CNA’s Asia First: Restarting the economy takes a disproportionate amount of resources
Tony Nash, CEO and founder of Complete Intelligence, joins Avril Hong and Adam Bakhtiar of Asia First to share his insights on restarting the economy, Texas’s economy on a lockdown, fiscal stimulus and policy, and if he’s bullish on China. Watch Tony’s segment here and in our Youtube channel.
This video is part of a 2-hour live news show at Channel News Asia’s Asia First. CNA is part of Mediacorp. Find the original segment here: https://www.channelnewsasia.com/news/video-on-demand/asia-first
CNA: Tony, the last time we spoke was a couple of months ago. At the time, Houston hadn’t confirmed any cases of coronavirus. Fast forward to today, we’re seeing the biggest daily surge in confirmed cases. 10,000 in the state. Do you still think that it’s not as big an issue for the lockdown for restarting the economy especially for the Sun Belt state as a whole?
TN: We’re seeing the the case counts rise. But we’re seeing the death rates stay low and even decline. In terms of markets, I think that’s a good sign. If we saw the case counts rise and the death rate stay consistent or rise, then I’d be very concerned. But we’re seeing the case counts rise and the death rates fall. We’re seeing plenty of capacity in hospitals as we talk to hospital administrators here. Here in Texas, places like Arizona, Florida, what I’m seeing by talking to people in healthcare is that things are okay. Again, what I’m keeping an eye on really is the death rates. And the the death rates as that incidence rises. This is a virus. That’s going to get out. It’s going to grow. It’s going to hit more people. I don’t necessarily think that incidents itself is an issue. We have to look at the fatality rate and how persistent that fatality rate is.
CNA: Right. Then if it’s not that big of an issue, then is there less of a need for stimulus whether from the Fed or the government in that sense because we’re hearing from some of these Fed officials, they’re warning that growth has plateaued. It’s kind of leveling out and they are asking for more stimulus. But if it’s not such a big concern these surge in coronavirus cases and its impact on restarting the economy, is there still a need for further stimulus?
TN: The problem with stopping an economy or pulling the plug on an economy, which is what governments around the world did, is that restarting it takes a disproportionate amount of resources. So governments around the world pulled the plug, stopped business, stopped socializing, stopped all these things, stopped flights, and it killed the oil and gas sector. It killed the hospitality sector. It killed travel and so on and so forth. In order to restart the economy, it takes a disproportionate amount because there’s inertia in economic activity and so we really have to push it along pretty far so that it gets back to that rate. It’s pretty easy to criticize companies that aren’t performing. Q2 revenues for example, Q2 earnings are going to come in pretty poor. But these guys are doing the best they can given the impacts of governments globally. And here in the US, we see state level and local governments making decisions for businesses to stop. But they’re not the ones who provide the fiscal support. It’s the federal government or the central government that actually provides that support. So there’s a weird misalignment of incentives in the US where it’s local governments forcing companies to close our state governments. But they’re not actually accountable and they’re not paying the consequences of it.
CNA: Yeah, so that therein raises this moral dilemma I guess, because whether you’re looking at fiscal or monetary policy support, we see the Fed dipping its toes into corporate bonds, buying Apple bonds, Microsoft bonds for example. Apple stocks up 25% year to date and then in terms of fiscal policy support, sure that pandemic aid program, it has according to the Trump administration, helped to save more than 50 million jobs. But it’s also helped the wealthy and connected.
TN: Sure. It has. When you see the the Fed of the Treasury spending on things like Apple bonds, yes it’s for Apple, but I don’t think it’s really for Apple. It’s the wealth effect of markets and getting US consumers back to the point of feeling like they can spend again is a very difficult place to get consumers and so, especially when you look at baby boomers and the spending power they have, they’re looking at their retirement years. If they’re looking at their portfolio being cut dramatically, then they’re going to cut back on their spending really, really dramatically. So the sentiment around markets is important. It’s easy to make fun of. A lot of people mock it. But the fact is baby boomers have to feel comfortable to go out and spend because they’re the biggest age cohort. Actually, those guys and millennials in the US are around the same size. But it’s important for them to spend and that the sentiment around markets, the sentiment around things like real estate values are really, really critical right now.
CNA: Right. Okay. Let’s shift focus a bit and talk about the Asian markets. We’ve been seeing that Chinese rally. It seems to have, you know, showing no sense of stopping. Shanghai Composite still closing up about half a percent. Do you still feel bullish on the mainland markets?
TN: No. Look, they’re way ahead of what we thought they would hit by year end. Sure, you may see more momentum. You may see more of a run in Chinese markets but we don’t see it based really in any fundamentals, which very few markets are right now. But we don’t really see a lot of room left there even before the end of the year. So, we may see some volatility there. I was working in Beijing in 2015 when markets crashed there before and sadly, we may see something similar now. It all depends on how the central government will then address it and if people will walk away whole. But I have friends who in 2015 lost 30, 40 percent of their wealth in that collapse and so, will we see another one? I don’t necessarily think we will. I want to think that they’ll be more prudent. But all the games that we expected before the end of the year have already been taken off the table in the Shanghai Composite.
CNA: Thank you for sharing your time and your thoughts with us. That was Tony Nash, Founder and CEO of Complete Intelligence.