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February 23, 2019

April is the cruellest month, breeding lilacs out of the dead land

US President Donald Trump. /REUTERS
US President Donald Trump. /REUTERS

I have been reading Ngũgĩ wa Thiong’o and in his book ‘’Dreams in a Time of War’’, he writes: ‘’Years later when I read T.S. Eliot’s line that April was the cruellest month, I would recall what happened to me one April Day in 1954, in chilly Limuru...The Day came back to me, the now of it, vividly.’’

And then I jumped to the Opening Lines of the Poem to which Ngũgĩ is referring:

‘’April is the cruellest month, breeding

Lilacs out of the dead land, mixing

Memory and desire, stirring

Dull roots with spring rain.’’

And here we are approaching April and on the back of my mind, I was thinking ‘’will it be cruel?’’

Internationally, April might well turn out very cruel for US President Trump. Investors ran the dollar and the Dow Jones higher after November 8 polls, and now are running them both right down. The ‘’Trump’’ trade has become the ‘’Chump’’ trade. Prices emit a very clear signal, and the signal in all this noise is very pure. What is also clear is that for all the Trump’s distractions, ‘’incidental’’ wire-taps [The US taps the Russian ambassador he walks into Trump Tower (through the back door) for a meeting with his senior advisor and son-in-law Jared Kushner (which Kushner does not declare)] are set to confirm a simply unprecedented level of ‘’non-linear’’ coordination between Team Trump and a Foreign Power. The failure to repeal Obamacare speaks to a president who is out of his depth and New York Times columnist Maureen Dowd described him thus ‘’because you’re sitting around in a bathrobe getting your information from wackadoodles on @FoxNews’’. Therefore, sell the dollar. Trump has injected political risk into the US equation in a way that we have not witnessed previously.

Crude oil in New York closed out at $48.21 which is a five-month low. The price action is signalling a big risk of a further dramatic and asymmetric move to the down-side. Keep an eye on Caracas, Riyadh, Abuja, Luanda and all the rest. I expect April to be very cruel for these capitals. Closer to home, the Central Bank of Nigeria has engineered a powerful naira on the black-market from levels above 500.00 to the dollar to below 400.00. Given my outlook for the price of oil, this naira rally is not sustainable.

In Nairobi, the stock market wobbled big. The Nairobi All Share crashed -10.289% from the start of the year through March 9, and that date was in fact a 47-month closing low. The NSE 20 Index closed at a more than eight-year low at the end of January. The mood was dark. Everywhere we turned, it seemed policy-makers were on a Kamikaze mission to destroy shareholder value wherever they could find it. And what with the election just around the corner, I remember folks looking at me with some incredulity when I said: ‘That’s it for the year, this is the low, it’s like an elastic band that’s been stretched too far.”

Well The Nairobi All Share is +9.1874% since March 9. The Nairobi NSE20 is +10.33% since Jan 30. A number of stocks have struck more than 2017 highs. StanChart closed +15.34% in 2017 [plenty more upside scope after reporting FY 16 PAT +42.679%], KCB +9.56% in 2017 [Sh3 final dividend], amongst others. Safaricom is marginally down for the year as it recovers from what was an onslaught. It looks outstanding value even after staging a +8.52% price rally in March. Local institutions [overweight bonds and underweight equities] have been caught wrong-footed, and need to re-balance their portfolios urgently more in favour of equities.

The shilling closed the week just below 103.00 to the dollar. In January, I recall a barrage of headlines which made you think that the Shilling was tanking. I remember being at a conference at the Radisson Blu and a Fellow pulling me aside and saying: “Look buddy, its all about the risk of a big asymmetric move to the downside’.”

I have a fondness for the word “asymmetry” and its derivations. For example, what happened in London where “a middle-aged crackpot in a rented Hyundai’” [@rj_gallagher] caused havoc is an example of asymmetric warfare. So I recalled that conversation ‘”the now of it, vividly”.

The shilling will confound the naysayers through 2017. Oil is the key signal.


Aly-Khan is a Nairobi-based financial analyst.




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