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Satchu's Rich Wrap-Up
Monday 25th of April 2022

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Its a Wizard of Oz moment
World Of Finance

We have reached the point when the curtain was lifted in the Wizard of Oz and the Wizard revealed to be ‘’an ordinary conman from Omaha who has been using elaborate magic tricks and props to make himself seem “great and powerful”’’ 

The Curtain has been lifted and Mr. Powell has now arrived at his Volcker moment 

Deutsche Bank's Jim Reid notes that yesterday's surge in the 2-year US Treasury yield was, by one measure, "the biggest "shock" since October 1979 when Volcker announced his intentions on the world @ReutersJamie
The last time inflation was here, February 1982 - the Fed Funds Rate was 15%. @Convertbond
Dartmouth economist and former Fed adviser Andrew Levin says the Fed needs to get rates to a neutral setting within a year or so, and that the means getting the Fed Funds rates up to 4% or 5%

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Disaster Disaster is a strong but appropriate word that applies perfectly to the state of U.S. monetary policy. Lacy Hunt Q1 2022 H/T @TheBondFreak
World Of Finance

Consider the following:

A) The Fed, in reaction to the COVID-19 crisis, dropped the Fed funds rate to 0.25 bps and expanded total reserves of the depository institutions by an average of 63% in 2020 and 2021. 

This unprecedented growth was achieved by increasing total U.S. Treasury and other securities held outright by $4.5 trillion, equaling 70% of the $6.4 trillion increase in total Treasury securities outstanding. 

Consequently, the commercial bank deposit component of M2 (that accounts for about 78% of the M2) surged by a record 20.5% over the past two years. 

This fact reveals the massive coordination of monetary and fiscal policy as government checks were directly funded by monetary largesse. 

In the face of an unsurpassed breakdown in product delivery systems, this money creation caused a massive imbalance between the demand and supply of goods.
B) The result of the coordinated monetary and fiscal actions was a 5.7% increase in real GDP last year, the best rise since 1984 and a 10.1% rise in nominal GDP, the highest since 1984

With the aggregate demand curve shifting outward and the aggregate supply curve shifting inward, the headline CPI inflation rate jumped from 2.3% in the twelve months ending in December 2019 to 8.5% in the twelve months ending March 2022, the fastest such increase in forty years

Reversing the past monetary and fiscal excess liquidity error will take time and persistence by the Fed.
Most Americans have suffered a substantial fall in their standard of living over the past twelve months. 

In the latest available twelve-month change, 116.2 million American wage and salary workers suffered a 3.7% decline in their inflation adjusted paychecks, the largest drop since 1980 (Chart 1).
Summing those whose income trailed price increases (116.2 + 50) yields a figure of approximately 170 million Americans.

“If you plug in the current inflation rate over the past four quarters (about 4%), the gap between GDP and its potential for the second quarter (about -2%), a target inflation rate of 2%, and a so-called equilibrium interest rate of 1%, you get a desired federal funds rate of 5%.”
These and many other harbingers of recession constitute a favorable environment for long-term bond investors. 

However, should the Federal Reserve cease in their efforts to calm inflation before it has been fully restrained, bond investors should be wary.

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World Of Finance

There is no training – classroom or otherwise.. that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market. 
There's typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. Paul Tudor-Jones

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14-FEB-2022 :: the greatest macro trading opportunity to reset shorts in the US 10 and Ultra Bond this is a Super Bubble that is going to burst big.
World Of Finance

Friday's action and next immediate sessions might afford us the greatest macro trading opportunity to reset shorts in the US 10 and Ultra Bond. We can look across all G7 Bonds because this is a Super Bubble that is going to burst big. There is no way out now.

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The Music has been playing for Eternity and its about to stop
World Of Finance

Love Fellini. So brave, with that whiff of insanity. @DiAmatoStyle Federico Fellini's 8 1/2 @tcm

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A liberating time Niemeyer #Brasilia Rene Burri 1960

This was a liberating time," said Niemeyer of Brazil's new capital Brasilia  "It seemed like a new society was being born, with the traditional barriers cast aside. It didn't work'' #Brasilia. Inaugural night of the city Rene Burri. 1960 

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The Charge of the Light Brigade
Law & Politics

The Charge of the Light Brigade 
Half a league, half a league, Half a league onward,
All in the valley of Death
Rode the six hundred.

 “Forward, the Light Brigade! Charge for the guns!” he said. Into the valley of Death
Rode the six hundred.
“Forward, the Light Brigade!” Was there a man dismayed? Not though the soldier knew
Someone had blundered. Theirs not to make reply, 

Theirs not to reason why, 

Theirs but to do and die.

Into the valley of Death Rode the six hundred.

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US narrative won’t survive defeat in Donbass @BhadraPunchline
Law & Politics

An extraordinary thing about British diplomacy is that it continually looks for ways to stay ahead of the curve and provide added value to its customer across the Atlantic, the United States

That makes the remarks on Ukraine conflict by the UK Prime Minister Boris Johnson at his press conference in New Delhi on Friday highly significant. 

Johnson brought to mind the evocative lines of Matthew Arnold’s poem Dover Beach on the “melancholy, long, withdrawing roar” when faith is receding. 

He was completely at odds with the focus of the US president Joe Biden’s remarks at the White House just the previous day where he vowed

“to hold Putin accountable for his brutal and bloody war”;
“to further augment Ukraine’s ability to fight in the east — in the Donbas region”; 
to “repel Russia’s aggression in Ukraine, to beat back Putin’s savagery”; 
“sending an unmistakable message to Putin: He will never succeed in dominating and occupying all of Ukraine.  He will not — that will not happen”; 
“to ratchet up the pressure on Putin and further isolate Russia on the world stage”; 
“further to deny Russia the benefits of the international economic system that they so enjoyed in the past”; 
“to continue to stand with the brave and proud people of Ukraine.”
Biden managed to pack all this vitriolic rhetoric in one single speech! 

In fact, he even rounded off exuding optimism that “There is no evidence yet that Mariupol has completely fallen”. 

But Johnson, in sharp contrast, tended to go along with the forecast by British Military Intelligence that the Russians could win in Ukraine. Without any verbal acrobatics, he straight came to the point: 
“I think the sad thing is that that (Russian victory) is a realistic possibility. Yeah, of course. Putin has a huge army, he has a very difficult political position … the only option he has now is to continue to try to use his appalling, grinding approach, driven, led by artillery, trying to grind the Ukrainians down. He’s very close to securing a land bridge in Mariupol now. The situation is, I’m afraid, unpredictable. We just have to be realistic about that.” 

During his recent visit to Ukraine, Johnson had reportedly advised President Vladimir Zelensky to make a retreat from and form a new defence line but Zelensky had no option but to follow American advice. 

For President Biden, of course, there is good enough reason why the war should continue as a forever war. The war rallies Europe behind the US’ weakening transatlantic leadership. 

Besides, Biden now has an alibi to explain away the high inflation in the US economy. 

He is placating the military-industrial complex in an election year. Biden announced on Thursday a new $800 million package in military aid for heavy artillery, 144,000 rounds of ammunition and drones, which will be sent “directly to the front lines of freedom” in Donbass. 

However, the big question remains: How long will the Western unity behind American leadership hold if Biden seeks a protracted conflict with Russia? 

The successive defeats in Mariupol and Donbass would not only break the back of the Ukrainian army and seriously dent the credibility of the US but discredit the entire Western triumphalist narrative. 

While the western sanctions have hurt the Russian economy, per current indications, Moscow is adjusting to a “new normal.” 

Contrary to Western expectations, the sanctions have not shifted Russian public opinion against the government. 

The successful testing last Wednesday of Russia’s next-generation intercontinental ballistic missile Sarmat — which “has no analogues in the world and will not have for a long time to come” (Putin’s words) — is no doubt a defiant assertion. 

Meanwhile, Western attempts to “isolate” Russia have no success stories to tell. At the G20 finance ministers meeting in Washington, the “Russia boycott” plank had no takers other than the Western bloc. 

The US failed to persuade Saudi Arabia to disengage from its OPEC+ cartel with Russia. 

Above all, in the key area where it matters most — oil and gas — Europe is unable to agree to an embargo. 

Several EU countries threaten to veto any such move by the Commission. 

European economies are in varying stages of meltdown, as the blowback from sanctions begins to hit them. 

Germany’s central bank warned Friday that a full embargo on Russian energy purchases could could cost 180 billion euros, take 5% off Germany’s expected GDP this year, and tip the economy back into a severe recession. 

It warned that even the need to find replacement sources of energy would put a rocket under inflation, adding over 1.5% percentage points to this year’s consumer price index and over 2% points to next year’s. 

Chancellor Olaf Scholz told Spiegel on Friday that a gas embargo is ultimately about “avoiding a dramatic economic crisis, the loss of millions of jobs and of factories that would never open again.” 

He said that given such “huge consequences for our country, for the whole of Europe,.. it’s my responsibility to say: ‘We can’t allow that (embargo)’.”

Europeans are realising sooner rather than later that they are big losers. 

Aside disruptions in supply chains hampering industrial production, what with the burden of 5 million refugees (so far) and the big impact on food security due to the war in the “breadbasket of Europe” combining with the short supply of the fertilisers that are used to increase crop yields, Europe is feeling the brunt of price hikes. 

Even before the war in Ukraine, fertiliser prices were rising rapidly due to the increasing cost of gas, with nitrogen fertiliser costing almost five times as much as it did this time last year. Experts warn that all this could lead to a food crisis. Agitated farmers have led protests calling for concessions. 

The Gallup International polls have shown that the biggest concerns of EU citizens at the moment are rising prices, fear of a widening war in Ukraine and possible shortages in energy supply. More than half of EU citizens believe that Europe has already provided sufficient support to Ukraine. 

This is where the defeat in Donbass turns into a climactic event calling into question the entire US narrative on Ukraine — NATO expansion, European security, and dialogue with Russia — and, of course, the fixation about Vladimir Putin’s leadership of Russia.

A poll published Thursday by The Associated Press-NORC Center for Public Affairs Research shows Americans’ desire to get involved has waned somewhat. Only 32% say the U.S. should have a major role in the conflict, down from 40% last month. An additional 49% say the US should have a minor role.

While speaking in Delhi, Johnson all but discarded Biden’s narrative. Instead, he called for “setting out a vision for the future of Ukraine in the security architecture of Europe. Where does Ukraine fit in now?” 

Johnson said Ukraine needs to be able to answer that question eventually — “what the Ukrainians want eventually.” Interestingly, he didn’t use the word “Ukrainian government.”  

Johnson dilated on “a collection of security guarantees from like-minded countries — security commitments about what we can do to back them up with weaponry, with training, and with intelligence sharing.” But he quickly added that this cannot be “like an Article 5 (NATO) guarantee.” Instead, he said, Ukraine should have “deterrence by denial.”  

Per Johnson’s vision, Ukraine’s NATO membership is inconceivable. Britain anticipates new facts on the ground. Johnson appeared to recognise the emergent political realities as the Russian juggernaut relentlessly “grinds” Kiev’s war machine to dust. 

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There is clearly zero intention to resolve this matter anywhere other than on the battlefield
Law & Politics

Secretary Blinken has refused to meet Lavrov, Biden calls for ‘’Regime Change’’ on a daily basis and ‘’defensive’’ weapons are being shoveled into Ukraine at an unprecedented speed. 

There is clearly zero intention to resolve this matter anywhere other than on the battlefield and through an insurgency which will bleed Russia to death and the Ukrainians as well.

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In his debate this week with Le Pen, Macron said France is seeking the goal of a ceasefire in Ukraine. Is the US seeking that goal? @mtracey
Law & Politics

Because no one in the Biden Administration or Congress ever even seems to mention it; all we hear about are the latest heavy weapons shipments

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Steel plant is teeming with Western mercenaries and even senior @NATO officers. @thedailybeast

On Friday, Russian Defense Ministry spokesman Major General Igor Konashenkov declared: “The remainder of Ukrainian nationalists from the Azov regiment… together with foreign mercenaries from the United States and European countries, are securely blockaded on the territory of the Azovstal plant.”
The previous day, experts on state television had started to suggest that this belief might have played a part in Putin’s decision to halt the bombing of THE besieged steel plant.
Appearing on 60 Minutes Thursday evening, military expert and retired Colonel Yury Knutov opined that Azovstal is hiding secrets of global importance. 

He speculated that unveiling them would cause a ripple effect, including the possibility of impacting the re-election of French President Emmanuel Macron. 

His right-wing populist challenger, Marine Le Pen, has long been championed by Russian state media as the Kremlin’s preferred candidate. 

During the broadcast of 60 Minutes, Knutov asserted: “Many experts say that likely, aside from members of Azov and Ukraine’s Armed Forces, NATO advisers are there [at Azovstal]—and very high-level ones. And if they end up in the hands of the Russian Army, this will cause an international scandal and have major political implications inside NATO countries. Political leaders, leaders of NATO countries, have claimed that none of their advisers are there and NATO has no part in this, other than providing secondary aid by sending weapons. Suddenly—if this will be proven to be a lie—Macron could be defeated in his election. A number of other politicians might be forced to resign.”

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Under the Azovstal industrial zone, owned by oligarch Rinat Akhmetov, there are 24 km of tunnels at a depth of up to 30 meters.
Law & Politics

Under the Azovstal industrial zone, owned by oligarch Rinat Akhmetov, there are 24 km of tunnels at a depth of up to 30 meters.
>There is also a secret NATO facility—PIT-404 – and a secret NATO biological laboratory with biological weapons. At the PIT-404 facility, NATO officers are blocked. The tunnels are equipped with a bunker system with armor protection.
>There are about 240 foreigners inside, including officers of NATO and the French Foreign Legion, as well as biolab staff. Their security, funded by Akhmetov, has up to 3,000 people.
>The biolab under the Azovstal plant in Mariupol at the so-called PIT-404 facility was built and operated by Metabiota, a company associated with Hunter Biden, Rinat Akhmetov and Vladimir Zelensky.
>In the laboratories of this facility, tests were conducted to create bioweapons. 

Thousands of Mariupol residents have become “guinea pigs” in these terrible trials. And mostly Western “specialists” took part in these inhuman experiments.
>Some French intelligence officers died during the rescue operation. The head of French intelligence, Eric Vido, was dismissed on March 31, 2022 for the failures of French intelligence in the war in Ukraine.
>Officers from the USA, Canada, Germany, France, Italy, Turkey, Sweden, Poland and Greece are now blocked in the dungeons of Azovstal. 

American Lieutenant General Roger Clothier, captured by the People’s Militia of the DPR the other day from a downed helicopter, was tracked by the GRU of the General Staff and the SVR of Russia in Mariupol based on the results of external surveillance of his mistress in Turkey in Izmir.
>A citizen of Ukraine, known to intelligence as Klute, always accompanied the general as a traveling wife, confidant and translator. 

As soon as it was reported that this lady had arrived in Mariupol, Russia launched a military operation and blocked the city.

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Global asset classes compared by market cap in 2021. @MacroAlf
World Of Finance

- Real estate: $326 trn
- Bonds: $124 trn
- Equities: $109 trn
- Gold: $12 trn
- Digital assets: < $2 trn

Real estate is HUGE.

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Mellon advised him to liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system'
World Of Finance

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.”

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.077665
Dollar Index 101.312
Japan Yen 128.5310
Swiss Franc 0.95841
Pound 1.28023
Aussie 0.716045 
India Rupee 76.61555 
South Korea Won 1248.905 
Brazil Real 4.7949 
Egypt Pound 18.576900
South Africa Rand 15.69450 

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Rising inflation is increasing the risks of regime change in African countries as higher prices make falls in per head GDP more likely, according to research this month from Renaissance Capital’s chief economist Charles Robertson.

Inflation rates of 20% or more mean that per head GDP is likely to fall, which in terms increases the chances of political upheaval, the research argues.
In most global emerging markets in 2022, even falling GDP per head has little impact on political risk, because most markets are simply too wealthy and stable, Robertson says. 

That, he argues, does not apply in many parts of Africa. 

The continent’s low-income countries face more risks when there are destabilising external events, such as the Russia-Ukraine war, because food represents a higher share of the consumer price basket than in richer economies.

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For a while regime change was de rigeur

Muammar Gaddafi was decapitated and the domino effect only stopped when Vladimir Putin decided he was going to put a stop to it and intervened on behalf of Bashar Al-Assad in Syria.

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@business Next Africa: The Strains Are Starting to Show

Russia’s invasion of Ukraine has driven up the price of the oil products, grain and fertilizer that many African nations depend on. 

A conflict in Ethiopia has derailed the economy of the continent’s second-most populous nation, and the wider Horn of Africa region is now in the worst drought in 40 years.

On the back of sometimes profligate financial management, the series of misfortunes has left many countries close to the brink.

Ghana and Ethiopia, with borrowing costs that have risen more than seven percentage points since 2019, are among countries that Bloomberg Economics sees in immediate danger of being unable to pay their debts.
Others may not be far behind. Kenya expects to spend a record amount of money servicing its liabilities in the budget year starting July 1. 

Other countries, like Senegal, are facing similar fuel shortages that crippled East Africa’s biggest economy for weeks.
There are many variables outside of Africa’s control. 
President Vladimir Putin’s decision to invade Ukraine instantly constricted global supplies of wheat and fertilizer and upended the oil market. The coronavirus spread from China to Europe and then to Africa.
The continent’s economies were ill prepared for the unexpected shocks. 
Onerous debt burdens and sluggish growth make African nations among the first dominoes likely to fall in a time of global upheaval.

After an eight-year wait, Angola’s stock exchange will get its first listing on June 9 when Banco BAI starts trading. State-owned oil company Sonangol and diamond producer Endiama will offer 10% of their shares in the IPO.

South Africa’s inflation remained just inside the central bank’s target band at 5.9% in March, highlighting the tough choice it faces to balance curbing price growth and supporting a sluggish economy. 
Barclays sold a 7.4% stake in former African unit, Absa, for $687 million, cutting its holding by half.

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Zimbabwe’s Central Bank Says No Plan to ‘Raid’ Forex Accounts @markets @economics

Zimbabwe’s central bank said it has “no reason or appetite to raid” foreign-exchange accounts and denied allegations from the country’s largest industry lobby group of U.S. dollars being raided and a bank run.
The Confederation of Zimbabwe Industries in a position paper published Friday had asked the central bank to dump its weekly foreign currency auction and also highlighted the growing use of U.S. dollars in most transactions, which undermines the use of the Zimbabwean dollar. 

The lobby group also referred to the “raiding” of foreign currency accounts.
“The impressions depicted therein are unfortunate and uncalled for as they have the potential of destabilizing financial markets and economic stability of the country,” John Mangudya, the Reserve Bank of Zimbabwe governor, said in an emailed statement late on Saturday.
The central bank won’t suspend the weekly foreign currency auction as requested by the lobby group as this will lead to a shortage of goods and stoke inflation, Mangudya said. 

“The government and the bank will pursue an orderly de-dollarization process and hence it is false that a mono-currency system is now in place,” he said.
The official exchange rate of $155.14 Zimbabwean dollars per U.S. dollar lags behind the parallel market exchange rate of Z$360 per U.S. dollar, according to ZimPriceCheck.com, a website that tracks both official and unofficial market rates.
Old Mutual’s unit in Zimbabwe in its quarterly economic brief said Friday that dollarization is inevitable, as the official exchange rate is being sidelined in favor of the growing and divergent parallel market rates.

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21-JAN-2019 :: @harari_yuval & money

“Money is accordingly a system of mutual trust, and not just any system of mutual trust: money is the most universal and most efficient system of mutual trust ever devised.”
“Cowry shells and dollars have value only in our common imagination. Their worth is not inherent in the chemical structure of the shells and paper, or their colour, or their shape. In other words, money isn’t a material reality – it is a psychological construct. It works by converting matter into mind.”
The Point I am seeking to make is that There is a correlation between high Inflation and revolutionary conditions, Zimbabwe is a classic example
The Mind Game that ZANU-PF played on its citizens has evaporated in a puff of smoke.

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Remittances hit RECORD HIGH of $363 million in March 2022 v. $291 million in March 2021 (+25%). @MihrThakar
Kenyan Economy

Remittances in the 12 months to March 2022 were $3.9 BILLION, as compared to $3.2 billion in a similar period in 2021 (+21.6%).

The US accounted for 58% of remittances in March 2022.

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Yields on Kenyan Eurobonds @CytonnInvest
Kenyan Economy

10-year bond issued 2014 7.6% 10-year bond issued 2018 9.1% 12-year bond issued 2019 9.6%, 

30-year bond issued 2018 10.3% and 7-year bond issued 2019 9.2%

12-year bond issued 2014 9.3%.

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by Aly Khan Satchu (www.rich.co.ke)
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April 2022

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