#Episode29 Daily Update with Sridhar – Markets have spoken, Hong Kong being suppressed

#DailyUpdateWithSridhar #Episode29 - Markets have spoken, Hong Kong being suppressed and more...

Red Book on Sale!

Sree Iyer: welcome to PGurus Channel, I’m your host Sree Iyer. Today is episode number 29 of daily updates with Sridhar. Sridhar ChityalaJi Namaskar and welcome to PGurus Channel.

Sridhar Chityala: Namaskar and good morning to all, very early good morning to you Sree IyerJi and good afternoon and good evening to rest of them.

Sree Iyer:  So, sir will jump straight across to Hong Kong, where the last vestiges of democracy are being dismantled by the Xi Jinping regime. What are your initial thoughts, Sir?

Sridhar Chityala: In my initial thoughts are this was anticipated, it was expected, and they have been progressively moving towards the approach of what they call containment and submission. So no territory under China would be a renegade and would need to follow the policies that are established from the center. So they have chosen the most appropriate moment when there are questions around the transition and there’s contention. So, therefore this is in the US Elections, right? There was anticipated this gap would be leveraged for some kind of activities, which China would attend. So, we have seen the first part of it, the four legislative council members were suspended for the Democratic activities in the council. So this age-old institution which was the last Bastion of democracy witnessed all of the opposition members and en masse resigning against this concept of, you have to be a patriot in the council. We saw an immediate reaction from Mike Pompeo, which is to say, we haven’t seen the last of what we would do in Hong Kong and know there’s more to come and the United States doesn’t accept.  Whether the incoming current incumbent, Mr. Biden and Miss Harris follow the same or would they have a little softer approach in dealing with Hong Kong and China remains to be seen. But it’s very very difficult to see Chinese at any given point of time reneging what they have done. So this makes it all the more important, what is going to happen to Indo Pacific and the South China Sea discussions When Mr. Biden and Ms. Harris that takes charge and what’s going to be the scenario.

Sree Iyer: Yes indeed and we now are going to start looking at some of the happenings in the United States Biden has formed his transition team and there’s a whole bunch of activity going on there. Sir, your initial thoughts on his team, he has created a new position also for Supply Chain management. So, perhaps you can walk us through all the things that Biden has been doing.  By the way, we are going to talk about markets right after this and there’s an important announcement there also, so please go ahead and let’s talk about us politics to start with.

Sridhar Chityala: So, Biden was very clear and he has the mandate, which not so small mandating, 74 million people voted for Biden, was 71 for Trump. So it’s a huge mandate that he has, in his hands and he had indicated that the economy and pandemic are his first two priorities. Notwithstanding what his kind of beliefs is on the economy, which seems to be chugging along recently well, the pandemic is a kind of a big issue. So, the first thing that he did is, he has formed a pandemic task force for the overall integration and supply chain kind of management and that is given to Dr. Vivek Murthy, the previous medical General to be in charge of the project that’s the first. The second is that he’s also going to establish a Nation-wide taskforce very similar to Roosevelt model, that’s the story, that will ensure that mass testing would happen right across the country. This is one of the issues that they were discussing in the stimulus two programs, that the testing should be Nationwide and for all so that was the second point. Then, in terms of the executive actions that he had contemplated, that was his policy plank.

I think one of the first things that he is to do is to look at this whole situation of unemployed people, whether, you extend the insurance to all the unemployed kind of people and the non-documented, he doesn’t use the word non documented, expansion of the Medicare to the broad Universe in the United States, some of whom have been left, so, I think that’s one of the first items. The second is also looking at removing or mandating the unionization policy, which is to say that every member has a right to form the Union within the Workforce or what you call right to work, so this is the second thing that he is contemplating. The third thing that is kind of contemplating is lifting the travel bans that were imposed in some of the specific Islamic Nations. He wants to say I’m lifting the travel ban, so that’s the third thing that he may execute using his executive power.  The fourth one that is planning to is this restore confidence, what he calls restore confidence in global institutions, so which is namely, give the due importance and start paying the dues to WHO, United Nations and such organizations, which used to say, we’re back in business, this model is different to the kind of the older model. So, let’s kind of re-establish and reconnect. Then, he wants to reach out to the global leaders, what he calls allies, who had left her out and tell them, I am back and we’re going to be working with all of you. There’s no kind of preconditions for allies to be part of the, what you call the relationship framework with the United States. Whether, he would do it in executive or whether he would go through the normal conventional leader processes, re-joining the Paris Accord,  given that the Paris Accord was established during his vice presidency in the Obama-Biden years.  I think he may do that as an immediate kind of invisible step-up goodwill and re-join the Paris Accord. So, you can see that he is very clearly thought out and orchestrated kind of an approach in terms of what he proposes to do. We are executive actions on day one and just on that point on the Affordable Care Act while this is going on, the Republican said file third times the government of few State file with the Supreme Court, the kind of termination of the Affordable Care Act. Last night Justice Scalia and Justice Roberts seemed to be more definitive inching towards a model where they will leave most of the Affordable Care Act intact only eliminating the individual mandate portion, the individual mandate itself in 2017 was made null and void to some extent by making the individual mandate 0 that means every person has to have medical insurance and that medical insurance can be zero, so that effectively the clause is instant, so, the Supreme Court has set aside. So, that could also be a that’s a kind of a win as he steps in which is to say Obama Care Act is here, the only individual mandate is removed, so, how do we extend the reach.

Sree Iyer:  And next we want to talk about a little bit on what is happening in the world, Arnab Goswami popular TV Anchor of Republic TV seems to have gotten his bail from the Supreme Court, a little bit of what you think happened sir, at Supreme Court today. He had been put through the wringer in terms of, been thrown in jail and in a case that is apparently been closed, so, what do you make of what happened today, sir?

Sridhar Chityala: Just can I take one minute of the time to wrap up the executive actions with the broad policies in place.

Sree Iyer: Please go ahead.

Sridhar Chityala: Thank you, sir. So you may see a broad set of policy changes that will be fundamentally deviation from the Trump policies around immigration, labour laws, trade, security, foreign relations, energy. So there’s a whole range of programs that they have laid out which effectively will replace many of the policies including taxes and the environment. Many of those policies he has laid out beside the executive actions through the House and Senate process that will effectively be nullified, whatever the prior regime had kind of done including the 4.7 or 4.3 trillion, whichever number that comes out to be till your new taxes. So we’ll cover that separately, but I just wanted to wrap up. The executive actions are immediate but the broad policy changes will happen during the course of his regime. Okay, so I just want to say that so that the two pieces are delineated and there is a holistic context.

Now moving to your question around, I think our Arnab. It’s a very interesting question to ask someone who is very distant. But let me kind of give my two sentences. I think it looks like the anomalies and the ambiguities, which was not brought out was picked up by the Supreme Court and what they have stated is that the role of the Supreme Court is to make sure that the Constitutional validity is preserved and maintained and one can not use the whims of power of the state and the police to act and misinterpret the constitution in terms of putting a person behind bars, that seems to be the case in this. There’s nothing proven as yet nor there is a correlation between money and suicide that has occurred. So, therefore, it’s time that that the law is rightly interpreted and I’m not just going to walk out leaving that part because this court has responsibility for the preservation of the Constitutional validity. He seems to have won the day to that extent. The law has prevailed once again in India, the Supreme Court has acted, notwithstanding lots of noise that you heard – Modi didn’t do this, Modi didn’t do that, whether there’s a system etc., Arnab is represented by a team of lawyers led by Harish Salve who is very respected and reputed legal luminary in India. So I think that there seems to have been some normalcy. I think it continually raises these questions around the independence of Journalism vs the political State and juristic legal influence in the processes. It seems to be very muddy and it also seems to be driven by to some extent political connotations.

Sree Iyer: Yes and one hopes that Arnab will continue his brand of journalism and we will be watching and we will be commenting on the developments as they come along. Sir, now let’s take a look at the United States stock markets. The Markets appear to be rotating in and out of shock. Like for example, some tech stocks were down but today we are seeing tech stocks are up. What do you make of this market gyrations now? Is it because the money has no other place to go but the stock market that we are seeing the stock market keep going higher?

Sridhar Chityala: Oh I think you have probably have hit the nail on the head which is the market gyrations are a manifestation of both sentiments as well as liquidity. So it was driven by sentiments in the first three days it went up to 850 points to a date in the Dow Jones index which is driven by the discovery of the pandemic vaccine and when I say discovery it has 90% of tests reveal positive disposition on around 45,000 patients which was the Pfizer. Now, we also got Eli Lilly getting the approval for the plasma transplant type vaccine model. So you’re beginning to see that there is positive synergy so that you saw in what they call as the non-tech as well as non-lockdown stocks. So some of these like Zoom and these kinds of tech stocks went down and went back into the fore which is financials and consumer discretionary and tech stocks took back seat, went into financials, it went into materials, it also went a bit into manufacturing. So which means people will be going and physically kind of doing work. And so that’s the rotation which you talked. But today again suddenly you see back, the tech stocks are up ranging from 0.3% – 1% depending on where the stocks are, depending on where the relative multiple is for those stocks. Amazon was the smallest mover and Microsoft and Alphabet etc saw a little higher moves in terms of tech. This is a pre-market and these things change every few minutes. So even 10 minutes old information is a piece of old information. So you saw that what will continue to see until such time there is clarity in policy. Also the outcome for the senate elections, I have heard rumours or have heard unofficial that North Carolina has been won by Republicans, but it has not been confirmed. Officially, Alaska, they are leading by a long margin but not confirmed only 55%, assuming if those two goes to the Republican that’s 50 seats effectively that means they either win one seat or both in Georgia, they have a majority which implies, as most of the analysts say the markets loud divided government. I have a divided government. They will be checks and balances in terms of any extraneous outcomes that come from the market. So in terms of immediate term,  that would be, in terms of yesterday, today and for the rest of the week, you may see these gyrations come up and down. And to your point which you really adequately pointed out is equities means only US market, right? Especially with the bond years, the way they are the only place where you grow, where you go to drive growth and generate some income is equity stocks.

Sree Iyer: Now, is it a good time to buy stocks or is it already too late?

Sridhar Chityala: I think that you have to selectively buy stocks. Some of them may be very highly overpriced. If you are in for a long term, if you are in for a longer-term, longer-term, my definition is anything above three to five years. I believe tech stocks are very good, healthcare, biotech stocks are very good because imagine what the next 3-4 years kind of hold. I believe that there is going to be a transition to the retail model so you are going to see the consumer discretionary and consumer Staples moving up. We’re also going to see financials kind of going up and eventually, interest rates need to kind of rise. So you will see financials to be a good play.

I say Material Sciences also is good because they form the foundation for the fab industry, which are semiconductor stocks. Why semiconductor, because more consumption of electronic digital content means there’s more digital infrastructure that is required. That means the next generation of chips. Mind you Mac is just announcing the next Mac and one with its own chip. So, therefore, you are going to see the semiconductor industry kind of go as well. So these are some of these sectors. I am more a macro kind of a guy, I am not a day trader so I manage. I am in public markets, but more as a macro portfolio investor rather than a day trader.

Sree Iyer: Thank you very much Sridharji. That brings a close on today’s program, We’ll be back as always tomorrow morning bright and early at 8:00 a.m. eastern time, 5 a.m pacific and 6:30 p.m Indian Standard time. Thanks for watching and subscribe to PGurus channel.

Sridhar Chityala: Namaskar and Thank you so much. Have a wonderful day.

 

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