Actions taken between 30-40yrs determine grandchildren's heritage

Between 30-40yrs, most of us will have decided what we want to do with the rest of our lives based on skills an experience acquired; opportunities available and so forth. Most will have chosen their spouse and will either buy or build their first home as well as have children.

Economically, its the ideal decade to acquire assets that will set you in good stead when you retire. It is also the decade to set up businesses that may grow to be future NSE new kid on the block.

Like the Tatu City idea, but who is minding the ecosystem

Nairobi is the Green City no more. We have built over almost every empty piece of land such that if you were in Eastlands and wanted a game of football or a picnic in the park, you have to walk to Uhuru Park. If you are in Karen, you have to go to one of the gentrified pubs in the area. If you are in Westlands likewise.

As we now look to the outskirts of Nai as the next destination of our concrete jungle, it'd be wise to start thinking about the consequences of:

a) uprooting farmlands with plants that in effect act as part of the cleansing of the atmosphere

b) using the most arable land in Kenya for buildings. Its ironic that most Kenyans prefer building on red soil, which also happens to more productive food-wise.

RIP Nelson Muguku- Equity's largest individual shareholder- an inspiration to me

From this unlikely business, he rose to become a 6.1% holder of a Ksh100bn bank that is one of Kenya's business star stories. Proof once again, "its not where or how you started, its where or how finish".

He put to shame those who said Kenya doesn't have honest billionaires.

He has been an inspiration to me. May God console his family at this time.

The early bird catches the fat worm is the golden rule of investing

Imagine you had invested in Equity in 2006 when it listed. Suffice to say, but today you'd have made a million even with Ksh200k worth of shares. Imagine you had started saving as you started working. Even if it was just 10% of your salary. Today, you'd probably have the equivalent of your annual salary in savings.

If you had a bought a one acre plot in Athi River or Kitengela in the early part of this decade, today you'd be looking to spoilt the same into one eight acres plots costing the same as the 1 acre you bought in early 00s. The same is true of almost any large town in Kenya. Even agriculture land has in some parts increased by similar price.

Who is your uncle? Africa culture goes missing...

Had an interesting discussion the other day. The sister of this guy is having a child. Big news especially in England where odieros are increasingly choosing not to procreate. The guy was very happy that he was shortly to become an uncle and this is where the debate began. You see, I happened to say that I’m already an uncle and the question was then paused as to whose uncle I was i.e. which of my siblings has a child. I responded that all my cousins’ kids call me uncle. At which point, i was told that I’m not an uncle.

You see, according to Western definition, the only person that can be called an uncle is the brother of either your parents and at a stretch (if the sun shining . In Kenya (and I believe a significant portion of Africa) however, the definition for your uncle is extended to include your parents cousins. When I explained this cultural context, there was silence. the sort you get when you are into subjects where the majority are ignorant.

Africa culture is with very few exceptions, ignored the world over. On the other hand since 1884 and beyond, we continue to gobble up other cultures.

Culture is important because it creates cohesion. It gives one roots and identity. Because of these and other important features, colonising nations have either used culture as a colonising tool or a signal that they were in control. Part of reclaiming your nation is to instil your culture.

An analysis of the 2009 Census figures

Well. Its official. China's one child per family has never seemed more appealing. We've increased by a third in 10years. As many couples will tell you, have one child is very noticeable on the budget. Having two or three is even mooore noticeable.

Unlike in Chine were you need permission to have two children, in Kenya, GoK should just say you have to pay for schooling your second. And clearly we need family planning education.

Other highlights?

• Nai has the highest proportion (14%) of its young going to University. Central is next with 2.6%. Vast gap and I'm pretty sure some of it is explained by the fact that Nai houses more single people than children.
• 2 of the largest counties (outside of Nai), are in Western. Bungoma and Kakamega with around 1.7m each both have 700k more people than Mombasa. Nyeri has a similar population to Kajiado and Kwale (just under 700k).
• North Eastern hs the highest proportion of bush toilet users (63%). Unsurprisingly, Nai has the highest proportion of its population (47.7%) with main sewer toilets followed by Coast. With 5.8%. Huge gap. Only 8% of Nyanza households have piped water. Only 2.6% of households in NE (which has the highest), use rain harvesting techniques.
• Despite (or because) fo their love of mbuzi choma, Central only have 0.5m goats compared to 4m in Eastern and almost 12m in Rift Valley. Human population outnumbers each of its animals even ingoho which are only 25m. There is an economic opportunity here and I think guys need to think harder about the meat business. If you want asali, go to Eastern province where
• Surprisingly, Central has the highest proportion of households (85%) that own a radio. 62% of Nairobian households own a TV with 40% in Central doing the same. Only in North Eastern do less than 50% of the households own a cellphone. A flattening market? Computer ownership (14% in Nai at the highest and 3.8% in Coast which is 2nd), is paltry although I think cellphones have been a handy substitute.
• 42% of our population is aged less than 14 years.

Well done to GoK for doing this census because it'll help to guide planning.

Why do Africans have European names?

3 reasons I have been given so far:

1. They were mythically told that adapting a Christian name was a mark that they had been saved and baptised and were a now a new creature with new name. Its a myth because no where in the Bible does it say that you have to change your name...
2. The white colonisers got fed up trying to pronounce Wambugu, Onyancha and said we had to have European names to get jobs on their farms. There is some truth here because my grandfather said it was either that or you were called brooryfoo (bloody fool) or "boy" and the later is anathema to the circumcising tribes.
3. To be more like our European masters, we adapted their names.

You see culture imperialism is the subtlest and most powerful form of colonialism. Today, Africans will laugh at you for having the temerity not top have a Christian or Western sounding name. We are no longer intrigued by the origins of our African names, our history, the history of our and origin of the names of places...

So why not the same for the Japanese, Chinese, Indians, Arabs and many other free nations?

NSE & 2012: Scenarios for investors to ponder

Investors who hadn't factored 2012 into their equation when investing in Kenya, will today have bashed the wall in frustration.

Although most of us only think of LEPEST in theoretical cases, in Kenya and some other parts of Africa, its must to peg some risk-weighting against each of these factors at a macro (investing in Kenya vs investing in the UK as an example) and micro ( the impact of changes in political situation on the prospects of a particular firm).

Lets consider likely before and upto 2012 and likely bearing on NSE:

• ODM/PNU break up: Initially, I thought RAO and Ruto were playing for the cameras. Until I heard Joshua Kuttuny say that their (some of RV MPs) strategy was to muddy RAO until he became unelectable. The weekend's events portend serious issues for ODM. People like Martha Karua are not really in PNU. Lets assume that the wantaway parties don't join up with anybody else. Would be the worst case scenario for Kenya imho because the nation would be ungovernable. Note, if Ruto et al leave ODM, they'd have to seek re-election
• ODM loses Ruto et al gains young Central/Kisii/Coast MPs: The compe with PNU and Ruto ensemble (aka KKK aka Klu klaxx Klan) would be interesting. If KKK lost against an ODM alliance with those MPs, Kenya would prosper despite pockets of violence in RV. A win for KKK would lead to more corruption with a rapture between UK/Ruto vs Kalonzo when he realises he'll never be Rais.
• Kibaki waits until new katiba is passed and goes for a 3rd term: Would lead to PEV all over again.
• Business as usual: ODM remains intact and PNU similarly continues to go thru the motions of breakdown though primarily a GEMA party. Most likely to lead to PEV repeat in my view. The mantra that drove ODM was hatred of the GEMA...

Predictions for 2010

Markets:

· NSE will touch a high of 4,200 (the highest until 2012) with KQ, Mumias, Equity, Centum, Stan Chart, Safcom all seeing new highs.

· Gold will touch a high of 1,250 before falling off as inflation fears recede due to rises in interest rates in the 2^nd half of the year

· Oil will stay around $80 all year

· Shilling will not go below K120 to the pound but will be much more volatile against the dollar

Economics:

· Kenya’s economy will record 4.1% growth in 2010 driven by agriculture, construction, tourism and “actual” reduction in inflation

· Spain, Greece among others will see credit rating downgrades. UK will only avoid one if Tories/Labour have a clear majority in the May elections

Politics:

· The two mbutas that most of us want to see at the Hague, Ruto and UK won’t be going there

· In keeping with our love of tribalism as a political ideology, various of our elected wabunge will continue alliance building ensuring no repeat of 2008 PEV in 2012

· Tories will win but with a sliver thin majority

Environment

· Mau won’t happen. That is, no mbuta will be evicted without the serious compensation already mooted

Warren Buffet: invest in what u know & other priceless gems

A must watch docu-info for experienced and aspiring investors alike. And remember, buy low, sell high

Living abroad and investing

Just some observations:

Middlemen- cut them out or to absolute minimum. That includes relatives, "friends", brokers et al.

The more liquid an asset, the better.

Remember exchange rates matter.

Legal recourse in Kenya can be long and expensive.

Returns in motherland can be awesome.

Timing is important, therefore avoid herd mentality.

Invest in things you can monitor easily. This might mean investing locally.

DYOR

Insurance as an investment/saving product

To invest, you mostly have to have saved unless you are the type who does investing for a living in which case you can use leverage. Savings will come from your disposable income. To create the room for enough disposable income, you either increase your income; reduce your spending or do both. One-off big ticket expense items can derail your saving/investment strategy. Even if you earns zillions, having to buy a central heating system or replace a broken electrical home appliance will skew your savings targets.

Which is where insurance comes in. By insuring some of these big-ticket items, you'll typically be able to claim either on the repair work or the replacement. And although, you may not need to claim every other month, saving yourself that once a year cost is sufficient reason for taking out the insurance product.

Giving NSE some bouyancy

The reasons for the current fall and stale state of the NSE are various and now well known:

• Brokers' embezzlements
• Economy messed up by (a) PEV (b) drought (c) bloated GoK (d) public crowding out private sector
• 2012 and bleak outlook
• Bonds taking up the liquidity
• et al

Some of the above won't change unless we see radical moves like UK or Ruto in handcuffs on their way to Hague. I think bonds have some way to go given its the latest kid on the block and corporates are now queuing up to go through this avenue.

However, the NSE can attract attention back to itself in the following ways:.

1. Share consolidation: while (i) sharebuy back legal stuff is being sorted out and in any case will probably be too expensive in the medium for any firm to contemplate doing (ii)the cheaper share consolidation is easy to do and will give shareholders, brokers and the firms themselves a consolidated cheaper way of managing the quantity of shares. Safaricom being the share that indirectly started the current bear should kick-off the stage by doing a 10 for 1 share consolidation. This would mean 40 shares if you currently hold 400 and so forth. Equity could then do a 2 for 1.
2. Shorting: a hobby horse of mine where the NSE is concerned. It will probably be the single most educative instrument that can be introduced to the NSE. Because it allows an investor to make returns and take a view whether a share is rising or falling, NSE investors will no longer think of shares as endlessly rising investing instruments. Clearly, brokers will also have two more avenues for revenue generation. How about concerns re margins?Initially, the movement when shorting could be limited to a 20% loss at which point the investor would have to come up with the cash to cover his losses.
3. Bring up NSSF: UK obviously banned NSSF from new share purchase to facilitate liquidity in the bond market. In the medium and longer term however, its a silly policy to ban one of the deepest pockets in the land from a capital market. An oxymoron if you like.

Saying all that, an NSE at 2,500 is a very welcome re-entry for me.

Thinking of having kids?

One of aspect of financial life that no one can really plan sufficiently for, is how your finances change once you get married and then have children. Having kids and seeing them grow is both a blessing and very satisfying. Infact, a perfect tonic to a busy life. However, its good to be realistic and know its a lifetime commitment which should be borne in mind when planning your economic/financial life.

Handily enough, the UK FSA has come up with a calculator that gives you a rough idea of how much it'll cost you to bring up your kids.

Play away.

Be part of "Enough is enough"

Wangari Maathai launches her "enough is enough" campaign this weekend. The campaign is aimed at reclaiming wetlands which are necessary for Kenyans to be able to continue getting spring water that flows into the some of the dams that water Nai.
So rather than whining about lack of water, this is a good opportunity to go and do something about helping ensure supply returns next year. Was reading an article about how Kagame pioneered such a scheme successfully in Rwanda and it has helped reclaim wetlands.

Investing with 2012 in mind

As I have said before, as a longterm NSE investor, my plan is normally to invest within the presidential cycles i.e. buying and selling either the year of elections or the one before elections. I broke that rule for Equity in 2007, but that was the exception.

2012 will be different however. Assuming that all the current known crop of aspirants will be standing, I aim to be reducing my stake such that I am all out by the time the interims are announced in 2011.

That is unless Kibz positively endorses RAO to succeed him. IMHO, this will not only make for an interesting election, but will guarantee we have peace in 2012 itself and beyond. This is not because RAO and his supporters will bring us bloodshed if otherwise, but because it should and will close the chapter on 2008 PEV. 2ndly and imho, only RAO and Karua of the current aspiring crop have anything positive to offer Kenya.

Short selling shares at the NSE

Since the NSE is afraid of introducing market-makers to provide a bit more liquidity into the bourse, and brokers are broke, why not allow shorting of shares formally?

I figure looking at some of the past trade patterns that this already happens anyway. Kichini chini, Kenya-style.

Briefly, short selling works like this. I go to JM and borrow 1m HFCK shares paying him Ksh1 per share as borrowing fee. We agree I'll return them in 4 weeks time. I then sell them immediately say at Ksh17.50 per share. I sit back having (a) surmised that my trade won't go unnoticed or (b) had some inkling that HFCK was due release some nasty news. And buy back the shares at Ksh15. I give JM his shares back. JM makes a Ksh1m and I make something similar.

It would be a winner for all.

1. Brokers-would get their usual commission per transaction.
2. Long-term investors get to earn something while awaiting their horizon to mature.
3. Bourse has increased activity and interest.
4. Short-term investors get interested in the market.
5. Even lawyers get a bit of the crust in creating and signing off contracts although in most occasions the broker can facilitate.

So where is the problem? Are Kenyans only ever to be interested in the NSE when we have an IPO or a bull run?

Gap Trading strategy at NSE

Gap trading strategy is used mainly by traders but may also apply to the buy low, sell high investors. It’s basically where you take advantage of a snap back in price to either buy or sell. In most western markets, the time from taken to go either a week/month/year high or low and back to prior level can be a matter of hours and will usually be the first or last trades of the day. This then means that if you are trader you’ll want to put in a sell/buy order at these times. The gap trading will in effect be that you try to buy at the lowest (when it’s falling) and sell once it snap back to previous level. Or once you sense a price may rise, you sell at the highest level and look to buy when it snaps back to prior level. Gap trading strategy is event driven as stock prices react to macro/micro news. As such, the secret is clearly to keep an eye out for events that may impact the price. The worry is that sometimes, you get the opposite of the reaction you expect. A good example is a recent cash call (rights issue) by Lloyds TSB which led to the price going up for several days! Before starting the gradual fall to the rights issue price. So one then has to be agile.

At the NSE, such snap backs take weeks and months to effect. There are exceptions though. During the 3-4 year bull run, liquidity was such that a merger, bonus issue, good results would lead to 20% rise in short-term share price. During the bear period, the snap backs have taken longer. However they are still event-driven and it’s thus possible to benefit from movement.

Stock trading in times of credit crunch-lessons so far…

• The greater the risk of huge losses, the greater the risk of huge returns
• In other words, it’s all about marginal returns.
• If you were to buy a share at a 1/10th of its peak price, you’ll get to 100% gain faster than one who buys it at a ¼ of its peak price or the laggard who buys it at half its peak-price.
• Don’t analyse (you’ll get paralysis), trade.
• Ignore brokers' recommendations. If you are cautious and nervous after the getting pounded or seeing the pounding investors took last year, imagine how risk-averse somebody whose job depends on getting stocks right is…Classic, Nomura upgrade of Barclays this week from £1.10 to £3.20.
• Once you buy, volatility will be your biggest enemy. So have stop loss in your order, but upgrade it as you go along.
• Pick nuggets. Of info and all the happenings at your finger tips. There is still a recession out there, so share could still spring nasty surprises…
• Get it right when buying is as important as getting right when you sell.
• Take profits if you think there is likely to be a dip to a place below where you bought . Otherwise, stay calm.

Pigs getting in the way... again

Just as the markets were absorbing and had partially digested credit crunch and the recession and beginning to kick-on, up pops some flu to spoil the party. That combined with the upcoming US bank stress test releases (scheduled for Monday), almost certainly means stepping aside with the cash handy to re-enter asap.

It seems to me that the greater the pressure to feed the growing world population, the greater are the dangers of unseen side-effects of mass production means applied. Animal feed and rearing seems to a particularly dangerous source of manner of diseases.

SARS gave us 0.6% global economy downturn, will get the same from swine? I don't think so, but its spread (which by the way has not been proven in every case), suggests it will be a close call.

PS: Btw, another one in the eye for Tim G. Some of the stress tests have already been leaked. Inevitably its the lousy ones that have found their way to the press. Citi and BoA (poetic justice as it bought the wrong i bank), are the two big fishes without enough water. And surprisingly Wells Fargo,  WB's favourite bank of yrs gone by. Market reaction in states was understated and more so in the UK. Only the swine flu is causing jitters...