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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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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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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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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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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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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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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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U.S. Job Growth

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More Jobs Growth Data

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Households Brave New World

Threat to recovery:

Americans Shut Out of Home Market

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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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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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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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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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