|Tuesday 04th of June 2019
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Normal Board - The Whole shebang
Prompt Board Next day settlement
Expert Board All you need re an Individual stock.
The Latest Daily PodCast can be found here on the Front Page of the site
Big Tech plunges >5% as US moving toward major antitrust probe of tech giants. FTC and DoJ, which jointly enforce antitrust laws in US, have divided oversight over 4 comps Amazon, Facebook, Apple and Google
Big Tech plunges >5% as US moving toward major antitrust probe of tech
giants. FTC and DoJ, which jointly enforce antitrust laws in US, have
divided oversight over 4 comps Amazon, Facebook, Apple and Google.
Facebook crashes 8%, Amazon 5%, Google 7%
.@realDonaldTrump lands to pomp and Twitter tirades @FT
Law & Politics
While Mr Trump was breaking all the diplomatic rules when it came to
the politics, he basked in the immaculately choreographed pomp laid on
by the House of Windsor, from tea at Clarence House to a state banquet
at Buckingham Palace Those looking for a presidential gaffe claimed
that an awkward hand shake with the monarch was actually an attempted
fist-bump, although it was later described by commentators as
“half-handshake, half-thumb war”. And finally Mr Trump attended a
state banquet at Buckingham Palace, a white-tie occasion attended by
around 170 guests dining off the silver gilt of the Grand Service made
for George IV. They ate halibut with watercress mousse, saddle of
Windsor lamb, and strawberry sable with lemon verbena cream while
listening to music from Handel, Copland and West Side Story.
Bond Yields in "tilt" mode - Forever blowing Bubbles
G7 Government Bond Yields have sunk to record lows. The iconic German
Bund [10 Year German Bond] sank to -0.21%. The German Finance Ministry
receives 20 Cents per 100 euros of debt as a gift from the investors
when they sell 10 Year Bunds, In fact Switzerland is experiencing
Negative Bond Yields through 20 Years, Germany, Japan, Denmark,
Netherlands through 10 years, Austria, France, Finland through 8
years, Sweden, and Belgium 7 years, Ireland and Slovakia 6 years,
Spain, Portugal, Slovenia 5 years and even Italy's 6 month Bills are
negative. Of course Japan was the first G7 market to enter ''tilt''
territory and its JGB [Japan 10 Year Bond] remains at -0.10%. This
macro gale force level move has pulled US 10-Yr Treasuries to a
20-month low of 2.15% [Last November it was at 3.24%]. Rate markets in
the US have now priced in close to 85bp cumulatively of easing by the
end of 2020. (via JPM). The US Curve has inverted and typically curve
inversions are harbingers of recession. Markets and prices exhibit
patterns of correlation and essentially my perspective is that it is
the correlation that has exerted a ''Pull'' Effect on US Yields and
that therefore the ''recessionary'' Signalling of the Yield Curve
should be discounted. There has been a Strong ''Safe Haven'' Demand
develop over the last few sessions which has lifted Government Bond
Prices, Gold and the Yen. And there is a correlation element to recent
Yen strength, Japanese Bond Yields were already negative therefore in
the comparison Japanese Yields have become more attractive and given
further muscle to the Yen.
It was not too long ago that Everyone was predicting a Weimar Republic
outcome or if you are looking for a more recent vintage then dial up
Caracas, Khartoum or Harare. Classical Economic Theory predicted that
if lashings and lashings of freshly printed money were injected
intravenously into the Patient, then the value of money should devalue
and inflation run off the charts. Clearly this has not happened. In
fact Inflation Gauges are slumping and Inflation is ''Like a patient
etherized upon a table'' Trump's Tariff War has spiked earlier ''high
jinks'', stock markets have lost ground and Investors have continued
to run for cover and ''safe havens'' You will recall Ben Bernanke's
riposte when asked why Investors buy Gold
People hold Gold "As protection against what we call tail risks:
really, really bad outcomes."
Gold crossed $1,300+ on Friday. Crude Oil got crushed -5.34% Friday
capping a -15.87% retreat over the last 4 weeks. Crude Oil is an
interesting proxy because its been a Tug of War between sharpened
Geopolitical Risk [particularly in the matter of Tehran which sent
prices higher] versus concerns around Global Growth and the latter has
now overwhelmed the Former. It has turned out that it was not April
that was the cruellest month [breeding lilacs out of the dead land,
mixing memory and desire, stirring dull roots with spring rain] but
May. The Trade War intensified through May and its intensification is
best perceived through the Linguistics.
What we also know is that you don't stand in front of a Runaway
Freight Train. The Question we need to ask ourselves is how much
further this move may run? My sense is that the G7 Bond Markets are
now in nose-bleed territory. Whilst I accept that its a 20/80 [US
Consumer absorbs 20%, China will have to absorb 80%] of the Tariff
Price increase, nevertheless even 20% of a 100 is inflationary. The US
Rates and Bond Market looks seriously overcooked to me. However, what
we also know is that Markets can stay irrational longer than anyone
can stay solvent. Therefore, I would be tentatively selling 85bp of
cumulative US easing through 2020 as per JPM. Last week we saw
positive EM and Frontier market divergence, which was noteworthy.
Lusaka is in unprecedented Territory and the forced nationalisation of
Mr. Agarwal's Copper mines might well be a cashew nut moment for
President Lungu. Zambian $ Eurobond Yields are at 22%. Thats ''whack''
Mexican Avocado Price Jumps to Highest Since August 2017 @markets
One gauge of the Hass variety from Michoacan, the heartland of Mexican
avocado production, gained 3.7% on Monday to the highest since August
2017. Unchanged last week, the benchmark has surged 65% this year.
Avocados don’t trade on exchanges like soybean futures in Chicago or
copper in New York, and like other relatively opaque fruit and
vegetable markets, prices start with producers. A tough season has
squeezed supply and pushed up prices, according to a survey Friday of
half a dozen sellers in Mexico City’s busy wholesale market.
15 APR 19 :: The Platform Economy
The new high tech, millenial, crypto, avocado economy exhibits viral,
wildfire and exponential and even non-linear characteristics not
The tipping point is that magic moment when an idea, trend, or social
behaviour crosses a threshold, tips, and spreads like wildfire”-
10 NOV 14 ::Ouagadougou's Signal to Sub-Sahara Africa
What’s clear is that a very young, very informed and very connected
African youth demographic [many characterise this as a ‘demographic
dividend’] – which for Beautiful Blaise turned into a demographic
terminator – is set to alter the existing equilibrium between the
rulers and the subjects, and a re-balancing has begun. We need to ask
ourselves; how many people can incumbent shoot stone cold dead in such
a situation – 100, 1,000, 10,000? This is another point: there is a
threshold beyond which the incumbent can’t go. Where that threshold
lies will be discovered in the throes of the event. Therefore, the
preeminent point to note is that protests in Burkina Faso achieved
escape velocity. Overthrowing incumbents is all about acceleration,
momentum and speed best characterised by the Ger- man word
Zimbabwe strikes milestone @IMFNews deal to boost new currency @FT
Zimbabwe’s central bank said it would stop printing money as part of a
milestone deal with the IMF, which has agreed to monitor vital
currency reforms in the southern African nation.
Under the terms of an IMF staff-monitored programme announced on
Friday, President Emmerson Mnangagwa’s government will cease borrowing
from the central bank to pay its bills, a practice that has
exacerbated Zimbabwe’s debilitating currency crisis.
Money-printing has undermined Mr Mnangagwa’s pledge to make Zimbabwe
“open for business” after the 2017 coup that overthrew Robert Mugabe,
who led the country into penury under his long rule.
The IMF said stopping printing money was “critical to support the new
currency” which was launched in February to tackle shortages of the US
dollars that Zimbabwe has used since hyperinflation destroyed its
original currency a decade ago.
The institution also said that “significant economic reforms were
under way” in Zimbabwe, where the underperformance of the new currency
called RTGS dollars has worsened shortages of fuel and other goods.
Last year the government borrowed the equivalent of more than half of
its revenue from the money printing, though data indicate it has
avoided tapping the central bank since December.
Although the IMF programme will only dispense advice, not loans, it is
the biggest olive branch to Zimbabwe from a big international
financial institution since Mr Mnangagwa replaced Mr Mugabe.
It will also require Zimbabwe to cease taking on new debt from foreign
lenders for the duration of the programme.
While the government is seeking an IMF seal of approval in order to
shore up the RTGS dollars, the currency is regarded with suspicion in
Zimbabwe and has fallen in value on a parallel market since it was
Last year’s botched elections and violent crackdowns on opposition
groups and protesters have marred Mr Mnangagwa’s attempt to end
international isolation for Zimbabwe, which needs financial aid. The
IMF programme follows his government’s pledge to repeal repressive
public order and media laws.
The programme will monitor what the IMF admitted in a staff report was
a risky strategy for Mr Mnangagwa’s government to backstop the new
currency with tight fiscal limits.
Mthuli Ncube, Zimbabwe’s finance minister, is aiming to cut the
government budget deficit to about 4 per cent of gross domestic
product in RTGS dollar terms this year, compared with more than 7 per
cent in 2018.
The plan will require cutting spending and increasing tax revenue even
as Zimbabwe’s economy is already expected to contract this year
because of the currency turmoil.
The report also warned that “policy slippages, or interference by
vested interests, could impede ongoing efforts to have
market-determined exchange and interest rates”.
Investors and politicians have accused powerful interests in the fuel
trade of plotting against the currency reforms. This month the central
bank ended favourable rates for importers of fuel to access US
An interbank market for trading the RTGS dollar has failed to take
off. There has been little trading compared with the parallel market
where the RTGS dollar is much weaker. In a sign of the widening
distrust of the new currency, supermarkets also recently moved to set
prices in US dollars.
“Although the risks to a successful [staff-monitored programme] are
considerable, staff supports the SMP as a strong step to restoring
macroeconomic stability,” the IMF report said.
Three years ago, Zimbabwe paid off more than $100m of arrears on IMF
loans but it is still in default on debts to other international
lenders. Only when it clears them will the country be able to fully
access international financing.
The IMF monitoring will run until early next year. This month the
government borrowed $500m from Afreximbank, a Cairo-based lender, to
shore up the currency trading market.
Maybe Africa Really Will Be the New China @economics @bopinion
When people tell me that Africa will be the new China, I’m not as
incredulous as I used to be. The continent is showing potential, and
progress could come from what many consider to be a highly unlikely
All across Africa, investors -- many of them private entrepreneurs
from China -- are building factories. Others from India, Sri Lanka,
and Bangladesh are joining in, while car companies from Japan,
Germany, and South Korea are declaring their intent to put assembly
plants in places such as Ethiopia, Tanzania, and Ghana.
Meanwhile, overall African growth is looking impressive. The
International Monetary Fund forecasts that 6 of the top 10
fastest-growing economies will be African this year:
Six of the world’s fastest-growing economies are in Africa, according
to IMF forecasts
Manufacturing is only one factor. A recovery in natural resource
prices and urbanization (which creates more demand for local services)
also play important roles.
That said, there may be a lot more manufacturing going on than
official statistics suggest, since only a small fraction of African
workers tend to be employed in the formal sector.
So despite myriad policy challenges -- a fragmented patchwork of
governments, fragile nations with artificial boundaries drawn by
colonial empires of the past, scattered wars and violence -- many
African countries might be starting down the well-worn path of
manufacturing-driven growth trodden by the developed world.
Meanwhile, in South and Southeast Asia, poor countries like Vietnam
and Bangladesh are adding factories even more rapidly. Although few
expect this process to bring living standards up to the levels of
Europe or Japan anytime soon, there’s hope that worldwide
industrialization will at least alleviate extreme poverty.
Yet many people -- including Nobel prize-winning economist Joseph
Stiglitz and researchers at the Brookings Institution -- believe that
Africa and South Asia can’t follow the strategy that worked so well
for Europe and East Asia. Automation, they claim, will soon render
large-scale, labor-intensive manufacturing obsolete.
They can point to the recent experience of developed countries, which
have seen manufacturing work decline as a percent of total employment
in recent years. When productivity improvements outpace demand for
manufactured goods -- that is, when automation grows faster than
production -- the share of workers employed in factories must decline.
Even China is not immune. A new paper by economists Osea Giuntella and
Tianyi Wang finds that regions with industries more amenable to the
use of industrial robots have seen employment and wages decline more
in recent years.
But China is already industrialized; the real danger is to the
countries that are still poor. Stiglitz notes that in sub-Saharan
Africa, manufacturing was lower as a percent of gross domestic product
in 2000 than in 1977, and has risen only slightly since then.
A 2015 paper by Harvard economist Dani Rodrik makes the case that
premature deindustrialization is already hitting the developing world,
declaring that “countries are running out of industrialization
opportunities sooner and at much lower levels of income compared to
the experience of early industrializers.”
Stiglitz and the Brookings researchers both suggest that African
countries look elsewhere for growth. Their suggestions include
tourism, agriculture, natural resource exports, and information
technology services -- basically, everything but manufacturing.
Yet most of these suggestions offer little reason for enthusiasm.
Agriculture tends to automate even faster than industry.
Natural resource exports are linked to political dysfunction and trap
a country at the low end of the value chain. Tourism is fine, but
doesn’t lead to the kind of learning-driven productivity enhancements
that manufacturing is known for.
One shouldn’t dismiss manufacturing so quickly. The longer-term
decline in African manufacturing probably has more to do with the
failure of mid-20th-century industrial policies and central planning
than with automation: It happened in the 1970s, 80s, and 90s -- when
industrial robots were still not widespread, and when China and other
Asian countries were rapidly gaining manufacturing jobs. Now that
countries like Ethiopia, Tanzania, Vietnam and Bangladesh are
industrializing more naturally, through integration into global supply
chains rather than government-driven efforts at import substitution, a
repeat of 20th century deindustrialization seems unlikely.
And even if manufacturing doesn’t provide quite as much employment for
poor countries as in the past, factories can still have an outsized
impact on overall growth. One reason is an effect called local
multipliers. When a city or region exports goods to other regions, the
incoming revenue gets spent locally, creating extra demand and jobs
nearby. Economist Enrico Moretti, for example, finds that “for each
additional job in manufacturing in a given city, 1.6 jobs are created
in the nontradable sector in the same city.” Thus, even if most of the
new employment in Ethiopia, Tanzania, or Bangladesh comes from
restaurants, shops, hair salons, and so on, factories are still very
useful for generating those service jobs.
So poor countries shouldn’t give up on manufacturing. On the contrary,
they should double down. They should lure foreign investment with
quality infrastructure, improved education, and streamlined
regulation, while nurturing domestic entrepreneurs with export
assistance. Robots may one day shut the door to traditional
industrialization, but there is every reason to think that for now,
the opportunity is still there for the taking.
Kenyan Leader Likely to Reappoint @njorogep as @CBKKenya Chief @business @herbling
President Uhuru Kenyatta is likely to reappoint Patrick Njoroge for a
second term as governor of the east African nation’s central bank,
according to people with direct knowledge of the matter.
A steady currency, efforts to boost loans to small businesses and
market-led bank consolidation put him in good standing to retain the
job, according to the people, who asked not to be identified because
the matter is still private.
Njoroge, whose first four-year term ends June 18, told reporters last
week to direct questions on the subject to the appointing authority.
Njoroge’s reappointment emboldens him to continue measures that have
seen the shilling exchange rate barely move since June 2015, when most
other African currencies have seen double-digit depreciation. It also
means the currency’s valuation will remain a sticky issue -- Njoroge
said the International Monetary Fund, his former employer, made
mistakes in calculations that showed the local unit was 17.5%
Njoroge’s approach of voluntary bank consolidation, as opposed to the
Treasury’s failed bid to increase banks’ capital requirements fivefold
to force tie-ups, has been vindicated by deals in the pipeline. KCB
Group Plc is buying National Bank of Kenya Ltd. and NIC Group Plc and
Commercial Bank of Africa Ltd. are merging.
“We are not done yet,” Njoroge said on bank consolidation.
“The headroom for new borrowing has diminished,” Njoroge said last month.
Let me end with the Madaraka Day Masterstroke announcement.
I am sure the Central Bank has visibility on how much Cash is not in
circulation. The Announcement might be a catalyst for s short term
stimulus as Owners of the ''Jirongos'' try and dispose them. I would
have thought the discount is already 20% at the very least.
Demonitisation is a very neat Solution. Mohamed Wehliye tweeted
1. It is a one time tax on black money
2. Counterfeiting of 1k down
3. CBK liabilities of Ksh down as a certain percentage of the
demonetised 1k will be extinguished - not come back
4. Cash to GDP ratio will go down -
5. % of big denomination re money in circulation down
Its a very clever move and I noticed the President was rather amused
by its cleverness.