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Bond Yields in "tilt" mode - Forever blowing Bubbles
G7 Government Bond Yields have sunk to record lows. The iconic German
Bund [10 Year German Bond] sank to -0.21%. The German Finance Ministry
receives 20 Cents per 100 euros of debt as a gift from the investors
when they sell 10 Year Bunds, In fact Switzerland is experiencing
Negative Bond Yields through 20 Years, Germany, Japan, Denmark,
Netherlands through 10 years, Austria, France, Finland through 8
years, Sweden, and Belgium 7 years, Ireland and Slovakia 6 years,
Spain, Portugal, Slovenia 5 years and even Italy's 6 month Bills are
negative. Of course Japan was the first G7 market to enter ''tilt''
territory and its JGB [Japan 10 Year Bond] remains at -0.10%. This
macro gale force level move has pulled US 10-Yr Treasuries to a
20-month low of 2.15% [Last November it was at 3.24%]. Rate markets in
the US have now priced in close to 85bp cumulatively of easing by the
end of 2020. (via JPM). The US Curve has inverted and typically curve
inversions are harbingers of recession. Markets and prices exhibit
patterns of correlation and essentially my perspective is that it is
the correlation that has exerted a ''Pull'' Effect on US Yields and
that therefore the ''recessionary'' Signalling of the Yield Curve
should be discounted. There has been a Strong ''Safe Haven'' Demand
develop over the last few sessions which has lifted Government Bond
Prices, Gold and the Yen. And there is a correlation element to recent
Yen strength, Japanese Bond Yields were already negative therefore in
the comparison Japanese Yields have become more attractive and given
further muscle to the Yen.
It was not too long ago that Everyone was predicting a Weimar Republic
outcome or if you are looking for a more recent vintage then dial up
Caracas, Khartoum or Harare. Classical Economic Theory predicted that
if lashings and lashings of freshly printed money were injected
intravenously into the Patient, then the value of money should devalue
and inflation run off the charts. Clearly this has not happened. In
fact Inflation Gauges are slumping and Inflation is ''Like a patient
etherized upon a table'' Trump's Tariff War has spiked earlier ''high
jinks'', stock markets have lost ground and Investors have continued
to run for cover and ''safe havens'' You will recall Ben Bernanke's
riposte when asked why Investors buy Gold
People hold Gold "As protection against what we call tail risks:
really, really bad outcomes."
Gold crossed $1,300+ on Friday. Crude Oil got crushed -5.34% Friday
capping a -15.87% retreat over the last 4 weeks. Crude Oil is an
interesting proxy because its been a Tug of War between sharpened
Geopolitical Risk [particularly in the matter of Tehran which sent
prices higher] versus concerns around Global Growth and the latter has
now overwhelmed the Former. It has turned out that it was not April
that was the cruellest month [breeding lilacs out of the dead land,
mixing memory and desire, stirring dull roots with spring rain] but
May. The Trade War intensified through May and its intensification is
best perceived through the Linguistics.
What we also know is that you don't stand in front of a Runaway
Freight Train. The Question we need to ask ourselves is how much
further this move may run? My sense is that the G7 Bond Markets are
now in nose-bleed territory. Whilst I accept that its a 20/80 [US
Consumer absorbs 20%, China will have to absorb 80%] of the Tariff
Price increase, nevertheless even 20% of a 100 is inflationary. The US
Rates and Bond Market looks seriously overcooked to me. However, what
we also know is that Markets can stay irrational longer than anyone
can stay solvent. Therefore, I would be tentatively selling 85bp of
cumulative US easing through 2020 as per JPM. Last week we saw
positive EM and Frontier market divergence, which was noteworthy.
Lusaka is in unprecedented Territory and the forced nationalisation of
Mr. Agarwal's Copper mines might well be a cashew nut moment for
President Lungu. Zambian $ Eurobond Yields are at 22%. Thats ''whack''
Let me end with the Madaraka Day Masterstroke announcement. I am sure
the Central Bank has visibility on how much Cash is not in
circulation. The Announcement might be a catalyst for s short term
stimulus as Owners of the ''Jirongos'' try and dispose them. I would
have thought the discount is already 20% at the very least.
Demonitisation is a very neat Solution. Mohamed Wehliye tweeted
1. It is a one time tax on black money
2. Counterfeiting of 1k down
3. CBK liabilities of Ksh down as a certain percentage of the
demonetised 1k will be extinguished - not come back
4. Cash to GDP ratio will go down -
5. % of big denomination re money in circulation down
Its a very clever move and I noticed the President was rather amused
by its cleverness.
Global Yield Curves Blare Louder Alarms About Economic Prospects
Alarm bells are ringing louder by the day in bond markets around the
world, signaling anxiety about economic prospects is flourishing amid
ever-worsening trade tensions.
In the U.S., the 3-month bill’s yield on Friday exceeded the 10-year
note’s by a margin last seen in 2007, sounding the loudest recession
warning since just before the financial crisis. Germany’s 10-year
rates plunged to a new record low well below zero, cutting their
premium over two-year securities to the lowest level since 2015.
Britain’s yield curve is around its flattest level since the global
crisis more than a decade ago, and Canada’s is seeing 2007 levels of
Here's What Could Happen If the Yuan Slips to 7 a Dollar @markets
A miserable month for China’s yuan is pressuring officials to decide
how much they care about defending 7 a dollar.
The currency is down about 2.5% in May, headed for its worst drop
since July and the biggest loss in Asia. It touched a five-month low
of 6.9217 per dollar a week ago.
With the G-20 summit in Japan next month, some strategists see an
increasing chance that a trade war escalation could drive the yuan
past 7 for the first time in more than a decade.
They don’t agree on the consequences. While Citigroup Inc. says a
break of the key level may trigger a sell-off in stocks, competitive
devaluation and even financial instability, Bank of America Merrill
Lynch argues a weaker yuan is justified by slower growth, and that
massive outflows aren’t likely.
What’s clearer is that risk of intervention is higher when 7 is in
sight -- the authorities dumped dollars and mopped up offshore
liquidity repeatedly in recent years, and have come out with verbal
support for the currency this week. This is the third time the yuan is
close to testing that mark in the aftermath of a shock devaluation in
“What’s different this time is the intensification of trade tensions,”
said Claudio Piron, co-head of Asian currency and rates strategy at
BofAML. “When we look at all the tools that China has at its disposal,
an adjustment in the yuan is the easiest one to use. The trick is to
achieve it without scaring the rest of Asia.”
He added that the yuan may slide to 7.13 if China and the U.S. slap
more tariffs on each other’s goods. The odds of a tumble beyond 7
within a year have doubled over the past month to 39% following the
recent weakening, according to data compiled by Bloomberg based on
option prices. The yuan rose 0.12% to 6.9050 a dollar as of 4:35 p.m.
China’s top banking regulator has warned that traders would suffer
“huge losses” if they short the yuan, and the central bank governor
vowed to keep the currency stable. The PBOC has said it would issue
bills in Hong Kong in the near term, a tool that limits liquidity and
can strengthen the offshore yuan. Policy makers have also kept the
daily fixing stronger than 6.9, even though the spot rate traded
weaker than that level for most of the past week.
“I do not think the PBOC has a line in the sand at 7,” he said. “The
PBOC may increase its tolerance of a weak renminbi that is driven by
27-MAY-2019 :: Chinese currency which is -8.8% year on year basis is surely a very visible proxy
Chinese currency which is -8.8% year on year basis is surely a very
visible proxy. If this all turns ballistic, then this is going to fly
through 7.00 and the Chinese will surely use the value as currency as
push-back. If they do, they will be pushing an open door. It is clear
that directionally money wants to leave China and a great deal of the
2019 surge in Bitcoin is surely correlated to Chinese Flight Capital.
Therefore, my prediction is when the currency slides it is going to
slide real quick and Dollar Call Options are an interesting
10 NOV 14 ::Ouagadougou's Signal to Sub-Sahara Africa
What’s clear is that a very young, very informed and very connected
African youth demographic [many characterise this as a ‘demographic
dividend’] – which for Beautiful Blaise turned into a demographic
terminator – is set to alter the existing equilibrium between the
rulers and the subjects, and a re-balancing has begun. We need to ask
ourselves; how many people can incumbent shoot stone cold dead in such
a situation – 100, 1,000, 10,000? This is another point: there is a
threshold beyond which the incumbent can’t go. Where that threshold
lies will be discovered in the throes of the event. Therefore, the
preeminent point to note is that protests in Burkina Faso achieved
escape velocity. Overthrowing incumbents is all about acceleration,
momentum and speed best characterised by the Ger- man word
With Sudan's street-fighting women Our writer witnesses the unfinished revolution that pushed out a dictator @TheEconomist
ON APRIL 23rd I stood amid throngs of Sudanese as a train carrying
hundreds of people arrived in the heart of Khartoum. The carriages
were crammed with passengers from Atbara, the town where
anti-government demonstrations had begun five months earlier. They had
come to join the swelling ranks of protesters against military rule.
As we watched these reinforcements arrive, a fellow journalist
remarked that the scene reminded him of Russia in 1917. (He’s an old
hand but I don’t think he was there.) More than a century ago Vladimir
Ilyich Lenin arrived in Russia on a train from Switzerland, intent on
seizing power for the Bolsheviks. Yet, train aside, it is an inapt
parallel. For unlike Lenin’s coup d’etat, what I saw in Sudan was
peaceful, joyous and leaderless.
As we walked among those on the streets Abbas explained that: “There
was an atmosphere of darkness, now there is hope.”
Since most of those at the sit-in were under 30 years old, and since
this is 2019, smartphones were everywhere. There was a feedback loop
between the online and offline worlds: protesters at the sit-in would
take photos and post them on Facebook, which would encourage friends
to come down to the site; or they would take videos and have them
broadcast on the screen by the main stage. All this intensified the
feeling of being part of history.
At the protest I noticed many young couples holding hands. Such public
displays of intimacy may have been dangerous under the old regime. In
protests in Cairo in 2011 there were reports of sexual assaults. Here
in Khartoum, though, the atmosphere struck me as different, more
wholesome. In some ways it resembled the Tiananmen Square protests in
China in 1989, where young couples were unofficially married at the
sites of sit-ins.
Talking to Abbas after the Atbara train passed I wondered aloud
whether the mood was too celebratory, too soon. He said, politely,
that I should not confuse elation of with a sense of a job completed.
“We Sudanese”, he said, “we cover pain with joy.”
Empire builder Assessing Vincent Bollore @TheEconomist
Who is france’s greatest capitalist? Americans might think this
question is the beginning of a joke. Those who take it seriously may
finger Vincent Bolloré, who over nearly four decades has built an
empire spanning African ports and French pipelines, pay-tv, electric
cars, the world’s biggest music label and much else besides. On May
29th the 67-year-old stepped down from the board of Bolloré sa, the
holding company at his complex empire’s core. At an annual meeting
outside Paris, he air-kissed fawning shareholders one last time and,
as a parting gift, gave each one three bottles of wine (from a Bolloré
With sales of €23bn ($25.6bn) and 81,000 employees around the globe,
Bolloré Group testifies to its boss’s knack for business. A more sober
assessment of his reign reveals a complicated legacy. The tycoon
emerges as a flawed exemplar of capitalism. His heirs should draw
Though from 1822 five generations had built a Bolloré
bible-and-cigarette-paper concern in Brittany, Vincent is what the
French call un self-made man. In 1981, still in his 20s, he paid a
couple of francs for the family concern, which had fallen into the
hands of its creditors—a quixotic move for an up-and-coming investment
Mr Bolloré’s dynastic industrial ambitions, admired in French business
circles, were soon paired with stockmarket raids à l’américaine, which
were not. Not for him the polite ways of Parisian business, nor its
endless cocktail circuit. He is part activist investor, part
private-equity financier in a country which has little love for
either; a corporate “pirate” eyeing the shareholder registers of
august companies, whose family owners did not appreciate it. Some fell
under his control, such as a shipping group that then formed the
backbone of a logistics operation which now runs 16 container
terminals in Africa. Others, like Bouygues, a construction group, and
Lazard, a blue-blooded bank, persuaded less outré parties to buy his
stake at a hefty premium. Stodgy French capitalism can use an outsider
to shake it up. But Mr Bolloré’s norm-flouting has a less laudable
side. For one thing, his touch is not as golden as some make it out to
be. He has on occasion ridden roughshod over the principles of modern
corporate governance. Lastly, he and Bolloré sa face charges of
corruption, which both deny.
Start with the business. Mr Bolloré is a risk-taker of the sort every
economy needs. Investors who bought shares in Bolloré sa 30 years ago,
soon after it listed, have made their money back 40 times over,
compared with eight times for France’s cac 40 blue-chip index. Its
market capitalisation is now €12bn. The empire around it comprises 457
businesses. A simple total of their market caps gets to nearly €70bn.
The three main pillars are logistics, batteries and media.
The logistics and pipelines business has been the most successful. It
includes ports in Africa, where Bolloré sa says it has invested €4bn,
plus a freight-forwarding arm, three African rail concessions and
French oil terminals. Analysts value it at €8bn or so, roughly half of
Bolloré sa’s value including debt. It faces stiffer competition than
it did, but margins are healthy.
Those profits appear mostly to have been offset by losses from another
transport bet: on a new type of lithium battery developed by a
plastics operation which complemented the old paper business. Its only
big customer has been a car-sharing scheme in Paris, Autolib’, which
was run by Bolloré before collapsing in a heap of debt last year. The
battery venture is now eyeing electric buses. It is worth perhaps
one-tenth of the €3bn sunk into it.
Vivendi, a media behemoth in which Bolloré sa owns a 26% stake worth
around €8bn, has been a mixed bag. Mr Bolloré took control of the
group in 2014, fulfilling a long-rumoured ambition to become a media
baron. Universal Music Group, which is wholly owned by Vivendi but run
at arm’s length from California, has prospered as streaming revenues
from Lady Gaga, u2 and its other stars have soared. Its value is
thought to have swelled from $8bn in 2014 to $30bn—more or less
Vivendi’s market capitalisation. Vivendi has gained just €7bn in that
period, reflecting poorer performance at other parts of the group.
Canal+ has struggled to retain French pay-tv viewers in the age of
Netflix; Havas looks too small to compete with pr-and-advertising
rivals like wpp and Omnicom.
Mr Bolloré’s expansion into Italy, in a bid to create a southern
European content-and-distribution giant, has been costliest. Since
2015-16 Vivendi has tried to seize control of Mediaset, Silvio
Berlusconi’s broadcasting empire, and Telecom Italia, a mobile
operator. These bets have misfired: Mediaset’s share price has fallen
by a quarter and Telecom Italia’s by nearly two-thirds since Mr
Bolloré built stakes in them. A €1.1bn hit in the value of its Telecom
Italia holdings all but wiped out Vivendi’s net profits last year
(other holdings rose in value). As analysts at Morgan Stanley, a bank,
recently put it, “great music story, unappealing wrapper”.
As a result of these misadventures, Bolloré sa has lost shareholders
money in the past five years, even as the cac 40 has gained 40%. Such,
Mr Bolloré’s defenders might reasonably argue, is the nature of
risk-taking. Fair enough. But the wrapper has other unappealing
Bolloré’s corporate structure would put Byzantium to shame (see
graphic on previous page). At its heart is a corporate mille-feuille,
where Mr Bolloré and his family control a company that holds the
majority stake in a firm that in turn owns most of another, and so on.
Alongside this sit companies that do actual business, including
Vivendi. Such a model, which is not unique in France, allows minority
investors to be brought in while a central shareholder—in this case Mr
What sets Mr Bolloré’s layer cake apart from similar ones is that
those minority shareholders are often other companies in it. Bolloré
sa part-owns at least ten companies with direct and indirect stakes in
its own majority shareholder, Financière de l’Odet, and its parents.
When a company pays a dividend, the money loops through a few holding
companies before some of it returns to its own bank account. Several
of the holding companies are listed but at least 90% owned by Bolloré
Analysts attribute over a third of Bolloré sa’s market value to
shareholdings in its parents; these parents are also worth around
€12bn in total. That does odd things to Bolloré sa accounts. When its
value falls (like last year, when its shares lost 24%), that of the
holding companies above it dips too. Because Bolloré sa in turn owns
them, its balance-sheet and income must be adjusted downwards. This
then affects metrics used to calculate the value of its shares, whose
fall prompts a further adjustment. Share-price rises cause upward
In 2015 Muddy Waters, a hedge fund which specialises in arcane
companies, said the rococo empire was too complicated to be modelled
in an Excel spreadsheet. Analysts and investors with the patience to
track Bolloré sa disagree over basic things, such as who exactly is
entitled to the profits generated by the underlying operations.
All this makes it hard to gauge the Bolloré empire’s financial
condition. It reports net debt equal to a healthy 17% of equity. This,
though, assumes debts owed by one company in the structure can be
repaid with cash held in another part. Bolloré sa’s accounts subsume
all those of (much larger) Vivendi—not just the proportion, 26%, which
it owns. Such consolidation is perfectly legal, for Bolloré sa
controls Vivendi. But its claim on Vivendi’s cashflows would be as
owner of a 26% stake, not of 100%.
Information is patchy on where in the organigram debts sit (Bolloré
says all the holding companies contain cash). Pierre-Yves Gauthier of
AlphaValue, a research house, has spoken of “looming potential stress”
in the structure. With €10.3bn in gross debt and €4.8bn in cash at end
of 2018, its position looks reasonable. Its earnings before interest,
tax, depreciation and amortisation were just under €1bn last year even
before adding in Vivendi’s. The accounts of Omnium, near the top of
the structure, paint a different picture. These consolidate the group
but in effect strip out the cross-shareholding loops. They show net
debt of €5.6bn supported by equity (excluding outsiders’ stakes) of
just €482m at end 2018—gearing of over 1,000%.
Such leverage is sustainable so long as cash keeps flowing into the
system. Some observers suspect this is why Mr Bolloré has pursued
ever-bigger companies with ever-bigger balance-sheets, like Vivendi.
The company has been generating lots of cash by selling assets
accumulated in an ill-fated acquisition spree initiated in the early
2000s. Under Mr Bolloré’s leadership, Vivendi paid fat dividends,
which helped service debts that paid for his takeover of it. It is now
considering the sale of up to half of Universal. That would let
Vivendi send as much as $8bn to the Bolloré structure.
Critics who worry that Vivendi is run for the benefit of Mr Bolloré
and not its other shareholders point to such machinations as evidence.
In June 2017 the purchase by Vivendi of Bolloré businesses’ 59% stake
in Havas transferred €2.3bn in cash from Vivendi’s coffers into those
of Bolloré entities, which owned around 20% of Vivendi at the time.
Analysts questioned both the deal’s rationale and price. Independent
experts have decried worsening corporate governance at Vivendi (to
match Bolloré sa).
Other bits of the business have attracted the gaze of the authorities.
In April 2018 preliminary criminal charges were brought against Mr
Bolloré, other Bolloré executives, and later Bolloré sa, in relation
to corruption in Togo and Guinea. French investigating magistrates
suspect them of sending Havas spin-doctors to work in the countries’
election campaigns. According to the charges, it was Bolloré
businesses that footed much of the bill, not the politicians to whom
the services were rendered. (Bolloré says it paid for bona fide work
carried out.) Bolloré sa is said to have gained business after the
politicians won. Mr Bolloré, who was briefly detained for questioning
at the time, may face prison time if found guilty. Mr Bolloré, Bolloré
sa and the other executives all deny the allegations.
Many Bolloré ventures—ports, broadcasting—depend on government
goodwill. In Africa Mr Bolloré and his businesses have maintained
close links with current and former politicians. “He is a friend. I
favour friends. And so what?” Guinea’s president, Alpha Condé, told Le
Monde in 2016. Bolloré sa has recruited from France’s network of
former ministers, spooks and other grandees, often with tangled
business ties in its former colonies. Critics allege Mr Bolloré has
skewed the coverage of his tv channels and newspapers in favour of
politicians vital to his business interests.
Mr Bolloré keeps close to French power, too. After winning the French
presidential election in 2007, Nicolas Sarkozy holidayed on Mr
Bolloré’s yacht. “I’ve known Vincent Bolloré for 20 years,” Mr Sarkozy
explained at the time. Mr Bolloré’s son, Yannick, has called the
current president, Emmanuel Macron, “a friend”. Bolloré père has
reportedly lobbied the French state to keep its 3% stake in Vivendi.
Mr Bolloré and Bolloré sa deny any impropriety in all these
relationships. As for corporate governance, people close to Mr Bolloré
dismiss concerns as specifically Anglo-Saxon. Family groups are lauded
in Europe as long-term investors who see beyond quarterly earnings. Mr
Bolloré has made no secret that his son Cyrille, 33, who chairs
Bolloré sa, or Yannick, 39, who chairs Vivendi, will be in charge one
day (a third son is not active in the business; a younger daughter is
in its lower echelons).
For now, despite stepping off the board of Bolloré sa, the patriarch
remains the real boss. He retains positions—and influence—throughout
the mille-feuille. He still calls the shots at both Bolloré and
Vivendi. For years he has promised to relinquish all positions in
2022, when he turns 70 and the family business turns 200. Several
Bolloré investors worry that the untested sons lack their father’s
track record. Given the elder Mr Bolloré’s controversial tenure,
others may see that as a virtue.
Tanzania Investment Centre (TIC) has organised a forum whose key aim is to attract domestic and international investors in cashew nut sector @The_EastAfrican
Tanzania Investment Centre (TIC) has organised a forum whose key aim
is to attract domestic and international investors in cashew nut
sector, which is witnessing an average growth of 450 per cent
Geoffrey Mwambe, TIC executive director said they are seeking to
establish cashew nut processing projects and industrial parks mainly
in Lindi and Mtwara regions. The search for processors comes at a time
when the Tanzanian government is still holding a huge stock of cashew
nuts estimated at 200,000 tonnes it bought from farmers in November
last year after it failed to secure foreign buyers. The government
opted to buy all harvests after private buyers failed to up their
prices as demanded by President John Pombe Magufuli.
Rejection of @BarrickGold bid is 'no brainer', top @AcaciaMining investor says @ReutersAfrica
fidelity International, one of the largest shareholders in Acacia
Mining, said on Friday Barrick Gold’s low bid to buy the Acacia shares
it does not already own showed a lack of judgment and it was a “no
brainer” to reject it.
Barrick Gold spun off Acacia into a separate company in 2010, but owns
63.9% of it. Barrick has said the offer level reflects the risk of
operating in Tanzania and it has until June 18 to turn the indicative
bid into a firm offer.
Barrick had no further comment on Friday.
Fidelity International said the bid was around 50% too low.
“We are definitely not going to accept the offer,” Alexander Wright,
portfolio manager at Fidelity International, Acacia’s sixth biggest
investor according to Refinitiv data, told Reuters. “At this price
it’s a complete no brainer not to accept it.”
In the absence of a finalised deal with Tanzania, Acacia is expecting
to go ahead with an international arbitration hearing in July, with an
outcome expected by the end of this year.
Acacia’s shares reached a peak above 6 pounds in 2016 and have plunged
to less than 2 pounds, although they rallied in February on the
announcement of the proposed settlement and better than expected