Safaricom IPO Fast Money Analysis

Among the many irregularities that accompanied Safaricom's IPO was the ability by retail investors to buy the shares through margin. Unlike Kenya, retail investors in America cannot purchase initial public offerings using margin owing to the higher risks posed by such securities.

Considering that margin is usually used for short term trades, most of the retail investors who took bank loans to buy into SFCOM will have to repay their loans in the shortest time possible in order to maximize their gains. To do so, they will either have to sell their shares or seek funds from elsewhere. My guess is that most of the borrowers intend to flip their shares as soon as the price is right. And going by past NSE offerings, it is likely that they will dispose their shares during the first few weeks of trading as this is when the easy money is made.

Owing to the over-subscription of the IPO and the uncertainty surrounding the first few weeks of trading, this group of investors speculators may have bitten more than they can chew.

Using back-of-the-envelop calculations, the outlook does not look that rosy considering the risks they have taken to buy into SFCOM through margin. Here's why....

First I'll start with the following assumptions;

• Average allocation; 30% of shares applied.
• Initial margin requirement; 0% (i.e. 100% Loan-To-Value)
• Interest rate; 15% APR (AER = 19.56%)
• Costs; 2% of loan amount, 2,000/= pledge fees, 30/= CDSC levy, 300/= funds transfer fee, no prepayment penalty and interest charged.
• Period; 3 months from date of application to refund date and loan pay-off.
• Selling price; 10/= (fingers crossed as stock broker ineptitude is high in Kenya).
• Not factored; short term gains tax, selling commission, any other miscellaneous fees

Loan, Kshs	Cost, Kshs	Shares	Break-even price, Kshs	Profit, Kshs	Yield, %
10,000	2,886	600	9.81	114	1.14
25,000	3,719	1,500	7.48	3,781	15.12
50,000	5,108	3,000	6.70	9,892	19.78
100,000	7,886	6,000	6.31	22,114	22.11
150,000	10,664	9,000	6.18	34,336	22.81
200,000	13,442	12,000	6.12	46,558	23.28
250,000	16,220	15,000	6.08	58,780	23.51
300,000	18,997	18,000	6.06	71,003	23.67
350,000	21,775	21,000	6.04	83,225	23.78
400,000	24,553	24,000	6.02	95,447	23.86
450,000	27,331	27,000	6.01	107,669	23.93
500,000	30,109	30,000	6.00	119,891	23.98
1,000,000	57,888	60,000	5.96	242,112	24.21
2,000,000	113,446	120,000	5.95	486,554	24.33
5,000,000	280,120	300,000	5.93	1,219,880	24.40
10,000,000	557,911	600,000	5.93	2,442,089	24.42

The rich get richer and the poor get poorer - Markovnikov's rule

As you can see from the table, the less the amount borrowed the lower the profit margin. However, those who take on more risk and borrow into the millions, will reap the greater yields. And all this hinges on the fact that the stock brokers will execute their clients trades in a timely manner.

Assuming that Safaricom is priced below 10 shillings, those who borrowed heavily will still make a profit even if their sell orders are executed several weeks late. From a bank's perspective, the huge loans carry a lower risk unlike the small time investors who will be underwater if they don't sell immediately.

Going by the numerous of complaints that I hear from sellers and the large number of retail investors who will be hoping to hit it big, I have every reason to believe that the brokers will leave a lot of the small time investors high and dry.

For this reason, had I taken a loan to buy the shares I would start making payments even before the allocation is announced. While SFCOM makes a good stock for a quick post-IPO trade, I believe better prospects await long term investors. Unfortunately, it is not financially prudent to hold on to both the loan and the shares, as the interest charge will wipe out the gains once the shares stabilize after the post-IPO hyphoria.

While I don't want to sound gloomy and discourage risk takers, I believe the regulatory body, Capital Markets Authority, has abdicated its role in protecting investors. And the fact that two stockbrokers have gone belly-up without any action on their part means that they are not up to the task. Instead they are in bed with the stock brokers to continue fleecing unsuspecting members of the public.

Come the 9th of June at 10:30 am when Michael Joseph and/or Amos Kimunya ring the bell at the bourse, 10 shillings will be the magic number for many of the speculators. Anything less than this price will result in sleepless nights characterized by tossing and turning.

Should SFCOM fail to rise past 6 shillings, it will matter very little how much money speculators borrowed as they will all be counting their losses. In addition, the banks will have to absorb some of these losses.

Media reports indicating that Equity Bank lent 15 billion shillings to the masses means that they hold a greater risk than most high street banks that are known to shun small time borrowers. Like in the case of the U.S. sub-prime mess, they may find out that it is never prudent to give loans to hoi polloi for speculative purposes.

Come the first day of trading, we will find out whether SFCOM will live up to its billing as the mother of all IPO's.

Good luck to all the punters.

Addendum; According to the East African, some of the loans were for a fixed period of 6 months. To get the loan, all one had to do was pay the costs (which included pre-paid interest) and the shares would be held by the bank in one's CDSC account. This means the banks will only suffer a loss if the price fell below 5 shillings and the yields are 3.68% lower across the board.

Who was it that said that banks are there to help people make money?

Safaricom IPO Allocations And Opening Price

Going by the media reports, at least 2 million retail investors participated in the Safaricom IPO. At this point, it is safe to assume that the retail pool will be oversubscribed by 200% and thus the foreign investors allocation will be reduced from 35% to 20% of the 10 billion shares on offer.

Long queues were witnessed throughout Kenya as retail investors rushed to beat the deadline for the Safaricom IPO. Source - Nation

Therefore the total number of shares available to retail investors will be 4.88 billion instead of initial allocation of 3.38 billion.

Should the shares be allocated equally to all the retail investors, each will end up with 2,440 shares. However, if we assume that 50% or 1 million retail investors applied for the minimum quantity of 2,000 shares, the remaining 1 million investors will end up with 2,880 shares each.

What does this mean?

Worst case for retail investors will be 2,000 100 shares (worth 500 shillings, the equivalent of $9). Base case allocation will be something close to 2,500 shares with the best case being 3,000 shares for the majority of the investors. High net-worth individuals, including President Kibaki who paid 1 million shillings, will be very lucky if they get more than 10,000 shares.

Now that we have established that there was a huge demand for the shares, the question that begs to be answered is how much will investors be willing to pay when Safaricom commences trading on the 9th of June?

My guess is that it will open at nothing less that 10 shillings resulting in a 100% appreciation on the first day of trading. While a 20 shilling share price looked far fetched a few days ago, I will not be surprised if it sells higher.

The only thing that is certain is that Safaricom employees and authorised dealers will be laughing all the way to the bank when the stock commences for trading next month. This is akin to Google employees who became overnight millionaires when the stock IPO'd in August 2004.

Among the losers will be Kenyans in the Diaspora who remitted large amounts of US dollars at unfavorable exchange rates. Also joining this list will be locals who borrowed heavily to buy the shares as they are likely to be charged interest on their loans as they await for their refunds to be processed.

PS. It is now clear why Safaricom shares were priced at 5 shillings.

Barack Obama Priced For Perfection

Despite outspending Hillary Clinton in Pennsylvania, Obama's charm failed to work its way down to the rural blue collar voters. Short of financial bankruptcy, Hillary Clinton's campaign pulled a decisive win giving her the much need stimulus to stay in the democratic contest.

With the math against her and less than 10 more contests to go, Intrade still has Obama as the front runner. If anything, there have been very little changes to their contract prices in the weeks leading to the Pennsylvania primaries.

Going by other intrade contracts, Obama's hope of winning the nomination lie in North Carolina, Oregon and Montana. Intrade has Clinton winning West Virginia, Kentucky and the prized Indiana. However, Obama is projected to clinch the nomination by bagging more super delegates than Hillary. Obama is also favored by pundits to receive endorsements from Al Gore, John Edwards and Colin Powell.

For now, Obamamaniacs can only pray and hope that their candidate will make it to the Democratic party convention in one piece. Even though he is yet to clinch the democratic nomination, Intrade has him as the leading contender with $4.69 against John McCain with $3.92 with Hillary trailing at $1.20.

Troubling Toilet Tales

I've never really figured out why public toilets in America are designed like stalls. And what is it with the crack space on the door?

Maybe these are the reasons that they are called public restrooms. Because they offer no privacy.

However, it seems that the toilet stall design may be fueling the re-insurgence of cottaging.

Remember the infamous Senator Larry Craig public restroom incidence?

The republican Senator was arrested for lewd conduct after brushing his shoe against the shoe of an undercover police officer who was in an adjacent toilet stall. In addition, it is alleged that he tapped his foot and waved his hand under the toilet stall divider. And prior this, he supposedly peeped at the police officer through the crack of the toilet stall door.

So you can imagine my surprise after I came across the following graffiti on inside wall of a toilet stall in a public restroom.

Interestingly, Senator Larry Craig is said to have made the sexual advances towards the law enforcement officer at around 12:16 pm.

The said incident seems to have brought to light the bizarre going-ons in public restrooms.

In a bid to help others stay out of trouble, I have come up with following guidelines regarding the use of public restrooms in America.

- Keep away from public restrooms between 12 o'clock and 1 pm. High noon is the new full moon and there may be a correlation between high lunch time traffic and such deviant behaviour.

- Do not under any circumstance peep through the crack of the door to check if a toilet stall is vacant. If you are not sure that the toilet is occupied, try pushing the door.

- Do not call attention to yourself in public restrooms. Avoid chatting with strangers. Toilet seats should not be confused for bar stools.

- Unless you are on the road or are sick, avoid taking a dump in public restrooms.

- Never accompany your friend(s) to the restroom. And if you must go together, maintain silence as you go about your business.

- Avoid staring or looking at people in public restrooms. Look at the wall in-front when you are at the urinals.

- If there is someone in a toilet stall (opposite the mirrors), don't spend a lot of time at the mirror straightening your clothes. NEVER groom yourself or apply cologne while in a public restroom except when you are on the road.

PS. If you were intrigued by this post, you will probably want to read these other not so private toilet tales; Post-Card from America, Post-Card from Kenya and Restroom Attendant.

The Right To Own A Gun (And Not Use It)

One of the most controversial laws in America is the 2nd amendment of the United States constitution. The right to bear arms is one of the most contested issues especially now that the presidential campaigns are underway. So powerful is the issue that I know not of any presidential candidate who has won elections on an anti-gun platform.

And the fact that there have been a lot of shooting incidences in public places makes the 2nd amendment even more so controversial.

Until I attended gun safety classes in 2004, I never paid much attention to the anti-gun proponents. If anything, it has always been my desire to own a gun just like my dad. My plans back then was to buy a SUV and fit it with a gun rack (Isn't that part of the American Dream?).

Like Americans who claim to own a gun for protection, my dad also owned a pistol which he always carries with him at night or when travelling upcountry. Although Kenya is considered to be relatively insecure, only once did he have to use the fireman when he was confronted by a rowdy mob during the 1997 election campaign period. One shot in the air was all it took to send the drunken hooligans scampering into the darkness.

With guns openly being sold at the local Walmart, I used to habor ambitions of owning a hunting rifle. Only after attending the gun safety classes did I realize how dangerous it can be to own a gun in your home especially if you have young children.

Despite the dangers posed by guns and the fact that America is one of the most safe countries, 40% of households own a firearm with the majority owing more than one weapon. Closer to me, I would say that more than half of my neighbours own a gun though less than a handful are involved in hunting.

It took the theft of an AK-47 semi-automatic rifle from an unlocked vehicle on our street for my missus to realize that we live in a gun totting loving neighborhood. You should have seen the fear in my wife's eyes after I showed her the weekly police report which is usually published in the local county newsprint. The incident caused her to demand that we move to a 'safer' suburb.

Ask any American why they own a gun and chances are that they will tell you that it is for protection. Yet I can't remember the last time there was a break-in in our sub-division. And even when it happened, the teenage intruders were well aware that the occupants were away either on vacation or at work. Which leads me to wonder exactly what kind of protection do firearms offer.

And when there is a reported misuse of firearms, gun proponents are always quick to point out that "guns don't kill people but people do".

While I am not about to join the anti-NRA (National Rifle Association) bandwagon, I think the ownership of guns calls for a little bit of common sense. I shudder to think what would happen if there was a breakdown in law and order in America. With some people reported to be owning up to 80 firearms, the scenario would pale the anarchy that we are seeing in Iraq.

The High Cost Of Raising Children In America

Prior to the birth of our first born, my greatest fear was the cost of disposable diapers. From what I had heard from friends who had preceded us into parenthood, the cost of diapers ranked high on their list of complaints. I don’t recall worrying about the costs of other necessities.

Boy, was I wrong. Several years later, I have come to learn the hard way about the high cost of raising children. Especially here in America.

According to the U.S. government (pdf), the cost of raising a child in 2007 varied from $7,830 to $16,290 per year depending on the household income, location and age of the child. While there is a lot of substance in their estimates, I believe the numbers are fudged in favor of the agenda of the federal government (i.e. tax credits, social benefits and child support payments) .

Take for example the cost of childcare. I believe this is the most expensive expenditure parents face in America. Even if one were to employ an illegal immigrant to take care of their children, I doubt if it will cost less than $100 a week for one child. Yet the government estimates that childcare costs between $1,220 to $3,020 for a toddler. And as if it were not enough, they estimate that it will cost thrice as much to provide housing for a child.

I wish this was true because I paid much more in childcare last year than I paid for my mortgage. Even after receiving a 15% corporate discount per child, the childcare costs for 11 months turned out to be higher than my annual mortgage payments. I believe this is true for most parents because housing costs are relatively low in America compared to other developed countries.

Childcare consumes approximately 75% of the cost of raising children and it is for this reason that some mums choose to stay at home as they can’t earn enough wages to pay for childcare. Assuming childcare costs in the region of $10,000 per year, the mother would have to earn at least $30,000 to afford decent full time childcare for one child. For every additional child, they would have to earn an extra $10,000 per child until they are enrolled into elementary school.

In addition to childcare are activity costs. Ferrying kids from swimming lessons to soccer practice to music lessons or ballet seems to be the norm in the evening. While each activity tends to cost in the region of $10 - $30 a week, the costs can quickly add up to substantial amounts over a long period. With gas under $3 a gallon for the better part of last year, I don’t think transportation costs $2,000 per child. That is unless you include paying a hefty car note for a high end SUV or mini-van as part of the tab.

My second biggest pain seems to be clothing during Fall, Winter and Spring. Every morning before I dress up my son I have to check how warm it will be. Anything over 60F means they get to play out-doors and thus he has to wear a pair of shorts or else he will come back home with his pants torn at the knees. It does not matter how reinforced the knee section is. It’s like he crawls round the playing field for the entire duration of their play time.

Unpredictable weather resulting in a sunny day means a torn pair of pants. Add growth spurts and you have us shopping for clothes almost every weekend especially during Fall and Spring. At least we don’t go through the same pains when it comes to shoes. Nike and Sketchers seem to withstand the brutality of the playing fields and concrete walk ways.

While the government estimates that the cost of raising up kids increases with age, I don’t think this is the case. For this reason, I disagree that it will cost me $298,680 to raise each child until the attain 18 years. Because public schools are ‘free’ and there is no requirement for before and after school care in middle school, the costs decrease with increasing age until they get to college.

Interestingly, the government ignores the cost of vacationing which can be substantial. For domestic vacations this can cost up to $600 per child and rising to $2,500 if they vacation abroad. Maybe the government considers this to be an unnecessary expense which should be done away with. Fortunately, the government is very considerate when it comes to entertainment. Every child is entitled to a share of miscellaneous expense for entertainment purposes which goes into buying toys and electronic games which are a must-have feature for every kid in America.

For all it's worth, raising children is one of the most rewarding experiences in life. I can't think of a better way to spend (excluding childcare costs) my hard earned money.

Should Hillary Clinton Drop Out?

Sending Money Home

Sending money to Kenya is an issue that resonates across all Kenyans in the Diaspora. Over the years, the amount of remittance to Kenya has increased with the increase of Kenyans emigrating to foreign lands. According to official statistics by the Central Bank of Kenya, a total of $574 million was sent home in 2007. This number represents a 40% increase over the previous year whereby Kenyans sent $408 million. These conservative amounts represent close to 2% of the country's GDP as they do not account for the various ways that Kenyans remit money. Unofficial estimates from Inter-American Dialogue show that the amount sent could be close to $1 billion with each immigrant remitting at least $1,500 in 2006.

Personally, I have only sent money home once through official channels. Faced with a medical emergency then, I turned to the the services of Money Gram to send money to a relative. That is not to say that I have never sent money to Kenya. Like many other immigrants, I have always used unofficial channels.

My preferred way of sending money is usually through friends or relatives travelling to Kenya. Hardly does 3 months go by before a trusted kin or kith makes the journey to Kenya. While this is a risky and unreliable way to transfer money, I have continually used it successfully for the period of time that I have lived abroad. Doing so enables me to avoid transfer fees and get the best available exchange rate in Nairobi.

Once in a while I have turned to battering to send money home. In these instances, I usually get requests from friends in Kenya to buy them goods over here. Normally, I ask them to give the cash to someone in Nairobi then I send them their goods. This has worked well because, these people are in need of something and we both benefit from using the quoted exchange rate in the daily newspapers which is usually, better than what it would cost them if they wired me their money.

Closer to when we travel to home, I sometimes borrow locally from friends in Kenya whom I pay off later when I get to Kenya. The downside to this is you need to have good friends who don't mind helping out. On rare occasions I have turned to my folks though I try as much as possible to keep them out of my financial dealings.

Another means of money transfer that is fast gaining ground is the use of debit cards. Usually, a Diasporian will open up a debit account and send the ATM card to Kenya. When the recipient requires money, the sender deposits the money into the checking account which can be withdrawn in Kenya. I believe this is the best option especially now that foreign transaction fees and commissions are being phased out. What's more the recipient only needs an ATM to withdraw the money which can be accessed outside working hours. While I have given one of my siblings in Nairobi a Paypal debit card, I have never used this mode of transfer. From what I've heard, Bank Of America has a banking relationship with Barclay's Bank of Kenya and therefore they are the best suited for such no fee transactions.

Of all the ways to send money, I would discourage anyone from sending a check. A check takes days if not weeks to clear and there is usually a hefty check processing fee charged by the receiving bank. I tried to pay someone once through a check and they refused to cash the check even though I had factored the processing fee. Because the transactions involved funds from a third country, I was forced to delay the payment until when I travelled to Kenya on vacation. In return for the wait, they got a favorable exchange rate as I was paying them in foreign currency. Looking back, I think that was a foolish move because I landed in Nairobi at night and made the trip home from the airport close to midnight. In my pockets I had stashed wads of money which I could have lost had we been carjacked during the height of insecurity in Nairobi.

As globalization takes foot, I expect it is going to get cheaper to remit money home. Advances in technology and increased ease of international travel will open up more competing channels for Kenyans in the diaspora.

Garage Sale Bargains

The blossoming of the flowers in Spring brings with it new beginnings. All over America, households participate in the routine spring cleaning where they get rid of unwanted items. Out goes the old stuff and in comes more new stuff. Rather than store way this 'clutter', household tun to garage sales to help them dispose their unwanted wares.

Garage sales, also known as yard sales, are usually carried out on Saturday mornings in the front yard, drive way or inside the garage. Normally, neighborhoods hold garage sales on the same day so that they can attract the most traffic. In these sales, a lot of the household items sold are mostly used though occasionally you will find new items consisting mainly of unwanted gifts.

To get the most and the best from garage sales, one has to take several issues into consideration before embarking on a 'shopping spree'.

As they say, one man's trash is another man's treasure. The best bargains can be found in the richest zip codes. The richer the neighborhood the better the items put up for sale. Rich people don't hold garage sales to raise money but to get rid of their excesses (so that they can buy more household items). Among the items, you will find items that were bought on impulse that are in new condition. Going to poor neighborhoods is a waste of time as you will find people selling junk items.

Another place to avoid is communal garage sales held in churches or public schools. These fairs are usually overcrowded and because the proceeds don't go to the owners, a lot of the items sold qualify to be junked. Since the owners are unknown/anonymous, there is a high tendency to donate useless items for sale. In fact, after the end of the day garage sale fairs the remainder of the items are usually thrown away.

If you want to buy the best, be sure to get out early as you will also be competing with thrift shop owners or professional resellers. And if you are worried about the price tag, then the best bargains can be found towards midday when the sellers are eager to get rid of everything that they have brought out. Usually, most sellers don't like returning the items into their houses and once the sale is over others may leave the items on the drive way for anyone who wants to take them for free.

Among the items that you will find in garage sales are electronics, power tools and appliances. Don't buy these as the chances that they are spoilt is very high. Should you buy an electronic item, make sure it is in good working condition. A lot of the electronic items like computers or television sets may be old and almost obsolete technology. The same applies for music and movies. Unless you are looking for a specific classic, chances are that the CDs are scratched or the VHS tapes are unclear.

If you like reading, then garage sales are for you. In garage sales you will find cartons/boxes of books in good condition. And they are usually priced less than $2 each and some can go for as low as a dime. Usually after the sellers have read the books, they have no more use for them and will get rid of them.

If used clothing is your thing then you will may also find these in some garage sale. These are usually children clothes or costumes after they have out-grown them. On rare occasions, you may find new clothes being sold. Because of the stigma associated with used clothes, they are usually sold cheap.

Those looking for furniture, will find a lot of these in garage sales. From garden sets to beds, sofas, dining tables, mattresses and even storage shelves and bins. The downside to buying furniture in garage sales is that you will need to have a pick-up for carrying the bulky furniture and you may also end up with mismatched furniture in your home.

You will also find sports goods, games and memorabilia in garage sales. These include racing bicycles, home gym equipment, fishing gear and even golf clubs. Anyone looking to start a new hobby cheaply can try their luck in garage sales. In my case, I bought a spare bike at a cost of $20 for visitors, just in case they need to accompany me on my routine evening bike ride.

One thing to keep in mind is that prices in garage sales are not fixed. Everything is negotiable. If you are asked to put in an offer, do not shy from driving a hard bargain. The later in the day it is, the more the likelihood that your offer will be accepted.

With most Kenyans who win the green card immigrating to the US in the winter, I usually advice them to wait until Spring if they are looking to buy cheap household furniture. In their case, they don't have a lot of money to spare and garage sales can help them to quickly set up their homes.

Ridiculously Good Car Loans

With good reason, I’ve heard some people say that it ‘easier’ to buy a new car in America than it is to buy a second hand car. The way it works is that a lot of people buy cars through financing and you get better terms on new cars than on used cars. This tells me that the margins on new cars are better than used models and hence the discrepancy.

And with the economy tanking we are now back to the post 9-11 bizarre car deals. Back then, it was the introduction of 5-year no-interest car notes by General Motors that raised brows. Since then, we now have the 7-year car loans being peddled to people who will most probably own the car for 3 years leaving them with two car notes once they buy a replacement.

And with slowdown gaining momentum, 9-year car loans are fast gaining acceptance. Never mind that very few people get to own the same car for 9 years. Basically, people have stopped shopping for cars based on their sticker price and instead use the car payments to determine how much car they can buy. What this means is that, with a 30-year car note, a lot of people would trade-in their top of the range cars for a Ferrari.

On the day that the big three auto manufacturers announced double digit declining US car sales for the month of March, I noticed a new financing product in one of the Nissan dealerships nearby. A 12-month no payment car note.

I haven’t read the fine print but the whole deal just goes to show how desperate car dealerships are to clear their inventories. With gas hovering above $3 a gallon before the main driving season in the summer, you can imagine the horror that they are facing.

The irony of it all is that when the car makers announced disappointing numbers, Wall Street cheered them on. By weeks end, GM and Ford’s stocks had risen 10% and 15%, respectively. And to crown it all, the respectable Barron’s published a bullish article over the weekend on Ford that went on to predict that the stock is poised to double in the coming years.

Like the housing market, the coming months favor car buyers. Although car prices have held their ground, buyers with a good credit history will be rewarded when it comes to financing. If you have adequate savings and have complete control over your cash flow, then these products are definitely for you. Like in the case of the last recession, when we replace my wife's car I will be looking to get a 5-year no interest deal again. You can be certain that we will see a lot of the dealerships offering no interest financing once more.

Recommendation; At the beginning of the year, I received an offer by mail from the local Mercedes Benz dealer to test drive the 2008 C-class for 1 week. Yes. 7 days. Not the usual 24-hour test drive that we are accustomed to.

If you want free car rental, make your way to a car dealer near you and try your luck.

Viva el Capitalismo! Long live the US dollar.

Credit Crunched

It certainly looks like I'm not immune to the credit crunch. Or so does Lloyds TSB WorldWide Service think.

In a bid to ensure responsible lending, they have slashed my credit card limit from £4,000 to £1,000 with effect from my latest statement. Never mind that I can't even remember the last time I received a statement from them.

I think the last time I used this credit card was sometime in 2006 before they started strictly enforcing the pin and chip payment system. Basically, debit and credit cards issued in the UK require the buyer to input the ATM PIN in addition to signing for their purchase.

This is a far cry from the US system where they don't even bother to check the signature. For this reason, most of my cards are unsigned which has caused me untold suffering when travelling overseas. In one instance, I was almost turned away from a hotel in Europe because none of my credit cards were signed at the back. And to their horror, my passport was also unsigned. Another time, the attendant at the airport car rental firm almost called the police on me because he thought I was using a stolen card despite the fact that the name on the card matched the one on my drivers licence which has my picture.

In the case of the credit card from Lloyds TSB, I don't even think I've even activated it. It wouldn't surprise me if the card still has the activation sticker instructions on it. For this reason, I will not be contesting the decision to reduce my credit card limit. If anything, I will keep the credit card account until such a time that they close it. Which seems possible, as I recently closed both the savings and checking accounts that I held with them.

Small Business Is Big Bucks

In 1939 Bill Hewlett and Dave Packard, Stanford University classmates founded Hewlett-Packard with an initial investment of $538 (today's equivalent of approximately $8,135). The predecessor to HP, operated from a garage less than 3 miles away from their current headquarters in Palo Alto, California. Today, the $538 investment has grown to a corporation worth more than $115 billion with worldwide sales over $100 billion to boot.

The same can be said of hundreds of companies in America which started in college dormitories, study rooms, bedrooms, basements and garages. Through the sheer determination of their founders, these companies have gone on to make millionaires and in some instances billionaires of their founders.

That I believe is the beauty of this country, long called the land of opportunities and possibilities. And it is on this premise that I begin my journey into entrepreneurship.

The end of March marked my first quarter in the world of business. After much thought, soul searching, consulting friends and lots of researching, I finally took a step into starting my own at-home business. Armed with a lot of determination to succeed I ventured into a business that has claimed many casualties.

To my surprise, I must admit that I underestimated the effort required to launch the business. Even though I had a come up with the business plan, I have made a lot of changes along the way owing to my inexperience at what I am doing. Between reading books and talking to other business people, potential clients and vendors, I have really learnt a lot. In fact, I could say that having a business plan was of little use for me. Instead, I believe I could have gotten by with a project plan. IMHO, a business plan is crucial if you are seeking to raise funds or are starting a partnership and require everything to be put down in writing.

As much as I had planned to keep my expenses at a minimum, I have come to the realization that skimping on expenditures was one of the main reason that others failed. Simply put, you need money to make money. You cannot make money out of thin air. There has to be an initial investment. For this reason, I have decided to commit myself to ensuring that I do not repeat the same mistake.

Like any other start-up, the question of financing was at the top of my list. My plan was to use money from my income rather than my savings. Because of this, I have had to make financial adjustments along the way. So far, so good. Thanks to my tax refund, I have not overdrawn my checking account. And with the Tax Stimulus Package on it's way, it is unlikely that I will be hearing from my bank manager soon.

Surprisingly, when I was opening a business checking account, I was offered a $100,000 line of credit. Not wanting to turn down Bank of America's generosity, I instead settled for a credit card with a $5,000 limit.

By my projections, I will spend between $7,000 and $10,000 before I make my first sale sometime in the summer. Right now I'm working on my 'prototype', which will take another month before completion. After which I will go into production, which will take at least eight weeks, and then I'll be ready to launch. This is when the hard work begins. Making my first sale.

I don't expect to break even in during the first 2 years of operation. Should I succeed, it will probably take me 4 years before I can make substantial profits.

Even if I fail, I must say that I have learnt a lot in my first three months in business. As expensive as the failure may be, I count this as preparation for bigger ventures in the future. Lined up are two other business ideas, one of which I intend to initiate towards the end of this year.

Figure This Out!

• UBS reports a $19 billion write-down bringing their total sub-prime write-down to $40 billion.
• They will take a $12.1 billion loss for the 1st quarter.
• Last quarter, they reported a net loss of $11.28 billion and the quarter before that they took a $0.7 billion loss.
• Like last year, they are on track to report another full year loss even though they are in their 2nd quarter.
• They replaced their cash dividend with a stock dividend.
• Today they announced that they will be seeking to raise $15.1 billion in new capital in addition to the $11.5 billion that they raised last year.
• Their chairman announced today that he would be stepping down.
• Standard & Poor's belatedly cut their rating one notch to AA-, citing "risk management lapses, earnings volatility and need for new capital."
• The end to their sub-prime woes is no-where in sight.

And UBS stock opened 10% up this morning after last quarter's stunning loss.

Is this a April fools joke or what?

Like in the case of JPMorgan bailing out Bear Stearns, the ibanks are propping each other. If any one of them fails, it will be a domino effect that will knock the rest of them into oblivion.

The investment banks are nothing but a big Ponzi scheme waiting to capitulate.

Hanging Out With The Generals

Every year, senior ranking Naval officers from all over the world are selected to join the prestigious Naval War College in Rhode Island for 1 year program. Some of these graduands are Generals and most of them progress to the rank of General or Admirals in their respective country's Naval Forces. Because of their high rank, they viewed as important allies of America in their home countries. To this end, towards the end of the program, they are taken on a tour round the United States so that they can better foster friendship and cooperation with the U.S.

In what has become an annual tradition, the Naval officers have made my place of work one of their stops during their tour. During this time, they are taken through the work that we do and made to understand the value that we bring, not just to America but to the rest of the world. Due to the diverse nature of the group, I have always been invited to take part in these routine. My multi-cultural experience has always placed me at an advantage when it comes to interacting with foreign visitors.

For the first time in as many years, there was a high ranking Kenyan Naval officer in this year's class (and he happened to know one of my sibling). This is despite the fact that Kenya has always been a strong ally of America, a key military partner and a major recipient of U.S. military assistance. I am not sure why there has been no Kenyan attendee every year while there are usually officers from other African countries like Egypt, Nigeria and Tunisia.

For me, getting to meet these high ranking Naval officers has always been interesting. This is because we get to hear their thoughts on not only about the US, but also regarding world affairs. Even though the average age of these officers is 45 years, they are nothing close to boring. If anything, they come close to Sailors, if you know what I mean.

In my conversations with them, I have come to realize that although some of them are political appointees, they are usually full of wisdom. On rare occasions, there has been one or two officers who get carried away by their seniority in their respective countries. Interestingly, these officers have been from nations that don’t enjoy transparency and civil liberties so attitude can be traced to the countries from which they come from.

On the other hand, the most reserved officers are usually from the Middle East or Arabic countries. Even after a few drinks, it is very hard to get them to open up. May be it is because of their poor grasp of English but then again, most of these officers don’t come from English speaking countries.

If I was to choose one group to hang out with, it would be the officers from continental Europe. They are the most liberal thinkers and are never afraid to speak their mind. Even with their strong accents, they are nothing close to boring and show the greatest interest in understanding America. It’s no wonder that these countries have very competitive economies. Unfortunately, I prefer to hang out with the Africans as I connect more with them even though they are half as interesting as their European counterparts. At the same time I use the ocassion to speak my mind regarding the happenings in Africa as they are feared in their countries and may not get to hear the views of the common citizens.

As someone who greatly appreciates the service of the men in uniform, it is always an honor to meet these senior Naval officers. The few hours that I get to interact with them, serves to broaden my horizon and understanding of their different cultures.

Interestingly, the group is usually exclusively male. I am yet to meet a female Naval graduand from the college although there may be a female officer from the US Navy accompanying them . And now that I’m thinking about it, I've never heard of any high ranking female officer in both Kenya and America. It certainly looks like women have a long way to go in the Armed Forces.