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Tuesday 25th of June 2019 |
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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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