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Satchu's Rich Wrap-Up
Monday 15th of July 2019

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Macro Thoughts

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15-JUL-2019 :: US Rate Cut in three weeks a Racing Certainty. @TheStarKenya

It is now the received market wisdom that a US rate cut in July is now
all but certain. In fact the Market in its wisdom is now pricing in 4
rate cuts through 2020.   US Core CPI is at 2.1%, Unemployment is at
3.7%, GDP growth at 2.4%, Consumer Credit is growing at +5% annualised
and US Stock Markets have punched clean through to Fresh All Time
Highs. In fact, it is being reported that Chinese Journalists have
been proscribed from comparing the US and Chinese Stock Markets.  This
is indeed a quite incredible moment in monetary policy making where
the markets have led Policy Makers by the nose into a situation of
''Voodoo Economics'' plain and simple. The Violence of the Financial
Repression has forced interest rates deeper into negative territory in
many parts of the World and spilled over into Frontier markets where
Kenya's Eurobonds have served up a mouth-watering 20% gain in the
first Half. The Impulse has been so violent it has overwhelmed just
about every other calculation. President Trump has been bashing the
Federal Reserve Chairman and at least did not summarily dismiss him
like Reccip Tayyip Erdogan summarily dismissed his Central Bank Chief
a few short days ago but the net effect is the same, The Populists are
now in charge, Central Bankers are now doing the bidding of their
''Leaders'' and Erdoganomics [where if Trump lays sanctions on Turkey
for the purchase of the Russian S-400 Missile Defence Syste, the
economy could crumble like a stale biscuit] might well be the
Precursor for where this all ends up. The ''Parrot'' is as dead as it
was in the Monte Python sketch

Mr. Praline: Never mind that, my lad. I wish to complain about this
parrot what I purchased not half an hour ago from this very boutique.
Owner: Oh yes, the, uh, the Norwegian Blue...What's,uh...What's wrong with it?
Mr. Praline: I'll tell you what's wrong with it, my lad. 'E's dead,
that's what's wrong with it!
Owner: No, no, 'e's uh,...he's resting.
Mr. Praline: Look, matey, I know a dead parrot when I see one, and I'm
looking at one right now.
Owner: No no he's not dead, he's, he's restin'! Remarkable bird, the
Norwegian Blue, idn'it, ay? Beautiful plumage!
Mr. Praline: The plumage don't enter into it. It's stone dead.
Owner: Nononono, no, no! 'E's resting!
Mr. Praline: All right then, if he's restin', I'll wake him up!
(shouting at the cage) 'Ello, Mister Polly Parrot! I've got a lovely
fresh cuttle fish for you if you show...
(owner hits the cage)
Owner: There, he moved!
Mr. Praline: No, he didn't, that was you hitting the cage!
Owner: I never!!
Mr. Praline: Yes, you did!
Owner: I never, never did anything...

Specifically, with respect to the United States, stoking up the Fire
with rate cuts is a very dangerous situation because according to my
calculations, the FED will need to be raising rates into the Election,
something that will turn Trump apoplectic I am sure.

Further afield and Interestingly. Singapore has been caught up in the
US China Trade War cross fire. Gross domestic product in the
export-reliant city state shrank an annualized 3.4% in the second
quarter from the previous three months, the biggest decline since
2012. Singapore is an outward facing Economy [unlike the US which is
much more inward facing] and therefore this slowdown funk was
predicted and predictable. Staying in that Part of the World Hu Xijin
胡锡进 [who tweets Xi Jinping's thoughts in real time - a level of
Freedom that no Chinese Journalist or Media has] has been expressing
his unhappiness about developments in Taiwan.

''US-Taiwan ties breaching previous restrictions seems to be the
trend. China increasing military pressure on Taiwan to suppress
secessionists will also be a trend.These two trends will mutually
provoke and confront, becoming top risk that could trigger military
clash in TW Strait''  胡锡进 tweeted.

The Taiwan Strait is a part of the Geopolitical Hot Spot of Straits
which also includes the Strait of Hormuz where last week according to
a UK Government Spokesman

“Three Iranian vessels attempted to impede the passage of a commercial
vessel, British Heritage, through the Strait of Hormuz HMS Montrose
was forced to position herself between the Iranian vessels and British
Heritage and issue verbal warnings to the Iranian vessels, which then
turned away.”

Its interesting how these Global and geo-economic chokepoints are flaring.

The UAE's MBZ has bailed out on MBS' Yemen war where the Kingdom sure
is bleeding the Houthis but is bleeding in return. How MBS will
extract the Kingdom from this unwinnable War is as much a mystery as
is the Orb that appeared in the Painting Salvatori Mundi [a Painting
that MBS bought for $550m] and in Trump's first visit to the Kingdom.

We might yearn for President John Magufuli's more simple World. He
urged Tanzania's women to 'set [their] ovaries free' to  have more
babies to boost the economy

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Has the @federalreserve fallen victim to bond market bullies? @FT

The bond market “vigilantes” of old used to bully wastrel governments.
Now they appear to have moved on to a grander target — the US Federal
Reserve.  Traders are betting that the US central bank is certain to
trim interest rates when it meets this month. Whatever doubts remained
were largely dismissed by Fed chairman Jay Powell on Wednesday, when
he focused on persistently low inflation in the world’s largest
economy, and a fading global growth outlook.  But the prospect of
monetary easing still looks odd when set against mostly decent US
economic data. Richard Barwell, head of macro research at BNP Paribas
Asset Management, argues that investors have browbeaten the central
bank into a defensive posture.

“The market has seemingly spooked the Fed into changing strategy twice
in the space of six months, first capitulating on the hiking cycle and
then embracing an easing cycle,” he said. “It is becoming increasingly
difficult to make the argument that this Fed would be cutting rates
this month . . . in the absence of the relentless pressure from the
market to act now.”

The crucial question confronting the Fed and investors is whether
markets are right — and what this means for the longer-term, often
tempestuous, relationship between the central bank and investors. The
message from the market is clear: interest rate futures indicate
traders think the Fed could unravel all of last year’s four rate
increases by 2020. But officials themselves seem uncertain about what
to do. The latest projections indicate seven policymakers expect 50
basis points of rate cuts by the end of the year, and Mr Powell has
indicated that many of the remaining 10 members of the rate-setting
Federal Open Market Committee thought the case for easier policy had
strengthened. Analysts say the Fed is boxed in and will have to cut to
avoid a nasty bout of turbulence in asset prices.

“The market has acted as if the Fed has already cut. If the Fed does
not deliver, financial conditions will tighten, creating a headwind
for the economy,” said Michelle Meyer, chief US economist at Bank of
“This puts the Fed in a difficult position,” she added. “On the one
hand, they don’t want to be bullied by the markets. But, on the other
hand, markets have information that the Fed cannot ignore.” Although
US economic data has worsened over the past year, it remains
reasonably solid — something even Mr Powell highlighted in his
otherwise dovish comments this week.

Indeed, “nowcasting” models made by the St Louis and New York arms of
the Fed indicate that growth is now rebounding, and the trade war is
at least temporarily on hold, after a tentative truce engineered at
the recent G20 meeting.

Moreover, the latest employment data were glowing, and core inflation
accelerated last month as some of the “transitory” factors that Mr
Powell had previously highlighted started to wane.
“The market is bullying them and the data are now trolling them,” Mr
Barwell said.

The classic argument against blindly following markets came from
former Fed chair Ben Bernanke in 2004. He argued that while markets
“aggregate enormous amounts of information and thus provide a rich
hunting ground for central bankers trying to learn about the economy”,
trying to follow them is a strategy that “quickly degenerates into a
hall of mirrors”. In other words, if the Fed simply moves rates around
in response to market prices, those prices would be affected by
expectations of the Fed following, creating feedback loops,
potentially leading to terrible mistakes. Jan Hatzius of Goldman Sachs
sees three potential pitfalls.

“First, the hall of mirrors effect would surely degrade the
information content of bond yields. Second, the temptation to satisfy
market expectations asymmetrically — to avoid delivering hawkish
surprises — could undermine financial stability. Third, the bond
market could become a channel for political pressure on Fed
decisions,” he said.

On the other hand, some analysts argue that the Fed is not only right
to follow markets but should do so more often.

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1150AD gede/gedi -kenya <expanded> settled by the bantu-speaking swahili btn the 12th and 16th cent. @rhaplord

gede was the innermost of the swahili cities (but weaker than its
neighbors malindi and mombasa), the ruins include a five mosques,
multi-roomed houses and a city wall

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Ruins of Gedi Wikipedia

The Ruins of Gedi are the remains of a Swahili town located in Gedi, a
village near the coastal town of Malindi in Kenya.

From the 13th or 14th to 17th centuries, Gedi was a thriving community
along the jungle coast of East Africa. Although no written record
exists of this town, excavations between 1948 and 1958 revealed that
the Muslim inhabitants traded with people from all over the world.
Some of the findings included beads from Venice, coins and a Ming vase
from China, an iron lamp from India, and scissors from Spain. The
population was estimated to exceed at least 2500 people. These items
can be found in the museum in the complex which was opened in 2000.

Gedi had a mosque, a palace, and large stone houses. These houses were
complex for their time, with bathrooms with drains and overhead basins
to flush toilets. The city's streets were laid out at right angles and
had drainage gutters. There are also wells which supplied water to the
community. The material used to construct the buildings was made from
coral reef from the nearby ocean.

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Sic transit gloria mundi is a Latin phrase that means "Thus passes the glory of the world"

"Pater Sancte, sic transit gloria mundi!" ("Holy Father, so passes
worldly glory!")[2] These words, thus addressed to the pope, served as
a reminder of the transitory nature of life and earthly honors.

There are countless sayings in various languages expressing the same
sentiment; in English most idiomatic is "All that's fair must fade,"
following a line of Thomas Moore.

Within Buddhism, the corresponding doctrine is impermanence. In East
Asian Buddhism, the analogous saying is the four-character idiom 盛者必衰
(Chinese: {shengzhebishuai}), from a passage in the Humane King Sutra,
「盛者必衰、実者必虚」, which translates as "The prosperous inevitably decline,
the full inevitably empty". In Japan this is well-known due to its use
in the opening line of The Tale of the Heike, whose latter half reads
"the color of the sāla flowers reveals the truth that the prosperous
must decline." (沙羅雙樹の花の色、盛者必衰の理を顯す Sarasōju no hana no iro,
jōshahissui no kotowari wo arawasu).[11]

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Jorge Luis Borges Limits

Of all the streets that blur in to the sunset,
There must be one (which, I am not sure)
That I by now have walked for the last time
Without guessing it, the pawn of that Someone

Who fixes in advance omnipotent laws,

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13-NOV-2017 :: MBS arrived on the scene and immediately launched an unwinnable war in Yemen
Law & Politics

In all the history books I have read, its probably wisest to operate
on one front not two and certainly not three.

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24-JUN-2019 :: Wizard of Oz World. @TheStarKenya
Law & Politics

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. 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 pro- blems, 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, a beautiful fairy, a ball of
fire, and 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”.

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China's economy slowed to the weakest pace since quarterly data began in 1992 amid the ongoing trade standoff with the U.S
International Trade

China’s economy slowed to the weakest pace since quarterly data began
in 1992 amid the ongoing trade standoff with the U.S., while monthly
indicators provided signs that a stabilization is emerging.

Gross domestic product rose 6.2.% in the April-June period from a year
earlier, below the 6.4% expansion in the first quarter. In June,
factory output and retail sales growth beat estimates, while
investment in the first half of the year also gave further evidence
that stimulus measures to curb the slowdown are feeding through.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1277
Dollar Index 96.976
Japan Yen 108.006
Swiss Franc 0.9848
Pound 1.2570
Aussie 0.7033
India Rupee 68.568
South Korea Won 1179.34
Brazil Real 3.7413
Egypt Pound 16.6080
South Africa Rand 13.9472

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Commodity Markets at a Glance WSJ

Gold 6 month INO 1413.25


Oil trades near $60 a barrel after a storm shut almost
three-quarters of U.S. Gulf of Mexico crude production @business 60.21


Emerging Markets

Frontier Markets

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South Africa's new justice minister, Ronald Lamola, put the extradition of former Mozambique Finance Minister Manuel Chang back to his home country on hold after learning that he would have immunity from prosecution there.

Chang was arrested in December in South Africa, where he remains in
custody. The U.S. has also applied for his extradition, based on a
slew of charges related to financial crimes, including securities
fraud and accepting kickbacks in connection with Mozambique’s $2
billion hidden-debt scandal. Lamola authorized his department to
oppose an urgent application by Chang himself to be surrendered to
Mozambican authorities after receiving the information about his
immunity, the Ministry of Justice and Correctional Services said in a
statement on Saturday. Under South African law, Chang could only be
extradited if charges had already been filed in Mozambique. His
immunity would prevent him from actually facing any charges. Chang’s
extradition to Mozambique won’t be permitted until his immunity is
lifted and charges are filed. A spokesman at the ministry said it
wasn’t clear if and when Mozambique would revoke Chang’s immunity.
Lamola’s predecessor made a decision to extradite Chang to Mozambique
in May.

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South Africa All Share Bloomberg +8.61% 2019

Dollar versus Rand 6 Month Chart INO 13.9443


Egypt Pound versus The Dollar 3 Month Chart INO 16.611


Egypt EGX30 Bloomberg +4.88% 2019


Nigeria All Share Bloomberg -9.11% 2019


Ghana Stock Exchange Composite Index Bloomberg -7.23% 2019


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Kenya Shilling versus The Dollar Live ForexPros
Kenyan Economy

Nairobi All Share Bloomberg +6.62% 2019

Nairobi ^NSE20 Bloomberg -5.50% 2019

Every Listed Share can be interrogated here

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by Aly Khan Satchu (www.rich.co.ke)
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July 2019

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