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The Fed & ECB Playbooks: What are they thinking right now? (Part 1)

Fed & ECB Playbooks: What are they thinking right now? (Part 2)

Geopolitics experts Albert Marko and Nick Glinsman are back on QuickHit for a discussion on the Federal Reserve, the ECB, and central banks. What are they thinking right now?

 

Albert Marko advises financial firms and some high net worth individuals on how politics works in D.C.. He worked with congressional members and their staff for the past 15 to 20 years. In his words, Albert basically is a tour guide for them to figure out how to invest their money.

 

Nick Glinsman is the co-founder and CIO of EVO Capital LLC. He does a lot of writing and some portfolio management. He was a macro portfolio manager in one of the big micro funds in London for quite a few years. Prior to that, Nick was with Salomon Brothers. Now, he concentrates on providing key intel, both economics and politics on a global level to finance managers and politicos.

 

You can go here for Part 2 of the discussion.

 

 

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This QuickHit episode was recorded on July 29, 2021.

 

The views and opinions expressed in this The Fed & ECB Playbooks: What are they thinking right now? (Part 1) QuickHit episode are those of the guest and do not necessarily reflect the official policy or position of Complete Intelligence. Any contents provided by our guest are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes

 

TN: Today we’re talking about central banks and given where we are in “the cycle”, whatever that means at this point, post or late Covid, we’ve had waves of support coming from finance ministries and treasuries and central banks around the world. Central banks seem to be in a very weird position right now. So I’d really love to understand your point of view particularly what the Fed and the ECB thinking about right now and what are some of the biggest dilemmas they have? Nick, if you want to go first and frame that out a little bit and then Albert, will obviously go to you.

 

NG: Well, given how long I’ve been doing this, I’m more of a traditional, black coated central bank watcher. And I would say a couple of key comments to make right now is I think they’ve lost their independence to a large extent. Harder for the ECB to lose its independence. But with the commission, you have that loss.

 

I also think that we are, defective monetary financing. And again, I’ll go back to the ECB, who literally for the last month, for everything that was issued in Europe and this reluctance by the Fed to, even they admit talking about talking about tapering, but this reluctance to even consider a pullback on the mortgage-backed securities. The jest, pretty much the same, and it’s very clear with a lot of the actions that I’m in, my interpretation is, one, they’re working in cahoots with the political arm.

 

So treasury in the US, commission in Europe. Bank of England is a slight exception about to happen, but we can cover that later. So that’s clearly going on. And I think now Albert might do a lot of work together and I think this Albert came out with a comment a while back saying Yellen wants six trillion dollars fiscal. And the excuse that was given, aside from the political bias, was the Treasury market needs it.

 

And interesting enough, we saw the change to the Repos yesterday. This was after criticism by a committee that was published in the F.T. yesterday. And even Bill Dudley’s commented on Today suggesting that a lot more work needs to be done to ensure that the normal functioning of the plumbing behind the form of safe assets.

 

So it’s clear to me that things are being worked on in a politically coordinated way that impacts monetary policy. Now, I think they’ve got themselves into an economic or policy black hole. I think the mind set, and it’s been like this since probably ’08, which is they’re not prepared to accept the economic cycle anymore.

 

So back to one of my previous appearances on on your pod, the Fed not doing anything? Yeah, it seems to me that that’s an acceptable process, regardless of inflation is way above their forecast. And forecasting that’s a whole ‘nother bad area for the… Fed’s forecasts are terribly wrong. The ECB’s forecasts have been wrong for, you know, since time immemorial.

 

The ECB is more dangerous because they have a bias that keeps them on their policy’s wreck.

 

TN: So first on forecasts, if any central bankers are watching, I can help you with that. Second, when you say they don’t believe in the business cycle anymore, do you mean the central banks or do you mean the political folks?

 

NG: The central banks and government. I mean, funnily enough, I’m reading a biography on Jim Baker right now. And when you look at Reagan, when he came in and Volcker, economic data was pretty bad back at the beginning of the 80s. That. No way, no politician is prepared to accept that anymore. To be honest, I think the central bankers are prepared to accept that anymore. Any of the people leading the central banks being political appointees, of course.

 

TN: So this is kind of beyond a Keynesian point of view, because even Keynesians believed in a business cycle, right?

 

NG: It’s a traditional Keynesian point of view. The modern day, neo Keynesian, yes, you’re right. Way beyond what they’re thinking.

 

TN: There’s a lot of detail in that, and I think we could spend an hour talking about every third thing you said there. So I really do appreciate that. Albert. Can you tell us both Fed and ECB, what are they thinking about right now? What are the trade offs? What are the fears they have?

 

AM: We’ll start with the ECB. The ECB is not even a junior player right now in the central bank world. I know people want to look at the EU and say, oh, it’s a massive trading bloc, so and so. But the fact is, that it’s completely insolvent. Besides the Germans and maybe the French in some sectors, there’s nothing else in Europe that’s even worth looking at at the moment.

 

As for the ECB’s standpoint, you know, they’re still powerless. I mean, the Federal Reserve makes all the policy. They first will talk to the Anglosphere banks that are on the dollar standard basically. I mean, the Pound and the Australian dollar and whatnot. They’re just Euro Dollar tentacles. But, for the ECB, they’re frustrated right now because they see that the Euro keeps going up and their export driving market is just taking a battering at the moment. But they can’t do anything because the Fed goes and buys Euros on the open market to drop the price of the Dollar to promote the equities in the United States. And that’s just happening right now.

 

When it comes to the Fed, we have to look at what is the Fed, right? Normally what everyone is taught in school is that they are an independent entity that looks over the market and so on and so forth. Right. But these guys are political appointees. These guys have money and donors. They play with both political parties. Right now, the Democrats have complete control of the Federal Reserve. And everyone wants to look at Jerome Powell as the Fed chair, but I’ve said this multiple times on Twitter, the real Fed chair is Larry Fink. He’s got Powell’s portfolio under management of BlackRock. He’s the one making all the moves on the market, with the market makers and coordinating things behind the scenes. He’s the guy to look at, not Jerome Powell.

 

I mean, have anyone even watched Jerome Powell’s speech yesterday? It was appalling. He was overly dovish. That’s the script that he was written. He’s not the smart guy in this playing field, in this battleground.

 

TN: He needs a media training, actually. I think.

 

AM: He’s being set up to be scapegoated for a crash. He’s just no one to show. He’s a Trump appointee. So next time there’s a crash, whether it’s one week from now or one month from now, it’s going to be pointed on him that, you know, he’s the Fed chair. Look at the Fed chair. Don’t look at everything else that the political guys have made and policies in the past four or five years that have absolutely just decimated the real economy.

 

TN: This time reminds me, and I’m not a huge historian of the Fed, but it really reminds me of the of the Nixon era Fed where Nixon and his Fed chair had differences and they were known, and then the Fed chair ended up capitulating to do whatever Nixon wanted to get back in his good graces. Does that sound about right?

 

AM: No, that’s a perfect example. I mean, this idea that’s floated around by economists that economics and politics are separate entities is absolute fantasy. And it just it doesn’t exist in the real world.

 

NG: Just to pop in on this one because actually there is a new book out which I started three days at Camp David. Because it’s coming up to 50 years since that decision of the gold standard. Now, it’s just interesting you brought it up, because if you think of one of the rationales for coming off the gold standard, there’s several, but one that struck me as I was reading actually the review, the back cover show Percy.

 

This enables the government to stop printing in terms of fiscal, fiscal, fiscal. That’s what it did in effect. First of all, that’s one of the biggest arguments against people who argue for a return to the gold standard because that would decimate things or cryptos being in a limited supply of crypto as the new reserve currency because the gain that would be pulling against the elastic and you wouldn’t get, the economy would just boom. Right.

 

So that’s where I think it’s just huge, you know. I’ve always said that actually what we have is what we’re going to ultimately see is exactly the same cost that came with Lyndon Johnson paying for the Vietnam War, Covid. And then the Great Society, which is Joe Biden’s what I call social infrastructure and green ghost plan. So. Going back to that, Nixon was paying part of the price for all of that. With Volcke right. So I actually sit there thinking, well. There are similarities right now, and we’re seeing effectively a central bank and the Treasury, wherever you want to look, untethered from what used to be, well before I started in this business, to be part of the discipline. But even when they came off the gold standard, there was discipline. As you referred earlier, to, traditional Keynesians believed in the economic cycle of boom, bust. You know, boom, you tap the brakes a little bit, take the punch all the way. That’s gone.

 

That is to me what’s gone on recently, I don’t know whether you would say since the 08 or more recently is the equivalent of that ’73 meeting where they came off the gold standard. People just said no more cycles. Tapping the brakes and now the central banks are in a hole and politicized, they’re not independent because there are no.

 

AM: Yeah, yeah, that that’s real quick, Tony. That’s exactly right. I mean, even like, you know, I was on Twitter saying we’re going to go to 4400. We’re going to go to 4400 and people are like “No way. We’re in a bear market. This thing’s going back down 37, whatever charts and whatever Bollinger bands they want to look at. But the fact is because of the politics has a necessity to pump the market and then crash it to pass more stimulus packages. The only way was to go up to 4400 plus, right.

 

TN: Right. OK, now, with all of that in mind, Nick, you did a piece recently about the Fed and housing and some of the trade offs that they’re looking out looking at with regard to the housing market. Now, housing is an issue in Australia. It’s an issue in the UK. It’s an issue in the US and other places. Can you walk us through a little bit of your kind of reasoning and what you were thinking about with regard to the Fed and housing?

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.

 

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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

United Airlines’ biggest ever order

Back in the BBC Business Matters, Tony Nash shares his thoughts on matters like United Airlines order of Boeing planes and how important is this order for the US economy? Also, will travel be back to normal and how soon will that be? How about pork prices becoming super cheap, and what’s the outlook for the agriculture commodities in general? And is the work-from-home people be lured back to go and work in the office?

 

This podcast was published on June 30, 2021 and the original source can be found at https://www.bbc.co.uk/programmes/w172xvqdn58y6vl.

 

BBC Business Matters Description:

United Airlines makes its biggest ever order of aircraft in a bet on a post pandemic travel renaissance; the BBC’s Theo Leggett gives us the full details and how safe the bet might be. As many people abandon the office for working from home, property companies say they need to lure us back to the office by making us want to go back – Liviu Tudor is the President of the European Property Federation and tells us how he plans on making office spaces more alluring. As some companies introduce leave from work for women in menopause, the BBC’s Ivana Davidovic speaks to women about why it’s so hard to talk about menopause in a corporate landscape. Plus, cheap pork has flooded the market as China’s pigs recover from the African Swine Flu – Kirk Maltais from the Wall Street Journal explains how the oversupply of pork has forced US producers to cut their prices to very low levels. We discuss all this with guests Shuli Ren, Bloomberg Opinion columnist in Hong Kong, and Tony Nash, chief Economist at Complete Intelligence in Houston, Texas.

 

Show Notes

 

JR: How are you, Tony? Before we get on to the sort of impact on the trumpet or the importance of the travel industry, I just want to think about the importance of this order for Boeing. And I’m remembering that old phrase about GM. What’s good for GM is good for America. I mean, you can’t say about GM anymore. You could perhaps say that about Boeing, couldn’t you? I mean, that’s why this order is important.

 

TN: It’s important. And I’m pretty sure there’s some sort of subsidy for United to buy it, especially since a lot of it’s being spent in the U.S.. It’s in listening to some of the analysis, it’s pretty easy to be critical of United since they’ve been on government support. But really, the market was pulled by the government, the travel restrictions and everything else. So it’s really hard.

 

And I’m no defender of United for sure, but it’s really hard to blame them when their market was really pulled because of public health restrictions. So I do think that they’re making the right call here. I do think that travel will come back faster than the fears of many. I don’t think it will immediately react by September. But I do think that they’re making the right call.

 

JR: You’re not one of these people who thinks that travel will never quite go back to where it was. Actually, there have been certain changes in the way we regard moving around this planet in terms of we can do video conferencing, we don’t have to go to business meetings, we don’t have to go to those international conferences anymore. Is it not a permanent change or is it a temporary one?

 

TN: I think it’s probably permanent for maybe 30% of people. But if you think about the people who have to see each other face to face, the 30% who it won’t be required for, they will aspire to do that because they want to be like their peers who are actually getting deals done and who are actually meeting people that they need to meet face to face. I used to travel, you know, twice around the Earth every four weeks or something. And if I don’t ever get on a plane again, I am a happy man. But I don’t think I’m most people. I think most people are very happy to get on a flight and go for for a holiday or for business.

 

JR: Okay. I just want to know, have you traveled actually, and spend time in the last year or two by plane?

 

TN: I haven’t. But it’s not because there haven’t been business opportunities. I just really don’t like to fly anymore. So I’ve done way too much of my life.

 

JR: Yeah, Tony, the United’s last order actually involved Airbus aircraft as well as Boeing. And that has been this truce between the US and the EU on Airbus and Boeing over the trade war between the two. Do we feel that actually aircraft production is going to get back on track now?

 

TN: Well, I think that European and Asian airlines will be slow to make capital commitments. I think American Airlines in the U.S. have old fleets and so they have to renew them and their tired fleets, too. So but I think in Europe and Asia, the Asian fleets generally a little bit newer, of course. But I think they’ll be a little bit slower to order. I think we’ll have to say some European countries that subsidize their airlines, like I don’t know if United was subsidized, but I wouldn’t doubt if they were. But European countries that will subsidize their national airlines to help out Airbus, I mean, that’s its fiscal stimulus. It’s all over the place. It wouldn’t surprise me in the least.

 

JR: We can come to, you know, about the impact it’s had on the American producers and also on Chinese US trade relations, because that’s where it really starts to get interesting, because the China was importing a huge amount of hogs and also corn and soybean in order to be able to support their industry, which was really under in dire straits.

 

TN: Right. So there are three layers here. So first, you have the news about the hogs. And I think the the commodity prices sold off on the news, I personally don’t believe it. I think the herd is improving in China, but I don’t think it’s back to normal. You also have commodities like corn and wheat that are elevated on really bad corn crops in China and bad feed crops in China. So there’s been a lower corn crop in the U.S. than usual this year.

 

And Chinese pig farmers have started to feed them wheat, which is not a normal feed for hogs in China at least. So that’s affected with corn prices and wheat prices, which are which are continue to be elevated partly on the demand in China, but partly on, say, weather and supply and other things in the U.S..

 

So I do hope for China’s sake that the herd is healed and back to normal. I’m just skeptical of it. But I do think that we are seeing pretty hot and dry summer in the Dakotas and other parts of the U.S. that produce significant part of the U.S. corn crop. And until we start to see rain in the Dakotas and elsewhere, I think there’s going to be pressure on those prices. So U.S. farmers are you know, they’re struggling just to grow. Of course, the ones who are growing are doing well. Those who have crop to sell are doing well because the prices are elevated.

 

But it’s put pressure also on U.S. consumers because what we saw in the U.S. was a lot of accumulated frozen meat, pork, beef, chicken. And with the shutdown of the meat processing plants in the U.S. with the pandemic, it wasn’t manufactured in the U.S. So we had a large stock of frozen meat in the U.S. that’s now drawn down. And so the supply chains around meat are are pretty tight, actually. So we’re seeing real upward pressure in the U.S. on meat prices. And so that’s part of the reason I don’t necessarily think that the news in China is what they say it is, because there’s still there’s still draw of pork to China now.

 

JR: That’s really interesting. A whole lot of confluence of different influences that are pushing in different directions. We have seen these very dramatic falls. But you think they may actually be just temporary and just the sort of the market volatility of the last couple of weeks, you think?

 

TN: Well, I think part of it is weather, part of it is supply chains. I think we’ll see things come back to normal in probably four to five months in terms of U.S. commodities. But I think the summer is going to be pretty volatile still. So if China does continue to have the demand, it’ll put more pressure on the volatility in the U.S..

 

JR: OK, Tony, what about in Texas? What’s happening there? I mean, you still got supply chain problems, still got sort of the difficulties of actually getting stuff or is there no problem in that?

 

TN: I don’t think there’s a problem in actually getting stuff, I wouldn’t say it’s the supply chain itself. I think it’s the after effects of the supply chain problems. We also had things like I’m sure you’ve heard of the freeze that we had here in Texas in the spring. That freeze actually killed three generations of chickens. It killed the the chickens that would be sold to market and it killed the eggs.

 

So we had a several state area where where all of the chickens died because of the freeze that happened in this part of the U.S.. So while people made fun of us for our windmills not working, there actually was real impact. And, you know, we really had an impact here. So we’re seeing an impact on chicken prices. And, of course, meat is substitutional generally. So it’s really pressuring all of the all the proteins. But again, we are seeing vegetables and other things. It’s not necessarily availability per se at the cash register. It’s really the pressure on the price. So whoever pays the most will get it. At least that’s Texas.

 

JR: Has it got to the point of the poor people it’s a problem. I mean, it’s of a wages keeping up. I mean, is this a real issue or is it just one of these things people say, oh, gosh, prices are going up. It’s, you know, what a nuisance.

 

TN: Well, because of the the programs that the federal government has had here, I think the minimum salary of someone who actually stays home and collects unemployment is something like 48000 U.S. dollars a year. So for the past, I think 15, 16 months, the people who would be the poorest and who are unemployed are actually making almost 50,000 dollars a year based on a kind of the federal kicker because of the virus. And so while it’s hitting, the people who would normally be the most affected are actually getting more money from the federal government. So the hope is that they’re not feeling it.

 

JR: Okay, Tony, thank you.

 

I was talking to my colleague, Rob Young. Now, what I think is really interesting here is the sort of power play between the various people involved, the employee, the employer, the property company. And basically, if the employee has to come back, has to come back to the office, no one’s going to bother to give them fantastic facilities and sort of going to gyms and all the rest of it, if they’ve got to come back. And it’s really depends on that part played between the two. So do you think actually, Tony, we’re going to see any change in the way property companies or employers actually treat their employees?

 

TN: No.

 

JR: I’m quite doubtful, too. I mean, it always sort of blue sky thinking about how marvelous our offices are all going to be in the future. I don’t think it’s going to be different.

 

TN: No. And in fact, I’ll go even further than that. All of the talk over the last year about how work will change. I don’t believe that’s going to happen. You know, here’s what it really comes down to. People need to be in the office. Why? Because work is a couple of things. First, it’s about achievement and what you do. It’s about how much you know, but it’s also about how you politic. OK. You have to be in the office to politic with people. Otherwise, when the next retrenchment comes around, your head is you know, you’re out the door. So people will have to go back to the office and the ones who scream the shortest about not wanting to go back will be invited eventually to go elsewhere.

 

JR: The only thing I would say possibly is that actually if there is a demand and there’s a shortage of supplies, it’s supply and demand. There’s a shortage supply of certain workers. Employers will put better facilities in place to lure them in and treat them better and give them these kind of privileges, some of which will be the privilege perhaps of working from home if they want to.

 

TN: Interesting. I actually spoke with the U.K. demographer last week talking about this very issue, and he said there will not be a shortage at all. In fact, over the next 10 years, in 10 years time, there will be something like 600 million people who cannot get a job. Sorry. 420 million people who cannot get a job globally. So there will be people will be competing very aggressively for those jobs globally.

 

JR: Tony, isn’t that really important for them to be able to see stuff, hands on whatever job that doing really?

 

TN: Especially for you, surely because the Bloomberg office in Hong Kong is spectacular, according to the office, everything. So I’m surprised you didn’t just move in.

 

JR: Yeah. Do you get free food at the Bloomberg office as well? I remember that was one of the things where I used to work for Bloomberg a long time ago. And you did get free food in the office. I remember that.

 

SR: Yes. Bloomberg is very generous. So so these days, like there is free lunch, they have like that the vegetarian option that the vegetarian option with the calorie counts, very healthy food, absolutely free food.

 

JR: They are making an effort to lure you back in from your pajamas until your comfortable bedroom. Thanks for joining us. Business matters.

Categories
QuickHit

The Death of Growth: Old & rich vs young & poor in 2030 & beyond (Part 2)

The world’s birth rate is changing. Clint Laurent from Global Demographics shares surprising discoveries that he believes will happen in the next 10 years and how this will shape the world?

 

This is the second part of this discussion. Go here for part one.

 

Clint started Global Demographics in 1996 and cover 117 countries throughout the world and China. They do that right down to county level of 2,248 counties. Clint believes that demographics are better than financial data from the point of view of forecasting  because they tend to be stable trends.

 

Global Demographics is able to come up with reliable forecasts at least 15 years out. After 15 years, reliability goes down and they are typically never more plus or minus 5% error in our long-term forecast. Their clients are mainly consumer goods companies, infrastructure backbones and things like that.

 

 

 

 

 

 

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This QuickHit episode was recorded on June 17, 2021.

 

The views and opinions expressed in this QuickHit Clint Demographics Part 2 QuickHit episode are those of the guest and do not necessarily reflect the official policy or position of Complete Intelligence. Any contents provided by our guest are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes

 

TN: So Indonesia, India, Brazil and so on, so capital formation, capital investment is the real weakness there and it seems to me that’s a function of largely education. Is that fair to say?

 

CL: That’s exactly what it is. I mean, they you know, as they get the education right and, you know, they’re working on it, most of these countries that have been quite responsible in that area. And as they get that right, so the investment comes in, so the consumer gets more affluent and becomes a virtuous circle.

 

TN: OK, well, what timescale are we talking about for that consumption to come in a really notable way, for example, to take the place of, say, the under 40 Chinese consumption or the under 40, say, Western Europe or American consumption?

 

CL: Well, that’s the bad news. I mean, when you take India at least 15 years to get there. Because the education is only just coming right. And again to pick on India. India’s urbanization, 10 years ago, it was 30% of the population. Today, it’s 33% of the population.

 

TN: OK. So it’s not happening nearly fast enough.

 

CL: No. When you’re an uneducated girl in a village, why would you go to a slum somewhere of a big city? Your lifestyle would be actually worse, not better. And so they hadn’t been able to get that China effect of moving people from the low productivity agriculture into high productivity urban type of work.

 

TN: Yeah, but I think a lot of the, particularly the Westerners who are watching this would say, yeah, but I’ve been to Gurgaon and I’ve, you know, I’ve been to that kind of tech hubs in India. And I see, you know, a lot of women coming up in those hubs or have come up in those hubs over the last 10 or 20 years. But is not just such a small percentage that it matters, but it’s not making a huge difference?

 

CL: Exactly. It’s a small percentage. I mean, remember India is just behind China in terms of total population now. And by 2045, there’s 1.5 billion people. Because they’ve got the birthrate right under control as well. It’s dropping. But again, they’ve got an inertia of more women of childbearing age coming through. So total births keep going up. So they’ve got this problem of just too many people looking for jobs, which keeps the wage rates down. And that. And that’s what’s frustrating the education system, too, is they have to keep growing the number of school places to stand still, let alone expand. But they’re getting that right. So I don’t want to sound negative about that. All these countries are doing quite nicely on that, some positive.

 

And so but one important point to make is the demographic dividend hasn’t been collected. There’s was a lot of talk about India having a demographic dividend because there are always young people entering working age. But the trouble is they weren’t well enough educated, so they didn’t find jobs. In 2010, the propensity of a working age person to be in work was 58%. It’s now 50%. In other words, they couldn’t find the jobs for these people, so the dividend never paid off.

 

TN: OK, so jobs lead to consumption, of course.

 

CL: That’s right.

 

TN: But I guess. So it’s going to take these countries 10 to 15 years or more to get the quality of jobs that are needed.

 

CL: Yeah.

 

TN: So, you know, that growth that we’ve lazily relied on, say, China for the last 10 or 20 or 20 to 30 years, is there a gap between now and 10 to 15 years from now in terms of the rate of growth for, say, consumer goods and say, economic kind of new market entry, that sort of thing?

 

CL: Yeah, well, this is the crisis that’s coming. Because if we take, again, the kind of what I call the family stage countries, India, Brazil, etc, they actually need around about 250 million extra jobs in the next 25 years to get, to maintain their existing level of employment. Not lift it. Just maintain it. And that gives them a reasonable level of income. Not great, but hopefully with education situation, the earnings go up.

 

But let me put another layer on the cake, so to speak. This is fourth group of countries, which I call young and poor. I call them young because the median age of all of the countries in this group is 20 and some of them have a median age of 14. Mali and Niger, they both have a median age of 14.

 

That means half the population in those countries is under the age of 14 today. Yeah, and their birth rates are high. The average birth rate, an unweighted across these countries is 130 per thousand women. Most countries are at 40 elsewhere in the world. And the number of women of childbearing age, of course, are going up dramatically because of that as well. So even though the birthrate is starting to come down, it goes up dramatically. And it has a seismic effect.

 

First of all, is roughly a billion people in this part of the world at the moment. In 25 years time, there’s two billion of these people. In other words, in twenty five years, they add a billion people to their populations. And if I can just go on and to take Nigeria, for example, at the moment, has 45 million school age children, irrespective whether they are going to school, most of them are not. 45 million. It’s 90 million in 25 years time. Just to stand still on education, they have to double their education budget. And so, little own issues need improving.

 

TN: OK, so governments take, need tax revenue to grow their budgets. So will there will there be the incomes to allow them to grow those budgets just to keep up with where they are? And further, will they be able to accelerate the job growth to make sure they have those incomes, to keep their education, to improve their education like, say, India or Indonesia is doing well?

 

CL: Well, this is the crisis that’s coming because the answer simply is no. And it’s no for the simple reason that up until now, this is really what I was saying we were at a cusp. Up until now, the growth in consumption by the older affluent or the older countries generally, which includes China, has been such that it’s kept relatively full employment throughout the world.

 

There’s been enough jobs for those who are looking for jobs. And that doesn’t sound a bit. But even the young, poor countries have been trotting along at about 55% of working age people employed, which seems to work out quite well. But suddenly that whole relationship changes. As I said, the countries that account for, well, the old affluent account for 63% of global consumption. The other old add another 14% say up to 77% or 80%, chuck in a bit of India, 80%, which is also flattening out. So the countries account for 80% of the money that’s spent by households now flatten out in growth in their demand.

 

Layer on top of that, there’s a continuous increase in productivity per worker. The amount of number of workers needed to meet the new additional demand over the next 25 years is 300 million. And as I told you earlier, this 740 million people that are going to be looking for an extra job.

 

It’s going to be roughly 400 million people, mainly in the poor countries, are in a little bit in need, family stage countries, who are at working age, would like to have a job, but can’t get a job. That’s 400 million.

 

TN: That’s astounding. OK, so that’s as big as, say, the EU, right?

 

CL: Yeah, well, bigger.

 

TN: So if everyone in the EU didn’t have a job but they wanted a job. Man, woman and child couldn’t get a job.

 

CL: That’s right.

 

TN: So that’s terrible. So what do you think those people will do? What do you think some of the effects will be of this? First of all, where is this, kind of generally, geographically? Is this the kind of Bangladesh, Nigeria, kind of those types of countries?

 

CL: It’s based of the African continent and what we call South India, but not including India or Sri Lanka, which will be in Tibet, out there.

 

TN: So Bangladesh, Pakistan, Central Asia generally.

 

CL: And there’s a few small countries, obviously, in South America or Central America that are falling into this category as well. So it’s reasonably concentrated geographically. And it’s a real worry. And I think of myself. If I was turning, well, let’s say 20 and I cannot get a job. I’m scrambling for food. I’m scrambling for water, in some places in the world. What do I do? I’ve got nothing to lose. And that’s what something dramatic, I would rot and just die miserable, which is terrible.

 

So I think the world has a fairly major migration problem coming. These people are going to walk north. I would. So I don’t blame them. But it’s a desperate situation. So much so that in my own mind, it’s all very well to donate money to buy mosquito nets and things like that. I actually think would be better to donate money for a TV and an Internet connection so we could educate the kids. Because we could deliver education quite cheaply using modern technology. And if you could educate them, then they could do more productive things and then and so on and so on. You get the part of that. But there’s no easy solution to this one.

 

These people are largely alive today, will be alive in the next 10 years. And the consumption trends, well, they’re there too. The people with the money are getting older and saving. So the drawbridges are coming up. So this is.

 

TN: So migration. The migration issues we’ve seen over the last, say, 5 to 10 years sounds to me that they only intensify over the next, say, 15 to 20 years.

 

CL: Oh, incredibly so.

 

TN: And Europe is really the focal point. Yes. The US has some issues and maybe India, China have some issues. But it really seems to me that Europe is the major focal point there.

 

CL: But it’s the easy one to get to.

 

TN: Sure. Yeah.

 

CL: But there’s some other dimensions of migration, too, which is starting to come under stress. And I mean, for example, let’s take the U.K. It has one nurse for every 440 people in the population. So if you get sick, your access to a nurse is pretty good. But the UK hires nurses who have been trained and educated in the Philippines where there’s one nurse for every 4000 people in the population. Is that morally correct? Should affluent countries take skilled workers, from developing countries?

 

TN: But can you blame that worker for wanting to go to UK?

 

CL: Not at all. If I was the nurse, I’d be on the plane. I mean, basically, you’ve got the individual motivation and you’ve got the moral issue, and you’ve got the need. And then even if you take a country like Greece, which everyone says, oh, that’s nice and comfortable.

 

Greece’s population has dropped by one million people in the last 10 years. And that one million that are gone are skilled workers who got on a train and went north to Germany because under the EU, they can move.

 

TN: What percentage of the population is that? One?

 

CL: About 10%.

 

TN: 10% of the population?

 

CL: Well, you know, it’s a big drop. And again, you don’t blame the skilled plumber or electrician or whatever because he or she can earn 2 to 3 times as much going to Germany or getting across to Britain, which they could do perfectly legally. And then in 5 years time, the wife is with them, the kids are going to school, that kids speak German now, they never go back.

 

TN: So does this change, does this, you know, let’s say the education deficit issues and the jobs deficit issues in Africa, does it change immigration policy in Europe, for example, in the way Australia has the checklist of skills and those sorts of things to to migrate?

 

Does Europe come more to that type of migration policy to where they incentivize people, let’s say, in parts of Africa before coming, meaning get educated, you know, these sorts of things. And you can definitely come in. I mean, it certainly sounds like something that would be really helpful for places like Greece.

 

CL: Yeah, but not too helpful for places like Nigeria.

 

TN: Right.

 

CL: They’re losing the skilled worker. And the ability to lift the Nigerian economy is going to be a function of having skilled people. And if Greece takes them, that’s actually not that great. Right. So, yeah, you sort of resolve the great problem, but you don’t resolve the core problem, which is the change so to speak. Yeah. So it’s interesting because Greece, with its drop in population, its household values are dropping because the number of households is going down. And that’s the core asset of many households. So it’s trying to create some economic problems as well because the asset they could borrow against is going down in value, not going up in value. But that’s not just Greece. It’s Italy, Spain. It’s Romania, it’s Poland. And that being, you know, some of the talents are being sucked out. And that’s not good.

 

TN: So in sum, let me try to sum this up, because this has been a great conversation and it’s really opened up a lot of things I haven’t really thought about before. So so global consumption generally for, let’s say, the next 10 years or so is relatively stable.

 

We won’t see the rapid expansion that we saw in places like China over the last 10 or 20 years. So let’s say the pull on commodities right now, the inflation we’re seeing, the, you know, this sort of thing, that stuff really tamps down pretty quickly and really stabilizes for maybe a decade or so.

 

CL: Exactly.

 

TN: Once that stabilizes, then we see real disparities as these kind of young, poor countries explode in population. But the wealthy countries are pretty stable and continue to be pretty rich. Right. So we kind of have a status quo for the next decade or so. But then after that, there’s a real danger that emerges from global disparity.

 

CL: That’s right. You start to have a major, what I’d call a population crisis.

 

TN: Wow. OK. It’s a little bit dire. But this is great. Before we go, can you talk about, I know you have a couple of books coming out. Can you tell us what they’re about? I know they’re a little bit from coming to press, but I think it would be really helpful for people to understand what you’re writing about.

 

CL: Right. Well, one of the two books is basically called 2045: The Growing Demographic Crisis. And it’s pretty much along the lines that I’ve just discussed, the difference is, all the data is there. And you’ve got the data, if you like, at the segment level, which also go to by country level. And you can see how the numbers play out. It’s not something that we’re making these numbers up. They’re actually there. They’re pretty solid. And the core source, of course, is the World Bank and the United Nations that you can’t really argue with that. And it’s all old numbers behind what I’ve just discussed.

 

And the second book coming out is called China: 2040. Similar sort of theme. And what I have done that is China is going through a lot of changes that I’ve explained and China will continue to be important economically and politically for the next 10 years at least, if not longer. We know that.

 

So it’s actually quite important that people have a better understanding of what China is like demographically. And it’s not one country, it’s at least thirty one countries. The differences in consumption within that, it’s quite diversified.

 

This book is, if you like, the primer for someone that’s either doing business, thinking of doing business, investing in, whatever, into China. If you haven’t read it and you don’t know China, then you’d be dealing somewhat riskilly. If you read this, it’ll help you focus where the opportunities potentially are. Thanks for the opportunity to mention.

 

TN: Of course. Thank you so much for your time. You’ve been very generous and I think we’ve taken it a lot. I think of it to watch this two or three times before I kind of fully take it in. So I really appreciate it.

 

Further watching, please. We’d really appreciate if you’d like the video. We’d love it if you’d subscribe to our YouTube channel. And we’ll see you next time. Thank. Thanks very much.

 

CL: Thank you.

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.

 

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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
QuickHit

Ag’s Perfect Storm: Tight Supply, Strong Demand and Weather Uncertainty

Joining QuickHit for the first time is the commodities expert Kevin Van Trump of The Van Trump Report, helping us understand ag’s supply, demand, and clarifying uncertainties. Why are we seeing so much attention to agriculture right now? What’s contributing to the tightness in the ag market? How long will the corn rally last? How about wheat? What can we expect for the foreseeable future? And protein, how delicate is this with all that’s happening with ASF, cyber attacks, etc.?

 

The Van Trump Report, a very large agricultural newsletter and analysis service. Kevin Van Trump started trading in the 90s in Chicago. Switched over, traded Notes, 10 years, five years. And then really got more heavily into ag. He’s from a small rural town outside of Kansas City and I was really interested in corn, beans, wheat, cattle, livestock. They started putting together a newsletter 10, 15 years ago when ethanol started to become more prominent and it started to travel around the circuits with some of the bigger hedge funds and some of the bigger money managers.

 

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📺 Subscribe to our Youtube Channel.

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This QuickHit episode was recorded on June 2, 2021.

 

The views and opinions expressed in this Ag’s Perfect Storm: Tight Supply, Strong Demand and Weather Uncertainty QuickHit episode are those of the guest and do not necessarily reflect the official policy or position of Complete Intelligence. Any contents provided by our guest are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes

 

TN: There’s a lot of attention on ag right now. And can you just kind of give us a little bit of a set up of what’s happening in the ag markets, everything from the volatility of corn to, you know, what’s happening in wheat, a little bit of kind of protein, a little bit of beef activity. And that sort of thing. Can you tell us just generally why are we seeing so much attention on ag right now?

 

KVT: Well, I think you see the funds take a more proactive risk on approach. You know, just in commodities in general, we’re seeing location from Covid and things of that nature. And most people thought as we ramp back up, we’re going to have a pretty strong demand for, like you said, proteins bring in some of the livestock back on, just demand in general.

 

So we’ve seen more fund interest and more money flow into the space. Like you’ve seen the rebound in crude. You’ve also seen this rebound and in the ag and the commodity world. So China’s got a big appetite. They’ve been a huge, huge buyer of corn and have led the way. Beans as well on the protein side, as you and I will discuss here in a little bit. But yeah, basically, you know, we’ve we’ve gone from a oversupplied market for the last four, five years to all of a sudden we’ve got tight supplies. We’ve got record strong demand and some uncertainty into weather. So, you know, everything all said ripe for a possible rally.

 

TN: And is that tightness? Is that on, say, processing? I know with some of the protein, it’s processing concerns. But what is that tightness? Is it say, weather, drought in Brazil, that sort of thing, too much weather, too much rain, in the Midwest or what’s contributing to that tightness in the market?

 

KVT: Yeah, I think you had, you know, we really rarely get good numbers out of China from a supply or demand, especially a supply standpoint. They were supposedly sitting on a ton of corn and a ton of supply. All of a sudden they come online as a big, big buyer, you know, whether it’s maybe lack of quality with the storage of their corn, maybe the numbers just weren’t there all along. Maybe the supply wasn’t there. But it feels like they want to import the corn down into the southern part of China, maybe get away from.

 

We think Covid really exposed the rail dislocation. And when they had that rail shut down and dislocate, it probably crimped a lot of movement of corn supply and the Chinese government is looking at that and saying, hey, we can’t have that happen again if we’re going to see more possible problems. So they want to be a big buyer of corn from the US. They want to buy as much beans as they can from South America. And so so here we sit trying to juggle that. I think the world wasn’t really prepared for the size of buying that they were going to step in and do.

 

TN: OK. And how long specifically with corn, how long do you think that buying lasts? Is that kind of a three month phenomenon or does that go, say, for years?

 

KVT: Well, Tony is kind of how it played out for us in the soybean market years ago. China was what we would call a price buyer of beans. They would buy beans on the breaks and then they became a quantity buyer of beans, where it didn’t matter if soybeans were traded in five or six dollars a bushel or sixteen or eighteen dollars a bushel. They were going to buy beans every month. And so we see China as a quantity buyer of soybeans.

 

And we’ve predicted… Now, I hate to say this because we’ve made this call before. It’s OK. Own it. That China was going to become a quantity buyer of corn eventually. And like I said, we’ve heard guys in the market say this for the last 20 years and it never really came to fruition. They’ve continued to be a price buyer of corn.

 

We feel we’re at a tipping point and we believe they’re going to continue to be a quantity buyer of US corn for the foreseeable future as they try to transition, open more ethanol facilities, try to transition to cleaner energy. And some of those types of place, I think they’re buying corn longer term.

 

TN: So we’ve hit. It sounds to me like we’ve hit almost a semi-permanent new price level. Is that, would that be fair to say?

 

KVT: Probably not, I would say, how would you say? The grain markets in general and farmers in general. They’re going to plant from fencerow to fencerow. They’ll be planting acres on their back patio if they can, and they’re going to roll out more acres in South America. And so you’re going to see a lot of supply really come on with technology changes that can come on fairly quick.

 

 Even though I think China, you know, is going to be a continued buyer and demand is going to remain strong. I bet we really start to increase some of this production and we’ll probably balance it back out here. So that’s you know, they’ve caught us a little offsides right now. You got the price of corn at seven, close to seven dollars. And then we, barring any weather incidents or craziness that would really upset production, we probably trade here well, and then we start to ramp up supply and balance or back out.

 

TN: Very good. OK, interesting. Can we move on to wheat for a little bit? There’s been you know, we saw wheat come on strong and then come off and there’s expectations of wheat prices rising again. And you’ve covered this in detail in your daily newsletter. Can you talk a little bit about the wheat market dynamics and kind of what you’re seeing there?

 

KVT: Yeah, you know, wheat has become a big follower of corn, so to speak. We’ve seen, especially in China, you’re seeing a lot more wheat substituted into feed rations. So you’re getting a, you’re getting a bigger demand for wheat as a feed ration, but of corn, more to fizzle out. We probably see wheat drop off as well just because its demand is kind of correlated right now to being substituted in for the higher prices and corn. There are some pockets where we have some weather stories.

 

Spring wheat seems to be in short order here in the US. Some of those acres didn’t get planted, probably were planted to corn. You’re seeing those conditions problematic in, say, North Dakota, which is our biggest spring wheat producing state. They’re having problems with the drought and dry conditions. You’re having some pockets of some concern in parts of Canada, Canadian prairies, southern prairies, where also big spring wheat producing areas. So that, you know, spring wheat, maybe a little hot right now. But we see wheat is mainly a follower to corn at the moment.

 

TN: Very interesting. OK, let’s move on to proteins, because I think that’s a really interesting story. We had this cyber attack on the largest beef or one of the largest beef processors in the US this week. And we already had some tightness in the beef market. The inventories, the frozen inventories, from what I learned from your newsletter, were already low, other things. So how delicate is that market and will we see that follow on effects come later into the market or will that be sooner?

 

KVT: No, I think, you know, there’s going to be, there’s massive dislocation right now across the board still, and I think you can see that and we could talk about. I’m sure your follow up into the hog space. But I mean, you’re seeing that with both cattle and hogs. If you recall, back early in Covid, they had to shut down a lot of processing plants because workers were getting sick and they had to take precautions.

 

Now, on the hog and poultry side, as I’m sure as we were going to discuss, those shutting of the plants, whether it be a Tyson or whoever it may have been at the time. I mean, that really backed up supply or the herd. Now, you had producers had to call the herd and they pulled back and reduced the size of the hog or quite a bit or with cattle or things of that nature. Well, then all of a sudden, corn prices and feed prices take off to the upside. And you have a producer or rancher who just really doesn’t want to expand his herd because he’s not certain about the processing plant if they’re going to stay in his local area because it Covid and now he sees corn take off and the feed take off to these extreme highs. You’ve got them caught where there were a little bit short supply and all of a sudden demand coming back like gangbusters.

 

All the restaurants, or people around the world are starting to try to get out and about more. And so, like you said, you guys, you got surging demand right here and you got the supply pipeline dislocated a little cut off size.

 

TN: And then when we see things like ASF, African Swine Flu in China and the calling of the even the breeder hogs, that sort of thing, how global is that dynamic? Does not present pressure on, say, US pork prices or or is that really just a regional Chinese pork price phenomenon?

 

KVT: No, we think it does. I mean, we’ve seen as it creates ripples in China and they try to get on top of it. I mean, it’s a crazy dynamic. They cut their hog order in half. But as they tried to get on top of it, they’ve had to be bigger buyers of importing of pork and the United States has been a beneficiary. And I think that could continue to be the case. You know, God forbid that we were to get a case here in the United States that’s always kind of the last few years, the big wild card in the mix.

 

If we were to spot something like that here in the US, know probably the knee jerk immediately as to the downside. Just because prices probably break because people are going to want to eat the hogs. You’re going to kill a lot. But I think longer term, that creates a supply shortage and we rebound back in the opposite direction. So it could be a double edged sword.

 

TN: OK, so we’ve seen a lot of volatility in these markets. What are you looking for kind of for the remainder of 2021. Do you see these prices elevated, say, until Q3? Do they come off in Q4 or do you see these, the kind of the volatility and elevated prices continuing through the end of the year?

 

KVT: You know, kind of like we talk in crude, we probably see demand outpace supply through Q3, Q4, maybe even a little later if you get some dislocation. In our sector, if you’re talking corn, beans, wheat, things like that, it’s really right now about US weather.

 

In Brazil, they’ve had some real rough patches of dry, dry and hot weather and we continue to see their corn crop get smaller in size. The USDA was talking they had lowered it down to one hundred and two million metric tons for corn. Now they’re talking some guys in the 95 to 90 million metric tons. And so that that’s going to take more corn out of the supply pipeline or are available for exports. And now here in the US, we’ve got the drought that’s lingering and could, it just sit, we’re just right here on this tipping point, Tony, where if it turns hot and dry within the next 60 days, corn, beans and we take off. I’m talking we’ll probably go all time record highs. If you see what I’m saying.

 

So and you remember back to the 2012 drought, the USDA had the crop rated about the same condition as it does right now. Things were similar, but all it takes, Tony, and corn, is for you to get really hot and dry right around the pollination period, which will be the end of June, first week of July somewhere in there. And boy, I tell you what, the market will add a ton of risk premium and, you know, a lot of fireworks take place.

 

So that’s kind of what we positioned ourself for. If we get that story, we take off to the upside because demand’s so strong. OK, so we’re looking for hot and dry potentially in late June, early July. And that would really set things on fire and in ag markets.

 

TN: Right. Very good. Kevin, thank you so much for your time. I really appreciate this. This is a real pleasure to have you here. You know this stuff inside and out and we’re really grateful for all of the insights you’ve given us today. Thanks so much. For everyone watching, please like the video, please subscribe. That helps us out a lot. And we’ll see you on the next one. Thanks very much.

 

KVT: Thanks, Tony. Appreciate it.

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Podcasts

US Banks Accused of Failing the Public

Our CEO and founder Tony Nash is back on the BBC Business Matters for the discussion on US banks and why they are not helping enough during the pandemic, India’s Covid and their vaccine efforts, and Friends the Reunion. 

 

This podcast was published on May 28, 2021 and the original source can be found at https://www.bbc.co.uk/sounds/play/w172xvqbttq78ml.

 

BBC Business Matters Description:

 

Big US banks have been criticised for not doing enough to help ordinary people during the pandemic. The bosses of JP Morgan, Bank of America, Citigroup, Wells Fargo and Goldman Sachs were grilled during an appearance before US lawmakers.

Also in the programme, following the deaths of more than 315,000 people from coronavirus, India could fast track the clearance of some foreign vaccines in a bid to speed up vaccination in the country. The BBC’s Rahul Tandon has an extended report on how the country’s rollout is going so far.

Staying in India – we look at the relationship it has with Twitter. The information technology ministry in India has criticised the social media giant after it expressed concern over the potential threat to freedom of expression in the country.

Plus, as the cast of TV sitcom Friends reunite for a one-off special to look back at the making of the show, we discuss why it remains so popular.

 

Show Notes

 

RT: Then from Houston, Texas, we have the founder of Complete Intelligence, Tony Nash. I’m always very reassured to have Complete Intelligence on the program as a man of limited intelligence. Yes.

Tony, does that mean looking ahead and this is not a reflection on the current CEOs, but banks are going to have very different CEOs because it’s not all about the numbers anymore, is it?

 

TN: Well, I think these are smart CEOs, they can handle handle their own. I don’t necessarily think these guys are not skilled enough to handle these topics. These banks handle these topics every day. I think the range of questioning, to be honest, really shows just a lack of focus. These companies are better served when they focus on an issue and go deep on it.

 

RT: What should they be and focus on? What would you focus on?

 

TN: Whether it’s green loans or whether it’s access to finance are such rich topics that they could have spent the entire hearing on. And I think the hearing was really meant for a lot of one liners so that people could be seen in the media more than really a desire to dig deeply into this. So, for example, the the fees that were levied, the saving rate of Americans right now is 21 percent. Normally that’s five percent or seven percent, something like that, but it’s 21 percent.

 

So Americans generally have money. I’m not saying that it wasn’t the overdraft fees were not unfair in some cases, but it’s not as if that was kind of a massive hot button issue really until today. Americans hate banking fees. I think everyone hates banking fees. But I think it was just kind of an opportunistic thing to talk about.

 

What would have been really interesting to talk about is how those major banks, specifically for things like PPY loans, they did not cater to small businesses, OK, they catered to their largest clients.

 

RT: Interesting points that from Tony. What do you think? Tony. Anyway she’s part of the world that you know very well here entering an emerging market that should he said there with this strong man, but that’s something you’ll have to do if you want to grow your business.

 

TN: I think what Twitter has done with government accounts globally is it’s put a label this is from a government account or this is from a person who works for the government. So in the West and I’m sure in the U.K. and other places, you can see, for example, Chinese government spokespeople put out things that are obviously false that Twitter doesn’t police. They have to apply the rules evenly to everybody. So if they’re going to apply these rules to an Indian government official or an American government official, they have to also apply it to a Chinese government official or a Japanese government official. The problem that Twitter has is it is not treating its users equally around the globe.

 

RT: Twitter having to deal with people from countries. You may not be telling the truth. You mentioned China there. But if an Indian member of the government appears to be not telling the truth and Twitter says so, there’s nothing wrong with that. It has does to stand up on that principle now or does it cave in and say to the Indian government, “OK, we’re going to follow that rule because your market so big?”

 

TN: Well, Twitter is supposed to be a non-partizan platform. And so they are intervening as partizans at times, and that’s just not fair.

 

RT: They shouldn’t say anything. Just let people say what they want?

 

TN: I think they label as a government account. And if it’s seen as government propaganda, then either they let it go or they apply it evenly across all government accounts.

 

RT: Tony, if I can come to you firstly in Houston, in Texas, a personal question, I suppose. I mean, have you been vaccinated? Tell us a bit about the vaccination situation where I would imagine it’s quite good.

 

TN: So Texas has about 40 percent of its population vaccinated, and I think it’s 22 million people. So it’s nothing on the scale. I haven’t been vaccinated. I’ve wanted people who’ve needed it to go first. So I’m happy to wait on that so that older people or people at risk or whatever can go first. But the U.S. generally has about 40 percent of the population vaccinated. So things are pretty well advanced here. I was glad to see the U.S. government start to support India about  a week and a half ago or something two weeks ago? I think it was really, really late. I think they should have supported India much, much earlier.

 

RT: Well, I think it’s very admirable that you’re that you’re that sort of attitude that you’ve taken to vaccination. Tony, if you want to get vaccinated in the U.S., what’s the process that you have to go through? One thing that intrigued me was that in India, a country where many people still struggle when it comes to the Internet, the booking system is only online at this particular point in time and only in English. You obviously have large Hispanic community in Texas. Tell us a little bit about how you book it and sort of language abilities that.

 

TN: It’s online in Texas that I haven’t booked again, because I’ve been waiting for all these other populations to clear, but in Texas it has to be in multiple languages. I mean, we have such large communities here, not just Hispanic communities, but Vietnamese communities and other communities. So it has to be in other languages on the site. A look while we’re talking and if I can find it in time, I’ll let you know.

 

RT: Great. But if you can’t go online because, you know, there are many parts of the world, as you know, my parents struggle to go online. Sometimes they struggle with many things, really. But online is one of them. Can you make a phone call in Texas to get it? Is there another way? Can you just walk into a center?

 

TN: I’m not sure if you can just walk in, but there are multiple ways of contact. I’m on the website now, so there are multiple ways to contact. It’s a very, very simple website and it’s a multi-language website. So, yeah, there are multiple ways to get in touch with them with phone number, toll free telephone numbers, even for hearing impaired telephone numbers. So there’s a lot of ways to contact.

 

RT: Can I just say that was Complete Intelligence there from Tony just getting on the website and doing some live reporting for duty. Certainly did a great job at the Olympic Games are being held in Texas, Tony. And they weren’t vaccines available for the local population. And then you had thousands of people coming in, athletes who would get the vaccination. Do you think that would annoy people?

 

TN: I don’t think it would annoy people, I mean, Texas is open, we have sporting events and concerts and everything that are alive now. So I, I think Texans view is, look, if you want to get the vaccine, that’s totally fine. If you don’t want to get it, that’s totally fine. And so, you know, if a lot of people were coming in with vaccines, I think people would be fine with it. I don’t think they would they would be concerned if they knew that infected people were coming in. But if people were coming in, you know, checked with vaccines or without vaccines, I don’t think anybody would really mind either way.

 

RT: Quickly, do you think it’ll go ahead to.

 

TN: The Olympics, yeah, I hope it does, but I’m not optimistic, I mean, I’m going to say no at this point, but I really wish it would. The world needs something positive to focus on, and an Olympics would be an amazingly positive thing for us to focus on that issue.

 

RT: I think we all need something positive to focus on. Which one of you is the big Friends fan or are you both maybe.

 

SR: I like friends, but not a super fan.

 

RT: Tony.

 

TN: That was I was in my 20s when friends was out, so it was just kind of on in the background. It was kind of about people around my age. We had Seinfeld, we had Friends. I mean, the 90s was some really great TV. So it was good. It was a good show.

It was of the time Ross had girlfriends of different races. Ross, his ex-wife was in a same sex couple. Now you know all that stuff. So, I mean, I hear that criticism. But I think at some level, you would always do things differently if you could redo them. But at the time, I think they did a lot. You can’t see history through today’s lenses. You really have to look at it at a contemporary through contemporary lens. And at the time, they were doing a lot of.

 

RT: Yes. Thank you very much to both of you. Let us end the program, whether you like it or not, with a theme tune from friends.

 

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Podcasts

What’s Next For Crude Oil, Gold, And Cryptos?

As US and other markets decouple in terms of recovery trajectories, should investors adjust their portfolio? BFM spoke to Tony Nash, CEO of Complete Intelligence, on the major selldown of cryptocurrencies, as well as his thoughts on oil, gold, and inflation.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/whats-next-for-crude-oil-gold-and-cryptos on May 21, 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

 

RK: Well, choppy waters, to say the least. There is a little bit of a mixed day yesterday over in Asia. But right now, to talk more about global markets, we have Tony Nash CEO for Complete Intelligence for more insights here. Tony, good morning and thank you for joining us on the line. Now, it looks like the U.S. and other markets are beginning to decouple in terms of recovery trajectories. How do you think investors should allocate their portfolios according to this scenario?

 

TN: Well, obviously depends on the time, but I think that some action was taken yesterday in the U.S. around Fed comments as people were trying to decipher whether those comments were positive or negative. And today, I think they realized they were actually fairly dovish comments. So the U.S. is positioning itself to grow and other parts of the world say Europe and parts of Asia are still very conservative about opening until, you know, I think with the places that are being fairly conservative about opening, it really depends on investment, really depends on government assistance, monetary policy, you know, these sorts of things.

 

So investing in those markets depends on support that those companies are going to get and how how those investments will perform.

 

LM: Yeah, I’m just wondering, there has been increasing fears about inflation. Is that influencing or changing your views right now?

 

TN: Well, so, you know, we’re realizing that things like like lumber prices, which a lot of people talk about, that’s been a processing issue in sawmills. There’s a lot of raw lumber out there. Those prices in many cases are the same as they were like, say, 10 years ago. OK, it’s the process into their bottom and making issues in a number of other areas. One area that we’re keeping an eye on is crude oil, which I know is important later, of course.

 

And we’re not we don’t expect a dramatic rise in crude oil prices, partly because I still have six million barrels a day on the sidelines right now. So even if we saw a dramatic uptick in travel and other activity, power generation and so on, there’s spare capacity on the sidelines for a lot of countries to be holding down. So we don’t expect to see and short of having production cuts, we don’t expect to see dramatic oil price rises because that that supply will come on the market as needed.

 

RK: Right. And beyond crude, Tony, do you know crude oil in general is quite correlated to inflationary pressures and prices, but beyond crude oil, are you paying attention to any other commodities out there? Because, you know, we’re seeing a surge in all of them. Which ones particularly catch your eye?

 

TN: For industrial metals are the ones that have really rallied from, say, November or December through this month? What we expect is not pricing to continue to stay strong, but the rate of rise will will slow down.

 

OK, so we’ll continue, for example, to see high copper prices, but we don’t expect copper prices to rise at the same rate as they had been for the past five or six months. We see that across the board in a lot of commodities where we have seen really dramatic rises based on, you know, government spending, monetary policy and also uncertainty about the direction of the dollar when these things are positioned in or denominated in U.S. dollars. We’ve also seen over that same time, because it’s so going that in China we saw the Chinese renminbi appreciate pretty dramatically, which made the dollar denominated commodities really cheap.

 

And so there’s been accumulation of those commodities in China, whether it’s food or whether it’s industrial or metals. And we’ve seen that stuff accumulated in China because these things are really kind of pretty cheap for them in China in terms.

 

RK: And one more commodities. Want to get your views on here, Tony, is gold because it’s seen some strengthening over the last few weeks. In fact, you know, it was more towards the high single digits. Now it’s at the one percent range. Do you expect it to break into the green? And what kind of range do you expect for the year?

 

TN: You know, we do expect gold to continue to rise at least through August, August, September. We think that there’s kind of a sweet spot and people take a pause on, say, cryptocurrency. And as people look at some of these other metals and other commodities where the growth opportunity has slowed, we do expect attention to gold as well as kind of other inflation and currency risk type of focus will turn to gold as well. We expect there to rise through those then kind of a pause late Q3 and then we expect that to continue toward the end of the year.

So we’re not looking at a doubling of prices or looking at a know, low double digit type of price rises in.

 

LM: And Tony, twenty twenty one was supposed to be a bumper year for U.S. IPOs. Is it still buoyant or has sentiment turned more south?

 

TN: No, no, even seems like like Robin Hood starting to offer fractional IPO shares on their platform. So where IPO are typically restricted to a select few? We’re starting to see some things happen where where smaller investors are given opportunities in some of these IPO. So we do expect that to continue as long as investors are there to invest in IPO. And we don’t necessarily expect that that will taper off dramatically. We may see some hesitation if we see markets turn south in June, July, but we won’t necessarily see a dramatic taper off to the end of the year.

 

NL: So we have seen the major sell down of crypto currencies. How is the volatility affecting crypto companies like Coinbase and market confidence to gain legitimacy with institutional investors?

 

TN: Yeah, no doubt it’s hurting their credibility because cryptocurrency has kind of become a bit of a mockery over the past week or so, we assume on tweets and a number of other things. But I don’t necessarily believe that crypto currencies are a thing of the past. They haven’t been retired yet, but we do expect to see cryptocurrency is more regulation, more explicit regulation and kind of soft infrastructure around cryptocurrency like Coinbase that goes along with it. They’ll have the infrastructure to be able to help in that crypto investors who along with regulation and do just fine.

 

TN: So I don’t think crypto her dad the new not necessarily realize that they thought they may, but but I do think it’s still something that’s viable within the broad based interests.

 

RK: Thank you so much for your time this morning. That was Tony Nash, CEO of Complete Intelligence. And let’s take a quick look over at the coin prices right now. Bitcoin thing, a little bit of a recovery. It’s up two point six per cent now, forty one thousand dollars and on a year to date basis, up to forty one point six percent year to date, still far off from the 100 percent or 90 percent year to date gains we saw earlier this this year.

We take a look at Etha. It is now two thousand seven hundred and seventeen dollars, or seventy two thousand two hundred eighty dollars a coin up a little bit, point four percent year to date, up 275 percent.

 

NL: Yeah, very quickly as well. Taking a look at a piece of news, the first quarter of 2021 doesn’t appear to be working out in a week’s favor. According to the F.T., Quarterly losses almost quadrupled on year to over two billion dollars.

 

RK: We work not working. Yeah, that’s a headline in the making right there. The losses incurred as so far this year, three point two billion dollars in 2020. Revenue fell almost 50 percent on year from one point one billion to six hundred million dollars. And the company lost around 200000 customers from a year ago. And this, of course, all information, according to the Financial Times, because this is not a public listed company just yet. In fact, they’re looking to try and go public again later this year after their first failed attempt a year to be eighty nine point nine.

 

 

 

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Podcasts

Biden administration backs lifting vaccine patent protections

Our CEO Tony Nash recently guested at the BBC Business Matters to share his thoughts on the lifting of the vaccine patent protections to help in manufacturing more vaccines faster. Is that fair specially in this time of need? Also discussed are the special case of Facebook and Twitter’s suspension of Donald Trump’s social media accounts, college football, and the growing industry of recycled furniture.

 

This podcast was published on May 6, 2021 and the original source can be found at https://www.bbc.co.uk/sounds/play/w172xvq9r0rsxwz.

 

 

BBC Business Matters Description:

 

The US government has backed a temporary suspension of intellectual property rights for Covid-19 vaccines in a move likely to enrage the pharmaceutical industry, which strongly opposes a so-called waiver. Shares of the major coronavirus vaccine companies were hit by the announcement but is it just an empty gesture? We speak to Jorge Contreras, Chair of the Open Covid Pledge, a group that is lobbying organisations to share their patents and copyrights in relation to vaccine efforts. We also hear from Thomas Cueni, of the International Federation of Pharmaceutical Manufacturers & Associations. And there’s no status update for Donald Trump anytime soon; Facebook decides to uphold it’s ban of the former US president. We speak to Issie Lapowsky, Senior Reporter at tech site Protocol. Also in the programme, college sports in the United States are a big business, but the athletes taking part have typically been compensated through scholarships rather than salaries. But could that change? The BBC’s Will Bain reports. Plus, the Swedish furniture retailer Ikea has launched a scheme in the UK to buy unwanted furniture back from its customers, in a bid to save items from going to landfill. Hege Saebjornsen is the company’s sustainability manager for the UK and Ireland explains how it works. And we’re joined throughout the programme by Tony Nash, chief economist at Complete Intelligence in Texas and the writer, Rachel Cartland in Hong Kong.

 

Show Notes

 

VS: Tony, do you think, people in Texas will be as upbeat as George, our first speaker?

 

TN: Yeah, absolutely, I think people here are pretty happy about that. A couple of weeks ago, there was an uproar in India over Americans not sharing vaccines with India. Houston has a very large Indian community. And so we were very supportive of everything that could be done to help get vaccine components and vaccine intellectual property to India. So this is a positive development in every way.

 

VS: And so in terms of an anxiety of giving vaccines away before the population is fully inoculated, does that not exist in your experience?

 

TN: I don’t think so. There’s plenty of capacity, at least in Texas, if you want a vaccine today, you can sign up to get it. So it’s not really an issue here. I think India has the manufacturing capacity and the know how to do very good vaccines in India. So once the licensing is clear and the components are there, they can manufacture for India and for many parts of Asia, Middle East and Africa.

 

VS: Tony, what does this actually mean for Donald Trump? He’s not allowed to use social media at the moment.

 

TN: There are other social media channels, but I think it’s bigger than that. I think the real issue here is around what’s called section 230 in the U.S. government, which allows websites to not be considered publishers. And under Section 230, they are supposed to provide unrestricted access to posting content unless it’s a rules based system. This is clearly a personal deal. Whether you like Trump or not, this is this is making special rules for an individual. I think the bigger issue is around whether Facebook and Twitter and the other social platforms are abiding by Section 230 or whether they should be considered publishers. The BBC is a publisher there and certain things that the BBC has to adhere to that Facebook doesn’t. And so if Facebook was a publisher, they would have to adhere to the rules that the BBC abides by. So if they’re going to restrict postings like this, they should be a publisher. Otherwise, they need to have rules that they enforced regardless of the individual, regardless of the political party, regardless of the country someone from. I think they need to be applied consistently.

 

VS: So this idea of this board is a way of sort of perhaps circumventing that.

 

TN: But nobody does. I mean, nobody if you ask anybody in America, nobody actually believes this is an unbiased board. It’s just a fallacy so…

 

VS: Wide ranging from all around the world, different types of backgrounds. So you can kind of argue that they are a mixed background with lots of different worldviews.

 

TN: I run an artificial intelligence company. Nobody in the technology community, hand on heart. I actually believe this is an unbiased view. I’m sorry. It’s just not true. And it’s a big pretend game to act like this is unbiased. I’m not on Trump’s side here necessarily. But if you’re going to make rules personal, that really companies lose credibility as a result of that. And all I’m saying is that Facebook should be considered a publisher and they should abide by the rules that publishers like the BBC abide by.

 

VS: I’m sure it’s not going to last that we’re going to hear from this issue. And for those of us outside the United States, we don’t understand the significance of college football in everyday American life. Tony, you’re in Texas. Can you paint us a picture of that?

 

TN: Yeah, so college football is not professional and it’s kind of professionalizing, but by professional, I mean paid, right. So this California bill starts to professionalize college football. I think part of the problem with that step is that we have students who come out of high school effectively 17 or 18 year olds who have really raw talent. They’re not necessarily trained to play professionally. They typically spend time with high caliber coaches in universities to develop their skills in their craft over three to four years. Many of them go out early to try to go pro, but it’s over three to four years and then they’ll go into the professional leagues and make money.

 

So there is a very large investment that universities are making into those athletes. And what happens at the university level is,  when students come to a university, they do get a scholarship. The athletic dorms are not normal dorms. They are first class dorms. The food they eat is first class food. I’ve been in their cafeterias. It’s amazing. So they are not treated like normal students. So they do get a lot of advantages above a scholarship, but there’s this huge investment in their skill. And so, the other side of this is if students want to get paid when they leave high school, they’re welcome to try to go pro after their senior year in high school when they’re 18 years old.

 

And so if there’s a problem with them getting paid, they’re welcome to to try to join the draft and go through that process. They can do it at any time. They could go pro at 18 years old. I doubt many of them, if any of them, at least in football, would would qualify, would get drafted by a team.

 

VS: As you say and say presumably then, sports is encouraged at quite a young age, given how lucrative it can can be.

 

TN: Sure. And so they can try to do that, LeBron James actually went into the NBA out of high school, he never went to university. So there are kind of phenoms who can do that and, more power to those guys. They’re welcome to do it. But university, so the school where I went, where I did my undergrad is Texas A&M University. It has the largest revenue sports program of any university in the United States, very large. But the facilities that Texas A&M has for their student athletes are amazing. They rival any pro facility. And so what’s happened over probably the past 20 years, I would say, is a dramatic kind of upskilling and a dramatic improvement of not just the facilities, but the coaches.

 

And so there are coaches who go from college level to pro and back because the skills that they impart on the students are are amazing. So, the path to getting paid for your sport is one that is always there. They can always go pro straight out of high school. LeBron James did it, other athletes to it. But it’s a very, very, extremely rare process, I think, paying student athletes. Part of the reason I like college football, I prefer college football to pro because you root for a team in college football, you don’t root for an individual in pro football, really. It’s rooting for individuals. And it’s not really a team sport as much as it is at the college level. So I think a lot would change. I really do think a lot would change.

 

VS: When we heard that about Rachel’s lockdown project. Lack of. And are you cycling anything?

 

TN: Always, you know, so we just moved back to the U.S. about three years ago, so we’re not recycling much, but when we lived in Asia, we would regularly recycle as my kids grew up, as we worked through furniture, we would regularly, regularly recycle in Singapore.

 

There’s a guy named the current goony man in every neighborhood who would come and take your recycled materials. And so we would work with with him and he would donate it or something like that. So, you know, every community has its own way of dealing with these things.

 

VS: Do you sell on furniture that you don’t know because of these websites these days? You can do that well now.

 

TN: We do that as well. And it’s pretty common. I mean, there are loads of websites where we can do that. So it’s pretty common. We don’t really throw away much big stuff there. We had my son, my son’s bunk bed here. We just sold it on one of those sites about six months ago. So, yes, it’s very common.

 

VS: Costly to these sites around. Don’t say I wonder if if a company or a retailer decides that they’re going to buy back things. They’ve actually got quite a bit of competition, haven’t they?

 

TN: Yeah, I mean, I think they’ve probably done that calculation, it’s a pretty crowded market, so, you know, people will dispose of it in a pretty economic way and make money where they can. So I don’t know that everything will be coming back to them.

 

That’s probably just a small, small fraction that will actually.

 

VS: Thank you very much, Rachel and Tony, for joining me today.

 

Categories
Podcasts

Big US Bank Earnings And The Future Of Global Automakers

The IMF has upgraded its GDP forecasts for developed economies but what is the outlook like for developing economies in South-East Asia? The Morning Run asks Tony Nash, CEO of Complete Intelligence. They also get into insights from the earnings out of JP Morgan and Goldman Sachs, as well as how traditional automakers will have to adapt in light of the EV boom.

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/big-us-bank-earnings-and-the-future-of-global-automakers on April 15, 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

 

LM: The IMF has upgraded its GDP forecasts for developed economies, but what is the outlook like for developing economies in South East Asia?

 

TN: It’s actually not bad to look at this IMF report. We had such a pullback in economies in 2020 that we really have to look at the growth rates in 2019, 2020, and 2021. To understand it in context, Southeast Asia looks to be doing pretty well when we average those three years out. There’s growth in just about every country except Thailand, now with a slight pullback over that time. And so what that means is Thailand will not necessarily back up to the 2019 levels unfortunately, but Malaysia is 1.7%. In Asia, 2.4%. Singapore, 0.38%. So Southeast Asia is growing. Europe, on the other hand, there is only one country that shows growth over that period, which is the Netherlands within the Eurozone. So Europe has a bit of a problem. The US continues to grow, though around 1%.

 

NL: Meanwhile, is the sharp rise in March, U.S. CPI prices compared to February a good sign or something to be concerned about?

 

TN: We didn’t see long term inflation effects and a lot of kind of buzz about long term inflation affects or medium term inflation affects in the US. But our view is that this is two factors. One is the base effect, meaning we saw so much disinflation or deflation in 2020 that we’re seeing a base effect on that. The other one is supply constraint. So we’re seeing hold back in supply chains or we’re seeing supply chains catch up from closure.

 

There is a constrained supply which is driving up prices as supply chains continue to equalize and balance out. We should see those prices return to normal. If we go back to the IMF forecast, we don’t necessarily see rousing growth for 2021 compared to, say, 2019. So we have the manufacturing capacity in place. So I don’t necessarily see demand outstripping supply to create the inflation that many people are talking about.

 

NL: When do you expect the situation will normalize?

 

TN: It really all depends on when countries open up and and that sort of thing. I would do three of twenty one is when we start to see things more normal, I think it’ll work out in between now and then. Of course, currency dynamics have a lot to do with that, but we’ll have to see what happens with the dollar with CNY and the euro to really understand how that will shake out. But we think we’ll see normalization in Q3.

 

RK: The big Wall Street banks have kicked off earnings season with numbers from JP Morgan, Goldman Sachs and Wells Fargo. They beat estimates, but are these numbers sustainable or just a one off blip following a what was really a tough year?

 

TN: They both did really well in terms of return on equity. And that’s really one of the major requirements for banks. The real question is around loan. So we saw a spike in loans in the middle of 2020 in the US, largely on the back of small business loans and very low interest rates and government programs to push loans out. Loans are down in Q1 of ’21. There is an expectation that loans will perk up again in the second half of ’21. I’m not quite convinced we’ll see the loan growth that was talked about today with JP Morgan’s call. I think we’ll see loan growth in the second half of ’21, but I’m not necessarily sure that we’ll see the spike that we discussed on the call.

 

LM: So Tony, Legacy Cockburn’s and IT companies are both rushing into the electrical electric vehicle space out of these two, who’s likely to come out in front?

 

TN: I think it’s a combination. Car brands make really good hardware, but they’re really not great software makers. So I think there’s going to be a combination of the car brands relying on battery makers and relying on software to make great electric vehicles. There are a lot fewer parts in EVs. And so these supply chains that the car manufacturers had to have for internal combustion engines change pretty dramatically for EVs. They’re going to have to rely on battery makers and software makers.

 

I think the real question for the auto manufacturers is what is that business model going forward? I think they may learn from software makers with the recurring revenue model. So we may take a car and pay a monthly charge for that car, almost like combining finance and the car itself. So carmakers have a recurring revenue model with regular upgrades similar to the way maybe some mobile phone carriers operate, those sorts of things. I think it’s a stretch to have the one time payment. I think carmakers see that finance revenue go to other people and they may want to do that themselves with EV.

 

RK: Out of curiosity, do you have any thoughts on what will define whether a legacy car brand is going to succeed in the new car world? Because a lot of them have been hesitant to move. They’re going to have to make partnerships with the battery mate because they’re going to have to make partnerships with software makers is going to be the two defining parts who they’re putting on the battery and the software name.

 

TN: Yeah, I think it depends on, you know, the first mover is not necessarily the winner. So I think Tesla ultimately, they’re a great company. They make fine cars like every car company. They have problems. But I think they’re fine. It doesn’t necessarily mean they’re going to be the winner. I think with Volkswagen announcing, you know, big moves in the market a couple of weeks ago, say if Toyota really I mean, of course, they’re going after it already. But if there are real moves in that direction, I think the very, very large scale carmakers will ultimately win.

 

A lot of this has to do with regulatory and subsidy regimes within the consumption countries. So it is more expensive to buy an electric car. There is not the infrastructure necessarily to have electric cars to drive long distances. So the subsidies that national governments put out to push that market forward are going to have a major impact on the adoption of those cars.

 

The real danger, I think, is it’s going to take a long time to rollout that infrastructure and other things. So the real danger for the guys who invest in EVs in a big way is a different type of technological change that could come around. I don’t know what that could be. It could be a more efficient internal combustion engine. It could be, you know, I don’t know, a different type of fuel or something that’s a lot cheaper and a lot easier to use.

 

So there are a lot of question marks around the rise of EVs. I don’t necessarily think that it’s guaranteed that EVs will take over and the big car companies are going to go on a percent to electric vehicles.

 

RK: The large scale makers like Volkswagen, Toyota, they’ve got they’ve got essentially a conglomerate of other brands within them. Do you expect to see more consolidation, especially as this? Because the car industry hasn’t been doing well that great over the last few years and we’ve seen more M&A. We should we expect more consolidation, especially after last year?

 

TN: I don’t know how much more there is to consolidate. I think it may get specialized boutique. When you have technology changes in an industry, you always have specialized boutique companies that come around. We saw this in mobile phones, say, 10 or 15 years ago, and those ended up being purchased. So I think we’ll have an era where we’ll have even more TV companies, small ones that end up being bought by the larger guys. So, you know, a technological change really pulls a lot of innovation. Big companies are really not good at innovation, so they typically have to acquire it. Will it Tesla be acquired? Probably not, at least not at this valuation. But other small companies, early stages could potentially if they have very good tech. So I think that’s the way they leapfrog. I don’t think it’s the massive processes that they have internally, like a Volkswagen today. I don’t think that’s the way they leapfrog.

 

LM: Thanks so much for joining us this morning. Tony, that was Tony Nash, CEO of Complete Intelligence, giving us some insight into what’s happening in global markets.

 

RK: So we are talking about cars very quickly. I see this headline here that Jilly’s Lotus cars, miles, raising four billion ringgit.

 

And they’re only doing this to help the iconic British sports and racing automobile brand to expand into the IV market in China, according to people familiar with the matter. And this is a story from Bloomberg. So Geely is working with advisers to slander potential investors interested in funding the round. And that could see that would value good value lotus operations at about five billion U.S. dollars. This is going to be interesting because this is, of course, was formerly part of the Proton Group, which was then bought by Geely.

 

LM: And so so we’re going to be heading into some messages now and then. Up next, taking a look at Mithras financing with financial columnist Pankaj Kumar. Stay tuned. BFM eighty nine point nine.