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Satchu's Rich Wrap-Up
Monday 21st of November 2016

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21-NOV-2016 :: Higher Interest Rate is Propelling the Dollar @TheStarKenya

On the 12th of September, I wrote

Therefore, my second Trade of the year [And by the way, I issued my
3rd Trade of the Year the day after Donald Trump won the Election
which is to Buy the Dollar]  is to ''buy put options on 10- year bonds
because this is going to pop, and when it pops, the wizardry won’t
work anymore, and at that moment there is going to be one heck of a

Since Trump won, we have witnessed some seriously violent moves in the
Bond Markets. The US 10 Year Bond has surged 55 basis points higher in
2 weeks, which is the biggest fortnightly rise in 15 years and second
biggest in almost 30 years. Of course, The US remains the base-line
and this has created a shock-wave across global Bond markets. Higher
US interest rates have propelled the Dollar higher and versus the Yen
the Dollar is +7.5% over the last 2 weeks, its best fortnightly
performance since 1988, second best since end of Bretton Woods. This
is big.

What we are watching is the cratering of the Quantitative Easing Consensus.

Prime Minister Theresa May said this at the Conservative Party's
annual conference in October

"While monetary policy – with super-low interest rates and
quantitative easing – provided the necessary emergency medicine after
the financial crash, we have to acknowledge there have been some bad
side effects.

"People with assets have got richer. People without them have
suffered. People with mortgages have found their debts cheaper. People
with savings have found themselves poorer.

"A change has got to come. And we are going to deliver it. Because
that’s what a Conservative Government can do."

Prime Minister May and President Trump have been propelled to Power on
the back of older [mostly white] Folks, many of whom have seen their
hard-earned savings over a life-time, now earn them a paltry return
and a negative one in many cases. When all the now dumb-founded
Pollsters reach their ''mea culpa'' moment, they will all realise that
they underestimated the frustration and anger of this constituency.
This is important and this is what the Bond Market has seen very
clearly. The QE consensus is dead in the Water. Stone-cold Dead. It is
this realisation that is now creating a negative feed-back Loop across
Emerging Market assets and Bond Prices. Trumponomics is going to
accelerate this Trend. Trump is proposing to cut Taxes and increase
spending. The Dollar is at a 13 Year High, Asian currencies are at
multi-year Lows and bond yields have soared. For those who have
watched the Flight to Quality unfold here at home, this is no
different. Trump is accelerating a global Flight to Quality and a
stampede back into US Assets.

Here in Africa, Egypt has capitulated. They have taken $12.5b from
Madam Lagarde and freed the currency. The USD/EGP which had been
pegged at 8.88 climbed as high as 18.00 before settling down to
16.2495 last. Nigeria, which is in the exact same Boat as Egypt has
chosen a different Path.

Authorities should be able to jail for as long as two years anybody
holding dollars in cash for more than 30 days, or fine them 20 percent
of the amount, according to a draft amendment to Nigeria’s
Foreign-Exchange Act. Last week, security agents threatened to arrest
black-market money-traders if they exchanged the naira at a rate
weaker than 400 per dollar, compared with the existing street-rate of
around 460. The currency’s official exchange rate, which analysts say
the central bank is still manipulating, is 315 against the greenback.

“The CBN wants to take its regulatory onus to frightening
proportions,” analysts at SBM said in an e-mailed note Friday in
response to the new draft law. This is taking policy making Insanity
to a whole new Level.

What is unfolding in Nigeria is a debacle of spectacular and monstrous
proportions worthy of a Nollywood movie all of its own.

SSA Eurobond Yields have spiralled upwards. Kenya's 10 Year Eurobond
[which the Treasury should have tapped earlier in the Year - both the
IMF and myself tried to warn] has spiked more than 170 basis points
shuttering that option to go to the International Markets.
Fortunately, the Interest Rate Capping Bill has stampeded Banks into
Government Paper. Unfortunately, this is what crowding out looks like
because the stampede into GOK Paper has been at the expense of private
sector credit growth.

We are at an Inflexion Point with severe and negative implications for
EM and Frontier Assets. Its that moment when you have been climbing
steadily on a roller-coaster and all of a sudden you note you cannot
go any higher and you are about to drop precipitously. Your hands grip
a little tighter and you know your stomach is going to leap into your

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Elephants can weigh as much as 15,500 pounds each, but you won't necessarily hear them coming

Elephants can weigh as much as 15,500 pounds each, but you won’t
necessarily hear them coming—the soft tissue in the animal’s enormous
platelike feet acts like a shock absorber. “They’re almost completely
silent,” says Dutch model Doutzen Kroes

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Barack Obama and Vladimir Putin shake hands at the APEC Summit in Lima on Nov. 20. Photographer: Brendan Smialowski/AFP
Law & Politics

Putin’s foreign policy aide, Yuri Ushakov, blasted the Obama
administration as recently as Nov. 17. “The departing team has
recently been doing everything it can to push our relations into a
such dead-end that will be quite difficult for the new team, if it
wants, to pull them out of it,” Ushakov said.

Not very fond of each other are they?

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Law & Politics

Inside a stunned White House, the President considers his legacy and
America’s future.

“This is not the apocalypse,” Obama said. History does not move in
straight lines; sometimes it goes sideways, sometimes it goes
backward. A couple of days later, when I asked the President about
that consolation, he offered this: “I don’t believe in
apocalyptic—until the apocalypse comes. I think nothing is the end of
the world until the end of the world.”

“So when you stand and deliver that State of the Union address,” Lauer
said, “in no part of your mind and brain can you imagine Donald Trump
standing up one day and delivering the State of the Union address?”

Obama chuckled. “Well,” he said, “I can imagine it in a ‘Saturday Night’ skit.”

Finally, he read one off his phone from the Republican candidate:
“President Obama will go down as perhaps the worst president in the
history of the United States! @realDonaldTrump.”

A short, cool pause, then Obama delivered the zinger: “Well,
@realDonaldTrump, at least I will go down as a President.” And then,
like a rapper dropping the mike, Obama held out his phone and let it
fall to the floor.

For tens of millions of Americans, Trump was unthinkable as President.
It came to be conceded that he had “tuned into something”: the
frequencies of white rural life, the disaffection of people who felt
overwhelmed by the forces of globalization, who felt unheard and
condescended to by the coastal establishment. Yet Trump himself, by
liberal consensus, was a huckster mogul of the social-media age,
selling magic potions laced with poison. How could he possibly win?

The fissures and frustrations in the American electorate were nothing
new, and some commentators were notably alert to them. Before and
after the election, a passage from Richard Rorty’s 1998 book,
“Achieving Our Country,” circulated on social media. Rorty, a
left-leaning philosopher, who died in 2007, predicted that the
neglected working class would not tolerate its marginalization for
long. “Something will crack,” he wrote:

The nonsuburban electorate will decide that the system has failed and
start looking around for a strongman to vote for—someone willing to
assure them that, once he is elected, the smug bureaucrats, tricky
lawyers, overpaid bond salesmen, and postmodernist professors will no
longer be calling the shots. . . . One thing that is very likely to
happen is that the gains made in the past forty years by black and
brown Americans, and by homosexuals, will be wiped out. Jocular
contempt for women will come back into fashion. . . . All the
resentment which badly educated Americans feel about having their
manners dictated to them by college graduates will find an outlet.

 When Obama wandered down the aisle of Air Force One, I asked him, “Do
you feel confident about Tuesday?”

“Nope,” he said.

But then, in Obamian fashion, he delved into a methodical discussion
of polling models and, finally, landed on a more tempered and upbeat
version of “nope.” He was “cautiously optimistic.”

“I’m like Mick Jagger,” he said. “I’m old, I’m gray, but people still turn out.”

As we rode toward the airport, Obama talked about Trump. “We’ve seen
this coming,” he said. “Donald Trump is not an outlier; he is a
culmination, a logical conclusion of the rhetoric and tactics of the
Republican Party for the past ten, fifteen, twenty years. What
surprised me was the degree to which those tactics and rhetoric
completely jumped the rails. There were no governing principles, there
was no one to say, ‘No, this is going too far, this isn’t what we
stand for.’ But we’ve seen it for eight years, even with reasonable
people like John Boehner, who, when push came to shove, wouldn’t push
back against these currents.”

I asked about Trump’s capacity to eliminate serially a long string of
Republican contenders. “Donald Trump beating fifteen people said less
about his skills and more about the lack of skills of the people he
beat,” Obama said. “But, obviously, he tapped into something. He’s
able to distill the anger and resentment and the sense of
aggrievement. And he is skillful at challenging the conventions in a
way that makes people feel something and that gives them some

“I’m half Scotch-Irish, man!” he said. “When folks like Jim Webb write
about Scotch-Irish stock in West Virginia and Kansas and so on, those
are my people! They don’t know it, always, but they are.”

When I kept prodding him for a reaction beyond sheer fact and
discernment, he stayed in that calm zone he likes to inhabit, the
analyst of even his own gut.

“A lot of you are young and this is your first rodeo,” Obama told the
staffers in the Oval Office, a source recalled. “For some of you, all
you’ve ever known is winning. But the older people here, we have known
loss. And this stings. This hurts.”

Suddenly, Germany, led by Angela Merkel, was the lonely bulwark of
Europe and Atlanticism.

The White House was, as one staffer told me, “like a funeral home.”

The official line at the White House was that the hour-and-a-half
meeting with Trump went well and that Trump was solicitous. Later,
when I asked Obama how things had really gone, he smiled thinly and
said, “I think I can’t characterize it without . . . ” Then he stopped
himself and said that he would tell me, “at some point over a beer—off
the record.”

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Abe Convinced Japan-Bashing Trump 'Is a Leader We Can Trust'
Law & Politics

Abe told reporters in New York on Thursday night that he had frank
discussions in a “warm atmosphere” at Trump Tower. He said he
explained his views on a range of issues, but declined to comment on
the substance of the talks in a meeting that lasted more than an hour.
Abe gave Trump a golf club, and received a golf shirt from the
real-estate mogul.

“He made time for me, even though he is busy with personnel matters,”
Abe said after the meeting. “I am convinced that President-elect Trump
is a leader we can trust.” The pair agreed to meet again for broader
and deeper talks when their schedules allow, he said.

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"I am Thomas Cromwell in the court of the Tudors," Steve Bannon
Law & Politics

“I am Thomas Cromwell in the court of the Tudors,” Steve Bannon,
Trump’s chief strategist, told the Hollywood Reporter, likening
himself to Henry VIII’s right hand man and master manipulator (who, in
a fact he may have overlooked, was ultimately executed for treason).
Bannon did not propose historical roles for Reince Priebus, chief of
staff, or Jared Kushner, an intimate adviser married to Trump’s
daughter, but they are his rivals for Trump’s attention.

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Bernard-Henri Levy @BHL Marine Le Pen may win election as people have lost interest in whether politicians tell the truth.
Law & Politics

"You might say that those were the three main coups in this global
theatre of populism  - the rise of Le Pen, the reign of Silvio
Berlusconi, who is a kind of European Trump, and the Brexit."

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.0594
Dollar Index 101.34
Japan Yen 111.06
Swiss Franc 1.0102
Pound 1.2338
Aussie 0.7324
India Rupee 68.165
South Korea Won 1185.10
Brazil Real 3.3843
Egypt Pound 15.8030
South Africa Rand 14.4649

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The biggest copper rally in almost six years

The biggest copper rally in almost six years is leaving hedge funds
squaring off with Goldman Sachs Group Inc.
Futures in New York jumped 18 percent in just a month. The gains were
propelled by a drop in London Metal Exchange-monitored inventories and
speculation that Donald Trump’s pledges on infrastructure building
will increase metals demand. The president-elect seems to have
convinced money managers, who boosted their wagers on further price
gains to the largest ever.

Emerging Markets

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Moreover, some African despots - like Joseph Kabila of the DRC - have hinted that they just needed to cling to power long enough to see President Obama replaced by Trump.

Moreover, some African despots – like Joseph Kabila of the DRC – have
hinted that they just needed to cling to power long enough to see
President Obama replaced by Trump. In Kabila’s view, Trump won’t care
too much if an African leader violates term limits and overstays his
time in power. Sadly, Kabila probably is right.

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South Africa All Share Bloomberg -0.13% 2016

50,626.06 +8.49 +0.02%

Dollar versus Rand 6 Month Chart INO 14.4649


Egypt Pound versus The Dollar 3 Month Chart INO 15.8030


Red sky in #Lagos. #Nigeria @PaulWallace123


Economists surveyed by Bloomberg estimate #Nigeria's economy
contracted 2.05% in 3Q, and that central bank will hold interest rates
at 14% @PaulWallace123


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Nigeria Proposes Jail Time, Fines as It Tries to Boost Naira

Authorities should be able to jail for as long as two years anybody
holding dollars in cash for more than 30 days, or fine them 20 percent
of the amount, according to a draft amendment to Nigeria’s
Foreign-Exchange Act

The latest move will further worry foreign investors, according to
Lagos-based SBM Intelligence. Last week, security agents threatened to
arrest black-market money-traders if they exchanged the naira at a
rate weaker than 400 per dollar, compared with the existing
street-rate of around 460. The currency’s official exchange rate,
which analysts say the central bank is still manipulating, is 315
against the greenback.

“The CBN wants to take its regulatory onus to frightening
proportions,” analysts at SBM said in an e-mailed note Friday in
response to the new draft law. “The move smacks of desperation and can
only result in negative investor perception and capital flight.”

The central bank didn’t introduce the bill, Isaac Okorafor, a
spokesman, said in a text message in response to questions, without

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Ghana Nkrumah's heirs The Economist

FLAGS coloured with the red, black and green of Ghana’s ruling party
flutter feebly in the still, hot air that barely stirs above
Independence Avenue as it bends down towards the sea. There it ends
abruptly before the sweeping curves of grey Italian marble meant to
resemble, depending on whom one asks, the stump of a tree or the
buried hilt of a sword. Beneath it lies the body of Kwame Nkrumah, the
country’s first president and, for many millions of people, a man
synonymous with Africa’s liberation from colonialism. Ghana, in 1957,
was the first sub-Saharan African country to win its independence.

Yet here, at the birthplace of democracy in Africa, are portents of
its fragility. On what was once the whites-only polo ground where
Nkrumah declared the new state, his headless statue stands as a
reminder of how a once-promising flame guttered. After declaring a
one-party state and mismanaging the economy, Nkrumah was overthrown in
a violent coup in 1966. It took more than a quarter of a century
before the restoration of multiparty democracy in 1992 ushered in the
start of what many now call Africa’s second liberation, and put an end
to a cycle of military coups in Ghana interspersed only by brief
periods of civilian government.

More worrying than reminders of democracy’s past corruption are the
whiffs of its current decay. A presidential election is to be held on
December 7th. But apart from a few billboards, most of them hailing
the accomplishments of the incumbent, John Mahama, there are few
visible signs that either the ruling National Democratic Congress
(NDC) or the opposition New Patriotic Party (NPP) are campaigning
vigorously for the support of voters.

The NPP’s muted campaign is easily explained: it last formed a
government eight years ago and its coffers are almost empty. Without a
victory this year it will struggle to finance another serious bid for
the presidency in four years’ time.

The NDC’s lackadaisical drive for votes, by contrast, reflects the
insouciance of Mr Mahama. Instead of trying to win over voters through
a battle of ideas, his party relies on patronage, and on spending
money it does not have. Since the NDC came to power eight years ago,
spending on civil servants has exploded (see chart), pushing Ghana
precipitously close to a debt crisis so severe that it was forced to
turn to the IMF for a bail-out last year. Under strict supervision the
government has grudgingly brought its spending under control. However,
with public debt hovering at about 70% of GDP (and debt repayments
accounting for a third of government revenue), its finances are
precarious. Worse, it has already squandered the windfalls it expects
from the development of large offshore oilfields. The roads are full
of potholes, there are regular power cuts and big companies talk
openly about moving across the border into Ivory Coast.

And politics in Ghana can be a grubby business at the best of times.
“The 2012 election was won because of me,” boasted one government
minister to your correspondent. “I’m the one who did the
gerrymandering.” More recently a video has circulated showing Mr
Mahama’s motorcade driving through a market with him leaning out of
the sunroof of his car handing out wads of cash. At first his
spokesman said he was handing out pamphlets, though he was at a loss
to explain why they were palm-sized and tightly rolled. He later said
the money was compensation for damage to some of the market stalls.

If Ghana is to live up to its reputation as a beacon of democracy in
Africa, it needs to clean itself up.

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Woman detained for spreading malicious messages against Family Bank
Kenyan Economy

In the statement, the bank urged its customers to ignore negative
statements and malicious rumours on social media that tried to depict
it negatively.

“The source of the malicious statement is under investigation by the
directorate of Criminal Investigations,” the statement read.

Family Bank confirmed its strong financial position stating that it
operates within requirements governed by the Central Bank of Kenya.

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Ciano, other ex-Uchumi officials barred from holding office in public firms, to pay Sh21.7m
Kenyan Economy

Mr Ciano, together with former Uchumi chairman Khadija Mire, finance
manager Chadwick Okumu, former directors James Murigu and Bartholomew
Ragalo have also been banned from holding office in any publicly
listed company.
The markets regulator has also barred Faida Investment Bank from
carrying out any advisory services for six months for acting as lead
transaction adviser and sponsoring stock broker ill-fated Sh895
million Uchumi cash call.
CMA has slapped Mr Ciano with a financial penalty of Sh5 million and
will also seize Sh13.5 million deemed as proceeds of crime as he did
not declare conflict of interest to the Uchumi board.

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Kenya Shilling versus The Dollar Live ForexPros 102.24
Kenyan Economy

Nairobi All Share Bloomberg -4.78% 2016


138.73 -1.23 -0.88%

Nairobi ^NSE20 Bloomberg -18.55% 2016 [+5.369% since 29 August
Multi-Year closing Low]


3,291.25 +7.48 +0.23%

Every Listed Share can be interrogated here


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N.S.E Today

The Kenya Shilling traded a : 101.689 - 102.240 range today.
The Market tends to focus on this Pair but its worth considering that
against a Basket of currencies - the Shilling has appreciated quite
The Nairobi All Share closed -0.53 points lower at 138.20.
The Nairobi NSE20 Index ticked -7.31 points lower to close at 3283.94
Equity Turnover was lackadaisical and clocked 294.313m.

N.S.E Equities - Commercial & Services

Safaricom was the most actively traded counter at the Securities
Exchange and closed unchanged at 20.00 with 10.284m shares worth
205.668m [some 69.78% of the total volume traded today] changing
hands. I look forward to hosting the CEO Bob Collymore this Saturday
from 0930 am at the InterContinental Hotel. All are welcome. Safaricom
has been a Bull Outlier for a number of years and is +31.16% on a
Total Return Basis in 2016 vastly performing the All Share Index which
is -4.76% through this morning. I am expecting Fresh All Time Highs
before Year End.

WPP-Scangroup firmed +0.28% to close at 18.10 and was trading at
session highs of 18.95 +4.99% at the Finish, WPP-ScanGroup is -39.66%
through 2016.

N.S.E Equities - Finance & Investment

The Presidential Spokesman Manoah Esipisu MBS tweeted as follows
Sunday afternoon

''The Central Bank of Kenya whose mandate it is to regulate banks, is
in full control of the situation and must be allowed to do its work.''

''We are all aware of careless & alarmist reports regarding the
banking industry peddled mainly in social media in the last couple of

Family Bank urged its customers to ignore negative statements and
malicious rumours on social media that tried to depict it negatively.

“The source of the malicious statement is under investigation by the
directorate of Criminal Investigations,” the statement read.

The StanLib Fuhari IREIT rallied +8.73% to close at 13.70 on the news
that SBG Securities chief executive Nkoregamba Mwebesa was joining
Stanlib Kenya replacing James Muratha who left in August.

The Big Banks are now Piranhas and the Little ones tadpoles.

Kenya Commercial Bank
eased -0.69% to close at 30.50 and traded
878,800 shares. KCB is -25.71% in 2016 on a Total Return Basis in line
with a Banking Sector which has been wrestling with some serious
Equity Bank eased -0.78% to close at 31.75 and traded 545,400 shares.
Equity is -15.62% in 2016 on a Total Return Basis.

N.S.E Equities - Industrial & Allied

KenolKobil rallied +3.6% to close at a 2016 High of 12.95 and traded
229,900 shares. KenolKobil is +36.45% through 2016 and has seriously
outperformed through this year.

Kenya Power KPLC rebounded +2.23% to close at 9.15 and was trading
close to session highs of 9.45 +5.59% at the Closing bell.

by Aly Khan Satchu (www.rich.co.ke)
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November 2016

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