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.