UK housing prices slow, interest rates decision, O'Neal out

After almost 15 years of continuous upward momentum, UK prices seem to have started slowing down and even fallen in most parts apart from London. The main reasons are the recent credit crunch, OTT income/price multiple (in most places, average prices are 6 times average salary), widening gap between rents and mortgages and the 1.25% increase in interest rates which is now being felt by many who are coming of their 2/3 fixed mortgage terms. The situation is temporary and prices will continue to rise because of demand and supply aspects. A recent report basically says that even if 3m houses are built in the next 20yrs, these won't meet demand. In the short-term however, interest rates will need to come down not just to revive the housing market, but because inflation has slowed down and the economy may slowdown too.
I am a fan of the way the Labour govt has worked the economy no more so than its first big decision which was to make Bank of England independent. This depoliticised interest rate decisions.
I think the next 9 months will see two or three rate cuts to revive the housing market and the wider economy. So don't go buying that house/flat yet.
As anticipated, O'Neal, Merill Lynch's and the only black CEO in the investment banking world, got fired for messing up on sub-prime write-offs. Given that every investment bank apart from Goldman Sachs took a heavy hit, I think the decision is little bit unfair.

On majimbo, Macharia Gaitho's piece mirrors my thoughts.

KQ-where to next?

1. 19% fall in PAT for the first half after last year PAT fell
2. Rivals eating into its lucrative EU route
3. Delta to start direct flights from USA
4. Cargo revenue being nibbled by Qatar and others
5. Fuel prices going up so will hit the 2nd half
6. Costs to repair customer service and loss of staff

Where is the good news for our fine Airline?

• Africa routes-but we move fast and qualitatively consolidate the routes we've got so far and others
  
• Persevere with Far East markets
• Price smartly e.g. cheaper weekday flights from Europe
• How has Delta been able to fly into Kenya if US is concerned about JKIA? There is a case for GoK to intervene and get KQ the same status

Price Comment: Price will find its floor over the next 6 months.

BBK's bond-interesting pricing

BBK's impending floatation of its overdue Ksh5bn bond has not elicited as much excitement as I thought it 
would. This is an overdue and welcome development in the financial market and especially so if we are to develop infrastructure funding. BBK plans to draw down on the facility in three tranches with the first Ksh1.5bn  due to be on offer from Monday; Ksh2bn in May and Ksh1.5bn in 2009. The pricing sparked this post because i think its a missed
opportunity for BBK and a puzzle. As far as I can see, its really to entice investors who will always be able to
 make a little bit change over the prevailing interest rates .

A s a shareholder, one should see it s a missed opportunity. Why? What direction will interest rates take over the next 7 years? One small winnable bet is that they won't be that lower than they are now. 

So the way to go would have been to fix the interest rates for each tranche and space them out a little bit more. 

In the short-medium term, one of the biggest concerns of our growing economy is the adverse impact inflation is having on consumer expenditure. The current inflation's causes are three fold, money supply, fuel prices and supply bottlenecks caused by poor infrastructure. Money supply is a short-term issue and can be fixed by raising interest rates (in Kenya, this is still done by GoK going to the market), fuel prices is both medium/long term issue with short-term fixes (price controls, but I think this will be heavily fought by the oil-business which is already suffering from last year's tax changes ) and medium fixes being increasing capacity for Kenya Pipeline and long-term, signing contracts with our EA colleagues. 

 If GoK was to raise interest rates then its quite conceivable that borrowing would fall and with BBK's bond tracking the higher rate, BBK would find itself with a liquidity shortfall. And vice versa.  Thus, a fixed rate would have meant that a period of higher interest rates would see some good upside for BBK. Secondly, its actually easier to offer long-term fixed mortgages if your funding costs are also fixed. For those investing in housing on a fixed product, one can borrow against the incoming rental income with some certainty.

The bull gets mauled, Dragon's spending spree

Timing is everything in life. Just ask Merill Lynch. While all its peer investment banks reported for quarter periods ending August and therefore only took a partial hit from the credit crunch debacle, Merill with a quarter ending 
September took a full hit. It had to write-off $7.9bn of sub-prime mortgages that are now very very sub-prime which led to $2.3bn losses for the quarter. The added problem and which may lead to the firing of the only black CEO
 in the investment banking world, is that the write-off is $2.9bn higher than they warned about only last month.

The Chinese have now started spending some of those dollars they've been accumulating. In last 2 or so months, they've bought 9% of Blackstone (one of the world's largest private equity groups), bought a small stake in Barclays, another in Bear Stearns (another investment bank caught short by credit crunch) and today announced that's its also buying 20% of Stanbic (largest bank in Africa by assets). Stanbic have obviously just bought CFC and have serious ambitions for Africa. Watch this space...

Finally, for all those who are nuts about planes (stand up Banks), the A380, the double-decker of all planes finally took its first real maiden flight from Singapore to Sydney today. Its built to carry 800 peeps and will have an upper and lower economy so you can walk and down the stairs instead those clamped alleyways on a normal plane. I will wait for KQ, Virgin or BA to acquire one so I can fly on it-which might be a while given all the airports are having to be extended to accommodate it...

Is diversity good for business?

Diversity is a buzzword in corporate UK right now. In theory its valuing differences and supporting an inclusive working environment. In practice, it basically means having your firm's employee population reflect the wider society in terms of gender, colour, religion, lifestyle (actually sexual orientation but also employees who are parents, carers), disability, age etc. Some firms are now performance rating their managers in terms of how well they promote diversity (codeword for how diverse a employee population they have working under heir supervision). Apart from being seen to be  politically correct and not 
discriminate, when done well it makes business sense for the following  reasons:

1. Staff expense tends to be the highest expense for most firms, so you need to ensure you are paying money for the best that you can get. You can only do that by widening your recruitment net as widely as possible.
   
2. Most business ideas (i.e. new products, new markets,  distribution channels) tend to come from employees within a firm. Having a diverse group of employees a firm will in addition to generating many ideas, also generate diverse range of ideas.
3. It makes good business sense that if the population you are targetting is made up of Asians, Africans, you also have their people serving them

And yet, many firms are failing miserably because of the inherent resistance to change, a fear of different people and also more importantly a backlash against what is seen as political correctness. Lately, this has been in cases of employees taking their firm to court for being compelled to act against for example their religious beliefs.

Despite these challenges, valuing diversity does make business sense. 
In Kenya especially, growing and national firms (not to mention the civil service) must make extra efforts 
to ensure their employment practices reflect the facts on the ground i.e. a nation of 42 tribes ( and more if you include
 other races). After all, the language of business is English (actually its money) and not Kikuyu, Luo, Sikh etc.

NSE: A short history

The NSE has survived two dictators, many a cack-handed chairman since its inception proper in the 1950s. In those days, it was a whites only affair headed by the original owners of Francis Drummond. Those who had the ears and eyes open took advantage at Uhuru to maintain the exclusivity. Peeps like the late Francis Thuo were in on this game from early on.

Jimnah alongside the late Francis Thuo, Nginyo Kariuki and others stuck through the stock market-hostile 70s and 80s and thin 1990s so that whipsnappers like KCIG and 650,000 others could mint it at the NSE.

They have changed with the times, reducing settlement times, introducing ATS training system,
 doing away with share certificates, real-time data (heralding real-time trading in 2008/9 or whenever cheaper internet reaches our shores). For sure, there has been fraud, blinkered
 approaches on customer concerns, and while being one of the first to criticise when they go wrong, I for one I am glad that men and women with back-bone have midwifed the NSE to stage that it will go on to become an important financial source for our economy's growth . The NSE will be demutualising in 2008 meaning anybody
can own shares in it and even set themselves up to be a broker.

TPS: One of the stocks of 2008?

Did you know that TPS' shareprice has outperformed NMG over the last three years? Of the Aga Khan shares, only Jubilee has done better.  So why do I think it will be a stock to watch for 2008:

1. It should start seeing the benefits of its regional approach with tremendous improvements in its Zanzibar, Ug and lately Rwanda businesses
2. Tourism in Kenya is up 36% on year-to-date compared to last year. And projected to explode in the next 5 years (1m to 5m tourists-read Fintrade's article on the same)
3. The Serena offering in Kenya is increasingly targetting the growing middle class in Kenya with weekend excursions; 2/3 day fairly-well priced offers to go see game at Maasai Mara et al
4. A lot of administration has now been streamlined-its possible to now reserve your stay online. This has led to cost cuts.
5. TPS are projecting to double PBT for the year (based on their first half performance) and probably the same for 2008.
6. TPS is of course the only hospitality/tourism stock at the NSE. Despite a 1 for 5 bonus issue in June, the share price is today back to its pre-bonus issue price.
   
7. Interestingly, TPS are offering all their shareholders a 12.5% discount for any bookings this year.

In other stock news, Equity announced its Q3 numbers (with 98% yoy growth, although slightly down on Q2). As did EA Cable (they had a 24% increase yoy, but are getting stung by aluminium prices). Its good to see the effort they are putting into diversifying their revenue from Kenya -its  a good political hedge. It also a bit of a shock to see Kenya Orchard (they produce some very yummy strawberry jam)  announce their results. They do need a decent accountant however.

Climbing the slippery career ladder

The prospects for Sameer Africa may not be that promising given the compe from cheap sub-standard Chinese imports, but the CEO piece in the BDA today is timely. Any of it applicable to me? Definitely,

1. Diplomacy: having graduated from the school of call it as i see it, this has been a hard one to get into, but needs be.
   
2. Indispensable: Try this and it will ruin the period before you go on holidays, the period when you come back from hols and limits career movements within company.
3. Life-long learning: sound boring, but if one imagines that mobile phones were mass introduced 10 years and today are owned by 40% of the world's population, one has to keep learning to stay in touch with the world around you. I have found that after around 9 months one should everything there is to know about the job role they signed upto, after that its all about learning and applying new skills.

The implications on the share Index by the NSE chairman political affiliation

Many have been quick to politicise comments made by ODM Presidential Candidate Raila Odinga about the NSE. They have singularly associated the share index downward trend to his earlier comments on drug money finding its way to NSE also his concerns of share manipulation by a few well connected individuals. Paul Muite the chair of (Departmental Committee on Justice and Legal Affairs) similarly expressed the latter concerns albeit both politicians did not give details.

On Raila Odinga’s comments many have castigated him as an anti-development, alleged he is a communist, thus he would nationalise the listed companies. Others have even argued that he is a propagandist seeking political mileage.

However, many have overlooked the fact that Raila himself owns various private businesses and has strongly argued against his distracter that he has heavily invested at the NSE

Moreover, many people have glossed over others factors likely to be impacting on the downward trend. Such include, investors disposing of share in readiness to safcom IPO and the Christmas festival.

Other reasons as recently pointed by the NSE board are the rising inflation resulting in disposal of stocks so as to buy basic commodities.

Jittery investors holding back in anticipation of the political transition and uncertainty on the direction that the stock market is taking cannot be ruled out either.

One significant but overlooked factor that might also be contributing to the share index downward trend is that of the NSE chairman’s political affiliation and utterances.

Though as a presidential candidate Raila utterances and policies will have an impact on NSE, so too would the utterances and associations that the NSE chairman makes.

It is worth noting that, apart from being the current NSE chairman, Jimnah Mbaru also owes the largest investment bank/stock breakage firm in Kenya. His firm has won very many lucrative contracts from the current government. He is also a member of the presidential national advisory council on socio-economic issues. Also a member of T.C.L an investment clubs whose members are who is who in the current regime. This club has clinched top notch deals within a short period.

Contentiously, the NSE Chairman is also a staunch support of the current regime and is rumoured to be eying a parliamentary seat. He was recently in London with the president daughter and Equity bank CEO vilifying Raila. Not long ago he commented that an O.D.M win at the general election would cause the market to tumble. It is said that he has the regimes eye and ear.

Above issues may be interpreted by investors as resistance to changes likely to be introduced by and ODM government if it comes to power.

Yet it is clear to anybody that has been investing at the NSE that, just like the Capital Market Authority, both are screaming for revolutional transformation from the gentlemen’s club they are, into modern efficient, effective and transparent stock market and regulatory body.

Other investors may foresee a conflictual relationship between NSE (If led by the current chairman) and a future ODM government when the chairman refuses to be politically neutral.

There are also concerns the chairman has not, as was the case in relation to Raila's comments, come out to strongly condemn recent alarmist and false remarks attributed to the finance minister on the NSE losing 200 billion whilst the actual figure was 57billion.

Ironically, the chairman’s has neither come out to reassure anxious investors about the increasingly politicisation of the NSE

From this, one can conclude that the chairman cannot hold onto his seat and at the same time engage in politics without impacting on the share index. Indeed, his stand is a clear conflict of interest. Therefore, the best the chairman can do in reassuring investors is to stick to one role rather than apportioning blame where it is not due.

Where are the anti-corruption campaigners?

With the perceived and actual corruption in the current and previous regime, I thought this would be one of the strong points of the election. Lakini all I am seeing is statements about "forgetting the past" ODM-K; change of mind about Kroll Report and the Nd'ung'u Report (ODM's Ruto comment on this is memorable "My name and that of Raila are in the report. How can we implement it?") from the ODM camp. The govt has of course gone quite on corruption.

This is the most serious problem that Kenya has today (apart from poverty) and one that will continue to hold back our economy. So why isn't it part of the General Election campaign?

The weekend was full of sports. Thankfully for those of us living in England, we won't have to listen self-congratulatory and jingoistic (Engerland land of hope and glory, the best et al) news reports. Lakini 
I felt bad for Lewis Hamilton who really messed up his start in his most important race of the year.

Nairobi's rejuvenation: Gakuo has done well so far

Excellent article from Bankelele on the progress using Made in Kenya methodologies. In the same way that economic growth won't come to your door, neither will the beauty of Nai return without our collective effort.

Equity Bank: 1999 to 2006

Banking Sector Marches On

CFC Stanbic is now a reality. Watch out BBK and Stanchart, these guys will soon be competing for corporate clients with a very portent offering of banking, insurance and investment products.

NIC are in the midst of their right issue-priced at very good Ksh70 with an additional bonus share to come once they are through with the rights issue. NIC are an innovative bank who potentially have a very bright future ahead but need a partner , not necessarily another bank but another financial institution, on whom they can leverage distribution.

DTK are also shortly starting their rights issue again at a discounted Ksh70. This is not as attractive as the NIC and DTB's future lies in two things happening. One, the finance minister doing away with these you stick- to- insurance and you-to-banking kind of divisions so that a bank can
 offer insurance and investment products across the counter. And secondly, their being able to integrate successfully with Jubilee and Habib Bank.
In other news, Equity continue their expansion (how are they doing it?) with opening of branches in Kisumu and likely partnerships as far as Zimbabwe. And as a clincher, have now 
been allowed to take a bite of HFCK heralding the much anticipated Equity-HFCK-Britak
financial institution (possibly buying into some of the smaller brokers?).

And to read any blog you'd think Kenyans ate and slept politics!

Kenyans & their degrees-bugbear

Sunny's current article chimes into a bugbear of mine. Quite simply, everywhere I look now Indians are either doing or running all the IT jobs for investment banks  and commercial banks, they are in all the top consulting firms, are starting to appear as CEOs of CFo of FTSe 100 companies (e.g. Arun@ Vodafone) are usually doctors (and rarel;y nurses) in all hospitals and they still run all the corner/grocery/newspaper shops in the UK. Is that ambition or is that ambition? While part of it (the entrepreneurship and intelligence) is in their genes, its also a family thing. Indians mainly do arranged marriages and most families will look for a bachelor who is a doctor/lawyer/accountant/programmer. Yani they crave success built on solid foundations.

So my blood boils when you hear a Kenyan has been sent abroad by parents to study tourism, education, cookery, arts even MBAs. Kenya needs peeps who will create value for the economy. IT, scientists, doctors, engineers. 

Kenya TV : But not as we know it

Ati his name is Mungai, but i think i know a citizen of Kenya when i hear one and i think that "fisherman" has some explaining to do.

Njirani: South Sudan & Zimbabwe

Election time tends to be a time we Kenyans concentrate a lot on us and our future. However, it should also be a time of reflection about where we've come from but also us vs. our neighbours.

When the CPA deal was signed in '05, it was a time of rejoicing and despite the subsequent death of Garang, their founding father, Southern Sudanese had a lot to look forward to and many actually started returning home. The implementation of the deal has however been slow and misjudgements about each other's motives have further eroded an initially fragile relationship to the extent that Kiir has now suspended involvement in the coalition govt. Will they go back to war again?

Mugabe continues to visit upon his fellow countrymen the sort of horrors they never imagined about even the awful colonial and minority-rule days. Luckily for him, Zim has no oil...

Let's be thankful for God's mercy upon Kenya.

Kenya National Bureau of Stats

This website has a lot of interesting data on our great nation. I didn't actually realise just how important agriculture still is to our GDP (the single largest contributor by around 21-3%).

Equity

Its soaring share price has until two months ago been something to behold but for those who have read C.K. Prahalad, the man who wrote about the 'fortunes at the bottom of the pyramid' this is just proof of a known theory which many players in the banking industry have ignored and snubbed those so called poor unprofitable customers. Prahalad argues, "the word's most exciting, fastest-growing new market is where you least expect it: at the bottom of the pyramid. Collectively, the world's billions of poor people have immense untapped buying power. They represent an enormous opportunity for companies who learn how to serve them. Not only can it be done, it is being done--very profitable. What's more, companies aren't just making money: by serving these markets, they're helping millions of the world's poorest people escape poverty".

Its origins were covered in unbiased account by Microfinance. So I've so far dismissed rumours about its current CEO with a pinch of salt. Despite its current association (foolish and short-term in my view) with the current regime, I am now interested in where it goes next.
Kenya:
It still hasn't gone the length and breadth of the country and its venture to Western Province is good. It also needs depth and hence there is excitement in the likely banca-assurance concept that may come out of its HFCK-Britak integration. It doesn't in my view necessarily need to court big business. The SMEs is where the Kenyan economy will grow.

Regionally:
My limited research of Ug, TZ, Rwanda and Burundi and even further South reveals that its model remains fairly unique in meeting the needs of the majority of their population. And its there that it should be developing its strategy on.
Share Price comment:
Current uncertainties mean that its price hasn't found its floor yet, so hold out for a little longer. Because of the looming additional i supply in July 2008; likely disruptions if there is a new regime, buying now will mean probably holding for 3 to 4 years before one can make suitable returns.

The genius of Warren Buffet

This dude is amazing. Even when he sells earlier than his "holding forever" mantra, he still makes 7 times what he bought at (yes 7).

Get into China, the other BRIC countries and East Europe, that is my 2nd mantra for this quarter after get out of the NSE (but not at a loss).

Safaricom in the FT

Thankfully, while the political chatter dominates our press, real life is still going on.

Very good article in the FT on Safaricom. I think its some press exposure for the IPO, but a well-rounded article nevertheless.

Is a REIT right for you?

REITs are real estate investment trust which funnily enough invest in real estate. Given our obsession with owning real estate, I guess the only reason they've just been introduced in Kenya is because of the herd mentality of most businesses in Kenya. And CMA...

REITs are very similar to unit trusts in that you buy units which provide you with both capital gains but also dividends in form of a share of the rental income. As a rule, REITs must redistribute 90% of the rental income or capital gains realised over a financial year. In the West, REITs mainly invest in commercial rather than residential property. However, in the context of our housing crisis, REITs could benefit by going into the residential market. Like unit trusts, they'll give you access to the real estate market without the hassle of going through dodgy builders architects and the like.

NSE Handbook 6th Edition

This handbook is a superb reference and provides a good insight into the listed companies' market information and financial ratios that makes the decision-making process for any likely investor much easier.

The handbook provides summaries of performance of the capital's markets and key financial information for all listed companies for a 5-year period 2000 to 2005.

Please let us know if you wish to obtain an electronic copy of this issue of the handbook.

China: The march from world's most populous to largest economy

China is one of the oldest civilisations-and in any case, the most continuous one-in the world with history dating thousands of years. Its inventions include paper, printing, gunpowder and even football. And it has its share of  great thinkers including Art of War's Sun Tzu,Confucianism-behind the religion practised in Japan and Korea.

It was ruled by various dynasties the most famous being Qin (from which it derives its name), the Ming dynasty which established modern China entity and the last one being Qing dynasty which collapsed in 1912...

The next 37 years were spent in one form of war either Civil war or externally against the Japanese until Mao Zedong took control in 1949.

In retrospect, Mao's peak came in 1949. The next 27 years under his rule(using the Red Book) were spent in a politics experiment Lab. One month you'd be flavour of the month, the next you'd be denounced by somebody and be heading for execution. One minute, there was freedom to air thoughts (100 Flowers Campaign), the next minute those quick to open their mouths were forced (literally in some cases) to eat their words. Two experiments are remembered not too fondly. The Great Leap Forward(to induce industrialisation) and the Cultural Revolution (a purge of the bourgeoisie a period so bad that children denounced their parents and classmates their colleagues). 

Upon his death in 1976, China was politically exhausted (I know the feeling). Deng Xiapong and the Communist Party decided to get real and inaugurated what they call "Socialism with Chinese characteristics", I call it communist capitalism. Is successive steps there was:

1. Relaxation of the agriculture collectives so that farmers could sell their surplus produce
   
2. Then onto town and village enterprises basically allowing towns and villages to set up and run industries
3. Strong saving and capital accumulation culture (approaching 50%of GDP according to OECD
4. Controlled open door policy to allow foreign enterprises into China
5. Removal of price controls in 80s
6. Setting up of banking and capital markets in the 90s and consequent controlled entry of foreign bankers
7. Reduction of NPLs in state enterprises
8. Encouraging private  enterprise by relaxing property ownership laws

These changes have however had as their foundation, strict adherence to communist ethos, such as listening and responding to issues that pose a threat to its reign (in China, inequality as an issue is being actively tackled); executing the corrupt; maintaining strong oversight on the stock market, exchange rates, interest rates and general economic growth balance to ensure some parts of the population/country are not left behind. And depoliticised the economy.

And the results are impressive. China has averaged 9.5% growth pa since the early 80s and shows no signs of slowing having already recorded that average annual growth in the first half of 2007.

Today, China alongside the US are the two great anchors of the world economy. Most excitingly, according to the Economist China's economy has very few issues that could slow down the 10%+ growth in its economy for the foreseeable future.



Stockmarket comment:
China has 3 stock exchanges (if you include Hong Kong), Shanghai and Shenzhen all having one thing in common. They are powering forward to the extent that the govt there has tried to intervene verbally,introducing capital gains and transaction taxes and interest rates all to no avail. Historic and forward P/Es are now looking very ripe. However, current economic projections are supportive of projected company growth. More importantly no market today has the potential that China has.

Investors should have 20% exposure to China in their investment portfolio either indirectly (through unit trusts-for Diaspora, there is an array of these, if in Kenya, try EMAC or directly (some of the companies are now listed in US and UK).

Africa ready for business? Not politically.

A few days back, I attended a talk by a CEO of one of the investment banks. Someone there asked him the following question "given Africa is now being touted as the next emerging market, do you have any plans to set up base there?". His answer was straight to the point, "you are right that Africa is a soon-to-be-emerging market (he gave it 5-10 years), however from our shareholders' point-of-view, its political risks far outweighs any current ROC (returns on our capital)".

Currently, any interactive online Kenyan website is full of base politics i.e. politics of the lowest common denominator. One has to assume that the majority of the web visitors are fairly young i.e. the next generation of leaders. And this is their level of debate?

Wenzangu, kizuri chajiuza.

NSE: Recent Trends

The 6% fall last week was driven by the peculiar animal known as the entry of political risk. It has happened before. Between Oct and Dec 2002, the NSE rose 30%. In the UK, the early 90s was characterised by yo-yo movements as the FTSE investors feared a Labour govt getting the seat. Labour was then dimmed to be not very business friendly and always looking to hit population with some extra taxes. Even Clinton was victim to the same when he was first elected in 1992.
At the NSE , any GoK-run or affiliated stocks will likely take a pounding between now and Dec. These either have GoK majority share ownership or GoK has highest shareholding. Those stocks that have foolishly and closely aligned themselves with the current regime will also take a pounding. When one listens to ODM, you don't get a sense of continuity in the economics arena and of course business hates uncertainty in planning.

1. A typical business needs to do a budget that incorporates certain growth rates aligned to the economic growth rates.
2. For those dependant on GoK contracts, their will be worst-case scenario analysis, others dependant on continuity e.g. in construction will similarly take a pause.
3. Banks will invest in treasuries instead of lending and so forth. 
4. Worst-case scenario, diaspora may also play a wait and see game.
   

Politicians love making promises, but as I read the other day, they need to stop being surprised when someone expects them to keep these promises. Baba Judy said he'd serve one-term, he may get his wish.

In the meantime, my prediction is that the NSE will change by around 30% by year-end.

Joker card holders being revealed as UBS tanks...

As a Wealthy Manager, UBS is world renowned and the largest by far. This is no doubt helped by being from Switzerland, the country with the largest GDP per capita and one of the largest money laundering centres in the world.

As an investment bank however, UBS has always played catch up in  a game which less about numbers by about how many very smart employees you have working for you. The chasing after recognition in investment banking has brought several spectacular disasters because it always comes late and ends picking up the worst customers, riskiest plays et al. Hence LTCM, for which it took a big hit in 1998; DRCM (a hedge fund venture) for which it had to take a hit earlier this year.

Now with the sub-prime market issue, its taken the heaviest it so far leading to a huge loss in Q3. As a result, they've fired their head of investment banking, a very promising Welshman by the name Huw Jenkins and its CFO. This while the real players in the sub-prime and derivatives market,  Lehman, Goldman Sachs got away with just a splash of the mud. Citigroup, Deutsche Bank and a host UK banks are all rumoured to have suffered.

There is also a Kenyan angle here. I'd say upto 50% of the real estate investments in Kenya by the diaspora have been financed by mortgage equity. One can only hope house prices  do recover despite the tighter credit conditions.

Is Angro-Reasing about to be rumbled?

Story in the Guardian today. For Kibaki, the saying "it never rains, but it pours" seems to be apt.