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Satchu's Rich Wrap-Up
 
 
Thursday 08th of April 2021
 
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The Rise of the Adult Gap Year @cntraveller
Tourism, Travel & Transport





“It’s a chance to press reset on your life,” Dowe says of taking a career break, noting anecdotally that she sees a greater interest in doing so among women—men she has spoken to say they feel a pressure to continue earning money. 

“[It’s] a good opportunity to be with yourself without any outside influences and spend that time figuring out: If you could be anyone, anywhere in the world, who are you? Where are you? How do you spend your days?”

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28-MAR-2021 :: The Pandemic Is a Portal [said Arundhati Roy]
World Of Finance



Is it really social distancing if we are all surrounded by djinn ASKED @AAOLOMI and I thought to myself we are all djinn now.

The Quran says that the Djinn are made of a smokeless and "scorching fire", They are usually invisible to humans, but humans do appear clearly to Djinn, as they can possess them. 

DJinn have the power to travel large distances at extreme speeds and are thought to live in remote areas.

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Is China willing and able to invade Taiwan? @asiatimesonline
Law & Politics




In early March, Admiral Philip Davidson, the outgoing commander of the United States Indo-Pacific Command, raised eyebrows when testifying before the US Senate Armed Services committee. 

He stated the People’s Republic of China (PRC) could attack Taiwan within six years – by 2027.

And last week his replacement at USINDOPACOM, Admiral John Aquilino, testified that the PRC might attack even sooner than that.

Admirals Davidson and Aquilino are not some fellows in the peanut gallery (like some of us). 

Rather, they have access to the full range of US intelligence collection and analytical resources. 

They ought to be taken seriously. So that’s what we’ll do, starting with answering the most common arguments trotted out to counter the admirals’ concerns.

Is the PLA even capable?

The People’s Liberation Army (PLA) – a term that encompasses the navy and air force as well – is good enough to give it a try. 

According to some analysts, by the early 2010s the PLA was already capable of moving several tens of thousands of troops across the strait and landing them on Taiwan in a day. It has improved since then.

The Chinese have enough “lift” – with 50+ amphibious ships (including older ones) and hundreds, if not thousands, of ferries and barges that will work fine for moving troops and equipment. 

And, given China’s doctrine of civil-military fusion, there is no shortage of aircraft to drop airborne troops.

Keep in mind that an assault will take place in the context of missile barrages, cyber attacks, electronic warfare and naval and air forces swarming the island and its environs

Also, there is a fifth column of saboteurs and agents on Taiwan that the PRC has had 60 years to put in place – aided by Taiwan’s overstretched counter-intelligence capabilities.

It is also possible there will be coordinated attacks by China’s proxies in other theaters to distract and divert the focus and forces of Taiwan’s allies.


How would an invasion look?

One oft-mentioned option is a coup de main that “decapitates” Taiwan’s leadership and destroys and/or seizes key installations. 

This could even be combined with an all-out assault.

Special forces and fifth columnists might be employed to cause confusion and seize a few fishing ports and airfields – just long enough to allow PLA forces and equipment to be “pushed through” and establish a secure foothold.

Plenty of advance notice?

Not necessarily. The Chinese can move from a standing start, or even use a military “exercise” as cover for massing forces before the attack – as they did in the spring of 2020 in the Himalayas before they pushed across the Line of Actual Control with India.

Too complex?

One hears a lot that an amphibious assault of this scale is just too complex and difficult for the PLA.

However, underestimate the Chinese and you’ll learn a hard lesson – as the US military, and intelligence and business communities should know by now, even if not everyone has figured this out.

The PLA trains for amphibious assaults and joint operations as well. 

It has perhaps 20,000 Marines and at least 50,000 personnel with amphibious training. 

And Taiwan has been the PLA’s main objective for decades, so it’s gotten plenty of funding, attention, planning, procurement and practice.

Can’t Taiwan prevail?

Twenty years ago, Taiwanese forces could have defeated an assault. These days? It’s a toss-up.

Taiwan’s military is dedicated and hard-working, though underfunded. 

And 40 years of near-isolation from the United States and other free nations have hurt. 

Reserve forces are a shambles, and a national civil defense scheme is lacking. The PLA might like its odds.

Is Beijing motivated enough?

An assault would be bloody and provoke international condemnation and sanctions – and maybe even a US military response. But consider the upside from a Chinese perspective:

Seize control of Taiwan and you’ve upended the US defense posture in the Indo-Pacific

The PLA will have broken the so-called First Island Chain stretching from Japan to Malaysia, which hems in Chinese forces.

And with a lodgment in the center of the US and allied defense line, the PLA can extend its reach outward and drive a salient into the heart of America’s central Pacific defenses.





Island chain strategy map: Researchgate

Meanwhile, lines of communication between Japan and Australia are threatened, and a PRC-occupied Taiwan eliminates a launch point for attack and intelligence collection against the Chinese mainland. 

It could also give China access to Taiwan’s strategic chip manufacturing.

For a Chinese defense planner, Taiwan is worth a very high price. 

It would also give Beijing massive psychological and political advantages. Take Taiwan and you demolish American prestige in the region and globally. The message will be both clear and searing:

The US military could not stop the PRC.

The threat of financial and economic sanctions couldn’t stop the PRC.

US nuclear weapons couldn’t stop the PRC.

Few countries anywhere will be confident about US security promises. 

And most of Asia – except for Japan and Australia – will shift closer to China in the hope of being eaten last.

Reputational and trade risk?

It’s possible the risk to China’s international trade and reputation could dissuade it from making a move. Possible. 

But look at what has happened in Hong Kong – despite assurances that Beijing would never kill the goose that lays golden eggs.

Beijing snuffed out freedom in Hong Kong. US and Western businessmen averted their gazes, and business now appears to be booming.



Taiwan might be a little harder to overlook, but Beijing will argue it’s just an internal domestic matter (like Hong Kong) and shouldn’t the US and others focus on sorting out their own domestic issues? 

Meanwhile, Chinese money and influence will provide a salve for the Westerners managing the necessary moral contortions.

Bottom line: the decade of concern

Given all of the above, the admirals’ recent warnings about Taiwan shouldn’t be a surprise to anyone.

Almost a decade ago, US Navy Captain James Fanell was sounding the alarm about Chinese intentions. 

He even projected that 2020-2030 would be “the decade of concern”, when the risk of a Chinese assault on Taiwan would be extremely high.

Captain Fanell pointed out that Beijing was dead serious about seizing Taiwan. 

He argued that the PLA had received its marching orders to be ready to attack by 2020. 

And he assessed that seizing Taiwan by 2030 would allow 20 years for the free world to “get used to it” – just as it did following the 1989 Tiananmen Square Massacre.

This would then allow the Chinese Communists to declare the “great rejuvenation” of China in 2049 – the 100th anniversary of the founding of the PRC. 

The rest of the world would be suitably intimidated by the reemergence of the Middle Kingdom.

Given the seriousness and urgency of the threat, it is refreshing to see USINDOPACOM taking China’s intentions far more seriously than when Captain Fanell was howling in the wilderness.

However, that hasn’t stopped the usual suspects in the corner of the peanut gallery from accusing Aquilino and Davidson of hyping the China threat just to get more money.

That charge is made despite the fact that the amount of extra money they are requesting – about $5 billion a year for the next five years – is a pittance in the context of the US budget. It’s about a month’s worth of health care fraud.

More likely, the admirals made their comments based on their reading of the intelligence and advice from analysts who live and breathe the issue.

Even from the peanut gallery one can see cause for concern. 

Follow PRC behavior in the region and beyond and it just might show a pattern of a country “nerving itself up” for military conflict. Allies in the region can see it building as well.

Which brings us to one last question, the one the admirals pondered.



Most favorable timing?

One guesstimate is that the most favorable time for the PLA to launch an attack on Taiwan would be after the Chinese Winter Olympics, scheduled to run from February 4 – 20, 2022.

The theory there is that PRC planners would have been impressed at how Vladimir Putin stage-managed the Sochi Olympics in 2014 to increase Russian “prestige” (before the Russian doping scandal was uncovered, at least), just prior to invading and “taking back” the traditionally Russian Territory of Crimea, which he managed to do with no military reaction from NATO and with bearable economic sanctions.

From the Russian perspective, it was a very successful campaign – one that the PRC would perhaps want to emulate.

In another indication, PRC and Russian officials in a recent meeting discussed how to reduce the world financial leadership that accrues to the US on account of the dollar’s status as the world’s leading convertible currency.

If Beijing expects economic sanctions to follow a Taiwan invasion, it will need to line up economic allies in advance. (See Hitler and Stalin’s “understanding” before the invasion of Poland.)

All this is to say that it’s impossible to predict exactly when China may move on Taiwan. But with a high degree of confidence (as intelligence types say), this can be said: The PLA is coming.



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There is a reason that wargame models of both traditional and asymmetric conflict shows Taiwan and the US losing already. @man_integrated
Law & Politics


We've never fought an all-domain adversary. Any "win" against the PRC in the next decade would be a Pyrrhic victory as it would collapse our economy too.

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“Unity is iron and steel; unity is a source of strength,”
Law & Politics


“Complete reunification of the motherland is an inevitable trend..no one and no force can ever stop it!” 

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Xi has taken calculated risks. The muscular and multi-faceted nature of Chinese Power is seen in its handling of COVID19
Law & Politics



Controlling the COVID19 Narrative, suppressing the Enquiry, parlaying the situation into one of singular advantage marks a singular moment and 

Xi Jinping has exhibited Chinese dominance over multiple theatres from the Home Front, the International Media Domain, the ‘’Scientific’’ domain over which he has achieved complete ownership and where any dissenting view is characterized as a ‘’conspiracy theory’’

It remains a remarkable achievement.

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Data from #Covid19 worldwide as of April 07: + 557,149 cases in 24 hours, i.e. 132,977,168 in total @CovidTracker_fr
Misc.


Data from #Covid19 worldwide as of April 07: 
+ 557,149 cases in 24 hours, i.e. 132,977,168 in total + 14,135 deaths in 24 hours, i.e. 2,887,468 in total

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Latin America’s urban hotspots have endured an especially brutal year. @jburnmurdoch
Misc.





Deaths in the Peruvian capital Lima have been almost triple the norm. In Mexico City they’ve been double usual levels, and in Manaus almost the same.

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In the last week Mumbai found 63K cases (9K per day). An estimated 16K of these were from the slums. Test +vity was ~20%. @muradbanaji
Misc.


Half of tests were rapid - if all had been PCR (as they were early last year) +vity would probably be around 26%.

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If infection is "active" for 7 days, it would mean that 10% of the city is actively infected right now. Is this even possible? @muradbanaji
Misc.





Suppose detection is 2X higher now despite high +vity (for some reason). Even then, 15% were infected in the slums & 7% in nonslums last week. If infection is "active" for 7 days, it would mean that 10% of the city is actively infected right now. Is this even possible?

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08-FEB-2021 :: We are at peak vaccine euphoria
Misc.


Folks I followed on Twitter for their epidemiological excellence now simply recite Vaccine / Inoculation data like a liturgy.We have now passed peak vaccine euphoria because we are seeing a sustained acceleration in mutant viruses.

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Currency Markets at a Glance WSJ
World Currencies



Euro 1.1877

Dollar Index 92.303

Japan Yen 109.46

Swiss Franc 0.9282

Pound 1.3740

Aussie 0.7628

India Rupee 74.4775

South Korea Won 1116.53

Brazil Real 5.6137

Egypt Pound 15.7184

South Africa Rand 14.50

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A rare type of bear: do sovereign international bonds with massive coupons get repaid? @emsovdebt
Emerging Markets



Summary: With a massive coupon of 10.875% and a hefty spread of 960 basis points over US Treasuries, Mongolia in March 2016 priced a $500 million eurobond. 

The five-year bond was called the Mazaalai bond, after the extremely rare species of bear that lives in the Gobi desert. 

The high cost of borrowing reflected the economic challenges Mongolia then faced, including double-digit fiscal and external imbalances, and a temporary slump in mining-driven economic growth.

At such a high cost of borrowing, the Mazaalai bond was rare but quite a few other international bonds have been issued with similarly massive coupons. 

What makes the Mazaalai bond special is that it was repaid. In 2020, the government tendered the bonds, reducing them to $132 million outstanding. 

And on 6th April 2021, the Mongolian government repaid the remaining bonds and made history by honouring an international bond with such a high cost of borrowing. Markets do not often like bears, but this one was an exception. 

Why tolerate a huge coupon? 

The need for a double-digit coupon might lead a sovereign to decide not to issue a bond. Or it might put investors off so much that there’s not enough demand. 

For example, Laos marketed a five-year Eurobond with a double-digit coupon three times without any resulting issuance between December 2020 and March 2021. 

However, there are various reasons a country would tolerate issuing international bonds with massive coupons rather than declare both the borrowing costs too high and the market window shut:

Massive coupon reason 1: Liquidity crisis

A sovereign might need the bond proceedswhatever the costto weather an intense shock or crisis. 

The proceeds could be needed for a genuine short-term liquidity problem. 

For example, Indonesia issued a eurobond with a massive coupon in March 2009 as emerging markets struggled in the aftermath of the global financial crisis. The bonds were repaid once the storm had passed.

Massive coupon reason 2: Delaying tactic

Alternatively, massive coupon bonds might just be a delaying tactic. 

A government might have a looming solvency problem, but want to prevent a default in the coming months. 

This could buy time for proper reforms, or just delay the inevitable. Not throwing in the towel can be a useful tactic at certain points in an electoral cycle. 

With all this in mind I looked into how many international bonds with massive coupons managed to avoid default and survive to maturity. 

Defining “massive” coupon bonds

To define massive coupons, I started with coupons of 10% or higher – the point at which the coupons on a ten-year bond sum to the amount borrowed. 

Going back to the early 1980s, I sifted out a sample of 116 US dollar-denominated international sovereign bonds with double-digit coupons from the thousands issued. 

But global interest rates were much higher then: even Australia, New Zealand and Sweden had issued long maturity ‘Yankee’ bonds in double-digits. 

So I refined my massive coupon definition to require that the spread of the annual interest rate (over US Treasury bonds) was 700 basis points or more at issuance, reducing the sample to 35. 

Findings on massive coupons


History suggests that an international bond issued at a spread of up to 700 basis has a good chance of being repaid, although many have still defaulted. 

Once the spread breaches 800 basis points however, the odds thin, with a current survival rate of 62%

Once over 850 basis points, the survival rate becomes worse than a coin toss with only four of the eleven bonds sampled (that have matured or defaulted to date) surviving to maturity. 

The massive coupon bonds each tell part of an interesting story. Here are a few:

Argentina issued a pair of long-dated international bonds between 1999 and 2000 with a spread of over 700 basis points. It defaulted on both.

 In contrast, Brazil issued six massive coupon bonds between 1999 and 2003, and each matured. 

Ecuador issued a five-year international bond in 2015 with a 10.5% coupon at a spread of 913 basis points. 

This bond can be considered paid as it was tendered in 2019 with the proceeds of new bonds. 

But there is not cause for much celebration as the new bonds needed restructuring just months later in August 2020. 

Lebanon defaulted in 2020 on a large stack of eurobonds, including two massive coupon bonds it issued in desperation in November 2019. 

These were issued at 1,000 and 965 basis points above US Treasuries.

Suriname eurobonds are currently trading flat and a restructuring appears likely once an agreed coupon holiday expires. The 2023s were issued in December 2019 at a record breaking 1,128 basis points spread, with a 12.875% coupon on the 4-year paper. 

Like Lebanon’s 2019 bonds, this issuance might have bought a few months, but the cost of borrowing signalled a very high likelihood of default. 

Belize’s bond due in 2034 just scrapes in the sample when the step-up coupon is considered. 

Some people consider Belize one of six sovereign defaults in 2020, but it depends on whether the coupon suspension is considered friendly or not. It could well be a 2021 default – time will tell. 

The less contentious five 2020 sovereign defaults are the four countries listed above, plus Zambia. Zambia 2027s issued with a coupon of 8.95% and at 655 basis points just miss out on being included in the sample. 

Ghana issued a 15-year eurobond in 2015 at 845 basis points, despite a 40% World Bank guarantee on the coupons and principle. 

While global markets and Ghana were in a tight spot around this time, it is clear that the guarantee was not adequately priced at issuance. 

Longer lead times and greater effort in explaining the guarantee might help prevent such credit enhancements failing to reduce borrowing costs in future.

Maldives are the most recent sovereign to issue with a massive coupon. The five-year sukukpriced at the end of Marchhas a coupon of 9.875%, and was issued with a spread of 973 basis points (it was priced below a par of 100 at 98). 

The proceeds were used to tender an existing bond maturing in 2022. The government’s hope is that tourism revenues will improve rapidly enough from the current pandemic travel bans that the new bond can be serviced despite its high cost. 

Conclusion

I argue from my analysis that issuing an international bond with a spread of 850 basis points or more is to issue into shark-infested waters – there is a high risk of default

But on rare occasions, like a bear sighting in the Gobi desert, economies do bounce back and bonds with massive coupons are repaid. Time will tell if there is a Mazaalai to be found in the Maldives.



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Uganda says it has signed security agreement with Egypt amid tensions over Ethiopia dam @Reuters
Africa




Uganda and Egypt have signed a military intelligence sharing agreement, the east African country said late on Wednesday, against a backdrop of rising tensions between Egypt and Ethiopia over a hydropower dam on a tributary of the Nile river.

According to a statement by the Uganda People’s Defence Forces (UPDF), the agreement was signed between UPDF’s Chieftaincy of Military Intelligence (CMI) and the Egyptian Intelligence Department.

“The fact that Uganda and Egypt share the Nile, cooperation between the two countries is inevitable because what affects Ugandans will in one way or other affect Egypt,” Maj. Gen. Sameh Saber El-Degwi, a top Egyptian intelligence official who headed Cairo’s delegation to Kampala, was quoted in the UPDF statement as saying.

Egyptian President Abdel Fattah al-Sisi has warned of the risk of conflict over the Grand Ethiopian Renaissance Dam (GERD) which Addis Ababa is building on the Blue Nile, one of the tributaries of the Nile.




Conclusions



Egypt is flexing 

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@PMEthiopia has launched an unwinnable War on Tigray Province.
Africa



Ethiopia which was once the Poster child of the African Renaissance now has a Nobel Prize Winner whom I am reliably informed

PM Abiy His inner war cabinet includes Evangelicals who are counseling him he is "doing Christ's work"; that his faith is being "tested". @RAbdiAnalyst

@PMEthiopia has launched an unwinnable War on Tigray Province.

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Kenya plans to borrow $12.4 billion between now and June 2022 from foreign sources, according to the @IMFNews @economics @herbling
Kenyan Economy



Kenya plans to borrow $12.4 billion between now and June 2022 from foreign sources, the International Monetary Fund said in a report detailing terms and conditions of a separate $2.34 billion financing package approved by its board last week.

The amount includes $7.3 billion in Eurobonds, $4.8 billion in concessionary borrowing and $282 million semi-concessional loans, the IMF said in a report on its website

About $2.3 billion of the Eurobonds will be new borrowing to be spent on infrastructure projects, while $5 billion is refinancing for a Eurobond maturing in 2024 and to retire pricey syndicated loans, it said.

The external borrowing during the next 14 months amounts to about 6% to 7% of gross domestic product, according to Yvonne Mhango, head of research for sub-Saharan Africa at Renaissance Capital.

“It’s a significant amount for a country with debt that is already close to 70% of GDP, and one that is at high risk of debt distress,” she said. 

“The increase in domestic yields may be a factor that compelled the authorities to seek some external financing. However, we expected an increase in concessional financing to help keep financing costs moderate.”

While Kenya is at high risk of debt distress and subject to zero limits on non-concessional borrowing, the authorities have requested, and staff supports, non-zero limit exceptions for project financing and debt-management operations,” according to the IMF report.

Some of the reforms Kenya will implement during the 38-month IMF program include broadening the tax base to grow revenue and freezing civil-service recruitment.

Treasury also agreed to evaluate fiscal risks posed by about 20 large state-owned enterprises including Kenya Airways Plc, Kenya Railways Corp., Kenya Power and Lighting Co., Kenya Electricity Generating Co. 

The state will seek an independent adviser to evaluate the financial situation of its national airline and the least costly restructuring options for the company.

By October 2022, Kenya would have expanded reporting on public debt to cover non-guaranteed public-sector debt, including arrears.

It also plans to adopt e-procurement for transparency, strengthen its anti-money laundering measures, and make it mandatory for companies to declare their ownership to support anti-corruption efforts.

Treasury also plans to review the legal debt ceiling in the coming fiscal year to ensure it “remains consistent with program targets.”

Ghana’s successful issuance last week signals there’s still strong appetite for high-yield sovereign credit and Kenya will likely draw interest despite deteriorating public finances, according to Irmgard Erasmus, a senior financial economist at NKC African Economics.

Kenya’s outstanding dollar bonds don’t offer much value, according to Erasmus, “but the global backdrop should be favorable for high-yield frontier market issuers especially non-fuel commodity exporters. Kenya is trading expensive but yield-seeking may stoke appetite for new issuance still, especially with the U.S. Fed maintaining highly accommodative stance with rate lift-off seen in mid-2023 only.”

Yields on Kenyan Eurobonds due in 2024 fell 8 basis points to 3.493% by 4:25 p.m. in Nairobi, the capital, the most in almost a month.

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Whats this miracle expected from Treasury, when we borrowing to pay interest? @DavidNdii
Kenyan Economy



Revenue 1450b  

Recurrent Budget 1950b, o/w

Interest 500b

Wage & pensions 600b

Nat. Gov O&M 500b

Counties 350b

Recurrent deficit 550b

Nat. Gov Dev 300b

Debt principal Sh500b

Total financing gap 1300b

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by Aly Khan Satchu (www.rich.co.ke)
 
 
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April 2021
 
 
 
 
 
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