I often get caught up in big-picture thinking-- working on ways to bring capital to bear on solving every day problems. But this story from the NY Times reminded me that the problems that really matter are often the 50 cent problems.
The story is about a young boy, Karlo, in the Sudan who is sick. A few days earlier his older brother died of the same sickness. NY Times report Nick Kristof is in the Sudan and meets Karlo and his mother when his guide vehicle stops in their village to drive them to the nearest clinic. The guide vehicle, by the way, is Samaritan's Purse, a US aid agency run by Franklin Graham, Billy's son.
Take note that engaged on bringing this story about Karlo to us are two wildly different organizations: Samaritan's Purse born out of the religious right, and the NY Times the banner publication of the liberal left. I suppose political dogma doesn't matter much in the presence of a dying child.
Watch the video and see for yourself the power that 50 cents can do. What will Karlo grow up to become?
In this kind of work, it's easy to get caught up in thinking about thousands of dollars and even millions of dollars-- I certainly do. Karlo reminded me about the power of 50 cents.
Here's the link:
http://video.on.nytimes.com/?fr_story=36e26b2219b9cff40623d6d7ae048954619fc6f8
Friday, March 7, 2008
Tuesday, March 4, 2008
Heading to Kenya and Getting out of Gold/Silver
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The Kenya Agenda
I'm heading to Kenya March 9th thru the 18th and there's lots to get done while there. I'm going over with two investment colleagues and we'll be looking at several projects. First up are humanitarian projects surrounding those affected by the post-election violence. We'll be setting up a micro-lending program with a local micro-finance institution (MFI) that is specifically for families in the camps near Naivasha. The loans will help them start/restart a small business. Mary is our contact over there and we've learned Mary is not to be triffled with. She's a smart entrepreneur in her own right and has been running two microloan programs in the area. It will be great to see her again and visit the school she's running for Kenyan girls.
We will also look at getting some quality and safe low-income housing compounds built in Naivasha. Mary has already done one "compound" of 26 small units built in a u-shape around a gated courtyard. This gives a safe place for the kids to play and provides the single mothers a clean home. If we can do 2 or 3 of these units, it will be a good business and a great service to the community.
Another really interesting project provides capital to expand the lending roll of a firm that does payday loans for government workers. These are small loans paid back over a few months, much like payday loans here in the states. The difference is this service cuts out the predatory loansharks who love to sink their teeth into government workers for "favors." The governments of Kenya, Tanzania, and Uganda like the service because it's part of their anti-corruption policies. In fact, the way the model works, the government actually makes the loan repayments and just docks the workers the small payments out of their paychecks over time. It's a smart way to help the workers get the short-term credit they need while cutting out corruption. I really hope we can get that project fully funded. Their repayment rates are around 93%.
Another project we'll be working on is setting up small shops and storefronts for a community mall project in Naivasha. The location is amazing-- right downtown in the center of everything. We'll be looking at doing a pharmacy/clinic there hopefully in partnership with HealthStore.org, as well as a day-care center, a dentist office, and whatever else is a good business to put in there. This might include a day trip to Nyeri where HealthStore has several storefronts running. It's a great model: a nurse practitioner operates their own small pharmacy/clinic where high standards of care are ensured and certified medicines can be handed out. HealthStore.org has made a big impact on malaria in rural areas and I can't wait to see how it works. It will take a lot of ground work to vet the market and figure out the business plan but we're not going as tourists.
Another project we're going to look that I'm excited about is a housing development on the outskirts of Nairobi. The Athi-River project involves building concrete panels using engineered wired mesh. This brings modern building construction to the area that is fast and affordable. If we can get some investors on board with it, housing construction and quality will dramatically change in East Africa.
It will be great to reconnect with friends over there and visit the orphanage and see the young men being raised there. They recently started funding the school fees for nearby street orphans. The orphanage can't bring in the girls to live but they are feeding them and getting their healthcare and school taken care of-- that's the real bottomline of what we're trying to do. The more jobs we can help create, the more of the local economy we can fuel, that many more children go to school and get to see a doctor and that's the stuff that's transformational!
I can't wait!
Prognostication- Out of Metals and into Dollars
Okay, I'm turning unfavorable on Gold and Silver here. I think there will be volatility as anxious investors cash out profits-- seeing some of that today. There will likely be a pause ahead of the FOMC meeting on interest rates. I'm of the opinion that monetary support is likely to be a bigger factor than people appreciate and that the fed might not cut rates as much as the market is pricing in. Expectations are for a 50-75 basis point cut. I'd be surprised if it went that low. Gold already has that 50 basis point priced into it (remember that as Fed rates are cut the dollar weakens and gold goes up). So here's a good time to exit metals, wait to see what the Fed does and then re-evaluate. I think the Fed might surprise the market. Apparently the Fed chairman and the President are the only MBA's in the country that think we're not in a recession. Warren Buffet said yesterday that we're in one even if the technical indicators haven't shown up yet. There are other reasons I'm bullish on the Greenback and you can read my previous post for those reasons. Not a bad call on gold-- from $650 this summer to $970 today. Silver was even better.
Another reason I think it's time to get out of gold is that China just surpassed South Africa as the world's top producer of gold. This isn't xenophobic, rather an appreciation that China has just become the largest holder of US currency and the largest producer of gold-- essentially, they've cornered the market on the most valuable exchange commodities for the planet. The imposition of world politics on the commodities market is now undeniable and this increases the risk profile tremendously. I don't like where China is going on Taiwan and the US commitment to Taiwan could make things very bumpy over the next 12-18 mos.
So who is a rising dollar bad for? Think multi-nationals that get a boost out of a weak dollar. McDonald's, IBM, Starbucks to name a few. A rising dollar makes international growth harder to get so at some point basic economics will override accounting mysticism. Who will it be good for? Rough weather companies like Wal-mart where a rising dollar make imports cheaper to buy.
Humor Stuff
Zen Sarcasms that a friend sent me
1. Never test the depth of the water with both feet.
2. Always remember that you're unique. Just like everyone else.
3. If you tell the truth, you don't have to remember anything.
4. Some days you're the bug, some days you're the windshield.
5. Before you criticize someone, you should walk a mile in their shoes. That way, when you criticize them, you're a mile away and you have their shoes.
6. If at first you don't succeed...... skydiving is not for you.
7. Give a man a fish and he will eat for a day. Teach him how to fish, and he will sit in a boat and drink beer all day.
8. A closed mouth gathers no foot.
9. If you think nobody cares if you're alive, try missing a couple of car payments.
10. It's always darkest before dawn, so if you're going to steal your neighbor's newspaper, that's the time to do it.
11. Don't be irreplaceable. If you can't be replaced, you can't be promoted.
12. Duct tape is like 'The Force'. It has a light side and a dark side, and it holds the universe together.
The Kenya Agenda
I'm heading to Kenya March 9th thru the 18th and there's lots to get done while there. I'm going over with two investment colleagues and we'll be looking at several projects. First up are humanitarian projects surrounding those affected by the post-election violence. We'll be setting up a micro-lending program with a local micro-finance institution (MFI) that is specifically for families in the camps near Naivasha. The loans will help them start/restart a small business. Mary is our contact over there and we've learned Mary is not to be triffled with. She's a smart entrepreneur in her own right and has been running two microloan programs in the area. It will be great to see her again and visit the school she's running for Kenyan girls.
We will also look at getting some quality and safe low-income housing compounds built in Naivasha. Mary has already done one "compound" of 26 small units built in a u-shape around a gated courtyard. This gives a safe place for the kids to play and provides the single mothers a clean home. If we can do 2 or 3 of these units, it will be a good business and a great service to the community.
Another really interesting project provides capital to expand the lending roll of a firm that does payday loans for government workers. These are small loans paid back over a few months, much like payday loans here in the states. The difference is this service cuts out the predatory loansharks who love to sink their teeth into government workers for "favors." The governments of Kenya, Tanzania, and Uganda like the service because it's part of their anti-corruption policies. In fact, the way the model works, the government actually makes the loan repayments and just docks the workers the small payments out of their paychecks over time. It's a smart way to help the workers get the short-term credit they need while cutting out corruption. I really hope we can get that project fully funded. Their repayment rates are around 93%.
Another project we'll be working on is setting up small shops and storefronts for a community mall project in Naivasha. The location is amazing-- right downtown in the center of everything. We'll be looking at doing a pharmacy/clinic there hopefully in partnership with HealthStore.org, as well as a day-care center, a dentist office, and whatever else is a good business to put in there. This might include a day trip to Nyeri where HealthStore has several storefronts running. It's a great model: a nurse practitioner operates their own small pharmacy/clinic where high standards of care are ensured and certified medicines can be handed out. HealthStore.org has made a big impact on malaria in rural areas and I can't wait to see how it works. It will take a lot of ground work to vet the market and figure out the business plan but we're not going as tourists.
Another project we're going to look that I'm excited about is a housing development on the outskirts of Nairobi. The Athi-River project involves building concrete panels using engineered wired mesh. This brings modern building construction to the area that is fast and affordable. If we can get some investors on board with it, housing construction and quality will dramatically change in East Africa.
It will be great to reconnect with friends over there and visit the orphanage and see the young men being raised there. They recently started funding the school fees for nearby street orphans. The orphanage can't bring in the girls to live but they are feeding them and getting their healthcare and school taken care of-- that's the real bottomline of what we're trying to do. The more jobs we can help create, the more of the local economy we can fuel, that many more children go to school and get to see a doctor and that's the stuff that's transformational!
I can't wait!
Prognostication- Out of Metals and into Dollars
Okay, I'm turning unfavorable on Gold and Silver here. I think there will be volatility as anxious investors cash out profits-- seeing some of that today. There will likely be a pause ahead of the FOMC meeting on interest rates. I'm of the opinion that monetary support is likely to be a bigger factor than people appreciate and that the fed might not cut rates as much as the market is pricing in. Expectations are for a 50-75 basis point cut. I'd be surprised if it went that low. Gold already has that 50 basis point priced into it (remember that as Fed rates are cut the dollar weakens and gold goes up). So here's a good time to exit metals, wait to see what the Fed does and then re-evaluate. I think the Fed might surprise the market. Apparently the Fed chairman and the President are the only MBA's in the country that think we're not in a recession. Warren Buffet said yesterday that we're in one even if the technical indicators haven't shown up yet. There are other reasons I'm bullish on the Greenback and you can read my previous post for those reasons. Not a bad call on gold-- from $650 this summer to $970 today. Silver was even better.
Another reason I think it's time to get out of gold is that China just surpassed South Africa as the world's top producer of gold. This isn't xenophobic, rather an appreciation that China has just become the largest holder of US currency and the largest producer of gold-- essentially, they've cornered the market on the most valuable exchange commodities for the planet. The imposition of world politics on the commodities market is now undeniable and this increases the risk profile tremendously. I don't like where China is going on Taiwan and the US commitment to Taiwan could make things very bumpy over the next 12-18 mos.
So who is a rising dollar bad for? Think multi-nationals that get a boost out of a weak dollar. McDonald's, IBM, Starbucks to name a few. A rising dollar makes international growth harder to get so at some point basic economics will override accounting mysticism. Who will it be good for? Rough weather companies like Wal-mart where a rising dollar make imports cheaper to buy.
Humor Stuff
Zen Sarcasms that a friend sent me
1. Never test the depth of the water with both feet.
2. Always remember that you're unique. Just like everyone else.
3. If you tell the truth, you don't have to remember anything.
4. Some days you're the bug, some days you're the windshield.
5. Before you criticize someone, you should walk a mile in their shoes. That way, when you criticize them, you're a mile away and you have their shoes.
6. If at first you don't succeed...... skydiving is not for you.
7. Give a man a fish and he will eat for a day. Teach him how to fish, and he will sit in a boat and drink beer all day.
8. A closed mouth gathers no foot.
9. If you think nobody cares if you're alive, try missing a couple of car payments.
10. It's always darkest before dawn, so if you're going to steal your neighbor's newspaper, that's the time to do it.
11. Don't be irreplaceable. If you can't be replaced, you can't be promoted.
12. Duct tape is like 'The Force'. It has a light side and a dark side, and it holds the universe together.
Tuesday, February 26, 2008
Africa+China=Economics; and the US dollar
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The Chinese Connection
There's no comfort in it for personal freedom apologists like myself, but China's ever-increasing role in Africa is significantly improving the continent's macroeconomic future. True, most of energy-hungry China's investments center around oil, gas, coal, and metals, but something interesting happened in 2007-- China invested heavily in Standard Bank, one of the largest Africa-based financial institutions, to the tune of now owning 20% of Standard Bank. This is an interesting tipping point for the continent. Over the past 50 years, we've seen flirtations with outside investment in Africa's financial services companies (mostly by French and UK firms who had colonial governments to support) but China's play into Standard Bank is different. It's based on merit. It's a good investment. Obviously it will help their other investments, but that's the point; foreign direct investment on the continent is making African financial services companies good investments.
Here's what I like about China's investments: they are heavy on cash and lite on preconditions. They aren't trying to social-engineer the continent to their political whims. It's business. Africa has things China needs and China has cash that Africa needs. This efficiency (and capitalists will tell you that in the end, efficiency wins) is what is changing the macroeconomic picture of Africa, in my opinion. The US attempts this via programs like the Millenium Development Goals, the World Bank, the IMF-- but these programs have preconditions on them. "First do X, Y, Z, and then you get the investment." In comparison, China asks Africa, "What do you need?" and a deal is worked out.
The upside is that Africa is getting much-needed investments--getting roads and hospitals built, getting manufacturing facilities built, and jobs are being created. The downside is China will do deals with good governments and bad governments. Things like political freedom, religious tolerance, transparency, equal justice, are not key determining factors. Don't think the West can claim the moral high ground here having supported some pretty awful regimes in the Cold War. The stark reality is both good things and bad things are part of most economic equations. In some cases, like Darfur, it can be very very bad.
Does China= Warren Buffet?
If you know where to look, investors can surf upon China's economic wavefront and still do good things. China's investments are forward-leaning and a bell-weather of things to come, largely because they are the ones who will be the things to come. The investment in Standard Bank means investors should look at African financial institutions. China is a Warren Buffet of sorts; you want to go where they go. They are value investors and they bring enough capital to bear in their investments to make risky bets worth taking. So start looking at African banks, investment houses, and bonds. Understand that investing in business in Africa isn't as risky as it looks. American businesses should try to be more like Warren Buffet, and find good opportunities that are unappreciated... and one of the sectors worth looking at is African financial services.
Prognostication: The Currency Equation
One of the reasons China moved into Standard Bank, and into Africa, I think is because they need to diversify where they are parking their massive currency reserves. The largest holder of currency in the world is China, and having most of those reserves tied up in domestic financial institutions has now become a liability. China is currency top-heavy, which isn't good when the global economy is slowing down. If the dollar appreciates too much against the yuan, the value of those holdings declines in terms of purchasing and export power (and China lives on export power). China's economy in terms of purchase parity was recently reduced by the world economists, which is further straining the the currency equation.
This is why I'm still bullish on the US greenback despite the US heading into recession. The second tripwire was tripped today when home values fell below 8% (8.9% yy according to Case/Shiller index). Along with the 5% unemployment figures last month, that's two out of three so yes, the US is heading towards a significant recession.
So how can I be bullish on the greenback? Because what's also clear is that inflation is heading up, which means we're heading into stagflation where inflation increases and export growth worsens. This double-whammy means that currency valuation just became the key factor in economic growth (because nothing else will improve the economic picture).
The probability that currency-improving policies will be implemented now outweigh stimulus attempts like cutting rates which devalue the dollar. It also means that a slowdown in the US will be worse for the rest of the world than for the US. China's super-hot economy is already cooling off and cracks in the European economy are opening up. That means it will be more advantageous for holders of US currency than other currencies, and that will drive dollar holdings because there won't be that many safe places for investors to land.
Signs of this are already coming up-- the Euro has weakened a bit, and the South African Rand has lost 20% against the dollar.
I also think stagflation will drive liquidity vehicles. I still remain positive on gold and silver. Platinum seems too hot right now, but if you want to play with fire, platinum is also a liquidity vehicle. My prognostications also mean companies that have benefited from a weak dollar, like IBM, are likely in for harder times ahead. A strengthening dollar makes it that much harder to find growth.
I want to remind my readers that I'm not a license investment adviser or a school-trained economist. I'm just a guy who sees what he sees and is willing to tell you what I think. You must make up your own mind. Also remember that I don't have any personal holdings (at all).
Humor Stuff: two really lame hunting jokes...
Lame Joke 1: A couple of Tennessee hunters are out in the woods when one of them falls to the ground. He doesn't seem to be breathing, his eyes are rolled back in his head. The other guy whips out his cell phone and calls 911. He gasps to the operator, "My friend is dead! What can I do?" The operator, in a calm soothing voice says, "Just take it easy. I can help. First, lets make sure he's dead." There is a silence, then a shot is heard. The guy's voice comes back on the line. He says, "OK, now what?"
Lame Joke 2: Three statisticians go duck hunting. A duck flies by. The first statistician stands up and shoots but misses behind the duck. The second statistician stands up and shoots but misses ahead of the duck. The third statistician stands up and shouts "We got him!"
The Chinese Connection
There's no comfort in it for personal freedom apologists like myself, but China's ever-increasing role in Africa is significantly improving the continent's macroeconomic future. True, most of energy-hungry China's investments center around oil, gas, coal, and metals, but something interesting happened in 2007-- China invested heavily in Standard Bank, one of the largest Africa-based financial institutions, to the tune of now owning 20% of Standard Bank. This is an interesting tipping point for the continent. Over the past 50 years, we've seen flirtations with outside investment in Africa's financial services companies (mostly by French and UK firms who had colonial governments to support) but China's play into Standard Bank is different. It's based on merit. It's a good investment. Obviously it will help their other investments, but that's the point; foreign direct investment on the continent is making African financial services companies good investments.
Here's what I like about China's investments: they are heavy on cash and lite on preconditions. They aren't trying to social-engineer the continent to their political whims. It's business. Africa has things China needs and China has cash that Africa needs. This efficiency (and capitalists will tell you that in the end, efficiency wins) is what is changing the macroeconomic picture of Africa, in my opinion. The US attempts this via programs like the Millenium Development Goals, the World Bank, the IMF-- but these programs have preconditions on them. "First do X, Y, Z, and then you get the investment." In comparison, China asks Africa, "What do you need?" and a deal is worked out.
The upside is that Africa is getting much-needed investments--getting roads and hospitals built, getting manufacturing facilities built, and jobs are being created. The downside is China will do deals with good governments and bad governments. Things like political freedom, religious tolerance, transparency, equal justice, are not key determining factors. Don't think the West can claim the moral high ground here having supported some pretty awful regimes in the Cold War. The stark reality is both good things and bad things are part of most economic equations. In some cases, like Darfur, it can be very very bad.
Does China= Warren Buffet?
If you know where to look, investors can surf upon China's economic wavefront and still do good things. China's investments are forward-leaning and a bell-weather of things to come, largely because they are the ones who will be the things to come. The investment in Standard Bank means investors should look at African financial institutions. China is a Warren Buffet of sorts; you want to go where they go. They are value investors and they bring enough capital to bear in their investments to make risky bets worth taking. So start looking at African banks, investment houses, and bonds. Understand that investing in business in Africa isn't as risky as it looks. American businesses should try to be more like Warren Buffet, and find good opportunities that are unappreciated... and one of the sectors worth looking at is African financial services.
Prognostication: The Currency Equation
One of the reasons China moved into Standard Bank, and into Africa, I think is because they need to diversify where they are parking their massive currency reserves. The largest holder of currency in the world is China, and having most of those reserves tied up in domestic financial institutions has now become a liability. China is currency top-heavy, which isn't good when the global economy is slowing down. If the dollar appreciates too much against the yuan, the value of those holdings declines in terms of purchasing and export power (and China lives on export power). China's economy in terms of purchase parity was recently reduced by the world economists, which is further straining the the currency equation.
This is why I'm still bullish on the US greenback despite the US heading into recession. The second tripwire was tripped today when home values fell below 8% (8.9% yy according to Case/Shiller index). Along with the 5% unemployment figures last month, that's two out of three so yes, the US is heading towards a significant recession.
So how can I be bullish on the greenback? Because what's also clear is that inflation is heading up, which means we're heading into stagflation where inflation increases and export growth worsens. This double-whammy means that currency valuation just became the key factor in economic growth (because nothing else will improve the economic picture).
The probability that currency-improving policies will be implemented now outweigh stimulus attempts like cutting rates which devalue the dollar. It also means that a slowdown in the US will be worse for the rest of the world than for the US. China's super-hot economy is already cooling off and cracks in the European economy are opening up. That means it will be more advantageous for holders of US currency than other currencies, and that will drive dollar holdings because there won't be that many safe places for investors to land.
Signs of this are already coming up-- the Euro has weakened a bit, and the South African Rand has lost 20% against the dollar.
I also think stagflation will drive liquidity vehicles. I still remain positive on gold and silver. Platinum seems too hot right now, but if you want to play with fire, platinum is also a liquidity vehicle. My prognostications also mean companies that have benefited from a weak dollar, like IBM, are likely in for harder times ahead. A strengthening dollar makes it that much harder to find growth.
I want to remind my readers that I'm not a license investment adviser or a school-trained economist. I'm just a guy who sees what he sees and is willing to tell you what I think. You must make up your own mind. Also remember that I don't have any personal holdings (at all).
Humor Stuff: two really lame hunting jokes...
Lame Joke 1: A couple of Tennessee hunters are out in the woods when one of them falls to the ground. He doesn't seem to be breathing, his eyes are rolled back in his head. The other guy whips out his cell phone and calls 911. He gasps to the operator, "My friend is dead! What can I do?" The operator, in a calm soothing voice says, "Just take it easy. I can help. First, lets make sure he's dead." There is a silence, then a shot is heard. The guy's voice comes back on the line. He says, "OK, now what?"
Lame Joke 2: Three statisticians go duck hunting. A duck flies by. The first statistician stands up and shoots but misses behind the duck. The second statistician stands up and shoots but misses ahead of the duck. The third statistician stands up and shouts "We got him!"
Monday, January 21, 2008
Bottom Dollar, Big Blue, and Helping Kenya by remembering MLK
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Kenya: What Can We Do? Remember MLK
First, let me be clear that the violence in Kenya, the most severe in the western regions near Eldoret, is horrific and deplorable. Worse, it appears that the violence was premeditated in that region by groups of disenfranchised Kenyans reacting against land-use and ownership policies that date back to Jomo Kenyatta, independent Kenya's first president. The resentments and anger have been smoldering for decades, having last flared up in the 1990s. These groups were looking for a reason to take up the machete again and the disreputed elections was the chance they were waiting for-- but many of the attacks near Eldoret aren't about freedom in Kenya, nor democracy. They are about groups of have-nots attacking the have-alots, under the teachings of old and troubled men.
What can we do when we are faced with situations like Kenya? What can we do when images of Rwanda, the Congo, Sierra Leone flash into our thinking? We can do something very simple: we can remember Martin Luther King, Jr. We can remember that fifty years ago, in the time of my father, MLK stood up and changed the free world by changing the way people thought about their fellow man. He wanted us--all of us-- to be judged based on the content of our character, not the color of our skin. MLK, and those that followed him, did so using a weapon more powerful than the gun, more effective than the bullet, more immediate than the machete. He used shame. In his time, he shamed the largest and wealthiest population of racists the modern world has endured, and it worked!
It's too easy to say that Kenya could use its own MLK; someone who can wield the weapon of righteousness so effectively. In time, I'm confident a hero will emerge in Kenya. But it's also important to confront our own prejudices when we think about Africa and situations like Kenya. Too many times I've read or heard the word "tribal" used to describe Kenya. We in the West use this word and ignore the insulting nature behind it-- as if Africa will always be medieval in some way. It generalizes, and that's insulting as if all Italians are mobsters or all Southerners are rednecks. "Tribal" reminds me when we used to say "colored," as a softer way to say something else.
Want to help Kenya? Let's change the way we think and when we hear CNN or read the NYtimes, and when we come across the word "tribal" let's think about that word differently. Perhaps we might all uncover some of our own prejudices, and there is no shame in that. MLK wouldn't think so. MLK would think anyone overcoming their own prejudices was nothing short of righteous.
If you want to directly help Kenya, here are some organizations I can vouch for:
A small terrific orphanage in Naivasha: http://childshopeinternational.org/donate.htm
Help Kenya kids get computers and books: http://www.hkenyaproject.org/donate.html
Kenya Red Cross: http://www.kenyaredcross.org/donate.php?subcat=91
Prognostication: Betting The Bottom Dollar and eeks for IBM
I'm going to call the bottom of the US dollar here. Okay, it might erode a bit more, but here's a good place to get into the greenback. There's calamity across the world markets and the de-coupling theory (the idea that emerging markets like Asia are no longer dependent upon the US ecomony) is getting pushed to the breaking point. Stock markets across the globe had a freefall day on Monday and the press thinks the US sub-prime housing infection has spread to once-hot markets like China and India.
Two points here: first, the fact that an ill-informed HR manager in Naperville Illinois who thinks his 2 bedroom 1.5 bath split-level really is worth $400,000 and takes out an ARM only to realize that at most it will fetch $200,000... it's hard for me to draw the line that this means China and India markets should freefall. Second, I do believe that China and India markets should correct, but not because that HR manager won't be buying that giant flat-screen TV for his living room. China and India markets were bubble markets to begin with. And now it appears that the formula used to measure those economies (something called the price purchasing power or PPP) was flawed and based on an out-of-date 1980s formula. The central banks have all updated their calculations and it turns out China's market, for example, appears to be about 40% smaller than forecasted the past few years. Does it appear there is a cause/effect here with the US subprime meltdown? Absolutely, but its a case of Post Hoc Erego Propter Hoc-- just because one followed the other, does not mean the first caused the other.
Another reason I'm calling the dollar here is the HUGE influx of capital that foreign soveriegn funds have poored into US companies recently-- including the funny Loonies from up north, (Oh, Canada!).And not just any companies, but financial services firms where the dollar is king. There is no way these firms-- from China to the Middle East to the boys up Nort-- there's no way they pump in that kind of money without knowing a currency bump is coming. If the dollar strengthens against the other currencies, these guys make billions in risk-free action. The Federal Reserve should comp these guys free rooms, drinks, and get some showgirls to sit next to them at the next G8 and APAC meetings.
Up Dollar = Trouble for IBM
IBM was heralded recently for its foresight in puting hundreds of millions into overseas investments, and the weakening dollar meant they got the currency bump right a time when Wall Street was desperate for any good news. But that strategy is a double-edge sword for Big Blue. When the dollar rises, that buffer is going to evaporate quickly. They'll likely be able to hedge that risk for a quarter and soften the impact for 90 days-- so this will likely take a quarter or more to play out-- but the piper will be paid (and no not Piper Jaff). The second element to IBM's strategy was to focus on small to medium size businesses. Anyone want to guess who suffers first and hardest in a recession? Hint: it's usually not the Fortune 1000.
What about Gold then?
Traditionally, a rising dollar means bad news for Gold , but the overseas volatility means there will continue to be a rush to liquidity, and that means good news for Gold and other precious metals. I still like Silver here too. I said Gold could go above $950 (see previous posts)-- I'm now thinking that might be too low. Record levels would have to hit close to $2,000 (back in the 1980s, that's about what Gold was going for in current dollars). Therefore, I think there's still plenty of upside to Gold. In fact, I'm wondering if there will be pressure to start backing currency again with precious metals. I'm waffling on that one, but what was once ridiculous to consider doesn't seem so ridiculous anymore. I will say this: there is a second global currency to the US dollar, and that's oil. This is why I think de-coupling is actually a valid theory but that's for another post.
Humor Stuff
Speaking of the meaning behind words, The Washington Post has a contest for readers to provide alternate meanings to everyday words-- called Neologisms. Here are some winners that made me smile:
Coffee (n): a person who is coughed upon
Abdicate (v): to give up all hope of ever having a flat stomach
Flabbergasted (adj): to be appalled over how much weight you have gained
Balderdash (n): a rapidly receeding hairline
Oyster (n): a person who sprinkles his conversation with Yiddish expressions
Circumvent (n): the opening on the front of a pair of boxer shorts
Pokemon (n): a Jamaican proctologist
Excruciate (n): the ligament that joins your ex-wife to your paycheck
Perplexed (adj): lost in a movie theater
Discussion (n): a Frisbee-related head injury
Bustard (n): a rude bus driver... (it takes a second on that one)
One Tribe!
Kenya: What Can We Do? Remember MLK
First, let me be clear that the violence in Kenya, the most severe in the western regions near Eldoret, is horrific and deplorable. Worse, it appears that the violence was premeditated in that region by groups of disenfranchised Kenyans reacting against land-use and ownership policies that date back to Jomo Kenyatta, independent Kenya's first president. The resentments and anger have been smoldering for decades, having last flared up in the 1990s. These groups were looking for a reason to take up the machete again and the disreputed elections was the chance they were waiting for-- but many of the attacks near Eldoret aren't about freedom in Kenya, nor democracy. They are about groups of have-nots attacking the have-alots, under the teachings of old and troubled men.
What can we do when we are faced with situations like Kenya? What can we do when images of Rwanda, the Congo, Sierra Leone flash into our thinking? We can do something very simple: we can remember Martin Luther King, Jr. We can remember that fifty years ago, in the time of my father, MLK stood up and changed the free world by changing the way people thought about their fellow man. He wanted us--all of us-- to be judged based on the content of our character, not the color of our skin. MLK, and those that followed him, did so using a weapon more powerful than the gun, more effective than the bullet, more immediate than the machete. He used shame. In his time, he shamed the largest and wealthiest population of racists the modern world has endured, and it worked!
It's too easy to say that Kenya could use its own MLK; someone who can wield the weapon of righteousness so effectively. In time, I'm confident a hero will emerge in Kenya. But it's also important to confront our own prejudices when we think about Africa and situations like Kenya. Too many times I've read or heard the word "tribal" used to describe Kenya. We in the West use this word and ignore the insulting nature behind it-- as if Africa will always be medieval in some way. It generalizes, and that's insulting as if all Italians are mobsters or all Southerners are rednecks. "Tribal" reminds me when we used to say "colored," as a softer way to say something else.
Want to help Kenya? Let's change the way we think and when we hear CNN or read the NYtimes, and when we come across the word "tribal" let's think about that word differently. Perhaps we might all uncover some of our own prejudices, and there is no shame in that. MLK wouldn't think so. MLK would think anyone overcoming their own prejudices was nothing short of righteous.
If you want to directly help Kenya, here are some organizations I can vouch for:
A small terrific orphanage in Naivasha: http://childshopeinternational.org/donate.htm
Help Kenya kids get computers and books: http://www.hkenyaproject.org/donate.html
Kenya Red Cross: http://www.kenyaredcross.org/donate.php?subcat=91
Prognostication: Betting The Bottom Dollar and eeks for IBM
I'm going to call the bottom of the US dollar here. Okay, it might erode a bit more, but here's a good place to get into the greenback. There's calamity across the world markets and the de-coupling theory (the idea that emerging markets like Asia are no longer dependent upon the US ecomony) is getting pushed to the breaking point. Stock markets across the globe had a freefall day on Monday and the press thinks the US sub-prime housing infection has spread to once-hot markets like China and India.
Two points here: first, the fact that an ill-informed HR manager in Naperville Illinois who thinks his 2 bedroom 1.5 bath split-level really is worth $400,000 and takes out an ARM only to realize that at most it will fetch $200,000... it's hard for me to draw the line that this means China and India markets should freefall. Second, I do believe that China and India markets should correct, but not because that HR manager won't be buying that giant flat-screen TV for his living room. China and India markets were bubble markets to begin with. And now it appears that the formula used to measure those economies (something called the price purchasing power or PPP) was flawed and based on an out-of-date 1980s formula. The central banks have all updated their calculations and it turns out China's market, for example, appears to be about 40% smaller than forecasted the past few years. Does it appear there is a cause/effect here with the US subprime meltdown? Absolutely, but its a case of Post Hoc Erego Propter Hoc-- just because one followed the other, does not mean the first caused the other.
Another reason I'm calling the dollar here is the HUGE influx of capital that foreign soveriegn funds have poored into US companies recently-- including the funny Loonies from up north, (Oh, Canada!).And not just any companies, but financial services firms where the dollar is king. There is no way these firms-- from China to the Middle East to the boys up Nort-- there's no way they pump in that kind of money without knowing a currency bump is coming. If the dollar strengthens against the other currencies, these guys make billions in risk-free action. The Federal Reserve should comp these guys free rooms, drinks, and get some showgirls to sit next to them at the next G8 and APAC meetings.
Up Dollar = Trouble for IBM
IBM was heralded recently for its foresight in puting hundreds of millions into overseas investments, and the weakening dollar meant they got the currency bump right a time when Wall Street was desperate for any good news. But that strategy is a double-edge sword for Big Blue. When the dollar rises, that buffer is going to evaporate quickly. They'll likely be able to hedge that risk for a quarter and soften the impact for 90 days-- so this will likely take a quarter or more to play out-- but the piper will be paid (and no not Piper Jaff). The second element to IBM's strategy was to focus on small to medium size businesses. Anyone want to guess who suffers first and hardest in a recession? Hint: it's usually not the Fortune 1000.
What about Gold then?
Traditionally, a rising dollar means bad news for Gold , but the overseas volatility means there will continue to be a rush to liquidity, and that means good news for Gold and other precious metals. I still like Silver here too. I said Gold could go above $950 (see previous posts)-- I'm now thinking that might be too low. Record levels would have to hit close to $2,000 (back in the 1980s, that's about what Gold was going for in current dollars). Therefore, I think there's still plenty of upside to Gold. In fact, I'm wondering if there will be pressure to start backing currency again with precious metals. I'm waffling on that one, but what was once ridiculous to consider doesn't seem so ridiculous anymore. I will say this: there is a second global currency to the US dollar, and that's oil. This is why I think de-coupling is actually a valid theory but that's for another post.
Humor Stuff
Speaking of the meaning behind words, The Washington Post has a contest for readers to provide alternate meanings to everyday words-- called Neologisms. Here are some winners that made me smile:
Coffee (n): a person who is coughed upon
Abdicate (v): to give up all hope of ever having a flat stomach
Flabbergasted (adj): to be appalled over how much weight you have gained
Balderdash (n): a rapidly receeding hairline
Oyster (n): a person who sprinkles his conversation with Yiddish expressions
Circumvent (n): the opening on the front of a pair of boxer shorts
Pokemon (n): a Jamaican proctologist
Excruciate (n): the ligament that joins your ex-wife to your paycheck
Perplexed (adj): lost in a movie theater
Discussion (n): a Frisbee-related head injury
Bustard (n): a rude bus driver... (it takes a second on that one)
One Tribe!
Friday, January 4, 2008
Kenya: Joy Cometh in the Morning... also coffee, PEET, and gold
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Where Did I Go? A Blogger's Sin
I committed a blogger's mortal sin-- I was silent for nearly eight weeks. My apologies but I had a good cause, a very serious lung infection that put me on the sidelines all the way up to the holidays. I haven't been sick like that since I was a kid. My apologies but I did learn something valuable: that Mike's Hard Berry Lemonade mixed with hot water makes for a very tasty cough suppressant.
Kenya Violence-- What the Press/CNN is Missing
The reports out of Kenya in the disputed election-- the deaths, burning churches, riots in the slums-- paint a bleak picture, one of absolute chaos and meltdown (CNN has called Kenya an "orgy of violence"). While that might be eye-catching copy, it distorts the reality on the ground. There is a section in the rural areas in the Rift Valley in the western part of the country where much of the horrific violence is taking place. But talking with our people in Kenya, many of the towns and cities are peaceful and businesses and banks are open and people are going to work. Yes, Nairobi is shut down due to the Kibera neighborhood violence (700,000 people live in Kibera, a poverty-stricken area of several square miles). There are violent outbreaks in the northwest towns around Eldoret, another poverty-stricken area. It's bad in places. Very bad. But it isn't horrific everywhere.
And this is where the Western press is myopic and is missing the story of Kenya-- that this isn't a tribal issue, it is pure (and actually pretty basic) discrimination, and discrimination is part-parcel that comes with democracy and capitalism. When you think Nairobi, think Detroit and Cleveland and Philadelphia in the 1960s and 1970s. Poverty in the face of prosperity where there is legitimate discrimination produces resentment that, if not dealt with, will boil over into violence and destruction.
The discrimination at force in Kenya is basically the caste system-- yes, there are tribal elements but Kenya has over 40 tribes, so it isn't like Rwanda of one tribe versus one other. What my wife and I have experienced in Kenya is that the powerful and prosperous Kikuyu's often do look down upon "lesser" tribes. One of our business partners in Kenya is Kikuyu and she is very prejudiced about other tribes, but those prejudices are based in economics and education, not simple tribal membership. One must understand that after independence from British rule, the presidents and leaders of Kenya were mostly from Kikuyu and a handful of other tribes-- and they ensured preferential treatment was provided for this "upper caste" of these few tribes. For example, tuition to university was free, international study visas were almost exclusive to the upper castes; and that produced a divided generation of educated and uneducated, connected and unconnected, the very wealthy and the very poor. Does this sound familiar? If it doesn't, ask any African American over the age of 50 if it sounds familiar to them. Burning churches? Yes, America had a few of those too not long ago and yes, women and children were killed. Displaced people, refugee camps? In America, we call them reservations and oh, by the way, we didn't let those "displaced people" go back home.
Democracy often wanders from the path of justice often with horrific consequences but what makes democracy great is its ability to find that path again. Throughout history-- especially America's history-- democracy has produced preferential treatment among racial and socioeconomic lines; and there are ebbs and flows of justice and oppression. But Kenya is becoming a modern democracy and she will find her path to justice. Even if the election results are overturned and ODM candidate Odinga is installed, the economy and civil processes of Kenya will likely change some but not significantly. What will change significantly is the perception of equality-- something that does need to change. In fact, Odinga is said to be friendlier to the US and Europe investment than current President Kibaki. The O in his ODM party stands for the Orange movement, which came out of Ukraine, a country fast becoming a case-study in transformational democracy. If Kibaki remains in office, he'll likely have to create power-sharing agreements and implement empowerment policies. My prediction for Kenya is Psalm 30: though weeping stays for a night, Joy cometh in the morning.
It's the old adage: crisis produces the opportunity for change, and while the manner of Kenya's conflict is troubling and the deaths horrific, we can't ignore that America became stronger after it healed from its own horrific injustices. Don't write off Kenya yet. It's simply undemocratic to do so.
Prognostication: Coffee-- still heading up and time to play with Gold again
Well, my coffee predictions came true. Prices for AA and AB grade coffee beans spiked in late November and December despite increase in crop production, and I think a new range is about to be established. Coffee futures are heading up and I think that trend will continue, which makes me think PEET's could be the sufferer. Additionally, their "master roaster" has left to start his own business. I think PEET's probably has another quarter of satisfying profits but the first cracks of the "coffee crunch" will likely show up soon as prices for high-end coffee will likely keep heading up, a trend I don't see abating yet. Kenya is a high-end coffee producer so the current troubles will have an additional effect, but more worrisome is the coffee plant disease that has hit the country. Vietnam and Asia producers will also likely suffer from La Nina effects. I don't think it will be catastrophic but the pinch will produce a new floor and an open ceiling for a bit. This isn't about a pinch in supply as it is a rise in production costs-- the era of cheap coffee is over.
Also, I think it's time to play with Gold again. One of my tripwires of the US economy was tripped today with unemployment figures hitting 5%. I think there will be a run again on liquid vehicles and gold (silver too) will be in demand. I'd look at over $950 for gold in the next 90 days. It had a strong run up year end but I think that's just the beginning. It's what I call the Jed Clampett effect-- that "liquid gold" (oil prices) will override the strengthening US dollar and allow gold another breakout. If you look back in my blog, you'll see an good track record on this prediction-- including the "pause" in the fall over $800.
What's Next?
I'm heading back to Africa as soon as possible-- probably February. I've been working on setting up the investment firm the past three months and I'm anxious to get back over there and source more opportunities and make new friends. Kenya will likely be on my agenda. Good news is we're about ready to start taking in serious investment dollars. It's a great time to be doing what I'm doing. We had a meeting in early December of the capital-players and that team is starting to gel and that's great to see.
I'll have a new prognostication next week but here's something to bring a smile...
Where Did I Go? A Blogger's Sin
I committed a blogger's mortal sin-- I was silent for nearly eight weeks. My apologies but I had a good cause, a very serious lung infection that put me on the sidelines all the way up to the holidays. I haven't been sick like that since I was a kid. My apologies but I did learn something valuable: that Mike's Hard Berry Lemonade mixed with hot water makes for a very tasty cough suppressant.
Kenya Violence-- What the Press/CNN is Missing
The reports out of Kenya in the disputed election-- the deaths, burning churches, riots in the slums-- paint a bleak picture, one of absolute chaos and meltdown (CNN has called Kenya an "orgy of violence"). While that might be eye-catching copy, it distorts the reality on the ground. There is a section in the rural areas in the Rift Valley in the western part of the country where much of the horrific violence is taking place. But talking with our people in Kenya, many of the towns and cities are peaceful and businesses and banks are open and people are going to work. Yes, Nairobi is shut down due to the Kibera neighborhood violence (700,000 people live in Kibera, a poverty-stricken area of several square miles). There are violent outbreaks in the northwest towns around Eldoret, another poverty-stricken area. It's bad in places. Very bad. But it isn't horrific everywhere.
And this is where the Western press is myopic and is missing the story of Kenya-- that this isn't a tribal issue, it is pure (and actually pretty basic) discrimination, and discrimination is part-parcel that comes with democracy and capitalism. When you think Nairobi, think Detroit and Cleveland and Philadelphia in the 1960s and 1970s. Poverty in the face of prosperity where there is legitimate discrimination produces resentment that, if not dealt with, will boil over into violence and destruction.
The discrimination at force in Kenya is basically the caste system-- yes, there are tribal elements but Kenya has over 40 tribes, so it isn't like Rwanda of one tribe versus one other. What my wife and I have experienced in Kenya is that the powerful and prosperous Kikuyu's often do look down upon "lesser" tribes. One of our business partners in Kenya is Kikuyu and she is very prejudiced about other tribes, but those prejudices are based in economics and education, not simple tribal membership. One must understand that after independence from British rule, the presidents and leaders of Kenya were mostly from Kikuyu and a handful of other tribes-- and they ensured preferential treatment was provided for this "upper caste" of these few tribes. For example, tuition to university was free, international study visas were almost exclusive to the upper castes; and that produced a divided generation of educated and uneducated, connected and unconnected, the very wealthy and the very poor. Does this sound familiar? If it doesn't, ask any African American over the age of 50 if it sounds familiar to them. Burning churches? Yes, America had a few of those too not long ago and yes, women and children were killed. Displaced people, refugee camps? In America, we call them reservations and oh, by the way, we didn't let those "displaced people" go back home.
Democracy often wanders from the path of justice often with horrific consequences but what makes democracy great is its ability to find that path again. Throughout history-- especially America's history-- democracy has produced preferential treatment among racial and socioeconomic lines; and there are ebbs and flows of justice and oppression. But Kenya is becoming a modern democracy and she will find her path to justice. Even if the election results are overturned and ODM candidate Odinga is installed, the economy and civil processes of Kenya will likely change some but not significantly. What will change significantly is the perception of equality-- something that does need to change. In fact, Odinga is said to be friendlier to the US and Europe investment than current President Kibaki. The O in his ODM party stands for the Orange movement, which came out of Ukraine, a country fast becoming a case-study in transformational democracy. If Kibaki remains in office, he'll likely have to create power-sharing agreements and implement empowerment policies. My prediction for Kenya is Psalm 30: though weeping stays for a night, Joy cometh in the morning.
It's the old adage: crisis produces the opportunity for change, and while the manner of Kenya's conflict is troubling and the deaths horrific, we can't ignore that America became stronger after it healed from its own horrific injustices. Don't write off Kenya yet. It's simply undemocratic to do so.
Prognostication: Coffee-- still heading up and time to play with Gold again
Well, my coffee predictions came true. Prices for AA and AB grade coffee beans spiked in late November and December despite increase in crop production, and I think a new range is about to be established. Coffee futures are heading up and I think that trend will continue, which makes me think PEET's could be the sufferer. Additionally, their "master roaster" has left to start his own business. I think PEET's probably has another quarter of satisfying profits but the first cracks of the "coffee crunch" will likely show up soon as prices for high-end coffee will likely keep heading up, a trend I don't see abating yet. Kenya is a high-end coffee producer so the current troubles will have an additional effect, but more worrisome is the coffee plant disease that has hit the country. Vietnam and Asia producers will also likely suffer from La Nina effects. I don't think it will be catastrophic but the pinch will produce a new floor and an open ceiling for a bit. This isn't about a pinch in supply as it is a rise in production costs-- the era of cheap coffee is over.
Also, I think it's time to play with Gold again. One of my tripwires of the US economy was tripped today with unemployment figures hitting 5%. I think there will be a run again on liquid vehicles and gold (silver too) will be in demand. I'd look at over $950 for gold in the next 90 days. It had a strong run up year end but I think that's just the beginning. It's what I call the Jed Clampett effect-- that "liquid gold" (oil prices) will override the strengthening US dollar and allow gold another breakout. If you look back in my blog, you'll see an good track record on this prediction-- including the "pause" in the fall over $800.
What's Next?
I'm heading back to Africa as soon as possible-- probably February. I've been working on setting up the investment firm the past three months and I'm anxious to get back over there and source more opportunities and make new friends. Kenya will likely be on my agenda. Good news is we're about ready to start taking in serious investment dollars. It's a great time to be doing what I'm doing. We had a meeting in early December of the capital-players and that team is starting to gel and that's great to see.
I'll have a new prognostication next week but here's something to bring a smile...
Humor Stuff
Amazon.com to Replace Kindle with New Device: Announcing the new Built-in Orderly Organized Knowledge device, otherwise known as the BOOK.
It's a revolutionary breakthrough in technology: no wires, no electric circuits, no batteries, nothing to be connected or switched on. It's so easy to use even a child can operate it. Just lift its cover. Compact and portable, it can be used anywhere -- even sitting in an armchair by the fire -- yet it is powerful enough to hold as much information as a CD-ROM disk.
Here's how it works: each BOOK is constructed of sequentially numbered sheets of paper (recyclable), each capable of holding thousands of bits of information. These pages are locked together with a custom-fit device called a binder which keeps the sheets in their correct sequence. By using both sides of each sheet, manufacturers are able to cut costs in half.
Each sheet is scanned optically, registering information directly into your brain. A flick of the finger takes you to the next sheet. The BOOK may be taken up at any time and used by merely opening it. The "Browse" feature allows you to move instantly to any sheet, and move forward or backward as you wish. Most come with an "index" feature, which pinpoints the exact location of any selected information for instant retrieval.
An optional "BOOKmark" accessory allows you to open the BOOK to the exact place you left it in a previous session -- even if the BOOK has been closed. BOOKmarks fit universal design standards; thus a single BOOKmark can be used in BOOKs by various manufacturers.
Portable, durable and affordable, the BOOK is the entertainment wave of the future, and many new titles are expected soon, due to the surge in popularity of its programming tool, the Portable Erasable-Nib Cryptic Intercommunication Language stylus [PENCIL]
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