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Satchu's Rich Wrap-Up
Monday 01st of October 2018

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A conversation about the FX markets with Ben Robson @TradeFXsmart Author of Currency Kings

From @georgesoros to algorithmic trading and more @egm_securities
@KevinNganga @Maqbuli @RichTvAfrica Dollar Yen Prudential Bache
Corzine MF Global 2008

Macro Thoughts

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01-OCT-2018 :: Brent crude at a four year high

The World consumes 100 million barrels per day (bpd) - more than twice
what it was 50 years ago - If we use a Price of $80.00 a barrel, that
equates to $8b a day $2.92 Trillion a Year and thats a raw number
without value addition. And this is real cash and why Ryszard
Kapuściński wrote in his book Shah of Shahs

“Oil kindles extraordinary emotions and hopes, since oil is above all
a great temptation. It is the temptation of ease, wealth, strength,
fortune, power. It is a filthy, foul-smelling liquid that squirts
obligingly up into the air and falls back to earth as a rustling
shower of money.”

“Oil creates the illusion of a completely changed life, life without
work, life for free. Oil is a resource that anaesthetises thought,
blurs vision, corrupts.”

The History of Oil did not start In February 1945, when Roosevelt met
with King Abdulaziz of Saudi Arabia in person aboard the USS Quincy
but the History of the Petro-Dollar did. This Grand Bargain between
the US President and a Saudi King established that Oil would always be
denominated in Dollars and Folks from Saddam Hussein to Chavez of
Venezuela and now The High Representative of the European Union for
Foreign Affairs Federica Maria Mogherini have all sought to break the
chokehold of the Petro Dollar. Mogherini announced that Europe would
create a Special Purpose Vehicle ''a legal entity to facilitate
legitimate financial transactions with Iran and this will allow
European companies to continue trade with Iran, in accordance with
European Union law''  Good Luck with that Federica, well, at least she
showed willing, which is as far it goes.

Whilst Western Powers have been practically religious about how they
characterise Oil Wars as being nothing of the sort. You will recall
Wolfowitz who when asked why a nuclear power such as North Korea was
being treated differently from Iraq, where hardly any weapons of mass
destruction had been found, the deputy defence minister said: "Let's
look at it simply. The most important difference between North Korea
and Iraq is that economically, we just had no choice in Iraq. The
country swims on a sea of oil."

On Friday, Brent Crude surged to A 4 Year high above $83.00 a barrel.
The market is anticipating the US sanctions on Iran and a November
Guillotine. At its 2018 peak in May, Iran exported 2.71 million bpd,
nearly 3 percent of daily global crude consumption. Trump has proven a
sanction warfare Specialist in fact his intrusive, coercive, economic
and sanction warfare strategy is surely his signature success of what
has been an otherwise ''freewheeling'' US Administration. Venezuela
which was another big Supplier is imploding. The market is tight and
the Total CEO is now calling for triple digit Oil Prices. This is a
double whammy for many Emerging Markets [strong Oil weak currencies] ,
with India and its Prime Minister a Sitting Duck, for example.

Trump has become increasingly strident about high prices which is a
little cute given that it is his sanction warfare [particularly
against Iran] which has lifted prices. Donald Trump spoke on the phone
Saturday with King Salman bin Abdulaziz of Saudi Arabia, days after
the U.S. president’s latest criticism of OPEC over high oil prices.
Trump has gone after OPEC multiple times this year, including while
speaking at the United Nations on Sept. 25.

“OPEC and OPEC nations, are, as usual, ripping off the rest of the
world, and I don’t like it,” Trump said in an address to the United
Nations General Assembly in New York. “We want them to stop raising
prices. We want them to start lowering prices and they must contribute
substantially to military protection from now on.”

He of course is facing a problematic Mid-Term Election and the last
thing he wants are Angry Consumers at the Polling Stations. Therefore,
I venture, he will tempted to unload Supply out of the US Special
Reserve and therefore Bulls need to be wary of a precipitous downside
draft on that announcement which might well wash a lot of People out.
That announcement will be the starting Gun for Folks who have the guts
to catch a Falling Knife because it will prove a momentary and
fleeting firesale.

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What Oil at $100 a Barrel Would Mean for the Global Economy @business

4. Who wins from higher oil prices?

Most of the biggest oil-producing nations are emerging economies.
Saudi Arabia leads the way with a net oil production that’s almost 21
percent of gross domestic product as of 2016 -- more than twice that
of Russia, which is the next among 15 major emerging markets ranked by
Bloomberg Economics. Other winners could include Nigeria and Colombia.
The increase in revenues will help to repair budgets and current
account deficits, allowing governments to increase spending that will
spur investment.

4. Who loses?

India, China, Taiwan, Chile, Turkey, Egypt and Ukraine are among the
nations who would take a hit. Paying more for oil will pressure
current accounts and make economies more vulnerable to rising U.S.
interest rates. Bloomberg Economics has ranked major emerging markets
based on vulnerability to shifts in oil prices, U.S. rates and

One of the biggest winners might also find itself on the losing end:
Oystein Olsen, Norway’s central bank governor, warned that western
Europe’s biggest petroleum producer risks problems if the industry
takes its eyes off controlling costs.

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Home Thoughts

Dites à mes rêves de se faire beaux  J'arrive_


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Black mirror: '20:50', 1987, by Richard Wilson at the @haywardgallery via @spectator

A reflection on still water was perhaps the first picture that Homo
sapiens ever encountered. The importance of mirrors in the history of
art has been underestimated

“The sky was rarely more than pale blue or violet, with a profusion of
mighty, weightless, ever-changing clouds towering up and sailing on
it, but it has blue vigour in it, and at a short distance it painted
the ranges of hills and the woods a fresh deep blue.” ― Karen Blixen,
Out of Africa

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Happy (811th) birthday, Mowlana #Rumi @JZarif

"I am not of the East, nor of the West, nor of the land, nor of the sea; ...
For I belong to the soul of the Beloved.
I have put duality away, I have seen that the two worlds are one;
One I seek, One I know, One I see, One I call."

Happy (811th) birthday, Mowlana #Rumi.

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Both Japanese and American forces flew near the uninhabited Diaoyu Islands, which are controlled by Japan, but claimed by China @SputnikInt
Law & Politics

The bank now expects the yuan to drop to 7.01 per dollar by the end of
December and 7.19 by September 2019, after previously projecting it at
7.02 in 12 months’ time. China’s currency closed at 6.8725 per dollar
in onshore trading last week. The median forecast of analysts surveyed
by Bloomberg is for the currency to strengthen to 6.70 by the end of
next year. Deutsche Bank AG is among the yuan bears, seeing it
depreciate to 7.4 next year.

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U.S. warship sails near disputed South China Sea islands: U.S. official @Reuters
Law & Politics

The official, speaking on condition of anonymity, said the destroyer
Decatur traveled within 12 nautical miles of Gaven and Johnson Reefs
in the Spratly Islands.

The operation was the latest attempt to counter what Washington sees
as Beijing’s efforts to limit freedom of navigation in the strategic
waters, where Chinese, Japanese and some Southeast Asian navies

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@jpmorgan Sees All-Out U.S.-China Tariffs, Lowers Yuan Call @economics
Law & Politics

“JPMorgan has adopted a new baseline that assumes a U.S.-China endgame
involving 25 percent U.S. tariffs on all Chinese goods in 2019,”
JPMorgan strategists including John Normand wrote in a note Friday.
While growth forecasts for both the U.S. and China aren’t much
affected, thanks in part to Chinese stimulus measures, “a weaker yuan
becomes part of the new equilibrium,” they wrote.

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Former foreign secretary @BorisJohnson questioned whether @theresa_may believes in Brexit and branded her Chequers plan "deranged" @thesundaytimes
Law & Politics

In an interview with The Sunday Times — his first with a newspaper
since resigning from the cabinet — the former foreign secretary
questioned whether Theresa May believes in Brexit and branded her
Chequers plan “deranged”.

Johnson also called for the government to be “proud” to advance
Conservative ideas and far bolder in building houses and

He said Britain should build a bridge to Ireland and put the HS2
scheme on hold so a high-speed rail link can be built across the north
of England instead. And he touted his own experience of winning two
London mayoral elections as evidence that the Tories can win in
unlikely places — if they have the right leader.

In a scarcely coded attack on May’s taste for new regulations and
taxes, Johnson said: “I think we need to make the case for markets. I
don’t think we should caper insincerely on socialist territory. You
can’t beat Corbyn by becoming Corbyn.”

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His performance was right out of Norman Rockwell with a touch of "Mad Men." @NYTimes
Law & Politics

What America saw before the Senate Judiciary Committee was an
injudicious man, an angry brat veering from fury to sniveling sobs, a
judge so bereft of composure and proportion that it was difficult not
to squirm. Brett Kavanaugh actually got teary over keeping a calendar
because that’s what his dad did. His performance was right out of
Norman Rockwell with a touch of “Mad Men.”

This is what you get from the unexamined life, a product of white male
privilege so unadulterated that, until a couple of weeks ago,
Kavanaugh never had to ask himself what might have lurked, and may
still linger, behind the football, the basketball, the lifting
weights, the workouts with a great high-school quarterback, the
pro-golf tournaments with Dad, the rah-rah Renate-ribbing yearbook,
the Yale fraternity, and the professed sexual abstinence until “many
years” after high school.

For my common sense, Mr. Kavanaugh “doth protest too much, methinks.”
Christine Blasey Ford rang true. I’ll take her “100 percent” over his.
She felt no need to yell. Nor did she hide behind a shield of
repetition. She did not succumb to pathos (“I may never be able to
coach again”). She spoke with a deliberation, balance and humanity
missing in the judge.

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There is a coordinated script that has been in place for a very long time with the goal to turn the human race into non-thinking automatons.
Law & Politics

The more one researches mind control, the more one will come to the
conclusion that there is a coordinated script that has been in place
for a very long time with the goal to turn the human race into
non-thinking automatons.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1589
Dollar Index 95.22
Japan Yen 113.90
Swiss Franc 0.9817
Pound 1.3029
Aussie 0.7209
India Rupee 72.815
South Korea Won 1111.21
Brazil Real 4.0516
Egypt Pound 17.8545
South Africa Rand 14.1436

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Tesla $920 million convertible bond matures March 1, 2019. If stock below $359 conversion price then $TSLA pays $920 million @pierpont_morgan
World Currencies

Tesla $920 million convertible bond matures March 1, 2019. If stock
below $359 conversion price then $TSLA pays $920 million.  Strong
motivation to make materially misleading claims about production,
profitability & buyout funding for a company with liquidity issues

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We're just a week away from #Brazil's elections. Currently, the Brazil economic policy uncertainty index is abated relative to last year's #beef scandal @TayTayLLP
Emerging Markets

We're just a week away from #Brazil's elections. This is the most
contentious general election cycle in the sovereign. Currently, the
Brazil economic policy uncertainty index is abated relative to last
year's #beef scandal. @SoberLook @Sunchartist @_globalmacro @EMgist

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The President is taking no chances and making no concessions. He is mobilising 24,000 reservists as popular protests continue @KagutaMuseveni to tough it out 2 @Africa_Conf

The President is taking no chances and making no concessions. He is
mobilising 24,000 reservists as popular protests continue

Thousands of new security personnel are being deployed to meet the
threat of mass civil unrest after the triumphant return to Kampala of
Robert Kyagulanyi aka Bobi Wine to huge crowds on 20 September. The
MP, singer and People Power leader had been receiving medical
treatment in the United States for injuries inflicted by soldiers in
the street and in detention. He has been charged with treason.

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Prof PLO Lumumba has this afternoon been denied entry into Lusaka Zambia @KUTVKenya

Prof PLO Lumumba has this afternoon been denied entry into Lusaka
Zambia where he was scheduled to speak at EDEN university on the

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Ghana's Economy Is Now 25% Bigger After Data Overhaul

 GDP at current prices $52.5 billion in 2017 after revision
 West African economy expanded 8.1% last year, new data shows

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At a headline level, these big upward GDP revisions help because they imply a country can manage a larger debt burden. But the tax take does not raise by 25% as well #GDPrebasing

At a headline level, these big upward GDP revisions help because they
imply a country can manage a larger debt burden. But the tax take does
not raise by 25% as well - so actually markets have to recalibrate
(down) what they think an acceptable level of debt is.  #GDPrebasing

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The Kenyan economy grew by 6.3% in Q2'2018 according to data released by @KNBStats compared to 4.7% in Q2'2017.@CytonnInvest #Cytonnreport
Kenyan Economy

According to @KNBStats  Kenya’s economy expanded by 6.3% in Q2’2018,
higher than 4.7% in Q2’2017. This was due to (i) recovery of
agricultural sector, which recorded a growth of 5.6% due to improved
weather conditions

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Kenya Shilling versus The Dollar Live ForexPros
Kenyan Economy

 Kenya Shilling gained marginally against the US Dollar by 0.1% in
Q3’2018 to close at Kshs 101.0 from Kshs 101.1 at the end of Q2’2018.

Improving diaspora remittances, which increased by 71.9% y/y to USD
266.2 mn in June 2018 from USD 154.9 mn in June 2017 and by 4.9% m/m,
from USD 253.7 mn in May 2018,

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.@NSE_PLC market is currently trading at a price to earnings ratio (P/E) of 12.1x, and a dividend yield of 4.8%, @CytonnInvest #Cytonnreport
Kenyan Economy

Key to note is that the assented Finance Bill 2018 does away with the
floor on deposit pricing, which was initially set at 70.0% of the
Central Bank Rate (CBR) but retains the cap on loan pricing at 4.0%
above the CBR

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Unga Group Ltd reports FY 2018 EPS +1,271% Earnings here
Kenyan Economy

Par Value:                  5/-
Closing Price:           41.00
Total Shares Issued:          75708872.00
Market Capitalization:        3,104,063,752
EPS:            6.72
PE:              6.011

Unga Group Limited FY 2018 results through 30th June 2018 vs. 30th June 2017
FY Revenue 19.982070b vs. 19.528785b +2.321%
FY Operating profit 1.273403b vs. 237.868m +435.340%
FY Finance income 116.649m vs. 67.415m +73.031%
FY Profit before taxation 1.299266b vs. 228.350m +468.980%
FY Profit for the year from continuing operations 788.774m vs.
111.912m +604.816%
FY Profit for the period 783.203m vs. [7.039m]
FY [Loss]/ Profit attributable to owners of the parent 509.082m vs.
37.371m +1,262.238%
Basic and diluted EPS 6.72 vs. 0.49 +1,271.429%
Total assets 9.932664b vs. 9.455316b +5.048%
Cash and cash equivalents at the end of the period 1.088455b vs.
1.714755b -36.524%
Dividend 1.00 vs. 1.00 –

Company Commentary

Discontinuation of operations at the Ugandan subsidiary shielded the
Group from some of the losses suffered in the preceding year, in which
an investment impairment was recorded.
exploration of regional opportunities is ongoing.


Strong rebound.

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NDII: Fiddling, while Kenya burns @DavidNdii
Kenyan Economy

First, the expenditure cuts are less than the revenue forecast which
is revised downwards by Sh. 96 billion, while expenditure is revised
downwards by Sh. 83 billion. Even though the 10 billion difference is
not such a big sum, it’s unclear why the government would go to such
lengths to table an austerity budget that increases the deficit.

More significantly, the revenue forecast is still unrealistic. The
budget was based on revenue growth of 31 percent, comprising of 30
percent and 36 percent increase in tax and non-tax revenues
respectively, which has now been scaled down to 25 percent, with tax
and non-tax revenue forecast down to 24 and 28 percent respectively.
These forecasts are out of touch with reality. Tax revenues increased
only three percent and non-tax by 12 percent for a total revenue
increase of four percent. This, as we will see shortly, is not an
anomaly—it is a significant trend.

But the National Treasury’s growth projections are as panglossian as
ever. In the original budget forecast, the nominal GDP expands from
7.7 trillion in FY16/17 (the latest actual data) to Sh. 12.6 trillion
in FY20/21 a growth of 64 percent or 17 percent per year. Nominal GDP
is the denominator used to calculate budget financial ratios. This
translates to a real economic growth rate of 7.4 percent per year
(this is obtained by applying an inflation adjustment known as GDP
deflator. I have applied the average deflator for the last five
years). Average growth rate for the last five years—5.56 percent.
Growth has topped seven percent only once in the last thirty years—
2007. Now comes the remarkable part. In the revised projections,
nominal GDP has been adjusted upwards to just under Sh. 13 trillion in
FY20/21. It is conceivable that the mandarins are factoring higher
inflation— one hopes so because otherwise it translates to a
delusional eight percent per year growth rate. The reason for the
sharp fall in the revenue ratio last year is now clear— GDP has been
inflated on purpose. What is this fantasy in aid of? Their purpose is
to reduce the budget financial ratios without budget cuts. This way,
they are able to “get away” with fiddling with the actual budget
figures and still achieve “fiscal consolidation.” This year, the
deficit in the revised budget is adjusted upwards by 14b from 603 to
622 billion but it as a ratio to GDP it declines from 6.3 to 6.1
percent on account of GDP being adjusted upwards by 321 billion.

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by Aly Khan Satchu (www.rich.co.ke)
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October 2018

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