Macro Thoughts

Gorgeous #map shows economic status of world population. Check for
stark differences between neighbours. The stronger the #wealth gap
between nations the more likely borders are to be strictly controlled
and regulated

Home Thoughts

"The only dream worth having is to dream that you will live while you
are alive, and die only when you are dead. To love, to be loved. To
never forget your own insignificance.To never get used to the
unspeakable violence and vulgar disparity of the life around you. To
seek joy in the saddest places. To respect strength, never power.
Above all to watch. To try and understand. To never look away. And
never, never to forget" - Arundhati Roy

When Saad Hariri’s jet touched down at Riyadh on the evening of 3
November, the first thing he saw was a group of Saudi policemen
surrounding the plane. When they came aboard, they confiscated his
mobile phone and those of his bodyguards. Thus was Lebanon’s prime
minister silenced.

Crown Prince Mohamed bin Salman’s “Night of the Long Knives” did
indeed begin at night, only hours after Hariri’s arrival in Riyadh. So
what on earth is the crown prince up to?

Put bluntly, he is clawing down all his rivals and – so the Lebanese
fear – trying to destroy the government in Beirut, force the Shia
Hezbollah out of the cabinet and restart a civil war in Lebanon. It
won’t work, for the Lebanese – while not as rich – are a lot smarter
than the Saudis. Every political group in the country, including
Hezbollah, are demanding one thing only: Hariri must come back. As for
Saudi Arabia, those who said that the Arab revolution will one day
reach Riyadh – not with a minority Shia rising, but with a war inside
the Sunni Wahhabi royal family – are watching the events of the past
week with both shock and awe.

My Money is on these Guys in fact

It makes sense to be cynical about Crown Prince Mohammed bin Salman’s
ostensible crackdown on corruption in Saudi Arabia. Among the 11
princes, 4 ministers, and dozens of well-known businessmen arrested
were some of the 32-year-old’s last potential rivals to the Saudi
throne. The move also smacks of an asset snatch. Police nabbed 3 of
the Arab world’s 10 richest men, including investor Prince Alwaleed
bin Talal, the billionaire best known for rescuing Citicorp in 1991
and making big bets on Apple Inc. and 21st Century Fox Inc. But was it
only a Machiavellian power play? Or is this the start of a dramatic,
go-for-broke attempt to transform a country that’s resisted change for
decades?

Prince Mohammed seems to be playing the equally ruthless roles of
autocrat and reformer. The millennial has been outspoken about his
bold plans to modernize Saudi society and wean the kingdom from fossil
fuel. Now, Prince Mohammed has locked up globe-trotting tycoons and
other dynastic rivals, sending shock waves across the desert and
around the world. Since Saudi Arabia’s founding in 1932 by his
grandfather, Abdulaziz Al Saud, successive kings have sought consensus
among the family’s thousands of princes, balancing religious,
princely, and tribal factions to maintain stability in the world’s
largest oil supplier. Decisions were made at a glacial pace, often
capped with generous payouts for anyone left unhappy. Prince Mohammed
has smashed that conservative status quo in an act, he no doubt
believes, of creative destruction.

This is a man of dead-certain belief in himself, who told this
magazine in a long, autobiographical interview in April 2016 that his
childhood experiences among princes and potentates were more valuable
and formative than Steve Jobs’s, Mark Zuckerberg’s, and Bill Gates’s.
So, he wondered aloud, “if I work according to their methods, what
will I create?” Now we know his disruptive potential.

The prince is racing the clock. When he and his father came to power
in 2015, oil prices had recently plummeted, leaving the country in
imminent danger of a budget meltdown. They slashed spending and
reduced subsidies for energy and water, grounding the economy to a
halt. With little prospect that oil prices will rise much higher, the
country has only about four more years at its current rate of deficit
spending until its currency reserves are depleted. “Four years is not
a long time; time is running out,” says Ziad Daoud, an economist with
Bloomberg.

Conclusions

The OPEC “Go-Go” days of Sheikh Yamani, his prayer beads and delphic
pronouncements belong to yesteryear. Mohammed Sanusi Barkindo, the
current OPEC secretary-general, is a poor imitation of Yamani and is
playing with a set of cards that is stacked against him. Reserves have
been depleted from Abuja to Riyadh, from Luanda to Caracas and in all
the oil producing capitals in the world. So many capitals are fiddling
while sitting on a tinderbox and playing with matches.  The deputy
Crown Prince was quoted on Al-Arabiyya about Iran: “How can I
communicate with them while they prepare for the arrival of al-Mahdi
al-Montazar?”

This is deluded thinking at a time when things could seriously fall apart:

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere  e ceremony of
innocence is drowned;
The best lack all conviction, while the worst Are full of passionate intensity.
Surely some revelation is at hand;
Surely the Second Coming is at hand
[W.B Yeats The Second Coming]

the U.A.E., Trump, Jared Kushner and Bibi Netanyahu — will push M.B.S.
into a war abroad and at home at the same time, and we could see Saudi
Arabia and the whole region spin out of control at the same time.

The economic warfare involved an attack on Qatar’s currency using bond
and derivatives manipulation. The plan, laid out in a slide deck
provided to The Intercept through the group Global Leaks, was aimed at
tanking Qatar’s economy, according to documents drawn up by a bank
outlining the strategy.

The outline, prepared by Banque Havilland, a private Luxembourg-based
bank owned by the family of controversial British financier David
Rowland, laid out a scheme to drive down the value of Qatar’s bonds
and increase the cost of insuring them, with the ultimate goal of
creating a currency crisis that would drain the country’s cash
reserves.

The Qatar debt project would be grandiose in its ambitions. “Control
the yield curve, decide the future,” reads the planning document,
referring to a standard financial-industry graph showing a country’s
borrowing costs for debt that is due at different dates. The height
and shape of the yield curve is thought to be a reflection of how
healthy an economy is and influences what financing options are
available to a country.

Targeting a nation’s economy using financial manipulation would be a
dramatic break from traditional norms of diplomacy and even warfare.

Banque Havilland does not trade in bonds, securities, CDS, or any
other instruments of Qatar and it has no plans to do so,” Kozlov said,
reading a statement. As for the plan to take down Qatar, he said, “The
bank is a prestigious private banking group and will not be drawn into
or make comments on what are political storylines.”

The cost of insuring Qatari debt has risen some 70 percent since May,
the stock market is down 24 percent this year, and yields are rising
ahead of a bond offering to be made by the end of the year. Ahead of
that debt sale,

In other words, the UAE plans to short Qatar, then drive it into the
ground by manipulating international financial markets, all while
gaining diplomatic leverage against its rival.

If all goes according to plan, the next move would be to force Qatar
to blow through its cash to prop up its currency. “Maintaining the peg
requires extensive use of central bank foreign exchange reserves,”
reads the outline’s mission statement. The idea would be that as the
Qatari bond market tanks, so will the country’s currency. And as
holders of Qatar’s currency sell it off and exchange it for dollars,
the country’s dollar reserves plummet.

The basic premise of the plan — that Qatar is spending billions of
dollars to offset the pain inflicted by the blockade and that the
country’s currency is vulnerable — is largely correct. Just before the
blockade against Qatar was enacted, the sheikdom held at least $35
billion in currency reserves. After the embargo, Qatar’s reserves
plummeted as it spent to prop up its currency and keep its economy
afloat. The country now holds just under $24 billion in reserves,
though a recent accounting maneuver roughly doubled that number.

The House of Saud’s protector has always been the US but this time an
American president has excelled himself at extracting a mindbogglingly
egregious price. I have to surmise that the emir of Qatar baulked at
the price and that his adversaries are saying OK, we can always do it
by force because this looks like a mugging in a dark alley, now

You might say it is a match made in heaven. With their taste in gold
elevators, the Trump family and the House of Saud were destined to
alight at the same penthouse. But the affinity between Donald Trump,
US president, and Mohammed bin Salman, Saudi Arabia’s de facto
monarch, goes beyond a shared aesthetic for “dictator chic”. It is
chiefly transactional. The US-Saudi relationship is the quintessence
of Trumpian diplomacy. Its flowering symbolises the decay in the
US-led global order.

Mr Trump’s approach to foreign relations is a blend of family and
money and a weakness for flattery. Japanese prime minister Shinzo Abe
pledged $50m to the Ivanka Trump-inspired Women Entrepreneurs Finance
Initiative — the World Bank’s effort to seduce America’s first family.
Mr Abe, whose first gift to Mr Trump was a gold-plated golf club,
hosted Ms Trump in Tokyo shortly before her father turned up. Six
months ago, Saudi Arabia and the United Arab Emirates became the first
donors to Ms Trump’s scheme with a $100m grant. Now it is China’s turn
to host Mr Trump. Its president, Xi Jinping, approved a flurry of
Ivanka Trump trademarks shortly before he first met her father in
Mar-a-Lago earlier this year.

It showed a president who cannot tell the difference between the
national interest and his family business. It was the kind of
self-dealing you would expect from a Saudi royal. But I repeat myself.

Euro 1.1636
Dollar Index 94.48
Japan Yen 113.53
Swiss Franc 0.9951
Pound 1.3124
Aussie 0.7678
India Rupee 65.155
South Korea Won 1120.27
Brazil Real 3.2590
Egypt Pound 17.6565
South Africa Rand 14.2681

“Mugabe has faced challenges from outside before, but never an
internal challenge. This time it is the machinery that has kept him in
power that is now shuddering,” said Piers Pigou, an analyst with the
International Crisis Group in Johannesburg.

“She is a psychotic case … now she has obliged her senile and doting
husband to leave power to her. The whole nation is outraged,” he said.

Pigou, the analyst, said: “Mugabe’s brinkmanship may have backfired
but he still has a lot of cards up his sleeve.”

Fears of the return of hyperinflation have led to panic-buying and
rocketing prices in Zimbabwe, while confidence in the parallel “bond
note” currency, launched by the government nearly a year ago, has
collapsed.

Conclusions

This promotion of Grace will not last a moment longer than her husband's life.

President .@MagufuliJP hails H.E @KagutaMuseveni - “I have been out of
Tanzania four times but the two times I have been out, it has been to
visit Uganda. This shows how important the relationship between
Tanzania and Uganda is to me"

“The Ax Has Fallen”

The beginning of the end of Nhlanhla Nene’s political career came on a
warm Monday morning. He was catching up on email in his office in
Pretoria’s neoclassical Old Reserve Bank building, where he was
serving as South Africa’s minister of finance, when his deputy,
Mcebisi Jonas, asked for an urgent meeting. Jonas had been desperate
to speak to his boss for days, but what he wanted to tell Nene was far
too sensitive to discuss by phone.

Nene, a veteran trade union activist, has heavily lidded eyes, the
build of a retired rugby player, and a preternatural calm. He
suggested to Jonas that they step onto an adjoining balcony, the
better to avoid any listening devices. There, Jonas began his tale.

The previous Friday, Jonas said, he’d been summoned to a four-mansion
compound in Johannesburg owned by the Gupta family—a clan of
Indian-born businessmen known to wield substantial influence over
South African politics. Ajay Gupta, the eldest of three brothers atop
the family, was direct: Nene was becoming a problem. He explained that
Jonas would soon replace Nene as finance minister and, in that
capacity, would remove some senior officials who were also standing in
the family’s way. Gupta spoke in the future tense, presenting Jonas’s
appointment as a fait accompli.

Jonas was staggered. The Guptas have no governmental role, and
ministers serve solely at the discretion of the president, Jacob Zuma.
Jonas said as much and made his way toward the door. As he did, Jonas
would later tell investigators, Gupta said his family could put 600
million rand, or about $43 million, into an account of Jonas’s choice.
And if Jonas happened to have a bag with him, he could have 600,000
rand in cash right away. (The Gupta family denies the meeting
occurred.)

“Nonsense,” he told Jonas. “Those guys can’t remove me.” The best
response, Nene said, was to focus on their work. They had a budget to
prepare and Africa’s most sophisticated economy to run.

Just over six weeks later, on Dec. 9, 2015, Nene was leaving a cabinet
meeting when he received a call from one of Zuma’s advisers asking him
to report to the president’s office. Nene turned around to return to
the Union Buildings, the sprawling hillside complex that houses the
presidential administration. Zuma was waiting for him. Speaking in a
mix of English and his native Zulu, the president stood as he told
Nene he was finished at the finance ministry, effective immediately,
and should start preparing for a post at a government-backed bank.
Nene, returning to his car, texted Jonas: “The ax has fallen.”

The Guptas are widely famous in South Africa but also deeply
mysterious. They almost never speak in public. In a rare appearance
last year, Ajay Gupta, a stout, floppy-haired figure in a black suit
and open-necked gray button-down, told a hand-picked interviewer that
he wanted to give “a straight answer. … I am not a lobbyist. I am not
a state capturer. … I am a friend only.” The only capturing going on,
he joked in surprisingly rough English, was in forcing him to talk. He
spoke for less than seven minutes.

There is an almost fable-like quality to the Gupta brothers’ story.
Their father, Shiv Kumar Gupta, was a trader of spices and soapstone
powders in Saharanpur, a gritty industrial city on India’s northern
plains. As his sons, born in the late 1960s and early ’70s, entered
adulthood, he sent each of them in a different direction to seek
fortune. Ajay went to Delhi, Rajesh to China, and Atul to Africa,
which Shiv Kumar believed was on the verge of a transformational boom,
like the U.S. a century earlier. Atul arrived in Johannesburg, South
Africa’s largest city and commercial capital, in 1993.

In 2005 the brothers began putting Zuma’s family on their payroll.
They hired his son Duduzane, then in his early 20s, as an IT
specialist; appointed Duduzane’s twin sister, Duduzile, as a company
director; and made one of Zuma’s wives (polygamy is legal in South
Africa, and Zuma currently has four) a communications officer.

Even so, Zuma remained formidable. He ran intelligence operations for
the ANC in exile, giving him thick files on his colleagues, and his
Zulu middle name, Gedleyihlekisa, translates roughly to “the one who
laughs as he grinds his enemies.”

The day Maseko was scheduled to go see Ajay, his cellphone rang. He
recognized the number immediately, he said in an interview, expanding
on an account he has previously laid out for investigators. It was the
switchboard at South Africa’s presidential residence. Zuma came on the
line. “These Gupta guys … need your help,” he said in Zulu. “Please
help them.” Maseko was alarmed. Why would the president himself be
involved?

The communications painted a picture of an intimate partnership
between the Guptas, Duduzane, government ministers such as Zwane, and
parastatal executives like Molefe. Around the time Glencore agreed to
sell the Optimum mine to the Guptas, an email shows Zwane’s name on
the passenger list for a flight on their private jet departing from
Zurich to Delhi.

“If it were up to me and I made the rules,” President Zuma told
supporters at a rally outside Johannesburg last year, speaking in
Zulu, “I would ask for six months as a dictator.” Remove the
constraints of the democratic system, he continued, and “you’d see
wonders.”

Dollar versus Rand 6 Month Chart INO 14.2681
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Nigeria All Share Bloomberg  +37.87% 2017
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg  +41.46% 2017
http://www.bloomberg.com/quote/GGSECI:IND

His speech to the Center for Strategic and International Studies, a
think-tank, was broadcast live on Kenyan television.

“The biggest problem in Kenya right now is exclusion ... unless they
(the problems) are addressed they will tear the country apart,” he
said. ​“As things stand now, anger and radicalization is growing by
the day.”

By one estimate, the M-Pesa mobile-money system alone lifted about 2%
of Kenyan households out of poverty between 2008 and 2014. Technology
cannot solve all of Africa’s problems, but it can help with many.

“If KQ doesn’t want the CFO, there’s no court in the land than can
force him to stay there.”

Kenya Airways stock has dropped 5.7 percent this week, after trading
at a five-month high of 6.15 shillings on Nov. 3.

Par Value:                  5/-
Closing Price:           13.00
Total Shares Issued:          254851988.00
Market Capitalization:        3,313,075,844
EPS:             1.38
PE:               9.402

FY Turnover 589.380m vs. 831.761m -29.141%
FY Gross profit 392.648m vs. 532.806m -26.306%
FY Other income 36.589m vs. 40.805m -10.332%
FY Administrative expenses [155.315m] vs. [173.511m] -10.487%
FY Operating profit 273.922m vs. 400.100m -31.537%
FY Finance and other income 146.619m vs. 178.768m -17.984%
FY Fair value [Loss]/ gain on equity investments 11.115m vs. [31.120m] +135.717%
FY Fair value gain on revaluation of investment property 25.000m vs. –
FY PBT 456.656m vs. 547.748m -16.630%
FY Profit for the year attributable to shareholders 352.300m vs.
375.568m -6.195%
FY Total comprehensive income for the year 428.282m vs. 375.568m +14.036%
Basic and diluted EPS 1.38 vs. 1.47 -6.122%
Dividend per share 0.70 vs. 0.70 –

Company Commentary

A challenging year with increased competition and market challenges.

Conclusions

Big Turnover downshift of -29.141%

Co-op Bank 3Q17 Results via Kestrel
Loan book (net) increased by 14.2% y/y to KES 259.4bn. On a q/q basis
the loan book (net) increased by 2.7%.
Customer deposits increased by 12.1% y/y to KES 289.0bn. On a q/q
basis customer deposits increased by 1.1%.
Interest income declined by 7.7% y/y to KES 29.9bn – marginally above
our expectation of KES 29.3bn. The decline was mainly on the back of a
6.9% y/y decline in interest income from loans and advances.
Interest expense declined by 8.5% y/y to KES 9.1bn – marginally above
our expectation of KES 8.9bn.
Net interest income declined by 7.3% y/y to KES 20.8bn – marginally
above our expectation of KES 20.4bn.
Gross NPLs increased by 69.5% y/y to KES 16.9bn. This was mainly
driven by delays in government payments on salaries impacting
check-off loans. The increase in NPLs was further compounded by the
real estate slowdown - and Co-op Bank wanted to be proactive in
recognising NPLs.
NPL ratio increased to 6.2% from KES 4.1% reported in 3Q17. Guidance
for the FY17 NPL ratio is 6.0%.
Loan loss provision increased by 31.7% y/y to KES 2.6bn.
Operating expenses (excl. loan loss provisions) declined by 3.3% y/y
to KES 14.7bn.
PBT declined by 9.8% y/y to KES 13.7bn – below our expectation of a
PBT of KES 13.95bn.
Co-op Bank now trades at a trailing P/E ratio of 8.2x and a P/B ratio of 1.4x.