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Macro Thoughts

On the 30th of December 2016, I wrote that My Conviction Trades for
2017 [see http://bit.ly/2vQTv9T] were as follows

1. Long BITCOIN.
2. Long BITCOIN short Gold

Bitcoin started the year just above $1,000, and the overall growth now
is approaching 900 percent. The cryptocurrency’s market capitalization
has reached $145 billion [the total crypto currency market cap has
soared to almost $275 billion]. Bitcoin is more valuable than major
corporations like Siemens, Mastercard, British American Tobacco or
McDonald’s. BITCOIN has been the top-performing currency every year
since 2010, except 2014 and this Year at +900% the return has been
parabolic [off the charts]. The Parabola was described thus by Thomas
Pynchon

“But it is a curve each of them 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.’’

If you spend Your life deeply immersed in the markets, then it is
necessary to sniff out these parabolic moves. And its Better to do
Right than Say right as Edwin Lefevre noted nearly a century ago.

Or as T.S Eliot said in The Hollow Men

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

Lets return to the subject at hand. On the 3rd of March this year, the
Price of #Bitcoin crossed the Gold price for the first time ever
[refer my Trade 2. for the year].  Bitcoin hit $1,900 on 22nd May and
$2900 on 7th June. In September Jamie Dimon of JP Morgan briefly
stemmed its rise when he said  'you can't have a business where people
can invent a currency out of thin air'.
By 1st November, Bitcoin was surging again after the Chicago
Mercantile Exchange announced the launch of Bitcoin Futures contracts.
On November 8th, 'Buy Bitcoin' Overtook 'Buy Gold' as an Online Search
Phrase. As I file this report on Sunday morning [and the grass is a
luscious green after the short rains, outside my window], Bitcoin is
all set to burst through $9,000,00.
The value of the second largest cryptocurrency Ethereum also smashed
an all-time high of $485 on Saturday. Ethereum’s market capitalization
is approaching $46 billion, and its gains this year have reached 5,000
percent. At the start of 2017, you could buy one token for $8.27,
about 58 times less than the current price. This, you will agree, is
mind-boggling inflation. In my experience, when I have found myself
riding a Tiger by its Tail, the key issue is the getting off and not
trying to run the Trade for every penny. I got off this Tiger.
Interestingly, Bitcoin traded as high as $13,499.00 in Zimbabwe last
week, but that speaks to the complete dislocation of that economy.

Mr. Novogratz who has raised $500m for a Crypto currency Fund said,
"Bitcoin has value because people say it has value."  and "Bitcoin you
can look at as digital gold."  Mr. Gartman said on bitcoin: "this is a
market for criminals and millennials" Th mining of bitcoins now uses
more electricity than Ireland or Nigeria.  Our Central Bank Dr.
Njoroge  said he thinks bitcoin a pyramid scheme JP Morgan's Jamie
Dimon called bitcoin a "fraud" in September and said it "won't end
well." The Guardian spoke about the 8 fold price inflation and
pronounced

''Since it is only widely used as a currency in drug deals or for
ransom payments, there is either a huge boom in criminal activities
outside the world of cryptocurrencies, or one within unregulated
exchanges where these tokens are traded''

''One of the few men to get out in time before the Wall Street crash
of 1929 did so – legend has it – because he was offered a stock tip by
the boy who shined his shoes. He immediately sold all his holdings. If
the mania for gambling on the stock market had reached down to the
children on the streets, the bubble must have been due to pop at any
moment. The corresponding moment for the cryptocurrency bubble will
only be discernible in retrospect, but we have some pretty strong
candidates already. The endorsement of one project by the reality TV
star Paris Hilton has already happened''

There are many cryptocurrency schemes which are sold on the same
grounds as the greatest South Sea Bubble prospectus: “For carrying on
an undertaking of great advantage, but nobody to know what it is.”

My Investment Thesis at the start of the year was that Bitcoin was
going to get main-streamed in 2017. It has main-streamed beyond my
wildest dreams, therefore, I am now sidelined.

Let me leave you with Hunter S. Thompson '' “Life should not be a
journey to the grave with the intention of arriving safely in a pretty
and well preserved body, but rather to skid in broadside in a cloud of
smoke, thoroughly used up, totally worn out, and loudly proclaiming
“Wow! What a Ride!”

A lot of risk calculations are based on Value at Risk (VAR).
Essentially, you overlay a volatility measure over the portfolio, and
you calculate how much money is on the line. Central banks have
suppressed volatility therefore in real terms; investors are now
holding bigger positions at these current artificially suppressed
levels. If volatility spikes, positions are going to be reduced en
masse. Or to put it another way and to borrow the lyrics from the
Eagles Hotel California:

Mirrors on the ceiling,
The pink champagne on ice
And she said “We are all just prisoners here, of our own device” Last
thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
“Relax,” said the night man,
“We are programmed to receive.
You can check-out any time you like,
But you can never leave! “

What is clear is that we are at the fag-end of this party.

Home Thoughts

Elmenteita is derived from the Masaai word muteita, meaning "dust
place", a reference to the dry and dusty quality of the area,
especially between January and March. The town of Gilgil is located
near the lake. In the south-to-north sequence of Rift Valley lakes,
Elmenteita is located between Lake Naivasha and Lake Nakuru. The major
Nairobi-Nakuru highway runs along the nearby escarpment affording
motorists a spectacular vista towards the lake.

At the southern end of the lake lie the "Kekopey" hot springs, in
which the Tilapia grahami breed. Very popular for bathing, the local
Maasai claim that it can cure AIDS. The reed beds nearby are fishing
grounds for night herons and pelicans.

The Lake Elmenteita area saw its first white settlement when Lord
Delamere (1879-1931) established Soysambu, a 48,000-acre (190 km2)
ranch, on the western side of the lake. Delamere gifted the land on
the other side of the lake to his brother-in-law, the Honorable
Galbraith Lowry Egerton Cole (1881-1929), part of whose "Kekopey
Ranch", where he is buried, is preserved today as the Lake Elementaita
Lodge.

Ecclestone is used to calling the shots. Until the start of this year,
he was the chief executive of Formula One — ringmaster of the global
car-racing series he transformed into one of the world’s most-watched
sports. His four decades at the helm ended dramatically in January
when the US group Liberty Media, controlled by billionaire John
Malone, completed a $8bn takeover of F1’s parent company. Ecclestone
was shunted into the role of “chairman emeritus”. What does that
involve?

“I’m an adviser to the board,” he says. And what has his advice been?

“They have never asked,” he says with a thin smile. It’s an honorary
title designed to match his exalted status.

“I’ve got the highest position there is,” he jokes. “So high that when
I look down, I can’t see anything.”

It has been quite a ride for the son of a Suffolk fisherman and
housewife who became a used-car salesman as a teenager. The
wheeler-dealing provided the capital in 1971 to buy Brabham, an F1
team, at a time when the sport was merely a pastime for motoring
enthusiasts. Through the 1970s, he negotiated deals with circuits and
television companies on behalf of teams, selling F1 as a package,
rather than race by race. Attracted to the glamour, sponsors opened
their cheque books.

In the 1990s, Ecclestone was nominated for a knighthood, with
character references from Nelson Mandela and Silvio Berlusconi. His
stewardship of F1 has helped to create “motorsport valley” in the
south of England where many F1 teams are based, employing thousands.
Other British business­people have been recognised for less, but civil
servants balked at ennobling him. A man who still shocks his country’s
political establishment — he voted Leave in last year’s Brexit
referendum and believes that US president Donald Trump has “done a lot
of good things for the world” — has been rejected by it.

“Honestly, I think the guy who should be running Europe, impressed me
more than anything, is Mr Putin because he’s a guy that says he’s
going to do something and does it . . . [He’s] a first-class person.”

The ineffectiveness cries out to the heavens, especially considering
reports that Israel helped Egypt with intelligence and the use of
drones against ISIS strongholds

Time was when a mere statement from a secretary of state – let alone a
US president – would have the phones jangling across the Middle East.
The Reagans, Clintons, Bushes or Obamas of this world actually did
have an effect on the region, albeit often malign, US leaders being
poorly briefed and always in awe of Israel (not to mention its power
to destroy political lives in Washington). But today, who is calling
the shots across the old Ottoman Empire?

Well, just take a look at Putin and Assad and Erdogan and Sissi and
Macron and Rouhani. These are the men who are currently holding the
headlines, either declaring Isis dead or beaten or Syria “saved” or
the Kurds “terrorists” or rescuing Prime Minister Saad Hariri from his
hostage home in Saudi Arabia – although now we’ve all got to believe
that he wasn’t detained and didn’t really intend to resign or did
resign but doesn’t want to resign any more. And rather oddly, Mohamed
bin Salman looks less and less influential, a Gulf Crown Prince whose
attempts to destroy Yemen, Assad’s Syria, Qatar and Al Jazeera and
even poor Lebanon look more and more like a child in a tantrum,
throwing his toys around in an attempt to frighten the neighbours –
including the one neighbour he will not fight, the Islamic Republic of
Iran.

Truly, the US has turned into the Cheshire Cat, sometimes quite
disappearing from our vision with the exception of various bits and
bobs of American special forces who pop up to help Kurds and weirdly
named militias – all of which appear to have three-letter acronyms –
who will be abandoned, betrayed or forgotten in the months to come.
Perhaps only the Cheshire Cat’s grin will remain. The Hezbollah, I
suspect, is the only armed force in the Middle East which has only one
name. And they’re on the “terrorist” list – though not of course in
Moscow, where Putin supports the Hezbollah’s ally Bashar.

Number of times you were on the cover: 0. Number of times you made the
Time 100 influentials list: 0. Thanks anyway!

For more than half a century, Saudi Arabia’s oil minister could move
markets with a few choice words about what OPEC may decide at its next
meeting, generating millions if not billions of dollars of profit for
insiders.

Not anymore. While OPEC’s gatherings still influence prices, it’s not
Saudi Arabia’s voice that matters most, but the voice of a non-member:
Russia, specifically Vladimir Putin.

Since engineering Russia’s pact with the Organization for Petroleum
Exporting Countries to curb supplies a year ago, Putin has emerged as
the group’s most influential player. As one senior OPEC official put
it on condition of anonymity, the Russian leader is now “calling all
the shots.”

International Markets

Euro 1.1927
Dollar Index 92.76
Japan Yen 111.49
Swiss Franc 0.9798
Pound 1.3336
Aussie 0.7612
India Rupee 64.55
South Korea Won 1085.64
Brazil Real 3.2341
Egypt Pound 17.6890
South Africa Rand 14.15

Commodities

Brent for January settlement climbed 31 cents to $63.86 a barrel on
the London-based ICE Futures Europe exchange. The global benchmark
crude traded at a premium of $4.91 to WTI.

Emerging Markets

Frontier Markets

Sub Saharan Africa

Inside State House in Harare, Robert Mugabe was in the tightest spot
of his 37-year rule. Tanks were on the streets and troops had occupied
the state broadcaster, from where the army had announced it had taken
control of Zimbabwe.

Mugabe, 93 years old but still alert, remained defiant. The only
leader the country had known since independence was refusing to quit.

At a tense meeting with his military top brass on Nov. 16, the world’s
oldest head of state put his foot down: “Bring me the constitution and
tell me what it says,” he ordered military chief Constantino Chiwenga,
according to two sources present.

An aide brought a copy of the constitution, which lays out that the
president is commander-in-chief of the armed forces.

Chiwenga, dressed in camouflage fatigues, hesitated before replying
that Zimbabwe was facing a national crisis that demanded military
intervention.

Mugabe retorted that the army was the problem, according to the
sources present. Then the beleaguered president indicated that perhaps
they could find a solution together.

The meeting marked the start of an extraordinary five-day standoff
between Mugabe and Zimbabwe’s supreme law on one side, and the
military, his party and Zimbabwe’s people on the other.

The generals wanted Mugabe to go, but they also wanted a peaceful
“coup,” one that would not irreparably tarnish the administration
aiming to take over, according to multiple military and political
sources.

In late October, Mugabe summoned Chiwenga to a showdown, according to
another of the documents, dated Oct. 30. It said Mugabe confronted the
army chief about his ties to Mnangagwa and told him that going against
Grace would cost him his life.

“Chiwenga was warned by Mugabe that it is high time for him to start
following. He mentioned to Chiwenga that those fighting his wife are
bound to die a painful death,” the intelligence report said.

At the same meeting, Mugabe also ordered Chiwenga to pledge allegiance
to Grace. He refused.

“Chiwengwa refused to be intimidated. He stood his ground over his
loyalty to Mnangagwa,” the report said.

After another tense meeting with Mugabe on Nov. 5, Chiwenga left
Harare on a pre-arranged official trip and traveled to China, which
wields significant influence as a major investor in Zimbabwe.

A day later, Mugabe sacked Mnangagwa as vice president and purged him
from ZANU-PF, the liberation movement that Mnangagwa had served since
his youth and for which, as a young militant caught bombing a train,
he had nearly been executed.

For the generals, Mugabe had gone too far. The military immediately
activated a “Code Red” alert, its highest level of preparedness, a
military source said.

“China and Russia are after change,” the report said. “They are after
change within ZANU-PF as they are sick and tired of Mugabe’s
leadership.”

“The two countries are even ready to clandestinely supply arms of war
to Mnangagwa to fight Mugabe.”

President Robert Mugabe’s resignation on November 21, 2017 came after
a military coup that ended his 37 years of unbroken control over
Zimbabwe. Yet the weakness within the Mugabe regime was apparent in
the last few years, as two factions within Zimbabwe’s ruling party,
the Zimbabwe African National Union, Patriotic Front (ZANU-PF), had
been jockeying for the right to succeed the 93-year-old Mugabe. One
group, called “Generation 40” or G40, is headed by First Lady Grace
Mugabe and backed by younger political leaders Jonathan Nathaniel Moyo
and Saviour Kasukuwere. Their competitors, the Lacoste Group,
primarily consists of senior independence era leaders; the group is
named after former Vice President Emmerson Mnangagwa, who is known by
his nom de guerre “crocodile,” acquired during the Rhodesian Bush War
against the white minority government. The Lacoste group has been
historically close to the Zimbabwean Defense Forces, currently headed
by General Constantino Chingewa. While Grace Mugabe’s expensive
lifestyle and desire to become her husband’s successor is well known,
Mnangagwa is known for his brutality in crushing the Ndebele
opposition in the 1980s Gukurahundi and his unswerving loyalty to
Mugabe.

The events that started on November 14, when General Chinegwa led a
coup to wrest power from President Mugabe, arrest members of the G40,
and assure the return of ousted Vice President Mnangagwa (possibly to
become president) has been extensively covered by the international
press. However, little is known about the international aspects of the
coup, specifically the role of China. Despite issuing official denials
of such reports, it seems that China supported the coup, at least
tacitly. It appears that China was initially closer to the G40
faction, but shifted support to the Lacoste faction because of its
ties to the Zimbabwean army and Mnangagwa himself.

Although China has officially denied involvement in the recent coup,
it has cultivated deep ties with Zimbabwe’s political leadership since
the 1960s-70s Rhodesian Bush War. Mugabe’s ZANU, primarily led and
soldiered by the Shona ethnic group, acquired weapons and funding from
China. From the 1990s, China continued to increase economic ties with
Zimbabwe; it has investments in mining, agriculture, energy, and
construction. In 2015, China became Zimbabwe’s top export market and
accounted for by far the largest share of foreign direct investment
into Zimbabwe (74 percent). The same year, China also promised a $4
billion aid and investment package in 2016, and has pledged $46
million for the building of Zimbabwe’s new parliament building.

China’s ties with the Zimbabwean Army, from which the Lacoste faction
draws its strength, are particularly deep. It has sold weapons ranging
from small arms to fighter jets and, in an almost symbolic culmination
of these ties, China financed the building of Zimbabwe’s new National
Defense College, which trains both defense and internal security
forces. A parallel aspect of these arms sales, however, has been the
alleged diverting of revenues from Zimbabwe’s Marange diamond fields,
in which the primary investor is China’s Anjin Investments.

The diamond mines were, in fact, the source of China’s increasing
concerns about the Mugabe regime’s indigenization policy, which
required 51 percent local ownership of foreign businesses. Although
the two Chinese companies, Anjin and Jinan, began operations in 2012
with 51 percent of shares owned by Zimbabweans, the Zimbabwean
government integrated them into the state owned Zimbabwe Consolidated
Diamond Company (ZCDC) in 2015, which led to vehement public
opposition by the Chinese government. The crisis also led to the
overall deterioration of China-Zimbabwe relations, and China refused
to support Mugabe in his 2016 crackdown on the opposition.

However, the threat to Chinese investments in the diamond mines also
hurt the Zimbabwean military, which has reportedly collaborated with
these companies under the leadership of General Chiwenga. A 30 percent
stake of the aforementioned Anjin Investments, for example, is
allegedly controlled by the Zimbabwean Defense Forces through a
subsidiary.  The Zimbabwean security forces’ broad involvement in the
diamond business has especially enriched senior officers associated
with the Mugabe regime. Also, during Zimbabwe’s 1998-2002 intervention
in Congo’s civil war, Mnangagwa was accused by the UN of using the
Zimbabwean Defense Forces to profit from illegally mined diamonds.

After being ousted from his vice presidency by Mugabe in November
2017, Mnangagwa reportedly fled to China. He had cultivated relations
with senior members of the Chinese Communist Party, which allegedly go
back to the Rhodesian Bush War when China offered the guerrillas both
training and weapons. General Chiwenga also visited China from
November 8 to 10, on an official trip organized prior to the recent
events. During the visit, he met with Li Zuocheng of China’s Central
Military Commission, the organization within the Communist Party that
controls defense and security policymaking, as well as China’s Defense
Minister General Chang Wanquan. Despite China’s denial of any
involvement in the recent coup, and announcement of a “wait and watch”
approach, Mnangagwa’s presidency with Chiwenga’s backing from the
Armed Forces will assure it a firm grip on Zimbabwean politics and
economy, assuring China’s interest in regional stability in met.

For the past 10 days, since events in Zimbabwe began to unfold, the
Democratic Republic of the Congo’s (DRC) state broadcaster – the
Radio-Télévision nationale congolaise (RTNC) – has refused to report
on or show images of the situation. It seems the ruling Congolese
elite fears that the‘non-coup’, which culminated in Robert Mugabe’s
resignation as president on 21 November, might be contagious.

There are indeed many similarities between the two countries. Both are
led by presidents who have overstayed their welcome. Congolese
President Joseph Kabila has extended his time in office one year
beyond the expiration of his mandate, while Robert Mugabe was the only
president Zimbabwe had ever known. He was voted out in 2008 only to be
saved by his army. Both men are unpopular with their own populations.

S&P Global Ratings cut South Africa’s local-currency debt score to
junk on Friday, while Moody’s Investors Service also threatened to
slash its ranking to the same level, raising the risk of a selloff
from global indexes.

S&P lowered the country’s local-currency rating one step to BB+, one
level below investment grade, and placed it on a stable outlook. Its
assessment on South Africa’s foreign-currency debt, which it already
considered speculative, was taken down one notch to BB. Moody’s opted
to keep both readings on Baa3, its lowest investment grade, but put
them on review for possible downgrade.

The reduction by S&P “reflects our opinion of further deterioration of
South Africa’s economic outlook and its public finances,” the company
said in a statement. “Economic decisions in recent years have largely
focused on the distribution -- rather than the growth of -- national
income. As a consequence, South Africa’s economy has stagnated and
external competitiveness has eroded.”

Should Moody’s also downgrade the local-currency rating, rand debt
would fall out of gauges including Citigroup Inc.’s World Government
Bond Index, and this could spark outflows of as much as 100 billion
rand ($7 billion), Citigroup economist Gina Schoeman said ahead of the
rating company announcements. A selloff of rand bonds -- which
comprise about 90 percent of South Africa’s outstanding liabilities --
would raise borrowing costs for the nation as it sells more debt to
plug a widening budget gap.

The rand fell as much as 2 percent to 14.1585 per dollar Friday, and
has lost 7.5 percent of its value since the middle of the year.

It will be “very difficult” for the South African Treasury to come up
with the kind of “magic tools” needed to stop a downgrade by Moody’s,
said Thabi Leoka, an economist at Argon Asset Management in
Johannesburg. “It’s 90 days or bust and they can actually make a move
before the 90 days.”

60,323.95 +25.79 +0.04%

“No one is in shock as investors have, unfortunately, become immune to
such events,” said Ashraf Akhnoukh, the director of Middle East and
North Africa sales trading at Arqaam Capital. Still, “there is
negative sentiment triggered by the attack.”

Kenya’s main opposition alliance is pressing its campaign against
Uhuru Kenyatta, saying it will hold an event to commemorate victims of
political violence on Tuesday, the day he is scheduled to be sworn in
for a second term as president.

The National Super Alliance will also convene a so-called people’s
assembly next month to chart the country’s “political destiny,”
Musalia Mudavadi, one of the principals in the four-party coalition,
said in a statement emailed Saturday from the capital, Nairobi.

The government has warned county legislators that it considers such
gatherings illegal. Twelve of 19 pro-opposition counties have already
endorsed the formation of people’s assemblies and back the
opposition’s repudiation of Kenyatta’s victory, the Nairobi-based Star
newspaper reported on Saturday, citing people it didn’t identify.

“The sovereignty of the people enshrined in our constitution means
that the people are the architects of the state,” Mudavadi said. “If
leaders consistently abuse power, if checks and balances do not work
as they should, then the people are compelled to go back to the
drawing board. The people’s assembly is that drawing board.”

3,833.00 +6.24 +0.16%