#WeekdayNewsCapsule EP33 – With Sridhar Chityala

#WeekdayNewsCapsule #Episode33 - With Sridhar Chityala

Sree Iyer: I am your host Sree Iyer. It is my pleasure and honor to have Sridhar Chityala Ji as part of our everyday news capsule. SridharJi Namaskar and welcome to PGurus Channel

Sridhar Chityala: Namaskar and very good morning on a bright Tuesday morning here in the United States.

Sree Iyer: I don’t know how the morning is going to be in California yet, it is still not sunrise.  Viewers, we have a special program tomorrow at prime time for about 30 minutes, where SridharJi and I will discuss the RCEP in some detail and in as part of that we will also discuss the pros and cons of India have joining or not joining that and therefore why India decided to stay away from it. We will do a complete analysis. Do join us tomorrow. There will be a new has captured the usual time. But in addition to that, we have in 9 PM prime time. Sir, today we are going to do a slightly different sequence in which we are going to start talking because there is very significant happening going on in the markets in the United States today. Take it away sir and tell us what is happening in the markets.

Sridhar Chityala: Morning sir. The market saw yesterday on the back of the Moderna story, which is 95.4% recovery rate to the vaccine, the market gave a big thumbs up that was part of the Trump’s project or program. And markets were up with the highest kind of uptick in the moment. Dow was about 1.8 per cent and S&P was up around 1.2% and technology stocks went up around less than 1% in terms of the relative moments. Basically reflecting that the economy will be on the way to recovery and momentum because the two biggest vectors in terms of the market growth are one is a vaccine for Coronavirus and second is the Stimulus. So, one of the vectors got the big thumbs up yesterday, so, the markets responded very favourably. S&P in a pandemic year as we speak is close to about 10% up today, which in itself is a remarkable kind of a story when you look at the growth. It also tells you that the well-directed fiscal program, which is a stimulus program can basically help the markets at least to remain steady and grow and double-digit growth is a phenomenal kind of an outcome. So, I think that’s the first story on the markets.

There are four specific events that are happening in the markets, one is Tesla now joining the S&P 500 Index from December 21st, the market gave a thumbs-up and overnight. It was 9%, I’m told right now as we speak the markets showing that it’s going to be up on the opening 12%. Why it is because it becomes one of the largest drivers of the S&P 500 with a market cap of 380 billion dollars in valuation. And I won’t use the word PE, you know, PE is nevertheless, it’s 770-780 billion on post-tax income or pre-tax income of 900,000 is not big but the more valuation is around the long-term future, so that’s a very big deal. So, Tesla met the criteria, which is titbit’s they have set out to be part of the S&P 500 Index. So, they join the other kind of elite like Starbucks and so on in the consumer discretionary section. The third big news in the market is the Airbnb, which has been hanging around is now saying that it will be launching its IPO priced at three billion dollars is the nearest competitor is Trip Advisor. Most of the downward movement is because of the pandemic situation, but they seem to have flipped the business model in terms of traditional kind of Housing and accommodation or traditional Travel and lodging into a new category reflecting again transformative changes taking place in the economic kind of models. So, that’s very positive news, the pricing will be determined soon, but they are announcing an IPO, that’s the third news in the market. The fourth news in the market which is not a surprise that was coming is the Amazon Pharmacy and Amazon is launching its Pharmacy business to compete with Walgreens, CVS and Walmart. The details will become soon available but that’s again very big news because, Prescription, what you call as the mail-order business is one of the largest Pharmacy dispensation businesses in the United States and everybody is more and more moving towards rather than in-store, but mail orders, so, it fits right within the Amazons kind of parameter. And the last news is around here, it’s not the last but the key headline point of view Walmart announcing its earnings and Walmart demonstrating again a very positive earnings growth very important driven by 79% increase in its e-commerce sales, 79% increase, this has followed a consistent pattern and in terms of how people are recalibrating their businesses, recalibrating their engagement from the point of a daily need of view. So, this may become want you kind of do it, you know, 3-6-9-12 months then it’ll become habitual in terms of people following the same pattern. So, these are the key kind of headlines from a market and some of the top stories making news in the markets.

Sree Iyer: I have a couple of things to add to what you just said, sir. One of the things that I am 100% sure, Tesla he’s going to face is that as they’re doing these rapid rollouts, they are not really managing their software releases in a consistent manner and I am speaking from personal experience, the Tesla that was rolled out in 2018 isn’t as stable software wise as it was when 2014 got rolled out and the interesting thing is the hardware hasn’t changed since 2014. So what I am trying to say is that the 2014 models continue to get upgrades like autopilot function. There are so many features that are getting added. However, once in a while, you’ll get these hiccups where you know, you upload the software has more problems and then you have to go back and upload one more time to fix it. A few turbulent things there and as the mass of installed base goes up. I think they are going to have some turbulence. I expect the stock to come down. I mean frothy is is beyond frothy the way it is being evaluated right now. I don’t think it’s worth that much. But anyway, that’s just my personal opinion.

So one more question before, we move away from Market, Chinese companies almost all Chinese companies don’t seem to be owned by individual such as Abraham and ANT financial, but it is somebody else seems to be owning this. what is this model? Why has it not come out in the public before this and now Chinese companies can’t even list in the United States. What are the implications of that? Do you think that will change under Biden?

Sridhar Chityala: I think it’s a great question. This is one of the items, thanks for recharging and bringing up this point. We had the ANT financial IPO being rolled back after euphoric listing to be one of the largest IPOs ever to be listed in the dual markets of Shanghai and Hong Kong full bag, and there was much consternation as to why it was there and it was done. You know, there is the kind of the Chinese indicated that it is basically because regulation non-compliance and then eventually found that the transfer of ownership took place to the Chinese government just as all assets are owned by China. Yesterday or this evening, we got the news that China is going to impose more regulation into the financial fintech companies which simply implies that China has one single structure of managing its people and its markets and its Partners, which is namely everything is driven from and by the Chinese government, which is the Communist Party. The only one arm which is Chinese Communist Party, so it looks like they’re going back to that model, which is there will be no quarter for anybody other than the government driving most of these businesses whether it is new business or old business. Why the media is not are highlighting? I think we have discussed this ad nauseam. There seems to be, between the left press as well as the Chinese are very close cooperation or collaboration in somehow justifying this irrational approach of China. Even the market leaders are beginning to kind of, even some of the big market leaders rather than standing up are speaking against him, be it from the banking industry or be it from the political side of the business. They seem to toe the line because somehow it’s a large market and you don’t ruffle but how do you accept such kind of intolerance.

Now, your question about Biden, it is generally considered based on the past Obama-Biden years, they have been soft on China. They’ve never been forceful. On paper, they may look forceful but on enforcement, they have not been forceful, be it in the trade side or on the security side. On the trade-side, these subsidies and WTO violations have been going on forever. And then also, this question around currency manipulation. They say yes there is currency manipulation. No, there’s no currency manipulation and so on. The fact is that the bilateral, trade deficit has enormously grown until Trump stepped in and address both these issues. On the security side, he became very firm on the South China Sea, and then the launch of the Indo-Pacific strategy with Covid combatant. So to a point, which is namely to say that we are afraid that Biden may toe a much softer line and allowing China to continue this punitive approach in terms of containing any type of innovative growth where the wealth is transformed from the state to individual employees. So I think we may see more of it.

Sree Iyer: So let’s take a step back and look at politics again and we have about four minutes left sir. First starting about United States elections about the president. We’re still having some bullfight going on, things are still in flux. The secretaries of many states have not certified the election and where do you see this headed? How many more days before we are going to start seeing some clarity?

Sridhar Chityala: So lets kind of, we talked about it for a minute. This is not yet an officially certified election as yet by which that the state secretaries have not certified all the counting and votes and said, okay, here’s the final result from each of the states. They are in different stages. We covered Georgia, Nevada, Pennsylvania, Michigan, Wisconsin. So we covered the states in terms of the reconcile some of the stuff that is going on. So check you seeing is two sides of the coin. One is, pretending that the election has been won, the other is, saying that I’m still contesting the election, I have not conceded. So everything seems to revolve, every action seems to be going down the same path, one is saying I am the incumbent so I will continue to engage as though I’m coming to power.

Whereas President Trump saying hey, you know, I’m still the guy sitting, I have not conceded the election, so I’m going on with my moves. So it is really unfortunate, you have this dual situation, be it RCEP, be it the vaccine that has come up, be it the issues around the pandemic, be it around the shutdown be it around the… we even had the clashes over the weekend in Washington DC where there was a major rally by the Trump supporters, then you had Biden’s supporters coming in and then some skirmishes began to break-up. So still there is this issue. I think we also touched on both President Obama and Michelle Obama adding more fuel to the fire, rather than staying out of it by which I mean, there’s no point, the last thing that we need is more opinions on this. When will you think it’ll happen? I think we’ll get some clarity around on November 30th, I believe so, okay. Well before November 30th, we may get some clarity. Technically that’s the cut-off date. And then by December 14th, they have to, unless there are challenges and some significant issues that are discovered, if that is the case it may go to Supreme Court.

Sree Iyer: Ya and some cases are getting dismissed. But viewers please remember there are hundreds of lawsuits. Just because one or two get dismissed here and there doesn’t mean that the final word has been said on this. So there is still some more stuff coming down the pipeline. In fact, there are lots of websites covering some sensational news. We are refraining from doing all that because we want to go only by facts and data and that’s how we will be. But the most important thing here is that the balance of power in the Senate, that becomes all the more crucial and we think that it is better for the country as a whole that Republicans still have the majority in the Senate. This is a message out to all the Georgia voters. Please go and vote. I don’t care who you vote for but keep this in mind that the country progresses and thrives when you have a very credible opposition and effective opposition and for that to happen Senate needs to be in Republican hands.

Anyway, so let’s get back to what has been happening about the Covid vaccines? A comparison of two Covid vaccines – one from Pfizer and the other from Moderna. From what I’m hearing, sir, Moderna’s vaccine is probably easier to deploy because it doesn’t require any additional storage facilities whereas Pfizer’s require you to have even colder storage facilities. Many of the hospitals may not have this so that poses a bit of a problem for Pfizer, isn’t it?

Sridhar Chityala: It does, it does, and this is the same issue that was brought up in India as well. But Pfizer BioNTech has a partnership with the Indian government to dispense this medication. So they have to set up this cool storage distribution centres for it to be dispensed.

I think we’re going to see more vaccines come out. Moderna is the number two, then you have Eli Lilly then you have two other companies – Astra Zeneca is one of them – then there is the co-vaccine which is coming in India, then you the Russian version which is the Sputnik, then you have the German version, then you have the Israeli version which is come. So there is a lot of vaccines now which are into the market.

There are three things, one is the rapid testing capability – that seems to have been resolved. There’s a lot of Rapid testing kits available. And actually, if you look at India’s kind of record, it is quite remarkable in terms of the recovery rate. They have done testing as well as have therapeutic conjunction with a vaccine program which seems to be having a very positive kind of an effect. So you see that the testing part is done. Now they’re coming into the vaccine part of it. The number of trials that are being done is very positive you will see in colder countries such as Europe and the United States because of the natural habitat for viruses to evolve you may see a huge uptick that is why they have had shutdowns but eventually, the distribution, as well as the rollout, will be sorted out. I think President Trump has appointed two people – how transient and how permanent that is we don’t know because once Biden takes power he may have his own approach in terms of rolling out the program. So, therefore, I think it, in my view, it will be resolved the way it has been handled thus far. What exactly are the specifics, we will get to know in due course. 

Sree Iyer: And that brings us to a close on today’s news capsule. Do tune in tomorrow. And remember that there is a special 9 p.m. IST module on RCEP and do also tune in for that. And once again, thank you very much Sridharji and we’ll be back as always tomorrow morning at 6:30 p.m. IST

Sridhar Chityala: Thank You ji, have a wonderful day to everybody.



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