ABRAHAM GULKOWITZabe@gulkowitz.com917-402-9039

2017 issue 3February 12, 2017

Alternative Facts… Markets continue to ride high on promises of fiscal stimulus, infrastructure spending and deregulation, defraying political risks both here and abroad. Forexample, the Eurozone entered 2017 on a stronger footing with output growth maintained at December's five-and-a-half year high and job creation nearnine-year record. All this in the face of a long stream of worries over forthcoming European elections and political minefields. Also helpful are hints of a“phenomenal” announcement on taxes in the next few weeks -- potentially at the February 28 State of the Union address to Congress. At the same time,alternative scenarios are emerging that herald more serious risks than are generally perceived in the market place. First, one has to respect the new realitythat the elections in Europe may yet surprise us. Secondly the breakdown in the U.S. political scene, the extreme polarization, may become disruptive overtime. Third, the complexity of some of the “fixes” will become more evident over time. Infrastructure spending requires careful monitoring and sharp pencilson cost-benefit analysis. Fixing or repealing Obamacare will become a litmus test of how difficult mega-legislation has become. The same can be said foramending Dodd-Frank. This argues that much of the forward thrust in markets may be more tenuous than is appreciated. The direction remains upbeat,however, and the economic data is likely to remain supportive despite the seismic upheavals in the U.S. and that may yet engulf Europe.

SMACKDOWN WITH MEXICO... AND OTHERS

U.S. oil rig count rises to highest since October 2015

Expectations of simpler bank regulations

The US job market started the new year on afirm footing. However, the change in totalnonfarm payroll employment for Novemberwas revised down from +204,000 to +164,000,and the change for December was revised upfrom +156,000 to +157,000. With theserevisions, employment gains in November andDecember combined were 39,000 lower thanpreviously reported.

Eurozone entered 2017 on a strong footing with output growth maintained at December's five-and-a-half year high and job creation near nine-year record

NOT JUST TRASHINGTrump Finance Upheaval Should Demand Better Approach To Regulation And Consumer Protection

Oil prices rose after the United States imposed sanctions onsome Iranian individuals and entities, days after the WhiteHouse rebuked Tehran for a ballistic missile test.

The first round of the 2017 French presidential election is scheduled to be held April 23, with a run-off election to be held May 7 in the event no candidate wins a majority.

Investors pile into risky bonds in bet on Trump economyBorrowings by junk‐rated companies up nearly two‐thirds from a year earlier

The IBD/TIPP Economic Optimism Index rose to 56.4 in February of 2017 from 55.6 in January. It is the highestfigure since October of 2004, as Americans are hopeful that President Trump will deliver on his promises toboost employment and growth. The personal financial outlook index gained 0.5 points to 62.8 and the measure ofconfidence in federal economic policies rose 2.4 point to 50.9. In contrast, the six‐month economic outlook edgeddown 0.4 points to 55.6. Economic Optimism Index in the United States averaged 49.12 from 2001 until 2017,reaching an all time high of 62.90 in March of 2002 and a record low of 35.80 in August of 2011.

Copper prices increased to 20-month high onFriday, amid better-than-expected Chineseexports and imports data; the second day of thestrike at the biggest mine in Chile and ongoinguncertainties over the renewal of mining permit atGrasberg mine in Indonesia.

The PunchLine...

2

February 12, 2017

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... (pg 7)

• The Market Roar… (pg 8)

• Households… (pg 9)

• Household Hints… (pg 10)

• You Can’t Handle the Truth ! (pg 11)

• How Do You Figure? (pg 12)

• More US Job Data ! (pg 13)

• Credit… (pg 14)

• Pumping Iron… (pg 15)

• The DNA of Business… (pg 16)

• Real Estate and Construction… (pg 17)

• More Real Estate (pg 18)

• Will Life Ever be the Same? (pg 19)

• Alternative FactsMarkets continue to ride high on promises of fiscal stimulus, infrastructure spending andderegulation, defraying political risks both here and abroad. For example, the Eurozoneentered 2017 on a stronger footing with output growth maintained at December's five-and-a-half year high and job creation near nine-year record. All this in the face of a longstream of worries over forthcoming European elections and political minefields. Alsohelpful are hints of a “phenomenal” announcement on taxes in the next few weeks --potentially at the February 28 State of the Union address to Congress. At the same time,alternative scenarios are emerging that herald more serious risks than are generallyperceived in the market place. First, one has to respect the new reality that the electionsin Europe may yet surprise us. Secondly the breakdown in the U.S. political scene, theextreme polarization, may become disruptive over time. Third, the complexity of some ofthe “fixes” will become more evident over time. Infrastructure spending requires carefulmonitoring and sharp pencils on cost-benefit analysis. Fixing or repealing Obamacare willbecome a litmus test of how difficult mega-legislation has become. The same can be saidfor amending Dodd-Frank. This argues that much of the forward thrust in markets may bemore tenuous than is appreciated. The direction remains upbeat, however, and theeconomic data is likely to remain supportive despite the seismic upheavals in the U.S.and that may yet engulf Europe. (pg 1)

• In This Issue (pg 2)

• The Future Ain’t … (pg 3)

• Alternative Facts… (pg 4)

• Dislocation, Dislocation (pg 5)

• Engines of GrowthDespite some better economic indications recently, intense and confusing stress signalsare still emanating from around the globe . Uncertainties -- particularly from Europe,China, the commodity markets, key emerging markets and even the new administrationin the U.S. - - have confounded investors and contributed to intermittent bouts of severevolatility. Despite extensive and massive easing, most of the global economy still faceswoefully inadequate growth prospects and difficult policy options. Very obvious financialvulnerabilities and serious geopolitical concerns are aggravating the uncertainty. Andlet’s not forget that many of the challenges are not fleeting, and many cannot beresolved easily or quickly… (pg 6)

Contact information:

Abraham Gulkowitz

phone: 917-402-9039 email:   abe@gulkowitz.com

The PunchLine...

3

February 12, 2017

The Future Ain’tWhat It Used To Be

European Bonds Post Worst January on Record Amid Political Angst

Stocks of crude oil in the United States roseagain… It is the biggest jump in 13 weeks.Meanwhile, gasoline stocks increased also…

Retired Gen. David Petraeus warned lawmakers that theworld order created in part by the United States in the20th century is under “unprecedented threat frommultiple directions,” pointing to Russia, China, Islamistextremists and cyber threats. Those threats arecompounded by an America whose “resolve about itsdefense has become somewhat ambivalent,” he added.

U.S. companies including major exporters General Electric Co and Boeing Colaunched a coalition to back a House Republican plan to tax all imports,saying the proposal would "support American jobs and American‐madeproducts.“ The group, comprised of more than 25 U.S. companies and dubbedthe "American Made Coalition," also includes Dow Chemical Co, Eli Lilly and Co,Pfizer Inc, and Oracle Corp, the companies confirmed. The group's launchunderscored a growing division in corporate America over the House Republicanproposal that would cut corporate income tax to 20 percent from 35 percent,exclude export revenue from taxable income and impose the 20 percent tax onimports. President Donald Trump has sent mixed signals about border taxesand the House proposal could face difficulties in the U.S. Senate where someRepublicans question whether it would unduly raise prices for U.S consumersand businesses. Companies that rely heavily on imports, such as retailersTarget Corp and Best Buy Co Inc, say a border tax would outweigh thebenefit of a lower headline corporate tax. Net exporters like Boeing andcompanies that are purely domestic U.S. concerns say they would benefit.

The PunchLine...

4

February 12, 2017

Alternative Facts- Careful Reading

US JOBSNice January Increase, Down Revisions in Earlier MonthsTotal nonfarm payroll employment increased by 227,000 in January,and the unemployment rate was little changed at 4.8 percent, the U.S.Bureau of Labor Statistics reported today. Job gains occurred in retailtrade, construction, and financial activities. .. . The job market startedthe new year on a firm footing. However, the change in total nonfarmpayroll employment for November was revised down from +204,000 to+164,000, and the change for December was revised up from +156,000to +157,000. With these revisions, employment gains in November andDecember combined were 39,000 lower than previously reported.

Risk premiums on high yield and investment grade corporatedebt — ameasure of the spread investors demand to hold thosebonds over benchmark US Treasuries — have fallen to within259 basis points of each other, Bank of America data show.That is down from a peak of over 650bp a year ago, when a rapiddecline in commodity prices and fears of a Chinese slowdownsparked broader market turmoil.Lower corporate taxes would free cash up for interest paymentsby these companies, while a reduced regulatory burden couldbolster margins, investors and strategists say. Faster economicgrowth would in turn underpin higher sales.

Auto sales in Brazil dropped sharply by 28 percent to147.2 thousand vehicles in January 2017, after risingby 14.7 percent in the previous month. Sales fell for:Light vehicles (-27.8 percent); trucks (-33.8 percent);and buses (-24.3 percent). Compared to a year ago,auto sales slipped 5.2 percent.

The PunchLine...

5

February 12, 2017

Dislocation, Dislocation, Dislocation

Based on a preliminary estimate from WardsAuto, lightvehicle sales were at a 17.47 million SAAR in January.That is up about 2% from January 2016, and down 4.5%from the 18.29 million annual sales rate last month.

The PunchLine...

6

February 12, 2017

Engines of Growth…

US GDP SLOWED AGAIN… The deceleration in real GDP in thefourth quarter reflected a downturn in exports, an acceleration in imports, adeceleration in PCE, and a downturn in federal government spending thatwere partly offset by an upturn in residential fixed investment, anacceleration in private inventory investment, an upturn in state and localgovernment spending, and an acceleration in nonresidential fixed investment.

Orders for long-lasting goods made in the U.S. fell in December forthe second month in a row, largely because of a cutback in demandfrom the Pentagon. New orders for durable goods dropped 0.4%last month, the government said. Meanwhile, non-defense capitalgoods orders excluding aircraft, a closely watched proxy forbusiness spending plans, increased by 0.8 percent after a 1.5percent gain in November.

The total debt in China's economy has reached levels that have preceded financial crises in other countries

Eurozone growth defies uncertaintiesThe eurozone economy ended 2016 in good shape, boosting hopes thatthe region’s recovery is strong enough to shake off the politicaluncertainty sparked by Britain’s Brexit vote and the election of DonaldTrump in the US. Gross domestic product data released by Eurostat,the European Commission’s statistics bureau, yesterday beat analysts’expectations and showed the euro area expanded by 0.5 per cent in thefourth quarter, taking growth to 1.8 per cent since the final quarter of2015. The early signs are that the eurozone’s economy has remainedresilient to the uncertain external political climate at the start of 2017.

Japan is putting together a package it says could generate 700,000U.S. jobs and help create a $450‐billion market, to present to U.S.President Donald Trump next week, government sources familiarwith the plans said. The five‐part package, to be unveiled when PrimeMinister Shinzo Abe visits Trump on Feb. 10 in Washington, envisageinvestments in infrastructure projects such as high‐speed trains andcybersecurity, said the sources, who declined to be identified as they werenot authorized to speak to the media. Investing in overseasinfrastructure projects dovetails with a key plank in Abe’s growthstrategy, which is to export "high‐quality" infrastructure technology.Japan will invest 17 trillion yen ($150 billion) in public and private fundsover 10 years, the sources said. That would include helping develop high‐speed railways in the northeastern United States, and the states of Texasand California, and renovating subway and train cars.

China's foreign exchange reserves fell by $12.3 billion in January 2017 to$2.998 trillion, compared with a drop of $41 billion in December. It wasthe seventh straight month of decline and the first time in nearly sixyears that reserves were below the closely watched $3 trillion level, evenas authorities tried to curb outflows by tightening capital controls.Meanwhile, China's gold reserves rose to $71.292 billion at the end ofJanuary, from $67.878 billion at end‐December.

Germany competes primarily on quality, but the weak euro has also improved its price competitiveness German exporters will benefit from the euro-area’s modest

recovery. The ECB’s expansionary policy -- which keeps the euro weak --

hurts German bank depositors who face negative real interest rates. Medium-sized companies -- the ‘Mittelstand’ -- could suffer

disproportionally from non-tariff barriers to trade. Domestic demand may become increasingly important as a driver

of growth.

Chinese exports grew much faster than expected in January on rising global demand,producing the highest monthly trade surplus in nearly half a year. Exports jumped7.9% in January from a year earlier, reversing December’s 6.1% decline, the GeneralAdministration of Customs said Friday. This compared with a median forecast of 3.1%growth from 11 economists polled by The Wall Street Journal. Imports in January alsosurged by a greater-than-expected 16.7% from a year earlier, compared with 3.1%growth in December. China’s trade surplus widened in January to $51.35 billion, itshighest level since August, from $40.82 billion in December.

The PunchLine...

7

February 12, 2017

The Likelihood of Unlikely Events

Global DisorderCyber Risk Focus Rising for Corporates and Governments

Saudi internal security threats could multiplyTerrorism arrests underline ‘blowback’ risks from regional conflicts The need for cybersecurity is increasing as

interconnectivity and technology progress

Ratings agency Standard & Poor's cut its outlook forTurkey to "negative" from "stable", citing growing constraintson policymakers' ability to contain inflation and shore up thetumbling lira currency.

Trump has sunk the Trans-Pacific Partnership trade agreement, creating space for one that includes ChinaRisk of free-for-all is the likely result of the US withdrawal from TPP Shortly after Donald Trump was sworn in as US president on January 20, hisadministration announced withdrawal from the Trans-Pacific Partnership (TPP)trade agreement. This leaves the Regional Comprehensive EconomicPartnership (RCEP), which unlike TPP includes China, as Asia's mostambitious planned regional trade agreement. The RCEP encompasses North-east Asia, South-east Asia, India, Australia and New Zealand. It has so farreceived less attention than the larger, more comprehensive TPP, but is nowmore likely to happen.

Japan faces working hours ‘shokku’Cuts to overtime hours could tighten labor markets, hit earnings and alter consumption patterns

Hand of Russia is suspected in Czech cyber hack that may have sought intelligence on Prague’s Euro-Atlantic relations

China labor unrest spreads to ‘new economy’Retail and logistics sectors hit by strikes and protests once focused on industry

Demonetization May Delay Indian Bank Asset-Quality RecoveryDemonetization is likely to push back the recovery in Indian banks' asset quality, given the disruptive impact that cash shortages have had on the country's large informal economy.

Brazil's private sector contracted at the fastestpace in five months in January, data from IHSMarkit revealed Friday. The composite outputindex dropped to a five-month low of 44.7 inJanuary from 45.2 in December. A reading below50 indicates contraction in the sector. Withmanufacturers seeing a quicker drop inproduction, the downturn in output across theprivate sector as a whole gathered pace. Theservices Purchasing Managers' Index heldsteady at 45.1 in December. The survey showedthat the service sector activity declined for thetwenty-third straight month in January, as newbusiness continued to fall.

Crime is contributing to Latin America's economic woesThe costs of crime to economic growth may in turn undermine prospects for youth

President Trump’s tough talk on Iran is winning him friends in the Arab world, but italso carries a significant risk of conflict with a U.S. rival that is now more powerfulthan at any point since the creation of the Islamic republic nearly 40 years ago.With its warning last week that Iran is “on notice,” the Trump administration signaleda sharp departure from the policies of President Barack Obama, whose focus onpursuing a nuclear deal with Iran eclipsed historic U.S. concerns about Iranianexpansionism and heralded a rare period of detente between Washington and Tehran.

Geopolitics, Russia, Iran, French Election Skew USD, Gold Views

Europe’s leading central bankers are at loggerheads overone of the biggest economic judgments facing the continent:does a disorderly Brexit pose a financial stability risk?Mark Carney, Bank of England governor, fears a messy andsevere Brexit could be a moment akin to the building-blockgame Jenga that leads to the collapse of the legalarchitecture that underpins financial flows, hurting the Cityof London’s European customers even more than the UKitself. Mario Draghi, meanwhile, is largely unfazed.

Some booms do not go bust, making it harder to spot the ones that will

Major Chinese bitcoin exchanges halt withdrawals after crackdownVirtual currency under fire as central bank tries to stem capital flight

The PunchLine...

8

February 12, 2017

The Market Roar… History May Not Repeat, But It Often Rhymes

The PunchLine...

9

February 12, 2017

Households – Brave New World

U.S. single‐family home price increasesaccelerated at a faster pace than expectedin November and rising mortgage ratescoupled with potential economic growthcould push them higher, a survey showed.The S&P CoreLogic Case‐Shiller compositeindex of 20 metropolitan areas rose 5.3percent in November on a year‐over‐yearbasis, up from a 5.1 percent climb inOctober. November's result topped theestimate of 5.1 percent from a Reuters pollof economists.

Four-fifths of executives surveyed said that a shortage of sufficiently skilled workers will affect their companies in the next 12 months.

American consumer credit climbed less than forecast in December,closing out the smallest annual increase in household borrowing since2013. The $14.2 billion advance last month followed a revised $25.2billion jump in the prior month, Federal Reserve figures showedTuesday. For all of 2016, borrowing rose 6.4 percent. Consumer debtwas restrained in December by a smaller advance in credit-cardbalances. Americans, emboldened by a steady pace of hiring andcheap financing, were still more willing to borrow for big-ticketpurchases such as cars.

US consumer sentiment retreats from decade peak recordedThe University of Michigan ConsumerSentiment Index hit 95.7 in February,down from 98.5 in the prior month.

The PunchLine...

10

February 12, 2017

Household Hints

States’ Revenue Shortfalls Exacerbate Budget Crunch

The PunchLine...

11

February 12, 2017

YouCan’t Handle the Truth…Let's Take the “Con” out of Economics

EU INFLATION ON THE COMEBACK….Industrial producer prices in the Euro Area increased by 0.7percent on the month in December 2016, following a 0.3 percentrise in November and beating market expectations of a 0.4 percentgain. The main driver behind the increase was higher energy cost(+2.1 percent from +0.5 percent in November), followed by risingprices for non-durable consumer goods (+0.4 percent from +0.1percent), intermediate goods (+0.4 percent from +0.5 percent) andcapital goods (+0.1 percent after showing no growth). Meanwhile,prices were unchanged for durable consumer goods (from -0.1percent in November). Excluding energy, producer prices went up0.3 percent. Year-on-year, producer inflation jumped to 1.6percent, the highest level since January 2013.

Japanese Prime Minister Shinzo Abe is considering increasing energy imports from the United States, two sources familiar with the plan told Reuters, as he prepares to meet President Donald Trump, who has complained about Japan's trade surplus.

Saudi Arabia Non-Oil Private Sector PMI rose to 56.7 inJanuary of 2017 from 55.5 in December. The reading pointedto the highest since August 2015, as output expanded at thestrongest pace in 17 months while new orders rose the mostin 14 months amid improving business sentiment. Also, newexport orders increased markedly as firms offeredinternationally competitive prices.

The U.S. trade deficit fell in December as exports hit their highest level in more than1-1/2 years amid record shipments of technology products, but strengthening domesticdemand points to further rises in imports, which could constrain economic growth.The Commerce Department said on Tuesday the trade gap dropped 3.2 percent to$44.3 billion, ending two straight months of increases. The trade deficit rose 0.4percent to a four-year high of $502.3 billion in 2016. That represented 2.7 percent ofgross domestic product, down from 2.8 percent in 2015.

The PunchLine...

12

February 12, 2017

How Do You Figure?

The PunchLine...

13

February 12, 2017

More US Job Data

The PunchLine...

14

February 12, 2017

Credit Matters - Know RiskMany Excel in Strategy, Few in the Management of Risk

A Default in China Spreads Anxiety Phone maker Cosun’s default is among highest-profile failures to hit China’s network of Internet-based financial firmsA Chinese phone maker’s failure to repay around $166 million in bonds hasrippled through the world’s largest internet investment marketplace, hittinginvestors who hadn’t even bought the securities. The default, by phone makerCosun Group, is one of the most high-profile failures to hit China’s sprawlingnetwork of Internet-based financial firms. It is an embarrassment to AlibabaGroup Holding Ltd. because its affiliate Ant Financial Services Group owns theinvestment marketplace where the bonds were sold, and illustrates a rising riskin China, where hundreds of millions of people seeking higher returns on theirsavings have used their mobile phones to buy risky, unregulated investments.

China’s Bond Market Has a Forgery Problem With defaults rising, Chinese companies may have a harder time rolling over debt, which is likely to expose new problemsForged seals, fake letters, and counterfeit documents. They’re all part of a recentspate of fraud in China that’s added to worries about the country’s $3 trillioncorporate bond market, where defaults have been rising and companies are findingit increasingly difficult to sell debt issues.

Russian construction industry's protracted slowdown is turning into a negative for the banks

Global negative-yielding sovereign debt declined slightly to $9.1trillion outstanding as of Dec. 29, 2016, from $9.3 trillion as ofNov. 28, 2016, according to Fitch Ratings. The decline came fromthe strengthening of the US dollar and little net change in Europeanand Japanese sovereign long-term bond yields. In December 2016,unchanged long-term yields were accompanied by a decline in short-term eurozone bond yields. Since short-term eurozone yields werealready less than zero, this trend had little effect on the total amount ofnegative-yielding debt outstanding. However, it exacerbated thechallenges bond investors face. Investors with short-term liquidityneeds, such as short-term money market funds (ST MMFs), wereconfronted with yields less than negative 1% on many short-datedeurozone bonds at year-end 2016.

Rock-bottom rates squeeze German lendersBanks face sharp drop in margins if rates do not rise, warns Bundesbank report

The People's Bank of China sent a signal with its interest rate hikes Fridaythat it would maintain a neutral to tight monetary policy, the EconomicInformation Daily reported Monday, adding PBOC is pushing forward themonetary policy transition by controlling the price of capital. The rates onreverse repos, the Standing Loan Facility (SLF) and the Medium-termLending Facility (MLF) will become important interest rate anchors and thecentral bank can impact the real economy and the capital market byadjusting these interest rates in the future, the report said. The atypicalinterest rate hikes indicate the previous easing policy stance has shifted tomarginal tightening.

The People’s Bank of China (PBOC) said onWednesday that it plans regular on-site inspectionsof the leading Chinese bitcoin exchanges,including BTCChina, Huobi, and OKCoin.

CHINA: ZIG AND ZAG China’s central bank has quietly raised interest rates and tightenedliquidity in recent days, fuelling speculation that the government’s policy focus has shifted fromstimulating growth to addressing the risk from rising corporate debt. But it could be that therecent rate rises are primarily aimed at deflating financial asset bubbles, especially in the bondmarket. Remember that authorities still seek to ensure a strong economy in the run‐up to acrucial leadership transition in November. At the same time, President Xi Jinping wants toensure the bond bubble does not explode spectacularly in an echo of the 2015 stock market bust.

Retail is the fourth largest sector in CLOs, but has the highest amount of distressed collateral

The central bank of Mexico raised its benchmark interest rate by 50 bps to 6.25percent on February 9th, 2017, in line with market expectations. It was the fourthstraight hike, bringing borrowing cost to the highest since April of 2009. Thedecision aims to protect the currency and to prevent additional inflationarypressures after the government increased gasoline prices. In January, theinflation rate rose to 4.72 percent, the highest since September of 2012 andthe monthly one reached 1.7 percent, the highest in 18 years.

Number of 'AAA'-Rated Countries Lowest Since 2003Eleven countries have 'AAA' status, compared with an all-time high of 16 during2004 to 2009, reflecting the longer term impact of the global financial crisis. Thisis less than 10% of Fitch's global sovereign portfolio, the smallest ever share forthe rating category, and consistent with 'AAA' sovereigns now accounting for40% of global government debt at end-2016, down from 48% a decade ago.

Japanese 'Mega' Banks Facing Multiple Growth HeadwindsOverall performance of the Japanese banking system remains stymieddespite sound domestic asset quality and credit costs.

QE-Driven European Corporate Issuance Shrugs off Political RiskBond sales by European corporates and financial institutions in all currenciesreached EUR130 billion in January 2017, broadly matching the volume a yearago, despite heightened political risk manifesting in wider sovereign spreads.

At a time when money is pouring into junk bonds and the leveraged loan market is red hot, the more aggressive and creative use of add-backs suggests that buyers of the debt are losing discipline over the credit risk they are taking on.

The PunchLine...

15

February 12, 2017

Pumping Iron…The Old Economy Revisited

The pace of U.S. car and light truck sales downshiftedmodestly in January as automakers pulled back on bulk salesto rental, government and business fleets and concentrated onmore profitable retail sales to individual consumers. Bestsales still point to light trucks and SUV sales.

Florida Orange Squeeze… Things keep getting worse forcitrus growers in Florida, where crop disease and slowing demandcontinue to threaten what used to be a signature industry in thesunshine state. The state’s orange crop is poised to shrink to whatcould be the smallest harvest in five decades.After touching a record high last November, the orange juice futuresmarket has fallen almost a third. However, physical prices — whichalso rose last year — remain at record highs due to supplies beingconstrained. Speculators plowed in last year after supplies plungedfollowing a drought in the world’s largest orange juice producerBrazil, and a deadly citrus disease in the US. Investors are nowtaking profits on the futures market, say analysts and traders.With Brazilian production expected to rebound, there areexpectations that the supply problems will ease.

Singapore Airlines announced aprovisional order worth $13.8 billion atlist prices to buy 39 Boeing wide-bodyplanes on Thursday as it battles Gulfcarriers, dealing a blow to Airbus in thekey market for big twinjets. SIA signeda letter of intent with Boeing for 20 777-9s and 19 787-10s to tap additionalpassenger growth and to modernize itsfleet over the next decade. Additionaloptions for the two aircraft types couldtake the deal to as many as 51 aircraft.

The PunchLine...

16

February 12, 2017

The DNA of BusinessReconfiguring Industries to Define Growth

Royal Dutch Shell’s decision to sellmore than half its North Sea productionbase for up to $3.8bn will be seen bymany as another sign that the UKoffshore oil and gas industry is enteringits twilight years. Having been at theforefront of the North Sea rush in the1970s with development of the Brentfield — a discovery so big it gave itsname to the benchmark for prices —Shell is joining the retreat by large oilgroups from UK waters. However,there is a more optimistic interpretationof yesterday’s sale to Chrysaor, a smallUK company backed by US privateequity group EIG. As the biggest NorthSea acquisition since 2010, the deal willraise hopes that departing oil majorscan be replaced by entrants willing tocommit fresh capital to one of the oldestoffshore basins.

A prospective tax shift in Washington that has the potential to radically change energy flows around the worldis the big focus for the oil industry. The “border adjustment tax” (BAT) put forward by Republican lawmakers — andembraced sporadically by President Donald Trump — would radically change the way companies are levied, taxing imports andexempting exports in the world’s biggest economy. While the new US administration’s stance on BAT has been muddled, withsome political observers doubting that the tax come into effect, its potential to transform the economics of global oil flows meansthe industry is paying close attention. Almost one in every five barrels of oil produced globally is consumed in the US, whichremains dependent on imported crude to meet about half that demand, even after the shale boom raised domestic production. Theheavily populated Atlantic coast also depends on imports of petrol, while the vast refining sector along the Gulf of Mexico coast —which can process nearly a fifth of the word’s daily crude supply — exports millions of barrels of refined fuels every day. If the taxwere enacted at 20 per cent, that much would be added to the price of imported crude. US refiners would pay $66 plus freight costs abarrel, against the current international Brent price of $55. They would then bid up the price of domestic crude — a boon for USproducers but one likely to be borne by motorists. Higher relative US crude oil prices could in time spur oil companies to increasedomestic exploration and production in line with Mr Trump’s “America first” policy.

Amazon.com Inc plans to invest $1.49 billion tobuild a large air cargo hub in northern Kentucky,state officials said, stoking expectations it may oneday opt to directly compete with FedEx Corp andUnited Parcel Service Inc.

Walgreens Boots Alliance to Pay Lower Merger Price for Rite Aid,

Walgreens Boots Alliance, Inc. (WBA) and Rite Aid Corporation said that WBA is reducing what it will pay for Rite Aid by 13%-15%, from the $17.2 billion the two had originally agreed to in October 2015. The reduction resulted from a renegotiation following the expiration of the original agreement and we believe is due largely to a reduced number of Rite Aid stores WBA plans to buy as well as a decline in Rite Aid earnings.

With four days before kickoff, the average priceof a ticket to the NFL championship game wasdown 14 percent from last year — to less than$5,000, statistics released by StubHub reveal. Itwill now cost you “just” $4,284 to see theFalcons play the Patriots in Houston, the ticketreseller said. That’s 16 percent lower thanStubHub’s average price of $5,089 a week ago.Last year, the average price of a Super Bowlticket at Jan. 31 was $4,512. At the same time,the number of tickets sold through Jan. 31 is up14 percent from last year — the result, in part, ofthe larger seating capacity of this year’s stadium.

Manhattan financier Fred Iseman is ready to part with his biggest investment. His buyout firm CI Capital Partners has quietly put public company Ply Gem Industries up for sale seeking more than $2 billion including debt. Ply Gem, which Iseman bought in 2004, is the country’s biggest maker of vinyl siding, and makes windows and doors.

British consumer goods maker ReckittBenckiser Group Plc is in advancedtalks to buy baby formula maker MeadJohnson Nutrition Co for $16.7 billion,in a deal that would take it in a newdirection and boost its business in Asia.

Discount broker shares tumble on price war fears

Drastic declines in Print Advertising at NYT not offset by Digital Gains

Canada's Hudson's Bay makes takeover approach for Macy's

College Textbooks SkyrocketThe chemistry textbook Principles of Instrumental Analysis (7th edition), with a list price of $448, but available at a sale price on Amazon.com for $425 (gift-wrap available !)

Swedish home appliance maker Electrolux said on Monday it was buying precision cooker maker Anova in the United States as it looks to accelerate its development of connected devices for kitchens and homes.

U.S. court blocks Anthem-Cigna $54 billion deal

Reckitt Benckiser has agreedto buy U.S. baby formulamaker Mead Johnson Nutritionfor $16.6 billion, giving theBritish consumer goodscompany a new product lineand expanding its presence indeveloping markets.

Price Debate Could Realign US Drug IndustriesPermitting the US government to negotiate drug prices would cause acascading realignment of economic incentives, influencing the structureand profitability of the pharmaceutical industry, private insurers andpharmacy benefit managers that currently negotiate prices on behalf ofthe government.

The PunchLine...

17

February 12, 2017

Real Estate and Construction Outlook

The PunchLine...

18

February 12, 2017

More Real Estate

NYC apartment leases with concessions reach 31% of all new contracts

The PunchLine...

19

February 12, 2017

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 financialinstrument. The information contained herein has been obtained from sources believed to be reliable but is not necessarily complete and itsaccuracy cannot by guaranteed. The views reflected herein are subject to change without notice. No one connected to this publication accepts anyliability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. This publication may not bereproduced, distributed to any person for any purpose without express permission from TPL Advisory, LLC. Please cite source when quoting. Allrights are reserved.