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Macro Thoughts

The recent collapse of the Argentine Peso and other emerging
currencies is more than a warning sign.

It could be the arrival of a “sudden stop”. As I explain in Escape
from the Central Bank Trap (BEP, 2017), a sudden stop happens when the
extraordinary and excessive flow of cheap US dollars into emerging
markets suddenly reverses and funds return to the U.S. looking for
safer assets. The central bank “carry trade” of low interest rates and
abundant liquidity was used to buy “growth” and “inflation-linked”
assets in emerging markets. As the evidence of a global slowdown adds
to the rising rates in the U.S. and the Fed’s QT (quantitative
tightening), emerging markets lose the tsunami of inflows and face
massive outflows, because the bubble period was not used to strengthen
those countries’ economies, but to perpetuate their imbalances.

Wikipedia has an article on: halcyon days and it reads thus,

From Latin Alcyone, daughter of Aeolus and wife of Ceyx. When her
husband died in a shipwreck, Alcyone threw herself into the sea
whereupon the gods transformed them both into halcyon birds
(kingfishers). When Alcyone made her nest on the beach, waves
threatened to destroy it. Aeolus restrained his winds and kept them
calm during seven days in each year, so she could lay her eggs. These
became known as the “halcyon days,” when storms do not occur. Today,
the term is used to denote a past period that is being remembered for
being happy and/or successfuL

If volatility spikes, positions are going to be reduced en masse. Or
to put it another way and to borrow the lyrics from the Eagles Hotel
California:

Mirrors on the ceiling,
The pink champagne on ice
And she said “We are all just prisoners here, of our own device” Last
thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
“Relax,” said the night man,
“We are programmed to receive.
You can check-out any time you like,
But you can never leave! “
What is clear is that we are at the fag-end of this party.

Home Thoughts

I'm not sure where my career will take me and I am not sure whether I
have taken an iconic image yet, I'll let others decide. But I do know
that the photograph unveiled today for the #TAGHeuer
#DontCrackUnderPressure campaign is probably the most powerful shot
that I have taken.

Political Reflections

Conclusions

The paleo- hawk strategy is to ditch the agreement, present another
quasi ultimatum known in advance to be unacceptable to the Iranians
which then delivers in their mind a casus belli. Except Europeans wont
have any part of it

Conclusions

This is the Now. See Below for the Then from 2013

THE recent rapprochement between President Barack Obama and Iran’s
Hassan Rouhani has certainly snapped a losing sequence in US-Iran
relations that goes all the way back to the Iranian revolution in 1979
when Ayatollah Khomeini overthrew Mohammad Reza Pahlavi, the Shah of
Iran. The Shah was the second and last monarch of the House of Pahlavi
and otherwise known as the peacock throne. Hussein [Barack Hussein
Obama] and Hassan [Rouhani] share the same name as did Prophet
Muhammed’s revered grandsons. Those who pursue the study of
anthroponymy [personal names] especially in the Islamic World probably
view this as very fortuitous.

I was wandering around the Hirshhorn Gallery in Washington last year
and I came across this from the Chinese artist Ai Weiwei:

What’s in a name?

A name is the first and final marker of individual rights, one fixed
part of the ever-changing human world. A name is the most basic
characteristic of our human rights: No matter how poor or how rich,
all living people have a name, and it is endowed with good wishes, the
expectant blessings of kindness and virtue.

Hussein and Hassan are going to cut through a great deal of
interference. In this situation, there are powerful vested interests
fully invested in the status quo. If the pax Americana in the Middle
East were a three legged stool with the US the most important leg,
then Israel and Saudi Arabia are the other two legs of that stool.
Neither Riyadh nor Tel Aviv are aligned with President Obama’s Iranian
rapprochement and Saudi Arabia in particular has become increasingly
forthright and is even threatening its own pivot and away from the US.

Giuliani’s perplexing and sometimes conflicting remarks have
increasingly become a cause of consternation for Trump’s aides. Asked
last week whether Giuliani’s portfolio included foreign policy, White
House spokeswoman Sarah Huckabee Sanders said simply, “Not that I’m
aware of.” And on Friday, even Trump seemed peeved by the attention
Giuliani’s off-message comments were attracting, telling reporters
that the former prosecutor had just come on board and was still
working to “get his facts straight.”

"If Assad allows Iran to turn Syria into a military vanguard against
us, to attack us from Syrian territory, he should know that would be
the end of him, the end of his regime."

Sharpening these warnings, Energy Minister Yuval Steinitz said on
Monday that Assad may find himself in Israel's sights.

"If Assad allows Iran to turn Syria into a military vanguard against
us, to attack us from Syrian territory, he should know that would be
the end of him, the end of his regime," Steinitz told the Ynet news
site.

Asked if that meant Israel might assassinate Assad, Steinitz said:
"His blood would be forfeit." He also appeared to suggest that his
remarks did not reflect Israeli government policy, saying: "I'm not
talking about any concrete proposal."

In his book from 2000, Putin briefly tells a story of the first time
he learned “the meaning of the word cornered.”

There, on that stair landing, I got a quick and lasting lesson in the
meaning of the word cornered. Tere were hordes of rats in the front
entryway. My friends and I used to chase them around with sticks. Once
I spotted a huge rat and pursued it down the hall until I drove it
into a corner. It had nowhere to run. Suddenly it lashed around and
threw itself at me. I was surprised and frightened. Now the rat was
chasing me. It jumped across the landing and down the stairs.

I have no doubt that Putin ran a seriously 21st predominantly digital
programme of interference which amplified the Trump candidacy. POTUS
Trump was an ideal candidate for this kind of support.

Putin has always been considered a grandmaster of geopolitics, but of
late has been placed under tremendous pressure by the oil warfare
specialist –President Barrack Obama of the US.

International Markets

Euro 1.1921
Dollar Index 92.84
Japan Yen 109.04
Swiss Franc 1.0032
Pound 1.3548
Aussie 0.7508
India Rupee 67.255
South Korea Won 1078.43
Brazil Real 3.5507
Egypt Pound 17.7120
South Africa Rand 12.5609

Commodities

The price of oil could rise further, from what is now the highest
level since 2014, if the U.S. withdraws from the Iran deal.
Alternatively, it would probably decline somewhat significantly if
there's a surprise renegotiation or change of U.S. sentiment.

Emerging Markets

As the euro hits its weakest levels versus the dollar in 2018, it's
worth noting that emerging-markets debt has been heavily correlated to
the fate of the euro. Here's a chart of EURUSD versus the price on the
biggest local-currency EM debt fund:

Frontier Markets

Sub Saharan Africa

Of course, Africa is not a Country, in fact the Continent is seriously
non-linear, booms and busts quite often occur simultaneously. However,
what is clear is that the demographic surge, the overwhelming nature
of the numbers of this ''Born Free'' generation [Despite beliefs that
Millennials make up a large portion of the African population, they
are less than 30% of this population according to the 2017 estimates
by the Africa Development Bank. Africans aged 15 and below make up 41%
of the continent’s population. Those below 19 years old are at 51%. -
Geopoll] is creating a more homogenous African. The Arrival of the
Information Century, which started with the mobile Phone, then the
mobile internet triggered a process of binding Africans closer to
their Fellow Africans. Once upon a time, when I was a Young boy, we
had one of the few landlines in Mombasa, that was my connection to the
World. Today, I and millions like me know what is happening in real
time across this massive Continent of ours practically in real time.
What has occurred in the last two decades is surely a revolution, a
revolution whose velocity continues to gather speed and when you look
at the graph [which started at practically zero] its a little dizzying
and I would like to write a book about it at some point.

According to a recent McKinsey report, Africa has the world’s youngest
population. More than 50% of its people are under 20 years old,
compared with 28% in China. The 16 to 34 age group now accounts for
roughly 55% of income. And with that comes an insatiable appetite for
alcohol. In 2017, champagne consumption in the West African country
was estimated to reach 1.1 million liters, according to a Euromonitor
report.

“Champagne consumption is part of the culture in Lagos. It is not a
Lagos party if there are no champagne bottles being popped. It has
actually turned into a competition where clubbers try to out-pop each
other,” says local pub promoter Paul Yusuf.

The Euromonitor report also uncovered that Nigeria had the
fastest-growing rate of new champagne consumption in the world, second
only to France, and ahead of rapidly growing Brazil and China, as well
as established markets such as the United States and Australia. That
accounts for about $50 million spent on bubbly and still rising each
year. A surprising feat for a country where about 65% live on less
than $1 a day.

From rooftop venues such as the newly-refurbished Sky Lounge at Eko
Hotels & Suites that have elevated the Lagos night to stratospheric
heights, to the revelers who want to let off steam, one thing is for
certain, Lagos never sleeps.

Authorities raised dollar bonds late last year and in the first
quarter with the aim of reducing naira borrowing, bringing down costs
and encouraging companies to access the local debt market. That helped
drive yields on local bonds down about 400 basis points since late
August.

Its plan had been to more than double its fleet to 120 and become
Africa’s biggest airline by 2025, but it already has 100 planes flying
to dozens of destinations from Asia to South America, including four
U.S. cities.

The state-owned carrier has also outpaced regional competitors Kenya
Airways and South African Airways to become Africa’s largest airline
by revenue and profit, according to the International Air Transport
Association.

“We have expanded more than we planned,” said Chief Executive Tewolde
Gebremariam. “We had to revise the objective to make it 150 airplanes
or more by 2025.”

It now plans to place orders this year for 13 additional Boeing 787
jets and six more Airbus A350s, he told Reuters.

The airline has come a long way from when it was established in 1945
as a joint venture with now-defunct U.S. carrier Trans World Airlines
(TWA).

In its 2016/17 financial year Ethiopian Airlines generated $2.7
billion in revenue, Tewolde said, up more than 11 percent from the
previous year. Passenger numbers climbed by more than 18 percent to 9
million while net profit was $233 million, up from a little more than
$220 million.

In 2013 Ethiopian Airlines acquired a minority stake in Malawi
Airlines to serve as a base for its southern Africa operations.

That kicked off a series of deals including January’s agreement with
Zambia’s government to relaunch that country’s national carrier, shut
down more than two decades ago. [L8N1PB36C]

The strategy is aimed at gaining a “competitive advantage” against
rivals such as those in the Gulf, Tewolde said.

With Africa’s aviation industry still hampered by government
protectionism and high taxes, Tewolde said that setting up or taking
stakes in small carriers is a way around the restrictions.

Ethiopian Airlines aims to create a new airline in Mozambique that it
will fully own, he said, adding that it is also in talks with Chad,
Djibouti, Equatorial Guinea and Guinea to set up carriers through
joint ventures.

“Going forward, it will be difficult for us to compete with only one
hub in Addis Ababa.”

But it isn’t all clear skies for the fast-growing carrier.

The economic downturn in Africa caused by the collapse of oil prices
in 2014 has indirectly hit the continent’s airlines, and Ethiopian is
unable to repatriate more than $145 million in profits from Angola,
Sudan and Zimbabwe because of foreign exchange shortages, Tewolde
said.

“Running a business needs cash flow,” he said. “Here in Africa, we
have a huge problem with this.”


Kenya

Kenyans abroad sent home a record $641.5 million (Sh64.3 billion) in
the first three months of the year, in part reflecting the impact of
growing investment products targeting the diaspora.
The inflows in the January-March period represent a jump of 48.29 per
cent over the $432.6 million (Sh43.4 billion) captured in the same
period last year, fresh data from the Central Bank of Kenya shows.

Conclusions

“Remittances are indeed a wonderful ‘silver bullet’…our inward
remittances have been accelerating to fresh all-time highs and speaks
fundamentally to Kenya Inc.’s intellectual capital and monetisation
thereof,” independent analyst Aly-Khan Satchu, who runs investment
advisory Rich Management, said.

Let me loop now to Safaricom, which will be reporting its FY Earnings
Wednesday morning. I don't need to remind you of Safaricom's
centrality to the fortunes of the Nairobi Securities Exchange.
Safaricom has a market Cap of $11.2b about 43% of the total market Cap
of the Securities Exchange. Therefore, this is the Big Beast of
Earnings Releases at the Nairobi Securities Exchange. After hitting a
record high on April 5th, Safaricom corrected -20.00% through Friday
morning. Citibank were surely the Catalyst with a sceptical Earnings
perspective. Safaricom provided every Kenyan with an Entry Ticket into
the c21st. Jack Ma last year posed the question when asked about the
Infrastructure Gap,

''But what is the most important Infrastructure of them all? Its the
information Superhighway and yours is fast.''

Safaricom is a Need not a Want. Buy the Dip, add to the position if we
react lower on the results. Safaricom has built the Superhighway.
Everyone else is still playing the tarmacking Game. You know what I
mean. The roads around Westlands are the best example.

Par Value:                  0.05/-
Closing Price:           28.50
Total Shares Issued:          40065428000.00
Market Capitalization:        1,141,864,698,000
EPS:             1.21
PE:                 23.554

H1 Service revenue 109.73b vs. 98.01b +12.0%
H1 Handsets and other revenue 4.49b vs. 4.01b +11.9%
H1 Construction revenue 0.20b vs. 0.08b +150.0%
H1 Voice revenue 45.70b vs. 47.35b +3.6%
H1 SMS revenue 8.92b vs. 8.63b +3.4%
H1 Mobile data revenue 17.55b vs. 13.40b +31.0%
H1 Fixed service revenue 3.23b vs. 2.40b +34.7%
H1 Mpesa revenue 30.05b vs. 25.87b +16.2%
H1 Total revenue 114.43b vs. 102.10b +12.1%
H1 Other income 0.32b vs. 2.28b -86.0%
H1 Direct costs [35.43b] vs. [32.50b] +9.0%
H1 Construction costs [0.20b] vs. [0.08b] +150.0%
H1 Other expenses [24.84b] vs. [20.99b] +18.3%
H1 EBITDA 54.27b vs. 50.81b +6.8%
H1 Depreciation and amortization [16.74b] vs. [16.35b] +2.4%
H1 EBIT 37.53b vs. 34.46b +8.9%
H1 Finance income 0.91b vs. 0.83b +10.2%
H1 Finance costs [0.63b] vs. [0.81b] -21.9%
H1 PBT 37.82b vs. 34.49b +9.6%
H1 Net income 26.20b vs. 23.93b +9.5%
H1 Basic and diluted EPS 0.65 vs. 0.60 +9.0%
Shareholders funds 94.82b vs. 107.49b -11.8%
Cash and cash equivalents at the end of the half year 28.07b vs. 43.03b -34.8%

Company Commentary

Customer numbers +10.8% 2.5m at at 30th September 2017
Mobile Data Customers 16.9m +13.5%
MPesa Customers 19.3m +9.5%
Service Revenue +12.00% to 109.73b
Voice service Revenue 47.35b +3.6%
Messaging SMS Revenue 8.92b +3.4%
Mobile Data Revenue 17.55b +31%
MPESA revenue 30.05b +16.2%
Non Voice service Revenue increased to 56.8% of total service revenues
EBITDA +6.8% to 54.27b
EBIT +8.9% to 37.53b
Net Income +9.5% to 26.2b excluding one off adjustment in H1 17 Growth was 21.4%

Access to the school difficult due to recent rains / muddy road no
problem via Ox Cart !