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ABRAHAM GULKOWITZ
abe@gulkowitz.com917-402-9039
2014 issue 5March 13, 2014
Crisis after Crisis
A series of crises, the latest being the ominous developments in the Ukraine and further evidence of disappointing growth in China, have rattled financial marketcourse, with all major central banks at amazingly easy policy stances, the bet continues to be that the latest uncertainties will also pass. That may be true once againone must recognize that many of the serious flaws uncovered in each of the predicaments will linger for years to come and that the policy remedies have at best cov
up the fundamental issues without completely resolving them. Even in the U.S., the best of all major economies, the economy and financial markets still suffer from "laeffects" of the Great Recession and seem yet to be able to muster up enough momentum to get back up to previous robust growth rates, especially for job growth. Anmassive easing itself is likely to have its own potential for unintended consequences. Serious and surprising weakness in emerging economies may also jeopa
growth trajectories for global recovery. The exposure emanates out of the greater vulnerability that world trade and growth have today from these super perforemerging economies. This is particularly true for China, which by now has a stronger impact on the worlds economy, supply chains, commodity markets and wcurrencies. China is a key issue. Weaker growth, a complexity of debt issues, and awkward demographics, all combine to raise issues regarding the outlook. Chinas d
are troubling and not just because theyre alarmingly big. Amplifying the concerns is the complexity of those debts. Thats the trouble with Chinas lengthening cchains. And in Europe, markets roared back as the euro crisis seemed to recede in the face of policy support. Yet basic job growth seems to be far beUnemployment is undermining many countries in the EU, not just massive debt levels. The unemployment is particularly severe for most of the younger age gro
Fertility rates are very low, and life expectancy keeps rising -- trends that underpin the conundrum of demographic ageing. Even those countries performing relativelyare retaining a cautious stance about future prospects, and those performing poorly are still short of new ideas -- and, in many cases, the adequate financial wherewitto alleviate weak growth prospects.
.
Chinascurrencydrop marksseismicshiftChina Weakens Yuan
China's central bank weakened the daily reference
rate for its currency against the U.S. dollar by the
largest percentage in more than a year and half as
it continues to fight capital inflows.
Chinas yuan depreciated the most on record
against the dollar as investors speculated thecountrys central bank will widen the currencys
trading band.
For the entire 2013, U.S. real GDP increased
1.9%, compared with an increase of 2.8% in 2012.
Ukraine flares up into major
superpower crisisOver the past few days, Western attention shifted from violence on Kiev streets and the state of Ukraine's economy to the threat oRussian military invasion. While all these issare important one key aspect of the crisis tremains largely overlooked is the failure of Turchinov government to consolidate power stabilize the fragileand fragmented country.
Russia spends $billions supporting its roMondays move was one of Russias largest focurrency interventions on record and is equival
2.3% of $493bn its FX reservesSevere weather across much of the
United States took a toll on shopping
and consumer spending in recent
weeks, leading to slower economic
growth or outright contraction in some
areas of the country, the Federal
Reserve said
Worries regarding'unintended consequences' of QEPhiladelphia Federal Reserve President CharlesPlosser is "very worried" about the potentialfor unintended consequences of the Fed'smassive quantitative easing program. Plossertold CNBC that the U.S. was still sufferingfrom "lasting effects" of the recession and"may never return" to its previous growthratesand warned that policy should not beton growth returning to previous rates, saying it
could be "many, many years."
Corporate default ends Beijing's 'implicit guarantee'
China and Ukraine worries hit markets
UStoreleaseoilfromstrategicreserveTest comes amid heightened tension over Crimea
A significant number of economists hdoubts about the European Central Banview that deflation is not a threat and tthe recovery will take hold without more action, a Reuters poll showed, athey say more stimulus is needed.
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March 13, 2014
In This Issue
Headlines and data appearing in The Punch Line came from widely available publications including
national and international newspapers, trade journals, economic and industrial bulletins and news websites.
The Likelihood of Unlikely Events... (
Go Figure (
You Cant Handle the Truth (
U.S. Job Growth (
More Job Data ... (
Households (p
Enlightenment (pg
The Return to Normal (pg
Credit (p
Pumping Iron (pg A New Geography of Business (pg
The DNA of Business (p
Real Estate and Construction (p
Will L ife Ever be the Same? (p
Crisis after CrisisA series of crises, the latest being the ominous developments in the Ukraine
and further evidence of disappointing growth in China, have rattled financial
markets. Of course, with all major central banks at amazingly easy policy
stances, the bet continues to be that the latest uncertainties will also pass.
That may be true once again. But one must recognize that many of the
serious flaws uncovered in each of the predicaments will linger for years to
come and that the policy remedies have at best covered up the fundamental
issues without completely resolving them. Even in the U.S., the best of all
major economies, the economy and financial markets still suffer from "lasting
effects" of the Great Recession and seem yet to be able to muster up enough
momentum to get back up to previous robust growth rates, especially for job
growth. And the massive easing itself is likely to have its own potential for
unintended consequences. Serious and surprising weakness in emerging
economies may also jeopardize growth trajectories for global recovery. The
exposure emanates out of the greater vulnerability that world trade andgrowth have today from these super performing emerging economies. This is
particularly true for China, which by now has a stronger impact on the worlds
economy, supply chains, commodity markets and world currencies. China is a
key issue. Weaker growth, a complexity of debt issues, and awkward
demographics, all combine to raise issues regarding the outlook. Chinas
debts are troubling and not just because theyre alarmingly big. Amplifying
the concerns is the complexity of those debts. Thats the trouble with Chinas
lengthening credit chains. And in Europe, markets roared back as the euro
crisis seemed to recede in the face of policy support. Yet basic job growth
seems to be far behind. Unemployment is undermining many countries in the
EU, not just massive debt levels. The unemployment is particularly severe for
most of the younger age groups. Fertility rates are very low, and life
expectancy keeps rising -- trends that underpin the conundrum of
demographic ageing. Even those countries performing relatively well are
retaining a cautious stance about future prospects, and those performing
poorly are still short of new ideas -- and, in many cases, the adequatefinancial wherewithal -- to alleviate weak growth prospects. (pg 1)
In This Issue (pg 2)
Dislocation, Dislocation (pg 3)
Engines of GrowthEasy money and the timing of the Feds policy shift continue to dominate across the
globe. But weaknesses in significant emerging economies have also become more
evident. Very obvious financial vulnerabilities, repercussions from various political
stalemates and serious geopolitical concerns are aggravating the problems of clearly
insufficient growth in the world economy. And lets not forget that many of the
challenges cannot be resolved easily (pg 4)
Contact information:
Abraham Gulkowitz
phone: 917-402-9039 email: abe@gulkowitz.com
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March 13, 2014
Dislocation, Dislocation, Dislocation
Growing signs of weakening Chinese demand forcommodities are filling a void created by murky
economic data and sparking a selloff in the country's
currency, its stock market and in the coal, copper and
iron ore it buys.
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March 13, 2014
Engine Drivers
Weak growth data hide Japan's underlying strengthsFourth-quarter GDP rose a weak 1.0% from the previous quarter
(seasonally adjusted, annual rate). The impending three percentage
points rise in the consumption tax on April 1 prompted stronghousehold consumption, with buyers taking advantage of before-tax
prices. However, this still fell short of the 4-5% leap seen ahead of
previous rises in the national sales tax -- though consumer durables
did jump 17%, consistent with the prediction of tax-boosted buying.
Japan's economy watchers' assessment of current situation and
expectations continued to deteriorate in February, survey data from
the Cabinet Office showed Monday. The index that measures
experts' views of the current condition of the economy dropped to
53 in February from 54.7 in January, marking the second
consecutive fall. Likewise, the outlook index, which reflects the
assessment of future economic situation in Japan, fell to 40 in
February from 49 in January. The index has now fallen for the thirdmonth in a row.
Turkeys consumer confidence weakened forthe third consecutive month in February, withthe index dropping to 69.2 from 72.4 inJanuary, the lowest score since February 2010when it was 68.6. All four subindicesdeclined. The index assessing householdssentiment about the possibility of saving thismonth declined the most, dropping 15.8% to22; followed by the index gauging consumersview on the general economic situation, whichfell 3.9% to 90.4.
The China central bank seems set on bashing
speculators betting on a stronger yuan,
without changing the currencys long-term
appeal. The trick is to target low volatility
that fuels trades. But its a fine balancing act
and risks rewarding those who were
betting on a China downturn.
Indias GDP Growth Slows as Interest-Rate
Increases Dim Outlook
Indias economic growth slowed last quarter, holding below
5 percent and denting the Congress partys chances of
extending its decade-long rule in elections due by May.
Greek Yields Fall Below 7% as Crisis
Source Regains ConfidenceFour years after threatening to splinter Europes
monetary union, Greek bond yields are back below 7
percent as signs Europe is putting the debt crisis
behind it boost demand for the regions assets.
China extends run of double-digit military
spending increasesDefence spending will rise 12.2% in 2014 to
Rmb808bn, continuing an almost unbroken
string of double-digit annual increases over
the past two decades
China will struggle to hit even
modest growth targets
The European Commission's latest economic forecasts include
upward revisions to its GDP estimates this year in many of the EU'sCentral and East European (CEE) economies, where growth rates are
expected to be among the fastest in the EU. Stronger recoveries in
the Central Europe (CE) region in particular, driven by a pick up indomestic demand, are a key factor underpinning favorable investor
sentiment towards the region, at a time when Emerging Europe isbearing the brunt of the selloff in emerging markets (EMs). The
weakness of the Russian ruble, which has been exacerbated by
the escalation in geopolitical tensions over Ukraine, and thepersistent vulnerability of the Turkish lira are the most
conspicuous examples of the recent shift in market concernsaway from Emerging Asia and towards Emerging Europe.
Ukraines international bondsdeclined for a seven consecutive week as the political standoff
between Russia and western governments over the Black Sea Crimea region continued. The $1billion of Eurobonds due in June 2014 fell 1.3% to 91 cents on the dollar from 92.35 yesterday
with the yield climbing by 6.5% to 49.633%. The Ukraines benchmark stock index (UX)
retreated 0.8%, extending this weeks drop to 4.3%. In contrast, the countrys currency
strengthened 1% to 9.11 per dollar.
Spanish Central Bank Joins Chorus of Concern Over Euro's StrengthECB May Ease Policy if euro's Strength Continues to Curb Inflation Says Spanish Central Bank Chief
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March 13, 2014
The Likelihood of Unlikely Events
Lebanon's new government will bolster HezbollahLebanese factions will continue talks today on remaining differences ovenew government's draft policy statement. The negotiations come amid fo
Prime Minister and Sunni leader Saad Hariri's announcement that he mreturn to Lebanon before presidential elections scheduled for May. Harir
been living outside of the country for more than two years for sec
reasons. On February 22 a suicide car bomb targeted a Lebanese Army p
Hermel, in the latest attack by an al-Qaida-linked group in retaliatio
Hezbollah's role fighting alongside the Assad government in Syria. Harir
his allies in the 'March 14' coalition have repeatedly called on Hezbolla
withdraw its fighters from Syria, in line with the previous government's
declared disassociation policy on the Syrian war.
Growing geopolitical tensions prompt risk aversion
Growing tension in Ukraine and Russia dampened investors risk
appetite, weighing on global stocks and sending the Japanese yenand the Swiss franc higher amid increased demand for safehaven
assets. Worries over geopolitical uncertainty hit Europeans sharesespecially hard
West scrambles to counter RussiaAmid western condemnation, Russ ia t ightens i ts grip on
Ukrainian peninsula as rouble and equities take a battering
Crimea spillover risk will rise as Kiev strugglesTensions in the peninsula have escalated over the past days with clashes
between ethnic Russians and Crimean Tatars
Russian shares tumbled after Crimeas parliament voted in favor of
becoming part of Russia.
Privacy concerns may hinder US 'financial warfareDetails were widely reported today about Operation O
Nerve, in which UK intelligence collected images
personal webcam communications delivered via Ya
sparking renewed concerns about privacy. Since
September 11, 2001 terrorist attacks, the US govern
has explored innovative means to starve terro
organisations and states of necessary finan
resources. Many of these initiatives have had lim
success. However, the fact that the largest exchange
bitcoin, a digital currency accused of being a mecha
for illicit funds, filed for bankruptcy protection to
could lead to greater use of financial mechanisms i
operations.
Russia's Central Bank Lifts Key Rates Unexpectedly
Russia's central bank raised its key interest rate unexpectedly by a massive
150 basis points on Monday, as rising concerns over the escalating crisis in
Ukraine took the ruble to record lows against the U.S. dollar and caused the
stock market to plummet. The Bank of Russia lifted its lending rate to 7.00
percent from 5.50 percent, citing rising risks to inflation and financial
stability.
Developed economies are less resilient to an emerging-mar
shock than they were in the 1990s, when crises from Thaila
to Russia rattled investors without triggering a glo
recession. Thats according to an 81-page study released March 5Morgan Stanley economists and strategists. They estimate a 1990s-s
slump in emerging-market demand would create an average drag of percent for four quarters on the growth of the U.S., while the euro area
Japan probably would be tipped into recession. Reasons for the gre
vulnerability include the fact that developing markets, and especi
China, now have a stronger impact on the worlds economy, supply cha
and trade. Emerging economies account for about half of global gr
domestic product, up from 37 percent in 1997-1998. Developed econom
are also more exposed to their smaller counterparts via exports, corpo
revenue and banking, and the financial crisis of 2008 means they
weaker now than two decades ago
DANGER in the delay: A delay may be justified but a delay in return to morenormal central bank policy settings also carries dangersBIS economists said there were risks from markets focusing too narrowly
on certain aspects of Central Bank forward guidance and from centralbanks themselves potentially becoming too worried about markets'
reaction, to the extent that it could delay a return to more normal
policy settings. This could "raise the risk of an unhealthy
accumulation of financial imbalances," the report said.
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March 13, 2014
Go Figure
Select Market ConsiderationsRisk o f g lobal 'secu lar stagnatmay be risingAs the global recovery continues a
tepid pace, concerns have risen
developed economies could exit
'Great Recession' only to enter a per
of 'secular stagnation'. The id
endorsed by such high-pro
economists as Larry Summers and P
Krugman, relies on Keynesian intuit
that demand is currently insufficien
match idle capacity, boost econo
growth or lower unemployment. Inde
more than five years after the end of
global financial crisis, GDP gro
across advanced economies is we
unemployment stubbornly high
inflation worryingly low. Rising inco
inequality and foreign rese
accumulation are contributing to low
consumption and excess savings at
global level, which has dampened
impact of historically low interest rate
CHINA EXPORTS: Many believe tha
export growth data are distorted --- like
three different ways:
(1)exporters tend to rush their production
shipments ahead of the Chinese New
creating a slump for February; (2) this yea
Chinese New Year arrived earlier, makin
February figure look even weaker; and (3)
was a considerable amount of falsified in
in exports last year for carry-trade.
Emerging markets output growth slows to five month low in FebruaryBusiness activity across emerging markets expanded in February at the slowest pace in five months, weighed down by
weaker manufacturing in big developing countries such as Russia and China, a survey showed on Thursday.
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March 13, 2014
You Cant Handle the TruthLet'sTaketheConoutofEconomics
A new CBO report projects that the ACA will
cost $2 trillion, and 2.5 million jobs, over its
first decade.
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March 13, 2014
U.S. Job Growth
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March 13, 2014
More Jobs Growth Data
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March 13, 2014
Households Brave New World
Threat to recovery:
Americans Shut Out of Home Market
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March 13, 2014
Enlightenment
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The Return to Normal ?
Household wealth in the U.S. increased from October
through December, as gains in stock portfolios and
home prices boosted Americans finances. Net worthfor households and non-profit groups rose by $2.95
trillion in the fourth quarter, or 3.8 percent from the
previous three months, to a record $80.7 trillion, the
Federal Reserve said today from Washington in its
financial accounts report, previously known as the
flow of funds survey.
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March 13, 2014
Credit Matters-Know RiskMany Excel in Strategy, Few in the Management of Risk
Portugal Readies Bond Buyback asMoodys Says Debt Load a RiskPortugal is due to buy back bonds due in
October 2014 and October 2015 today to ease
debt repayments as the nation approaches the
end of its international bailout program
Portuguese two-year notes rose for a fifth day
before the buyback auctions, which are
scheduled for 10:30 a.m. London time. There
are 5.9 billion euros ($8.1 billion) of the 3.6
percent 2014 bonds outstanding and 9.2 billion
euros of the 3.35 percent 2015 securities
according to debt agency IGCP. With the end
of its 78 billion-euro rescue program from the
European Union and International Monetary
Fund approaching on May 17, Portugal isseeking ways to ensure it can regain full access
to debt markets. While it has raised 6.25 billion
euros selling bonds through banks this year, the
nations debt and growth outlook is still a
concern, Moodys Investors Service senior
analyst Kathrin Muehlbronner said yesterday.
ChinasSubsidiesEndPromptsForecastsforSlowerGrowthChinese carmaker may be getting some bad news as it
prepares to start selling in the U.S. next year. A planned
reduction in government subsidies and a phase-out of
interest-rate controls threaten to raise costs for it and
thousands of companies across China. Less than a
decade after surging wages began forcing manufacturers
to cheaper countries, President Xi Jinping is preparing to
dismantle a web of subsidies that began under Deng
Xiaoping in the 1980s. The measures could slow averageannual growth to as low as 3 percent through 2022 from
10 percent in 2010. They also will mean higher prices for
capital, land and water and swings in the cost of energy,
potentially squeezing indebted state businesses. Among
those with highly leveraged financial profiles are
power producer Huaneng Power International Inc. (902)
and China Shipping Development (1138) Co., according
to a Sept. 2013 report by ratings company Standard &
Poors.
China property developersSOHOs earnings fell 47 percent in thesecond half of 2013. A shift from sales toletting means cash flows are dwindling.When the most financially sophisticatedplayers show cracks, its time to worry. Atleast SOHOs lenders are supportive.Lesser rivals may be less fortunate.
S&P warns of downgrades
for European lendersThe agency said recovery and resolution ruleunder which banks will be rescued by bondholbail ins, rather than state bailouts would ratings
Competition among Chinas credit-
rating agencies is intensifying, leading
to a slide in standards reminiscent of
what happened in the U.S. before the
financial crisis, according to Dagong
Global Credit Rating Co.
Puerto Rican default fears will reappear in 2015
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March 13, 2014
Pumping Iron
The Old Economy RevisitedU.S. dealerships can significantly improve on the industry's average
profit margin if they upgrade the capability of sales and service
employees and pursue new sales formats, a McKinsey & Co. study
concludes. The average U.S. dealership posted a pretax profit
margin of 2.2 percent in 2013, according to the National Automobile
Dealers Association. But some top performers already make margins
of up to 5 percent, and that level is attainable for the typical
dealership that puts in the effort to improve, said Hans-Werner Kaas,
McKinsey's senior partner leading the consulting firm's Americas
automotive practice in Detroit
Dream of U.S. Oil Independence Slams Against Shale CostThepathtoward U.S. energyindependence, made possible by a boom in soil, will be much harder than it seems. Just a few of the roadbloIndependent producers will spend $1.50 drilling this year for every dollar get back. Shale output drops faster than production from conventmethods. It will take 2,500 new wells a year just to sustain output of 1 mbarrels a day in North Dakotas Bakken shale, according to the Paris bInternational Energy Agency. Iraq could do the same with 60. ConSanchez Energy Corp. The Houstonbased company plans to spend as mas $600 million this year, almost double its estimated 2013 revenue, onEagle Ford shale formation in south Texas, which along with North Dakoone of the hotbeds of a drilling frenzy thats pushed U.S. crude output tohighest in almost 26years. Its SanteNorth 1H oil well pumped five timesmwater than crude, Sanchez Energy said in a Feb. 17 regulatory filing. Shsank 7 percent.
The Texas utility renamed Energy Future is nearly bust six-
plus years after the $45 bln takeover led by KKR and TPG.
A flock of buyout firms and hedge funds, including Apollo
and Avenue, are clawing at each other for the scraps. This
odd beast has juicy bits buried in its books.U.S. Factory Orders Fall
0.7% In January, More
Than Expected
GermanindustrialoutputroseforathirdconsecutivemonthinJanuary
as
mild
winter
weather
boosted
construction
activity.
Car Makers Try to Make It Big With Smallest of ModelsAuto makers are taking a fresh crack at solving the problem of how
to make money on the tiny cars that European regulators, and many
consumers, want them to sell.
Car Makers Warn of Hit for EuropeEuropean auto executives warned that
tensions over Ukraine and sluggish
growth in Western Europe mean their
new investments could go elsewhere
Big Auto Makers Post Weaker February SalesDemand Stayed Strong for Ford, Chrysler Pickup Trucks
U.S. Paper Industry Gets anUnexpected BoostAmericans renew their relationship wit
paper, ditching the cheap stuff for read
news to buy expensive stock for photo-
based cards and albums.
CHINA AND COMMODITIESIron ore traders say buyers are standing on
sidelines and stockpiles are rising in China's por
a drop in exports and tightening credit make
mills reluctant to add inventory. Copper price
down on fears that inventory would flood the ma
as companies dump the metal to unwind risky tra
Copper bottoms !
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March 13, 2014
A New Geography of Business
French efforts to lure back FDI will fall shortFrance's foreign direct investment (FDI) inflows, as measured by the
UN Conference on Trade and Development (UNCTAD), fell from
25.1 billion dollars in 2012 to 5.7 billion dollars in 2013 -- a 77%
decline. Germany's FDI inflows quadrupled in the same period, to 32
billion dollars. While UNCTAD's figures may be debated, other data
point to a decline in France's attractiveness to foreign investors. The
first tax decisions of President Francois Hollande, elected in spring
2012, seem to have damaged the country's international investment
competitiveness -- something Hollande sought to repair on February
14, when he invited 34 foreign executives to the Elysee Palace to
discuss the launch of a new strategy aimed at boosting France's
'attractiveness' to foreign investors.
AustralianeconomybuildsonChinademandforproperty--A construction boom driven by Chinese demand for Australian
property could play a key role in rebalancing the economy after mining
investment boom
Prospects for India in the second quarterParliamentary elections will be held between April 7 and May 12, the Election Commission
announced today. The polls will be a three-way race involving the incumbent Congress-led
coalition, the main opposition Bharatiya Janata Party (BJP) and an Alternative Front of
smaller parties, with none of the three on track for a clear mandate. The establishment of the
next government, following intense coalition jockeying, will consume much of the secondquarter, creating short-term policy uncertainty. On the economic front, GDP growth in the
quarter ending December 2013 slowed to 4.7%, from 4.8% in the previous quarter -- close tohalf the rate of expansion achieved during the 2003-08 boom (8.7%). Given this slowdown,
the new dispensation is unlikely to enjoy a 'honeymoon' period.
China's military budget hike will fuel 'arms race'
Unemployment will speed Spain's demographic ageingUnemployment is undermining Spain's economic recovery and
blighting the lives of one quarter of its inhabitants seeking
employment and over half its young people. It is also contributing toa shift in longer-term demographic and labour market trends. Gender
imbalance in the labour market is disappearing, fertility rates are very
low, and life expectancy keeps rising -- trends that underpin the
process of demographic ageing (the accumulation of a larger
proportion of the population in older age groups). Greater uncertainty
surrounds net international migration, now the principal determinant
of population change. Since 2010 this has reversed, from net in-
migration to net out-migration, draining people from the working age
group, stretching the social security system and adding to pressure on
health services.
Thailand political turmoil imperils foreign and domestic investment
Thailand's consumer confidence declined to a 12-year low in
February as political uncertainty continued to weigh on investment and
spending. The consumer sentiment index fell to 69.9 from 71.5 in
January, reports said citing the University of Thai Chamber of Commerce
on Thursday. This was the 11th consecutive fall.
Euro will soon admit Lithuania as 19th member
Canadas Job Loss and Trade Deficits Signal Slower GrowthJob losses and trade deficits suggest the Canadian economy is slowing in the first quarter of
this year with businesses failing to drive growth as policy makers predicted. Employment
fell by 7,000 in February, the second decline in three months, according to Ottawa-based
Statistics Canada, as a 50,700 drop in government workers exceeded a 35,200 gain at private
companies. Januarys trade deficit reported today was the 23rd in 25 months, subtracting
from growth as export volumes fell faster than imports. The Bank of Canada said earlier
this week the worlds 11th-largest economy may slow in the first quarter while keeping its
key lending rate at 1 percent, citing weak exports and investment. Todays employment
figures suggest consumers may struggle to keep driving the expansion.
Indias merchandise exports fell notably in February, decreasing
3.7% (y/y), the first year-on-year decline in 8 months. Importsdeclined sharply, falling by 17.1% (y/y), driven by lower oil and
non-oil imports. Consequently, the trade balance recorded a deficit
of US$8.1bn, which was lower than the deficit of US$14.1bn
recorded last year.
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The DNA of BusinessReconfiguring Industries to Define Growth
Men's Wearhouse and Jos.A. Bank on way to merger
Compared to the same time last year, Costco's salesduring the second quarter (which ended in mid-
February) were up 6% to $25.76 billion. On a same-
store basis, sales were up 4% in the US but flat for
stores in the seven other countries where it operates.
But, Costco also reported what same-store sales are
after "excluding negative impacts from gasoline price
deflation and foreign exchange": up 5% in the US and
up 7% for its international stores. Gas prices and
exchange rate volatility took its toll on Costco.
Meanwhile, Costco's profits took a hit. Its operating
profit of $724 million was 2% lower than last year and
net income was down 15% to $463 million. CFORichard Galanti noted that last year's net income was
helped by a $62 million tax benefit thanks to a special
cash dividend to its 401(k) plan participants. Yet that
wasn't enough of an explanation for the disparity, the
company acknowledges. Weaker sales and bigger
discounts on its non-food items during the shorterholiday season as well as lower margins with fresh
foods also cut into Costco's profits.
Federal forecasters predict a warming of the
central Pacific Ocean this year that will
change weather worldwide. Globally, it can
mean an even hotter year coming up and
billions of dollars in losses for food crops.
The National Oceanic Atmospheric and
Administration issued an official El Nino watch
Thursday. An El Nino is a warming of the
central Pacific once every few years, from a
combination of wind and waves in the tropics.
It shakes up climate around the world,
changing rain and temperature patterns.
EuroperiskslosingadvancedcombataircraftindustryBAESystems (BAES) recently confirmeda 7 billiondollar contract to supply 72 Eurofighter Typhoonfighters and lifetime support to Saudi Arabia.Following the loss of a 9 billion dollar order fromthe United Arab Emirates (UAE) and failure tosecure an even bigger deal with India, the Saudicontract has given BAES and the fournationEurofighter consortium vital breathing space inthe battle to secure export orders. However,
Typhoon has had limited export success so far,and Eurofighter has struggled to secure supportfor further development that would improve itsbomber capabilitiesa major limitation in exportbattles with its French and US competitors.
Canada is set to phase out tariffs on So
Korean auto imports in less than five year
part of a free t rade deal with Seoul, accor
to a person familiar with the matter. Cana
deal with South Korea, Ottawa's first s
deal in the fast-growing Asian-Pacific reg
is expected to be announced
Chiquita to Merge With Ireland's
Fyffes, Becoming Top BananaChiquita of the U.S. and Fyffes of Ireland a
merging to create the world's largest bana
company, in an all-stock deal valued at abo
$1.07 billion.
Air lines Report on Winter 's ImpactThe four largest U.S. airlines said they had canceled
a combined 74,500 flights in the first two months of
this year because of extreme winter weather.
Safeways $9.4 billion sale to the owner
of rival supermarket operator Albertsonsmeans that, after years of shrinking, it will
be part of something much bigger. But the
merger's success will hinge partly on
whether Safeway can operate more like a
local grocer. While size and nationa
scale offer advantages to supermarket
chains, such as more purchasing power
with suppliers, their business largely
depends on catering to local demand
One thing Albertsons has done well under
its private-equity owners, a group led by
Cerberus Capital Management LP, is to
give regional managers more voice in key
decisions such as what products to stock
say analysts and industry consultants
That's an area in which Safeway hassometimes stumbled.
Wireless Bills Go Up, and Stay Up
Competition in the U.S. wireless market
has increased over the past year, but so
have Americans' overall phone bills.
Engine of Wall Street profits sputtersInvestment banks face 25% fall in quarterlyfixed income revenues
Cyber security start-ups have become the latest fascination for Silicon Valley investors, who
have flooded the sector with venture capital investment as they seek to back the latesttechnology to combat criminals online. Early-stage funding for the sector soared by
almost 60 per cent last year to $244m worldwide, according to data from research group
PrivCo. The number of deals rose even faster, up more than 100 per cent year-on-year to
more than one a week. The figures imply multibillion-dollar valuations in total for these
young companies, which often only have a small number of employees.
Amazon Working on Music-Streaming ServiceTo Spur Song Purchases, Limits Would Be Placed on Listening
Google Fibers gigabit service appears to
be gaining momentum. The company said
last month it has invited 34 cities across
nine major metropolitan areas to exploreways to bring the service to their citizens,
signaling its ready to make a substantial
investment in the venture.
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March 13, 2014
Real Estate and Construction Outlook
Despite proven academic success
f NYCs charter schools, the
mayor and unions have started a
war on citys charter kids
Investors are willing to
more than twice as much
offices on the upper floors
Hong Kong skyscrapers t
for equivalent space
Manhattan, Knight Frank L
said.
New-Home Building in BigShift to ApartmentsThe share of new homes being bu
as rental apartments is at the high
level in at least four decades, as a
improving jobs picture spurs
younger Americans to form their
own households but tighter lendi
standards make it more difficult
buy.
ondonskylinetoberadicallyreshapedReport reveals 236 towers being built or in the pipeline
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Will Life Ever Be the Same?
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