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Satchu's Rich Wrap-Up
 
 
Tuesday 05th of July 2022
 
Morning
Africa

Rgister and it's all Free.

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Double, double toil and trouble; Fire burn, and cauldron bubble.
World Of Finance


Double, double toil and trouble; Fire burn, and cauldron bubble.

Representation of the Three witches by Kathryn Hunter

It is now clear that no amount of gaslighting can finesse a Ukrainian military rebound from here. 

Shoigu [who has resurrected himself from the dead You will recall Information Warfare Specialists had informed us that he was on his last legs] has pronounced the Lugansk People's Republic liberated. 

As mentioned before, I see Russia moving eventually towards Odesa, landlocking Ukraine and only then coming to the Table.
The inability to read the battlefield, the extraordinary propaganda threads on Twitter, the deplatforming of any voice that countered the Propaganda effort have produced a ''Fairy Tale'' reality and a geoeconomic boomerang effect which is shredding the standard of living in the West and whose consequence will be Regime Change in Western Capitals long before Moscow.
The choice for Western Policy Makers is extraordinarily bleak. 

It is either an ignominious retreat a la Afghanistan [and this creates a risk of a domino effect with Taiwan making it a potential Trifecta of reversals [Afghanistan, Ukraine and Taiwan]. 

The Ukrainian Military is largely extinguished and there will be no insurgency which will bleed Russia. 

Therefore, given the singular lack of understanding about the efficacy of sanction warfare

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BIDEN ADVISOR BRIAN DEESE: "This is about the future of the Liberal World Order and we have to stand firm." @Breaking911
Law & Politics


BIDEN ADVISOR BRIAN DEESE: "This is about the future of the Liberal World Order and we have to stand firm." @Breaking911

CNN: "What do you say to those families that say, 'listen, we can't afford to pay $4.85 a gallon for months, if not years?’"

The overarching Point remains

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‘’You can print money, but not oil to heat or wheat to eat’’ wrote @CreditSuisse’s Zoltan Pozsar. Sunday, April 10
World Of Finance


‘’You can print money, but not oil to heat or wheat to eat’’ wrote @CreditSuisse’s Zoltan Pozsar. Sunday, April 10

Therefore, it is clear Western Policy Makers are going to double down on the failing sanction warfare strategy.

The Flaws in this Strategy are in plain sight but apparently invisible to the Architects of the Strategy [who by the way would have been stopped out an eternity ago if this was a Trading Floor] 

Western markets are turbo finiancialized and for an eternity, Western banks and Central Banks have been able to distort the commodity price complex with little difficulty. 

Take the Gold market for example where derivatives are 100x the underlying. One can create inorganic cascade like price moves in the derivatives market and thereby control the physical commodity. 

There are plenty of examples of these inorganic price moves. In essence, the Tail wags the dog. 

The challenge is where the Supply/Demand balance is precarious and a small adjustment [reduce Supply or increase Demand] tips the situation into disequilibrium. 

The Tail will no longer wag the Dog and the Dog will simply run amok.

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JP Morgan says oil (currently at $110pb) could skyrocket to $380pb if the West continues to sanction Russia and Russia decided to cut off supplies @AlexeiArora
Minerals, Oil & Energy


JP Morgan says oil (currently at $110pb) could skyrocket to $380pb if the West continues to sanction Russia and Russia decided to cut off supplies @AlexeiArora

“Well, of course, Gazprom was forced to reduce the volume of gas supplies to Europe by 20%+. But you know, prices have increased not by 20%+, but by several times! ''

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Today Europe is back to paying 7.5 times more for natural gas than the US @DoombergT
Commodities


Today Europe is back to paying 7.5 times more for natural gas than the US @DoombergT

Any scenario analysis would be forecasting a complete collapse of Western economies and an exponential and parabolic increase in the cost of living  if any of these outcomes come to pass. 

Today the Russian Ruble is the best performing currency in the World. 

There are plenty of Armchair Generals and Commentators on Twitter who will dismiss the Ruble rally but they are like the Armchair Generals who told us Zelensky was going to take his Army to Moscow and the Russians were going to strew rose petals at his Feet.
By sanctioning the Russians, we created a reverse '' Petro Dollar'' We created a ''Petro Ruble'' a currency backed by commodities. 

It is a straightforward calculation now between a Money Printer and a currency backed by hard and soft commodities. 

Its a No Brainer and a seismic macro development. 

During the last few trading sessions, interest rates in the US and Europe capitulated, bonds rebounded as markets began to price in the risk of recession. 

The overarching Problem remains Inflation and a recession is secondary. If Inflation is at 8.6% in Europe and the US, just how far can [US] bonds with a 2 handle rally?
The market reaction is Pavlovian. Sure it's been an annus Horribilis in the First Half but betting on a return to QE, lower rates and easy money seems to me a seriously sub optimal Bet. 
On a YTD basis, just 4 of 38 non-currency assets in DB's sample are in positive territory @Schuldensuehner

In many respects @RahulGandhi best captured the current moment. 

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.@RahulGandhi was mocked for saying this. @SriniSivabalan @srinivasiyc
Emerging Markets

.@RahulGandhi was mocked for saying this. @SriniSivabalan @srinivasiyc

Therefore, recent [largely inorganic] Price corrections in the commodity complex [Oil, Gas, Wheat, in particular] should be accumulated into and not sold. 

The negative spillover and feedback loop in EM and Frontier markets [particularly the Commodity Importers] has further to run.

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Hopscotch Author: Julio Cortázar
Misc.

Hopscotch Author: Julio Cortázar

Boulevard Jourdan, where sometimes at midnight the members of the Serpent Club used to get together to talk to a blind seer, a stimulating paradox.

La Maga came over and sat on the floor with a cigarette in her mouth. The green candles burned in her eyes. Gregorovius looked at her in ecstasy and remembered a street in Morlaix at dusk, a high aqueduct, clouds.

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With the fall of Luhansk, the battle for Donetsk looms. @nytimes
Africa


With the fall of Luhansk, the battle for Donetsk looms. @nytimes 

As one battle in Ukraine was ending — with Russia taking the key eastern city of Lysychansk on Sunday — another was already underway.

Russia’s capture of Lysychansk, and with it effective control of Luhansk Province, allows it to refocus on neighboring Donetsk, the other province in the Donbas, the mineral-rich region bordering Russia that has long been in President Vladimir V. Putin’s sights.

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Currency Markets at a Glance WSJ
World Currencies

Currency Markets at a Glance WSJ
Euro 1.044260 
Dollar Index 105.112
Japan Yen 136.250
Swiss Franc 0.9600 
Pound 1.211700 
Aussie 0.687145 
India Rupee 79.0628
South Korea Won 1299.805
Brazil Real 5.330000
Egypt Pound 18.866100 
South Africa Rand 16.334700

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What’s behind the sharp drop in Bitcoin’s value? $BTC #Bitcoin @AJInsideStory
World Currencies

What’s behind the sharp drop in Bitcoin’s value? $BTC #Bitcoin @AJInsideStory 

Presenter: Sami Zeidan
Guests
Aly-Khan Satchu – Investor and CEO at Rich Management
Naeem Aslam – Chief market analyst at AvaTrade
Brian Lucey – Professor of international finance and commodities at Trinity Business School

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A “Deal with the Devil” in the Heart of the Great Lakes @CrisisGroup @SEMATUMBA & @nicodelaunay
Africa


A “Deal with the Devil” in the Heart of the Great Lakes @CrisisGroup @SEMATUMBA & @nicodelaunay

Scattered laughter breaks through the patter of Congolese rumba at Inbox, a restaurant in the centre of Beni, a major town in the eastern Democratic Republic of Congo’s (DRC) North Kivu province. 

I make some small talk, too, amid the hubbub, but then the conversation turns serious. 

The man I’m speaking to, a member of the local administration and a long-time contact of mine, looks down at the plastic table between us, contemplates his beer and grimaces lightly. I have just asked him a “ticklish” question.

The date is 13 December 2021. For the last fortnight, and with Congolese President Félix Tshisekedi’s approval, the Ugandan army has deployed to the countryside around Beni to fight the Allied Democratic Forces (ADF), an Islamist militia originally from Uganda but based in the DRC’s east for many years.

The Ugandan army’s intervention is a direct response to a triple bombing on 16 November 2021 in Uganda’s capital Kampala, which was attributed to the ADF.  

Uganda may also be looking to secure its economic interests in Congo – notably the construction of a road that will eventually link Ugandan border towns to Beni, Butembo and Goma in North Kivu, which should boost trade between the two countries. 

Uganda strengthened its deployment from 1,700 to more than 4,000 troops in the first few months, extending their range to the northern province of Ituri this past February. 

For Kinshasa, its neighbour’s military support is a boon. The “rapid and robust” response to insecurity in the country’s east that Tshisekedi promised when he assumed office in January 2019 has so far yielded mixed results.

Despite the rosy projections in Kinshasa and Kampala, the Ugandan deployment in the eastern DRC is far from straightforward.  

Uganda has a fraught history with North Kivu and, farther north, Ituri. In the late 1990s and early 2000s, the Ugandan armed forces occupied large parts of these two provinces, engaging in looting, murder and rape, and leaving painful memories among the people. 

On 9 February, the International Court of Justice, the UN’s highest judicial body, ordered Uganda to pay $325 million to the DRC in damages.

Cocoa, which transits mainly through Uganda before being exported outside the African continent for processing, is an integral part of the war economy that has developed around the Great Lakes region’s natural resources. 

“There is gold in Bunia, coltan in Masisi, cassiterite in Walikale, and then there is cocoa in and around Beni”, says Christophe, a farmer who used to grow the plant in Mbau, north of Beni, before armed groups forced him out of his fields. 

“Unfortunately, the same thing often happens”, he explains. “We work hard to grow cocoa and then the ADF come and take over our crops at harvest time”. 

“Whenever we produce a lot of cocoa, the massacres increase”, adds a woman farmer we meet in Kipriani, a neighbourhood in northern Beni.

Onesphore, who was born in the eastern DRC, sums up the fragility of life here with his usual sense of humour. “We have a saying here: ‘Life expectancy is 24 hours, renewable each day’”.

The most common estimates hold that armed conflict in the eastern DRC and the related humanitarian crises have resulted in some 6 million deaths since 1998.

First, in May 2021, he declared a state of siege in North Kivu and Ituri, the two provinces most affected by the violence. Then, from 30 November 2021, he agreed to military cooperation with Uganda.

Since Kampala received authorisation to deploy its forces, the Burundian army has entered South Kivu to hunt down rebels from the Burundian RED-Tabara group. 

Last February, Rwandan President Paul Kagame raised the possibility of sending his country’s troops to the DRC to fight the Democratic Forces for the Liberation of Rwanda (Forces Démocratiques de Libération du Rwanda, FDLR), a remnant of the Rwandan Hutu militia that massacred much of the Tutsi minority and many moderate Hutu during the 1994 genocide. 

Kagame justified his talk of intervention with allegations of links between the FDLR and the ADF. 

More recently, he has accused the Congolese army of working with the FDLR to fight another militia, the March 23 Movement (M23).

On 20 November 2012, the M23, a Congolese rebel movement backed by Rwanda and Uganda, attacked Goma, the town in which I have lived for 32 years. 

After putting up weak resistance in the northern part of city, the Congolese army retreated to Minova, a town 50km to the west. 

Like thousands of other Goma residents who crowded along the roads, I watched in stupefaction as the columns of tanks and soldiers moved westward, leaving the city at the rebels’ mercy. 

“This is a politicised war”, some soldiers said to justify their departure when questioned.

Onesphore had warned me before I arrived in the DRC. The numerous issues linked to insecurity in his country’s east are completely intertwined, forming a tapestry whose complexity is sometimes difficult to grasp. And yet I leave Beni convinced that although the violence in the eastern Congo has brought the region to its knees, it will not yield.

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The Return of Macroeconomic Imbalances: Adapting to Life on the Edge @IMFNews @aselassie
Africa


The Return of Macroeconomic Imbalances: Adapting to Life on the Edge @IMFNews @aselassie
Macroeconomic imbalances, as elsewhere, have returned as a first order challenge for most African countries. And they are pushing countries close to the edge.

Fiscal positions have deteriorated over the past decade, with median public debt gradually doubling back to around 60 percent of GDP. 

And, with supply chain disruptions and the Russian invasion of Ukraine, double-digit inflation has returned for several countries, such as Angola, Ethiopia, and Zambia, precipitating food shortages and hurting the most vulnerable.

The risk of heightened destabilizing social unrest in the months ahead is very high. 

After all, what an increasing share of urban poor are grappling with is the inability to feed their families today over improving the livelihood of their offspring down the road.

From global tailwinds to global headwinds. The era of low rates has ended. 

We are seeing tighter financial conditions and increased financial market volatility, which is putting further pressure on indebted nations, as ever costlier borrowing is eroding fiscal space. 

In addition, geo-political fragmentation—an ongoing phenomenon amplified, though not generated, by the war in Ukraine—is disrupting trade and investment flows, dislocating global value chains, and raising production costs.

Sharp cuts in aid budgets. Budget support from the international community to sub-Saharan Africa is in secular decline. 

And this decline is staggering: as a percent of recipient GDP, OECD official development financing has declined from about 4½ in the 1990s to 2½ more recently.
Welcome to the “gray zone” 
And in this context, what I have been struck by in recent years is the number of countries that have entered what I would call a “gray zone” of high imbalances. And I expect more to do so in the coming years.

Take a country with public debt of 70 percent of GDP (and one-third of sub-Saharan African countries have public debt at that level or higher). 

To bring debt back to lower levels of, say, 50 percent of GDP at a realistic pace of 1 percentage point of GDP a year, would take, at least, a decade of continuous tough fiscal adjustment.

Living on the edge: what does it really mean for policies?

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The Phenomenon is spreading like wildfire in large part because of the tinder dry conditions underfoot.
Africa


The Phenomenon is spreading like wildfire in large part because of the tinder dry conditions underfoot.
Prolonged stand-offs eviscerate economies, reducing opportunities and accelerate the negative feed- back loop.
Antonio Gramsci wrote, “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum, a great variety of morbid symptoms appear. now is the time of monsters.”
Ryszard Kapucinski also said: “If the crowd disperses, goes home, does not reassemble, we say the revolution is over.”
It is not over. More and more people are gathering in the Streets.

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