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Macro Thoughts

The United Nations General Assembly #UNGA is a set piece Event that I
always look forward to with a level of desire which always catches me
a little off guard. #UNGA is one of the few Platforms where William S.
Burroughs' edict
“Smash the control images. Smash the control machine.” applies and
just about everyone gets their Warholian moment
 "In the future, everyone will be world-famous for 15 minutes" said Andy Warhol.
Fortunately, this Year, we were able to skip Bibi Netanyahu's ''Dog
and Pony show'' because he had other things to focus on like trying to
cobble together a Government and I am sure the entire World breathed a
collective sigh of relief.
The 16 Year Old Environmental Activist Greta Thunberg who of course
set the tone with her powerful intervention
“You have stolen my dreams and my childhood with your empty words. And
yet I’m one of the lucky ones. People are suffering. People are dying.
Entire ecosystems are collapsing''
“We are in the beginning of a mass extinction. And all you can talk
about is money and fairytales of eternal economic growth. How dare
you!''
Of course the ''How dare you!'' resonated with me because it is as
Ryszard Kapuscinski wrote
''It is authority that provokes revolution''
President Bolsonaro pronounced  ''You shall know the Truth and the
Truth shall set you free'' and spoke of ''Trails of death and
destruction. Ideologically infected human souls and biologically
perverted children''  which I will just leave out there because his
intervention in fact left me speechless.
Boris Johnson spoke of ''Smart cities [which] will pullulate with
sensors, all joined together by the “internet of things”, bollards
communing invisibly with lamp posts.....[and asked] How do you plead
with an algorithm?''
President Rouhani skipped a handshake with President Trump and instead
delivered his message direct via Fox News, which was a very neat
touch.
President Trump evidently found it all a little overwhelming and had
his security detail block a 16 year old Girl and then did a J. Alfred
Prufrock and a ''Like a patient etherized upon a table'' impression.
Imran Khan delivered a speech which was as effective as the reverse
swing with which he used to bamboozle the World's best Batsman and
this time he bowled Prime Minister Modi all ends up.
TS Eliot wrote another poem captioned The Hollow Men which stars
Mistah Kurtz-he dead
Between the idea
And the reality
Between the motion
And the act
Falls the Shadow
Now lets turn to the markets. Of course, Greta was referencing the
feedback loop and the risks of die back where we enter a Phase of
''cascading system collapse'' precisely because of the negative
spillover effects of the Hydrocarbon Century.
 So let me turn to the Houthis who two weekends ago struck deep inside
the Kingdom with a swarm of Drones and are now reporting that they
attacked the Saudi frontline and have  captured “thousands” of enemy
troops, including many officers and soldiers of the Saudi army, as
well as hundreds of armored vehicles.
“Operation ‘Victory from God’ is the largest military one since the
brutal aggression began. The enemy suffered heavy losses ... and wide
swathes of territory were liberated in only a few days,” Houthi
spokesman Mohammed Abdul-Salam tweeted. 3 Saudi brigades fell in hands
of Yemen’s Houthi fighters in Najran south of Saudi Arabia.
Saudi propaganda was effective in bringing the price of Oil right back
down after a 20% surge two weeks ago but a reprice higher is coming
and this time its not going to ebb. No number of Patriot missile
batteries can protect the House of Saud and its Salvatori Mundi now.
The Enemy is no longer at the border, its on the inside. BUY OIL.
The Dollar has been girding its loins all year and is set to explode.
BUY THE DOLLAR.
Safe Havens like GOLD and the new c21st Safe Haven BITCOIN, however,
are trading like everybody is long and are very crowded and look set
to deteriorate. BITCOIN could in fact fall as far as $1,000,00 where
it was in January 2017.
President Xi will have to let the renminbi go so SELL the RENMINBI.
They will hold it steady this week because the CCP is celebrating 70
years of the People's Republic but when the Party is over, it will be
an almighty hangover.
And You can also SELL STERLING because the United Kingdom is crashing
out of Europe. and the EURO as well where Parity is calling.

There is now concern that the government is seeking simply to ramp up
a “blame game”, sources said, with the chances of an agreement now
seen as being “very low”.

’ What’s your road, man? - holy- boy road, madman road, rainbow road,
guppy road, any road. It’s an anywhere road for anybody anyhow. Where
body how?” -
The Key question is this. Can Prime Minister Johnson self-eject
Britain? Can he be stopped? This is a political calculation.
As I watched the Pound fall like a stone, I could not help wondering
if this Sterling moment is precisely like it was in 1992, a no
brainer.

I’m not suggesting we are headed into Mellon doctrine Territory.
Mellon believed that economic recessions, such as those that had
occurred in 1873 and 1907, were a necessary part of the business cycle
because they purged the economy.
In his memoirs, Hoover wrote that Mellon advised him to “liquidate
labor, liquidate stocks, liquidate the farmers, liquidate real estate.
Purge the rottenness out of the system. High costs of living and high
living will come down. ... enterprising people will pick up the wrecks
from less competent people.”

There is certainly a Fin de siècle even apocalyptic mood afoot. The
conundrum for those who wish to bet on the End of the World is this,
however. What would be the point? The World would have ended.

Home Thoughts

• They always say time changes things, but you actually have to
change them yourself • • Andy Warhol • @SamTheDrecker
https://twitter.com/SamTheDrecker/status/1178352763853561856?s=20

The white Desert, Namibia🇳🇦 :@wild_travel_bay @explore_namibia
https://twitter.com/explore_namibia/status/1177972095822770177?s=20

“We are in the beginning of a mass extinction. And all you can talk
about is money and fairytales of eternal economic growth. How dare
you!''

Mistah Kurtz-he dead
            A penny for the Old Guy

We are the hollow men
    We are the stuffed men
    Leaning together
    Headpiece filled with straw. Alas!
    Our dried voices, when
    We whisper together
    Are quiet and meaningless
    As wind in dry grass
    Or rats' feet over broken glass
    In our dry cellar

    Shape without form, shade without colour,
    Paralysed force, gesture without motion;

    Those who have crossed
    With direct eyes, to death's other Kingdom
    Remember us-if at all-not as lost
    Violent souls, but only
    As the hollow men
    The stuffed men.

                           V

    Here we go round the prickly pear
    Prickly pear prickly pear
    Here we go round the prickly pear
    At five o'clock in the morning.

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

    Between the conception
    And the creation
    Between the emotion
    And the response
    Falls the Shadow
                                   Life is very long

    Between the desire
    And the spasm
    Between the potency
    And the existence
    Between the essence
    And the descent
    Falls the Shadow
                                   For Thine is the Kingdom

    For Thine is
    Life is
    For Thine is the

    This is the way the world ends
    This is the way the world ends
    This is the way the world ends
    Not with a bang but a whimper.

YouTube’s algorithm, especially, has an outsize influence. The
platform is estimated to be second only to Google in web traffic, and
70% of what users watch is fed to them through recommendations.
The platform is estimated to be second only to Google in web traffic,
and 70% of what users watch is fed to them through recommendations.
In recent years, this influence has come under heavy scrutiny. Because
the algorithm is optimized for getting people to engage with videos,
it tends to offer choices that reinforce what someone already likes or
believes, which can create an addictive experience that shuts out
other views.
This also often rewards the most extreme and controversial videos,
which studies have shown can quickly push people into deep rabbit
holes of content and lead to political radicalization.
Here’s how YouTube’s recommendation system currently works. To
populate the recommended-videos sidebar, it first compiles a shortlist
of several hundred videos by finding ones that match the topic and
other features of the one you are watching.
Then it ranks the list according to the user’s preferences, which it
learns by feeding all your clicks, likes, and other interactions into
a machine-learning algorithm.
Among the proposed updates, the researchers specifically target a
problem they identify as “implicit bias.”
It refers to the way recommendations themselves can affect user
behavior, making it hard to decipher whether you clicked on a video
because you liked it or because it was highly recommended.
The effect is that over time, the system can push users further and
further away from the videos they actually want to watch.
To reduce this bias, the researchers suggest a tweak to the algorithm:
each time a user clicks on a video, it also factors in the video’s
rank in the recommendation sidebar.
Videos that are near the top of the sidebar are given less weight when
fed into the machine-learning algorithm; videos deep down in the
ranking, which require a user to scroll, are given more. When the
researchers tested the changes live on YouTube, they found
significantly more user engagement.
Though the paper doesn’t say whether the new system will be deployed
permanently, Guillaume Chaslot, an ex-YouTube engineer who now runs
AlgoTransparency.org, said he was “pretty confident” that it would
happen relatively quickly:
“They said that it increases the watch time by 0.24%. If you compute
the amount, I think that’s maybe tens of millions of dollars.”

🇨🇳 China's leaders, including President Xi Jinping, arrive at
Tiananmen Square on the eve of the 70th National Day #國慶節 #国庆节 @tictoc
https://twitter.com/tictoc/status/1178491403023740928?s=20

Yemen’s Houthi movement said on Saturday it had carried out a major
attack near the border with the southern Saudi region of Najran and
captured many troops and vehicles, but there was no immediate
confirmation from Saudi Arabian authorities.
The Houthis’ military spokesman said in a statement that three “enemy
military brigades had fallen” in the attack, which he said was
launched 72 hours ago and supported by the group’s drone, missile and
air defense units.
Houthi-run Al Masirah TV quoted the spokesman as saying the
Iran-aligned movement had captured “thousands” of enemy troops,
including many officers and soldiers of the Saudi army, as well as
hundreds of armored vehicles.
“Operation ‘Victory from God’ is the largest military one since the
brutal aggression began. The enemy suffered heavy losses ... and wide
swathes of territory were liberated in only a few days,” Houthi
spokesman Mohammed Abdul-Salam tweeted.

Hundreds killed/injured and detained. A huge quantity of  weapon
including armored vehicles. Saudi senior officers among the war
prisoners.

The operation is the biggest ever.

It is clear now that the ''Yemen War has become Saudi Arabia’s Vietnam
(or Soviet Union’s Afghanistan or indeed U.S. version of
Afghanistan)'' @JKempEnergy and that the ''The kingdom has thrown
everything into conflict but failed to achieve a decisive military
advantage and favourable political endgame'' More worrying for the
Kingdom is the second scenario were these Drones might have been
launched within the Kingdom which would be signalling that the Houthis
might well have teamed up with the Saudi Shia who represent up to 25%
of the Population and have been ground down viciously by the House of
Saud, characterised as Apostates and whose Leaders have been beheaded
and crucified.

Shah of Shahs depicts the final years of the Shah in Iran, and is a
compelling meditation on the nature of revolution and the devastating
results of fear. Here, Kapuscinski describes the tyrannical monarch,
who, despite his cruel oppression of the Iranian people, sees himself
as the father of a nation, who can turn a backward country into a
great power - a vain hope that proves a complete failure. Yet even as
Iran becomes a 'behemoth of riches' and as the Shah lives like a
European billionaire, its people live in a climate of fear, terrorized
by the secret police. Told with intense power and feeling, Kapuscinski
portrays the inevitable build-up to revolution - a cataclysmic
upheaval that delivered Iran into the rule of the Ayatollah Khomeini.

Ryszard Kapuscinski in his book Shah of Shahs  [a Book about the
overthrow of the last Shah of Iran the Shahanshah ("King of Kings")
and  Aryamehr ("Light of the Aryans")]

Oil kindles extraordinary emotions and hopes, since oil is above all a
great temptation. It is the temptation of ease, wealth, strength,
fortune, power. It is a filthy, foul-smelling liquid that squirts
obligingly up into the air and falls back to earth as a rustling
shower of money. To discover and possess the source of oil is to feel
as if, after wandering long underground, you have suddenly stumbled
upon royal treasure. Not only do you become rich, but you are also
visited by the mystical conviction that some higher power has looked
upon you with the eye of grace and magnanimously elevated you above
others, electing you its favorite.

Many photographs preserve the moment when the first oil spurts from
the well: people jumping for joy, falling into each other’s arms,
weeping. Oil creates the illusion of a completely changed life, life
without work, life for free. Oil is a resource that anesthetizes
thought, blurs vision, corrupts. People from poor countries go around
thinking: God, if only we had oil! The concept of oil expresses
perfectly the eternal human dream of wealth achieved through lucky
accident, through a kiss of fortune and not by sweat, anguish, hard
work. In this sense oil is a fairy tale, and like every fairy tale, a
bit of a lie. Oil fills us with such arrogance that we begin believing
we can easily overcome such unyielding obstacles as time. With oil,
the last Shah used to say, I will create a second America in a
generation! He never created it.

Oil, though powerful, has its defects. It does not replace thinking or
wisdom. For rulers, one of its most alluring qualities is that it
strengthens authority. Oil produces great profits without putting a
lot of people to work. Oil causes few social problems because it
creates neither a numerous proletariat nor a sizable bourgeoisie. Thus
the government, freed from the need of splitting the profits with
anyone, can dispose of them according to its own ideas and desires.

Look at the ministers from oil countries, how high they hold their
heads, what a sense of power they have, they, the lords of energy, who
decide whether we will be driving cars tomorrow or walking.

the overwhelming geopolitical question is around the longevity of the
House of Saud and its Crown Prince who is of course the Proud Owner of
Leonardo Da Vinci's Salvatori Mundi which means Saviour of the World
and according to Robert Baer has so. many enemies that he sleeps on
his $500m yacht the Serene off Jeddah. The much commented on Orb is of
no help now. If the Houthis have tapped into the Saudi Shia, the House
of Saud in my opinion is on its last legs. This is a Big Call and
needs to be understood for that. No amount of paid PR or kind words
from Trump can finesse this. Over the Weekend, so many of the Oil
Watchers I follow were saying we must wait for the Official Saudi
comment. Let me tell you this for free. Saudi comment is worthless,
irrelevant and paid for.

And by the way, my conclusion remains we are at a Peacock Throne
Moment for the House of Saud and that markets and folks tend to miss
inflection points and therefore I have a supreme conviction around the
Oil markets and am conducting my own operations and only on a need to
know basis. The Shah of Shahs ended up in Panama all on his lonesome
looking out to sea and there is another fellow not unlike the
fictional Dean Jocelin with a $500m Yacht called the Serene who will
most likely be looking out to Sea in the not too distant future.

As its name suggests, the THAAD aims to intercept  incoming short
range or medium range ballistic missiles arcing down into the top of
the atmosphere 25 to 90 miles up and no further away than 125 miles.
The THAAD’s radar must therefore “acquire”–spot– the actual missile
warhead, distinguishing it from nearby broken up pieces of its spent
booster rocket or from  decoys deliberately launched with it. The
radar must then track and predict the future trajectory of the warhead
itself, not confusing it with any of the accompanying bits and pieces.
Relying on the radar’s predictions, the THAAD missile interceptor,
once launched, must quickly accelerate to MACH 8 speed and guide with
absolute precision to hit the target warhead  directly, like a bullet.
Near misses won’t do.
After a series of early, disastrous failures, the Pentagon is now
touting a fifteen out of fifteen string of successful THAAD
launchings. Needless to say, not one of these tests has been against a
ballistic missile target accompanied by booster debris or decoys, much
less against half a dozen of such missiles fired at once.
This alone should be reason enough for the Saudis to toss the deal,
but even if the system could perform as advertised, it would have been
entirely irrelevant as a defense against the September 14 Houthi
attacks on Abqaiq and Kurais.  The drones and cruise missiles employed
clearly came in at low altitude, while THAAD is designed to operate
against high altitude targets. The Patriot and Hawk batteries already
in place are of course no better suited to confront low altitude
threats, which are inevitably masked by ground clutter.

.@WhiteHouse officials were particularly distressed by Trump’s
election remarks because it appeared @POTUS was forgiving Russia for
an attack that had been designed to help elect him

So much has happened in 2016, from the Brexit vote to President-elect
Trump, and it certainly feels like we have entered a new normal.
One common theme is a parabolic Putin rebound. At this moment,
President Putin has Fortress Europe surrounded. The intellectual
father of the new Zeitgeist that propelled Brexit, Le Pen, the Five
Star movement in Italy, Gert Wilders in the Netherlands, is Vladimir
Putin.
In the Middle East, it is Putin who is calling the shots in Aleppo,
and in a quite delicious irony it looks like he has pocketed Opec as
well.
However, my starting point is the election of President Donald Trump
because hindsight will surely show that Russia ran a seriously
sophisticated programme of interference, mostly digital. Don DeLillo,
who is a prophetic 21st writer, writes as follows in one of his short
stories:
The specialist is monitoring data on his mission console when a voice
breaks in, “a voice that carried with it a strange and unspecifiable
poignancy”.
He checks in with his flight-dynamics and conceptual- paradigm
officers at Colorado Command:
“We have a deviate, Tomahawk.”
“We copy. There’s a voice.”
“We have gross oscillation here.”
“There’s some interference. I have gone redundant but I’m
not sure it’s helping.”
“We are clearing an outframe to locate source.”
“Thank you, Colorado.”
“It is probably just selective noise. You are negative red on
the step-function quad.”
“It was a voice,” I told them.
“We have just received an affirm on selective noise... We will
correct, Tomahawk. In the meantime, advise you to stay redundant.”
The voice, in contrast to Colorado’s metallic pidgin, is a melange of
repartee, laughter, and song, with a “quality of purest, sweetest
sadness”.
“Somehow we are picking up signals from radio programmes of 40, 50, 60
years ago.”
I have no doubt that Putin ran a seriously 21st predominantly digital
programme of interference which amplified the Trump candidacy. POTUS
Trump was an ideal candidate for this kind of support.
Trump is a linguistic warfare specialist. Look at the names he gave
his opponents: Crooked Hillary, Lyin’ Ted, Little Marco, ‘Low-energy’
Jeb — were devastating and terminal. The first thing is plausible
deniability (and some folks here at home need to remember those
words).
The second thing is non-linearity, you have to learn how to navigate a
linear system (the new 21st digital ecosystem) in a non-linear way.
When you launch a social media campaign where a 100 bots repeat the
same thing verbatim, like Mombasa did last week, then your very
linearity is a monumental ‘’look its me’’ sign.
Beppe Grillo, the comic turned leader of the Five Star movement in
Italy said: This is the deflagration of an epoch. It’s the apocalypse
of this information system, of the TVs, of the big newspapers, of the
intellectuals, of the journalists.”
He is right, traditional media has been disrupted and the insurgents
can broadcast live and over the top. From feeding the hot-house
conspiracy frenzy on line (‘’a constant state of destabilised
perception’’), timely and judicious doses of Wikileaks leaks which
drained Hillary’s bona fides and her turn-out and motivated Trump’s,
what we have witnessed is something remarkable and noteworthy.
Putin has proven himself an information master, and his adversaries
are his information victims.

Of course, there are many other Frontiers, the Mediterranean Sea, the
Sahara desert, Islands because of the EEZ's they control.

Euro 1.0944
Dollar Index 99.07
Japan Yen 107.81
Swiss Franc 0.9905
Pound 1,2306
Aussie 0.6756
India Rupee 70.5085
South Korea Won 1203.00
Brazil Real 4.156
Egypt Pound 16.3060
South Africa Rand 15.1345

Heading into the qtr, we viewed NFLX’s 2H content slate as perhaps its
best-ever & a key driver of the company’s ability to achieve its 2H
paid net adds guide.
We believe 3Q expectations have come down meaningfully in recent
weeks, particularly Int'l where fewer than 5M net adds may now be
expected.

Once Investors appreciate that the Story is an international one and
not a US one anymore, we will see the price ramp to fresh all-time
highs. I, therefore, am putting out a ‘’conviction’’ Buy on Netflix at
Friday’s closing price of $270.75.

Randolph’s paternal great-granduncle was psychoanalysis pioneer
Sigmund Freud and his paternal great-uncle was Edward Bernays, an
Austrian-American pioneer in the field of public relations and
propaganda.[9] Randolph spent his summers during high school and
college working for the National Outdoor Leadership School, becoming
one of its youngest instructors
Randolph’s fascination with using computer software to track
customers’ buying behavior would ultimately inform his decision to
create a user interface at Netflix that doubled as a market research
platform.
Randolph wanted to replicate the e-commerce model pioneered by online
bookseller Amazon.com. He had heard that digital-versatile-discs (DVD)
were being tested in several U.S. markets, and he wanted to explore
the concept of selling the compact new digital format online. He and
Hastings could not find a DVD, so they tested the idea with a compact
disc.[20] “Reed and I were in downtown Santa Cruz and we were saying,
‘I wonder if we can mail these things’,” Randolph said. “We went in
and bought a music CD and went into one of the stationery stores … and
bought a greeting card and stuck the CD in the envelope and mailed it
to Reed’s house. And the next day, he said, ‘It came. It’s fine.’ If
there was an aha moment, that was it.”[21] Hastings, Randolph’s
mother, and Integrity QA founder Steve Kahn were initial investors in
Netflix. Randolph named the company, designed its initial user
interface and branding and acted as chief executive for the first year
while Hastings attended Stanford University graduate school. Netflix
launched on April 14, 1998 out of an office park in Scotts Valley,
California.[22] Randolph designed the user interface to act as an
online catalog of movies and a market research platform so that he
could constantly test different versions to perfect the user
experience. The data generated by these market tests led the team to
three concepts that they combined in 1999 to create Netflix’s
successful business model: a subscription-based service with no due
dates or late fees and unlimited access to content, a “Queue” that
allowed subscribers to specify the order in which DVDs should be
mailed to them, and a serialized delivery system that automatically
mailed out a DVD as soon as the previous rental was returned.[23]
The subscriber data collected by the user interface fed a
recommendation engine known as Cinematch, that helped manage the
company’s limited DVD inventory by guiding subscribers to movies and
TV shows that were in stock and generally away from new releases.[24]
Randolph ceded the CEO post to Hastings in 1999 and turned to product
development. He and founding team member Mitch Lowe tested a concept
for a movie rental kiosk called Netflix Express that Lowe later turned
into movie kiosk giant Redbox after Hastings rejected it as a line of
business.[25] Randolph left Netflix in 2002 after helping guide the
company through its initial public offering two years earlier.[15][26]
He credited Hastings with successfully scaling the company to 93
million subscribers worldwide,[27] and said he preferred the start-up
stage.[28] "At the beginning, it's very much triage. If there are a
hundred things broken and you need the skill to pick the three you've
got to fix, I'm really good at that. I'm not good at the other
ninety-seven," Randolph said.

Aging population creating a massive bid for bonds.  Get used to these
low rates (negative real rates).  They are not going away.

One result of aging developed world is increase in % of savings
worldwide; when Bernanke proposed global savings glut in ‘05, world
savings, had never been > 24.5% (horizontal line)... since ‘05, it’s
only been < 24.5% in ‘09 at low point of financial crisis
@biancoresearch

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

Gold 6 month INO 1492.50
http://quotes.ino.com/charting/index.html?s=FOREX_XAUUSDO&t=c&a=50&w=1&v=d6

The crisis is far from over, however, as doubt grows daily over the
local currency’s two decade-old peg to the dollar.
“I guess they found a solution for now. But we don’t know what’s going
to happen down the line,” a Total gas station employee in the Mount
Lebanon governorate told Asia Times.

Frontier Markets

The now $109.1bn African sovereign eurobond space has been growing
rapidly. 21 African countries have issued sovereign eurobonds in US$
and euros, with maturities of up to 30-years.
From the continent, South Africa and Tunisia issued sovereign
eurobonds in 3Q19. The narrative has recently shifted from only
issuance to include a growing track-record of eurobond repayment
alongside efforts to reduce refinancing risk.
However, African countries' debt levels are increasing faster than in
other frontier markets.
African eurobonds saw mixed performance in 3Q19 after a strong rebound
in the first half of 2019 from a tough 2018. Here is an update from
the third quarter of 2019.
Third quarter 2019 eurobond issuance
3Q19 saw sovereign eurobond issuance from Tunisia and South Africa.
Egypt, Benin, Kenya and Ghana issued in the first half of 2019. Taking
2019 issuance to date to $17.7bn (including $14.1bn and EUR3.2bn of
paper).
2019 is already the second largest issuance year on record for African
sovereign eurobonds.
Tunisia came to the markets in mid-July for EUR 700mn due in 2026. The
borrowing was more expensive (with a coupon of 6.38%) than when they
last issued (a similar amount of 7-year euro was issued in February
2017 with a coupon of 5.63%).
South Africa issued a twin-tranche $5bn eurobond issue at the end of
September (with $2bn of eurobonds maturing in 2029 and $3bn in 2049).
Better market sentiment helped South Africa secure a lower cost of
borrowing.
For example, the September 2019 issued 30-year paper has a coupon of
5.75%, versus a 6.30% coupon on the 30-year eurobonds issued in May
2018.
No eurobonds matured in full in 3Q19, although Kenya and South Africa
had paid back eurobonds in the first half of 2019. 11 African
countries have now paid back sovereign eurobonds.
Third quarter 2019 eurobond performance
African eurobonds performed very well in the first half of 2019,
almost across the board, as investor sentiment recovered from a tough
2018. 3Q19 performance was more mixed.
Markets were favourable for emerging markets in 3Q19 in some respects,
and bad in others. Favourable factors included two (25bpt) rate cuts
by the Federal Reserve and the yield of US 10-year treasuries ended
the quarter at around 1.7%, down from just over 2.0% at the start.
Investors have been bullish about emerging market economies in 2019
and bond funds have received a net increase in funds. There were some
outflows in August but overall in 3Q19 asset managers received
additional funds to invest in emerging market bonds.
Nonetheless, a collapse of Argentine eurobond prices in August hurt
investors and that led to some contagion effects hitting sentiment for
African eurobonds, especially those with long duration. The China-USA
trade war also continued to provide uncertainty.
Oil prices (Brent Crude) started the quarter at around $65/bbl and
ended it at around $62/bbl. This compares to a drop of $5/bbl in 2Q19,
and an increase of $14/bbl in 1Q19.
The average cost of African eurobond borrowing remained static in
3Q19. At the end of 3Q19, average yields of African eurobonds were
approximately 6.1% (the same level as they started the quarter). In
the first half of 2019 average yields fell (150bpts) from around 7.6%
at the start of 2019.
Some countries performed better than others. Rwanda, Cameroon, Morocco
and South Africa did best with average yields dropping slightly (as
prices for their eurobonds increased). Tunisia, Angola, Egypt, Ghana,
Kenya, Namibia and Nigeria all saw their average yields (and cost of
borrowing) increase.
The average additional premium gained for investing in African
eurobonds above assets deemed to be safer (US issued bonds) increased
(50bpts) in 3Q19 from 4.4% points of yield to 4.9% points. This is
possible when average yields of African eurobonds remained static
because US Treasury bond yields fell.
Third quarter 2019 snippets
Rwanda performed best in 3Q19. The price of Rwanda’s only eurobond
($400mn maturing in 2023) increased (and the yield fell 47bpts), a
move supported by their credit rating upgrade by S&P on 9 August (from
B to B+).
Negative bond yields in many European countries boosted appetite for
investment grade African debt from Morocco, and South Africa (who
still have one investment grade credit rating left).
Ethiopia’s sole eurobond ($1bn due in 2024) yield remained fairly flat
during the quarter versus peers. Although late in the quarter Moody’s
shifted the outlook on their B1 rating to negative, as their concerns
over state enterprise external debt heightened.
Egypt eurobonds traded flat for most of 3Q19 after a strong first half
of year. But the bonds prices fell a little at the end of September
following anti-government protests in major cities.
Confidence in Angola’s IMF supported reforms has ebbed a little bit in
3Q19, with average eurobond yields increasing 45bpts to 7.8% despite
oil prices gaining a little. Angola has 3 eurobonds due in 2025, 2028
and 2048 with a combined value of $5bn. Fitch dropped the outlook on
its B rating of Angola from stable to negative in 3Q19.
Tunisia saw its average eurobond yield increase 67bpts to 7.31% as
political uncertainty increased in 3Q19. Following the death of the
President the national elections were brought forward to September 15.
But the government still managed to issue a new eurobond in July.
Zambia continues to stand out in the Africa space with the weakest
trading eurobonds. Each of their 3 eurobonds are priced around 70 US
cents on the dollar as investors see an increasing risk of default and
fear they will not be repaid in full. Zambia’s credit rating was
downgraded by S&P from B- to CCC+, following downgrades by Fitch in
June and Moody’s in May.
Republic of Congo signed an IMF program, after a long wait, in July
2019. Having re-profiled its Chinese debt portfolio and continued
‘good faith’ negotiations with commodity traders that have provided
oil-backed loans.
Moody’s upgraded Mozambique’s credit rating to Caa2 because they
thought that the eurobond (currently in default following coupons not
being paid since January 2017) might soon be (generously) exchanged
for a new one with bond-holding investors.
Niger was provided a new rating by Moody’s of B3. There are now 10
African countries with credit ratings and without having issued
eurobonds.

MAPUTO (Reuters) - Mozambique is targeting $880 million in capital
gains tax from the takeover of Anadarko Petroleum by Occidental
Petroleum, local newspaper O Pais reported on Friday.
Anadarko led a liquefied natural gas project in the southern African
country, but it was replaced by Total after the French oil major
agreed to buy Anadarko’s African assets as part of the Occidental
takeover.
President Filipe Nyusi announced the capital gains tax target after he
met Occidental and Total managers in the city of Chimoio, O Pais
reported.
In 2017, Mozambique sought $350 million in capital gains tax from
Italian energy company ENI for its sale of a stake in the Coral South
natural gas field to ExxonMobil.

Dollar versus Rand 6 Month Chart INO 15.12
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Egypt Pound versus The Dollar 3 Month Chart INO 16.3070
http://quotes.ino.com/charting/index.html?s=FOREX_USDEGP&v=d3&t=c&a=50&w=1

Egypt EGX30 Bloomberg
http://www.bloomberg.com/quote/CASE:IND

Nigeria All Share Bloomberg -11.95% 2019
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg -11.59% 2019
http://www.bloomberg.com/quote/GGSECI:IND

Tanzania Family of the doctor that died of Ebola like symptoms in Dar
es Salaam missing - they were initially told she died of Ebola this
was later changed - they were not able to witness the burial - they
were put under 30 day quarenteen - and now moved to undisclosed
location

As some African leaders laud Mugabe today, @PastorEvanLive argues:
“There can be no mixed feelings, misconceptions or complications about
Robert Muga- be’s legacy. He presided over the destruction of millions
of people’s lives over a span of 37 years.”

Italian oil and gas group Eni said on Thursday its chief executive,
Claudio Descalzi, was under investigation for a conflict of interest
issue over dealings in the Congo.
In a statement Eni said CEO Descalzi had been served notice by
prosecutors he was being probed for not disclosing certain information
regarding relations between Eni’s Congo unit and a company called
Petroservice. It gave no additional details.
A source close to the matter said prosecutors in the Congo probe were
alleging Descalzi had not disclosed the fact that his wife, Marie
Magdalena Ingoba, was behind Petroservice. Eni declined to comment.
“I firmly reject the alleged accusation. It is without any
foundation,” Descalzi said in the statement.
A lawyer representing Descalzi’s wife was not immediately available
for a comment.
State-controlled Eni is currently under investigation by Milan
prosecutors for alleged corruption in the Congo Republic in the period
between 2009 to 2015.

NAIROBI (AFP) - Last week, a man walked into a Nairobi car yard and
paid for a luxury Mercedes with a mountain of 1,000 shilling (S$15)
banknotes, desperate to offload cash that within days would be
worthless.
With a deadline looming before the Central Bank of Kenya bans all old
edition 1,000 shilling notes, people with their fortunes stashed in
cash are under pressure to find ways to jettison their money.
A new print of the 1,000 shilling banknote, the largest denomination,
was rolled out in June, with Kenyans given to Sept 30 to exchange
their old bills at the bank or be stuck with bundles of useless cash.
The operation is aimed at flushing out dirty money being hoarded by
tax evaders, crooked businessmen and criminal groups.
Large deposits of the old notes, embossed with the image of Kenya's
founding father Jomo Kenyatta, raise alarm bells at banks and require
paperwork to prove their origin.
The central bank in June said there were roughly 218 million 1,000
shilling notes in circulation, but declined to say what proportion was
being stashed as black money.
Kenyan economist Aly-Khan Satchu said devaluing these bills works by
"taking its owners by surprise".
"Four months is a short period of time when you want to launder big
sums of money," he said.
"People who have that money will definitely try to save what they can."
So people are getting creative, devising schemes to quickly unload
small amounts of their cash while avoiding detection by the
authorities.
John, a car dealer in Nairobi, recalled his customer last week
counting out thousands upon thousands of banknotes to purchase a
luxury car worth US$74,000.
"People want to get rid of their old notes, but they know very well
that questions will be asked if they go put the money themselves in
the bank," said John, who declined to offer his real name due to the
nature of his business.
"When I go to the bank to deposit money from a car sale, people ask
for the papers from the sale, sometimes even copies of e-mails, but it
never goes further." Other businesses are finding a lucrative side
trade in washing 1,000 shilling notes through their tills - for a bit
in return.
"I was approached by a friend through another friend and we struck a
deal. I get around 500,000 shillings every day to bank together with
my daily sales," said a liquor shop owner who declined to be named in
Hurlingham, a district near downtown Nairobi.
"In return I get between 5 and 10 per cent, depending on the amount."
The amounts being deposited are below one million shillings, the
threshold at which banks required detailed paperwork under a new
transparency policy imposed by the central bank in June 2018.
One canny businessman in western Kenya dished out his cash in the form
of small, interest-free loans of around 50,000 shillings.
The amounts are low, so those exchanging the old bills avoid
detection, and upon returning the debt his money is cleaned into new
bills.
"Nothing is written down, it is a gentleman's agreement," he said,
declining to be named.
Other methods involve sinking cash into real estate or investment
funds, or businesses moving large volumes of money, several business
people told AFP.
But it's not all underhanded and hush-hush.
One bar in the coastal city of Mombasa is offering to swop banknotes
on behalf of drinkers, encouraging punters to spend big at their "Old
Notes Send Off Party" being held the eve of demonetisation.

gaming industry achieved a combined revenue of 204 billion shillings
($2 billion) last year.
 Kenya introduced new gambling regulations, including a ban on
advertising outdoors and on social media.
This week, parliament voted an amended proposal raising the excise
duty proposed in the 2019/20 (July-June) budget on the amount wagered
at the time a bet is placed on all betting platforms to 20% from an
initial 10%.
SportPesa said it was “disappointed” by the move and that it would
stop its operations until a “non-hostile regulatory environment”
returned.
Newspapers Daily Nation and Standard reported that a second firm,
Betin Kenya, had also ended its operations, citing the heavy taxation
as the main reason

@NSE_PLC is currently trading at a price to earnings ratio (P/E) of
10.9x, and a dividend yield of 5.5% @CytonnInvest
http://j.mp/2mS51Af

Nairobi All Share Bloomberg +2.73% 2019
http://www.BLOOMBERG.COM/quote/NSEASI:IND

Nairobi ^NSE20 Bloomberg -14.04% 2019
http://j.mp/ajuMHJ

Closing Price: 41.95
Market Cap:  $1.237b
EPS: 7.83
PE:  5.358

Closing Price:           37.95
Market Cap: $1.352b
EPS: 5.25
PE:  7.229

Closing Price: 28.95
Market Cap: $196.141m
EPS: 6.48
PE:  4.468

Closing Price: 11.80
Market Cap: $669.339m
EPS: 2.18
PE:  5.413