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Macro Thoughts

Last year, I made bitcoin my number one choice and it rallied close to
20-fold before correcting and ending the year +1,300%. I am no longer
bullish bitcoin, in fact, I am bearish. The structure of bitcoin is,
however, one that lends it to being ‘’short-squeezed’’ and being
‘’short-squeezed’’ is not a pleasant sensation, let me assure you. For
2018, the portfolio will look to be short bitcoin on a tactical basis.

Bitcoin has been the top- performing currency every year since 2010,
except 2014, and this year at +900%, the return has been parabolic
(off the charts). The parabola was described thus by Thomas Pynchon

“But it is a curve each of them feels, unmistakably. It Is the
parabola. They must have guessed, once or twice -guessed and refused
to believe- that everything, always, collectively, had been moving
toward that purified shape latent in the sky, that shape of no
surprise, no second chance, no return.’’

If you spend your life deeply immersed in the markets, then it is
necessary to sniff out these parabolic moves. And it’s better to do
right than say right as Edwin Lefevre noted nearly a century ago.

Or as T.S Eliot said in The Hollow Men

Between the idea
And the reality
Between the motion
And the act
Falls the Shadow
For Thine is the Kingdom.

This, you will agree, is mind-boggling inflation. In my experience,
when I have found myself riding a tiger by its tail, the key issue is
the getting off and not trying to run the trade for every penny.

‘’One of the few men to get out in time before the Wall Street crash
of 1929 did so – legend has it – because he was offered a stock tip by
the boy who shined his shoes. He immediately sold all his holdings. If
the mania for gambling on the stock market had reached down to the
children on the streets, the bubble must have been due to pop at any
moment. The corresponding moment for the cryptocurrency bubble will
only be discernible in retrospect, but we have some pretty strong
candidates already. The endorsement of one project by the reality TV
star Paris Hilton has already happened.’’

There are many cryptocurrency schemes which are sold on the same
grounds as the greatest South Sea Bubble prospectus: “For carrying on
an undertaking of great advantage, but nobody to know what it is.”

My investment thesis at the start of the year was that Bitcoin was
going to get main-streamed in 2017. It has main-streamed beyond my
wildest dreams, therefore, I am now sidelined.

Let me leave you with Hunter S.Thompson, “Life should not be a journey
to the grave with the intention of arriving safely in a pretty and
well preserved body, but rather to skid in broadside in a cloud of
smoke, thoroughly used up, totally worn out, and loudly proclaiming
“Wow! What a Ride!”

Home Thoughts

Political Reflections

“The great hope of convergence between China and the U.S. is becoming
less and less of a likely reality.”
The meetings in Singapore and Papua New Guinea produced little to
suggest U.S. President Donald Trump and Chinese counterpart Xi Jinping
would reach a deal when they meet in a few weeks at the Group of 20
summit in Argentina. The Asia-Pacific Economic Cooperation summit
ended in disarray on Sunday after leaders failed to agree on a joint
statement, reflecting tensions after Trump threatened to add to
tariffs already in place on $250 billion worth of Chinese goods. Xi
has retaliated with duties on $110 billion in U.S. imports.
Pence also had stinging remarks for Xi’s Belt-and-Road Initiative,
which Morgan Stanley says may total $1.3 trillion by 2027 -- dwarfing
the funds the U.S. and allies have mobilized. The vice president said
the U.S. doesn’t “drown our partners in a sea of debt” or “offer a
constricting belt or a one-way road.”
“This is one episode in the hegemonic struggle between the U.S. and
China -- it will go on for a while,” said Kunihiko Miyake, a former
Japanese foreign ministry official who is now a visiting professor at
Ritsumeikan University. “It will be a Cold War, whether we call it
that or not.”

The three-dimensional projection in question is Mike Pence, Trump’s
vice-president. In two speeches spread 44 days apart, Pence gave up
America’s Asia game plan for 2019. And it won’t be pretty for
policymakers, markets or investors in the most dynamic economic
region.
One is that US$505 billion worth of tariffs are coming. Trump has been
teasing the idea of doubling the $250 billion worth of levies on
Chinese goods.
Pence’s words suggest there will be no Trump 2.0 doctrine following
the beating the Republican Party took in November 6 midterm elections.
Instead, expect the White House to double down on a trade war it
thinks is working.
Pence’s assurance that “we’re here to stay” could mean a brutal 2019
for Asian stocks, export growth and epic volatility in currency
markets.
One of Trump’s biggest missteps on the world stage was believing
President Xi Jinping, a fellow nationalist strongman, would buckle.
Just as Trump maintaining his base requires him looking resolute, Xi’s
legitimacy in Communist Party circles relies on projecting Chinese
strength.
Bowing to the hate-tweeter-in-chief isn’t an option for a Chinese
president aiming to be in office long after the Trump era.

The trade imbalance between China and the Maldives is “so huge that
nobody would think of a free trade agreement between such parties,”
Reuters cited Mohamed Nasheed, a former president and now an adviser
to Solih, as saying. He separately told the BBC that the trade deal
was “very one-sided” and that Chinese investments would be reviewed.
Former president Abdulla Yameen had signed the free trade agreement
with China in Beijing in December last year. Later that month his
parliament ratified the treaty despite opposition complaints that he
had rushed through the 1,000-page document in less than an hour
without debate.
Nasheed told Reuters that parliament would not pass legal changes
required for the zero tariffs agreement to go into force. More than 99
percent of the $258 million trade between the countries last year
consisted of Chinese exports to the Maldives, according to data
compiled by Bloomberg.
Underlining the shift away from China’s influence, Solih’s office said
Monday that the nation -- a tropical tourist destination southwest of
India -- would rejoin Britain’s Commonwealth of Nations. In a veiled
reference to restrictions on freedom of speech and the jailing of
opposition leaders under Yameen, the statement noted the importance of
promoting human rights, freedom of expression and democracy.

International Markets

Euro 1.1448
Dollar Index 96.22
Japan Yen 112.55
Swiss Franc 0.9931
Pound 1.2852
Aussie 0.7275
India Rupee 71.335
South Korea Won 1128.05
Brazil Real 3.7557
Egypt Pound 17.9100
South Africa Rand 14.0623

“We just put information into the bloodstream to the internet and then
watch it grow, give it a little push every now and again over time to
watch it take shape. And so this stuff infiltrates the online
community and expands but with no branding – so it’s unattributable,
untraceable.”
“It’s no use fighting elections on the facts; it’s all about emotions.”
“So the candidate is the puppet?” the undercover reporter asked.
“Always,” replied Nix.
The fundamental challenge for Facebook is this: It has represented
itself as an ‘’Infomediary’’ An infomediary works as a personal agent
on behalf of consumers to help them take control over information
gathered about them. The concept of the infomediary was first
suggested by John Hagel III in the book Net Worth.
However, Facebook has been hawking this information as if it were an
intermediary. This is its ‘’trust gap’’. That gap is set to widen
further. Facebook is facing an existentialist crisis.

Apple shares fell 4 percent to $185.86 on Monday.

Commodities

Emerging Markets

“You can go to war with your neighbors, or you can trade with them.
It’s really hard to do both.’’

Frontier Markets

Sub Saharan Africa

The secretive businessman known as Vladimir Putin’s “chef” for his
Kremlin catering work is alleged to have helped Russia seize parts of
Ukraine, turn the tide in the Syrian war and meddle in U.S. elections.
Now he’s reaching deep into Africa with an army of mercenaries and
spin doctors in tow to cash in on his newfound expertise.
Yevgeny Prigozhin, a restaurateur from Putin’s native St. Petersburg,
has emerged as an unlikely point man in Russia’s belated push to
bolster its geopolitical might by rekindling Cold War ties across a
largely underdeveloped region laden with untapped mineral wealth.
Lacking the financial muscle of its main rivals, the U.S., Europe and
China, Russia is carving out a niche by shoring up strongmen in
unstable but potentially rich states who have a taste for Russian
weaponry.
Prigozhin and his hodgepodge of contract soldiers and political
operatives are offering security, arms training and electioneering
services in exchange for mining rights and other opportunities, two
people familiar with the matter said. He’s already active in or moving
into 10 countries that Russia’s military already has relationships
with: the Democratic Republic of Congo, Sudan, Libya, Madagascar,
Angola, Guinea, Guinea-Bissau, Mozambique, Zimbabwe and the Central
African Republic.
This spurt of activity comes as Putin prepares to host more than 50
leaders for the first Russia-Africa summit in 2019. It’s an event that
will cement “Russia’s active presence in the region,” Foreign Minister
Sergei Lavrov said before a sweep through the continent earlier this
year.
The low-profile nature of Prigozhin’s businesses ensures some
deniability for the Kremlin. Putin, who gave Prigozhin an award for
his service to the state in 2014, this year compared his old ally’s
international work to that of George Soros, the American billionaire
financier who’s long been accused by the Kremlin of subverting
governments at Washington’s behest.
“The Russians want influence with governments, they want economic
access and they’re much more flexible—that’s their advantage,” said
Peter Pham, head of the Washington-based Atlantic Council’s Africa
Center. “It doesn’t cost very much to send a couple of hundred guys to
shore up a president.”

Some of the negative effects of the changing external environment are
already being felt in South Africa despite its economic resilience.
Amid deepening global trade tensions and capital outflows from most
emerging markets, nonresident investors have been selling South
African assets, more than reversing the large inflows that followed
the change in government, although the country has not been as badly
hit as some emerging markets. The rand has depreciated, and its
volatility increased. Bond yields have risen, lifting the government’s
financing costs. Despite important mitigating factors, such as the
freely floating exchange rate, sophisticated financial and corporate
sectors, and favorable currency and maturity profiles of the sovereign
debt, there is no room for complacency.

Mozambican companies are facing a collapse in revenue because of an
interbank-payments system outage that began last week, according to
the country’s biggest business association.
Retailers are seeing daily sales fall by as much as 90 percent, with
restaurants and hotels suffering reductions of as much as 70 percent,
Bernado Cumaio, director for financial policy at the Confederation of
Business Associations of Mozambique, told reporters Monday.
Bank customers are having to wait in line for cash as a contractual
dispute between the country’s national payments system and a software
service provider persists, rendering customers unable to swipe their
bank cards or withdraw cash from automated teller machines.

Kenya

Bitcoin [$4,300 last] and the entire Crypto Universe is getting
creamed. Bitcoin -10% today-15% yesterday -33% in a week
There are many cryptocurrency schemes which are sold on the same
grounds as the greatest South Sea Bubble prospectus: “For carrying on
an undertaking of great advantage, but nobody to know what it is.”
US Tech also is getting creamed. Facebook shares dropped to the lowest
level since Feb 2017
The iconic Apple which closed at a record of $232.07 on Oct. 3 has
plunged almost 20 percent since then and fell 4 percent to $185.86 on
Monday.
''Talent hits a target no one else can hit, genius hits a target no
one else can see'' said Steve Jobs.
The markets had become a little bright eyed and bushy tailed about Xi
and Donald doing a deal.
The markets will be disavowed of this notion.
Mozambican companies are facing a collapse in revenue because of an
interbank-payments system outage that began last week, according to
the country’s biggest business association.
Retailers are seeing daily sales fall by as much as 90 percent, with
restaurants and hotels suffering reductions of as much as 70 percent,
Bernado Cumaio, director for financial policy at the Confederation of
Business Associations of Mozambique, told reporters Monday.
The Kenya Shilling confounded the Naysayers and sent them running for
cover rallying as high as 102.40 at one point before closing at the
102.80 Level.
Keep an eye on the Oil Price for further clues.
Trading volumes have sunk and today the NSE traded 161.195m shillings
[$1.571m] of which 68.69% was transacted in Safaricom.
The closing Prices have not been received as I file this.

Safaricom closed unchanged at 23.50 [the weighted average price was
23.74 but was marked down] and traded 4.664m shares worth 110.739m. We
have been in a tight trading range capped by 24.25 since the beginning
of October and for Value Investors this is the that moment wen they
they should be stepping up.

KCB closed unchanged at 39.00 and traded 260,500 shares worth 10.164m
making it the second most actively traded share at the Exchange. KCB
reported a +19.686% Q3 2018 Profit after tax acceleration which
underpinned the share price. KCB trades on a Trailing PE of 6.065.

KenGen closed unchanged at 7.10 and traded 82,600 shares.

Transcentury which announced a Roll-over of USD 3.5 mn worth of
short-term loans by one year. The loan was taken from Kuramo Capital
Mgmt was high ticked +8.77% on the grand total of 100 shares and
closed at 3.10.

East African Portland Cement slumped -9.97% to close at 14.00 and
traded 1,800 shares.
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