Thursday, March 29, 2007

shocking end week of march

this week i have got a number of shocks that have left me speechless

first shock, i went to isich (i cant spell the correct name). the place where Kenyan Somalis ,Iraqi Somalis, al qaeda Somalis,American Somalis, Somali Somalis and just ordinary Somalis have turned into a trade haven. am told that they are like nakumatt, you need it, they have got it. in fact when my phone was stolen, in 2005, it was first traced to isich. here you can get a gun at only 1000 bob, they have some of the most advanced communications equipment which they use to communicate with outside world especially Canada. (am told Canada is the other leading Somali nation) at this place, there are even full time 24/7 brothels, the houses are paid almost a year in advance and the people are basically doing a roaring business almost in every sector. am also told that telkom have a special exchange in this parts and safaricoms biggest customer base (in terms of revenue) is isich. however i discovered that the road network in this 'country' is totally non existent, the mini buses just struggle slowly and meander around each other like snakes. i was told to watch the pocket keenly and also watch out for anyone looking suspicious. it appears that the people in isich are in another country as they have their laws, their currency replete with exchanges and all, they have their own telecommunication system or course in addition to the Kenya ones and so on. why does our government allow this to happen?

second shock, the media was full of reports of a group of thugs calling themselves mungiki who terrorize people and levy 100/= from every matatu plying certain routes. they also strip women in trousers and rape others on top of circumsicing them. i don't know why the media still dignifies these thugs by calling them a sect. the thugs now want 250 shillings everyday from every matatu ! thats a whoping 90,000 /= per year. for what? just for being a thug. in my vocabulary that is called robbery. even the govt does not take that in taxes. however what is more shocking is that the government of national unity, or the government of mwai wa kibaki is saying nothing , hearing nothing and doing nothing. (by the way how come we don't have a government of kenya these days?)

however before i could say the word shock, jimnah mbaru, a 'respected' investor in the Kenyan and African market circles comes up and sayts he market will get jittery in case ODM Kenya does not sambaratika! he explained that the market expects the party to disintegrate and that if it did not, the market may collapse. in other words he is saying that ODM unity is bad for the market. i cant even dignify that with a comment but what was more shocking was the fact that the chairman steered clear of the ills facing the NSE. he said nothing about the brokers who are stealing from investors and never mentioned or even suggested what needed to be done to them. he refused to comment on the credibility crisis that even the nation media group gave an editorial yesterday!

and by the way, is Mt. Elgon really in Kenya? it appears that as far as the GNU is concerned, the western boundaries of Kenya are in nakuru, looks like the New Kenya is just central province and Nairobi only

another shock? have you seen how mugabe is treating opposition members, and have you seen how the common mwananchi is suffering down there? and is there anything more shocking than the silence of African leaders including mbeki who is his next door neighbor?

and is the news about the government of Kenya looking to privatize telkom Kenya annoying or is it just me?

and curving out geothermal business from kengen after it was sold to the public, is that not a shocking robbery with violence? thats after they refused to make KPLC pay the correct fees to kengen. Kenyans were conned!

however on a better note, the index is slowly showing signs of recovery with most counters recording significant gains during the week. however the significant issues that have come up, need addressing. lawyer and legislator Paul Muite has taken it up and i just hope for the best.

Monday, March 26, 2007

Feel good weekend

last weekend was full of good feeling for being Kenyan Starting with clean sweeps in cross country races. the young Kenyans did us proud as expected and brought all the medals home. but they went further and won even the medal-less positions, 4, 6 etc. felt really good to see the perennial threat bekele bow out of the race beaten by the heat and humidity. it was reported that the Ethiopian fans broke down and cried like babies. by the way, is there any country which has dominated any sport the way Kenyans own this race? why then don't we just say Kenya is the greatest sporting nation in history? and by extension the greatest land?

the second good feeling, was seeing other Kenyan boys whipping Swaziland at nyayo national stadium. the arena was packed to the gate and the boys were great from the whistle. even though the team was hurriedly cobbled up, they played with purpose and focus that was not only refreshing but also inspiring. but i wonder why the KFF never wants to confirm Ghost Mulei as head coach and pay him what he deserves. the man has always delivered, but he never gets the support he deserves. KFF somehow still believes that only foreigners (read white) can coach football.

cricket results weren't as good, but india and Pakistan's elimination, shows that the competition was tough and that Kenyans having won one did us proud still.

another good feeling were reports that Kenyan finance minister made good his promise to woo investors from the Kenyans in diaspora. as also reported by Benin Epilogue. this was only after we suggested in this blog that we can always turn these brain drains to brain gains. great many returns are expected from this wise venture

more good feelings ; that finally, the NSE and CMA are working on making activities at the NSE more reasonable. the sale of 100 shares should not necessarily affect the price of 2 billion shares! funny that they never thought of this when the prices were heading north. adversity is a good thing.

Odegle tip of the day ...
this is actually a very good time to buy shares for the long term

Thursday, March 22, 2007

deja vue, no cause for alarm

that the NSE has been receding constantly is no news. but today the prices fell like 14 falls and investors are panicking and crying. the people left celebrating are owners of pyramids who are benefiting from the fleeing hunters to their warm embrace.

A number of investors who joined the NSE bandwagon after seeking advice from me have rushed to me asking me to explain why their portfolios are in the red. my quick answer has been that i cant point at one issue. there are many related issues. but bottomw line is that stocks market throughout history are wont to behave this way. there are periods of unexplained rise and periods of unexplained fall and other normal periods when much can be explained. last year most counters appreciated without any good reason at all. this year, even firms which reported historical results have seen their share prices dip. i also say that it takes time to make diamonds. when it comes to investments, time, patience and prudence reign supreme.

A lot of curious happenings though. eg last year, the dailies were full of adverts by equity fund managers like britak, old mutual and the like. they placed adverts detailing the returns they had made per month, per year , 24 months and since inception. those adverts are no more. these just help fuel the panic. why is is that businesses advertise when biashara is brisk and go missing when biashara is scarce, i thought you need to advertise more when its dry. the way farmers cultivate when it is shining.

The other thing is the goings on about brokers who are stealing from their customers. this however gives one the feeling of deja vu. it reminds you of the banking crisis which saw several banks go under in the 90s. greed was squarely to blame and outright theft. when you miss out on regulation, you risk these kind of things. the banks put their act together after realizing that political loans were never paid and that you needed more than just deposits to stay in business. if the slide continues, then brokers and investment banks will be forced to dismiss some of their employees. they will learn that only one worm spoils the broth for all the rest.

currently the brokers cannot be regulated as required. because like i mentioned in my very first post in this blog, the NSE , the brokers and the CMA sleep on the same bed add to that a weak or compromised CBK governor and what you have is a crisis.
However, if you are sure that your investment bank is stable and that your shares are not being sold without your knowledge, then just hold to them or better buy some more now. things will be better next year after a new govt checks in.

Odegle tip of the day -- fear not my son (daughter) cannaan is only months away!

Wednesday, March 21, 2007

Brain drain, brain gain

we had a heated debate with two of my colleagues the other day concerning reports that most Kenyans were leaving the country for the western states. the report had indicated that for each doctor that Kenya lost, 36 million bob went down the drain and for each nurse 30 million. the concern was that we were ending up with fewer health workers per capita and that was quite worrying. my position was that Kenya it was important to see this as an opportunity instead of seeing it as a curse. all we needed to do was to trade in our personnel. ie train more doctors instead of teachers and export them to the west. one friend suggested that we could draw a contract where the exported health workers are paid by the Kenyan government and the benefiting foreign institution pays the Kenyan government. how about that? just the same way consultants work with their sponsoring consultancies.

my other argument was that in fact, we have more nurses than we can afford to absorb and thats why there are so many of them tarmacking or earning peanuts. instead of wasting these talents and trainings, we could instead facilitate their posting abroad and benefit from their remittances back home. its not lost to anyone that Kenyans in the diaspora never forget their mother land and normally send back billions of shillings each year. In fact the nation has reported today that they have become the top foreign exchange earner for the country toping traditional commodities eg tea and coffee, and even tourism!

further, having more professional Kenyans out there is also good for the country politically since these guys can influence the international opinion about Kenya and help grow the domestic industries. if Kenyans abroad decided to market Kenya as the place to be for holiday, the place to get vegetables, the place to buy fish, the place to get sports men, the place for shooting movies etc, you can just imagine the explosion we would have. all we need to do is to encourage them to be positive about this beautiful country. of course i know we have a number of problems that most diasporians actually ran away from but then you don't solve problems by focusing on them. thats why i don't believe in poverty eradication, rather wealth creation is more like it.

Value of bonds yesterday we gave a 101 on bonds and what they are. today we can mention here briefly how to determine whether you are getting value for your money. there are several ways to determine that but the one i fancy is to find the NPV of the bond. normally you would work out the present value of all cash flows expected from year 0 to maturity. the way to do this is to discount the initial outlay (the cost of the bond) which will be -ve in this case, and all the other inflows (the coupons and the final amount) based on the rate of return.

if the NPV is -ve then you know the bond is over priced and you should toss it. if the NPV is +ve then you should take it up without blinking. else if the NPV is 0 then you know you are not getting a bargain but a fair value for your money

odegle tip of the day MainaT actually reminded me; the 14.5% promised by the CBK is quite juicy and you should strongly consider if you can get it

Tuesday, March 20, 2007

bonds 101

they say a promise is a debt. and if that promise is given by the government it is definitely going to be paid. its a good debt. this is based on the fact that governments being the supreme bodies in any land, never lie. bonds are one of the fixed income instruments often issued by governments through which they take loans from wananchi (and wenyenchi). How does a bond work? typically a bond is just a loan which is not on a reducing balance principle. you buy a bond from say govt or a company for an amount also called a par value or face value. normally the debt (bond) would be repaid to you on a specified date called the maturity date. before the par value is repaid , the issuer pays interest periodically to the holder of the bond. these interest payments are called coupons. most coupons are paid semi-annually but for your calculations you can enter them in your books as monthly or annual repayments.

lets take an example, if say you bought a bond worth 100,000 /= with a coupon of 5% on it. and say the maturity for that bond is 3 years. it means you expect to be paid 5000 Kshs every year (or 417 /= per month) for 3 years. on the last year, you will be paid 105,000. ie your coupon plus your initial amount.

you can see that the return doesn't look very good. but that is because bonds are considered risk free (no pain no gain is actually true) this is because governments cannot fail to repay their debts. normally the government just issues new bonds to repay old debts ( more like ponzi scheme? ) but don't forget that the government as opposed to ponzi gets income from taxes and fees as well.

corporates also issue bonds. and in the Kenya scenario we have seen, ARM, Safaricom KREP etc issuing bonds on the market. you can also call this borrowing through the market. for corporates, the rate of return on the bond depends on the risk it posses, the more risky the firm is, the higher the rate of return and vice versa. firms are normally rated for credit worthiness. but thats beyond the scope of this 101.

However, corporate bonds will always offer higher rate of return than government bonds since they are more risky

Odegle tip of the day bonds are also traded at the NSE and people buy and sell depending on whether they feel the bond is under priced or over priced. for more detailed reading, i recommend the book Investments by William Sharp available in most major bookshops in Nairobi

Sunday, March 18, 2007

weekend of carousal

after a heavy and busy week, i decided to venture off the arm chair and into the world of entertainement. first stop was numetro on prestige plaza. i was not able to get a good movie at the CBD, but the other problem was that at the CBD the concetration of young people was too high and that oddly reminded me that i was fast aproaching my sell by date. at the 20th fox, i was even invited by a model looking girl barely past teenage to attend semagandas(sp) seminars on how to become a millionaire overnight. the young man who appears on money matters on NTV is holding several trainings on how to join the 10% kenyans who own 90% of kenya.

at numetro, the movie wasnt starting till 6:20 so i spent the 1 hour i had in my hand walking along the aisles of nakumatt and admiring their fridges, plasmas and lether seats. i have never seen a 3 door fridge before. 3 vertical doors and almost 5 feat wide, why would any one have that in the house??? the movie dream girls was perfect and had my favorite names vis, eddie murphy, fox and beyonce. but i was captivated by the new talent called hudson, (or was is it her full cheeks and kissable lips) nice movie really . i love musicals. and the music in this one was perfect!

after the movie to one amaica restaurant at china centre, where i was welcomed rather cordially by a girl i had mistaken for a patron. given she was not in uniform and was dressed rather sexily. (i still remember the shape of her navel...) at amaica they had my favorite group kenge kenge doing their thing. i didnt stay though and after 2 hours, i was driving to deep west where 2 benga giants were having a go at each other.

my word, the place was packed to the brim. and there were all tarriffs of GMB (geneticaly modified butts) all of them held up in all sorts of jeans trousers.(like kombe kombe) what is it between kenyan women and jeans really? however those GMBs gyrated very rythmically and gracefuly to the endurinng benga beats. the two musicians sang non stop almost like a disco and i found that quite amazing. but even the music or the GMB or the beer could not stop me as soon i was again off to another strong joint along moi avenue, luck was out for lunch though and this time there was no parking. another joint on koinange street eased the nerves. inside there was the highest concetration of BSB (beauty saturated bodies) i have ever seen in one night. pple were watching some small girls in lingeries doing some erotic dances at the center. you could not move realy. as there was someone on either side. packed like a nyayo bus! i was soon hitched. i met a drop dead gorgeous mrembo who engaged me in a quite youthful dance to which i could not hold. she offered; nay she insisted to go any where with me as long as i parted with 3000 /= of my kenyan money which is currently suffering a bear run at the NSE. thank heavens for the small room, as that excuse helped me to quickly escape the power of the beauty before rushing to the comfort of my bed! but that was only to be after stopping at impala hotel on parklands road for some one man's guitar and mugithi. mugithi is nairobi's only dance where you are allowed to hold the waist of another mans wife from behind and move as close as you want! at this joint there were many large PSD (past sell-by date) women and men drunk-dancing to church songs mixed with other songs with realy lewd lyrics. one of them offered to give me a night of my life if I could buy beer and spare another 1500 for her taxi back home. (time to sneak again!)

as expected, on my way home , i met a number of cars which had either driven into pavements or roundabouts . and some which had hit each other. their young drunken drivers trying in vain to wake up and comprehend the situation.
a great weeknd in nairobi!

Friday, March 09, 2007

catch 22

the new nation business daily reports that fund managers are holding billions of shillings from the equity market in order to allow the market to auto correct. the general feeling which was echoed by most bloggers and investment sites last year was that the NSE was over heated. that perharps explains why all the counters are recording steady decline just the way they recorded appreciation last year based on no fundamentals at all. However the catch is, given that the fund managers are withholding cash, foreign investors are also holding out siting the fact that the NSE is thus illiquid. what to do!?

i suppose most of these money will find their way into the 15 year bond launched by the govt the other day. bonds are risk free and offer a constant coupon. even though low, you dont have the headache or heartache associated with equity. however you also miss out on the adrenaline rush. the adventure, the excitment, the tears and pain associated with investing in stocks. i always argue that the bond market is for old people and the stock market is for young people. if you are young take the risk. even if you lose 1 million bob, you still have time to make a new one and re-invest. if you are old and probably retired then you need stability and predication, so bonds are good enough, plus at old age you dont need too much return anyway. you have been there, done that, got a heart break. problem is the last govt bond was oversubscribed by 150%!

otherwise you can also wait with the fund managers for the correction and instead direct your energies elsewhere eg lease a wheat farm in narok, or hire a fishing boat in sio port, misori beach or sori. you will beat the NSE pants down. if thats not your cup of tea then get a matatu!

odegle promise of the day ... we will post here how and why of the bonds and bills market

Wednesday, March 07, 2007

starved of credit

i honestly do not know what to make of news i got recently regarding bank interest rates. just about the time i was negotiating a loan from a leading bank in kenya, news were coming from US that were to say the least depressing. my bank was offering me an interest of 21% unsecured loan. the maximum i could take was 1 million. payable withing 4 years. for that to come through, i was supposed to furnish them with 6 months bank statement (i dont understand why yet they are my bankers), 3 months payslip, letter from my employer proving that am not on notice to leave , proof of place of residence and so on. i am also to insure the loan at about 2% , pay arrangement fee and be paying standing order fee (for the premium deducted from my account to theirs) thats after signing an agreement that my salary will be processed by this bank for which al pay 160 /= per salary!

well at that time my friend told me that he just got a 30,000 dollar loan at 3.6% without much ado. only thing the bank was interested in was his credit rating. this led me to believe what i also heard the other day. another good pal of mine works for a leading micro credit operative. in fact he is the one who established the lenders branch in eldoret. here is how it works:
this guy, a briton, takes cheap loans from UK for onward lending in kenya. he does not take deposits. he is just a lender. his target market; civil servants, parastatals, teachers and the like. what you need to take the loan? your ID, job ID and payslip. as you can see that means the lending is pretty much risk free. i mean how easy is it to lose a job in these places. for a teacher to be fired for example you need 3 tribunal hearings! ok so this guys loan has to be repaid using a check off system. meaning that he gets his money even before you get your payslip!

now the depressing part, the loan amount ranges from 10K to 100,000. 100,000 is the biggest you can get and the interest is 8% per month. yea you got that right 8 % per month! now my friend did not even find that shocking. what was shocking according to him is that his boss does not care even if his clients remain with 0 /= on their payslips after the loan. what i did not understand is how come the personnel dept of these companies allow that.

but while i thought that was inhuman, what i found out next was even inanimal. in the rural areas, teachers and other staff from public firms get another form of credit. there are traders who give their goods on ccredit, professionaly called hire purchase. the teachers can easily 'take' these goods and pay using check off from TSC. now what does a teacher do when he wants cash? he arranges with someone who wants say a TV, the person gives him cash say 10,000 then he goes to the hire purchase and takes the TV which he hands over to the lender of 10,000. it means this lender has effectively bought a 21 inch TV for 10,000 bob and the teacher gets to repay perharps 20,000 bob plus interest when he only benefited from 10,000! now some of the employees of these traders and even the traders themselves have foudn out this and are themselves arranging for this sort of thing.

on a lighter note i got this website from a friend of mine. its a very inovative site by a kenyan. on one post, the author asked kenyans abroad what about the convinieces that they got compared to back home, some said they liked the west since there are dish washers, another liked it because of flat screen TV, another talked of hot showers , while another said it was because in the west there are diapers. ah well now we know!

Friday, March 02, 2007

slide continues

The slide at the NSE continued for another week with the index sheding some 150 points on wednesday the hieghest in recent times. in fact today the index is sniffing the sub 5000 point. just at the begining of the year the index had crossed the 6000 point mark heading north. meanwhile most companies have continued to report increase in profits although the profits are not as good as were promised by the price rally of last year. most investors are panicking and due to this several short cuts have come up. one good thing that came belatedly was the CBKs warning on the schemes that have the potential of bringing down even whole goverments.

However the slide provides the best oportunity to buy. for those who missed out on some very good counters, you can take positions now when the slide is happening. and for those who already have shares, in those counters, you can buy to net off; bring down the average cost so that when it starts to rise you shall have made a profit.

further to that damning reports came a foot about brokers who have been selling investors shares without their knowledge. i was appalled when Kimunya straight faced, told all and sundry that it wasnt posible to do that while there are live cases of people who cannot get either their money or their shares from the brokers or investment bankers. whats more suprising is that the govt which Kimunya serves is trying to seek reelection on the basis of improved economy, but with the index retreating fast and illegal schemes sprouting unabatted it may prove to be a hard sell.

even the poverty survey did not help matters since it showed that the 5.8% economic growth only helped parts from which the govt ministers come.

finaly several pple have sent me what they call damning reports on a scandal that threatens to bring down the largest media house in east africa. I have tried to discourage these emails by suggesting that they dont help those mentioned or their loved ones and children. I even suggested that this is not the only place where people climb the coporate ladder on their backs but they still keep coming. finanly someone has put an investor perspective to it. How will it affect the share price and the stock market as a whole?

odegle tip of the day ... this is a season of dividends and bonuses and so on. its good to reinvest all distributions of whatever kind for compounded growth.