Items by CRB

Concept Advisory Services

• Are You Gambling When Investing In Stocks?

  Posted: April 10, 2008, 7:30 pm by CRB

  I have a lot of fun following individual stocks. I keep tabs on a small handful of companies that I have a personal interest in - Centum, Kenya Re, KenGen, and Barclays Kenya, namely. I watch for news articles on the company, read their annual and quarterly reports, and stay up to date on pretty much everything about the organizations.

  For a short while, I owned individual shares in Housing Finance and Mumia’s Sugar in mid-2007. I bought into HFCK in late July, purchasing about 4,000 shares when the stock was at k’sh 38. Over the following three weeks, I watched HFCK drop like a stone to below k’sh 25, then I sat there through late August and early September as it rose back up to k’sh 40. I sold immediately. Over the same rough period, I bought 500 shares of Mumias at k’sh 32, watched them sink and struggle to rebound, and sold the shares in late September at k’sh 29.

  In the end, I didn’t lose too much money. What I did lose is a lot of sleep. The second I owned those stocks, I became obsessive over those two companies. I read every single morsel of information that came out about them, read reports, studied numbers, sweated, didn’t sleep at night, and a few times I even queued up panic sales of these stocks.

  The second I finally sold all of them, I felt much better, and I walked away with a bitter taste in my mouth. But is that the right lesson to take away from the experience? Let’s dig into the idea a bit.

  Most forms of gambling that aren’t merely chance, such as blackjack and poker, are games of partial information. You know some of the information out there - the cards you hold, perhaps some of the cards the dealer holds, any revealed cards, and the “tells” that the other players have shown you. At the same time, key pieces of information are hidden - what the others are actually holding.

  The same statement is true of stock investing, except the story is a bit different. Most of the information you’d really need to know - in fact, virtually all of it - is right out there for you to see. The only problem is that it’s like trying to find a water droplet in Lake Victoria - there’s so much information out there that processing it all is impossible.

  As a result, stock investors often choose specific pieces to focus on. Perhaps they look at the P/E ratio for a company, or maybe they look at the backgrounds of the company leaders. I’ve read tons of books about different strategies, but most of them boil down to isolating a few key pieces of information about companies and using them as a judge about when to buy and when to sell.

  The problem is that no individual metric is perfect. One can’t ever boil down the complexity of Mumias entire business into just one factor. What would happen to Equity stock if tomorrow morning James Mwangi dropped dead of a massive heart attack? Do you have any idea? Obviously, it would go down, but how far would it go down? Would Equity weather that storm? Those are both huge unknowns, but investing in Equity stock means you’re making some sort of prediction on those questions. You’re using one view of the information to make a judgement about a whole company.

  Some people respond to this glut of information and the inherent risks quite well. They focus in on specific things and just blot out everything else. They do the homework they need to do and walk away from it. Are these people gamblers?

  What about others, like myself? When I invest, I am almost driven crazy by the desire for more information. I know that there is more to know about where my money is sitting, and I need to know it. Am I an information addict?

  Personally, the risk itself doesn’t bother me so much - I am merely overwhelmed by the actual level of information in that information game. But what about a person who knows why he’s investing, but is ready to throw up after a 0.5% drop? I have a close friend like that - he basically can’t invest in anything that isn’t fully guaranteed. Is that person far too conservative?

  It all comes down to personal makeup and psychology. Some people are predisposed to play this information-rich game; others simply aren’t. I put myself into the “ average predisposed” category - I invest when I have money that is truly “play” money, but not if anything of any importance relied on that money. It would move from being a dalliance to being an obsessive information hunt - and that’s the result of my psychological makeup, not the game itself.

  Individual stock investing is something like playing blackjack at a casino where, on every hand, the dealer is wagering just a little tiny bit more than you, but there are thousands of people around you shouting out suggestions. If you can concentrate enough and take the time to sift through the information overload correctly, you can potentially go on a very nice winning streak - and the odds are slightly in your favor. At the same time, though, as with any game where you don’t have all the information, you can very easily go on a losing streak.

  My solution to all of this - and the solution that leaves me sleeping well at night - is to buy some units from the fund mangers. That’s kind of like going to that casino and playing 5,000 hands at once with earmuffs on. Because of the huge number of hands, the luck of any individual hand is negated and eventually you end up with a small overall win without the stress, time, and focus needed to win at an individual hand.

  I think investing in individual stocks is a fine diversion and a potential way to earn a lot, but far from a guarantee and the work needed to get those earnings is tremendous. For the casual investor who hasn’t invested the time to really learn the game and the investment and learned how to fight through the information noise, individual stock investing might as well be gambling.

• Time Value For Money

  Posted: April 9, 2008, 7:33 pm by CRB

  The basic idea of time value of money is that a shilling today is worth more than a shilling tomorrow. This can be shown in many ways, many people find it easier to understand if they think in terms of something they already know: food. For example having the money today allows you to buy some food immediately. Alternatively, you may be willing to forgo current consumption and wait until later to purchase your food. Thus you could lend your “food money” to another with the promise of being paid back at some future time. Since you are passing up food today you would demand a return sufficient to allow you to buy at least as much food in the future that you are giving up now.

  As we do not know the future this type of deal involves risks. For example, the borrower may decide not to pay you back. This is called default risk. Or the borrower may pay you back but due to rising prices, you can no longer purchase the same amount of food as you had expected to be able to buy. Because of these risks (you as a lender) would require a higher interest rate to compensate for accepting the risks. However if you ask for too high of interest rates you will not find any takers for your loan.

  Stock trading is a bit different in the sense that you only make a gain when a stock appreciates or when a company announces a dividend. Majority of us venture into stocks not because of the dividends but for capital gains. And here in lies the trick. When do you decide that it is time to offload? Many of us rely on gut feeling. You watch a particular stock and at one time you feel that it has reached its peak you offload. This is what financial analysts refer to as timing the market. A risky venture if you ask me. If you engage in this type of trading, that is why you sometimes feel like you exited too soon, and other times you curse yourself for holding a stock past some price.

  Personally, I prefer setting a price target. This way, I reduce the agony of deciding when to offload or buy. Some of you might consider this as speculative trading but I see it as smart trading. Assume you buy Centum investments today at a price of k’sh 25 and you put a price of k’sh 32 as the price to dispose. Come January 2009 the price shoots to k’sh 33 and you dispose. Owing to the cyclical nature of the market, the price is bound to come down to levels of k’sh 30 or to a high of k’sh 35. You then have a chance to buy the same stock at a discounted price of k’sh 30. However, it is also a gamble considering that the price may take some time to come down. This is equivalent to long term trading with the advantage of acquiring more shares for the same stock and with your initial capital.

  How about where to invest, in order that your money works for you by giving you a higher return over and above the rate of inflation. I always wonder why someone would want to have all his wealth in a savings account. Our banks are notorious for low interest rates on fixed deposits and savings account. Nowadays they have improved from a low of 3% to 6% for fixed deposits. With Stanbic and Standard chartered bank doing a 6% rate. Do not even think of a savings account as the rates are horribly low. I am talking of less than 1.5%. With the Unit trust products, banks are feeling the heat as customers continue to withdrawal their savings and putting it in the hands of the fund managers.

   For those of you who have doubts on their ability to make it at the NSE, the fund managers will invest the monies on your behalf. Moreover, the minimum amount to place with the managers has come down with Suntra Investment Bank having a low of k’sh 100,000.  They are many applications pending for registration as fund managers and this would be a welcome move, as charges will come down. The 7% annual charge is a hindrance to many as this eats into their investment. Last year NSE posted a negative return of 2% and this reflected in the unit trusts performance. For those who had invested in the equity fund they was the dip in the market to factor and the charges too. This resulted in even lower returns.

  They is also forex trading for those willing to risk a little more. I have always considered forex trading as equivalent to gambling. Tried it once and burnt my fingers. I thank God it was those dummy accounts. Rather than castigate forex trading I have sought an expert and the lessons are interesting. Given time, this might just turn out to be the next big thing.

  The opportunity to make some money is limitless if only we are willing to learn and pay the price.

   

• Keep Your Goals in Mind When All Is Not Well

  Posted: April 8, 2008, 9:26 pm by CRB

  As we have closed out the first quarter of 2008, those who have investments should be receiving their quarterly statements in the coming days. The first quarter of the year was not a very good one in terms of performance, and if you have investments in the stock market or equity fund, you’re probably going to see some negative numbers.

  Nobody enjoys losing money, but even if your statement shows that you did during the first three months of the year, don’t panic. You should certainly examine your investments and see how they fared, but make sure you’re doing it in context of your investment objectives. For example, if you’re looking at a unit trust account and you have 2 years until liquidation, the last thing you want to do is make drastic changes based on a couple months of poor performance.

  When you make significant changes to your investments based on what has happened over a relatively short period of time, you’re trying to time the market. It has been proven that it is extremely difficult to consistently make good investment decisions by getting in and out of investments by reacting to current events.

  Also keep in mind that by making a change now, you’re doing so after the damage has been done. In a perfect world, you would make these changes in anticipation of a current trend. Selling an investment now based on what happened in January doesn’t make much sense, does it? The markets could go down further, they could trade sideways, or they could go up in the next quarter. It is anyone’s guess.

  You also want to keep things in perspective when it comes to performance. Remember, you’re quarterly statement just shows a small snapshot of time. If you look back over the past three or four years, you’ll likely see that one bad quarter isn’t as bad as it first seems. There will always be ups and downs, and it is unrealistic to expect to see uninterrupted positive gains. Will your investments go back up? Certainly. It might not happen overnight or even after a few months, but the cycle will reverse just like it has done many times in the past.

• An Interesting Encounter

  Posted: April 3, 2008, 9:18 pm by CRB

  On Monday evening, I shared a lift in downtown Nairobi with a man who gave me his card. Apparently, he works as a success lecturer at Success University. If you are wondering whether the university is real, just visit Norwich Union 5th floor. I know it because the man invited me for a session at his office/university having said it ‘would change my life’ forever. My schedule on Tuesday was a busy one and so we planned for 6.30pm yesterday.

  I kept my promise and at 6.30 Pm, I was promptly at the door. I was ushered into a modest furnished office where the host warmly welcomed me for having made it. In one of the room, some sort of lecture was going on. It is just some two rooms and it does not require you to be extra keen to hear what is going on in the other room. My host requested that I wait for our presentation as they were just finalizing with an earlier group. I was not alone in the waiting area and immediately struck a conversation with some fellows invited.

  The surprising thing was that it was a mixed crowd in terms of age and from our conversation majority were professionals or business people. I had expected to find the usual desperate Nairobi crowd who are always on the look out for an interesting event to attend.

  Eventually the group before us finalized and we got in.

  Success University has its origin in the United States and has a presence in over 70 countries. Kenya is just among the many countries. The concept behind it is simple or so I got. The owners or lecturers have teemed up with notable personal development experts or gurus and have compiled their material into one package. The gurus include Zig Ziglar, Antony Robbins among many. For registration you pay the equivalent of 170$ (k’sh 11,000) and you can enroll for monthly classes at a monthly charge of 40$ (k’sh 2,600) which is optional. With the registration fee, you get a couple of CD’s on topics of interest including personal finance, marketing, sales, love, relationship, and entrepreneurship.

  As a learner you can also make some money. For every student you introduce you get 60% commission on the joining fee. The more people you introduce the higher you move in rank and the higher you earn in commission. Looking around the room I could figure out that many were not there to make some money but to learn on how they can improve on some areas of their life. Personal development is a multi million-dollar industry and I was not surprised that many had attended. Look around you and you will not miss an advert promising you how you can improve your finances, love life or career if only you followed some steps. The best sellers in our bookshops are not the fictional work or educational material but books dealing with personal development.

  I can smell a prymind scheme a mile away and this was not. They call it multi level marketing and even though the ones I know deal with real products this one is service based. The only similarity is the aspect of recruiting where you have to enroll new student for you to make an income. And if you ask me this is normal sales task. Because there is a real value in form of the inspirational books and motivational talk, it is not a hot promise.

  Its not that I have joined, what I am giving is my observation and understanding. The lecturers did give a presentation on personal success that I found very informative. They touched on personal finance, motivation,  and success in inter personal relationships among other topics. Considering we are not taught how to lead balanced lives through formal schooling, this is one meaningful talk I have attended this year. I would encourage you to attend. After all knowledge is power.

• Progress on Safaricom IPO

  Posted: April 2, 2008, 6:45 pm by CRB

  The enthusiasm shown by investors on the Safaricom IPO is impressive. Even with the negative publicity, scores of investors are lining up to apply for a share of the most profitable company in the region. The bug has caught even the cautious Ugandans and I understand there is a lot of interest from that side. Our politicians finally gave up though I did not take them seriously in the first place: I mean, if they were not for the sale the simplest thing would have been to file for an injunction and halt the process. Talk of playing with people’s emotion.

  But I did agree with them on the issue of disclosure. Our capital markets will not reach he projected highs if deals are within ‘an old boy’s network’ as it is the case with Safaricom shareholding where Mobitelea acquired a 10% stake without any form of consideration.

  I also understand that Kenyans have taken up well the issue of online application. I have checked it and its simple enough for an average investor. Majority of investors are still wary of the process and would rather stick to the old and tested way of application. Moreover, I can understand their concern since online application removes that personal interaction between an investor and the broker.

  There is no doubt that the share offer is going to be oversubscribed considering banks and employers are financing up to even a 100%. This is advantageous to those who will dig into their savings as they can dispose even in day one in the secondary market. In financing, the shares allocated will act as security. As we wait for refunds they is a likely hood of the share appreciating; lets admit it, even at k’sh 7 it is still a fair deal. My only concern is this time around we may not see the 300% or even 200% appreciation on the first day of trading as we have been accustomed to. There is a large amount of shares in the hands of retail investors whose aim is to make a quick buck. A slight appreciation will result in a high supply thus depressing the market.

  I had expected other counters at the NSE to be performing poorly but not at the current rate. The prices have corrected in regard to the offer but only with a small margin. Actually, since the opening of the offer the NSE index has been climbing. With the realization that it will not be a full allocation savvy investors are looking into the other counters. I am seeing this change in the next two months. Upon listing and assume the price does not rise in a big way there will be a lot of interest as both retail and corporate investors take their position with the future firmly in mind. Other counters will be ignored albeit temporary. Their prices may not go down but will not go up either as investors adopt a wait and see attitude.

  There are a couple of things to learn from this IPO. One is on the success of online application. Will it be as messy as the manual? Can it serve us with the next offer? I am also interested with how the foreign investors are seeing the offer. Their price will be through the infamous book building process. And considering how the year began for Kenyans, will the foreigners find the offer attractive. This includes our neighbors who for all intent and purposes are foreigners. As William Ruto pointed out, this company has been built from scratch with the sweat of Kenyans and Kenyans should derive maximum benefit before we can invite a third party.

• Safaricom IPO: Is it Worth?

  Posted: March 28, 2008, 7:25 pm by CRB

  Two years ago, I was a banker and hence I can imagine what those in the operations department of our local banks are bracing themselves for on the opening of the Safaricom IPO. At that time, it was the KenGen IPO and I remember us leaving office sometimes at 10Pm as we processed the many requests for financing.

  Apart from the KenGen IPO, no other IPO has received much interest from the Bankers like the Safaricom IPO. Not only because of the magnitude of the offer but also because the company is one of its kind in East Africa in posting record profits. For the current financial year, analysts are predicting k’sh 17 billion as the firms’ net profit.

  Investors unlike in previous IPO’s eagerly await the share. With the other IPOs, investors debated on the wisdom of subscribing. The trend has been low allocation on the shares applied with Kenya Re and KenGen having greatly disappointed many investors. Applicants for KenGen were allocated a measly 7,000 shares as the maximum while retail investors got a low of 200 shares. The issue of delay in refunds has also greatly dampened the appetite for retail investors. There has also been the issue of share price appreciation with many doubting the ability of the IPO’s and the secondary offer prices to rise. A case in point being the Mumia’s secondary offer where the offer price was k’sh 49 only to see the price come down to a low of k’sh 17 before the bonus issue. Eveready has not helped with the price dropping to k’sh 6, less than the k’sh 9 offer price.

  However, Safaricom is different and I do not see the price ever going below k’sh 5 unless something drastic happens like reporting a loss. Nevertheless, even as we get excited with the IPO, I want us to consider some points on the much-awaited IPO. That Safaricom is a big offer is no doubt. Compare the 10 billion shares on offer with the KenGen offer of 650 million. With the retail investors allocated over 30% this translates to 3 billion shares in the hands of investors who are keen to dispose at the least price appreciation. My worry is many will be buying the share with the sole intention on disposing and thereby making a kill in the secondary market. This price appreciation may be a myth considering the large volume of shares out there. The average investor has also smarted and now knows that price appreciation on secondary market is only for a short while. Moreover, considering the foreign investors are well taken care of with their 35% allocation, where will the demand come from?

  There is also the issue of earning. There are 10 billion shares on offer representing 25% of the Safaricom share capital. This means the share capital of Safaricom is k’sh 200 billion with 40 billion issued shares. Now assume that Safaricom makes k’sh 20 billion after tax. The earning per share will be k’sh 0.5. Moreover, in the last financial year, Safaricom made k’sh 12 billion and paid out a dividend of k’sh 4 billion. Assuming the same rate of dividend payout, this would translate to a dividend earning per share of k’sh 0.11 for the current period. This is commendable for a share with supposedly a market value of k’sh 5. KenGen with a market price of k’sh 24 paid k’sh 0.40 for its financial year ending December 2006.

  There is fear that Safaricom share may not rise as expected due to the high number of shares in the hand of retail investors. Similar argument has been advanced to explain KenGen whose share price has never gone past k’sh 40 two years after listing.

  What does this contend for the investor looking to finance the IPO through credit financing? Many banks are coming out apparently to assist investors in buying the share with a 100% financing. And many are buying the idea considering the hype generated by the IPO. Even some banks not known as retail friendly are all out announcing their financing product.

  Financing comes at a cost with Equity bank charging a 15% interest on reducing balance. Add the banker’s cheque commission, processing charges and the insurance cover and you get a whole lot of added expenses not being disclosed- but for obvious reasons- by the bankers.

  Not that I would advise anyone to ignore financing. Using other people’s money is not a new phenomenon in investing. Assume the share price rises, you can dispose the share and pay off the loan and just pay interest on only one month. But there is a catch. Upon financing, shares will be the security, thus one cannot dispose until they clear the loan, and the CDSC can release the hold on the shares. The implication is that one has to borrow another loan to clear with the bankers and ensure they sell the shares in a reasonable time to ensure good return. A small delay can see a potential investor losing out due to price swings. And the Capital market players are not famed for their efficiency especially when they have a large workload to handle.

  For those queuing to get info on financing, my advice would be take that loan only if you can afford to pay the instalment from other means rather than hoping the share price will rise big time and you will sell and pay the bankers. That is what many are contemplating. And can you imagine a fraction of 3 billion shares being dumped at the NSE? This would ensure the price does not go past k’sh 7

• Safaricom IPO: Is it Worth?

  Posted: March 28, 2008, 5:40 pm by CRB

  Two years ago, I was a banker and hence I can imagine what those in the operations department of our local banks are bracing themselves for on the opening of the Safaricom IPO. At that time, it was the KenGen IPO and I remember us leaving office sometimes at 10Pm as we processed the many requests for financing.  Apart from the KenGen IPO, no other IPO has received much interest from the Bankers like the Safaricom IPO. Not only because of the magnitude of the offer but also because the company is one of its kind in East Africa in posting record profits. For the current financial year, analysts are predicting k’sh 17 billion as the firms’ net profit. Investors unlike in previous IPO’s eagerly await the share. With the other IPOs, investors debated on the wisdom of subscribing. The trend has been low allocation on the shares applied with Kenya Re and KenGen having greatly disappointed many investors. Applicants for KenGen were allocated a measly 7,000 shares as the maximum while retail investors got a low of 200 shares. The issue of delay in refunds has also greatly dampened the appetite for retail investors. There has also been the issue of share price appreciation with many doubting the ability of the IPO’s and the secondary offer prices to rise. A case in point being the Mumia’s secondary offer where the offer price was k’sh 49 only to see the price come down to a low of k’sh 17 before the bonus issue. Eveready has not helped with the price dropping to k’sh 6, less than the k’sh 9 offer price. However, Safaricom is different and I do not see the price ever going below k’sh 5 unless something drastic happens like reporting a loss. Nevertheless, even as we get excited with the IPO, I want us to consider some points on the much-awaited IPO. That Safaricom is a big offer is no doubt. Compare the 10 billion shares on offer with the KenGen offer of 650 million. With the retail investors allocated over 30% this translates to 3 billion shares in the hands of investors who are keen to dispose at the least price appreciation. My worry is many will be buying the share with the sole intention on disposing and thereby making a kill in the secondary market. This price appreciation may be a myth considering the large volume of shares out there. The average investor has also smarted and now knows that price appreciation on secondary market is only for a short while. Moreover, considering the foreign investors are well taken care of with their 35% allocation, where will the demand come from? There is also the issue of earning. There are 10 billion shares on offer representing 25% of the Safaricom share capital. This means the share capital of Safaricom is k’sh 200 billion with 40 billion issued shares. Now assume that Safaricom makes k’sh 20 billion after tax. The earning per share will be k’sh 0.5. Moreover, in the last financial year, Safaricom made k’sh 12 billion and paid out a dividend of k’sh 4 billion. Assuming the same rate of dividend payout, this would translate to a dividend earning per share of k’sh 0.11 for the current period. This is commendable for a share with supposedly a market value of k’sh 5. KenGen with a market price of k’sh 24 paid k’sh 0.40 for its financial year ending December 2006. There is fear that Safaricom share may not rise as expected due to the high number of shares in the hand of retail investors. Similar argument has been advanced to explain KenGen whose share price has never gone past k’sh 40 two years after listing. What does this contend for the investor looking to finance the IPO through credit financing? Many banks are coming out apparently to assist investors in buying the share with a 100% financing. And many are buying the idea considering the hype generated by the IPO. Even some banks not known as retail friendly are all out announcing their financing product.  Financing comes at a cost with Equity bank charging a 15% interest on reducing balance. Add the banker’s cheque commission, processing charges and the insurance cover and you get a whole lot of added expenses not being disclosed- but for obvious reasons- by the bankers. Not that I would advise anyone to ignore financing. Using other people’s money is not a new phenomenon in investing. Assume the share price rises, you can dispose the share and pay off the loan and just pay interest on only one month. But there is a catch. Upon financing, shares will be the security, thus one cannot dispose until they clear the loan, and the CDSC can release the hold on the shares. The implication is that one has to borrow another loan to clear with the bankers and ensure they sell the shares in a reasonable time to ensure good return. A small delay can see a potential investor losing out due to price swings. And the Capital market players are not famed for their efficiency especially when they have a large workload to handle. 

  For those queuing to get info on financing, my advice would be take that loan only if you can afford to pay the instalment from other means rather than hoping the share price will rise big time and you will sell and pay the bankers. That is what many are contemplating. And can you imagine a fraction of 3 billion shares being dumped at the NSE? This would ensure the price does not go past k’sh 7

   

• Tembea Kenya:Know Kenya

  Posted: March 18, 2008, 1:57 pm by CRB

  Easter holidays are here with us and I am not sure how you will spend yours. Are you in the minority who will opt not to overindulge but invest the funds in the upcoming safaricom IPO? The announcement by Finance Minister, Amos Kimunya, caught me by surprise as I had anticipated the process to start afresh after the peace deal.

  The other news of the week, and which the mainstream media did not pick was the unveiling of the Tembea Kenya website that is an initiative by the Kenya Tourism Board to raise awareness on local tourism. Tourism is one of the sectors badly affected by the post election violence and any measures taken in a bid to return the industry to normalcy is welcome. The only part I fault Kenya Tourism Board is their tendency to fall back to the local market when the foreigners are not willing to travel to Kenya. Marketing to the locals should be an ongoing activity in order to entrench the holiday culture in our people. As of today, locals account to a partly 25% of the tourism revenue.

  The other day a client of mine from Nyanza was joking on the possibility of me not having gone past Nakuru town. I did inform him that I have gone further; even to Kampala and that there are few major towns in Kenya I have not visited. We then got into an exchange on Kenyans’ travel habits and the outcome was unanimous that we are not the adventurous type. I have met many residents of Central province who have no idea where Kakamega is. On the same note, how many from Western or Coast can claim to have visited Meru National Park in Eastern province. Kenyans have a tendency of locking themselves up and viewing any chance to visit a new place as bothersome.

  Apart from the educational visit, few of us would care to know where the National Museum is situated, the snake park, giraffe centre or mamba village. Or even the Ngong hills! Instead, our idea of spending leisure time is by drinking ourselves silly. You drink at the same place or town on each weekend and do not even care to know what that pub at Langata is offering. For those not in love with alcohol, you spend most of your time curled up in the seat reading and watching TV or gossiping on this or that.

  The point is, you could do with some travel outside town for once. Get to know that place you hear of in Machakos. Get to Nakuru and by all means visit the national park and see the flamingos in their millions. And if you have a passport, cross the border and get to learn one or two things from our neighbors. For example, last year we traveled to Arusha just for the fun of it and I was surprised by the quality of their infrastructure. Arusha town is a relatively cheap, clean, and airy town. And our neighbors are not as backward as we Kenyans like to imagine. In fact if we continue with our political squabbles, we might as well sell our birthright to these guys. I have had similar trips to Kampala and other towns within Kenya. And Easter is one such a period you can decide to know your country.

  Many of us think you need lots of money for such a trip. However, the reality would surprise you. for a backpacker trip to any East African town for two people you would need only K’sh 20,000 and return home with some few artifacts even if fake. I’ll give the example of a trip to Arusha and the following is the breakdown of costs involved.

  1. Transport: For a good deal get a Matatu to Namanga for k’sh 300 each and then connect to Arusha at the border. Here you will pay k’sh 350 each.
  2. Accommodation: With k’sh 1,500, you get the equivalent of Kenya’s hotel 680 half board. Therefore, four days will just consume 6k of your budget.
  3. Taxi local. You can hire a cab for k’sh 2,000 for 6 hours. Yes 6 hours.
  4. Food. Food prices are dirt-cheap. With k’sh 100, you are assured of a healthy breakfast. For evening meal, budget k’sh 200 on the higher side.
  5. Security. The place is secure as we could travel without restriction. We didn’t sample the nightlife but there didn’t seem to have much happening.
  6. Service. Probably this is the only area the locals need to improve on. But this was more or less compensated by their legendary calmness and good manners. Even the cops are humane going out of the way to make you feel at ease ‘naomba passpoti yako ndugu’

  I hope that I have managed to shatter the myth that any form of travel is expensive. Get out and interact and surely you will broaden your thinking.

  Happy Easter holiday!

• Ten People You Should Get To Know In Your Organization

  Posted: March 15, 2008, 12:46 pm by CRB

  When you walk into a new job for the first time, it’s often not clear what the culture of the organization is or what exactly you will truly be doing in your job. It might also be very unclear what exactly is expected of you, and also what your opportunities are for advancement.

  Naturally, it’s great to cultivate relationships with your peers (the people who work regularly with you), but no matter the culture of the organization, it’s worth your time to get to know a few other people as well, as they can help you out greatly without much effort on their part.

  Here are ten people you should get to know in your organization as soon as possible to make your job go smoother and also maximize your promotion opportunities later.

  The boss This is the most obvious one on the list, and this is also the first person you should know. When you’re new, don’t hesitate to ask questions and use those as leverage for conversations. The questions shouldn’t express a cluelessness in your job, but should instead invite the boss to open up a bit. Ask questions about general organizational culture, and look for opportunities to ask questions directly about your boss’s role in defining that culture and the direction of the organization as a whole. In short, get the boss to open up by making him or her feel good about their role; you can do this by asking questions that allow for reflection on

  The boss’s boss If you have a chance to meet people further up the ladder, be sure to make your name known to them. Shake hands firmly and be very direct. If the opportunity permits, state your pleasure in being with the organization and ask questions similar to how you opened the door with your boss. Mostly, the key here is to cultivate a positive presence and hopefully name recognition up the ladder.

  The Tea lady and the janitor:  Not only does this person help keep your area clean, this person hears a ton of things about what’s going on at work. Befriending the janitor will not only improve the service that you get in terms of cleanliness, but it also give you an insight into a lot of things that are going on. In my previous organization, the janitor was almost always the first person to know if there were promotions, firings, hirings, and reorganizations coming down the pike.

  The administrative assistant Be very nice to the administrative assistant who manages any paperwork you may file. Don’t ever forget to regularly stop by just to ask how he/she is doing. Listen to venting and empathize. Not only will this make things smoother for you when you need secretarial services, a secretary sees a lot of things pass over his/her desk.

  The boss’s secretary Similar to how you treat your secretary, you should treat the boss’s secretary well, too, but for different reasons. The boss’s secretary will be able to make sure that things you turn in are reviewed quickly and also properly attributed, which can be vital if you’ve ever had anything stuck in “secretary purgatory.”

  The boss’s boss’s secretary This is very similar logic to why you should favor the boss’s secretary, but this relationship mostly ensures that you’ll at least have access up the food chain if need be.

  The person with the most seniority close to you in job rank This person usually has a huge amount of knowledge of what’s going on in the workplace, both in terms of your actual job function and also the culture of what’s going on around you. This person can be an amazing resource for straight shooting on how to get things done.

  The human resources person assigned to you The human resources personnel are usually overlooked until they’re needed, and then they’re basically demanded. When you have a pressing HR need, it’s going to go much smoother (and much more likely in your favor) if you have a good standing relationship with the HR officer.

  The IT specialist assigned to you The logic is almost identical to the HR person, except the IT specialist can get you back to work quickly if you have a good relationship with them. A good way of handling this is to occasionally just chat with the IT specialist if you see an opportunity and send a thank you note after everything that they do for you.

  The person with the most job knowledge close to you in job rank Basically, this is the smartest person in your peer group. You should naturally make friends with everyone in your peer group, but make a special effort to reach out to anyone who has a strong grasp of the technical aspects of their job.

• Is It Time To Sell Your shares?

  Posted: March 13, 2008, 2:38 pm by CRB

  In less than a week, the Nairobi Stock Exchange (NSE) share index has shed some points, which is reversal of the bullish run that come upon after the signing of the peace deal between Premier Raila Odinga and the President, Mwai Kibaki.

  Many people see this as a reason not to buy stocks or to sell them. In fact, many people do just that. They look at these losses and see danger - and they don’t want danger, so they stay out or they sell.

  Let’s look at it another way.

  On December 21, 2007, you could have spent K’sh 100 to buy a share in the Nairobi Stock Exchange. On February 29, 2008, those shares are now on sale for k’sh 96. You are buying the exact same thing, except now you’re saving k’sh 4 per share.

  Nothing fundamentally has changed about the investment itself. You’re still buying the same pieces of a wide array of large Kenyan companies. The only difference is that right now, these stocks are on sale.

  Let’s keep this logic going. Let’s say over the next two months, the stock market rebounds and it goes back up to 5,600 points. You will score a very quick return on your investment.

  On the other hand, if it goes down yet again, your losses now are much smaller than if you had bought in on December 21^st.

  What’s the idea? A down market isn’t a time to sell. It’s a time to buy. You don’t go to the supermarket and stock up on produce when the prices are expensive - you wait until things are in season and the prices are low.

  What if I already own that Unit trust and I just took that loss on the chin? What if you came into this downturn already owning a fund, and you’re sitting there swallowing losses? This is the scenario where it’s tempting to sell and stop the bleeding.

  Look at it this way, though. You’re already stuck with this loss - there’s no way of getting out of it. On the other hand, you’re currently holding an investment that’s at a discounted value. If you’re investing for the long term - and if you’re in stocks, this really should be a long-term investment - then you need to hold onto that stock, not sell. By selling it now, you’re asking someone else to come in and take that discounted investment from you at a nice bargain price.

  What if I own individual stocks? Individual stocks are potentially different. First, if you own the stock of a specific company, you should have specific reasons for owning it. Perhaps you have high confidence in the current management, or you believe in a specific product of the company. The reasons can vary, but if you don’t have a clear reason - and also a clear definition of what needs to happen for that reason to go away, you shouldn’t own the stock.

  Let’s say, for example, that you own Equity bank stock and you do so because you believe in James Mwangi management style. As long as he’s firmly in as CEO, you’ll keep holding the stock. When word starts being whispered that perhaps Mwangi is about to retire, it may cause some serious tremors in Equity’s stock, and it might have gone down a bit when you hear the news. Of course, your reason for owning Equity is now gone, so you should sell - but that reason to sell has nothing to do with the stock price as of today.

  In the end, keep one thing in mind: stocks are a long-term investment and if you sell based on what the price is doing today, this week, this month, or even this year, you’re asking a smarter and more patient investor to take your money. Don’t sell any investment unless you have a reason for selling it, a reason not based on that day’s price.

• Some Thoughts on Shopping Kenyan Style

  Posted: March 12, 2008, 1:48 pm by CRB

  Below are my thoughts on Kenyan shopping.

   

  Location matters: Stores and supermarket located in affluent areas charge a higher price. I had this idea that a Nakumatt store was a Nakumatt store but had a rude shock. Try shopping at the junction or Westgate branch. The prices are higher than what you would find at Lifestyle and Nakumatt downtown branches. This price distortion can be witnessed in firms located in Tom Mboya Street and lets say Kimathi Street despite selling similar products. Economists call it price differentiation whereby you charge a different price on the same product or service depending on the consumer’s ability to pay. Kenya Power and Lighting are masters at this. The industries pay higher than the households do. Moreover, the fellow who lives at Lavington definitely pays more than the individual who stays at Kiambu does.

   

  Very few shops stock quality items, and even then the price is too high: I visited a men’s shop that deals with suits situated along Kimathi Street in downtown Nairobi.  And who have a solid reputation in quality of their suits only to find out that what they are stocking is available from the stalls i.e. ‘exhibition’ centers at half price. A point is do a bit of window-shopping and do not take even established players for their word. Do not be the individual who is attracted by the brand more than the product itself.

   

  Whenever you see a sales tag displayed at the window, know that this is a store’s way of disposing dead stock. The store will incur a huge loss if they were to stick with the stock and to minimize on losses; the best way is to invite the masses with discounted offers. Bata Shoe Company is currently running such an offer of buy the second pair at a 35% discount. The shop is at an exposed position and you will be surprised in that majority are willing to accept even a lower offer than what they have stated. Try it once and you will be surprised.

   

  For those who like shopping at Tom Mboya Mall (from hawkers) always quote your offer at 50% of the sale price. The hawkers may not hold a qualification in marketing but there are masters in manipulation and human psychology. Thus they will make their offer price double on their projected sale price. Most of us will proceed to haggle some 20% off and the hawker will have made a kill. I have friends who have bought junk at ridiculous prices. If you must buy from Tom Mboya Mall, make sure you squeeze for the best bargain. Make your offer, stick to it, and let the hawker know you are willing to leave without the product. Haggling will only reveal you as a desperado and give him more ammunition to make a quick buck from you.

   

  Kenyans are into fads: For men it’s those sharp pointed shoes first seen with pastors of the evangelical churches. I can’t speak for the ladies but boots seem to have made a comeback. Problem is, during this period prices of the goods will be high until everyone has the item and then price comes down until the manufactures can come up with another fad.

   

  Kenyan products are substandard: Occasionally I feel the urge to promote our industries by buying a Kenyan product be it clothes or electronic stuff. However, the experience is the same countless times. Either the product will not last or the quality or finish is extremely poor. My conclusion is you cannot buy an item for patriotism sake.  The manufacture should not peg his product success on how patriotic Kenyans will be. In most scenarios consumer take quality in consideration even before the price.

   

  What is this thing with suppliers or providers of services increasing prices without notices? The Matatu men can do it due to their uncouth behavior but even descent establishment are adopting the habit. The other day I popped in my usual place for lunch and while settling the bill was informed of the price increment up by k’sh 20. This is consumer exploitation though we’ve gotten used courtesy of the oil companies.

   

   

• Some Thoughts on Shopping Kenyan Style

  Posted: March 12, 2008, 1:03 pm by CRB

  Location matters: Stores and supermarket located in affluent areas charge a higher price. I had this idea that a Nakumatt store was a Nakumatt store but had a rude shock. Try shopping at the junction or Westgate branch. The prices are higher than what you would find at Lifestyle and Nakumatt downtown branches. This price distortion can be witnessed in firms located in Tom Mboya Street and lets say Kimathi Street despite selling similar products. Economists call it price differentiation whereby you charge a different price on the same product or service depending on the consumer’s ability to pay. Kenya Power and Lighting are masters at this. The industries pay higher than the households do. Moreover, the fellow who lives at Lavington definitely pays more than the individual who stays at Kiambu does.

  Very few shops stock quality items, and even then the price is too high: I visited a men’s shop that deals with suits situated along Kimathi Street in downtown Nairobi. And who have a solid reputation in quality of their suits only to find out that what they are stocking is available from the stalls i.e. ‘exhibition’ centers at half price. A point is do a bit of window-shopping and do not take even established players for their word. Do not be the individual who is attracted by the brand more than the product itself.

  Whenever you see a sales tag displayed at the window, know that this is a store’s way of disposing dead stock. The store will incur a huge loss if they were to stick with the stock and to minimize on losses; the best way is to invite the masses with discounted offers. Bata Shoe Company is currently running such an offer of buy the second pair at a 35% discount. The shop is at an exposed position and you will be surprised in that majority are willing to accept even a lower offer than what they have stated. Try it once and you will be surprised.

  For those who like shopping at Tom Mboya Mall (from hawkers) always quote your offer at 50% of the sale price. The hawkers may not hold a qualification in marketing but there are masters in manipulation and human psychology. Thus they will make their offer price double on their projected sale price. Most of us will proceed to haggle some 20% off and the hawker will have made a kill. I have friends who have bought junk at ridiculous prices. If you must buy from Tom Mboya Mall, make sure you squeeze for the best bargain. Make your offer, stick to it, and let the hawker know you are willing to leave without the product. Haggling will only reveal you as a desperado and give him more ammunition to make a quick buck from you.

  Kenyans are into fads: For men it’s those sharp pointed shoes first seen with pastors of the evangelical churches. I can’t speak for the ladies but boots seem to have made a comeback. Problem is, during this period prices of the goods will be high until everyone has the item and then price comes down until the manufactures can come up with another fad.

  Kenyan products are substandard: Occasionally I feel the urge to promote our industries by buying a Kenyan product be it clothes or electronic stuff. However, the experience is the same countless times. Either the product will not last or the quality or finish is extremely poor. My conclusion is you cannot buy an item for patriotism sake. The manufacture should not peg his product success on how patriotic Kenyans will be. In most scenarios consumer take quality in consideration even before the price.

  What is this thing with suppliers or providers of services increasing prices without notices? The Matatu men can do it due to their uncouth behavior but even descent establishment are adopting the habit. The other day I popped in my usual place for lunch and while settling the bill was informed of the price increment up by k’sh 20. This is consumer exploitation though we’ve gotten used courtesy of the oil companies.

• Make the Most of Your Salary From Your First Job

  Posted: March 11, 2008, 12:55 pm by CRB

  Getting that first job after college or high school is a very exciting, yet stressful event. You’re probably overwhelmed with many new challenges, opportunities, commitments, and have a lot of questions. One of the biggest changes may be in regards to money.

  This new job may provide a significant increase in cash flow. While it may seem like you’ll now have a lot of money, this is a critical time to begin managing your money wisely. This includes creating a budget to help you pay off debt, student loans, develop savings, and begin investing for retirement.

  Create a Budget

  If you’ve been in school prior to this new job, your finances were probably relatively simple. You had some basic bills to pay i.e transport to and from campus; photocopy services etc. and your education may have been funded by your parents or through the Higher Education Loans Board (HELB)

  Now that you are ready to begin life in the workforce, your cash flow needs will change significantly.

  Once you have an idea of how much your paychecks will be, it is time to sit down and determine what your expenses are. How much is rent for that SQ at Buru Buru? Will you be moving to a nicer place? Buying a car? How long before you have to begin paying back the student loans. These items will play an important role in determining where your money has to go.

  Creating a budget doesn’t have to be difficult and it can be done in a few easy steps. It is important that you establish this spending plan as soon as possible so that you don’t find yourself in financial trouble later on.

  Tackle Your Debt

  If you have student loans, you generally have three to six months before payments begin. Don’t use this grace period to rest on your laurels, but begin to plan for the payments before they start. Find out how much the payment will be and factor it into your budget now. If your lender offers automatic electronic payment, consider setting up monthly or bi-weekly payments to come right out of your bank account.

  Develop a Savings Plan

  Now that you are on your own and have a steady stream of income, you should begin saving a little bit of money each paycheck for an emergency fund. Having an emergency savings fund will help you out in a jam so that you do not have to rely on high-interest credit cards or face a financial crisis.

  The best way to begin saving is to create an automatic savings plan. If you have a set amount of money being set aside from each paycheck automatically, it is impossible to forget. In addition, once the money is saved automatically, after a few paychecks, you won’t even miss the money.

  Begin Saving for Retirement

  If you are like most young people starting out in your first job, the thought of retirement seems like an eternity. Do not be like many who on each Friday, they have no savings and yet can afford to drink on a weekly basis at the many downtown Nairobi joints.

  While it may be true that you have 40 or more years until retirement, do not wait to begin saving. Even a very small amount can begin to add up thanks to the effect of compounding interest.

  Check with your employer to see if they offer a retirement plan. Many companies even offer a matching program where you can essentially get free money just by saving. If your employer doesn’t sponsor a plan, the best thing to do would be to consider having a personal pension plan.

• Are You Taking Responsibility for Your Personal Financial Situation?

  Posted: March 9, 2008, 2:56 pm by CRB

  I have made it a point to watch Jeff Koinange’s show, Capital Talk, on K-24 whenever I have the time. The show is informative and Jeff makes it a point to ask straightforward questions. More often, journalists from other media houses are reluctant to venture into some topics that can give us a better insight into the guest’s mind; the real persons and not the rehearsed versions! For example, while interviewing Manu Chandaria, Kenya’s arguably top most CEO, Jeff had the guts to ask him on his relation with his wife considering the couple is always together in public functions.

  Jeff’s guests are normally the who is who in Kenya. Top CEO, politicians, business owners and even men of God have all graced Jeff’s show. He has also interviewed comedians like John Kiarie. I am yet to see a ‘common man’ in his show, but then, when did a common man set an agenda for the nation.

  I have noticed how all these guests are optimistic on the future regardless of how things are. The guests also take hands on approach to issues, always preaching that a solution starts in us. That it depends on us as individuals, not the government, church or even the politicians to solve what afflicts us as individuals and as a society. When Kenya was burning, you could tell that these guys were willing to play a major role to see the situation return to normalcy.

  Compare the CEO sentiments with the regular crowd found at Kencom bus stage. Every time the news people want to hear on the common mans view, you will see cameras zooming to this direction. And what comes out of their mouths is sometimes depressing. To them each problem requires government intervention. I once watched a feature on a dumpsite and the residents were complaining on the foul smell. How the government should relocate the site. The funny thing is, in the background there was this man emptying his trash at the same site. Some trash he could have probably burnt. And to make it worse, the dumping site was only a few meters away from the recognised dumpsite the Nairobi City Council set up. Why the community decided not to travel a few metres to the designated dumpsite evaded me. But here they were shouting loudest on the need to relocate a dumpsite that was their own making.

  Therefore, as the CEO takes a personal responsibility on issues the common man is comfortable sweeping the issues under. And when he cannot handle it much further he will point his finger elsewhere.

  Personally, I feel that taking issues head on enables us to lead better lives. Something happens to our lives when you are able to tackle a problem that at the beginning looked like a mammoth task. It is this good feeling that will give you the confidence to be self-reliant. Ultimately, small success will lead to big ones. Even the poor fellow who becomes super rich, the rags to riches type, learns this at one point. That is why the fellow will start with a kiosk at downtown Nairobi, make it a success and move on to a well-stocked general shop and with some time set up a wholesale shop somewhere in a middle class estate.

  The individual who constantly shifts blame robs himself the ability to set his life on course. Problem solving is a process rather than an event. First you recognise a problem, and then try to find a solution. What might work and what will not. You then go to the implementation phase. If it works out then all is fine, if not then you repeat the process. This process will definitely make you a better and focused individual.

  This also applies to our personal finances. Are you the type constantly drinking each weekend but blaming your employer for a poor pay? Have promotions evaded you due to lack of qualifications but you are better off meeting your pals for chitchat instead of enrolling for an evening course for some additional qualifications? Or are you yearning for a better income but the idea of starting a Jua kali business makes you nauseas since you are too qualified for that sort of trade. The list is endless but I am sure you get the hint.

  Ultimately, how you live is up to you. But do not blame others for your shortcomings. Be it financial, on health and even your love life. Take the initiative to sort out the mess, and hopefully when others see you trying they will not feel so hard to chip in.

• Bernard Obonyo emails about his student loan money

  Posted: March 8, 2008, 1:16 pm by CRB

  Now for the most part all of that money will be used to do things like pay rent, and buy groceries, but when I’ve calculated it out, there’s around K’sh10,000 left per semester minimum, and more if I can be frugal about how I spend it.

  My questions was, do you think it would be smart to turn around and pay off part of my loans with the extra cash, or could you recommend me a direction to maybe take this extra money that I have, and invest it to make a return? I know right now that I could put it into a money market account at my bank, Stanbic, Nairobi, which is about 6%. Other than that I wouldn’t know where to begin.

  The problem with investing money in the short term is that it’s dumb. Sure, you could make a few percentage points — or you could lose most of it. Short-term volatility is very high, while time (and good investing choices with low fees) smooths out short-term volatility. As I’ve written before, time pressure=bad decisions. For example, I remember when I was a first year, we hosted this prospective freshman in our room for Admit Weekend. This guy left our room with a single decree: “Guys,” he said, “I’m not coming back until I hook up with a hot girl tonight.” My roommate and I looked at each other and laughed and laughed. Then we told him to just pack his stuff and take it with him — he wouldn’t be coming back, and it was nice to meet him. When he sheepishly came back around 3am, alone, I believe that moment of happiness will rival even the birth of my children. Setting a rapid timetable for getting ass, it turns out, is difficult.

  Back to student loans. Do you want to invest your student-loan money for the possibility of making just k’sh 90/month (9% returns) but possibly losing some/most/all of it in the short-term? “But Concept Services,” you might say, “I’ll just invest it in something safe so I can’t lose it.” Lower risk = lower rewards, so if you invest it in a safe government bond, you’ll earn about 5% — basically your savings rate. You need time and more capital to grow your money, not K’sh 10,000 and a few months. That’s the domain of get-rich-quick quacks, something I hate. Remember, the first thing I ask when someone wants to know about investing is, “When do you need this money?”

  The basic messages here are:
  Risk and reward. Before you get overly excited about something, ask yourself if it’s worth it. You might make k’sh 2,000 in a year, with the possibility of messing up your finances for doing those stupid balance-transfer games? Not worth it.
  Sexy vs. rich: Making it sustaintable. Are you building a long-term infrastructure or are you doing something short-term and dumb to distract yourself from the hard work of learning about real banking, budgeting, saving, and investing? Do you have a savings account? An investment account with proper asset allocation? Have you bought even one personal-finance book?

• The Art Of Speculation

  Posted: March 7, 2008, 1:09 pm by CRB

  There was a time it paid to be a speculator in the Nairobi Stock Exchange, from the period of September 2005 to October 2006.Many individuals would put in their money and in a few weeks time reap good returns. Majority took Sacco loans and the unsecured personal loans from banks and pumped all this cash in stocks, and they were not disappointed.

  By then, prices would rise by margins of k’sh 5 to even k’sh 20. Any keen investor didn’t have to wait for a major announcement like expansion plan or declaration of a huge dividend from the companies to make some good gains.

  Nowadays, even with companies announcing big profits e.g. 33% profit increment by Kenya Commercial Bank; this does not excite the market. You actually get the impression that this was expected. And Stanchart announced what might turn out to be the highest dividend of the year at k’sh 10. The share price has gone up but not with the expected margin. Even my favorite stock, Centum investments that announced half-year profit of 600 million has its share still at k’sh 28.

  The only share that favors the speculators is Equity Bank stock. Just when you write off the stock as having reached its peak, it climbs to a greater price.

  I have made a couple of observation on trading to gain as a speculator.

  Average investor: The average CDSC holder is getting sharp as far as stock trading goes. Individuals are doing a thorough homework as opposed to prior years where they could just put their money on whichever stock without consideration. This has meant that price oscillation with big differences is no longer possible. If you are to speculate, do your homework twice.

  Time factor: Two years ago, you could buy and dispose the same stock in a month and still make a quick buck. Have you noticed the way prices are constant of late. It has taken over three months for Centum investments to move from price of k’sh 26.5 to k’sh 28. And k’sh 28 has come to be due to the bullish run after the peace deal. To make it as a speculator in today’s market, give it a time horizon of a minimum of six months.

  Volume counts: Trade volume was a factor two years ago and will still be a factor years to come. For you to maximize return on a small price movement you need to hold a good volume. You definitely cannot speculate with 100 shares. Even if it is for the Nation Media Group with a current market price of k’sh 340. You need some serious volume to realize any tangible gain. Consider an individual with 20,000 shares in share X. if the share price appreciates by even k’sh 2, this individual will have made k’sh 40,000 less brokerage commissions.

  Few are chosen: Some stocks are not for speculation for a couple of reasons. The first is volume. You need a share easily available. That is, the daily trade volume should be high. With some stocks you can place a buy order and not get it soon as no one wants to sell. For others, like those in alternative investing segment go for months without a single trade. The easier it is to buy, the faster it will be for you to pull out with your profits.

  Favorite Stocks: There are some stocks generally favored by the masses. Stocks like KenGen, Mumias, Kenya Re and all financial sector shares. Being the favorite, individuals are constantly monitoring their performances and any good news translates to an increase in the share price. Compare Kenya Commercial Bank stock with a stock like Limuru Tea. Are you even aware that Limuru Tea is listed in the first place?

  Price counts: The average Kenyan investor considers price as the greatest factor when it comes to trading in stock. That is why KCB will move a high volume in any given day than Barclays bank. Many are willing to part with k’sh 28 than k’sh 70.

  Our stock market is largely fueled by the retail investors who practice such beliefs, that the lower the share in market price the better it is. For you to gain substantially you need to be where the retail investors are. These individuals sell and buy without careful considering. Many belonging to this group will trade based on their neighbor’s advice or even on a rumor. It is through these mistakes where you will make a gain.

  Exit strategy: Only invest and speculate on what you can afford to lose. If it does not go your way in the short term, be prepared to invest for the long-term

  Maximizing returns at the Nairobi stock exchange does not require a degree in financial analysis. Some observations and watching your back will come in handy.

• The Art Of Speculation

  Posted: March 6, 2008, 6:51 pm by CRB

  There was a time it paid to be a speculator in the Nairobi Stock Exchange, from the period September 2005 to October 2006.Many individuals would put in their money and in few weeks time reap good returns. Majority took Sacco loans and the unsecured personal loans from banks and pumped all this cash in stocks, and they were not disappointed.

  By then, prices would rise by margins of k’sh 5 to even k’sh 20. Any keen investor didn’t have to wait for a major announcement like expansion plan or declaration of a huge dividend from the companies to make some good gains.

  Nowadays, even with companies announcing big profits, i.e. 33% profit increment by Kenya Commercial Bank does not excite the market. You actually get the impression that this was expected. And Stanchart announced what might turn out to be the highest dividend of the year, at k’sh 10. The share price has gone up but not with the expected margin. Even my favorite stock, Centum investments that announced half-year profit of 600 million has its share still at k’sh 28.

  The only share that favors the speculators is Equity Bank stock. Just when you write off the stock as having reached its peak than no sooner it climbs to a greater price.

  I have made a couple of observation on trading to gain as a speculator.

  Average investor. The average CDSC holder is getting sharp as far as stock trading goes. Individuals are doing a though homework as opposed to prior years where they could just put their money on whichever stock anywhere without consideration. This has meant price oscillation with big differences is no longer possible. If you are to speculate, do your homework twice.

  Time factor. Two years ago, you could buy and dispose the same stock in a month and still make a quick buck. Have you noticed the way prices are constant of late. It has taken over three months for Centum investments to move from price of k’sh 26.5 to k’sh 28. And k’sh 28 has come to be due to the bullish run after the peace deal. To make it as a speculator in today’s market, give it a time horizon of a minimum of six months.

  Volume counts. Trade volume was a factor two years ago and will still be a factor years to come. For you to maximize return on a small price movement you need to hold a good volume. You definitely cannot speculate with 100 shares. Even if it is for the Nation Media Group with a current market price of k’sh 340. You need some serious volume to realize any tangible gain. Consider an individual with 20,000 shares in share X. if the share price appreciates by even k’sh 2, this individual will have made k’sh 40,000 less brokerage commissions.

  Few are chosen. Some stocks are not for speculation for a couple of reasons. The first is volume. You need a share easily available. That is, the daily trade volume should be high. With some stocks you can place a buy order and not get it soon as no ones wants to sell. For others, like those in alternative investing segment go for months without a single trade. The easier it is to buy, the faster it will be for you to pull out with your profits.

  Favorite Stocks. There are some stocks generally favored by the masses. Stocks like KenGen, Mumias, Kenya Re and all financial sector shares. Being the favorite, individuals are constantly monitoring their performances and any good news translates to an increase in the share price. Compare Kenya Commercial Bank stock with a stock like Limuru Tea. Are you even aware that Limuru Tea is listed in the first place?

  Price counts. The average Kenyan investor considers price as the greatest factor when it comes to trading in stock. That is why KCB will move a high volume in any given day than Barclays bank. Many are willing to part with k’sh 28 than k’sh 70.

  Our stock market is largely fueled by the retail investors who practice such beliefs, that the lower the share in market price the better it is. For you to gain substantially you need to be where the retail investors are. These individuals sell and buy without careful considering. Many belonging to this group will trade based on their neighbor’s advice or even on a rumor. It is through these mistakes where you will make a gain.

  Exit strategy. Only invest and speculate on what you can afford to lose. If it does not go your away in the short term, be prepared to invest for the long-term

  Maximizing returns at the Nairobi stock exchange does not require a degree in financial analysis. Some observations and watching your back will come in handy.

• Making Sense Of A Personal Budget

  Posted: March 4, 2008, 2:31 pm by CRB

  Visit any website dealing with personal finances (including this one) and you won’t miss this advice: ‘have financial goals to put your finances in order’. Accompanying this advice is the importance of maintaining a budget on a monthly basis. You are then required to collect details on how you spend your money and with this know what to cut, where to lessen expenses etc.

  I tried it once and it did not work. I had this spreadsheet detailing each expense incurred. Therefore, if we have a drink, there would be an entry ‘had a drink with Alex, cost k’sh 1,200’. I did this for sometime but found it to be demanding hence abandoned the idea altogether. First, I made it a point to remember all expenses that I had paid for during the day. Was I to remember what a client had requested or what I had for a snack? Secondly, I found myself conscious of my expenses. Actually, too conscious! My job entails meeting many people and mostly, it is I who initiate the meeting. It therefore follows that I am normally the one to foot the bill. Consider a situation where I am checking on what you are ordering, despite assuring you that you can have whatever is on the menu. Obviously, I would worry if you ordered a drink or a meal which I consider out of my budget.

  So does this budgeting thing work? Many individuals who have gone the budgeting way prefer working with a given figure in mind i.e. monthly estimates unlike a situation where you monitor where each coin is going. For instance, you can allocate k’sh 5,000 for entertainment. Overshooting this amount by k’sh 1,000 may not be a cause for alarm but if you overshoot by k’sh 2,000 then there is a reason to worry. If your monthly average expense for Safaricom/ Celtel post paid line is k’sh 8,000 and the last month you were billed k’sh 12,000, that is way above the mark and you need to monitor your calling habits with a view to reduce the expenses. A budget, like any other tool is supposed to work for you, not you working for the plan- by each evening inputting figures in a spreadsheet. This will become monotonous and I can guarantee boredom and fatigue will set in as there will be no motivation.

  In any case, you need to be flexible with your finances. If you follow your budget too closely, there is a danger in losing in other ways, which are beneficial in the long term. For example, while budgeting, making a provision for entertainment with friends may seem to be a bad idea. But it is the same friends who in your gathering, get to inform you of an upcoming vacancy or that investment idea with good returns. You also get to reduce your stress levels by sharing out life’s challenges with your friends. In the short run, it is true your bank account will exhibit a healthy position by tight budgeting but the very fact of being tightfisted is limiting future opportunities for you.

  I have interacted with many successful individuals who operate within budgets and the pointers below might be of help.

  1. Know your income. And I do not mean gross pay for the employed! If you do not know what is coming in, how will you know what you are spending on?
  2. Allocate your expenses in order of importance. Start with Rent all the way to entertainment. Simply prioritize. Do not be like the individuals who when paid will first check in a pub and will only go home/ work after exhausting all the money.
  3. Make your allocation as realistic as possible. If from town to Buru Buru bus fares range from k’sh 40 to k’sh 70, depending on the whims of the matatu driver, then allocate 4,500 as your monthly expense. For the surplus, you could save this amount but do not make a low provision.
  4. Enlist the help of others. If it is your drinking pals or the investment group you are in, let them know your ceiling. If you are comfortable with a contribution of k’sh 12,000 and not k’sh 15,000 let them know beforehand.
  5. Start small. Even if you know you are ‘wasting your money’ in one way or another, do not take drastic measures. The way to go about it is to carry out your expense reduction plan in bits. Do not go cold turkey; it’s not as if you are flushing some toxic material out of your system.
  6. Avoid. I think the easiest way to fall into temptation is to prohibit oneself from carrying an action or behaving in a particular way. With many, the moment you decide to forgo a certain practice is the day you find yourself overwhelmed by a big craving. Therefore, if you decide to cut on shopping that is the day you will pass by an elegantly displayed skirt suit. My advice is to avoid those situations that will tempt you and weaken your resolve to go on with the plan. Myself, I have been an internet addict but nowadays I avoid the internet cafes, especially where you

• For Many Kenyans,Lack of Enough Money Not A Reason

  Posted: March 2, 2008, 4:52 pm by CRB

  John’s day has been hectic. He has been up and running, the whole day trying to beat the Kenya Revenue Authority (KRA) deadline of submitting the Value Added Tax (VAT) returns by the twentieth.

   ‘Working as an Accountant is no easy task’, Johns says. ‘Its all about meeting deadlines’ he adds. ‘If it’s not the government, with the statutory returns, it’s the management who expect timely weekly reports’ says John.

   Meet John, a 28-year-old Accountant for a medium sized architecture firm. John has risen to the position of Senior Accountant having graduated 4 years ago with a Bachelor of Commerce degree from the University of Nairobi.

   To unwind, John frequents his favorite drinking joint to meet either old friends or network by making new contacts. Today is one of those days. John wanted us to meet to discuss the financial mess he is in, and explore the various channels he could invest in.

   John knows what I do and the conversation takes the familiar route of personal finance. You see, despite John earning a tidy sum, he has not been able to do much in terms of investments. To his pride, he has bought a couple of stocks for two blue chip companies at the Nairobi Stock Exchange. However, with his hefty net pay, he could be in a better position. For once, he should be having a better-diversified portfolio since this is the only form of investment that he makes. John prefers to keep the rest of his pay in a savings account.

   Nevertheless, keeping money in a savings account is not the only shortcoming afflicting John. His lifestyle has made him not realize his full potential in terms of investing. John is the type who has to visit a pub in downtown Nairobi every day after work. Actually, the waiters know him and his usual request for a beer is meet with ‘Kama kawaida?’ Swahili for usual beer. He ends up spending k’sh 500 for the night when he is alone and if there is company, the bill comes to an average of k’sh 1,500 since he has to use a cab, as chances are he will leave late.

   John’s house is classy, with the latest carpet from Saudi Arabia. The seats are black leather and had a price tag of k’sh 200,000. His entertainment system is valued at slightly over k’sh 150,000. John’s motto has been to live today, as no one knows about tomorrow. John is also not the type to draw a household budget when making his purchases. Being single, John prefers eating out with the occasional cooking over the weekend.

   John’s financial woes have to do with his spending habits. If he could cut on the consumption of non-value adding items, he would be able to save and invest part of his income.

   As we do the paper together for him to join, the British American equity fund John asks me to stay in touch. ‘You see, if I knew about these investments products, I could be far in terms of wealth’ John says as we conclude our meeting.

• Life After The Political Deal

  Posted: February 29, 2008, 1:57 pm by CRB

  President Mwai Kibaki and ODM leader, Raila Odinga have finally struck a deal.

  What does this mean for your purse or wallet? To paraphrase the former president, Daniel Arap Moi, will this add a couple of ugali sufuria’s in your household?

  I am not disparaging the new arrangement. The last two months have been painful. Many Innocent Kenyans have suffered for a fault not of their own making.

  Nevertheless, watching the daily updates on the Kofi Annan mediation effort, I got the feeling that our politicians were only interested with dividing slots amongst themselves and not about you and me. It was clear from the beginning that both parties lacked the goodwill to solve the political crisis. All the same, politics does play a major role in our lives and finances for that matter and we cannot wish away the fact that politics will always be with us.

  One thing am happy about is the possibility of an upward trend in the price of shares at the Nairobi Stock Exchange. Even if for a short term, this will inject a level of confidence eagerly needed after the NSE decisions to bail out Nyaga Stock Brokers accused of malpractices. With the political crisis and the debacle with the stockbroker, players in the stock market have had their confidence badly shaken.

  If the Kenyan society was not a ‘man eat man’ society as explained by the late Tanzanian President, Mwalimu Julius Nyerere, I would expect prices especially on consumer goods to come down. The transport network is now back to normal and there is no justifiable reason why prices should continue to be high. If the rate of inflation remains high, individuals budgets will be strained, and many will not afford to save or invest since the little they have will be used to meet the daily expenses.

  For the investors, probably this will call for a shift in our investing strategy. This year may not be the best for the equity market. Shrewd investors may opt to go the unit trust way and choose the money market or balanced fund that more or less guarantee minimal returns with no (minimal) risk. This may not be the best time to play the NSE by engaging in speculative trade. As the past two months have shown, investing in shares is a long-term affair with many low turns. If you are the type that easily panics, the NSE may not be your place of choice.

Blah blah blah

Fish cakes

Alas a fish cake.

Yet more fish cakes

Guess what ... yeah ... fish cakes.

The end of the fish cakes