Complete Intelligence


Claims, Caution, and China

Tony Nash, CEO of Complete Intelligence speaks with BFM 89.9 about the US market rebound, what to expect in the third quarter of 2020, jobless claims and US unemployment, and Hong Kong amid the US-China cold war or trade war.


BFM Notes

It’s been an eventful weekend in politics, and all eyes are on whether markets will reflect the renewed uncertainty. We reached out to Tony Nash, CEO of Complete Intelligence, to help us break down Federal Reserve chairman Jerome Powell’s comments before the US Senate Banking Committee, data expectations, and what the potential impact of Hong Kong losing its special status might be on emerging market currencies.


Produced by: Michael Gong, Roshan Kanesan

Presented by: Noelle Lim, Roshan Kanesan, Lyn Mak


Listen to the BFM Podcast here.



Show Notes


BFM: Thanks for joining us, Tony. So now, Jerome Powells made some comments before the Senate Banking Committee pointing towards a cautious rebound in the US economy. But nevertheless, U.S. markets closed in the green on the back of some positive housing data. So could you help shed some light on what’s happening here?


TN: Sure. We had the positive housing data. We had a broad tech rally. We also had Boeing like 14 percent today on a test flight on the 737 Max. So it was simply a test flight and it was a successful test flight and Boeing rallied 14 percent. It’s a major component and it has an impact on broad market activity. So there are some good things happening, but certainly low expectations environment.


BFM: Do you expect end of quarter rebalancing by funds, would that costs significant market volatility? I mean, could you just give us some thoughts about this?


TN: As we’ve said before, we expect volatility to continue through probably mid-August. So we will see some rebalancing and we will see as these investors figure out what the right value is for the assets they’re invested in. So we’ll see some change. We’ll see a lot of people kind of take it in Q2. And Q3 is a brand new quarter, so they’ll wipe the slate clean. We’ve seen a lot of companies dump everything but the kitchen sink into the Q2 earnings. Well, but we expect them to. And so Q3 will be hopefully a whole new world. And and we’ll be approaching something more positive by then.


BFM: Right. And Tony, when we look at the every week, we’ve been paying very close attention to the jobless claims numbers, right? What are your expectations of the US Weekly jobless claims numbers this week and June Non-Farm payroll data that’s expected on Thursday or Friday overtime?


TN: Well, we saw a huge jump in non-farm payrolls in May of 2.5 million, which was pretty massive. Also, the unemployment rate improved from almost 20 percent to like 13 percent. So, we expect things to improve gradually. We don’t expect the two million, although I hope we do, but we don’t expect that magnitude. But we do expect jobs to continue to accumulate as companies gradually come back. So the initial wave of companies opening up in the US produced a lot of new jobs. But now we’re starting to see that continue, but not necessarily at the same magnitude. But again, if we see 2.5 million or more, that will be a delight, everyone.


BFM: So now, Tony, fluctuating crude prices and as well as bankruptcies like Chesapeake Energy make oil stocks seem like a bit of a risky proposition. Shouldn’t investors still be considering energy companies as part of their portfolio?


TN: Well, I think you have to do with caution. So we look at things like crude oil inventories in the US reached an all time high of something like 540 million barrels about a week and a half two weeks ago. So there’s plenty in storage. I think if you’re investing in energy companies, whether they’re the developers option companies or service providers or whatever, I think you just have to go in with your eyes open to know that the growth there and the draw down in inventories is not likely to be a quick one.


TN: So, again, it’s just you have to understand your own risk profile. You have to understand your own tolerance and then go in. I mean, when you look at something like Chesapeake, that was, it happened. And I don’t think it was a complete surprise. But you also look at BP. They sold off their chemical business to Eneos over the weekend. And so some of these companies are hiving off other businesses so they can focus on their core business.


BFM: So, now you know, the latest piece of news where US is going to revoke Hong Kong’s special status. So what do you make of this piece of news in the larger picture of the trade war, the Cold War between China and US?


TN: I think it puts Hong Kong… It’s another piece in the puzzle to put Hong Kong in a light that it doesn’t really want to be put in, which is one country, one system. Hong Kong has for the last 20, 30 years, been the special place where you can access China without all the baggage. But what we’ve seen with the security like coming in is if you’re in Hong Kong, you’re also accepting the China baggage, which means you have to self-censor your comments, which means you have to be really careful about everything you do and say. And if you’re an investor, that’s a pretty difficult place to be. And so I think, the announcements in the State Department of not selling this technically sensitive equipment there, it was inevitable.


I don’t necessarily think it’s a surprise. I think from the Chinese side, it may have been a surprise. But I think they were kind of deluding themselves if they didn’t expect it. So there is accountability for China’s actions and it’s been as they’ve moved into Hong Kong, there have to have been ramifications and were seeing those, and there will be more. And China will have to understand that if they want the benefits of open, say investment markets, they’re going to have to limit their desire to control a number of aspects around business.


BFM: Thank you very much for speaking with us this morning, Tony. That was Tony Nash, CEO of Complete Intelligence, giving us his insight into global markets.


Economies are sputtering, which means trade war will intensify

Here’s another guesting of our founder and CEO Tony Nash in BFM Malaysia, talking about trade war between US and China. Can these two countries actually decouple? Or is the current supply chain too dependent to do that? Can the economy have the V-shaped recovery that everyone is dreaming of, or is it just an illusion? What can the policymakers do to improve the economic outlook for this year? What can his firm Complete Intelligence see happening based on the algorithms and AI?


We also discussed regionalization of supply chain as a result of the Trade War in this QuickHitQuickHit episode with Chief Economist Chad Moutray of National Association of Manufacturers.


BFM Description:

The trade wars between the US, China and the Eurozone seem to be gaining momentum. Tony Nash, CEO, Complete Intelligence, offers some insights, while also discussing European industrial activity.


Produced by: Michael Gong

Presented by: Wong Shou Ning, Khoo Hsu Chuang


Listen to the “Economies are sputtering, which means trade war will intensify” podcast in BFM: The Business Station.


Show Notes


This is a download from BFM eighty nine point nine. So is the station. Good morning. This is BFM eighty nine point nine. I’m considering that I’m with one shotting bringing you all the way through the 10:00 o’clock in the morning and Rano 76. We are talking about markets, but well above 50 bucks sort of because of that with about 15 minutes time, we’re talking to call you. Ling was an independent panel, a political economist at Ciggy and I’m advisers will be discussing palm oil.


BFM: So last night in America, the stock market slumped. Investors are cautious, right How did the markets do?


Not so well, because there’s been clearly a resurgence in virus cases in multiple states, which puts into question the economic recovery. So, unsurprisingly, the Dow closed down three percent and S&P 500 closed down 2.6 percent, while the Nasdaq closed down 2.2 percent. Meanwhile, in Asia yesterday, only Shanghai was up, which was up 0.3 percent, while the Nikkei 225 closed down marginally by 0.07 per cent. Hang Seng was down 0.5 percent, Singapore down 0.2 percent, and KLCI was down 0.3 percent.


So for more clarity into the whys and wherefores of markets, we’ve got it on the line with us Tony Nash, who is the CEO of Complete Intelligence. Now, Tony, thanks for talking to us. Trump’s getting tough on China rhetoric highlights, well, obviously, the American’s concerns about being too reliant on China. And, of course, we can see that being manifested in the list of 20 companies, which is deems suspicious. In your opinion, can the two economies decouple or other interests in supply chains too heavily aligned?


TN: Well, I don’t think it’s possible to completely decouple from China. I think the administration are really being hard on each other. And I think the hard line from the US, you know, it’s relatively new. It’s a couple years old. But I don’t think it’s possible, regardless of the hard line for those economies to decouple and for the supply chain to decouple. We had some comments over the weekend out of the U.S. saying that they could decouple if they wanted to. But that’s just the hard line and unaware of the possibilities. We’ve been talking about, for some time, probably two and a half, three years, is regionalization of supply chains. And what we believe is happening is the US-China relations have just accelerated regionalization. It means manufacturing for North America, moving to North America. Not all of it, but some of it. And manufacturing for for Asia is largely centered in Asia. Manufacturing for Europe, some of it moving to Europe. And that’s the progression of the costs in China. And some of the risks are relative risks to supply chains highlighted by COVID} coming to the realization of manufacturers.


BFM: U.S. markets corrected sharply last night. So is the market actually now waking up to the reality that COVID 19 is going to be a problem for economic recovery? And this V-shaped that what many investors thought is probably a pipe dream?


TN: I think what markets are realizing is that it’s not a straight line. Well, we’ve been saying for a couple months is that end of Q2 or early Q3, we would see a lot of volatility. Then people started to understand how the virus would play out. Until we’ve had some certainty around the path, we will have days like today. And we’ll have a danger with an uptick as optimism comes back, what’s happening is markets are calibrating. People are trying to understand not only the path of COVID, but what those actors mean—the governments, the companies, the individuals—will do to respond, how quickly the markets come back. But what are people going to have to do? What mitigations that we’re going to have to take? What monetary and fiscal policies will governments take as well? We’re not done in that respect. So more of that’s to come, but we don’t know what’s to come there exactly. Markets have moved a lot on new case count. I don’t believe that it’s the case counts itself because a lot of these are are really mild cases. It’s just the uncertainty around how long it will last. The magnitude and the mitigation that people will take around it. There’s more of this volatility to come.


BFM: Tony, you might have seen the IMF‘s growth forecast, which was just announced a few hours ago. They’ve now said that global growth will shrink 4.9 percent for 2020. That’s nearly two percent worse than what they originally thought. And I think the U.S. also marked by an expectation of a negative 8 percent, down from negative 6o.1 percent. Do you think this might cause the policymakers to have an even more vigorous policy response and liquidity into the system?


TN: It might. I think the U.S. has shown that it’s not really afraid to be pretty aggressive. I think you may see more aggressive policy responses in other places. Obviously, Japan is very active on the monetary policy side. But we need to see more actual spending and more direct support of individuals and companies to make it through this. So, I do think that, obviously, IMF’s forecast concern people and get policymakers attention. I do think that they’re probably a little bit overblown to the downside, though. So I wouldn’t expect 8 percent decline. I wouldn’t expect a global decline as acute as they’ve stated today.


BFM: If you look at oil prices declined last night and I think this is on the back of U.S. crude inventories increasing. But is this also a function of COVID-19 fears in terms of how that may impact the economy’s going forward and consumption of oil again?


TN: Yeah, that’s interesting. The oil price is our… I think there are a number of things. The storage, of course, as you mentioned. But there’s also how much are people starting to drive again? What do traffic patterns look like? Also, how much are people starting to fly again? We really need to look at like Google Mobility data. We need to be looking at flight data. We need to be looking at looking to really understand where those indicators are headed. So when we compare a $40 a barrel of oil at $39 s barrel for WTI today, compared to where it was a month ago. The folks in oil and gas are really grateful to have that price right now. And it’s a real progress from where we were a month or two months ago. So I think what people are looking at today is the progress and then the expectation. They’re not even necessarily looking at the real market activity today. It’s all relative to a couple of months ago and it’s all expectations about a couple of months from now.


BFM: Last question on perhaps the data that your algorithms generated, Complete Intelligence. What kind of signs and indicators does our technology and the AI tell us about the direction the market’s going forward?


TN: Yeah, well, this is where we we pulled our assertion of volatility. We we really expected things to be pretty range traded for some time. So, you know, crude oil is a good example. We were saying back in February, March, the crude oil would end the quarter in the low 40s. This is WTI and here we are. So, with volatility, we’re not necessarily trying to capture the high highs and the low lows. We’re just recognizing that the markets are trying to find new prices. So it’s interesting when you look at things like the dollar. The dollar is a relative indicator for, say, emerging market‘s uncertainty and troubles as well. We did expect a dollar rise toward the end of Q1, early Q2, as we saw. But we haven’t expected the dollar to come back to strengthen until, say, September. So there are a number of indicators around trade or on currencies. And what we’re finding generally with our client base, for global manufacturers generally, are the algorithms… We’ve found that our average-based forecasting has an error rate that is about nine percent lower on average than consensus forecasts. So when we had all of the volatility of the last three, four months, consensus forecasts in many cases were 20 to 30 percent off. Ours were about nine percent better than that. Nobody expected the COVID slowdown. If we look at that from a few months ago, the bias that’s in normally of doing things, negotiating, procurement, supply chain, the revenue, that sort of thing. We take that out and this passionate… I would suggest that there is a lot of passion in the analysis from day to day when you look at three percent fall in markets today, but you can’t extrapolate today into forever. And what we can do with AI is taking emotion out of this, take a rational view of things. And really remove, not all of the error, of course, nobody can remove the error. There area a lot of the error from the outlooks in specific assets, currencies, commodities and so on.


BFM: All right, Tony, thanks so much for your time. And that was Tony Nash, chief executive for Complete Intelligence talking from Texas, USA. Interesting that this kind of stuff that he does at his business, tries to remove the emotional, the emotive side of the markets and give something a predictor over the future. But I think that sometimes you can’t discount too much of human emotion because it’s all driven by essentially two emotions, right? Greed and of fear.


But you know, basically his nugget is it’s going to be volatile. Right. Hang onto your seats. Right. Because we really don’t know. There’s too much uncertainty out there at the moment. This is a scene where it’s for oil prices or even for equity markets.


Mo’ Money, Mo’ Honey

Tony Nash speaks with the BFM team in Malaysia to explain what’s going on in the US markets and economy after the FOMC announcement. What it means for gold and other assets, if businesses actually spend the excess cash for capital reinvestment, how this adds to wealth inequality in America, and how do tech stocks and traditional stocks compare?


BFM Notes


In the US, the FOMC left interest rates unchanged, pledging to continue with their quantitative easing till 2022, indicating that America’s markets will continue soaring on the back of this wall of cheap liquidity.


Tony Nash, the CEO of Complete Intelligence in Texas, discusses the implications of what commentators are calling the Fed’s ‘yield curve control’ policy.


Produced by: Michael Gong

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


Listen to this podcast in BFM: The Business Station.


Show Notes


BFM: Let’s talk about the markets in the U.S. Markets whipsawed as all attention was on the FOMC meeting. The Dow closed down one percent. The S&P 500 closed down 0.5 percent. But the Nasdaq closed up in the green. 0.7 percent. What about Asia? Asia was rather mixed. The Shanghai Composite ended down 0.4 percent. The Hang Seng was marginally down by 0.03 percent. The Nikkei 225, I think they closed up about 0.2 percent. And FBM was up 0.01 percent. Just barely in the green — 0.01 percent. Now for more on global markets, we speak to Tony Nash, CEO of Complete Intelligence. Tony, are you down the line with us?


TN: Yes, sir. Morning.


BFM: Good morning to you. Now, the FOMC left interest rates unchanged of the meeting, pledging to continue with quantitative easing till 2022. What does this tell you about the state of the economy there?


TN: The Fed is really just trying to create stability. We see them, like you said, the next three years, they’ll keep them the same. We think that they’ll just reinforce some of the policies they’ve already put in place. One of the areas we see them focusing on is on yield curve control, although that’s not explicit. We really see that as an area that they’re moving in to encourage capital investment.


We’ve really seen capital investment fall here in the States, especially since the COVID time. Oil and gas companies have trimmed billions of dollars of capital investment, for example. So if they can have low-cost borrowing through a yield curve control, it could help that.


BFM: What are the implications of doing this? Yield curve control that, for example, on gold?


TN: The environment generally with both QE, which is meant to provide liquidity, and yield curve control, which is meant to provide low interest rates, what that does is it really pushes the Dollar down. Although it’s not perfectly inverse, there is generally inverse relationship between the Dollar and gold. So if it’s intended to push the value of the Dollar down, one would expect gold to rise.


BFM: Tony, yield curve control can also be called money printing, which has been happening for the last ten, twelve years from an evidence shil standpoint. Have corporations actually spend some of that excess cash on capital reinvestment or have they done it in terms of paying dividends to themselves and their shareholders or even worse, share buybacks?


TN: Mostly share buybacks. But share buybacks and dividends, one can argue are similar. It’s just a different form of paying back shareholders. So share buybacks have really been made to be evil over the last, say, five, 10 years or something. But it’s really similar to a dividend that it brings value to the investors themselves. So is it a good thing? I don’t necessarily think so, but it is just one form of getting money back to investors.


It’s not necessarily helping capital investment. It hasn’t necessarily helped capital investment. And so, you know, looking at things like yield curve control, what we’ve seen is a lot of QE, but we haven’t seen as much yield curve control. So yield curve control could be one way to provide more incentive for capex.


BFM: Well, that hasn’t happened clearly. And to what extent do you think that that policy has exacerbated the wealth inequality in the country, in the United States, which some say has manifested themselves in some of these demonstrations you see all over the country?


TN: That’s a very complicated question. And we can spend a lot of time on it. So I think whether a yield curve control has done that, I can’t necessarily argue for or against it. Has QE done that? Oh, surely. I mean, QE has definitely contributed to inequality. It’s definitely contributed more to capital concentration itself than overall inequality. Capital is concentrated with the investment class rather than, say, the working class. Although that sounds very Marxist and it didn’t really mean it to sound that way, but it’s really helped to concentrate capital.


BFM: Well, let’s take a look at last night. The U.S. markets were mixed overnight. Is this a reality check that the recovery may not be as soon or as sharp as anticipated by investors?


TN: The kind of the relief rally we’ve seen over the past few weeks has really been one of really just excitement that COVID is ending and really hopeful that things will open, as well as recognition of the Fed’s activity and the Treasury’s activity of getting trillions of dollars into the economy. As investors realize how slow those openings are going to be and the impact that it will have on Q2 earnings, but potentially Q3 earnings. I think we’ll see some of this enthusiasm fall away. So markets are trying to find that level. What is that level? And because there is so much uncertainty, we don’t really know that level. This is why we’ve expected volatility through Q2 and into Q3 until there’s more clarity about the pace of opening, how that will affect different industries, and the severity of, say, a second wave. And to be honest, whether people really care about the second wave.


BFM: Well, NASDAQ has passed ten thousand and valuation is at the highest in the last 15 years. Where do you think tech stocks will go from here?


TN: It really all depends on how companies focus on things like productivity. If we continue to see layoffs and unemployment, companies may decide to invest in technology. We may see some real broad-based investment in productivity like we did twenty five to 20 years ago when companies really started to invest in computing and Internet and all these other productivity shows, it’s quite possible that we see that across large companies.


It’s really questionable. Have we expanded valuations as far as we can or is there further expansion there?


BFM: Just following up on that. We’ve seen the market recover in the U.S., but there’s definitely a divergence between how the tech stocks have performed and how the larger S&P 500 has performed. Do you think there’s a lot more room for tech stock? Do you think these two indexes will actually going to diverge at this point?


TN: We may see a little bit of divergence, but I don’t see that much divergence. I think there is a lot of synchronization within those indexes. We may see a bit like we saw today, but I don’t think that will continue in a massive way.


BFM: So when you mean synchronicity, you mean that they will track each other in a parallel? But there is a gap between something like the NY Fang index and the S&P in general. Is that due to the S&P just being weighted down by other classes of assets there?


TN: Sure, yeah. It’s looking at traditional businesses that have physical assets and a lot of legacy employees and retirement commitments. These sorts of things really weight down old traditional businesses. The Fang’s, for example, they don’t have a huge retirement commitments than, say, a large manufacturer that’s maybe a 100 years old has. As those things play through and this really has to do with the aging of baby boomers, really. Those retirement commitments will age with them and then they’ll phase out eventually.


But a lot of this is around again, those companies are not as efficient as they could be. And until they get to a level of efficiency that they need, we’re gonna see a drag on their earnings. So, of course, with guys like the Fang’s, since they have kind of virtual software related businesses, they will have valuations that are much more generous than traditional, say S&P 500 businesses.


BFM: All right, Tony. Thank you so much for your time this morning. That was Tony Nash, CEO of Complete Intelligence.

I think just ending that point is how this divergence between traditional industries and tech industries had been even more highlighted by what we’ve seen.

Yeah, I think that’s really quite concerning because the alternative point of view is that of the Fed’s money printing policy, which has really accelerated exponentially the last three months. There really is no indication from Trump, from Jay Powell, that he has an exit strategy in mind or has any exit strategy at all. Because how do you unwind this much? You basically dopamine the markets without having some kind of pain. It’s very clear, I mean, even though he was quite tempered in his response, this inequality has been really exec-abated for the last 10 years.