before we start to see gold being the safe haven again or being the preeminent safe haven.


So until Bitcoin and the other crypto assets really deteriorate in value and people go flocking back to gold, which I think will happen eventually. I don’t think it’ll happen overnight, but until we see a lack of faith in crypto, I don’t think we’ll necessarily see dramatic price pressure on gold.

KSC: Tony, you talked about Asia, right? And now China is moving to banners via structure, which is the loophole that allows its companies to list in New York and other foreign exchanges. What does this mean in terms of China’s overall strategy to go its own way to quote Fleetwood Mac?

TN: Sure. Yeah. So I think, of course, it hurts Western banks, and it hurts the Western banks that are in Asia because they don’t necessarily have those fees to take things public in the west. But I think the bigger problem is this those companies going public don’t have US dollar denominated resources to access, and so they have to get CNY or Hong Kong dollar or Japanese yen or other Sing dollar other denominated assets. Okay. But the US dollar is 87% of global transactions. So it helps those companies to have US dollar reserves, especially as they’re newly public.


Because why do you go public? Because you want to buy another company, you want to use that cash for a big investment or something, you want to expand in a big way. So if you don’t have the US dollar assets that come from going public, say, in New York or somewhere in the US or whatever, it’s really hard to have a big source of cash to do a massive international expansion or undertake a big international project or do a big international buy that’s I guess the biggest downside I would see from the decline of that type of structure in China.

KSC: All right, Tony, thank you so much for your time, Tony Nash there chief executive of Complete Intelligence. And just to hang on this last point, Phil, if you don’t list in the US, you don’t get US dollars necessarily. But that doesn’t matter if you are China, and you believe that the real market is domestically or within ASEAN, where you’ve got to combine, I don’t know, 2.1 trillion people or 2.1 billion people. That’s quite a fair few heads. Yes.

PS: Correct. I think it’s a question of whether you see a convergence between where you list versus where you operate.

KSC: Absolutely.

PS: And I think in the past we thought, okay, you could tap financial markets globally to serve your local markets. But I think China is kind of proving the point. No. I think it’ll be closer together.

KSC: Yeah. And what he was talking about in response to your question on gold, Phil, how gold hasn’t responded to all this uncertainty, which has been traditionally the case. And Bitcoin is somewhere hovering around in the mid 50s, which is a bit weird because you would expect some kind of flight to what was seen as safe havens, right.

PS: Ironic is considered Bitcoin a flight to safe havens.

KSC: Well, because it’s finite in nature. So it’s a bit like gold, right. It seems interesting, because in the last few weeks, we’ve seen a move among corporates like Mark Zuckerberg of Facebook and now Jack Dorsey, formerly of Twitter, who has left his job at Twitter. Still, at the same time was CEO of Square fintech platform financial platform. He’s moving to turn Square into a company called Block, and it’s a bit like it would make Mr. Miyagi proud because martial arts moves from square to block, but he’s going all in.

PS: But this is a very interesting thing because he’s going all in on crypto. And I think you’re referring to Blockchain blockchain reference to Blockchain, which is the distributed platform for data used by Crypto.


But it’s interesting, right? This whole name shift.


I think Jack Dorsey, I think, is trying to evolve away from just being a pure payments provider to offering solutions that are anchored on blockchain as a solution.

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Podcasts

Bottlenecks To Ease With Xmas Coming?

Tony Nash gave the BFM 89.9: The Morning Run his thoughts on how the sooner-than-expected Fed rate hikes could affect global markets. Will inflation derail hastening of the tapering talk? How does crude oil look like in the next few months? As the Christmas season is coming, how much of a concern supply chains will be for the consumers and the economy? When the Fed begins normalizing rates, which currencies will be vulnerable if or when this happens?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/bottlenecks-to-ease-with-xmas-coming on November 25, 2021.

 

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Show Notes

 

SM: BFM 89.9 good morning. You are listening to the Morning Run. I’m Shazana Mokhtar together with Khoo Hsu Chuang and Philip See. It’s 9:07 in the morning. Thursday, the 25 November. If we look at how the US markets closed yesterday, the Dow was down marginally by 0.3%. The S&P 500 was up 0.2%. Nasdaq was also up 0.4%. So for some thoughts on where international markets are headed, we have with us on the line Tony Nash, CEO of Complete Intelligence. Good morning, Tony. So the Fed minutes revealed that the pace of tapering may be hastened, while macro data points from personal spending to job data suggest that the US economy is in quite the sweet spot, but will inflation derail this?

 

TN: Yeah. There was a statement from one of the Fed governors today talking about that inflation is not transitory in their mind or could potentially not be transitory in their mind. That’s a real danger to people who are thinking that we’re really in a sweet spot right now because it could mean Fed intervention, meaning tightening sooner than many people had counted on. So I think people had counted on some sort of intervention, maybe in Q2, but it may be happening sooner. That would have a real impact on the dollar. The dollar would strengthen, and that would have a real impact on emerging markets all around Asia, all around Africa. People would feel it in a big way where there is US dollar debt.

 

KHC: We are seeing that strengthening US dollar in our currency now. But I just want to get your perspective on crude oil because various countries from the US to China are now tapping into their strategic crude reserves to alleviate the present energy crisis. But if you look at crude now, it’s not really being responsive, right to these actions?

 

TN: Right? That’s right. So what the US agreed to release is about two and a half days of consumption. Not much. The releases agreed in the UK and India, for example, were really token releases. They weren’t really major portions of their consumption. So these countries are kind of giving a nod to the Biden administration, but they’re not really alleviating the supply concerns that are spiking prices. So it really has been a dud for the White House. It’s been kind of an embarrassment because crude prices haven’t fallen, really. They fell initially, but they really came back after the release announcement was absorbed.

 

PS: Yeah. Tony, that trickling in oil supply releases from the US government hasn’t done much to alleviate the supply concerns. Gas prices in America have been on a massive uptrend as well, just in terms of inflation and not being as transitory as people expected, as we enter Christmas season, how much of a concern is it for consumers as well as the economy?

 

TN: It’s a real concern. I have to tell you, I’ve driven halfway across the US for our Thanksgiving holiday, which is tomorrow morning. It’s Thursday here, and we’ve seen a lot of trucks with cargoes on US roads, and I make this drive pretty regularly. So it seems like a lot more on roads than I normally see. So that’s good in terms of the domestic supply chain.

 

I think it’s the international supply chain that is really concerning, and we still have those backups in the Port of Long Beach. That is the real main constraint for supply chains in the US. So I don’t think we’re going to see major disruptions outside of other ports. But through Long Beach, we definitely see issues.

 

The semiconductor supply chain is the main impact for, say, electronics and automobiles in the US. We did see semi manufacturers start to produce more auto related semiconductors, say mid-Q3 and into Q4. We should start to see those automotive supply chains, the semiconductor dependent issues and automotive supply chains alleviate, probably in Q1. So that will help.

 

But for the Christmas season, I’m not sure that there’s a whole lot that’s going to help with electronics and say automobiles.

 

PS: Yeah, Tony with JPowell still back and still in the fair chair in terms of his reappointment. And he does hike rates earlier than expected to address inflationary concerns. How much of a dangerous is to slowing down the economy in America and as  the rest of the world.

 

TN: Sure, it is a risk in America. I think it’s really hard to hire people in the US right now. There’s a lot of job switching happening and people haven’t come back into the workforce. We lost about 5 million people in the workforce in the US through the Covid period. So that’s a real issue. Anything that raises the cost of doing business is problematic for the US and will inhibit growth. The main problem in the US is that the environment right now, it continues to crush small companies. It’s very difficult for small companies. And while it may seem that small companies don’t matter that much, they are the main employer in the US and the main growth engine in the US. And the Biden administration hasn’t helped this with a lot of their policies. Their policies have been very favorable toward big companies. If the Fed pushes inflation, it will make borrowing a little bit harder. I’m sorry if the Fed pushes the interest rate, it’ll make borrowing a little bit harder. But the collapsing, say, the tapering of the Fed balance sheet will have a bigger impact on liquidity in the US.

 

SM: And if I could just touch on large US dollar debt and what happens to emerging markets when the Fed begins normalizing rates, which currencies do you see as going to be particularly vulnerable if or when this happens?

 

TN: Well, I think one that I’m really keeping an eye on is the Chinese Yuan because it’s a highly appreciated currency right now. And the Chinese government has kept the CNY strong so they can continue to import commodities and energy for the winter. And they’ll likely keep it strong through Chinese New Year. We expect CNY to really start to weaken, say, after Chinese New Year to help Chinese exporters. So winter we mostly pass. They want to help kind of push a Chinese export, so they’ll start to really devalue, seeing why probably end of Q1 early Q2.

We do see pressure, the Euro, as you’ve seen over the last three weeks, there’s been real pressure on the Euro as well. Other Asian currencies. We do think that there will be pressure on other Asian currencies. Sing Dollar will likely continue to stay pretty consistent. But we’ll see some pressure on other Asian currencies simply because of the US dollar pressure. The US dollar is something like 88% of transnational transactions. So the US dollar as a share of transnational transactions actually come up over the past two to three years. So there’s much more pressure with an appreciated dollar and it’s coming.

 

KHC: Just like the one. Tony, India Indian equities record high. Have you reached to speak considering PTM’s IPO failure?

 

TN: Yeah. I think there’s been a lot of excitement there, and I think it’s at least for now. I think it has I don’t think you can ever really claim that an equity market has hit its peak, but I think for now, a lot of the excitement is dissipated. It may come back in a month, it may come back in six months. But I think that momentum is really important. And as you see, failed IPOs, I think it’s really hard for equity investors to kind of get their mojo back.

 

SM: Tony, thank you so much as always for speaking to us and happy Thanksgiving to you and your family. That was Tony Nash, CEO of Complete Intelligence, giving us his thoughts on how the sooner-than-expected Fed rate hikes could affect global markets.

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Visual (Videos)

USD unlikely to continue strengthening, CNY to stay strong

 

This is the most recent guesting of our CEO and founder Tony Nash in CNA’s Asia First, where he shares his expertise on inflation and the US economy. Will consumers continue to spend to help the economy? What’s his view on Biden’s call to boost oil supply to ease prices? Where does he think the US dollar is headed and how will that impact Asian currencies?

 

The full episode was posted at https://www.channelnewsasia.com. It may be removed after a few weeks. This video segment is owned by CNA. 

 

 

 

Show Notes

 

CNA: What’s still ahead here in Asia First. We’ll check if US companies continue to charm investors with some big earnings in focus. Plus, to give us a stake on markets inflation and the US economy, we’ll be joined by Tony Nash from Complete Intelligence.

 

US stocks closed in the red overnight as lingering inflation concerns continue to dog investors. The Dow ended lower by six tenths of one percent, dragged down by a four point seven percent. Drop in visa the S&O 500 slipped 0.2 percent. And the NASDAQ fell by 0.3 percent.

 

Now after the bell, we also had some US tech earnings. NVIDIA shares rose after it beats on the top and bottom lines. The ship maker saw its revenue jump 50 percent on year on strong gaming and data center sales. Cisco shares tumbled and extended trade after missing on revenue expectations before the quarter. The computer networking company also issued a weaker than expected guidance.

 

For more on the broader markets and economy. We’re joined by Tony Nash is founder and CEO of Complete Intelligence speaking to us from Houston, Texas. So Tony as we heard their inflation fears seem to be back despite better expected earnings but CEO’s are starting to warn of more pain when it comes to supply chains. And that could put a damper on in that could lift inflation. Do you think the US consumers will continue to spend despite all this and will that help the recovery of the US in the next year?

 

TN: Yeah, I think the real issue here is that inflation is rising faster than wages. And what we’re seeing with oil prices. These oil prices are not terrible given kind of historical prices but it’s oil prices within the context of everything else. Obviously, the supply constraints really are pushing up prices of food and other activities as well as say goods that are imported for say the holiday purchases that Americans will make.

 

So Americans have absorbed a lot of those price rises to date. They’ll continue to absorb some but I think they’re almost at their limit in terms of what they can tolerate without getting upset.

 

CNA: Yeah, Do you think there’s a disconnect here when it comes to energy because Biden administration is hoping to boost supply to ease that oil price pressure but OPEC and its allies expect surplus into the next year. So, do you think they’re looking at it differently? And who has it right here and where oil prices headed?

 

TN: Yeah, I think part of the issue in the US with crude oil is the Biden administration restrictions on pipelines and on the supply side in the US. So, Joe Biden is asking other countries Russia, Saudi Arabia, other OPEC members to supply more oil yet he’s restricting the supply domestic supply in the US. So, I think what’s happening with those other suppliers they have customers who are buying their crude oil. They don’t necessarily want to have to produce more because they want slightly higher prices. They don’t want things too high but they want slightly higher prices and so they’re pushing back on on Joe Biden and saying look you really need to look at your own domestic supply. You really need to look at at those issues yourself before we start to open up our own market.

 

So you know, the current administration is trying to have it both ways. They’re trying to restrict supply within the US. They’re trying to bring in more supply from overseas. Americans see this and they understand kind of the incongruent nature of that argument from the administration.

 

CNA: I want to get your thoughts on the US dollar, Tony. Because that hit a 16-month high amid his expectations of more aggressive policy from the Federal Reserve. Where do you think the US dollar is headed and how will that impact us here in Asia, especially Asian currencies?

 

TN: Sure, it’s a great question. We saw a lot of action with the US dollar yesterday. The dollar index as you said reached highs for in the last say 18 months, two years. And that is on Fed action but one thing to consider is we’re looking at potentially changing the Fed chairman later this year.

 

So, if the current Fed chairman is exited. There is an expectation of a more dovish Fed chair coming in that’s one possibility. I think people are really trying to… While there is upward pressure on the dollar. People are trying not to get too far too much behind it because there could be a more double dovish Fed chair coming in. So, we think the dollar is overshot just a little bit in the short term.

 

We don’t expect it to continue rallying at its current pace. We expect say the Euro has fallen quite a bit and depreciated quite a bit in the last say three weeks. It’s going to appreciate just a bit a couple cents over the next month or so. Asian currencies, we think the CNY will stay strong. We think CNY will remain strong through say March, April as they start a devaluation cycle to help exporters. We think the Singapore dollar is going to stay in the same range that it’s in about now. We don’t see much policy change in Singapore and we think with a stable dollar at these levels. We think the same dollar will stay at about the same exchange rate of Scott now.

 

CNA: All right. We’ll keep our eyes on those currency exchanges and who becomes the next Federal Reserve Chairman. Tony Nash thanks for joining us. Tony Nash there founder and CEO of Complete Intelligence joining us from Houston, Texas.

Categories
Visual (Videos)

Retail sales, jobless claims and the $3.5 trillion infrastructure bill

CEO Tony Nash joins CNA’s Asia First program to explain the logic behind the US market’s performance. Will the better-than-expected retail sales continue to the Christmas season? What is his outlook for Q3 and what’s hampering the economic recovery in the States? And what are at stake around the success of the $3.5T infrastructure bill?

 

This video segment was published on September 17, 2021 and is originally from Channel News Asia’s videos on demand, which can be found at https://www.channelnewsasia.com/watch/asia-first/fri-17-sep-2021-2186306

 

Show Notes

 

CNA: Well, Wall Street closed mixed in the State overnight as the major indices fail to build on Wednesday strong performance, while for the session, the blue chip Dow closed lower by two tenths of 1%, and the S&P 500 fell by a similar percentage.

 

However, the Nasdaq managed to eak out second consecutive day of gains. Well, this after investors digested mixed economic readings released before with the opening Bell when August retail sales surprised the market and rose 0.7% from the month prior, with analyst expecting a decline. But on the downside, jobless claims rose from last week’s pandemic low.

 

Of course, to help us understand the logic behind all the market movements were joined by Tony Nash, founder and CEO with Complete Intelligence, speaking to us from Houston, Texas. Very good evening to you, Tony.

 

So we’re looking at the better than expected retail sales number. And do you expect that momentum to continue given that we are 100 days away to Christmas in the State side and 99 days away from here in Singapore side.

 

TN: And we certainly hope that continues. But it’s really uncertain, given some of the corporate outlooks and given some of the other indicators that we’ve seen: purchasing managers indices and the regional Fed reports, Fed Manufacturing reports.

 

The port hold-ups in Long Beach are not helpful either. It’s really hurt supply chain. So we could see that spending tick up. But we do expect prices to continue to rise. And so there’s really a trade off there in terms of the volume that’s sold and the value that’s sold. And when we’re looking at, say a 1% rise in value of retail sales, that’s quite frankly, not even keeping up with inflation.

 

CNA: In the meantime, we’re also seeing that the weekly jobless claims increased. And of course, before that, many economist with organizations like JP Morgan has downgraded their third quarter economic growth outlook. So what is your outlook there and what is hampering economic recovery over there in the State Side?

 

TN: Well, it’s really companies are not seeing great investment opportunities. So the demand for credit in the US, just like in China, and just like in Europe, the demand for credit is really declining.

 

So we’re not seeing companies spend on big ticket items. They’re not investing on new equipment, they’re not investing on new projects. And so that’s hurting everything downstream because there are impacts across the economic spectrum when companies decide to spend on big ticket items. This is hurting the US. It’s hurting China. It’s hurting Europe.

 

So between now and you mentioned the end of the year, we expect that corporate spending to have an impact, the damper in corporate spending. We expect the supply chain difficulties and inflation have impacts as well. And if unemployment continues to tick up like it did, we could have a very difficult Christmas season. And the Fed and city administration here in the US are really contending with that, because as they go into the last quarter of the year, they’d really like to see things tick up.

 

CNA: And talking about those spending of course, there’s one catalyst that investors are watching out would be the passage of the $3.5 trillion infrastructure bill. But given the situation that a Biden is facing now, do you think that this increasing likelihood that this bill can’t be get past?

 

TN: Yeah, I think you’re right. With the failed withdrawal from Afghanistan, Biden has really lost a lot of the support from Democratic moderates. And so he’s got the support of the extreme left Democrats. But a lot of the Democrats in the middle are really starting to say, “Hold on a minute. We need to be really careful about how much we support Biden,” because those guys have to be reelected in November of ’22. So from here on out, the voters in their respective districts will be paying a lot of attention to what they’re doing.

 

This 3.5 trillion infrastructure plan, only 1.2 trillion of it, I say “only” but 1.2 trillion of it is dedicated towards real hard infrastructure. The rest of it is a lot of social spending, a lot of pet projects, and that’s a lot of money. 2 trillion plus dollars.

 

So Americans are really tired of seeing big stimulus programs put out, and they’re really tired of seeing the pork going to people connected to politicians. So they’d much rather see the lower $1.2 trillion program. It’ll go direct to infrastructure. They’ll see it. It’ll be a very tangible spend.

 

One other thing to keep in mind is there is still $300 billion that haven’t been spent from the stimulus program that came out in Q1 of 2021. So a lot of Americans are asking, why do we need to green light another three plus trillion dollars in spending if we still have $300 billion that’s unspent?

 

CNA: All right, Tony, thank you so much indeed, for your analysis. Tony Nash, founder and CEO with Complete Intelligence.

Categories
Podcasts

Awash with Cash and Jay Powell’s Continuation, Markets Look Up

Tony Nash joins BFM 89.9 and explained where markets are headed in the context of rumors that dovish Fed chief Jerome Powell might stay a second term, even as corporate earnings and cash-rich US tech giants might boost gains with share buybacks. He was also asked whether the US market is bullish right now — and what sectors should investors look at? Also discussed is the EU economy amidst the recent lockdowns.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/awash-with-cash-and-jay-powells-continuation-markets-look-up on July 22, 2021.

 

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Show Notes

 

SM: BFM 89.9. You are listening to the Morning Run I’m Shazana Mokhtar together in studio with Wong Shou Ning and Khoo Hsu Chuang as we always do in the early morning, we recap how global markets ended the trading day.

 

WSN: Yes, it was an excellent day in the U.S. The Dow and S&P 500 were up zero point eight percent. Nasdaq was actually up 0.9%. Nikkei 0.6%. Shanghai is up 0.7%. Hong Kong was down 0.1%. Singapore is up 0.3%. And week Abkhasia were down 0.2%.

 

SM: OK, then to get some insight into where global markets are headed, we have on the line with us Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Let’s start with the markets. They seem to be toggling between risk on and risk off. Which direction is it in? Is it a long bull or one that’s plateauing?

 

TN: It really all depends on the Fed. I think we expect to see things continue to rise through Q3. Well, they should continue to rise gradually. Doesn’t mean we won’t see volatility. We do expect to see further fallout. But by the end of the quarter, we expect things to continue to march higher, even through the volatility and some of the uncertainty. The Fed meeting in August in Jackson Hole really should give us a bit of clarity around what some of their future plans are. But beyond that, we do expect the Fed to be pretty calm and markets to proceed accordingly.

 

KHC: There’s some news, of course, unconfirmed at this point in time that Jerome Powell might seek a second term. What might that mean for markets and investors, given that he’s more of a dove than a hawk?

 

TN: I think it’s continuity, I think the White House has talked about other people to take that role, but I think keeping Powell right now is actually important for continuity because a really tricky situation. So I actually think I’m not a huge Powell fan, I’m not a huge detractor, but I actually think it would probably be a good idea to keep him in order to to reassure the markets with continuity.

 

WSN: Meanwhile, its results season. So far so good, except maybe for financials and Netflix. But we already see some strategists upgrading the S&P 500 year end targets. Do you think they’re a little bit too premature?

 

TN: No, I don’t think so. I think we’ll continue to march higher. We’ll have a few scares before the end of the year. But I think we will continue to march higher. The thing that I think is will be a little bit worrying for people toward the end of the year will be, you know, will the risk of keeping things in be enough? You know, will you get enough reward for keeping your money in the market?

 

Because I think things will get riskier the further way we go along in the year. All of this is assuming there isn’t more Covid aid and Fed stimulus and all this other stuff like increased rate of stimulus. But assuming everything is the same as it is now, we’ll hit toward the end of the kind of benefits of that stimulus toward the end of the year, at least the perceived benefits. And I think people really start to wonder whether the reward is there for them to to keep their money in the markets.

 

WSN: But, Tony, if I ask you to look into your crystal ball, what sectors do you think might surprise on the upside then?

 

TN: I think we’ll start to see things like travel and tourism do well. There are mumblings of efforts in the US that certain people want to close down parts of the economy. Again, we’ve seen California start to take some steps in that direction. But I just don’t think that anybody here wants things closed down again. Texas has said today that he will not reinstate a massive mandate in Texas.So Americans really want to get out. They want to travel. They want to see other parts of the country in the world. So I think we’ll see some things in tourism and travel do really well.

 

KHC: What you’ve just mentioned obviously reflects the economic fundamentals and a reflection in terms of those sectors. But JP Morgan, I think a couple of days ago talked about the S&P hitting 40, 600 points, is about 200 of the plus points from here on, and not because of the economy returning, but because of the share buybacks. What do you think about that particular development?

 

TN: Look, companies have a lot of spare cash and and how are they going to get EPS growth if they don’t buy back shares? The economy is awash with cash right now. If you’re the CFO for a publicly traded company and you have a lot of cash on the side, you really have to do that calculation to understand how is it going to hit your share price if you do buybacks. I think that’s definitely a part of the equation, at least of the end of the year, if not in the second half of ’22.

 

KHC: So names wise, who pop out obviously Berkshire with over 200 billion and Apple a notable cash hoarder’s, what are the names pop out to you.

 

TN: I can’t think of any right now to be honest, but I think it’s just a matter of looking at balance sheets and looking at who has that cash and then also, doing some research on the CFO and the board and look at their previous behavior. Some companies want to sit on cash or they want to say invest it. Others want to do share buybacks are typically technology companies do a lot of share buyback services. Companies do a lot of share buybacks. So I think those are the sectors that you would want to be looking at, banking, services, technology, those sorts of things.

 

SM: All right, Tony, let’s squeeze in one more question. Looking across the pond to Europe in 2020. Europe’s economy struggled with the pandemic. What’s your outlook on the E.U. this year, particularly in terms of an export led recovery?

 

TN: You’re getting a lot of pushback among EU citizens around lockdown’s, especially with the current variant that’s going through. And there’s a lot of discussion about the efficacy of the virus. And, you know, all this a lot of public health debate. But the problem of Europe has is well, on its on the plus side, China will likely keep the CNY strong into 2022, so that should help European exports. But when you look on the down side, Chinese PMI and consumer spending really haven’t been aggressive in recent months and we don’t really expect that to come roaring back in the next six months or 12 months.

 

So China is going to have some real pressure. Europe is going to have some real problems with goosing exports into China. I think the U.S. is fine and number two, export market for Europe. But I think there are some difficulties between the U.S. and Europe right now. And it may not necessarily outside of maybe automotive, it may not necessarily be a roaring market for Europe. So I think they have some serious headwinds and I think they’re going to struggle.

 

SM: All right, Dan, thank you so much, Tony. That was Tony Nash of complete intelligence, giving us his outlook for European exports and not looking particularly rosy at this point.

 

WSN: Yeah, but still very bullish on the U.S. markets. Right. He does suggest that S&P 500 might inches we up, but the risk of what may be the easy money has been made. So it’s not going to see some stellar jumps. But he likes tourism and travel. He thinks that Americans don’t stay home anymore.

 

KHC: No brainer. I mean, people have been stuck at home for 15 months, right? They want to go traveling.

 

WSN: But I don’t know if your infection cases rise. I mean, will you curb your own behavior? You might write especially I think in America, Delta is now 80, 80 percent of all the infections.

 

KHC: Don’t forget, America is the land of the free and the brave, the brave.

 

WSN: I like that word.

 

KHC: be the first of the Marcellus. And then, you know, Bob’s your Uncle Gene. I mean.

 

WSN: OK, well, we’ll watch this space, but I think its results season.

 

SM: That’s right. We’ve got a few results on our docket to look at this morning. Let’s start with Coca Cola’s. Coca Cola reported a second quarter revenue that surpassed twenty nineteen levels, prompting the company to hike its full year outlook. So Coke reported a net income of two point six billion dollars. That’s up forty six percent on year. Of course, there was a low base last year. Net sales rose forty two percent to ten point one dollars billion, topping expectations of nine point thirty two billion dollars.

 

WSN: Well, the. Good news is that the company said that the away from home channels, so like restaurants and movie theaters were actually rebounding in some markets like China and Nigeria. However, India and Southeast Asia were the only areas that did not see any sequential volume acceleration on a two year basis this quarter. Surprise, surprise, because I think India, particularly by covid-19 in Southeast Asia, was still in some form of lockdown, especially Malaysia. But all is doing segments reported double digit volume growth for the quarter.

 

Sparkling soft drinks units, including, of course, its namesake soda did particularly well.

 

KHC: I saw net sales rise by 42 percent. That is incredible. You know, this is a 245 billion dollar company, right, for net sales in one quarter. The rise with 40 percent. You know, I think lest we forget, a lot of people, they don’t care about diabetes. You know, they don’t care about high blood pressure.

 

WSN: No, but I think that’s why Coke is venturing into other drinks. So you do see high drinks. They do like growing five percent and even coffees significantly.

 

KHC: So there’s a developed market bias, which is obviously to grow more healthy. And there’s an emerging market base which is aspirational. Coca-Cola is aspirational. You cannot I mean, for people who have grown up on Cichon and warm water, right. They want to have Coke.

 

WSN: By the way, for those who are wondering what says is Chinese to eat.

 

KHC: Yeah, the chips drink you can find in a coffee shop.

 

I should know I’m from Penang.

 

WSN: But the street clearly loves it, right? I mean, when I’m looking at Bloomberg, the consensus price target is sixty U.S. dollars and twenty six cents. Current share price is fifty six dollars and fifty five cents. Still nineteen buys nine holes five times current earnings.

 

SM: Well when you think about it, this is probably super cash generative. So not surprising. It’s perfect. Right.

 

WSN: All right. I’m looking at another company that has its earnings out. Johnson and Johnson reported earnings and revenue that beat Wall Street’s expectations. Revenue rose up twenty seven percent to two point three billion U.S. dollars, beating the twenty two point two billion expectations.

 

Well, this is the pharmaceutical industry business, right? They developed the single shot covid-19 vaccine generating twelve point six billion in revenue, a seventeen percent year on year increase. Global sales just this quarter, 164 million. And I think that’s just just the beginnings of it, right?

 

KHC: Yeah. I mean, I recall a few weeks ago Pfizer talked about how they’ve seen they expect billions and billions of decades of billions of dollars in top line. And Pfizer’s it’s a very long tail. Pharmaceutical sales.

 

SM: There we go, 719 in the morning. Up next, we’re going to bring to you the major headlines in today’s papers and portals. Stay tuned. BFM eighty nine point nine.

 

Categories
Podcasts

Manage Your Expectations, Valuations Are Stretched

Tony Nash joins the BFM team, giving them his views on the equity markets, fixed income market, Fed Reserve, and oil prices. What’s his recommendation to investors now that Dow, S&P 500, and more equity markets have reached a new all-time highs? And what about the consensus on oil? With all the changes in the markets, are we seeing a new economic model?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/manage-your-expectations-valuations-are-stretched on July 8, 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.

 

Show Notes

 

PS: Really good day in the U.S. The Dow and S&P 500 were up 0.3%. The Nasdaq was flat. Shanghai is up 0.7%. But the rest of Asian markets were down negative. Heng Seng was -0.4%. Nikkei down 1%, FTI down 1.5%. And back home, FBI culture was also down 0.01%.

 

WSN: So to help us make sense of where markets are going, we speak to Tony Nash, CEO of Complete Intelligence. Now, Tony, Nasdaq, S&P 500, Dow, all hit all-time highs. Does this make you actually nervous? Markets looking a bit toppish?

 

TN: I don’t know about toppish today, but I guess what people have to be aware of is how big is the gain from here? So whether you’re toppish now or toppish in October, you really have to be careful about the risk calculation right now and what your expectations are as things turn over in the coming quarter or two.

 

PS: But time to switch for anything. What asset classes or markets look attractive now?

 

TN: You know what. I think you just got to be careful all around. The expectation, evaluations, levels of investment, profits and so on seem pretty stretched as we’re in the middle of wage pressures, inflation pressures and stressed consumers. So I think there seems to be more risk than opportunity out there. So I think we’re in a pretty stretched market and short of more support from global governments. It’s really hard to justify significantly higher valuations.

 

SM: And everyone is, of course, looking at the Fed, where last night’s FOMC minutes, what financial markets expected from the Fed or or do you think they could have given more clarity on their monetary policy?

 

TN: Well, they can always give more clarity. I mean, there’s always kind of reading the tea leaves with the Fed. But I think what really came out of it was what was expected. It was pretty noncommittal. They said tapering is coming, but they didn’t say it’s coming soon. There’s no expectation of a rate hike hike soon. So it’s really the current status quo, whatever that is. But it’s kind of more of the same for more time.

 

We don’t really expect much to change in the Fed through 2022. Markets have sufficient headwinds as it is as the world re-normalizes. We don’t expect much exciting happening. We didn’t expect that this month. We don’t expect it for some time.

 

WSN: Is that why the 10-year bond yields in the U.S. dropped from a four-month low, 1.3163? I look at the bloom at the moment. DO you think…

 

TN: This could be. But it’s also, you know, the current Fed chair may not be renominated by Biden. And if Jerome Powell is out, we’re likely to see Lael Brainard come in, who is very much a monetary policy activist. So we could see a really active Fed, not a conservative and extremely dovish Fed if Lael Brainard comes in. So I think that could be part of the reason we’re seeing expectations change in some of the bond markets.

 

PS: Can we shift your attention over to oil? Because as you know, the lack of consensus in OPEC+ and with the failure to negotiate production quotas has really put pressure on oil prices again. Is this conflict going to introduce more short term volatility in oil markets?

 

TN: Sure, yeah. Until there’s agreement between the U.S. and Saudi Arabia, I think we are going to see volatility because as the UAE creates a gap in expectations, other players like Russia and other folks can potentially violate the OPEC+ agreement. OPEC doesn’t necessarily have a history of agreeing uniformly very often. OPEC+ agreement has been one where they’ve really abided by it pretty well. And so OPEC is more fractious than it is kind of universal. I think we’re going to see volatility for at least a short time. But I do think there is underlying strength in oil prices. We don’t expect the $100 oil any time this year. Some people are calling for that. But we do see continued build in the strength of oil prices through the end of the year marginal bill.

 

SM: All right. And looking at other indicators, I mean, the US economy is booming, but the US ISM non-manufacturing figure for June came in below market expectations. Could you give us some explanation on what were the reasons for that drop?

 

TN: You know, the main reason really is unemployment or employment. Companies have had to cope with fewer workers as these federal government subsidies have kept workers on the sidelines. Effectively, they’ve paid workers to sit at home more than they’d make in hourly jobs. And so small companies particularly have had to figure out a way to work without additional workers. So now a lot of those workers are coming off of the federal stimulus packages. But a lot of these small and mid-sized sized companies have kind of learned how to cope without as many workers.

 

So they’re not trusting new workers until wages really come down. So it’s really kind of putting an impediment in the path for especially small and mid-sized companies. And that’s where there’s a little bit of doubt in the ISM.

 

WSN: So are we seeing a new economic model then, Tony, where there’s a lot of what we expect in terms of the full and employment numbers will change?

 

TN: It’s a great question, I certainly hope not. Over the last year and a half, we’ve seen immense government intervention in markets globally. Was the stimulus too much? Was it misallocated? We can argue that all day long. But the fact is, we’ve seen immense government stimulus and it takes a long time for stimulus that large to wash through the system.

 

We’re seeing the back side and the down side of stimulus. You know, we’ve seen things like inflation rates rise, you know, all this stuff over second quarter, but that’s really just a year on year number. We’re seeing what’s called base effects there. We’re seeing the same in things like wages and impacts on markets from government activity. So Q2 was a huge anomaly for markets and for government because of what’s happening globally with Covid in Q2 of 2020. As we kind of come back to a relatively normal-ish market, maybe by Q4, you know, we’ll start to see more normal readings across wages across, profits and other things.

 

So there really is a slow build. And as more of that government stimulus gets pulled out of the market or at least slows down, we’ll start to see things normalize. I don’t necessarily think it’s a new model unless the government insists on continuing to intervene and subsidize markets.

 

WSN: All right. Thank you for your time. That was Tony Nash, CEO of Complete Intelligence, giving us his views on the equity markets and even the fixed income market. But what was really surprising is that he thinks Jerome Powell will be replaced as the Fed chair. I was like, “this is news to me. I thought he was doing an OK job.” And usually I would imagine Joe Biden leading them to do their thing.

 

PS: That’s right. I wouldn’t expect Joe Biden to have places, political perspectives in the appointment of the Fed chair. But I think there are a lot of key decisions that has to be made. And that whole link between the tapering of his asset purchases and adjustment of interest rates, how do you have that delicate balancing act will be very critical.

 

WSN: Janet Yellen and Jerome Powell worked well together and Janet Yellen is his appointment. So I’m a little bit surprised by this news. But other news that I was like kind of focused on was also the fact that he thinks at the energy market upside is limited. So I think all of us as investors have to adjust our expectations in terms of the returns, because if you talk about the rally from March 2020 lows to now, it’s about 90%. And that’s staggering.

 

PS: And Tony is alluding to the fact that the stimulus was too broad, not targeted enough, I think, which basically resulted in a wash of cash, I think, creating a lot of frothy markets. And this is the challenge now.

 

WSN: So how does the bubble kind of burst, right, without creating chaos? Absolutely. You kind of want to deflate it, but not so much.

 

SM: And can I also draw your attention to something else that Tony said that caught my eye, the fact that he thinks oil isn’t going to hit $100 per barrel. We’re actually going to be discussing more on oil later at seven thirty after the bulletin with Sally Yilmaz of Bloomberg Intelligence. So stay tuned for that conversation on what the oil market’s going to look like.

Categories
Podcasts

Inflation, Just Transitory Not Hyper

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

 

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

 

❗️ 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.

 

Show Notes

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SM: OK, I’m not one of those there.

 

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

 

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

 

Categories
Podcasts

Are Meme Stocks Just Relying on Momentum?

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

 

Show Notes

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.

Categories
Podcasts

Investors Pause to Ponder as Markets Near Records and Prices Rise

This week in markets it’s all about the rising spectre of inflation in the US, and how it informs and shapes the markets, especially in the context of jobless claims and GDP data due out later today.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/investors-pause-to-ponder-as-markets-near-records-and-prices-rise on May 27, 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.

 

Show Notes

 

KHC: So to discuss markets, we’ve got on the line with us Tony Nash, the chief executive of Complete Intelligence. And Tony, let’s start with the recent stimulus measures and, of course, the rising specter of inflation. In your opinion, what is your sense of whether the inflationary numbers are transitory or rather more permanent in nature?

 

TN: I think it really depends on the products you’re looking at. So if we look at products like lumber or corn or some of the eggs, the non protein, meaning hogs and cattle, if you look at the plant type of eggs, that inflation seems to be coming off. It seems to be at least off of the peaks for now if we’re looking at the protein stocks. So pork and chicken and beef, the storage of protein products is pretty low.

 

In some cases, it’s 20 some percent below the product that we had a year ago. So I would expect an ongoing rising prices for things like meat over the next three to six months. But oil, I think we’re range trading in oil. I don’t necessarily see a spiking up in oil. We haven’t seen inflation in oil like we’ve seen in other commodities.

 

PS: Still in U.S. With respect to the stimulus, I think that’s resulted with individuals having a much higher level of personal savings. How do you think that is going to be utilized in the coming months?

 

TN: Sure, yeah. The personal savings in Q1 of this year was around 21% of Americans income. So there’s almost a lot of fiscal stimulus in the US. Normally, if we look 20 years ago in 2001 and the same quarter, the savings rate was 5%. So it’s more than four times normal. So how do we think it’s going to be spent? Probably on services, probably on things that people haven’t been able to do while they’ve been locked down for things like travel, restaurants.

 

I would expect to see a lot more spending at restaurants later in Q2, Q3 and Q4 of this year travel. Well, we definitely expect that to come back. But the hotel spending we think may be more regional rather than national or international.

 

WSN: So, Tony, does this mean that we should start looking at these kind of stocks? And so you’re talking about hospitality, aviation, even restaurants. Should we be buying these companies?

 

TN: No, I think it depends on the stock. It really is the type of market where you have to look at the individual stocks because valuations and really almost any other gauge for measuring the value of a company is pretty stretched right now. So you’d really have to identify the type of investing on it to make and really look at where you think that’s going over time. So will these valuations hold? Will the different metrics that people are looking at going to hold? A lot of these things are already baked into to the price of equities. So I’m not sure how much more we can juice out of these equities right now.

 

WSN: And this is not just the the sectors that we talked about. You’re talking about generally the broader market overall be over everything. So then how should we determine our asset allocation? I mean, should we move back into cash or should we look at other markets, for example, not just US?

 

TN: Well, yes, I think you really have to look at it on an opportunity by opportunity basis. I think we’re at that point in the market, in the cycle where you really have to evaluate every single opportunity individually. I think a lot rests on the upcoming Fed meeting on June 15. So we’ll know on June 15th as the Fed signaling that they’re going to tighten a little bit is going to be a little bit of taper. Are they going to continue running down the street with their hair on fire, just throwing cash out to everybody? If it’s the latter, then sure, we have some ability to stretch these values even more. If not, I think there’s going to be a lot of care taken and we’ll see a little bit of rotation into some things like gold and other things.

 

KHC: So more immediately, Tony, this week we’ve got jobless claims data and of course, GDP. How, if at all, with those data points, shape your investing decisions going into the weekend.

 

TN: Well, I think unemployment is a big one because last month’s number was so terrible, so if we have another terrible unemployment rate, it’s easy. If last month was terrible and it was a one off, then fine. But if it’s another terrible number, then I think that’s a really bad sign. But the Fed and the Treasury are wrestling with the fact that there’s really too much stimulus out there. So people are paid an extra twelve hundred US dollars a month to stay at home instead of go out and get a job.

 

So a lot of small business owners, restaurants and shops and these types of hourly workers, those employers can’t afford to hire people or the people making who would normally take those jobs are literally choosing to stay home and collect unemployment instead of get a job, because, again, they’re making more than a thousand dollars a month, literally by refusing to take a job. So that’s a disincentive for people to join the workforce, but to stay actively unemployed.

 

Supposedly, they’re looking for a job, but to not really take a job because they can make so much more money. Now, you have something like twenty seven states in the US that have now said they no longer want the federal unemployment kind of accelerator, which is that three hundred dollars a week extra on top of the normal unemployment people would get because the states are seeing that their companies are having a really hard time finding work.

 

And so if they no longer take federal money, then those small companies and those change will have an easier time finding workers.

 

PS: And Tony, can we give you a perspective on the current crypto volatility in your view, whether it will cause the contagion effect on price levels of traditional assets like equities or bonds?

 

TN: That’s a good question, you know, crypto came off big time, right, last week and over the last couple of weeks, and then it is interesting that there really hasn’t been a contagion to speak of. And a couple of notable things. When we’ve seen equities fall that much or commodities or something, there’s always a contagion. Right. And what always happens is central banks come in to intervene and help the markets. And what I’m wondering is that expectation that central banks are going to intervene, does that accelerate the contagion effect so the central banks would bear save the market, the potentially contagious markets with those markets because of falling and it hasn’t gone over to other markets?

 

Nobody expected central banks to intervene in crypto. So it’s a really interesting study on how markets function and also what people’s allocations were. I mean, a lot of people have money in crypto. They may not have a lot of money in crypto, but it’s a widely distributed asset that people have. It’s also seen as kind of a lottery ticket and gamble.

 

WSN: So Tony, do you have money in crypto?

 

TN: I don’t know if you guys follow me on Twitter, but I talk about my 19, 20 year old daughter who put, fifty dollars in crypto, and I think she was up six times at one point. I think now she’s up. Well, she’s probably still up six times. She was up, I think 15 times at one point.

 

PS: But she stood up.

 

WSN: So, yeah, you’re still the richest in the house.

 

TN: You know, your student, right. I got in with a little bit just after her, so. But it’s not a big bet. I’m just really curious to see how this asset performs. One of the learning she’s had is take out your principal as soon as you can, and she’s done that. So everything she’s playing with is profit. And I think that’s the guy that a lot of crypto investors are using is, hey, take out your principal when you can. Everything else is profit. And let’s just see where it goes.

 

KHC: Well, thanks, Tony. She has a good teacher. That was Tony. That is the chief executive of Complete Intelligence. Just on the back of what he was talking about with the stimulus checks. I mean, I’m rereading one of Jim Rodgers’s book, which got it to that last night. And when he was traveling through China, he noticed that in China, 30 percent of income is typically going to a savings rate in America. That number in the 90s when he wrote this book was around about two percent.

 

So Americans don’t have a culture of saving. They have a culture of spending. And because they get the stimulus checks, I think there’s a longer term discussion about what this is going to do on the job market because the Americans getting more money than they used to get in their previous jobs by sitting on their backsides in the couch. Right.

 

WSN: But it’s just not correct. They are going through and. Correct.

 

KHC: Yes, but they don’t behave this way. Right. They don’t save it for the long of the. And rub it Robinhood or they couldn’t buy an iPhone. Right.

 

WSN: I think this is the Robin Hood in the iPhone. You know, I want to put this into context. Yes. I’m sure some spend their money that way. But there were also some people who really need it, of course, check. So like in any economy in the recovery, you’ve got this case shape. So, you know, but I think what does this mean for the U.S. economy in terms of inflation? Pressure is the job market as well?

 

PS: Yeah, I think the question was whether they should have been more targeted, the stimulus, because he was quite overreaching and basically touched, I think, about 80 percent of people. That’s the challenge in question here.