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Tuesday 25th of June 2019
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0930-1500 KENYA TIME
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Macro Thoughts |
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24-JUN-2019 If You were to look at the US economy in isolation, You would have to say such a forecast is absurd. Africa |
If You were to look at the US economy in isolation, You would have to
say such a forecast is absurd. The Economy sure has some soft spots
but unemployment is at multi-decade lows and Consumer spending [the
Key Pivot] holding up. The US 2 Year Note which is at around 1.75% is
the Financial Instrument which is the purest Signal.in all the noise.
We are in ''nose-bleed'' Territory and I afraid this is ''Voodoo
Economics'' and just because we have not reached the point when the
curtain was lifted in the Wizard of Oz and the Wizard revealed to be
''an ordinary conman from Omaha, Nebraska, who has been using
elaborate magic tricks and props to make himself seem "great and
powerful"'' should not lull us into a false sense of security.
BITCOIN [which in my considered opinion has never been about its
utility but all about its Safe haven non-correlated asset status] flew
through 10,000.00 crossed 11,000
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Persian Gulf Oil Shipments Now Cost More Than $500,000 to Insure @markets Law & Politics |
The cost of insuring Middle East oil shipments is soaring as tensions
mount in a region responsible for about a third of all seaborne
petroleum. So-called war risk premiums for a standard oil cargo from
the Persian Gulf and the tanker hauling it can now cost upwards of
$500,000, according to people familiar with the insurance market.
Earlier this year, the same premiums would have cost owners less than
1/10 of that. Underwriters are now aiming to charge anywhere from
$150,000 to $325,000 to cover a cargo valued at $130 million, the
people familiar with that market said. Until this week, the same cover
cost $1,000 or less. Insuring the tanker itself now costs in excess of
$200,000, based on a $75 million vessel. That’s up from less than
$30,000 at the start of 2019. Despite the surge in insurance premiums,
the extra cost is still a small part of a barrel of crude. Based on
standard supertanker cargo, $500,000 would equate to 25 cents per
barrel.
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MBS, alleged owner of Leonardo Da Vinci's Salvator Mundi which is a painting of Christ as Salvator Mundi (Latin for "Savior of the World") dated to 1500 Law & Politics |
MBS, alleged owner of Leonardo Da Vinci’s Salvator Mundi which is a
painting of Christ as Salvator Mundi (Latin for “Savior of the World”)
dated to 1500. The painting shows Jesus, in Renaissance dress, giving
a bene- diction with his right hand raised and two fingers extended,
while holding a transparent rock crystal orb in his left hand. The
rock crystal orb of course reappeared during Trump’s visit to the
Desert Kingdom. The painting is currently in the Louvre in Abu Dhabi
because the ‘’optics’’ of this $450m purchase did not sit well with
being the son and heir to the kingdom. The king is called the
custodian of the two holy mosques after all. MBS is also the proud
owner of Serene [the yacht] which he bought for 500m Euros in 2015,
while vacationing in the south of France. Bruce Reidel alleges MBS
sleeps on the Serene off Jeddah because he too lives in fear for his
life.
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24-JUN-2019 :: Wizard of Oz World. @TheStarKenya International Trade |
The Wizard of Oz is a Film made in 1939 and widely considered to be
one of the greatest films in cinema history, It is a version of L.
Frank Baum's 1900 children's book The Wonderful Wizard of Oz. and
featured the then child star Judy Garland as Dorothy Gale. The Wizard
is one of the characters in The Wonderful Wizard of Oz. Unseen for
most of the novel, he is the ruler of the Land of Oz and highly
venerated by his subjects. Believing he is the only man capable of
solving their problems, Dorothy and her friends travel to the Emerald
City, the capital of Oz, to meet him. Oz is very reluctant to meet
them, but eventually each is granted an audience, one by one. In each
of these occasions, the Wizard appears in a different form, once as a
giant head, once as a beautiful fairy, once as a ball of fire, and
once as a horrible monster. When, at last, he grants an audience to
all of them at once, he seems to be a disembodied voice. Eventually,
it is revealed that Oz is actually none of these things, but rather an
ordinary conman from Omaha, Nebraska, who has been using elaborate
magic tricks and props to make himself seem "great and powerful".
Last week we witnessed some ''Wizard of Oz'' level moves in the
markets. The universe of negative-yielding bonds grew about $1.2
trillion last week pushing the total past $13 trillion for the first
time. "Last year, the tally of negative-yielding paper was shrinking
towards $6tn, only for the forces of financial repression to come
roaring back as the global economy encountered turbulence.” [Financial
Times]. Greek 10 Year Bonds which once printed 44% yields are
currently yielding 2.44%. This violent financial repression climaxed
[or did it?] last week and the Spillover Effect is to be seen in Gold
which crossed $1,400,.00 for the first time since Sep 2013. BITCOIN
[which in my considered opinion has never been about its utility but
all about its Safe haven non-correlated asset status] flew through
10,000.00 crossed 11,000 and was last at 10,700 and has posted a more
than +195% return in 2019. The Yen which is +2.545% versus the Dollar
in 2019 was on a tear last week. The S&P closed at an all-time high up
17.8% year-to-date and has had its best start to a year since 1997.
The Real Estate Moghul President Trump has been brow-beating The
Federal Reserve Chairman Powell even threatening him with demotion.
Last week Powell whilst holding US interest rates steady signalled the
next move would be lower. The Market fearing the Arrival of the
''Wicked Witch of the West'' has front-run Powell and has priced in 3
rate cuts within 12 months. If You were to look at the US economy in
isolation, You would have to say such a forecast is absurd. The
Economy sure has some soft spots but unemployment is at multi-decade
lows and Consumer spending [the Key Pivot] holding up. The US 2 Year
Note which is at around 1.75% is the Financial Instrument which is the
purest Signal.in all the noise. We are in ''nose-bleed'' Territory and
I afraid this is ''Voodoo Economics'' and just because we have not
reached the point when the curtain was lifted in the Wizard of Oz and
the Wizard revealed to be ''an ordinary conman from Omaha, Nebraska,
who has been using elaborate magic tricks and props to make himself
seem "great and powerful"'' should not lull us into a false sense of
security.
We might ask ourselves what might the ''Wicked Witch of the West''
look like? Is it the spontaneous combustion of the once mighty
Deutsche Bank and a multi trillion dollar derivative blow up? Is it a
War with Iran that spikes Crude Oil and topples the Oil Markets. And
think about this. A momentary blink of eye Flash Move in any of these
markets would be deadly. The Tariff War will be having its 2nd Truce
Dinner imminently. The First was in December and in Buenos Aires and
whilst Donald and Xi quaffed sirloin steaks and Malbec Wine, the
Huawei CFO was being interdicted in Canada that time. What will happen
this time is anybody's Guess. Trump has been massaging the US markets
ahead of his Truce Dinner but he is gaming the markets and like Obama
once confessed, the US President is like a Train Driver he can speed
the train up or slow it down but the Tracks have already been set.
Therefore, I cannot see any quick resolution around the Tariff War.
The US and its allies are upping the Ante in the South China Sea. Hong
Kong speaks to geopolitical Volatility on the Chinese Periphery. And
meanwhile, Trump stood down an Iranian Strike when the Planes were
already in the Sky. Iran has been pushed to the brink by Trump's
coercive, sanction warfare.and with Regime stability now on a
knife-edge, its clear Iran feels it has nothing to lose.
“Don't forget the real business of war is buying and selling. The
murdering and violence are self-policing, and can be entrusted to
non-professionals. The mass nature of wartime death is useful in many
ways. It serves as spectacle, as diversion from the real movements of
the War. It provides raw material to be recorded into History, so that
children may be taught History as sequences of violence, battle after
battle, and be more prepared for the adult world. Best of all, mass
death's a stimolous to just ordinary folks, little fellows, to try 'n'
grab a piece of that Pie while they're still here to gobble it up. The
true war is a celebration of markets.” ― Thomas Pynchon, Gravity's
Rainbow
We are at the cusp of an unprecedented Financial Moment. How it plays
out is anybodys Guess and that's exactly why Safe-Havens from Gold to
Bitcoin from the Yen to the US 2 Year are bid. Its exactly when the
markets fears ''Tail Risks'' [really really bad outcomes] are sky high
that Safe Havens go bid.
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The Wizard of Oz: Pay No Attention International Trade |
The Wizard is one of the characters in The Wonderful Wizard of Oz.
Unseen for most of the novel, he is the ruler of the Land of Oz and
highly venerated by his subjects. Believing he is the only man capable
of solving their problems, Dorothy and her friends travel to the
Emerald City, the capital of Oz, to meet him. Oz is very reluctant to
meet them, but eventually each is granted an audience, one by one. In
each of these occasions, the Wizard appears in a different form, once
as a giant head, once as a beautiful fairy, once as a ball of fire,
and once as a horrible monster. When, at last, he grants an audience
to all of them at once, he seems to be a disembodied voice.
Eventually, it is revealed that Oz is actually none of these things,
but rather an ordinary conman from Omaha, Nebraska, who has been using
elaborate magic tricks and props to make himself seem "great and
powerful". Working as a magician for a circus, he wrote OZ (the
initials of his first two forenames, Oscar being his first, and
Zoroaster being the first of his seven middle names) on the side of
his hot air balloon for promotional purposes. One day his balloon
sailed into the Land of Oz and he found himself worshipped as a great
sorcerer. As Oz had no leadership at the time, he became Supreme Ruler
of the kingdom and did his best to sustain the myth.
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Blue Blood Worth $60,000 a Gallon @business Commodities |
The horseshoe crab is effectively a living fossil—it’s been on Earth
for 450 million years. But in just a few decades, humans have
presented what is arguably the biggest threat yet to their continued
existence.
In the 1960s, scientists discovered that horseshoe crab blood could be
used to detect even the smallest amounts of harmful bacteria.
Since then, the pharmaceutical industry has been using it to make sure
our injections, vaccines and surgical implants are all free from
contamination.
And so, every year along the U.S. East Coast, 500,000 crabs are
collected, cleaned, measured and then drained of as much as one-third
of their copper-based, baby-blue blood.
Collections also take place across the eastern shores of Mexico and
China. Demand for the blood is high—it’s been called blue gold and is
reportedly worth up to $60,000 a gallon.
The horseshoe crabs are released back into the ocean soon after the
bleeding, but it’s estimated that 15% die as a result of the process.
Combined with the use of horseshoe crabs for bait, habitat loss and
sea level rise attributable to the climate crisis, some estimate that
the crab population has fallen by 80% in 40 years.
But there’s already a way to slow their demise—at least when it comes
to our Dracula-like tendencies.
Almost two decades ago, a professor at the National University of
Singapore created a synthetic solution that may be more effective than
horseshoe crab blood at making sure our medical supplies are safe to
use. It’s potentially cheaper, too.
For decades, however, the pharmaceutical industry preferred to keep
bleeding the horseshoe crabs.
Bloomberg New Economy followed the journey of the crab and its
synthetic savior to see how we might be starting to save the crabs
that have been saving our lives.
Emerging Markets
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Africa's Output Grew by 3.4% in 2018, @afreximbank's Africa Trade Report 2019 Shows Africa |
The African Trade Report 2019: African Trade in a Digital World,
launched today in Moscow during the 26th Afreximbank Annual Meetings,
states that Africa’s total merchandise trade in 2018 had a value of
over $997.9 billion
World Trade Organisation estimates show that the volume of global
merchandise trade grew by 3 per cent in 2018, down from 4.6 per cent
in 2017.
The report noted that while the European Union remained Africa’s main
continental trading partner in 2018 – accounting for 29.8 per cent of
total trade –
African trade with the South grew significantly over the last decade
to account for more than 35 per cent of the continent’s total trade in
2018.
China and India further consolidated their positions as Africa’s first
and second single largest trading partners, accounting for over 21 per
cent of total African trade in 2018.
Intra-African trade also increased steadily in 2018, growing by 17 per
cent to reach $159 billion.
The report highlights that Africa has the potential to do more, noting
that its contribution to global trade remains marginal at 2.6 per
cent, up from 2.4 percent in 2017, and that, while intra-African trade
rose to 16 per cent in 2018 from 5 percent in 1980, it remains low
compared to intra-regional trade in Europe and Asia.
The report states that ongoing digitalisation is paving the way for a
new African economy, with e-commerce platforms and internet
penetration expediting transactions, reducing costs and leading to a
new generation of transnational digital consumers.
Prof. Benedict Oramah, President of Afreximbank, said: “It is vital
that Africa grasps the economic growth opportunities flowing from the
African Continental Free Trade Agreement, growing domestic demand and
population and our ever-closer investment and trading links with
emerging partners in the South. We must exert concerted action to
ensure that we develop, industrialize and diversify our industries and
supporting infrastructure to foster regional integration and
participate fully in regional and global value chains.”
Chief Economist and author of the report, Dr Hippolyte Fofack said:
“Intra-African trade, which grew by 17 per cent in 2018, more than
three times the rate of growth of extra-African trade, was the major
driver of Africa’s total merchandise trade in 2018.”
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The U.S. has "intense interest" in Africa, and the perception that the continent is of little interest to President @realDonaldTrump's administration is incorrect @AsstSecStateAF Africa |
The U.S. is South Africa’s third-largest trading partner, with two-way
trade in 2018 of $13.7 billion, according to Nagy. Imports from South
Africa include everything from precious metals, iron, steel and
aluminum, to automobiles, car parts and millions of cartons of citrus
and table grapes from the Northern and Western Cape.
The land debate is being monitored closely he said. Sub-Saharan
African countries eligible for the African Growth and Opportunity Act
have to commit to protecting private property rights.
“As everybody knows, President Trump has asked secretary Pompeo to
monitor the situation, to look at it carefully, which is what we are
doing because that could be a loaded issue that U.S. investors would
take a very close look at, when taking a decision on whether or not to
invest in South Africa,” Nagy said.
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Don't expect debt relief, United States @AsstSecStateAF warns Africa @ReutersAfrica Africa |
The International Monetary Fund and World Bank began the Heavily
Indebted Poor Countries (HIPC) Initiative in 1996 to help the world’s
poorest countries clear billions of dollars worth of unsustainable
debt.
But Africa is facing another potential debt crisis today, with around
40 percent of low-income countries in the region now in debt distress
or at high risk of it, according to an IMF report released a year ago.
“We went through, just in the last 20 years, this big debt forgiveness
for a lot of African countries,” said U.S. Assistant Secretary of
State for Africa for African Affairs Tibor Nagy, referring to the HIPC
programme.
“Now all of a sudden are we going to go through another cycle of that?
... I certainly would not be sympathetic, and I don’t think my
administration would be sympathetic to that kind of situation,” he
told reporters in Pretoria, South Africa, late on Sunday.
Under Donald Trump’s administration, the United States has criticised
China for pushing poor countries into debt, mainly through lending for
large-scale infrastructure projects. It has warned those nations risk
losing control of strategic assets if they can’t repay the Chinese
loans.
Sri Lanka formally handed over commercial activities in its main
southern port in the town of Hambantota to a Chinese company in 2017
as part of a plan to convert $6 billion of loans that Sri Lanka owes
China into equity.
U.S. officials have warned that a strategic port in the tiny Horn of
Africa nation of Djibouti could be next, a prospect the government
there has denied.
From 2000 to 2016, China loaned around $125 billion to the continent,
according to data from the China-Africa Research Initiative at
Washington’s Johns Hopkins University School of Advanced International
Studies.
And a number of African countries form part of China’s $126 billion
Belt and Road Initiative to link China by sea and land through an
infrastructure network with southeast and central Asia, the Middle
East, Europe and Africa.
China has rejected criticism of its lending in Africa. And debt
campaigners point to the fact that much of Africa’s current debt load
consists of commercial debt to western financial institutions or
Eurobonds, which are more expensive to service than Chinese loans.
“All of these countries are sovereign states, so it’s for them to
decide who they want to trade with,” Nagy said. “We feel we have an
obligation to point out to them when we believe they are getting into
severe economic difficulties.”
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Tanzania to Sell 1 Million Tons of Corn to Drought-Hit Kenya @business Africa |
Tanzania is set to sell 1 million tons of corn to neighboring Kenya
where a drought curbed production and caused prices of the grain to
soar.
A formal request for the sale from Kenya has been received, Tanzania’s
state minister for agriculture, Omary Mgumba, said Friday in an
emailed statement without giving details of the transaction.
The East African nation is also in the process of selling 700,000 tons
of corn to Zimbabwe, Mgumba said.
Exports of that volume would represent a huge increase for Tanzania.
The country’s prior record for corn exports was 500,000 tons in the
2013-14 season, according to U.S. Department of Agriculture data.
Kenya may import 1.3 million tons in the 12 months that start July,
more than double the previous year’s purchases, according to USDA.
Prices of corn, which is used to make a staple food, increased as much
as 70% in April from a month earlier as output dropped, the National
Drought Management Authority said.
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Africa |
Barrick Gold Corp.’s troubled African unit, Acacia Mining Plc, posted
an almost 5,000 word rebuttal to claims from its parent amid an
increasingly bitter spat between the two companies.
Barrick is seeking to buy out the remaining shares it doesn’t own in
Acacia to end its troubled time as a listed company.
Yet Barrick is refusing to offer any kind of premium and is also in
control of negotiations with Tanzania, where Acacia has been in a
dispute with the government.
Acacia said on Monday that Barrick buying out its minority
shareholders would be an attractive solution, but it disagrees with
the valuation of its stock.
It also said many of its problems with Tanzania, which have led to the
collapse of its share price, were made worse by Barrick’s intervention
in negotiations.
Two years ago, Tanzania handed Acacia an export ban and a $190 billion
tax bill, saying it falsely declared bullion sales abroad.
Since then, the miner’s position in the East African country has
deteriorated further. Barrick stepped in to lead talks in a process
that has seen Acacia frozen out.
“Acacia believes that Barrick’s intervention in Acacia’s negotiations
with the government of Tanzania, the length of time Barrick’s
negotiations with the government of Tanzania have taken and the way
they have managed their direct negotiations, have had the effect of
undermining Acacia in Tanzania,” the company said in the statement.
Barrick said in a statement last Tuesday it received a three-week
extension to make a formal offer to minority shareholders for the
roughly 36% stake in Acacia it doesn’t already own.
Barrick Chief Executive Officer Mark Bristow said in an interview last
week that the company didn’t plan to improve its offer for Acacia.
Acacia also said it disagreed with Barrick’s comments on its assets
and how long they can be mined for.
“In the Barrick announcement, it was suggested that certain
adjustments should be made to Acacia’s life-of-mine plans to reflect
significant risks inherent in Acacia’s operations,” Acacia said. “
The company strongly disagrees with these views and is unclear on how
Barrick can substantiate its proposed adjustments.”
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Kenyan retirees may be missing out on better returns because of the over-emphasis local pension fund managers place on domestic fixed-income assets, according to money manager Allan Gray @BBGAfrica Kenyan Economy |
Kenyan retirees may be missing out on better returns because of the
over-emphasis local pension fund managers place on domestic
fixed-income assets, according to money manager Allan Gray.
Retirement fund managers in East Africa’s largest economy invested
less than 2% of their assets offshore, well short of the 15% allowed
by the industry regulator as of the end of 2018, figures from the
country’s Retirement Benefits Authority show.
They cut allocations to equities to 17%, the lowest in at least two
years, while stepping up exposure to government securities to 39%, the
highest since December 2016.
“If you look at how Kenyan retirement funds are positioned today, we
think they are overexposed to fixed-rate bonds in general,” Tapologo
Motshubi, chief executive officer of Allan Gray’s Kenyan unit, said by
phone.
The combination of Kenya’s relatively high level of government debt to
gross domestic product and a local currency that may have strengthened
too much can reduce returns for such a strategy, he said.
Cape Town-based Allan Gray, which oversees about $39.1 billion for its
clients, began investing in Kenya in 2012 and started full operations
there in the middle of last year. It now manages about 5 billion
shillings ($49 million) in the East African country, offering a
strategy of performance-based fees.
Kenyan banks are among stocks that he said appear more attractive than
bonds. More broadly, yields from investing in equities have become
increasingly attractive as those from government securities fall to
six-year lows, reducing the appeal of gilts.
Kenya’s debt has more than doubled since 2013 to 5.28 trillion
shillings by the end of last year, equivalent to 52.7% of GDP,
according to the National Treasury.
The International Monetary Fund said in October the Kenyan shilling
was as much as 17.5% overvalued. The currency has weakened 0.8% this
year against the dollar.
Local fund managers betting heavily on Kenya, which has a 0.1%
exposure to global capital markets, are locking out prospective
returns from the rest of the world, Motshubi said.
“We aren’t sure why there is such limited offshore investment, but we
believe home country bias/preference is a factor,” he said.
“This can be harmful to long-term pension fund member returns given
the likelihood of better risk adjusted returns being available
offshore.
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