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Rotating Permanently into Cyclicals

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

 

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

 

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BFM Description

 

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

 

Produced by: Mike Gong

 

Presented by: Lyn Mak, Wong Shou Ning

 

 

Show Notes

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

What will he take? Reasoning?

 

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

 

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

 

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

 

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

 

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

 

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

 

Categories
Visual (Videos)

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

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

 

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

 

Show Notes

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

Categories
Podcasts

Signs of Broader Recovery

Tony Nash joins BFM 89.9 The Business Station to discuss possible broader recovery. Where are the markets heading? In which direction will U.S. equities likely trade for the rest of the month? How much will that impact the ongoing debate on further fiscal stimulus? And how about the US unemployment data and is China on the recovery path?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/signs-of-broader-recovery on October 1, 2020.


BFM Description

 

US jobs data will be released tomorrow but are we expecting better numbers? Tony Nash, CEO of Complete Intelligence sees a stronger pace of recovery for the US economy with improving macroeconomic data. He however does not expect a recovery in oil prices as demand remains weak while there are no supply shocks.

 

Produced by: Mike Gong

 

Presented by: Wong Shou Ning, Roshan Kanesan

 

Show Notes

 

 

WSN: But the question is where our markets are heading? So to help us answer that question, we have on the line with us Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Now the question, in which direction will U.S. equities likely trade for the rest of the month? Is risk aversion making a comeback to financial markets given the political and economic uncertainties?

 

TN: We expected a down month in September and that’s what we got. We’re also looking for a pretty difficult month in October, not quite as far down as September has been. But I think you’re right on the uncertainty side, one of the big unknowns is stimulus coming out of the US government. And obviously that would help move markets in other countries as well.

 

We should know by the end of this week if there will be more stimulus or the magnitude of that stimulus coming out of the U.S. So the real question around whether things will rally or fall is when the US will open up and when other countries will kind of fully open up, not partially open up. We look at, you know, Europe’s doing pretty well actually in opening up. Asia is doing pretty well. The U.S. is still kind of a patchwork.

 

So we won’t really know the near-term direction. But I guess I think over the next month we’re looking at at a bit of a fall.

 

WSN: And meanwhile, the Fed is extending the dividend by that limit with Wall Street banks till 2021. The announcement came out last night. So what does it tell us about the finance sector?

 

TN: We’ve been expecting a rotation into financials for some time, and that tells us that if dividends and buybacks are limited, those banks, obviously there’s a risk factor there, meaning that the regulators want those banks to hold on to their cash. But it also means that that the regulators also aren’t sure about when things will be back to normal. So that conservative approach forcing banks to hold on to their liquidity tells us that there’s not a lot of confidence in the next quarter or two. So we’ll really have to see the pace of recovery here in the U.S..

 

WSN: And Tony, just one more question on the U.S. and that’s the job data that’s coming out later today. Right? So there is out on Friday and it’s going to be the last one before elections. Are you expecting a good number? And how much will that impact the ongoing debate on further fiscal stimulus?

 

TN: You know, we do expect it to be a good number, the ADP number was out today and it kind of usually comes before the U.S. government’s non-farm payrolls number. The labor number. It was 750000 jobs added. That was one hundred or more thousand greater than was expected. Now, the U.S. Labor Department typically is higher than ADP. We expect the Department of Labor report on Friday to be about 900,000. So this is really good. Companies are coming back online. They’re employing there are fewer people out of work. That’s good for the recovery.

 

We keep hearing hesitation about the pace of recovery. We’re not sure of the pace. But from an employment perspective and even things like retail sales, the indications are good. So, you know, we’re hoping for the best. And unemployment is telling us that things are moving in the right direction.

 

WSN: And if you look at the recent EPA and EIA inventory reports are telling us that all demand tells us about the oil demand projections for the rest of the year. So what do you think? Do you think recovery’s a long way off?

 

TN: We do, actually. So production is up about 15 percent or so. Demand is still down 20 to 30 percent. So, you know, it’s not a good pricing environment for crude or for petrol. Downward pressure will still remain in those markets. We won’t see, say, Brent, north of 50 for some time. We won’t see WTI north of 45 for some time. There is a possibility we keep hearing we’ve heard for months about the possibility of a supply shock as demand comes back, which would push prices up. We’re just not seeing that at this point. And it’s going to be several months. If that does happen, it’ll be several months before it happens.

 

WSN: And one last question on China. The manufacturing PMI for September came in at 51.5 higher than market forecast. How much should investors consider a place in this figure? Does this number suggest that China is well and truly on the recovery path?

 

TN: I would be really careful of I’m looking at a China PMI. I’m aware of PMI generally, but I’d be I’d be careful of the China PMI. I haven’t believed it well, for years, if it really is ever, partly because it’s a kind of a second derivative of real data. It’s an opinion survey of future expectations and it’s an index of that opinion survey.

 

I know that sounds confusing, but you’re really far away from real data when you’re looking at a PMI number. And with China, the uncertainty and murkiness around Chinese economic data is something to be careful of.

 

So I would say if I’m investing in China, if I’m looking at data in China, the stuff that I’ve always found more important was first-hand information. What’s actually happening on the ground with your vendors, what’s actually happening in cities on the ground?

 

I’m not saying that China is suffering. I’m not saying China’s experience a massive pullback. I’m just not sure about the rate of recovery in China.

 

WSN: All right. Thank you for your time. That was Tony Nash, CEO of Complete Intelligence, giving us a somewhat optimistic view of the U.S. economy, saying that all the indicators are that recovery is their unemployment numbers should improve.

Categories
Podcasts

Is The Rally Ending?

Tony Nash joins BFM 89.9 The Business Station for another look at the global markets and to get a sense of whether this is the end of the bull run. Also discussed how September is expected to be a volatile month. Will there be a fiscal stimulus for small businesses? Will banks and other financial institution get the next round of stimulus? And how about the oil prices — where is it going?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/is-the-rally-ending on September 24, 2020.


BFM Description

 

Speculation is rife over whether US lawmakers will be able to come to agreement over a new stimulus package, as deadlines loom. Federal Reserve Chairman Jerome Powell also warned that more stimulus will be needed, and all the uncertainty took its toll on US equities overnight. To get a sense of whether this is the end of the bull run, we speak to Tony Nash, Chief Economist and CEO of Complete Intelligence.

 

Produced by: Mike Gong

 

Presented by: Roshan Kanesan, Lyn Mak, Noelle Lim

 

Show Notes

 

LM: BFM eighty nine point nine. You’re listening to the morning run with Lyn Mak, Roshan Kanesan and Noel Lim, 707 a.m. Thursday, the 24th of September. And in round about 15 minutes, we’re speaking with Paul McManis, chief enterprise business officer at Maxus, to discuss how companies can best adapt to a post covid-19 business environment. But before that, we’re taking a look at the markets.

 

RK: Well, the markets were in the red, actually. The Dow was down two percent. The S&P 500 was down two point four percent, and the Nasdaq was down two point seven percent. How did Asia do?

 

NL: Well, Nikkei index down point zero six percent. The Shanghai Composite was up 22 percent. Hang Seng marginally point one percent of the Cosby eight point zero three percent stay up point seven percent. The FBI. CIA, however, was down one point six percent. And I guess that’s on the back of some very important news at 12:00 p.m. yesterday.

 

RK: Yeah, it’ll be interesting to see how all these markets open today on the back of the US market closing.

 

LM: Absolutely. So for more on international markets this morning, we have Tony Nash’s chief economist and CEO of Complete Intelligence on the line with us this morning. Tony, thank you for joining us. Now, U.S. equities retreated sharply last night as Jerome Powell warned that more stimulus is needed. While it seems more likely that lawmakers will be able to agree to this. Is this the end of the rally and perhaps the reality check that market’s needs?

 

TN: Well, I don’t know if it’s the end of the rally, but I know we had a conversation on August twenty sixth. I think it was when I caution you guys that September would be a really rough month and very volatile. And I think we’re certainly in the middle of that. So how much further will it go? We think it has a little ways to go, but so we don’t necessarily think there’s a huge rally coming. But the caveat to that is stimulus.

 

So if stimulus comes out this week from the U.S. Congress, which there has been a bill going through and there may be some reconciliation in in some of the committees to get some stimulus out, that could help. But I think the Fed I think what what the Fed has said is, you know, they’re out there doing their work. They’re getting loans out to larger companies. But really, fiscal stimulus has to take place for smaller companies until we have that.

 

I think markets are pretty upset.

 

RK: And if we take a look, sorry, OK. And as we take a look at some of the banks like HSBC and others, they’ve taken a bit of a beating from the Vincent report. Will this have a an impact on the rotation of play into the finance sector, do you think?

 

TN: I think it will certainly for those banks that have had issues around laundering money and other things, allegedly. Yeah, I think it’s a big problem because investors don’t want to invest in risk. There’s enough risk in their daily life. But for those banks who aren’t flagged, I think there’s a real opportunity for them. Unfortunately, the sector itself is having difficulties today. But you did see some movement in things like insurance and other things where you do see money moving in and looking at oil prices rising.

 

NL: U.S. oil inventories are keeping oil prices fairly subdued. Where do you see oil prices heading in the short term?

 

TN: We don’t see a lot of movement. You know, we see WTI in the high 30s, low 40s. We see Brent around the mid 40s. The problem is we just haven’t had that consumption rebound that’s needed to drive oil prices higher. There is a lot of discussion about a supply side issue going into the first half of next year that might push prices higher. I’m not entirely sure that that may happen. But even when we look at things like petrol prices, they’re probably 30 percent off of where they were a year ago.

 

And we really don’t expect that to change for six to 12 months.

 

LM: Thank you very much for speaking with us this morning, Tony. That was Tony Nash, chief economist and CEO of Complete Intelligence

Categories
News Articles

Time To Rotate

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

 

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


BFM Description

 

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

 

Produced by: Mike Gong

 

Presented by: Khoo Hsu Chuang, Wong Shou Ning

 

Show Notes

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

WSN: And Tony, look at Japan, right?

 

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

 

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

 

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

 

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

 

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

 

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

 

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