EP 194 | Daily Global Insights | Jul 1, 2021 | US News | India News | Global News | Markets

EP 194 | Daily Global Insights | Jul 1, 2021 | US News | India News | Global News | Markets

Sree Iyer: Namaskar and welcome to DGI Episode 194 with Sri and Sree. One of the sponsors of this program is Cowcoin USA, a digital currency that is directed towards addressing Healthcare, Education and Entertainment sectors. We have a lot to cover, and we start with Global News.

Here we go. Sridharji, namaskar and Welcome to PGurus Channel.

Sridhar Chityala: Namaskar good morning to everybody and looking forward as we complete six months of 2021 and moving to the second half of 2021 we expect better and more organized life as We step into one, I call as the post-Covid two eras at least in parts of the world.

Sree Iyer:  In Global News Putin says that the time will come to announce his successor is a possible successor, but this is not the time for that. And President Putin goes on to say that there was a US plane involved in a reconnaissance mission working closely with the British destroyer in the Black Sea. Viewers, if you remember, we had mentioned this in one of our previous episodes. Sridharji, what do you make of the situation? So, this is like a joint exercise between NATO and the United States.

Sridhar Chityala: It looks like the first incident that occurred was the British Destroyer making its way. We also announced the documents pertaining to that Destroyer were available at a bus stop, which was picked up along with the other defence documents. We covered that part. Now, Mr Putin has come forward and stated that, Hey, US you are part of this because you had a reconnaissance plane participating with it and so closely monitoring. It is not that we were not aware, we are extremely aware and we have given you the warnings as to next time we will give you a warning and then there will be missiles and bombs coming at you if you are trespassing our territory. So, clearly, I think Vladimir Putin is increasing his rhetoric to say you are unnecessarily stepping into my waters. Now to add further fuel to the fury, we will report this probably on Monday, once these exercises are complete. NATO is now, doing along with the United States, about 30 nations are participating in the exercise, called sea breeze, for some drilling on black to further, infuriated President Putin.

Sree Iyer:  As China celebrate its 100th year of CCP founding, the Covid-19, human rights trade violations, Border disputes, debt diplomacy dominate Global attention. Yet, one significant area that is often overlooked under Xi Jinping, since 2012 is his Focus to control International organizations. This though, he has had limited success as we all know that, many Global organizations are in his pocket. Anti-CCP Sentiments hits a new high amid the upcoming presidential campaign in South Korea. So, we have a lot of things going on in and around China. They are celebrating their hundred years. Sridharji, what do you make of this? Do you think this hegemony is going to continue that Xi Jinping will be able to be the premier till the end of his life?

Sridhar Chityala: Well, first and foremost, I think commemorating, which is today July 1st which is the end of day in Asia, he kicked out his address to a Chinese audience probably to the world audiences from Tiananmen Square, which in itself is a ceremonial point to make his comments and statement to the world. The key headline is socialism and Marxism, the model that has helped in the past hundred years. The development of CCP and the PLA and China as a country have worked. No, another model is relevant to China. This is the model that works and much to the celebrations and the Clapping of the 70,000 people which are present in the Tiananmen Square. So, he went on to orchestrate how China has become great, institutions, you know, how it’s a superpower now and very soon, it will dominate the world, all the rhetoric or all the facts, they are facts, I mean China is number one. Number two in the nominal GDP, number one on the PPP basis, when you look at various charts and figures, it’s the largest manufacturer in the world, is a country with the largest reserves. It’s a country system that has consistently maintained higher GDP growth relative to many countries in the world. So when you look at all those facets, it’s got a phenomenal Navy, it has got the largest number of people employed in its Arm forces Etc.

So there’s much too kind of celebrate from that point of view, what they have accomplished but then equally it is tempered when their behaviour as to what they have evolved themselves as with the power being interested in them both economically from a security point of view. And all those points that you mentioned highlight, the challenges that the world is confronted with on a number of fronts. And also he’s trying to control the Narrative through WHO, human rights organizations, Telecommunication Union, the international airline’s, there are various ways by, which he is trying to though he has had relatively modest success. He is footprint into the academic institutions to shape the academic narrative. He is footprint into the research institutions, to integrate and inculcate, the thought process and Integrate the research into Chinese thinking I mean, Wuhan is a classic example is a reflection of some of the issues. The hegemony that China has created the world, will he continue? It is 50/50 if I have to beg my dollars notwithstanding who attempts and so on, I think it will probably continue He may not continue for life, he probably will continue for another four years, but there is clearly growing concerns about Xi Jinping style of leadership and what it is unleashing to people of China.

Sree Iyer:  Myanmar military warns foreign media to not call it “Junta”. European troops make low key return home from Afghanistan as troop withdrawals draw closer. Most EU troops have left leaving the final US troops to complete the pull-out. The US is just days away from doing so. Your thoughts on this after the US leave, will it be like the free season for the Taliban to just rush in and fill the vacuum. What are your thoughts?

Sridhar Chityala: They have are already open sesame has been called thrice. So the door has partly opened. Now it will be complete and then they will get the Aladdin and the magic lamp. So, Soon genie will come out and we will begin to see the consequences of this. There’s no other solution, which is namely, you are not going to have hundred per cent permanently troops stationed in Afghanistan. This is notwithstanding, the fact, more than, you know, 20 years have passed. And still, we have no visible sign of security in Afghanistan is a telling reflection of the challenges that the region faces. But this abrupt withdrawal EU has more or less cleaned up cleared and it looks like almost the US is way ahead of its schedule of September 11th or 9/11, and they are also getting themselves out of Afghanistan. So what looms is in a potential consequence coming out of it. So, therefore whether it is Civil War, will see, but, my view is that they will be a very quick and rapid takeover by the Taliban.

Sree Iyer:  Israeli, foreign minister Yair Lapid and UAE Minister of Foreign Affairs, Sheikh Abdullah Bin Zayed Al Nahyan signed an economic trade agreement and also Israel opened its first Embassy in Dubai. This becomes much more traditional now, like, any country to Country Israel and UAE are now, just like normal countries, doing transactions between each other. Tigray Rebels seized more control of territory including in the capital region as they broke the ceasefire and fighting resumed. Sir, Israel I think the foreign policy has gone underground little change even though the government has changed and looks like they are continuing to become grow ties with the United Arab Emirates.

Sridhar Chityala: Well, they have very strong ties that were one of the first relationships that process established as part of the west Asian Peace Accord, that was struck by Trump and Devastation leadership. It is remarkable foreign policy success of any the US president within the context of what was accomplished once acrimony today and once acrimony and adverse, today have become, you know, Partners in business and partners in transacting between establishing people-to-people contacts. So I think it’s a very positive step. I recall that we had also covered in Daily Global insights. The trilateral partnership that was developed in Dubai and logistical Hub between India, UAE and Israel targeted a business of about 110 billion dollars over the next three to five years. So, it all augurs well in terms of normalization of relations, and the continuation of the foreign policy, as you rightly pointed out from the previous Benjamin Netanyahu regime transitioning into the Naftali Bennett phrase.

Sree Iyer:  In US news Former Defense secretary Dick Rumsfield has died at the age of 88. Trump visits the US Mexico border and claims that Democrats are running a disinformation campaign. The real question is, do they really want to open Borders or are they just playing Incompetent? President asked. Biden has failed, America and House Republicans blame Joe Biden for the Border crisis after inspection with President Trump. Joe purposefully undid successfully Trump policies, they claimed. So, these are House GOP Representatives, aren’t they?

Sridhar Chityala: Correct, the House GOP representatives with people like Jim Jordan and then, of course, Greg Abbott, the governor of Texas was there with President Trump. There was a town hall yesterday hosted by Sean Hannity, with Abbott and President Trump. It is a very different visit to the visit that was done by vice president Kamala Harris. Clearly, first hand, they saw surging through the border into the United States. And also some of the people commenting that it is just reflective of the pro surge policy, which is one of the reasons why that encouraged them to go through the hardships and make the journey. And there have been incidents of casualties because of the hot temperatures, all this was witnessed first-hand contrary to the ceremonial thing that happened so which prompted Trump and house representatives to make the observation, you know what exactly is the rationale behind this border surge? What exactly is the racial behind reversing the stay in Mexico policy? What exactly rationale behind be stopping the border construction? What exactly is the rationale behind some of the deportation policies? And what exactly is the reason why ICE’s focus has been shifted, they all have been sent out of the border and more focused on other types of enforcement issues within the state. So all these questions for which there are no answers. But that’s again, a political statement from the opposite side, but reflecting the reality in the Border.

Sree Iyer: Private donor funds South Dakota National Guard deployment to border according to South Dakota Governor’s office. Arkansas becomes the latest state to send troops to the southern border amid border surge. Department of Homeland Security secretary goes on to delay the deportation rules. This is the second deadline missed and effectively the country has no policy to govern its borders. Deliberate or incompetent, you decide viewers, we just explained everything.

Let’s move on. Pennsylvania Governor Tom Wolf vetoes the GOP backed election integrity bill. Arizona attorney general backs Georgia in their fight against DOJ over the election integrity reforms. Wisconsin Supreme Court rejects a lawsuit to ban absentee ballot drop boxes. When looked at together, every state is trying to pass its own reforms in voting reforms and so on and so forth. But again this begs the question, should there not be a uniform system throughout the country? This is just my thought, sir. What are your thoughts on this?

Sridhar Chityala: A uniform national voting system and National voting policies are imperative that every nation must have. But when you have no consensus, you only have two parties here and not 350 parties unlike a dysfunctional democracy like in India or any other dysfunctional democracies that exist around the world. There are only two parties, but the two parties seem to be so far apart, it looks like they are more dysfunctional than most of the democratic nations. So they’ve completely opposite principles and philosophies. There is no consensus Centrist group. All we have is two extremes. One is State-mandated, the other is a national mandate which has a set of rules which contradicts some of the Constitutional elements. So, therefore, to get to a National voting system, a National voting process and National voting enforcement of the conduct of the elections is a very difficult expedition for the US to embark on. For example, the rules that are being enacted by the house right now gives unilateral control to anybody. You can be a tourist, you can come in and vote basically because you just happen to be here at that point of time or you happen to have stayed etc. So you have two extreme views, hence it’s making the consensus towards a common goal. A very difficult path to converge.

Sree Iyer: House votes to appoint a select committee to probe Jan 6, Capital riots. Pretty much along party lines, Kevin McCarthy will be consulted to nominate five out of the 13 with the veto resting with the house speaker.

Sir, if you want to add something to this. These are just routine appointments, isn’t it?

Sridhar Chityala: This is very significant, it a political appointment, January 6th, Capital riots, the select committee probe was declined unilaterally by the House, Republicans and the Senate Republicans because they see a witch hunt that is going on. As usual, the Houses has used the majority to determine and vote in favour. A total of 13-members, chairmanship and the 8 nominees from the Democrats and Republicans can nominate 5. Even when Kevin McCarthy nominates 5, Nancy has the right to veto any of those 5, wh should be or should not be. So this is very much like political drafting of the agenda that is in progress. So what comes out of it? Another political rhetoric.

I just want to add one point before we transition to India. This is very significant. The DHS secretaries in the deportation, today, there is no deportation policy in the United States. For example, if you recall, the Supreme Court SCOTUS ruled that, if you choose to, you can indefinitely keep those people, if that’s what you want to do. But we’re not going to take these cases into the Supreme Court and come up with policies. There are no policies. We are now running past six months. We have dismantled, but there are no policies as to how the illegal aliens are going to be dealt with and how the governance is going to take place. It’s very astonishing that for a country of this size and this own that we don’t have. So that’s my observation on those two points and then we can go to Indian news.

Sree Iyer: In Indian news, 2 more drones were spotted over the Indian military area in Jammu and we are driven away by the Army. Indian Defence Minister clarifies that there was no sudden increase in troops on the China border amid reports of escalation. India issues an ultimatum to European Union over vaccine passports. India will decline if Indian vaccines, Covishield and Covaxin are not included in its list. India to implement One Nation. One ration card, scheme by July 31st, as per Supreme Court directive. There’s a story on this in PGurus. You can read that to get more. 8 core sectors output rise in May by 16.8% such as coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity. The CEA – Chief Economic Advisor of India predicts near double-digit growth for the fiscal year 2022. Looked at it together, what do you make of the progress of the economy under the current regime? And are things going to be more positive? Because today there’s a lot of activity on Twitter that across the country, the prices of petrol have cross Rs 100 per litre.

Sridhar Chityala: Two things. The first question that you asked is about economic indicators. There is a general consensus from various economists. I think we have covered this as to how the government has managed on the supply side. Various economists predict, including Moody’s, World Bank, IMF and now the CEA, plus the markets, they generally expect the economy to be around anything between 9% – 10.5% on the GDP growth site. If you take the exports, the exports have grown. We talked about that. If you take a look at some of the core sectors, you can see a continued month-to-month rise. Of course, one can say let you to 2020. But the fact is that you need to do a comparative analysis as the economy comes back to the mainstream.

Now on the demand side, I think we talked about this, it probably requires a much more inducement of the stimulus money, it is the stimulus money that is driving. So we need to see what they’re going to do, on the stimulus side. If you ask the government, the government is going to say, I’m feeding 800 million people free until I think, November, that is the Gareeb Yojna Program and then they have stated that we are vaccinating everybody for free. So there are a lot of measures that we are putting in, and our whole objective is through recapitalisation programs to infuse employment and then, therefore, create demand. But the opposite side of the view is that you need to do an equal amount of heavy lifting on the demand side and don’t worry about the deficits. Everybody is in deficit, so, therefore, it is not going to shrink your balance sheet. Don’t worry about the shrinking of the balance sheet, it is not going to be material in the overall context if you want to continue to sustain the momentum. This is the dialogue. If you ask me, I think I’ve covered this in my observations of the seven years as an external observer, rather than someone who is living on-ground and understanding the ground reality, as people would like to say. When I look at the macroeconomic parameters, they are doing everything consistent with what is required, except I would urge them to do something on the demand side of the stimulus.

Sree Iyer: Now let’s take a look at markets. In markets, stock futures are flat as the second half of 2021 kicks off. The headline news here is that the stimulus that has driven the economy with low rates is still going to continue to have its effect. Consumer confidence, better home sales augurs well, as we step into the second half. It is the unspent dollars in the consumer balance sheet, close to 3 trillion dollars, that would further power the second half and with it the corporate profits. JPMorgan forecast EPS for 2021 that is Earnings Per Share to around $200 from 144 in 2020 and 2022 it is going to go up to $225 and it predicts that by 2023, the EPS is going to be around $245. Very, very impressive numbers. Sir, are your thoughts on this and then we can wrap up this show.

Sridhar Chityala: The whole objective of sharing these numbers is to indicate notwithstanding the fact, there’s a huge debt and deficit that is building upon the balance sheet of the government, you are beginning to see the macro indicators in terms of the performance of the companies. Earnings Per Share is a reflection and aggregate of the 500 companies in the Standard & Poor’s Index. It’s a reflection that these earnings have seen a positive momentum since the covid times and it augurs well based on three specific factors, continued stimulus, low-interest rates and to some extent inflation, is 2.4% – 3.2% inflation is also pushing the price which is indirectly contributing to the overall value creation of these companies and their underlying profits. The honeymoon would start from somewhere around 2023 when interest rates are expected to climb up. The FED has indicated, they don’t see the interest rates climb up as it stands no interest rate and they will be two rates increases in 2023. That’s the summary of the first set of data.

Sree Iyer: S&P performance has been up 16.13%, Dow 12.73%, NASDAQ 12.54% and the Brent crude now is at $74.67 a barrel, more pain at the pump. A 10-year treasury bond is going from 0.93% to 1.45%. Bitcoin has been fluctuating between 28,383 to 34,979. So there’s is a lot of activity especially in the digital currency sector. We are headed for some very interesting times. As you know, we’re also now beginning to listen to more digital currencies coming online. So we’ll wait and see how this plays out.

Sridharji, as always, it was a pleasure listening to you on various topics around the world, sir. We’ll be back again tomorrow, Friday, Thank God. It’s Friday. Namaskar.

Sridhar Chityala: Namaskar and have a good day.




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