Sree Iyer: Hello and welcome PGurus Channel, welcome to episode 20 of the daily update with Sridhar. Sridhar ChityalaJi, Namaskar and welcome to PGurus Channel
Sridhar Chityala: Namaskar and good morning to all and good evening to wherever you are. So, another wonderful day and not a wonderful day in Manhattan, It’s raining cloudy, but I’m sure it’s a wonderful day all over the world.
Sree Iyer: I hope so too sir. And as we get ready for the weekend, prior to the United States elections. A lot of things are going to be happening over the weekend. For those of you who are residents of the United States and who are going to be voting much to mull over. And first, there is a really interesting development that happened yesterday. And I think we don’t know the latest perhaps, you can share with our viewers the latest on the Nancy Pelosi & Mnuchin meeting one more time on the stimulus. Are the Democrats feeling that there is a certain amount of tide turning against them, what are your thoughts, Sir?
Sridhar Chityala: Well, I think, its clearly very political within the statement coming out in the end hour. It also just could be grandstanding by the Democratic Party because this statement has come on the backdrop of two important economic data. First is the Q3 quarter numbers, which were Stellar, it is the most outstanding performance in any given quarter. Ever since the data was recorded on the economic outcome quarter by quarter in US history, so, 33% kind of growth is Stellar by any stretch of the imagination. It’s clogged back close to 1.3 trillion dollars of money lost in the first two quarters, which is close to 2 trillion dollars, by virtue of the contraction in the economy. And then just on the back of that, we had also the jobless claim numbers, which also seems to have tapering towards a very good outcome for President Trump in the way he has managed which prompted Newt Gingrich to issue a tweet, which is to say while Biden is very good in hiding in the base room. President Trump has demonstrated, he can not only get people back to work, but he can also get the economy back on the track.
Now, obviously, the markets are a little bit upset about the lack of progress on the stimulus. So, it is the political statement that’s coming out. So, immediately Steve Mnuchin retarded back there it’s not because of me that the discussions are held up. So, I think that’s when I see it. In my view, it’s a tick tick for President Trump. Of course, they may be Democrats and liberals and others listening in, they may not like to conceive that, but, data speak for itself rather than any kind of political decisions here.
Sree Iyer: And yes indeed, Data is facts, the fact is the truth and truth will always prevail. Let’s look at the on-going trip of Mike Pompeo. I think before he visited Vietnam, he also visited Indonesia, didn’t he? So, he is really going on hopping across Asia and this happening just a week before the Election. This is not unusual, this happened last time also. So, people should not look too much into it and I think SridharJi, you already mentioned that the President of United States of America is more like a CEO of a company and he works till the very last minute. Some of the things that Mike Pompeo and Dr Mark Esper drawing up, these are all government-to-government agreements and you expect them to go forward regardless of who’s in power isn’t it?
Sridhar Chityala: Yes, It is. I think I have two observations. The first observation is as President Trump pointed out, he is the president of the country. So, he’s President Trump, even after November 3rd, should he win, should he lose. He still the president till the next person who comes in. There is a transition government, but he’s not going to stop running his government in his tenure is complete, he made it abundantly clear in the last Presidential debate. People should get over the fact that there’s continuing to be decisions. Now, what has transpired today or earlier this week is not just an outcome that has just happened this week, this has happened right through the tenure of President Trump’s presidency. The whole notion of Indo-pacific strategy from the Asia Pacific was again renamed and kind and broadly the policy framework of a quad and 2+ dialogue, which initially started with India has now extended to Japan-India, Japan-US is all part of the broad fabric of his diplomacy and the security architecture that is being laid out. So, this specific visit is reaffirmation and confirmation of that. But, also take into fact that there is a big problem of China in the northern border of India. There is also a big issue of China in the South China Sea. They have made it very clear that the United States is front, centre and back in supporting India against China, in this unwarranted aggression. The Strategic objectives and what is a lead-out by way of the policy framework is being rolled up. So, it’s not a knee-jerk kind of a political reaction how much one may try to give that specific colour. Now, moving on in terms of your specifics, Indonesia is part of the journey where the Indonesian Defence Minister has come to the United States, not the Defence force is probably unusual. So, they’re building a security architecture so that there’s a broad set of Nations which are prepared to combat China’s incursion and all these countries are impacted including Indonesia. Especially around there from fisheries and incursion of their economic, what you call drivers of economic value for them in those waters. So, they signed up the deal. Vietnam was added to the list after the Indonesian trip. So, this is all part of the security dialogue. Now, many Asian Publications are now commenting and accepting for example even Nikkie which is considered to be left rather than Center, this China Policy is going to stay irrespective of whether Biden or Trump is in power, there’s no way this is going to be rolled back now. It is a long way ahead in terms of its progress.
Sree Iyer: There is one fine point that Mike Pompeo mentioned, which is very interesting. He said that India needs to call out China by name and this was a very interesting thing that he noticed that when India made its announcement, they did not mention the name China and I don’t know why the ministry of external Affairs in India tends to play very meekly. When the people are stealing your land and they don’t want to even mention the name China. Mike Pompeo brought that out and I don’t know what exactly is the undercurrents there, but he made it a point to mention that what are your thoughts on that sir?
Sridhar Chityala: I don’t think, it’s an undercurrent, it’s just the style of the Indian government. Let me give you two specific examples, one specific example that is pointed out is, this instance, which is namely to say both President Trump and Mike Pompeo have made explicit remarks. Please call China as the aggressor and China is creating problems in the northern border, but it is also creating problems internally by virtue of its networks that operate within the country. I mean, here they do that all the time in the United States, especially the present Indian government refuses to make that specific call, whatever may be there what you call diplomatic subtleties and those kinds of things. So, I think that very clear that is being pointed out, stay firm, stand aggressive and stand up against China. These were the exact words of President Trump when Trump and Modi met in the United States and the same thing is coming from Mike Pompeo. The second is that to counter the similar is there is a lot of noise in the social media network Modi stood commented that he’s against jihadism and terrorism and condemns the acts that occurred in Nice in France in terms of the killings that occurred. So the social media network is he’s prepared to do that in France, but there are things that are happening within India, why is he not calling it out when such incidents occur? There seems to be a consistent pattern of defensiveness rather than being forthright about the issues.
Sree Iyer: So the offensive defence policy has probably not still kicked in then?
Sridhar Chityala: The offensive defence policy in terms of outbursts has not kicked in. Offensive defence policy seems to be on paper and we assume that it is in actions across the border in terms of protection. Even that, there is apparently some kind of a mechanism whereby some specific order. These people are not supposed to carry their guns, weapons and so on and they need to wait for some kind of an order, you want to protect themselves in the event of an attack even that seems to have been only corrected recently, where they said you have the full authority to defend the territory. You have the full authority to protect and defend not only yourselves but the territory against any incursion. That’s the one that turned the tide in terms of this whole concept of defensive offence and also the policy of going inside the disputed buffer zone and making sure that the incursions and any preconceived attempts are stopped. All these things have happened only in the recent few weeks or so. So therefore to your point, this is the seems to be still not transcending into the words and statements.
Sree Iyer: Yes, indeed and let’s take a look at the markets and I want to focus our attention particularly at the tech sector. Sridharji I am going to show a graphic here that shows the performance of some of the six big tech stocks that have done a phenomenal rise, that has seen a phenomenal rise during the Trump era from Jan 20, 2017, up until October 28th and I am just going to give you some numbers and then you can weigh-in sir. Apple has grown 271%, Amazon 291%, Microsoft 225%, Facebook 111%, Google 83.27%, and the Standard & Poor Index 44.5 1%. So there has been some tremendous growth right through even the corona pandemic. What do you make of this and perhaps you can also touch on the blockbuster returns that some of these companies have reported.
Sridhar Chityala: Well, I think that’s a great kind of stat. They’re essentially three elements one that what the stat tells you is despite the discomfort and sustained tensions that prevail between Washington DC and the tech companies in the west coast they have insulated the market performance from the political rhetoric. So these companies have grown on the basis of their business performance notwithstanding some of their aspersions in terms of how they navigate the political waters. I think that’s the first part of the journey. The second part of the journey which some of these tech companies don’t allude to is the measures that were put in place, the economic measures that were put in place which has given both on the supply side as well as on the demand side of the ledger both the parameters for the markets to perform. During these four years that tax concessions or the new tax policy on the consumer side gave the additional purchasing power over the past four years resulting in incremental sales outcome. Second, on the demand side and the supply side of the business, the small businesses which constitute a significant chunk, almost 50% of 3.6 billion of sales occurred in the last quarter of small businesses of the Amazon ecosystem, so what it also says is that the small businesses benefit from fewer reforms, less compliance and less tax regime that translated in much higher profitability to the businesses as well. So that’s the second dimension to this. I think the third part of it is, which is very important, is that the pandemic has resulted in more consumers moving to the digital ecosystem and the consumption patterns being driven by the digital models. For example, Netflix is a good example. The Netflix increase the prices, which is likely to I think $14 dollars or $18 to tiers and it’s likely to contribute to $500 billion of revenue next year and EPS of 11 to 14 cents, right? The markets absorbed it. We saw that same in the Disney and then in terms of the retail sales 34% growth in the Amazon retail sales vastly coming from their food and retail network again reflected in the digitization as well as the shifting buying patterns and through the pandemic which means the stimulus which directly reached the people translated into tangible kind of sales and economic outcomes. The prediction of Amazon for the fourth quarter is a hundred billion dollars in sales, one hundred billion dollars.
The markets are a little bit tepid this morning because both Apple and Amazon, more specifically Amazon has predicted sales forecast between 1 – 4.5 billion dollars. That’s a very big range in terms of the profitability 1 to 4.5 and the fact they basically said the cost in the fourth quarter will be close to four billion dollars coming from various things that they need to do to prepare themselves to combat rising covid cases, testing, cleanliness, sanitation, all those kinds of things. So what this basically says, is that under the question that you faced, the company not only outperformed but they have been the drivers of the stock market and to a large extent which president Trump has been routing increase in balances of the 401K accounts.
Sree Iyer: Viewers that brings us to the end of this segment and I would request you to log back in on Monday same time the same site and before we conclude I want to let you know that Sridhar Chityala and I will be taking an in-depth look at some of these technology companies, what made them tick, what made them such a success because they have been around for more than 20 years. Some of them have also experienced troughs before bouncing back. We are going to have a series on these called ‘Secret of Success’. Please be tuned in for that. That will take a really in-depth look at how these companies pivot, how successful are they when they do those pivots and so on and so forth. Please do subscribe to our channel and we’ll be back again Monday morning first thing in the morning. Namaskar and thanks for watching our program.
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