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Macro Thoughts

Home Thoughts

Thirst drove me down to the water  where I drank the moon's reflection. Rumi

no one leaves home unless
home is the mouth of a shark
you only run for the border
when you see the whole city running as well

your neighbors running faster than you
breath bloody in their throats
the boy you went to school with
who kissed you dizzy behind the old tin factory
is holding a gun bigger than his body
you only leave home
when home won’t let you stay.37

no one leaves home unless home chases you
fire under feet
hot blood in your belly
it’s not something you ever thought of doing
until the blade burnt threats into
your neck
and even then you carried the anthem under
your breath
only tearing up your passport in an airport toilets
sobbing as each mouthful of paper
made it clear that you wouldn’t be going back.

White House: The acting AG has betrayed the DOJ by refusing to enforce
a legal order designed to protect the citizens of the US

It started with the doom-hued inauguration homily to “American
carnage” in United States cities co-written by Mr. Bannon, followed a
few days later by his “shut up” message to the news media. The week
culminated with a blizzard of executive orders, mostly hatched by Mr.
Bannon’s team and the White House policy adviser, Stephen Miller,
aimed at disorienting the “enemy,” fulfilling campaign promises and
distracting attention from Mr. Trump’s less than flawless debut.

But the defining moment for Mr. Bannon came Saturday night in the form
of an executive order giving the rumpled right-wing agitator a full
seat on the “principals committee” of the National Security Council —
while downgrading the roles of the chairman of the Joint Chiefs of
Staff and the director of national intelligence, who will now attend
only when the council is considering issues in their direct areas of
responsibilities. It is a startling elevation of a political adviser,
to a status alongside the secretaries of state and defense, and over
the president’s top military and intelligence advisers.

Susan E. Rice, President Barack Obama’s last national security
adviser, called the arrangement “stone cold crazy” in a tweet posted
Sunday.

Panic set in Friday evening into Saturday, with people taken off
international flights, refugees and visa holders detained at airports,
and lawyers and protesters parachuting into the tumult after President
Donald Trump’s executive order banning immigrants from seven
Muslim-majority countries. But it was the latest evidence that Trump
was following through on the radical departure from US norms on
immigration that he had promised throughout his campaign.
Then, amid the outcry, the administration released a presidential
memorandum Saturday evening reorganizing the National Security Council
and thrusting Bannon, Trump’s chief strategist, onto the cabinet-level
interagency group with more access than the director of national
intelligence and the chairman of the Joint Chiefs of Staff. The move
made it clear that the central figure on the White House staff, and
one of the most powerful men in America, is now Bannon. And his
fingerprints were all over Trump’s refugee ban and hardline
immigration executive orders.
And as Bannon emerges as central to the administration, the former
Breitbart boss — who seems to enjoy controversy but avoids interviews
— has also become the central target for Trump’s opposition. The top
hashtag on Twitter for a time Sunday was: #StopPresidentBannon.

Little more than a week into the Trump presidency, the timing of the
Friday sunset seems to be growing increasingly important. Jared
Kushner, Trump’s son-in-law and West Wing adviser, has been positioned
as something of a mollifying presence upon his mercurial boss. “I have
a feeling that Jared’s going to do a great job. He’s going to do a
great job. You’ll work with him,” Trump recently declared at his
pre-inaugural gala to assorted well-wishers and friends from the
business community. In a White House split between those seemingly
loyal to the Republican Party (Reince Priebus, the former chairman of
the R.N.C., now Trump’s chief of staff), and its rabid base (Breitbart
chairman turned chief strategist Stephen Bannon), Kushner appeared to
be a Valerie Jarrett type—a steady familiar voice who could suss out
the signal from the noise.

Kushner, along with his wife, Ivanka Trump, is also an orthodox Jew
who observes Shabbat. From sundown on Friday until sundown on
Saturday, the couple abstains from technology and work. And early in
the incipient Trump administration, that brief period has been
unusually fraught. Last week, the president personally called the Park
Service on the morning after his inauguration to inquire about the
size of the crowds who came to watch him take the oath of office. He
subsequently delivered a widely derided speech at C.I.A. headquarters
that afternoon, during which he blathered on about the media’s
treatment of him and his inaugural crowd size. He then sent his press
secretary, Sean Spicer, into the briefing room to falsely claim that
it was the largest audience for an inauguration in history. During the
tumult, some noticed the conspicuous absence of Kushner’s allegedly
calming presence. “He wasn’t rolling calls on Saturday when this
happened,” one person close to Kushner told me last week. “To me,
that’s not a coincidence.”

It is worth noting that 6 out of these 7 countries (with the exception
of Lebanon) identified by General Wesley Clark “to be taken out” are
now the object of President Trump’s ban on Muslims’ entry to the US:
Iraq, Syria, Somalia, Libya, Sudan, Iran and Yemen.

Euro 1.0701
Dollar Index 100.35
Japan Yen 113.42
Swiss Franc 0.9953
Pound 1.2511
Aussie 0.7565
India Rupee 67.885
South Korea Won 1164.11
Brazil Real 3.1267
Egypt Pound 18.9000
South Africa Rand 13.5171

Subsequently, newspaper advertising revenues fell from $67 billion in
2000 to $19.9 billion in 2014

Movie-theater attendance is down to a 19-year low, with revenues
hovering slightly above $10 billion—or about what Amazon’s,
Facebook’s, or Apple’s stock might move in a single day. DreamWorks
Animation was sold to Comcast for a relatively meager $3.8 billion.
Paramount was recently valued at about $10 billion, approximately the
same price as when Sumner Redstone acquired it, more than 20 years
ago, in a bidding war against Barry Diller. Between 2007 and 2011,
overall profits for the big-five movie studios—Twentieth Century Fox,
Warner Bros., Paramount Pictures, Universal Pictures, and Disney—fell
by 40 percent. Studios now account for less than 10 percent of their
parent companies’ profits.

But the real threat isn’t China. It’s Silicon Valley. Hollywood, in
its over-reliance on franchises, has ceded the vast majority of the
more stimulating content to premium networks and over-the-top services
such as HBO and Showtime, and, increasingly, digital-native platforms
such as Netflix and Amazon. These companies also have access to
analytics tools that Hollywood could never fathom, and an allergy to
its inefficiency. Few have seen the change as closely as Diller
himself, who went from running Paramount and Fox to building his own
tech empire, IAC. “I don’t know why anyone would want a movie company
today,” Diller said at Vanity Fair’s New Establishment Summit in
October. “They don’t make movies; they make hats and whistles.”

The real threat was that Netflix was doing it all with the power of
computing. Soon after House of Cards’ remarkable debut, the late David
Carr presciently noted in the Times, “The spooky part . . . ?
Executives at the company knew it would be a hit before anyone shouted
‘action.’ Big bets are now being informed by Big Data.”

Four years after the debut of House of Cards, Netflix, which earned an
astounding 54 Emmy nominations in 2016, is spending $6 billion a year
on original content. Amazon isn’t far behind. Apple, Facebook,
Twitter, and Snapchat are all experimenting with original content of
their own. Microsoft owns one of the most profitable products in your
living room, the Xbox, a gaming platform that is also a hub for TV,
film, and social media. As The Hollywood Reporter noted this year,
traditional TV executives are petrified that Netflix and its ilk will
continue to pour money into original shows and films and continue to
lap up the small puddle of creative talent in the industry. In July,
at a meeting of the Television Critics Association in Beverly Hills,
FX Networks’ president, John Landgraf, said, “I think it would be bad
for storytellers in general if one company was able to seize a 40, 50,
60 percent share in storytelling.”

So far, Netflix has merely managed to get DVDs to people more quickly
(via streaming), disrupt the business plan of the traditional
once-a-week, ad-supported television show, and help solidify the verb
“binge” in today’s culture.

And it’s only a matter of time—perhaps a couple of years—before movies
will be streamed on social-media sites. For Facebook, it’s the natural
evolution. The company, which has a staggering 1.8 billion monthly
active users, literally a quarter of the planet, is eventually going
to run out of new people it can add to the service. Perhaps the best
way to continue to entice Wall Street investors to buoy the
stock—Facebook is currently the world’s seventh-largest company by
market valuation—will be to keep eyeballs glued to the platform for
longer periods of time. What better way to do that than a two-hour
film?

The speed with which technologies can change an industry today is
truly staggering. Uber, which is eight years old, is worth more than
80 percent of the companies on the Fortune 500 list. When Silicon
Valley goes after a new industry, it does so with a punch to the gut.

There are other, more dystopian theories, which predict that film and
video games will merge, and we will become actors in a movie, reading
lines or being told to “look out!” as an exploding car comes hurtling
in our direction, not too dissimilar from Mildred Montag’s evening
rituals in Fahrenheit 451. When we finally get there, you can be sure
of two things. The bad news is that many of the people on the set of a
standard Hollywood production won’t have a job anymore. The good news,
however, is that we’ll never be bored again.

Emerging Markets

Frontier Markets

As more details emerged at the weekend about the covert operation to
pump up the ANC’s election campaign and spread fake news about
opposition parties, the party continued to deny knowledge and
involvement. It has “nothing to do with the ANC” was spokesperson Zizi
Kodwa’s response to a report of a secret recording implicating ANC
general manager Ignatius Jacobs in the war room operation to influence
public opinion during the election period. This is not only about the
criminal acts and big personalities being shamed. It is also about the
erosion of trust and further diminishing of the ANC’s credibility.

The company operates restaurants selling peri-peri chicken in
countries including the U.K., the U.S., Australia, India, Malaysia and
Qatar. Nando’s started in South Africa in 1987 after entrepreneurs
Robbie Brozin and Fernando “Nando” Duarte convinced Enthoven to invest
in the Portuguese-styled chain. The company traded on Johannesburg’s
stock exchange until 2003 when managers bought more shares and
delisted it.

Egypt sold $4 billion of Eurobonds in three tranches on Tuesday,
raising twice as much as targeted and at lower yields than initially
expected.

The combined order books for the five-, 10- and 30-year bonds exceeded
$13.5 billion, which bankers said should mean demand is there for
further bond sales.

"If (Egypt) decides in 2017 to issue more external debt it will be
able to do so because (Tuesday's) issuance was covered 3.5 times,"
said one banker, who declined to be named because he is not authorised
to speak to media.

The Nigerian naira fell against the greenback to 500 on the black
market as the nation’s dollar scarcity worsens, according to
abokiFX.com, which collates prices from traders in Lagos each day. The
currency’s unofficial rate is now 38 percent weaker than the central
bank’s level of 309. That’s despite several attempts by Governor
Godwin Emefiele and the government to stem the rout after a
devaluation in June.

Nigeria has asked Goldman Sachs and the local unit of South Africa's
Standard Bank to advise it on the sale of a debut "diaspora bond"
targeted at Nigerians living abroad, Stanbic IBTC Bank said on Monday.

Ghana Stock Exchange Composite Index Bloomberg +4.82% 2017
http://www.bloomberg.com/quote/GGSECI:IND

Mozambique’s £1.6bn borrowing spree has caused a fiscal crisis that
means interest on loans, civil service new year bonuses and other
government bills was not paid this month.

Four years ago, with one of Africa’s largest natural gas reserves in
development and visions of fabulous wealth before them, Mozambique’s
leaders took secret loans worth $2bn. These were organised by the
London offices of two major European banks, Credit Suisse and the
Russian state-owned bank VTB, the conduct of whom was sufficiently
questionable that they are now being investigated by financial
authorities in the UK, Switzerland and the US.

Mozambique debt crisis could be first sign of global financial shockwave

The money was for tuna fishing, maritime security and weapons to fight
Renamo rebels; according to Christine Lagarde, director general of the
International Monetary Fund (IMF), some if it was also used corruptly.

But gas prices collapsed and the development of the gas fields was
delayed. Last year, when it became obvious there was no money to pay,
the loan package became public.

In keeping the loans secret, the government lied to its own
parliament, as well as to the IMF and donors (including Britain), who
immediately reduced aid and lending. That exacerbated the economic
crisis, forcing an austerity programme.

There was a huge devaluation of the local currency, the metical, and
two weeks ago it was announced that inflation last year was 25%. The
austerity package means the government is delaying payments to its
suppliers; last week, it announced it would not make any interest
payments on the debt.

Private sector credit growth stabilized at 4.3 percent in December, 2016

While the battle rages in Somalia, in Kenya the battle lines ahead of
the election are being drawn, and Somalia was always going to be a
major point of difference between the ruling party and the opposition.
Al-Shabaab are making it harder and harder for the ruling party to
defend its position.

Al-Shabaab have always been canny propagandists, and their latest
attack on Kulbiyow is no exception. While the details of the attack
remain sketchy, there is no doubt that its impact is already being
felt in Mogadishu, Nairobi and Addis Ababa.

Conclusions

very curious. If it is incorrect then you have to ask who would go to
the trouble and why?

The Johannesburg bourse-bound firm now says it has opted to make
acquisitions in Europe; and has resorted to directly supplying its
goods to Kenya through a distributor.

“Our business model normally includes the acquisition of successful
businesses in our target countries to serve as a platform for
expansion, but we have found the pricing of such businesses to be
prohibitive in Kenya and have found better value in central and
eastern Europe,” Stefan Rabe, Bounty’s chief executive said in an
interview.

Bounty has in the past year made a string of acquisitions valued at
more than 1.2 billion South African rands (about Sh9.2 billion)
including Liberty Foods, food supplier Rieses Food Imports, trash bag
maker Tuffy, household cleaning accessories firm Goldenmarc, and
fashion retailer Footwear Trading which owns franchises for brands
such as Diesel, Levis, Jeep and Fila.

Deutsche Bank, which is German global banking and financial services
company, had in April last year notified NBK of their intention to
shut down correspondent banking relationship with the Kenyan based
bank. Contacted, NBK admitted closure of accounts but denied money
laundering allegations. “We got a notice from Deutsche bank informing
us of its intention to terminate this relationship by April 2016.
Deutsche Bank did not indicate the reason for terminating this
relationship in the said letter. Through our robust Anti-money
laundering (AML) and Know your customer (KYC) processes and systems,
we are not in the know of any money laundering attempted or
perpetrated through the bank,” NBK told Weekend Business in a
statement.

Nairobi All Share Bloomberg -9.06% 2017
http://www.BLOOMBERG.COM/quote/NSEASI:IND

121.26 -1.02 -0.83%

Nairobi ^NSE20 Bloomberg -12.45% 2017
http://j.mp/ajuMHJ

2,789.64 -22.40 -0.80%

Par Value:                  5/-
Closing Price:           2.95
Total Shares Issued:          364959616.00
Market Capitalization:        1,076,630,867
EPS:             -7.77
PE:

One of the main Kenyan supermarket chains.

FY EARNINGS Through 30th June 2016 versus through June 2015

FY Net sales 6.427143b vs. 12.954581b -50.387%
FY Cost of sales [5.450199b] vs. [10.816813b] -49.614%
FY Gross profit 976.944m vs. 2.137768b -54.301%
FY Other income 1.311470b vs. 2.588378  -49.332%
FY Operating expenses [3.291832b] vs. [4.816551b] -31.656%
FY Profit/ [loss] from operating expenses [1.980362b] vs. [2.228173b] -11.122%
FY Provisional write offs [466.782b] vs. [1.049037b] -55.504%
FY Profit/ [loss] before taxation [2.671497b] vs. [3.513064b] +23.955%
FY Income tax credit/ [expense] [165.235m] vs. 91.704m -280.183%
FY Profit/ [loss] after taxation [2.836732b] vs. [3.421360b] +17.088%
EPS [7.77] vs. [9.37] -17.076%
Shareholders’ Equity [2.097377b] vs. 0.739355b -383.677%
No dividend

Company Commentary

performance was impacted by the closure of non-performing branches in
Uganda, Tanzania and Kenya and supply chain challenges.
Group losses reduced by 17% from 3.4b versus 2.8b in 2017
Search for a strategic investor is ongoing

Auditors Opinion

The above financial information have been extracted from the financial
statement which were audited by KPMG Kenya who issued a disclaimer of
opinion on the group financial statements due to lack of audit
evidence on foreign subsidiaries up to the date of loss of control and
a qualified opinion on company financial statements with regard to
lack of audit evidence on Property and Equipment's opening balances.

Conclusions

Obviously a big scaling back evidenced in the -50.387% decline in FY Net Sales.
You would have thought that there is a big Opportunity still in the
supermarket space.

However, Uchumi’s auditors, KPMG Kenya issued a disclaimer of opinion
on the group financial statements due to lack of audit evidence on
foreign subsidiaries up to the date of loss of control and a qualified
opinion on the company’s financial statements due to lack of audit
evidence on property and equipments opening balances.

A Disclaimer of Opinion is issued in either of the following cases:
When the auditor is not independent or when there is conflict of
interest. When the limitation on scope is imposed by client, as a
result the auditor is unable to obtain sufficient appropriate audit
evidence.

A qualified opinion is a written statement by a certified public
accountant in an audit report, stating that the financial statements
of a client are fairly presented, except for a specified issue.

Par Value:                  1/-
Closing Price:           2.35
Total Shares Issued:          210000000.00
Market Capitalization:        493,500,000
EPS:             -0.98
PE:

Kenyan battery manufacturer.

FY Earnings through 30th September 2016 versus through 30th September 2015

FY Sales 553.311m vs. 1.124582b -50.799%
FY Cost of sales [425.016m] vs. [905.915m] -53.084%
FY Gross profit 128.295m vs. 218.667m -41.329%
FY Other income 4.872m vs. 75.929m -93.583%
FY Overhead expenses [296.782m] vs. [405.734m] -26.853%
FY Finance costs [72.368m] vs. [50.267m] +43.967%
FY Loss before tax [218.962m] vs. [161.405m] +35.660%
FY Loss for the year from continuing operations [171.824m] vs.
[182.075m] -5.630%
FY Loss for the year from discontinued operations [34.681m] vs.
[19.434m] +78.455%
FY Loss for the year [206.505m] vs. [201.509m] -2.479%
EPS [0.98] vs. [0.96] -2.083%
Total Equity 486.578m vs. 682.489m -28.705%
Cash & cash equivalents at the end of the year [0.731m] vs. [285.519m] +99.744%
No dividend

Company Commentary

Company experienced a challenging out of stock situation occasioned by
lack of supplies from our global supplier of carbon zinc and alkaline
batteries which adversely affected supply for a considerable period
during the Year under review.
-51% decline in FY Revenues
closed operations in Uganda
Sell the Nakuru property in order to clear the debt and provide
sufficient working capital to support the distribution business.
No Dividend

Conclusions

Should exit the battery business and return the surplus [land sales]
to shareholders

Passenger numbers +4.8%
Cabin Factor +4.00% at 72%

Kenyan economic growth is expected to slip to 5.7 percent in 2017 from
about 5.9 percent in 2016, the central bank said on Tuesday.
The Central Bank left interest rates unchanged on Monday.
The Shilling is steady just below 104.00.
''We are not reckless in minimizing the volatility of the exchange
rate, we are on both sides, it's a zero sum game ~ CBK Governor''
tweeted @kenyanwalstreet.
The Nairobi All Share snapped a losing streak which had seen the Index
slump -9.06% in 2017 through this morning and fall every session in
January except 13th Jan through 16th Jan. The All Share rebounded
+0.799%.
The Nairobi NSE20 Index which was -12.45% in 2017 through this morning
and at more than 8 year lows firmed 4.63 points to close at 2794.27.
Equity Turnover was 406.706m
The Securities Exchange is in fact in a disequilibrium.
Those who have a 12 month time horizon should make out like Bandits.

Safaricom rallied +0.82% to close at 18.50 and traded 5.451m shares.
Safaricom has rebounded +3.064% since closing at a 2017 Low of 17.95
last week.

Uchumi reported its delayed FY Earnings through June 2016. Uchumi
reported a FY Loss of 2.836b which represented a +17.088% improvement
versus the previous FY. Uchumi said '' performance was impacted by the
closure of non-performing branches in Uganda, Tanzania and Kenya and
supply chain challenges'' Uchumi said that the ''Search for a
strategic investor is ongoing.''
KPMG Kenya issued a disclaimer of opinion ''on the group financial
statements due to lack of audit evidence on foreign subsidiaries up to
the date of loss of control and a qualified opinion on company
financial statements with regard to lack of audit evidence on Property
and Equipment's opening balances''  FY Turnover slumped -50.387% as
Uchumi scaled back. You have thought that there still is a big
opportunity in supermarket retailing. Uchumi retreated -3.38%.

Kenya Airways issued a Q3 2016 October-December 2016 Update, which
confirmed a +4.8% uptick in Passenger numbers and a 4% increase in
Cabin Factor to 72%. Kenya Airways eased -1.05%.

TPS Serena rebounded +7.61% to close at 20.50 and traded 46,600
shares. TPS Serena is back to unchanged for 2017 and probably got a
fillip from the Passenger numbers released by Kenya Airways today.

KCB Group ticked -1.08% lower to close at 23.00 and traded 1.947m
shares. KCB has retreated -20.00% in 2017 and is badly oversold. I
expect KCB to positively surprise Shareholders with a handsome
dividend and at 23.00 it is now time for Investors to step up.
Equity Bank rallied +3.191% to close at 24.25 and was trading shares
as high as 25.50 +8.51% at the finish line. Trading was thin with just
25,800 shares traded.

EABL rallied +1.818% to close at 224.00 and traded 569,100 shares.
EABL reported H1 Earnings Friday last week where EABL reported a
-6.286% decline in H1 Net Revenue and a -31.291% decline in H1 EPS
largely because of a non-repeat of an extraordinary gain taken in the
previous FY. EABL is +2.28% since releasing its Earnings.

BAT surged +4.912% to close at 897.00 and traded 37,800 shares.

Eveready East Africa reported  a Full Year Loss after Tax of 206.505m
not far off the previous FY Loss of 201.509m. Eveready saw Full Year
Sales sink -50.799% to 553.311m and skipped a FY dividend. The Company
said it ''experienced a challenging out of stock situation occasioned
by lack of supplies from our global supplier,'' closed its operations
in Uganda and is set to ''Sell the Nakuru property in order to clear
the debt and provide sufficient working capital to support the
distribution business'' I would argue it is time to consider exiting
the battery business and returning the surplus [land sales] to
Shareholders. Eveready closed unchanged at 2.35 and is unchanged in
2017.

Crown Berger traded 300 shares all at 45.00 +7.14%

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