The Kenya Association of Stock-Jokers
Here they go again. This time it’s the stockbrokers who are hyperventilitating about the bearish stock market. They want people to start buying those stocks, darn it! Remember how these brokers make money: By charging you (the consumer) exorbitant commissions to buy and sell shares. Whether you make or lose money is irrelevant to them. They need those darn commissions so they can buy food to feed their babies. Do you want their babies to starve? Be kind.
So, let us analyze what they are saying and I’ll begin by posting a quote from the article in BD Africa:
“ The second and third quarter results of most listed companies have showed a positive growth pattern and the fourth quarter is likely to see this trend continue. Contrary to what some quarters may think, the international downward spiral and turbulence in the stock markets may have no direct impact on the NSE,” {the association said} arguing that there is no common investor base between the NSE and those exchanges in developed economies that would cause a joint response to fundamentals”.
People sure do love to use the word “fundamentals” or as I like to call it: “funny-mentals”. What are the fundamentals that are currently driving the Kenyan economy? Outside of farming, I don’t see any fundamental, except tricky financing by bankers. In fact, the Kenyan economy, is beginning to remind me of what we are currently seeing in Iceland, albeit on a much smaller scale. Iceland’s economic boom was built on borrowing and now, Iceland is in big doo-doo because they borrowed too much and can no longer afford to pay it back. That is what happens when you try to spur economic growth in a country that does not have a manufacturing base to speak of. Guess who else is doing that? yup. America. Very few goods are now manufactured in America. Their manufacturing base started being wiped out in the early 80′s and they turned to this tricky financing and now they are in trouble.
Now, where do these stock jokers think people are going to get the money to buy shares?
Remittances? I expect those to drop off significantly as more and more people start getting laid off.
Loans? The banks are already sweating from their high default rates and usually, when they voluntarily report default rates, they tend to under-report them. I wouldn’t be surprised if those default rates are actually higher than what they are reporting.
The NSE chairman said that the Co-op IPO should be pushed off until February because by that time, people will have forgotten about the bear market. Really? The problem is not about people forgetting. It’s about people not having the extra income to purchase those shares. How is that going to change by February? Are their wages going to increase significantly by February? I don’t think so. In fact, what’s going to happen is that civil servants, whose paychecks are going to start getting docked (by banks looking for them to repay their loans) are going to have even less money.
KE,
thanks to a few chapters of adam smith, i now appreciate your beef with the kenyan economy. kenya is really a farmer who owns a one-bed motel. all the hype about economic growth never really addressed the source of this growth. unless the farmers double their output or tourists visit our motel, we are as good as broke.
tourism & agriculture are tied to a slow annual cycle i.e we work for a year, export and get paid. an industrialised country on the other hand sells things every day of the year. the banks ignored these facts (the real fundamentals?) and gave loans to everyone and their nephew. the result? auctioneers are now having a field day (see daily nation’s classifieds) repossessing land, houses, cars and lifestyles. not to mention loans-for-shares.
how it will eventually play out at the nse is anyone’s guess. but as for the brokers & their babies, if they cant have cake, bread will do just as well.
And whats up with this “Do..Sell..Lies” broker….they are on the verge of being taken over..All they have been doing is selling me lies until I read the paper that the boss was kicked out yesterday. I hope they dont go under like “NYAGAnya the ostrich” because that will not only be a blow to NSE, but bail outs dont work in kenya and I cant afford to lose another penny..which brokers are we going to trust people ?
Koffi:
Let me ask you a question: What are you going to do if DSL does not return your money? This is the same thing that has happened with all the brokers in Kenya who have gone down. They are stealing people’s money and has anyone ever recovered their money from Nyaga stock brokers?
If people can’t trust the brokers with their money, the NSE is not going to be able to function.
Gordon Gecko,
I found out that they will still be in business until they get a buyer, so I am trying to get everything in order, ASAP….but I’m not sure which broker to transfer to..some peopple are saying they expect three more to go under…
But why are they having liquidity issues…we didn’t have the toxic subprime mess in kenya?
KE,
just to divert from the topic,I found this story from this link about Iceland very interesting. You may want to read
http://www.newyorker.com/talk/.....surowiecki
Koffi:
Who are the three brokers who are set to go down and is it for the same reason, i.e. stealing depositers money.
Noni:
Thanks, I read that article a few days ago even though I don’t particularly agree with many of the author’s analysis about economic issues. I prefer to listen to people like Nouriel Roubini because he uses facts and data to arrive at his conclusions, which so far, have been proven right.
Financial journalists (which is what the author of this article is) tend to gather most of their info by talking to so called “experts”, namely, the same overrated bankers who caused these problems.
The fundamental problem with trying to develop a stock exchange in the country is that culturally, Kenyans do not believe that people who commit white collar crimes should go to jail.
If you steal a chicken or a cow…well God help you! but if you steal people’s money (which is essentially what these brokers have done), chances are, you won’t see any jail time.
So, unless the government gets serious about enforcing these white collar crimes with actual jail time, I’m afraid, these kinds of things are going to continue to occur and eventually, if people can’t trust their brokers, they’re just going to stop giving them their money to buy shares.
I must say that most of the kenyan business blogs I read tend not to focus on this broader issue of law and economics. People just want to talk about the funny-mentals. They want to pretend that they can predict whether a stock price will go up or down based on some strange analysis which they utter with total clarity. There is rarely any discussion about the links between the rule of law, regulation and economics, even in this climate of financial crisis — people still think they can predict the future or even trust what these financial institutions are telling them.
You never really know what’s going on behind closed doors and the only way to prevent these kinds of sheenanigans is through tough sentences that promise jail time or through civil lawsuits that can wipe you out financially if you are found guility (which by the way, is what is going to happen to many of the CEO’s of companies like Lehman and AIG — they are going to be forced to spend millions of dollars defending themselves against these shareholder lawsuits and if the government decides to go after them, they could actually face jail time).
So, the CMA really needs to be working with the Attorney General to strengthen the countries securities laws and to include jail time as punishment for those who misapropriate client money.
with all the hullabaloo about the collapse of wall street,one is left wondering why do we leave the markets to regulate themselves.moreover how come no one is talking on measures to arrest the increasing cost of living,aren’t we making a small Zimbabwe here in Kenya,the rate of inflation is simply alarming!
KE,
U nailed this one so well…..thats where it should all start in kenya before even starting to think of 2030.
lloyd,
I was watching a documantary on the 1987 crash..when Greenspan had just been the governator….and you know what? the parallels are the same.UNBELIEVABLE!