Safaricom Post-IPO Ownership

While we are still caught up in the Safaricom euphoria, I thought this would be a good opportunity to look into the ownership of Safaricom after it has gone public. While the government of Kenya still insists that there are currently two owners of Safaricom, namely Treasury and Vodafone (K) Limited, we all know that there is a lot that they are not telling us. I won't go into the details of Vodafone's (VKL) composition as this has been discussed extensively in other blogs.

Break-down of Issued Ordinary Shares

Owner	Outstanding shares	Percent
Public/IPO	10 b	25
Vodafone PLC	14 b	35
Mobitelea	2 b	5
GoK	14 b	35
Total	40 b	100

So what happens on 10:30 am May 30th June 9th 2008 when Safaricom's shares start trading under the ticker SFCOM on the Nairobi Stock Exchange?

Nothing extraordinary apart from the fact that 10 billion new shares will be available for trading.

What about Mobitelea's 2 billion Safaricom shares?

These will be available for trading on the 25th 11th of September 2008 (give or take a few days). All 2 billion of them. According to the prospectus, VKL has agreed to a lock-up period lasting 180 days from the date of publishing the IPO prospectus. This is assuming that the first day of the offer as the publishing date.

The float on the NSE will remain 10 billion shares until such a time that either the government, Vodafone Group PLC or Mobitelea offloads more shares into the market.

Only after the said date is Mobitelea's stake fair game. Until then, Mobitelea's owners have to contend with dividends. Of which they picked 200 million shillings from last years 4 billion shillings yield. The year before that, they pocketed another 150 million shillings from the 2.99 billion shillings that was paid out. And if Safararicom makes 17 billion shillings this year, Mobitelea may earn 280 million shillings going by the 33% dividend payout ratio.

VKL stands to be dissolved after the IPO. This will allow Mobitelea to quietly and forever disappear from the horizon. This is likely to happen especially now that the possible owners of Mobitelea (Moi, Gideon Moi, Nicholas Biwott and Joshua Kulei) do not see each other eye to eye after their glory days in the government came to an end.

NB. Safaricom's Registrar, Image Registrars, is housed in Transnational Plaza which is owned by Transnational Bank which has been linked to the said owners of Mobitelea. I'm I reading too much?

Related posts; Summary of Safaricom's IPO Prospectus and My Take On The Safaricom IPO.

Summary of Safaricom's IPO Prospectus

Overview of Safaricom's Financials (2004 - 2008E)

Year	2004	2005	2006	2007	2008E
(%) Mobile penetration	10	17	23	32	40*
(%) Market share	66	65	73	80	80
Subscribers (mil)	1.5	2.5	3.9	6	9
ARPU (Kshs)	1223	1105	902	799	650
(%) Margin	27	31.2	35	36.2	35*
Revenue (bil Kshs)	18.9	26.9	34.9	47.4	68.8
PBT (bil Kshs)	5.1	8.4	12.2	17.2	22.5
(%) Tax rate	33	31	31	30	30*
PAT (bil Kshs)	3.45	5.85	8.43	12	17.2
(%) Rev growth	-	30	23	26	31*
(%) Profit growth	-	70	44	43	45*

I've had a chance to peruse through Safaricom's IPO prospectus and here are their numbers for the last four years plus my estimates for the current fiscal year that ends on 31st March 2008.

I've made several assumptions (marked with a asterisk - *) for 2008; Revenues and profit will grow 31% and 45% respectively. I've also assumed a 40% mobile penetration driven by last year's general election campaign financing.

They don't announce their results until later in the year so it will be interesting to see how the actual results compare with my estimates.

As far as valuation is concerned, at the current IPO price share, the trailing P/E is 16.6. If we go with the government's valuation, the trailing P/E is 19.3 with a market capitalization of 232 billion shillings.

If they are to earn 17.2 billion shillings in 2008, the company's P/E would be 11.6 at the current IPO price. If we are to assign a conservative price-earnings multiple of 17.5, I would estimate Safaricom to be worth 300 billion shillings. This gives it a share price value of 7.50 shillings.

A 10 shillings post-IPO price would give the company a 25% premium price-earnings multiple of 23.2 and a market capitalization of 400 billion shillings.

Safaricom's growth prospect are now hinged on increasing the ARPU which has been on the decline. Their future growth will depend on them increasing the ARPU which will be dependent on a growing middle class. The just ended post election violence, will make the coming year a tough one for Safaricom with the economy projected to have lost 2% 4% GDP growth.

PS. Apparently, Safaricom has 1,271 employees (as of 30th September 2007). Is that to say that 80% of its workforce are temporary hires? I would like to think that Safaricom directly employs at least 10,000 people.

Disclosure; I don't buy stocks on the Nairobi Stock Exchange. You can read my Safaricom IPO recommendation here (My Take On The Safaricom IPO) at the end of the post.

Merry Easter

It certainly feels like Christmas. We woke up to half an inch of snow, church was jam packed and the malls are closed.

What a week it has been. First there was non-stop rain for two days. On Friday, I got home from work to find my in-laws had turned on the air-conditioner as temperatures were approaching the 80's on the first day of spring. And now the freezing temperatures has brought with it some snow.

Wow! In the span of a week we've gone through the four seasons.

In an hour's time, we'll be fighting for seating space in restaurants. Sunday Easter brunch ranks high in suburbia when it comes to Sunday lunch.

Merry Happy Easter.

Enjoy................. (He's Alive - Dolly Parton)

Rain, Rain, Go Away

Heavy rains have turned one of my local high schools into a tourist destination. The school, currently under a few feet of water, has been shut down indefinitely.

Some low lying homes have not been spared either. Backyards have been turned into lakes and the houses into boat houses. And that's just two days of unrelenting rain.

NB. Notice the sandbagged house in the picture. Most likely their basement is flooded.

Sent via BlackBerry

Investing In Foreign Based Companies

As one of the Kenyan bloggers can attest, it is important to diversify one's financial equities portfolio across geographical regions. Doing so prevents finding yourself with all your eggs in one basket during market downturns like the one we are currently experiencing in the US. For investors in America there are two main ways of doing so. Either buying US multinationals with significant overseas exposure or investing in foreign companies that trade on the US equity markets.

ADR industries covered on the AMEX, NASDAQ & NYSE

Industry	# of ADRs
General Industries	1
Aerospace & Defense; Tobacco	2
Non-life Insurance	3
Forestry & Paper; Gas, H20 & Multiutility; General Finance; Household Goods; Life Insurance; Oil Equip, Serv & Dist; Personal Goods; Real Estate	4
Support Services	5
Automobiles & Parts; Chemicals; Construct & Materials; Food & Drug Retailers; General Retailers; Industrial Engineer	6
Industrial Transport	7
HealthCare Equip & Ser	8
Electricity; Food Producers	10
Beverages	11
Leisure Goods	12
Industrial Metals; Travel & Leisure	13
Media	14
Mining	15
Electron & Electric Eq	17
Oil & Gas Producers	19
Mobile Telecom	21
Software & Computer Svc	25
Pharma & Biotech	27
Fixed Line Telecom	36
Banks	50

The latter has played a large part in my investment strategy whereby I have always bought such companies who's shares are listed as American Deposit Receipts or commonly referred to as ADRs. In fact, the first stock that I owned here in the US was an ADR. I remember asking my full service broker to put in an order for an Israeli listed ADR. The trade went on to outperform all the shares that my broker had recommended despite his insistance that I stick to US based companies. I have since moved on to trading using discount brokers and until now, every 4 out 5 companies that I have owned have always been ADRs or Canadian based companies.

A quick look at the ADRs listed in the US shows that are a total of 428 companies to choose from. Of these, 3 are listed at the AMEX, 120 at the NASDAQ and the majority on the NYSE. These companies span across all the sub-continents and cover 37 industries. And if we head over to the OTC or Pink Sheet markets, there are another 1291 companies available for US investors that include such companies as UK's mega retailer Sainsbury's PLC (JSNSF.PK) in the midst of a multitude of penny stocks.

African companies are the most under-represented in the ADRs, with the majority of the listed companies consisting of South African miners like the well known AngloGold Ashanti Limited. However, in the OTC/Portals market, you will find another 47 sub-Saharan companies, the majority from South African again, with two companies from Nigeria and Zambia.

Buying foreign companies is not limited to ADRs as now there are numerous of Exchange Traded Funds that consists of companies from foreign lands. Once again, iShares MSCI South Africa Index (EZA) is the only ETF that I know of that covers an African country. This index consists of stocks traded on the Johannesburg Stock Exchange, the majority of which are in the materials, telecommunications and energy sectors. The fund which yields a dividend of 2.16% is down 17.22% YTD although it has outperformed the Standard & Poor's 600 Smallcap Index in the last 5 years.

And then there is the option of buying Mutual Funds, even though I am no longer a fan of Mutual Funds because of their high expense ratio and fees. One such fund that I have come across that covers the African sub-continent is T. Rowe Price Africa & Middle East fund (TRAMX). In the 7 month old fund, you will find 30 to 40 common stocks from Bahrain, Egypt, Jordan, Kenya, Lebanon, Morocco, Nigeria, Oman, Qatar, South Africa, and United Arab Emirates. The bulk of the companies are in the Financial sector. Despite claiming to covering Kenya, I could not find any Kenyan company in the fund's prospect.

Number of ADRs by region

Region	#'s
Aust & NZ	17
Cent & East Europe	6
Mainland Europe	84
Latin America	94
Middle East & N. Africa	8
Asia	146
Sub-Sahara	9
UK & Ireland	64

As the rest of the world opens up and globalization takes root in the most far flung places in the world, I expect to see more companies from Sub-Saharan Africa. One such company which would benefit from cross-listing overseas would be Kenya's Safaricom that IPO's in the coming weeks. With an expected market capitalization of over $3 billion, the company would benefit if it trades in Western markets as it would get access to the much sought after foreign investors.

As most individual investors have found out in the last few years, foreign based companies offer better returns than US based companies which have trailed the rest of the world despite of their strong financial positions. For this reason, the bulk of my portfolio will always consist of ADRs except those from China. Chinese companies seem to attract the greatest attention resulting in high trading volatility. I'm also not a fan of Japanese companies which tend to cross-sharehold among themselves thereby resulting lack of good governance.

My best investments have been companies from Brazil and Canada which also tend to pay good dividends and command lower valuations than their corresponding American counterparts.

As we head into a recession, it is worth noting that foreign based companies are not immune to the slowdown of the US economy. In addition, these companies are also sensitive to the strength of the US dollar. The weakening of the dollar, despite US Treasury's purported strong dollar policy, has contributed to some of the stock gains in these foreign companies. For this reason, it is important to keep an eye on the Forex markets when investing in foreign based companies.

There's No Such Thing As A Free Lunch

Sometime early last year, Chipotle Mexican grill opened up a branch close to my place of work. I like Mexican food, so I've been there more than a couple of times with friends from work and others who work in the vicinity.

The fast food chain that is famous for free food on it's first day of business, when they open a new branch, offered us free lunch today. As is their intention, the free lunch offer created a buzz at my place of work this week. Between 100 and 200 colleagues made their way to the eatery which I understand was jam packed.

I couldn't make it as I had a lunch time meeting where food was also provided. For the colleagues who made their way to Chipotle, they found out that TANSTAAFL (There Ain't No Such Thing As A Free Lunch). The Burritos were free but not the soft drinks. For $1.40 they could add a drink to their meal.

Chicken Burrito Bowl, $0

Ice cold Coca-Cola, $1.40

Mexican bubble bath, pricele$$

There are some things money can't buy, for everything else there's MasterCard.

Fun Day At The Science Fair

One of the highlights of my 4 years in high school was participating in what we called the Science Congress in Kenya. High school students competed by presenting projects in various fields of science and technology. For some reason, I can recollect very little about the projects that I presented and I doubt if I excelled past the provincial stage. The culmination of the Science Congress was the national competitions which I think used to be held at either the Kenya Science Teachers College at Dagoretti Corner or Kenya Technical Teachers College in Gigiri. I seem to recall attending the finals at both venues.

My interests in science and technology has led me into participating in my local Science Fairs here in the US. I normally volunteer my time to serve as a judge in the Fairs which are held around this time. Unlike touring the exhibits as a spectator, judging is much more demanding as it involves a thorough inspection of the projects which can be tiring especially if you have to spend a couple of hours going through the projects.

Two weekends ago, I volunteered as a judge in my school district. I was assigned to projects carried out by 5th graders. In total, there were close to twenty entries mostly in the experimental category. There was also one or two projects in the model and invention categories. In the experimental category, students investigate a problem by performing a series of tests in which one thing is changed each time and all other things remain the same from test to test.

Based on the judging criteria, I found the projects to be very competitive earning some of the participants more than 80 points out of a maximum of 100. Of interest were the following projects.

Relationship between IQ and body weight; The hypothesis was that there is an inverse relationship between body weight and IQ. The student subjected various 5th graders through the IQ test and compared the results to their body weight. Surprisingly, the results proved the hypothesis. I haven't checked this phenomenon online but I am certain this subject has been researched extensively in academia. Perhaps fat cells do clog the brain.

Another contestant looked at the effect of music on a blood pressure; They subjected their classmates to fast paced music (Christmas Song by Alvin and the Chipmunks). As they listened to the music, the subjects experienced an increase in blood pressure and pulse rate. They recommended this as a therapy for people with low blood pressure.

Fruit powered batteries; This was a project involving the generation of current from lemons. Basically, the student unsuccessfully tried to generate sufficient electricity to power a light bulb. I believe this could work for a low powered battery operated watch that use the tiny battery.

Effect of humidity on a baseball; This was a new one for me. Apparently, high humidity has an effect on the bounce of a baseball ball (no pun intended). The 'drier' the ball, the better it bats. They did their experiment by measuring the bounce of balls subjected to varying humidity dropped from a fixed height. You can imagine the effect of batting in high humidity (isn't that the case during the baseball season).

The Green house effect; The student demonstrated using a model, the effect of green house gases on global warming. They built a model of the earth with and without a boxed environment and compared their effect on the ease of melting a block of ice.

Other projects included the effectiveness of various mordants (Tin, Alum, Chromium, Salt) on dyeing clothes, a model of a hovercraft, the relationship between lung capacity and height, the effect of flavoring milk, efficiencies of catapults (1st, 2nd and 3rd class levers) and the effect of heat (various temperatures) on brass.

While I have seen better projects in the high school category where students take their projects seriously, I believe the 5th graders did a superb job. However, I have noticed that the greatest effect on the quality of the projects is the students parents. Normally, they assist their kids select a project and in most cases help them through. As such, kids with parents in technical fields excel much better than kids whose parents are in non-technical occupations.

Race/culture also has an effect. Most of the winners are usually of Indian or Chinese heritage. This is true at all levels and gets more pronounced as the Science Fair progresses to the national levels. The proportion of Asian and Chinese students is much higher than that of black and Latinos. The same applies to Spelling Bee contests which are mostly won by Indians. I think this is reflective of the competitive nature of natives from Asian cultures.

For these reasons, I would like to call on parents to take more interest in such contests as they have a lasting effect on the type of profession our kids will choose when they grow up. Encouraging and supporting our kids through such endeavours not only helps them take up well paying careers but also helps them get admission and scholarships to the best colleges in the US in addition to winning cash prizes during such contests.

Safaricom IPO Roadshow

I have received unconfirmed reports that Dyer and Blair will be carrying out a Safaricom IPO roadshow in the US.

It would not surprise me if other Kenyan stockbrokers follow suit.

Addendum; Would this be legal? I'd think that they need some sort of licence from the SEC to go around collecting money?

PS. Telkom SA (TKG) should not be confused for Telkom Kenya Ltd.

Related post; My Take On Safaricom IPO

There Will Be Blood

Here, have a dollar
In fact, no, brotherman, here have two
Two dollars means a snack for me
But it means a big deal to you

- Mr Wendle, Arrested Development

I almost fainted when I heard that JPMorgan is paying $2 per share for Bear Stearns. I had to check online to make sure that the announcer on TV was referring to BSC.

If you bought Bear Stearns on the cheap on Friday, chances are you'll not be sleeping soundly tonight.

Heck, tonight is going to be one of the longest night for a lot of traders. Tomorrow we face the possibility of a full blown melt-down. I sure hope NYSE, AMEX and NASDAQ have their systems ready for tomorrow's action.

$100 says Countrywide closes at less than $1 tomorrow. By weeks end, Bank of America should pull out of the deal or reduce their offer to a couple of dimes per share.

Could the last person that leaves Wall Street tomorrow please turn off the lights?

My Take On The Safaricom IPO

With good reasons, I don't blog about Kenyan companies. For one, there is hardly any information about them and secondly, I don't believe in long distant investing. However, now that Safaricom's IPO has finally been announced, I think it is appropriate that I pen down a few of my thoughts especially because 35% of the offering is targeted towards foreigners.

Summary of Safaricom Profits

Year	PBT/Kshs	% change
2002	0.75 b	-
2003	2 b	166
2004	3.45 b	73
2005	5.85 b	70
2006	12.78 b	119
2007	17.79 b	39
2008	?	?

At the current IPO price of 5 shillings per share, the IPO values Safaricom at 200 billion shillings. According to the Kenyan government, the 5 shillings per share represents a 14% discount and therefore by their calculations, the company is worth at least 232 billion shillings. Going by last years earnings of 17.78 billion shillings, the company has a trailing P/E of 19. To my knowledge, there is no mention of dividends though the company paid out dividends in 2006 and 2007. While I have not seen the prospectus, my expectation is that the company will declare a dividend at the end of the current year but withhold paying dividends to its new shareholders in the coming year.

Using the last available results from Safaricom, it is difficult to accurately determine the fair value of the company. While their customer base is on the rise, the cost of calls has fallen drastically in the last two years. Compared to the previous years, 1000 shillings worth of cell phone credit lasted more than 1 week during my visit last year. Before this, I used to credit my cell phone account every 2 or so days with the same amount. And now that Safaricom is rolling out a 3G network, it's revenue base should increase though they will have to invest in the infrastructure. I expect the use of mPesa service, which enables Kenyans to send money to each other, will add more revenues though I have heard that it's popularity is limited Kenyans who have no access to the banking system (any takers?).

Mobile Telecommunications ADRs (NYSE & NASDAQ)

Company	Country	P/E	% Yield
Movil (A)	Mexico	-	0.93
Movil (L)	Mexico	19	0.62
Indosat	Indonesia	16.8	2.17
TeleSystems	Russia	16.3	2.4
DoCoMo	Japan	17.1	2.5
Partner	Israel	14.5	5.52
SK Telecom	Korea	-	0.56
Telemig	Brazil	12.67	1.61
Turkcell	Turkey	14.9	2.05
Vimpel	Russia	22.1	1
Vivo	Brazil	-	0.15
Vodafone	UK	29.8	4.6

Going by last years results and compared to other mobile phone operators around the world, Safaricom seems undervalued. I have my doubts as to whether the current fiscal year's profits will top last year's record breaking profits. During the post election turmoil, there were disruptions in the sale of airtime and they will certainly incur losses resulting from the vandalism of their properties, loss of productivity and reduced usage by their business customers.

For me this IPO will be no different from the all others. My view is that I can buy other mobile and telecom operators that are listed here in the US equity markets. My favorite Africa play is Telkom SA (TKG) which pays a 5% dividend. The company provides mobile, fixed-line and internet services in addition to directory and e-commerce services in South Africa. Through joint ventures, the company has operations in Congo, Tanzania, Lesotho and Mozambique and is poised to expand into other sub-Saharan nations. Their biggest drawback is poor customer service as is evident from the numerous of negative posts by South African bloggers.

For Kenyans in the diaspora wishing for a piece of Safcom, they will have to put up with wiring money home, waiting for the allocation and refunds plus put up with shady stock brokers who are notorious for frustrating retail investors. It baffles me why Kenyans in the US would want to hustle just to buy shares worth $150 (minimum offering). According to Bankelele, Kenyans can expect to get shares worth $250 as the IPO is going to be over-subscribed as was the case with KenGen.

In my opinion, this offering should be left for Kenyans who have got no access to other equity markets. Knowing the psychology of Kenyan during IPO's, the stock is a good buy for Kenyan residents not only because of diversification reasons but also because of the ensuing post IPO share price appreciation hype.

Recommendation; If you are a Kenyan living in the US, send your loved ones $300 so that they can buy a piece of Safcom. If not, invest in a good cell phone like the iPhone (wait for the 3G version to be launched in the summer).

Addendum; You can read my summary of Safaricom's IPO prospectus here.

Investors Stone Blackstone Group

The only good news for Blackstone Group shareholders is that the company is not among the top 10 worst companies that have IPO'd in the past twelve months. The shares, which rose to a 52-week high of $38 on its first day of trading on June 22nd last year, have since declined to an all time low of $13.82 in the last few days. For the Chinese government, it couldn't be more painful. Their $3 billion investment for a 10% stake of the company is $1 billion plus underwater.

Blackstone's results for the just ended quarter may just be the beginning of their woes. Their dependence on the credit market to leverage investments and their yesteryear's appetite for buyouts has them caught between a rock and a hard place.

With the stock currently trading at 20% above its 52-week low price, I expect to see further declines because the equity markets have further deteriorated in this quarter. Instead of the $500 million stock buyback, the management might as well take the company private. Less than 15% of the company shares are publicly traded and they would be buying their shares at a discount.

Against the backdrop of the sub-prime mess Blackstone has outperformed other private equity groups such as Carlyle Capital, KKR, Fortress Investment and Cerberus Capital. For this reason, I believe they will come out stronger after the economic situation has stabilised. I will continue to monitor their performance with a view to taking a small position.

PS. As I publish this post Bear Sterns is no more. It's fallen 50% in the last 30 minutes. If JP Morgan doesn't buy them, they will be closing shop. Just this week several hedge funds have imploded and this is just the beginning. The reckless abandon of the sub-prime lending is finally coming out.

Fool's Gold

When it comes to investing, crowd behaviour can be very telling. Especially so for contrarian investors who prefer to keep away from the herd mentality. We saw it during the tech boom that Warren Buffet rightly characterized as mass hallucinations and we are now in one of the worst housing bursts ever to have hit this sides of the world. In between we had the ethanol boom that was cheered on by none other than president George Bush. And now even before the ink has dried from the housing burst, commodities seem to have taken off thanks to the efforts by the Feds to forestall a self inflicted recession.

Having bagged more than 100% profits from the ethanol boom, I am very weary with what is happening in the precious metals marketplace at the moment. With Gold prices pushing through $1,000 an ounce, it's only a matter of time before I bag in another 100% profit from my precious metal position. Even though the appreciation of commodities can be justified from the Feds monetary policy point of view, I'm afraid that dumb money is beginning to make it's way into the precious metals sector.

Earlier this month, CNBC's mad money host, Jim Cramer, was championing Gold in his show. Cramer, who has a wide following among retail investors in America, called on his viewers to take a position in Agnico-Eagle Mines Limited (AEM). A quick look at Agnico-Eagle Mines Limited, a Canadian Gold mining company, shows that the stock was already up more than 100% in the last 52 weeks prior to his call. Never mind the fact that in the event of a bear market sell-off, investors punish Gold mining stocks in the same manner as other stocks. And with inflation on the rise, Gold mining operations cost rise in tandem with manufacturing costs.

Before Crammer's bullish call, there was the release of Fool's Gold movie in the theaters. If we are to believe the cover story contrarian effect, then we would realize that the end is nearer than we think. Although most investors believe we are in the middle of a multi-year Gold bull run, it would not surprise me if we are now in the final stages or nearing a top. In addition, everyone is bearish on the US dollar and foreign governments are calling on the US to institute strong dollar policies as they are being disadvantaged by their strong currencies.

As an investor, I think it is important that I revisit my investment strategy in view of the gains that I have made in Central Fund of Canada (CEF). As much as I would like to bag 200% from my investment, I don't want greed to get in the way of a 100% appreciation. Going forward I will liquidate my gains in two phases once my gains clock 100%. Gold has served me well but it's hard to justify such a rapid appreciation in the span of a few months.

My belief is that whatever gains I give up now in return for cash, I will make up for it once I re-enter the market in readiness for the next economic expansion cycle. In essence, I intend compound my profits from Gold by investing in the next bull market.

PS. In celebration of my gains in Gold, I think it is fitting that I watch the Fool's Gold movie tomorrow night. There's no better way to thank the producers of this movie for stirring up the masses into a Gold rush.

Fed Rate Cut Folly

When the Federal Reserve Bank first cut the overnight funds rate in September last year, I was quick to point out that little would come out of their actions in the Equity markets. Since then, we have gone from bad to worse and another rate cut is in the offing when they meet later this month.

Right now the markets are calling for a 75 base points cut and it seems like we might get it. Never mind that the Fed last week increased the amount of money it lends to banks through the repo loans.

So what can we expect after this months FOMC meeting? More of the same. Probably one or two more rate cuts and a declining stock market. It takes a few months for the rate cuts to work its way into the economy and so we can expect the market doldrums to continue into the quiet summer period. Only this time, it may be as volatile as the last summer.

As Ben Bernanke put it last month, we can expect to see some Banks close shop by the time the sub-prime mess is over. Top on my list of failing banks is the forgotten Countrywide Financial which is waiting for Bank of America to rescue it. The monoline bond insurers are also fighting to stay open which will be bought out like Countrywide or if this fails, they will have to be split as they are currently holding the banks hostage.

With at least two more quarters of turmoil, I reiterate that this is the best time to build cash reserves.

Electoral Commission of Kenya Website Hacked

Not only can't the Electoral Commission of Kenya secure election results but also their website. If you've ever interacted with the ECK you'd realize that it's a cash rich organization unlike most run down goverment agencies . Last year the parliament allocated them 7.3 billion shillings yet they can't spend a few dollars to maintain a proper website.

According to Google, some portions of eck.or.ke contains or links to badware or otherwise violates Google's software guidelines. It goes on to add that there is a possibility of the website distributing harmful software, as it may have been compromised without the knowledge or permission of their owners.

I know this has little to do with Samuel Kivuitu but it goes to show the extent he has built an incompetent organization that almost destroyed a country. His buffoonery makes Ojwang Hatari and his Vitimbi entourage look like amateurs.

Warning; Access the website at your own risk.

Half Priced America On Sale

For people visiting America from overseas, especially Europe, the has not been a better time like now. The dollar is trading at all time lows against most of the major currencies and retailers are slashing prices in a bid to clear inventory.

A few weeks ago a friend of mine travelling from Europe for business arrived with only his hand luggage and left with 2 new suitcases filled with clothes and other stuff. In addition to spending his evenings at the mall, he even extended his stay in the US for two days so that he can buy as much as possible.

Take for example the price of a digital SLR camera. In the US, the Sony DSLR A700 12.2 Mega pixel camera with zoom lens retails for $1,599.98 plus tax at Best Buy. In the UK, you will pay £1,099.99 for an almost similar camera from Jessops. At the current exchange rate, you'll be paying almost $600 more for the camera in the UK. With the $600 that you'll save in the US, you will be able to add a tripod, memory card and other accessories to go with your purchase.

And it's not just the tourists who are having a ball. Investors too have joined the fray to pick up niceties. In Manhattan, the Russians and Arabs are out-bidding New Yorkers in the Real Estate markets. Sovereign Wealth Funds are also having an easy time acquiring stakes in major US firms. With stock prices and the dollar still on the decline, you can be sure that foreign ownership of US companies will continue.

As we await the Tax Stimulus Package signed into law last month, the joke in town is that we are borrowing money from the Chinese so that we can continue to buy their wares. It's no wonder that the budget deficit seems to be widening in the name of economic prosperity which has kicked millions of Americans where it hurts. In their homes. The economy may be slowing down but not the rate of foreclosures. In states like Nevada, 1 in every 30 homes will be foreclosed this year.

Not wanting to be left behind, Canadians are also falling over themselves in the West as the shop for second homes in these parts of the country that are famed for warm weathers throughout the season. And if the trend is to continue, Americans all over the nation will soon be paying rents to foreign landlords who are snapping up properties that Americans can't afford to own.

With the Fed set to cut rates once more later this month, you can expect foreign investors to take more advantage of the financial turmoils hitting the US economy. A few years ago, such moves would have been met with wild uproars as was the case when the US blocked Chinese oil company CNOOC's bid for Unocal. Left at the mercy of a slowing economy, American politicians are now overlooking the increasing foreign ownership of US assets. Times like these call for pretence rather than prudence.

Addendum; Fasten your financial seat belts as UBS estimates that the credit crunch losses will balloon to $600 billion. So far, losses of $160 billion have been reported and a lot on institutions are sitting on rotten eggs hoping the nightmare will resolve. Not even SWF will be willing to plug this losses in resulting from financial engineering by banks.

Now, where is my stimulus package? Lets have the government up it to match the new figures.