March 13, 2014

Crisis after Crisis

2014 issue 5

A 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 and growth 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 adequate financial wherewithal -to alleviate weak growth prospects.

Worries regarding 'unintended consequences' of QE

China and Ukraine worries hit markets Chinascurrencydropmarksseismicshift

China 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 the countrys central bank will widen the currencys trading band.

Ukraine flares up into major superpower crisis

Over the past few days, Western attention has shifted from violence on Kiev streets and the dire state of Ukraine's economy to the threat of a Russian military invasion. While all these issues are important one key aspect of the crisis that remains largely overlooked is the failure of the Turchinov government to consolidate power and stabilize the fragile and fragmented country.

Philadelphia Federal Reserve President Charles Plosser is "very worried" about the potential for unintended consequences of the Fed's massive quantitative easing program. Plosser told CNBC that the U.S. was still suffering from "lasting effects" of the recession and "may never return" to its previous growth ratesand warned that policy should not bet on growth returning to previous rates, saying it could be "many, many years."

Russia spends $billions supporting its rouble

Mondays move was one of Russias largest foreign currency interventions on record and is equivalent to 2.3% of $493bn its FX reserves

Severe 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

Corporate default ends Beijing's 'implicit guarantee'

UStoreleaseoilfromstrategicreserve
Test comes amid heightened tension over Crimea

ABRAHAM GULKOWITZ
abe@gulkowitz.com
917-402-9039

For the entire 2013, U.S. real GDP increased 1.9%, compared with an increase of 2.8% in 2012.

A significant number of economists have doubts about the European Central Bank's view that deflation is not a threat and that the recovery will take hold without any more action, a Reuters poll showed, and they say more stimulus is needed.

March 13, 2014

The PunchLine...

In This Issue
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 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 and growth 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 adequate financial wherewithal -- to alleviate weak growth prospects. (pg 1)

The Likelihood of Unlikely Events... Go Figure You Cant Handle the Truth U.S. Job Growth More Job Data ... Households Enlightenment The Return to Normal Credit Pumping Iron A New Geography of Business The DNA of Business Real Estate and Construction Will Life Ever be the Same?

(pg 5) (pg 6) (pg 7) (pg 8) (pg 9) (pg 10) (pg 11) (pg 12) (pg 13) (pg 14) (pg 15) (pg 16) (pg 17) (pg 18)

In This Issue Dislocation, Dislocation Engines of Growth

(pg 2) (pg 3)

Easy 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

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.

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The PunchLine...

Dislocation, Dislocation, Dislocation

Growing signs of weakening Chinese demand for commodities 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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Engine Drivers
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.

China extends run of double-digit military spending increases

Defence spending will rise 12.2% in 2014 to Rmb808bn, continuing an almost unbroken string of double-digit annual increases over the past two decades Turkeys consumer confidence weakened for the third consecutive month in February, with the index dropping to 69.2 from 72.4 in January, the lowest score since February 2010 China will struggle to hit even when it was 68.6. All four subindices modest growth targets declined. The index assessing households sentiment about the possibility of saving this month declined the most, dropping 15.8% to 22; followed by the index gauging consumers view on the general economic situation, which fell 3.9% to 90.4. Ukraines international bonds declined for a seven consecutive week as the political standoff between Russia and western governments over the Black Sea Crimea region continued. The $1 billion 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.

Weak growth data hide Japan's underlying strengths

Fourth-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 strong household 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 third month in a row.

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 Confidence

Four 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.

Spanish Central Bank Joins Chorus of Concern Over Euro's Strength

ECB May Ease Policy if euro's Strength Continues to Curb Inflation Says Spanish Central Bank Chief

The European Commission's latest economic forecasts include upward revisions to its GDP estimates this year in many of the EU's Central 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 pickup in domestic demand, are a key factor underpinning favorable investor sentiment towards the region, at a time when Emerging Europe is bearing 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 the persistent vulnerability of the Turkish lira are the most conspicuous examples of the recent shift in market concerns away from Emerging Asia and towards Emerging Europe.

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The PunchLine...

The Likelihood of Unlikely Events

Growing geopolitical tensions prompt risk aversion
West scrambles to counter Russia
Amid western condemnation, Russia tightens its grip on Ukrainian peninsula as rouble and equities take a battering

Lebanon's new government will bolster Hezbollah

Lebanese factions will continue talks today on remaining differences over the new government's draft policy statement. The negotiations come amid former Prime Minister and Sunni leader Saad Hariri's announcement that he might return to Lebanon before presidential elections scheduled for May. Hariri has been living outside of the country for more than two years for security reasons. On February 22 a suicide car bomb targeted a Lebanese Army post in Hermel, in the latest attack by an al-Qaida-linked group in retaliation for Hezbollah's role fighting alongside the Assad government in Syria. Hariri and his allies in the 'March 14' coalition have repeatedly called on Hezbollah to withdraw its fighters from Syria, in line with the previous government's selfdeclared disassociation policy on the Syrian war.

Crimea spillover risk will rise as Kiev struggles

Tensions 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.

Growing tension in Ukraine and Russia dampened investors risk appetite, weighing on global stocks and sending the Japanese yen and the Swiss franc higher amid increased demand for safehaven assets. Worries over geopolitical uncertainty hit Europeans shares especially hard
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.

Privacy concerns may hinder US 'financial warfare'

Details were widely reported today about Operation Optic Nerve, in which UK intelligence collected images from personal webcam communications delivered via Yahoo, sparking renewed concerns about privacy. Since the September 11, 2001 terrorist attacks, the US government has explored innovative means to starve terrorist organisations and states of necessary financial resources. Many of these initiatives have had limited success. However, the fact that the largest exchange of bitcoin, a digital currency accused of being a mechanism for illicit funds, filed for bankruptcy protection today, could lead to greater use of financial mechanisms in US operations.

DANGER in the delay: A delay may be justified, but a delay in return to more normal central bank policy settings also carries dangers
BIS economists said there were risks from markets focusing too narrowly on certain aspects of Central Bank forward guidance and from central banks 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.

Developed economies are less resilient to an emerging-market shock than they were in the 1990s, when crises from Thailand to Russia rattled investors without triggering a global recession. Thats according to an 81-page study released March 5 by
Morgan Stanley economists and strategists. They estimate a 1990s-style slump in emerging-market demand would create an average drag of 1.4 percent for four quarters on the growth of the U.S., while the euro area and Japan probably would be tipped into recession. Reasons for the greater vulnerability include the fact that developing markets, and especially China, now have a stronger impact on the worlds economy, supply chains and trade. Emerging economies account for about half of global gross domestic product, up from 37 percent in 1997-1998. Developed economies are also more exposed to their smaller counterparts via exports, corporate revenue and banking, and the financial crisis of 2008 means they are weaker now than two decades ago

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The PunchLine...

Go Figure Select Market Considerations

Emerging markets output growth slows to five month low in February
Business 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.

Risk of global 'secular stagnation' may be rising

As the global recovery continues at a tepid pace, concerns have risen that developed economies could exit the 'Great Recession' only to enter a period of 'secular stagnation'. The idea, endorsed by such high-profile economists as Larry Summers and Paul Krugman, relies on Keynesian intuition that demand is currently insufficient to match idle capacity, boost economic growth or lower unemployment. Indeed, more than five years after the end of the global financial crisis, GDP growth across advanced economies is weak, unemployment stubbornly high and inflation worryingly low. Rising income inequality and foreign reserve accumulation are contributing to lower consumption and excess savings at the global level, which has dampened the impact of historically low interest rates.

CHINA EXPORTS: Many believe that the export growth data are distorted --- likely in three different ways: (1) exporters tend to rush their production and shipments ahead of the Chinese New Year, creating a slump for February; (2) this year the Chinese New Year arrived earlier, making the February figure look even weaker; and (3) there was a considerable amount of falsified invoice in exports last year for carry-trade.

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The PunchLine...

YouCant Handle the Truth

Let'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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The PunchLine...

U.S. Job Growth

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The PunchLine...

More Jobs Growth Data

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The PunchLine...

Households Brave New World

Threat to recovery:

Americans Shut Out of Home Market

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The PunchLine...

Enlightenment

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The PunchLine...

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 worth for 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

The PunchLine...

Credit Matters-Know Risk

Many Excel in Strategy, Few in the Management of Risk
ChinasSubsidiesEndPrompts ForecastsforSlowerGrowth
Chinese 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 average annual 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 developers

SOHOs earnings fell 47 percent in the second half of 2013. A shift from sales to letting means cash flows are dwindling. When the most financially sophisticated players show cracks, its time to worry. At least SOHOs lenders are supportive. Lesser rivals may be less fortunate.

Portugal Readies Bond Buyback as Moodys Says Debt Load a Risk

Portugal 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 is seeking 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.

Competition among Chinas creditrating 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.

S&P warns of downgrades for European lenders

The agency said recovery and resolution rules under which banks will be rescued by bondholder bail ins, rather than state bailouts would hit ratings

Puerto Rican default fears will reappear in 2015

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The PunchLine...

Pumping Iron The Old Economy Revisited

U.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 Costs
The path toward U.S. energy independence, made possible by a boom in shale oil, will be much harder than it seems. Just a few of the roadblocks: Independent producers will spend $1.50 drilling this year for every dollar they get back. Shale output drops faster than production from conventional methods. It will take 2,500 new wells a year just to sustain output of 1 million barrels a day in North Dakotas Bakken shale, according to the Parisbased International Energy Agency. Iraq could do the same with 60. Consider Sanchez Energy Corp. The Houstonbased company plans to spend as much as $600 million this year, almost double its estimated 2013 revenue, on the Eagle Ford shale formation in south Texas, which along with North Dakota is one of the hotbeds of a drilling frenzy thats pushed U.S. crude output to the highest in almost 26 years. Its Sante North 1H oil well pumped five times more water than crude, Sanchez Energy said in a Feb. 17 regulatory filing. Shares sank 7 percent.

Car Makers Try to Make It Big With Smallest of Models

Auto 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.

Big Auto Makers Post Weaker February Sales

Demand Stayed Strong for Ford, Chrysler Pickup Trucks

Car Makers Warn of Hit for Europe

European auto executives warned that tensions over Ukraine and sluggish growth in Western Europe mean their new investments could go elsewhere

U.S. Factory Orders Fall 0.7% In January, More Than Expected

The Texas utility renamed Energy Future is nearly bust sixplus 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. Paper Industry Gets an Unexpected Boost

Americans renew their relationship with paper, ditching the cheap stuff for reading news to buy expensive stock for photobased cards and albums. Copper bottoms !

Germanindustrialoutputroseforathirdconsecutivemonthin Januaryasmildwinterweatherboostedconstructionactivity.

CHINA AND COMMODITIES

Iron ore traders say buyers are standing on the sidelines and stockpiles are rising in China's ports as a drop in exports and tightening credit make steel mills reluctant to add inventory. Copper prices are down on fears that inventory would flood the market as companies dump the metal to unwind risky trades.

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The PunchLine...

A New Geography of Business

French efforts to lure back FDI will fall short
France'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

Canadas Job Loss and Trade Deficits Signal Slower Growth

Job 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.

Unemployment will speed Spain's demographic ageing

Unemployment 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 to a 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 inmigration to net out-migration, draining people from the working age group, stretching the social security system and adding to pressure on health services.

China's military budget hike will fuel 'arms race'

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

Indias merchandise exports fell notably in February, decreasing 3.7% (y/y), the first year-on-year decline in 8 months. Imports declined 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.

Prospects for India in the second quarter

Parliamentary 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 second quarter, 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 to half 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.

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The PunchLine...

The DNA of Business

Reconfiguring Industries to Define Growth
Compared to the same time last year, Costco's sales during the second quarter (which ended in midFebruary) were up 6% to $25.76 billion. On a samestore 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. CFO Richard 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 shorter holiday season as well as lower margins with fresh foods also cut into Costco's profits.

Engine of Wall Street profits sputters

Investment banks face 25% fall in quarterly fixed income revenues

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.

Canada is set to phase out tariffs on South Korean auto imports in less than five years as part of a free trade deal with Seoul, according to a person familiar with the matter. Canada's deal with South Korea, Ottawa's first such deal in the fast-growing Asian-Pacific region, is expected to be announced

Chiquita to Merge With Ireland's Fyffes, Becoming Top Banana

Chiquita of the U.S. and Fyffes of Ireland are merging to create the world's largest banana company, in an all-stock deal valued at about $1.07 billion.

Europeriskslosingadvanced combataircraftindustry
BAE Systems (BAES) recently confirmed a 7 billion dollar contract to supply 72 Eurofighter Typhoon fighters and lifetime support to Saudi Arabia. Following the loss of a 9 billion dollar order from the United Arab Emirates (UAE) and failure to secure an even bigger deal with India, the Saudi contract has given BAES and the fournation Eurofighter consortium vital breathing space in the battle to secure export orders. However, Typhoon has had limited export success so far, and Eurofighter has struggled to secure support for further development that would improve its bomber capabilities a major limitation in export battles with its French and US competitors.

Airlines Report on Winter's Impact

The 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.

Men's Wearhouse and Jos. A. Bank on way to merger

Safeways $9.4 billion sale to the owner of rival supermarket operator Albertsons means 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 national 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 has sometimes stumbled.

Amazon Working on Music-Streaming Service

To Spur Song Purchases, Limits Would Be Placed on Listening

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.
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 explore ways to bring the service to their citizens, signaling its ready to make a substantial investment in the venture.

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 latest technology 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.

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Real Estate and Construction Outlook

Investors are willing to pay more than twice as much for offices on the upper floors of Hong Kong skyscrapers than for equivalent space in Manhattan, Knight Frank LLP said.

New-Home Building in Big Shift to Apartments

The share of new homes being built as rental apartments is at the highest level in at least four decades, as an improving jobs picture spurs younger Americans to form their own households but tighter lending standards make it more difficult to buy.

Despite proven academic success of NYCs charter schools, the mayor and unions have started a war on citys charter kids

Londonskylinetoberadicallyreshaped
Report reveals 236 towers being built or in the pipeline

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Will Life Ever Be the Same?

This publication is provided to you for information purposes and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has been obtained from sources believed to be reliable but is not necessarily complete and its accuracy cannot by guaranteed. The views reflected herein are subject to change without notice. No one connected to this publication accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. This publication may not be reproduced, distributed to any person for any purpose without express permission from TPL Advisory, LLC. Please cite source when quoting. All rights are reserved.

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