Sree Iyer: Hello and welcome to PGurus Channel. I’m your host Sree Iyer. It is episode number 19 of the daily update with Sridhar. Sridharji Namaskar and welcome to PGurus Channel,
Sridhar Chityala: Namaskar and good morning to all
Sree Iyer: Good morning to you sir, and good morning and good evening, wherever you are. Today, we are going to jump right in, Secretary of State Mike Pompeo after visiting India. He also visited Sri Lanka, then the Maldives and now he is in Vietnam. So what is the objective of his visit to Vietnam?
Sridhar Chityala: The objective of the visit to Vietnam is to continue to build this new Coalition in the Indo-pacific area. The discussion has now shifted from the South China Sea to the broad indo-pacific Coalition. Vietnam enjoys an extremely positive and warm relationship with India, Vietnam has invited India to be part of the ASEAN summit. My thoughts are that it is possible that Pompeo was persuaded to go to Vietnam. And it is what you call ceremonial and figurative type of footprint which is to say, welcome and be a part of the great coalition and we all will work together towards a common purpose. The common purpose is to make sure that there is sovereignty maintained and the Maritime interests are protected. So, that all nations can seamlessly trade and the common threat in all this is China, so, that is thematic.
Sree Iyer: Offshoots of this New York Post article being stuffed out by or not being put out by Twitter and Facebook. Is that now, all the tech CEOs Google, Facebook, Twitter and others are being grilled by the US Congress and Senate committees. So, yesterday we saw the opening remarks of Mark Zuckerberg and Sundar Pichai. What do you make of this? What do you think is going to come out of it? Is this something like a foundation stone being laid for tinkering with the 230 section? Do you think the 230 section will completely go away? What are your thoughts on this?
Sridhar Chityala: Well, I think that essentially three elements that have come out of what triggered this was, naturally the Hunter Biden story being suppressed and not being advocated that’s number one. Number two, two sets of principles that were used and I think which was brought out by one of the Senators, namely that you used a framework, which is called as the unverified story or fact-checking. It did not meet the fact-checking criteria for the Hunter Biden story. But, on the contrary, that there was a story that came from China about some specific incident and that was featured and you kept it going on the channel for almost 60 days before the fact-checking rule was applied and taken out having done enough damage. So, therefore this seems to be a distinctly biased and two sets of rules being followed. And the third is they were asked to qualify and validate, whether there’s been any change. Right there, Ted Cruz validated and found out, New York Post remains continued to be blocked from Twitter contrary to the statement made under oath by Jack Dorsey. Jack seems totally oblivious, he believes that he has law unto himself; he can do anything he wants. His lawyers have advised him, he comes from a liberal state. So, they will use all kind of circumnavigation to make sure they mitigate any potential kind of truth. Unless 230 is changed where the limitation of damages is taken out, these people are not going to toe the line. The same thing happened just to kind of wrap up, for two hours four executives of Twitter were questioned by the Parliamentary committee, which is a bipartisan parliamentary committee in India, where they put up Leh as part of China as opposed to India, there is something similar both on Kashmir as well. Now, these guys have become unilateral rules and they just have been legally briefed to kind of stand by and go on making the same statement albeit shamelessly in pursuit of people’s agenda rather than the truth. And they use convenient tools which don’t stand current set of rules and they use that as a basis to justify themselves creating a problem.
Sree Iyer: Well, this is something that has played out in the past also, after the alleged Russian tampering with the 2016 elections. Facebook Executives Sundar Pichai and others were also grilled over by the various committees in Washington DC. But, somehow Mark Zuckerberg talked his way through it, without as much as even as slap on the wrist for Facebook. How do you think this time things are going to be different?
Sridhar Chityala: Well, this time things are going to be different on only one facet, which is effectively the story itself is very relevant and it could turn out to be true that’s number one. Number two is that it is significant within the context of a very contested presidential election. So, therefore, there is deep intent on the part of the Republican party, which seems to be agreeing in this instance to pursue this course. And I think number three is that there is this global kind of phenomenon, especially from some of the right leading countries that there is a definite third leg of government, which is creeping in the absence of legislation. There’s an element of frustration, but, therefore, there is potential for resolution. But, the last one which is, I may say is, this Clarence Thomas seems to have written to either the Senate Judiciary Committee or Judiciary Committee which is to say, there’s enough data and there’s enough evidence to actually relook at 230 and make amendments. So, therefore that gives the extra kind of credence and leg when you have a supreme court’s sitting judge making that observation.
Sree Iyer: Yes indeed, when somebody like that weighs in, it gathers a lot of momentum towards making the change, a change positive, a change that levels the playing field and let’s look forward to something that is more equitable for sure. We’ve been saying this for a long time PGurus is perceived as someone who is right-wing, although we believe, we are Center and we also have an asymmetric set of rules applied against us and I am saying this with full knowledge of having a lot of facts behind me and I’ll be happy to talk to any Facebook or Twitter people to us, to why I believe so. Anyway, this is something that is an on-going battle; we have been suffering for a long time. Our growth has been stunted. I’m sorry to go on a rant here, but, let’s get back to our topics of the day on economy. Now, the stimulus is completely died down, the efforts to get it going perhaps, Nancy Pelosi and Steve Mnuchin figured that now, even if something comes out it’s not going to make a difference one way or the other for the election. What are your thoughts on that? Is that going to be laid at the door of the Democrats or of the Republicans? What are your thoughts, Sir?
Sridhar Chityala: I think that just to recalibrate your point. The discussions have gone on between Steve Mnuchin and Nancy Pelosi with no resolution in sight, no convergence in sight. It does not mean that they would not do anything which helps the economy to go forward because if they don’t do something that is going to be visible in the opinions of people who do matter. Of course, politics always prevail over policy. Unfortunately, that’s the case. So there are two schools that are going on. one school of thought is that should Biden win the election, he has no motivation. Democrats will have no motivation to resolve this in a lame-duck session which could mean that for almost 60 days there may not be a resolution unless an executive order is passed by President and which would become contentious. They may choose to do that so the market sentiments of the past two days is a reflection of those sentiments that are namely whether there is going to be a potential stalemate and delay. So on a near-term basis, whether there is going to be economic consequences as a result. That’s why the market went down yesterday close to almost 3.4%. The DOW was down 3.7% and the S&P was 3.4% down. So there is a significant dip in the continuation of the markets. It’s a symbol of what is to come? This is also not been aided by reports coming in which is to say in a JP Morgan stating, Hey if Trump wins the markets could go by x percentage on Goldman then backing by saying if Biden wins then the market can go. So all these things come into play in the sentiments of the markets.
In my view as I mentioned yesterday in our daily discussion that what you see is you just have to hold your nerve and whether this job in the past in the next 60 days, eventually the stimulus will come and the economy will rebound.
Sree Iyer: Sir, we have a few minutes left. Let’s talk about markets. Now this fall to lows in March. And then now the bounce-back, has the bounce-back been even across the board for all market segments or has it been pronounced in a few segments? What are your thoughts, sir?
Sridhar Chityala: Well I think that the markets have been favourable, unduly favourable in digital sectors which have helped and enabled people to work and manage in this recalibrated economy. Effectively, you gotta stay home ordered everything. Everything comes delivered. You can do takeouts in restaurants. So the segments that have been very positively impacted that’s reflected in prices of Amazon, online content consumption that’s reflected in Netflix and Disney then online logistics companies, online transportation so online infrastructure companies, like Microsoft and Amazon as well in that specific segments so it’s played. Tesla had a positive kind of impact because of which is about consumption, believe it or not, the four reported earnings for the last quarter because of the Ford vans, more vehicles being bought during the specific phase. So what it tells you is the market calibrates, the healthcare sector also saw an uptick because the virus and the consequences of money being spent and vaccinations. So the health care biotech, the consumer discretionary industries to some extent less excellent consumer staples, biotech industry, then of course the infrastructure which is the semiconductor industry. So you are seeing some of the consolidations again, we discussed so these sectors saw a big bump. We also saw because of that dollar value manufacturing showing a kind of uptick but banks, material companies, all of them saw different values.
Sree Iyer: Yes indeed we’ve seen The Wells Fargo Bank stock to completely crashing in the sense that it’s in the low twenties. I haven’t seen it go so low for a long time. So what is your prognosis for an expected recovery of Banks stock sir? I’m just specifically sticking myself to Banks because that’s your real forte, your field of play.
Sridhar Chityala: Well, you know, I think the bank stocks will recover only when you see some uptick in movements on the interest rates. Most of the banks are in the net interest margin drives. The underlying probability except for banks such as those who are in the M&A business, mergers and acquisitions and fee-based business, which are banks such as JP Morgan, Goldman Sachs, Morgan Stanley, these are businesses Bank of America. These are institutions which are reliant on M&A type of activity so you did see some positive movement in both record earnings in JPMorgan, record earnings and Goldman Sachs coming from the transaction and M&A fee-based businesses. Whereas those which are reliant on leading businesses like mortgages and current cards and traditional corporate businesses. All of such businesses suffered and the worse among them in that sector is Wells Fargo. When do I see that coming back? I don’t see that coming back up, you know before the end of 2021, or maybe early 2022. Interest rates are going to be 0 right through 2021.
Sree Iyer: Yes indeed and we will have to wait and see how things play out. Sir, the last but not the least today also, the hearings are going to continue on these social media events, but on the main story Hunter Biden story now more and more people are saying both sides, right, that there is more truth to it than what meets the eye and so on and so forth, for say this is not a fabricated thing. So what are your thoughts because that’s where we’d like to finish today’s conversation?
Sridhar Chityala: Based on all the initial indications when you contrast the Russian interference story and the dog hunting that went on against President Obama. And then when you contrast it with this story where you have recorded interviews, initial data pointing apparently pointing towards the evidence that there was some kind of activity that took place which was within the knowledge of Mr Joe Biden, is very strong evidence that there are some legs to this specific story. The question in the United States is how conclusive the evidence is or how inconclusive. So there could be a piece of anecdotal evidence that points out that they lost but then the question is eventually to make it what you call absolutely clinching you need to have very definitive evidence. I don’t know in any of these cases whether you would have that clinching evidence to say, okay, we got it. So that’s where the nail is.
Sree Iyer: Well that brings our episode to close and we’ll be back again tomorrow the same time and thanks once again Sridharji and Namaskar.
Sridhar Chityala: Namaskar