Sree Iyer: It is episode number 65, December 31, 2020, the last day of the year. Namaskar and welcome to PGurus channel. Sridharji, Namaskar.
Sridhar Chityala: Namaskar, good morning, and looking forward to the exit of 2020 and the arrival of 2021, it’s not covid19, it is covid20 which has kind of disrupted the lives.
Sree Iyer: Yes indeed and we are very very anxious to see how the New Year is going to turn out. But, in the meantime, there’s a lot of activity going on in the US Elections, so Sridharji, let’s take a look at what is happening in the US Elections. We know that Trump is headed back to the White House today, he is cancelling his New Year’s Eve party and that means that a lot of things are going to start happening, especially, since one Republican senator has said that he is going to a post-Electoral College verdict in the Senate.
Sridhar Chityala: Exactly, Mr John Howley has stepped up and become the first Senator to officially make his announcement in terms of the objections to the Electoral College votes that have been cast, citing across all battleground states, the integrity of the elections and as well as the validity of the votes cast and the state’s brushing aside and sending the Electoral College votes. Now, he’s backed by, as soon as he made the event public now, there’s a growing chorus of people coming to support him and all you need is 1 plus 1 to make sure that there is a discussion that takes place in the across the two floors.
Sree Iyer: So, let’s play it out, sir. So let’s say that the one Congressman also comes up and then there is a discussion. Is that going to be a joint chamber or is it going to be individual houses? And what’s going to happen after that?
Sridhar Chityala: I think it will be eventually a joint chamber discussion, they will be debated in House and eventually it would be joint because the votes have to be counted together. The votes are not counted House separately and Senate separately with the Electoral College votes. So the votes will have to be counted together. Mike Pence, the Vice President will be the presiding officer. There’s also litigation filed against him, which is to say that he is trying to accept what is illegitimate and invalid votes, which means that he’s forced to be the arbitrator in terms of calling this session and making sure that there is a process which justifies and which is legal towards an outcome of overruling, what is cast from the states in a legal manner, once the debate takes a specific shape.
Sree Iyer: Then, the next thing is Trump’s observation that about 289,000 votes had to have swayed the whole election. Is this something that he has come up with a sum total of all the different states or is it something that is just a number, how did he come about this number?
Sridhar Chityala: Well, there is another research which was done by an eminent Economist by the name John Lott who studied the integrity of the elections, by studying the voting patterns. Just to give you a headline because one specific area that he has pointed out whenever there have been more votes cast in favour of Trump than Biden, there seems to have been due deducted from Trump’s count and given to Biden’s count through the machine process or what they call the adjudication process, he explicitly, he is pointing out in his report. Now, the extent of the shifts that have happened across the five states as par six States as the case may be, those numbers by arithmetic count, Trump is using as a basis to come up with his 289,000 votes as the difference.
Sree Iyer: And Biden has made a statement that the Congress counting of electoral votes is a mere formality. Why do I detect a feeling among the Democrats that they will somehow run the clock out and that everything is going to just fall in place? Somehow, they are not recognizing the number of fraud details that are coming out, state to state legislators are now trying to say that know there’s this appears to be something wrong here. Pennsylvania for example has said that. Georgia is another place where people really doubt the results. So what is the mind-set in the Democratic Party in your opinion, Sir?
Sridhar Chityala: Well, I think that it’s a great question because the reason is very simple that if you can see this whole contested election, be it on the judicial side or be it on the legislative side has taken a political proportion, is not taken a legal shape, political proportion. I think we covered the Georgia incidents where right in the middle of six weeks between the time the election completed and in the next election, people are moving places, which is considered not valid and then you have a Georgia, Democratic favoured judge ruling in saying that that is perfectly valid as just as an example. So therefore to the extent that the secretary and the governor stating explicitly, Hey, you know, this is not correct. This is illegal. This doesn’t comply with the state rules. Anyway having said that to your question, which is namely that there is somehow you can even see some of the observations in PGurus people making a comment, you know. Hey, you guys are you know making it too much fuss about is all done and dusted and so on. People are just not oblivious somehow they want to, smirk off and say, you know let’s get on with this and we have won the election outright. We don’t care about fraud. We don’t care about the investigation. It’s all done. They also make a point that you know, Trump has filed 49 cases or 53 cases all cases dismissed, but they don’t seem to realize that most of these cases were filed with the intent to kind of an exposure point of view. So the point that you’re making is very valid, which is namely that they somehow want to get past the process. You know enough using the clout within the respective States judicial and legislative-executive process and the legislature where there is majority has not been tested. The legislature meeting has not been called and was called not to discuss this but was basically called to endorse and that too by the way only the governor and the secretary certifies the election. So, therefore, that has been certified and that’s why some of the state legislators objected and sent it by saying, you know cast my electoral votes ground rather than the certified votes that are being sent, so I think there is that feeling which is why Joe Biden.
There’s another incident which has happened last night and you see that Joe Biden making the point that you know, I am going to issue an executive order mind you there is no formal concession. There is no formal endorsement. There is no formal approval only when you come to House and Senate and you have a formal approval then if the president is actually recognized as the new presidential incumbent. So how an existing president can be overruled when his term is still underway is also a reflection of the sign of desperation or the sign of anxiety rather than a desperation to get things moving also from Biden has been complaining that he has now been denied the due security and other briefings that he’s entitled to. President Trump is saying no. This election is not over. It is legally being contested. It is being contested by us. It has to come to the floor of the house all investigations reveal that the data is pointing the other way. So this is both sides of the tussle that is going on. So to your point, which is namely this over-anxiety to put everything behind and move forward. Is a reflection of the uncertainty that is now beginning to creep into the minds of the people!
Sree Iyer: Sir, one of the things that is mentioned by Jenni Miller is that the Trump team wants to present new evidence on January 6. So, would they be given a chance to present that in the two-hour window that is allocated for this, assuming that goes forward?
Sridhar Chityala: Well, I think that they will certainly make an attempt and it’s up to the people, if you remember, one of the conditions of this second stimulus, which is you know, to use the word is bombed, you know has the independent objective discussion of the Electoral fraud. By the way, Nancy Pelosi did agree to it as part of the veto approval process. She did agree that both the section 230 as well as the validity of the election process would be discussed perhaps, it is in that forum this will probably come up. And I think there are enough indications as to what is going on, I mean, we don’t have the time window, but, the story is each of the states. Everybody is now looking also at auditing the election fraud in their respective States at least three states have come forward.
Sree Iyer: Well, let’s say that the auditing happens and they do find some irregularities, but the time is now running out, isn’t it? What can they do?
Sridhar Chityala: There is no time sir. There’s no time set, you know, which is namely they can extend these dates.
Sree Iyer: Okay, so even the 20th January, the inauguration ceremony might be put out, if in case there is still lingering doubts. Is that what you’re saying, sir?
Sridhar Chityala: That’s what I’m saying, they can delay January 6th, they don’t need to delay January 20th that process is underway, you know, it moves from January 6th to January 14th, these intervening process, they still have another week to get this stuff organized so or may be delayed by another 10 days that’s about it.
Sree Iyer: So let’s take a look at what happened in the US stimulus, Mitch McConnell was trying to tie the $2,000 per person package to three different conditions. And these were conditions that Trump had laid down that 230 had to go, pork spending had to go and that the number will be going up from 600 to 2000. Now, the Democrats are saying this is a non-starter where do things stand now, sir?
Sridhar Chityala: if I have to use Chuck Schumer’s words, the stimulus is $2,000 stimulus of Mitch McConnell Bill is bombed, which effectively he is saying is that it’s a non-starter, so these are all new conditions. So, he says to pass the 2,000 dollars as a cash check option as a separate, then, we can take these discussions around the three things are the section 230 number two discussing the voter fraud in the election or the integrity election and the third is looking at wasteful expenditure.
Sree Iyer: Well, we’ll have to wait and see how this thing plays out January 6 is hardly 6 days away. So, we are definitely starting a new year with a bang so that much we can say. So, let’s move on to the global situation sir. There is this new investment deal between China and the EU. First of all, people should remember that the EU is more of an advisory body and that each country, I think decides for itself what they want. I’m not a 100% clear on how that relationship between the EU and the individual countries is; perhaps, you can shade a little bit of light about this accord.
Sridhar Chityala: EU is a figurehead. It is not a political enforcement institution. EU umbrella, so, this is like all these ceremonial deals that are being done. Like, you know, China is trying to feel isolate the United States and emphasize to the world, you know, I am here, I am the big gorilla in town while threatening Nations and violating every Democratic norm. Now, the EU deal is about what they call the business investment deal, it’s a business investment deal which gives access to each other markets to invest. Then, the deal has said, EU has stated we have made all conditions, we have made all conditions, all conditions that have been you know, transparency, transfer of technology, the integrity of the intellectual property and intellectual capital, patents, misuse and abuse of technology, theft, all these things have been addressed and we represented these issue to China. And China basically said, hey, you know, no problem will agree to all of these things and we have reached an amicable thing. So the whole goal is to announce, I have announced RCEP. I’m going to announce that I’m going to be part of TP, CPP and then I’m going to be now announcing EU deal, which is basically to say the United States is a partner with ASEAN, the United States is part of RCEP and the United States is a strategic partner in EU. So, we have a deal with these nations. So the United States must come to the table. I think they must be living in a world of wilderness to assume that that is the case. We will cover just as the RCEP, we will have a separate session to cover the whole issue of what are the strategic issues, what is the size and scope of the deal between EU and China as a separate topic.
Sree Iyer: Yes, we will touch upon that in the days and weeks to come. The Southeast Asian countries are now rushing for one last deal with President Trump before heat demits office. So there is clearly now a polarization that is going on away from China towards the United States, perhaps towards the Quad and more importantly towards India, isn’t it?
Sridhar Chityala: Well, I think that the Southeast Asian nations are very clear their livelihood is affected. Our discussion on the RCEP lays down effectively the principles and even if you study rise and rise and rise of China, where we covered major areas and major areas of conflict and major issues at play. So all the Southeast Asian nations are saying let’s get together for one final deal, and what is that final deal? It’s all about security and defence preparedness. Indonesia met Taiwan, the Rear Admiral of the US Navy was present, the Philippines has, Singapore has, of course, Japan has, then Malaysia is excluded, Thailand has, Vietnamese is another one, so many of these countries are preparing themselves in concert with India because India has also been working with them to make sure that their turf is protected and China somehow doesn’t get barged in. And I don’t believe based on what has happened in the eight years of Obama – Biden regime that the status quo is acceptable which prevailed at that point of time, much of it was addressed, much of it was starting to be addressed in the four years of President Trump and that’s the Quad strategy.
Sree Iyer: And moving on, Azerbaijan is getting ready to supply gas to the EU. Viewers might remember that Russia had perhaps a lion share of this market of supplying natural gas to Europe. In fact, they are laying a new pipeline, I think to pass natural gas to Germany, and with Azerbaijan now saying that they can also supply natural gas, that makes it very interesting, isn’t it?
Sridhar Chityala: Yes, it does. So you have Qatar on the other side, you have Azerbaijan in the centre, then you have the South China Sea untapped natural gas right under the ocean. So the question, therefore, is Azerbaijan is saying ‘I’m here for business. I may be competing with Qataris to supply the gas to Europe. Similarly, if you go to the other side, I think you even have Ukraine, that was the part of the Russia that was much of contention around these gas pipes. And the oil that is coming from that side of the Black Sea, so that was the other, so I think what Azerbaijan is saying is emerging as an independent entity and therefore I’m a player and I can take care EU not just another country.
Sree Iyer: Yes, indeed and the Indian army continues to fortify along the Ladakh border. We’re also hearing the news that China also is amassing troops. It’s now extremely cold there. We also read about a news story where the people from India who were trying to take their sheep to graze but being shoo-ed by Chinese armed soldiers, but they were in plain clothes, and then the Indian administration had to step in and tell them to get out of there, and they eventually did. But this kind of salami tactics, this kind of scaremongering is continuing. So what do you think is going to happen next? Is China going to again try another adventurism? What are your thoughts?
Sridhar Chityala: Well, I think that China was caught by surprise at the intensity and ferocity with which India responded to the incursions that have occurred, and also the rapidity with which the infrastructure was built and India continues to build the infrastructure. So they’re adding more and more tanks, more and more fleet of the Sukhoi helicopters, the French Rafael, in close proximity with the Indian army, the exercises that we touched on Skyros in the Rajasthan desert, Jodhpur area. You find that all these points to the fact that both of them are very well entrenched in making sure that nobody is getting a position. Mind you, India, which occupied the strategic heights in the High Altitude, I don’t know the exact figures, but the mountains, those positions India has not withdrawn. So India is still holding to those positions and said ‘no, no way, we are going out of that as part of the deal, there was a deep withdrawal. India is saying, ‘no way, we’re not going to leave those positions.’
Sree Iyer: Yes, that would be something that General Naravane’s achievement when he said that this is how we take a hard bargaining position and they went and conquered these strategic heights and it is a very very important point and let’s see how this thing plays out.
The last one, I wanted to touch upon in global situation is that the secretary of state is designating Cuba also as a state sponsor of terror, for example, we already have Iran, North Korea, and Syria in this list, looks like Cuba is also joining that list.
Sridhar Chityala: Well, I think that there is a lot of discontents and as you can imagine that there is a huge Cuban population in Miami, in Florida, and many of them are pro-republican. They are saying that there are lots of continued human rights violations and more oppressive regime. So they’re saying, the United States is reaffirming the point that they are, it is also conceivable that some of the socialists, quasi activity happening in the United States, maybe perhaps stemming from, the two Nations that pop up are Venezuela and Cuba in this in this specific uprising. So it is conceivable that based on intelligence I think he’s moving forward to put Cuba as well into that map. If it does, it is back into that ledger with those three enviable countries. It’s very interesting Syria, North Korea, and Iran. Iran and North Korea have always been there, Syria and Cuba, Cuba went and was moved out under Obama when things begin to normalize, and now probably it will back under Pompeo, back under Trump as the final part of departure, if he departs. If he is back in power then it continues.
Sree Iyer: Take a look at covid now. The global cases continue to rise and now I think Britain is also starting to roll out the AstraZeneca vaccine which they developed along with Oxford. What are the initial findings of the AstraZeneca vaccine? Do we have any results on that? Because we know that Pfizer has caused a few ripples if I have to use that word, their vaccine has caused a few ripples.
Sridhar Chityala: Well, I think the first point is that Pfizer is under rollout, AstraZeneca-Oxford is moving from trials into contingent usage and discretion given to the hospitals. I think the test revealed a 55-60% improvement. Perhaps they have moved, moved further ahead in those results. So it is not yet in a full launch. I think India is also considering the Oxford-AstraZeneca with the Serum Institute as one of the manufacturers. So it is not yet certified in the United States only Moderna is certified. So we will know about the impact of the AstraZeneca vaccine only when it becomes commercially used and people are getting out of it, which I think it’s pretty early, too early to say what the outcomes are.
One thing that I would say though this new strain of the virus which seems to be highly contagious has entered the United States and it is person-to-person transmitting and there’s a CDC warning saying ‘Please be aware and be careful that this is in the United States. It’s person to person more contagious. In fact, it’s more contagious they give the other numbers ranging from 1.3 – 1.7 contagious than the normal.
Sree Iyer: And also, now research is indicating that those who are asymptomatic of covid are not spreading the covid virus to others. Now, we have to wait and see if this is something that is found across the world. But a lot of studies are now beginning to indicate that if someone is asymptomatic then chances are that, that someone is not spreading it. We have to wait and see how this thing plays out. The next thing that we have is, you’ve touched upon it, the UK virus range is now beginning to find its way across the various countries. So people have to be still careful. I think masks also is always a good thing to wear, because again, on the masks, judgment is still out. We are not a hundred per cent sure if masks are effective or not, but be that as it may, I think it is safe to wear it because it does filter-out your own germs and it filters others germs from coming to us. So sir let’s take a look at markets, the last thing, we’re already 24 minutes into our hangout. So maybe one or two minutes and then we can wrap this up. Because this is the last day of the year, trading is going to be mild. We will be back tomorrow to talk briefly if there is news, events, we will put out a tweet around, one hour before the program if we are going to have one or not. We have not sure because January 1st is usually celebrations, people wake up late and so on and so forth. But we will wait and see how events develop because the activity is heating up in Washington DC. Sir, market wrap-up.
Sridhar Chityala: Market wrap-up is a phenomenal year, not as great as 2019 but add to 2020 was a phenomenal year. It’s a phenomenal year within the context of the pandemic. Tech, retail, pharma were the big winners. We have finished the year with Dow up around 6% and S&P up around 15.6% and NASDAQ is up around 42%. And the most important data point that I would point out is energy. So the average price of crude was around $35 – $36 the lower price, the higher price was around the $64 today as we speak, in this program, we have seen the energy slowly creep up from about $35-36 to about $48 today.
That’s a pretty significant number in conjunction with the next data which is a 10-year bond. So you have seen, on an average cushion of $16 – $20 or even $30 variance between the lower price and the higher price. That money flows directly because all the gas stations are marked to market albeit delayed two weeks to that specific price. So that’s something that flew into the consumer spending patterns. The second is the 10-year bonds started at 1.68% or 1.67% and is now around 0.93%. 30 years was around 3.6% and it is now around 1.67%. So you find that this interest rate variable is another factor that has helped during this year of pandemic.
Why these three data points are important because this also gives the purchasing power in the hands of the people in conjunction with the stimulus that was handed down as part of the first stimulus and now the second stimulus is only next year. So the market has had reasonable robust growth even in the last year of the current term of the presidency.
Sree Iyer: That brings up an end to today’s hangout. We wish all our viewers a Happy New Year. Happy 2021 and stay safe. Don’t party too hard. Also, please remember to wear your masks. Once again, Happy New Year, Namaskar. See you on the other side of the Year, sir.
Sridhar Chityala: Great. Thank you so much. Thanks for all your support and we look forward to your continued support as we step into 2021 and also, you know best wishes to you, your families and everybody as you bring in the New Year.
Sree Iyer: Yes viewers don’t forget to subscribe. We’re having some technical difficulties about super chat today. We will investigate why that is, we don’t know, as far as we know we are doing fine. All the channels are transmitting Facebook YouTube as well as Twitter. Thank you very much, sir, and see you tomorrow.
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