Outside the Box: Don’t Ignore the Anecdotes

By John Mauldin

Whenever I’m in New York I make a point of calling a number of my economist and investor friends and arranging a “dinner with interesting people.” Thankfully, Rich Yamarone is almost always at the table, because his insights into what’s happening in the real economy, beyond Wall Street, are unrivaled.

Rich is Chief Economist at Bloomberg and the creator of Bloomberg’s Orange Book, a compilation of key insights from CEOs, taken from quarterly earnings calls.  He is also part of the team of 7 top economists who write the daily must-read Bloomberg Economics Brief. (Tom Keene of Bloomberg Surveillance is a contributor, too.) If you are a trader, broker, or portfolio manager or are just interested in keeping up with all things economic, this is a good way to do it. You can learn more here.

For today’s Outside the Box, Rich has written a piece that summarizes his chief concerns about the domestic economy in 2014. Those concerns focus around the fact that growth in both real disposable personal incomes (adjusted for inflation and taxes) and consumer spending have barely advanced in the wake of the Great Recession.

In compensation – and it’s an unhealthy form of compensation – government transfer payments as a percentage of disposable income have grown from 9% in 1970 to nearly 20% today.

To make matters worse, the Affordable Care Act (Obamacare) is having a real impact not just on hiring and firing but also on hours worked per employee; and Rich gives us some helpful anecdotes and data on this situation.

I am really looking forward to having Rich – who many of his friends have taken to calling “Lord Vader” – debate David Zervos, Chief Economist at Jefferies, who is more the Obi Wan Kenobe type – sweetness and light and lover of all things to do with quantitative easing.

I find myself this afternoon in Geneva, where tomorrow I will make several presentations and do a lot of interviews. This is a beautiful city but ghastly expensive for someone using dollars.

It seems I caused the recent weakness in the dollar and strength in the Japanese yen by actually buying ten-year put options on the yen. I would expect these things to come back, of course, but perhaps I should alert traders when I decide to put on the rest of the trade. The market so likes to make me look foolish, at least in the short term. Some friends here in Geneva have decided to take me out to eat at a Japanese restaurant tonight as consolation, which is fine, as I do love sushi and things that go with it.

And let me address one failure last week when I was listing the people who helped me with my house and mortgage process. The entire process was orchestrated by my able young associate Shannon Stanton. The massive paperwork would not have gotten done, nor would the budgets or anything else. And my other assistant, Mary Haddad, keeper of the schedule and coordinator of everything, is also key in making my life run semi-smoothly while on the road. Thanks!

Have a great week.

Your thinking about currency flows and valuations analyst,

John Mauldin, Editor
Outside the Box
[email protected]

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Don’t Ignore the Anecdotes

By Richard Yamarone

My top three fears for 2014 are: 1) income inequality that erodes the middle class, reducing the income and spending power of the primary engine of the U.S. economy, 2) widespread Chinese economic deceleration and an associated shadow banking crisis, and 3) a possible student loan bubble and widespread defaults amid elevated delinquencies.

After speaking extensively in 2013 and almost every week of this year, I’ve managed to gather a great deal of insight from the ground up – something that economists at big firms generally aren’t permitted to do. Do you think they travel to Conshohocken, PA; Oneonta, NY; San Marcos, TX; or Thibodaux, LA? Probably not. There is a great deal of information to be learned by gathering insights from this grass roots perspective.

Prior to Christmas, sometime around October or November of 2013, while shopping for my wife at the Macy’s flagship on 34th Street in New York, I chatted with the sales associate about how business had been and how she felt about her job. She said: no one buys anything here unless there’s a coupon or a heavy discount. This deflationary mindset remains in place even today. She also noted increased traffic on big discount days.

The comments regarding her employment situation were disturbing. Yes, she has a job – has held it for some 15 years in fact. But her hours worked were getting slashed. What used to be 45 hours, plus occasional overtime, as well as potential “inventory days” (where staffers are asked to stay overnight and estimate stockpiled merchandise) and anticipated holiday hours were reduced to a mere 12 or 15 per week. That’s about a 66 percent decline in hours worked.

Realizing that she wouldn’t be paying any bills with those hours, she was forced to obtain a job at Kohl’s. And since that gig was limited to 12-15 hours, she applied for a third position at Applebee’s.

Several business people have cited the Affordable Care Act (ACA) as the primary obstacle to hiring and capital spending. Essentially the ACA forces any business with more than 50 employees working more than 30 hours a week to offer some form of health care to its staff. Since reducing staff below 50 is not an option for some restaurant chains, such as Darden Group which employs more than 200,000 people, cutting hours worked is the only viable move. The data support this: hours worked in the retail and leisure and hospitality sectors are below 30 hours a week and hiring has increased in these two industries.

During March, the leisure and hospitality group added 29,000 positions, while retailers increased payrolls by 21,300. Combined, these two industries account for 25 percent of all private workers, so it is a significant percent of the labor market.

The data support this trend of increased low-wage hiring in avoidance of the ACA mandate. When people face certain economic constraints, they don’t roll over, they make adjustments, seek opportunities, and do what is necessary to provide for their families.

Because the year-over-year growth rate in average hourly earnings for leisure and hospitality is about 1.9 percent – and once adjusted for an inflation rate of 1.5 percent, the real rate is about 0.4 percent – it doesn’t seem likely these workers will be willing to increase their expenditures on health care.

Some companies may be realizing this is a concern for Americans. It may be the reason CVS is beefing up its Minute Clinics presence and jettisoning cigarette sales in an attempt to position itself as a legitimate medical alternative to those that cannot afford health insurance amid stagnant incomes. This insight is out there…you just need to get out and find it.

Affordability has hit all of us, across the entire income spectrum. In order to facilitate spending and subsequently economic growth, there needs to be income. Like gasoline in a car, without the fuel, the engine doesn’t run.

During February, real disposable personal incomes – those adjusted for inflation and taxes – advanced 0.3 percent, or 2 percent from year-ago levels. Historically, this is a very soft pace, one that traditionally has market participants unfurling the recession flags. There’s a good chance that consumer spending will return to a sullen state of affairs, since incomes are essentially the fuel for future spending – you can’t spend what you don’t have – and consumers have cut back on their credit card purchases – consumer revolving debt fell 0.3 percent in January.

The level of total compensation of employees is lingering at a year-over-year pace of 2.9 percent. This is essentially unchanged from the range registered since 2010. More importantly, the post 2007-09 depression recovery has had gains in total compensation below levels associated with previous recessions. Total compensation used to run between 5 and 10 percent, with several spikes above 11 and 12 percent. Today we barely break 5 percent.

The incomes report also identified the continuation of elevated levels of government transfers as a percent of disposable personal incomes. The mere fact that the U.S. economy is so dependent upon assistance from Uncle Sam suggests that this recovery will be considerably weaker than historical periods – in other words, more of the same type of recovery.

French economist Frédéric Bastiat wrote about the redistribution of wealth – or “ plunder” –  in 1850 in The Law: “There are only two ways of obtaining the means essential to the preservation, the adornment, and the improvement of life: production and plunder…. What keeps the social order from improving (at least to the extent to which it is capable of improving) is the constant endeavor of its members to live and to prosper at one another’s expense.”

Since the level and composition of incomes are somewhat suspect, expectations for spending should also be called to question. Real consumption expenditures, which increased 0.2 percent, or 2.1 percent since February 2013, are also at a dangerously low level – since this too is a pace that has seen the economy experience a downturn in the past.

Spending on my “Fab Five” indicators of discretionary spending is not entirely favorable. The ultimate discretionary purchase, dining out, was unchanged in February, and only 0.9 percent higher than 12 months ago. While casino gambling increased 1.5 percent, it was 6.5 percent lower than February 2013. Expenditures on cosmetics and perfumes inched up 0.4 percent, or 0.9 percent year over year, while women’s and girls’ clothing increased 1.55 percent in the month and 0.9 percent year over year. The strongest of the “Five” was spending on jewelry and watches, which climbed 3.5 percent in the month, and is 7.3 percent above year ago levels. This shouldn’t be surprising since they are popular Valentine’s Day purchases.

Essentially the economy is running on an empty tank of very low-octane fuel. Compensation growth is weak, and the reliance on government transfers is unlikely to spark any cylinders. Expectations for a solid recovery should remain reduced until there’s a definitive improvement in the quantity and quality of personal incomes.

The employment situation improved in March as a total of 192,000 nonfarm payroll jobs were added, the labor force participation rate increased, and there was a decrease in the number of long-term unemployed (27 weeks or more). The less welcome components of the release included an unchanged, stubbornly high 6.7 percent unemployment rate, a slower pace of average hourly earnings, and a record level of temporary staffing workers as a percent of total employment.

The 192,000 job increase had a better mix than in recent months, which is encouraging. It isn’t always the total number of positions added, but the composition of those jobs. About 47 percent of those jobs created last month were in the low-wage category – accommodation and food services (33,100), temporary staffing agencies (28,500), retail (21,300), and social assistance (7,600). This is an improvement from the better-than 55 percent registered in recent months.

One frequently cited “improvement” by many economists in their post-release commentaries was the 0.2 hourly increase in the average workweek in March for all employees on private nonfarm payrolls to 34.5 hours. On a year-over-year basis however, this remains unchanged. In fact, looking at the industry breakdown of those 12-month changes, the largest percent gains by industry was mining and logging, a staggering 4.6 percent higher from March 2013 and information, which experienced a 1.6 percent gain. The disheartening issue is that mining and information are the two smallest major categories with 898,000 and 2.6 million workers respectively. The two weakest performers, education/health (minus 1.6 percent) and retail (minus 0.6 percent) were among the two largest employers with 21.3 million and 15.2 million respectively.

Average hourly earnings slipped to $24.30 an hour in the last month, and increased a lowly 2.1 percent during the last year. Once adjusted for inflation of about 1.1 percent, the level of real average hourly earnings was about 1 percent.

Minimum wage legislation and the Affordable Care Act (ACA) are at the forefront of business concerns. Some of these issues surfaced in this latest jobs report. The use of workers at temporary staffing places as a percent of total nonfarm payrolls climbed to 2.09 percent, the highest level since 1990.

Buffalo Wild Wings Vice President Emily Decker spoke at an Analyst Day event last week and noted, “Minimum wage increases are being proposed at the federal level and at the state level, with 11 states significantly increasing their minimum wage in 2014. For issues like this, we are actively working with legislators to explain how changes in the laws affect our business specifically, and the restaurant industry in general.”

Similar concerns regarding minimum wage and the healthcare mandate were mentioned by Panera Bread, Wendy’s, and Jack in the Box. These government regulations are weighing on business decisions to invest and hire. Don’t expect any meaningful improvement in economic conditions until they are altered.

Even with the incessant complaints regarding the crippling effects of the weather on production, sales, confidence, employment and general economic conditions, the comments made during the quarterly earnings conference call season appear to be mostly positive, with the outlooks equally upbeat. Whether the lost business traditionally registered during the first quarter returns is yet to be determined. Issues remain with respect to poor currency translations, deflationary fears throughout Europe, and an uncertain situation in in Russia, Ukraine, and China.

The Bloomberg Orange Book of CEO Comments Sentiment Index has returned to a sub-50 posting in recent weeks, implying a continued sluggish economic recovery. Investors should expect more of the same since this indicator has been mired in a contractionary territory for more than a year-and-a-half.

Some of the comments from the current earnings season include:

Levi Strauss & Co (8089Z) Earnings Call 4/8/14: “We knew the first quarter would be challenging, but it turned out to be even more difficult than we expected. Our focus on our key strategies enabled us to maintain stable constant dollar net revenues, despite unfavorable weather conditions, continuing retail traffic declines, a competitive promotional environment, and ongoing softness in our U.S. women’s wholesale business…”

Alcoa (AA) Earnings Call 4/8/14: “Overall volume is slightly higher versus the previous quarter. Improved industrial volumes in Europe were offset by weaker demand in North America. We continue to be impacted by the continued market pressure and unfavorable pricing impacts in packaging. Auto sheet volumes were strong, resulting in record automotive revenues. Improved productivity and cost containment combined with the favorable fixed costs absorption significantly benefited the result.”

WD-40 (WDFC) Earnings Call 4/8/14: “Looking forward, we remain cautiously optimistic about several macroeconomic factors. As per our second quarter and year-to-date results, we expect that growth in EMEA and the Americas will continue to more than offset any lower industrial activity and sales in Asia-Pacific.”

Family Dollar Stores (FDO) Earnings Call 4/10/14: “Our second quarter was particularly challenging, especially considering the significant impact that the severe weather had on our results. There were 18 named storms in the quarter, which resulted in more than 60 days being negatively impacted by winter weather. In addition, winter conditions disrupted merchandise deliveries, and snow accumulation and very cold temperatures resulted in higher than expected store maintenance and utility expenses.”

JPMorgan (JPM) Earnings Call 4/11/14: “Despite a relatively favorable rate environment, the market got off to a slow start in 2014. We’re seeing tight housing inventory in some markets, and the purchase market was affected adversely by the severe weather. This led to a challenging quarter for the mortgage business with production of $17 billion, down 27% quarter-over-quarter and 68% over last year.”

Fastenal (FAST) Earnings Call 4/11/14: “The extreme weather that we had caused expenses to go up in more areas than you can imagine, simple things like snow plowing, the fuel, all of those things, heating expenses, but overall it’s very challenging with the hard weather.”

Wells Fargo (WFC) Earnings Call 4/11/14: “The housing recovery remained on track, and should benefit from the spring buying season. I’m optimistic about future economic growth, because consumers and businesses have continued to improve their financial conditions. Households have reduced their leverage to the lowest level since 2001 and the burden of their financial obligation is lower than at any time since the mid-1980s.”

Goldman Sachs (GS) Earnings Call 4/17/14: “The first quarter reinforced two consistent themes that we have seen over the past few years: first, the continued uncertainty around the strength of the global economic recovery; and second, the dominant role that central banks play in driving broad economic activity and capital markets sentiment.”

Sonoco Products Co. (SON) Earnings Call 4/17/14: “We’re seeing improvement in certain domestic markets as well. For instance, we’ve experienced growth in dough, coffee, and nuts, which was partially offset by weather impacted categories like fiber, caulk, and snacks. However, both of these sectors are now rebounding. In addition, flexible volume continues to grow and we believe we’ve turned the corner in our thermoforming and blow-molding operations.”

Chipotle Mexican Grill (CMG) Earnings Call 4/17/14: “While sales were understandably down during days of extreme winter weather. When the weather improved, our sales recovered to a higher level than before the extreme weather for a few days before settling back into a normal sales trend. The comp also benefited from an increase in the average check of about 2% and we benefited by about 1% from an extra trading day as Easter was in the first quarter of last year.”

Sherwin-Williams (SHW) Earnings Call 4/17/14: “Consumer Group got off to a respectable start from a revenue perspective with organic sales up 1.6% in the quarter, but the harsh winter weather over the first two months of the year disrupted raw material deliveries that made it difficult to move finished goods across the northern half of the country and occasionally the southern half for that matter. This drove supply chain costs up, resulting in negative flow-through for the group in the quarter.”

AutoNation (AN) Earnings Call 4/17/14: “Certainly, in the last 10 days of March with the thaw, business was exceptionally strong. We see the same intensity continuing into the month of April, which gives us optimism that in the second quarter we can recoup some of the disruption that occurred in the first quarter because of weather, which gives us the confidence to confirm our forecast for the full year of industry growth between 3% and 5% breaking through 16 million units.”

Kimberly-Clark (KMB) Earnings Call 4/21/14: “I hate blaming weather for anything, and so – because you like to think that our products are more essential. So…people who have – didn’t come to work didn’t use hand towels, people that weren’t able to get to the welding job site didn’t use our safety products. And so we really lost hours of work in the first quarter.”

A.O. Smith (AOS) Earnings Call 4/22/14: “We are cautiously optimistic about the developing recovery in U.S. housing. After a very strong water heater industry growth in 2015, helped by improved levels of home completion and significant expansion of the replacement market, we expect residential water heater volumes in the U.S. to be up to approximately 9 million units including tankless, primarily due to an increase in new home construction this year.”

Deltic Timber (DEL) Earnings Call 4/22/14: “…the winter weather conditions that existed for much of the US during the first quarter had a chilling effect on markets for these companies’ wood products. These conditions prevented builders from starting new homes, which resulted in decreased demand and lower prices for the dimension lumber used to construct these new homes. With these market conditions, we were forced to reduce our lumber production to meet the market demand…”

Genuine Parts Co (GPC) Earnings Call 4/22/14: “The extreme weather we encountered during the month of January, and even into February in some southern states as well as up and down the Eastern Seaboard, forced numerous store and customer closures and had a negative impact on our business.”

P&G (PG) Earnings Call 4/23/14: “We continue to operate in a volatile environment with uncertainty in foreign exchange, deceleration in market growth rates, and a rapidly developing policy environment.”

Manpowergroup Inc (MAN) Earnings Call 4/23/14: “As I look at the U.S. markets, we could see continued good, stable demand for almost all our service offerings. After some rough weather at the beginning of the year, we have seen demand and volume stabilize and improve across most of our brands.”

Norfolk Southern (NSC) Earnings Call 4/23/14: “The impact of severe winter weather was concentrated in January and February, with March showing a fairly strong recovery. Clearly severe weather in the quarter depressed certain economic activity and shipments in the first two months of the year in particular.”

Six Flags Entertainment (SIX) Earnings Call 4/23/14: “Attendance for the quarter declined by 434,000. As we discussed on our last earnings call, we anticipated a 300,000 decline in attendance in the quarter as a result of the shift of the Easter holiday and related school Spring Breaks at some of our parks into the second quarter this year. Unfortunately, in addition, we saw some very unfavorable weather at our two Texas parks during their Spring Breaks in early March, which accounted for the remainder of the decline.”

Yamarone

You can learn more about the Bloomberg Economics Brief here.

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PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor’s interest in alternative investments, and none is expected to develop.

 

 

How a Big Cat Started Europe’s Addiction to Oil

By Marin Katusa, Chief Energy Investment Strategist, Casey Research

On July 1, 1911, a German gunboat named Panther sailed into the port of Agadir, Morocco, and changed history.

For the previous two decades, a faction within the British Admiralty had called for the navy to switch from coal-fired ships to ones powered by a new fuel. Admiral John Fisher, First Sea Lord, led the charge, trumpeting oil’s numerous advantages: It had nearly twice the thermal content of coal, required less manpower to use, allowed refueling at sea, and burned with less telltale smoke.

Doesn’t matter, replied naval tradition: Britain lacks oil, and she has lots of coal. The switch would put the greatest navy in the world at the mercy of burgeoning oil-rich countries and the oil trusts that operate in them. (It didn’t help that the navy’s first test of oil-firing in 1903 engulfed the ship in a cloud of black smoke.)

It wasn’t common knowledge at the time, but Germany had surpassed the mighty British Empire in manufacturing in the late 1800s, most notably in the production of steel. Britain’s manufacturing base had largely moved abroad, taking investment along with it. Germany, meanwhile, was determined to build up the quality as well as quantity of its goods. That included its military technology and capacity, especially its navy. Has a familiar ring, doesn’t it?

Then came the Panther. Germany said she was there to protect German businessmen in restive Morocco, a reason more credible had there actually been German businessmen in Morocco. Britain read it as a challenge to its supremacy, a maneuver toward expansionism, and a threat to trade routes west out of the Mediterranean.

Britain’s young, up-and-coming home secretary wondered what specifications would be required to outmaneuver the ships of Germany’s growing navy. The war college gave a deceptively simple answer: a speed of at least 25 knots.

Coal couldn’t do it—too many boilers, too much weight, too long to build up a head of steam, too short a range. But oil could.

With the Panther’s arrival in Morocco, Admiral Fisher’s faction gained a new and eloquent advocate for converting the British Navy to oil, and it wasn’t long before Home Secretary Winston Churchill became First Lord of the Admiralty and the fellow whom history often credits with guiding the British Empire’s destiny with oil.

Germany’s Great Game

If Britain were to switch its navy to oil, it would need a secure supply of the stuff. Churchill saw that the struggling Anglo-Persian Oil Co. had the resources, but lacked the cash.

With Germany setting its cap for control of Middle Eastern oil—building a railroad between Berlin and Baghdad was the last straw—it wasn’t hard for Churchill to convince the Parliament that cutting a deal with Anglo-Persian Oil Co. was a good idea.

In exchange for an infusion of cash, the British government got 51% of the company’s stock. A hush-hush rider on that deal was a contract for Anglo-Persian to supply oil to the Royal Navy, with very favorable terms, for the next 20 years.

All this happened just in time for the spark that finally ignited the Great War, or as we call it today, World War I. Because of Churchill’s preparations, among them a new class of oil-fired ships, Allied naval forces were able to restrict the flow of essential supplies to Germany.

By war’s end, every country realized the strategic importance of a secure supply of oil. The players have been maneuvering ever since.

Fast-Forward 100 Years—the Rise of Mother Russia

The fortunes of the various players may change, but the scrimmage remains the same. Oil does everything from power vehicles on land and sea to supply manufacturers with the building blocks of medicines, plastics, and a host of other products.

The Soviet Union was a global powerhouse and a major oil producer until its disintegration in 1991, and Russia then had to shop hat in hand for loans to keep its economy afloat. It was largely its oil and gas resources that have enabled Vladimir Putin, Russia’s canny and forceful president, to wrest his country back onto the world stage of heavyweights in recent years. The European Union is currently Russia’s largest customer.

Indeed, Europe is feeling the squeeze from Russia, which has gunned hard to make it easy to get its oil and gas, but not so easy to keep getting them. Putin will happily play hardball with any country that won’t meet his terms—just ask Ukraine—and doesn’t mind if others down the line feel the sting of his stick.

The EU-28 imports over 50% of all the energy consumed. Russia provides about one-third of all the oil and natural gas imported by EU-28. Germany is the largest importer of Russian oil and natural gas.

The member countries of the European Union may be cheering Belarus on, but they’re also taking the hint from Russia. And they’d better: Between growing demand in Asia and instability in the Middle East, the European Union faces some serious energy challenges.

Slowly but surely, Europe is waking up to its situation. Alternative energies are a noble goal, but the hard truth is that the technology isn’t there yet to replace hydrocarbon fuels. For energy security, there’s little choice for EU countries but to back the oil and gas companies that call Europe home.

“We must get on and explore our resources in order to understand the potential,” declared Britain’s energy minister in July. Other countries, such as Germany, are taking on this pursuit as well. We believe that governments and oil giants in other European countries will follow their lead.

This article is from the Casey Daily Dispatch, a free daily e-letter written by renowned investment experts in the fields of precious metals, energy, technology, and crisis investing. Click here to get it your inbox every day.

 

John Mauldin’s Knock on the Side of the Head to World Leaders

Source: Karen Roche and JT Long of The Gold Report (5/7/14)

http://www.theaureport.com/pub/na/john-mauldins-knock-on-the-side-of-the-head-to-world-leaders

The future will be decided in a race between global advances in demand for resources, complex technology and biotech innovation, and growing sovereign debt. In this interview with The Gold Report, Thoughts from the Frontline author John Mauldin points to the sectors that could benefit from the upside of improving world demand and the possible downside of a fiscal collapse in the geographic hot spots of China, Japan and Europe.

The Gold Report: John, you’re one of the best-connected newsletter writers in the business. When you and I last chatted, the fiscal cliff was looming. Will the U.S. continue to lurch from one politically motivated crisis to another artificial crisis, or have politicians in D.C. learned their lessons?

John Mauldin: I guess it depends on which politicians you’re talking about. There are some politicians who get it. There are others who don’t. I think that government is still the solution to the problem. In the end, it’s going to take the equivalent of a knock on the side of the head by a two-by-four in the form of the bond market. Or voters could express their frustration with the direction of the country at the ballot box. That’s possible. Maybe the Republicans can realize that where they are is not where the voter population wants to be. They would have to change some of their programs to adapt to a younger generation and single women, because that’s where the Republicans are losing their message of fiscal conservatism, which is actually quite popular in those demographics. It’s all the other baggage that goes along with the Republican brand that is the problem. The same thing is true for Democrats. Their constituency is also fiscally conservative.

Perhaps after 2016, we could see a move to balancing the budget, which is really all we need to do. To do that, we have to figure out how much healthcare we want and how we’re going to pay for it. That’s going to take some compromises on both sides. I think both sides recognize that at the end of the day, if we don’t solve that question, then all the other questions become secondary.

TGR: You’re talking about compromise. The fiscal cliff was partially a crisis around using the raising of the debt ceiling to impact policy. Will that continue to be a flash point or have people decided that that’s not the way to fight?

JM: Democrats and Republicans alike have used the debt ceiling a handful of times in my lifetime. This last time it was politically not rational to use it, so it didn’t get used. But we’ll see it used again. There has to be some moment of crisis, something that forces people to compromise. Seemingly, we just can’t be rational and sit down like adults.

TGR: You are going to be speaking at the Strategic Investment Conference in San Diego along with Newt Gingrich and John Hunt. Your specialty is explaining the forces driving the global economy and investment markets. I have to ask the question everyone watching the upward climb of the indexes wants to know: Are we in an asset bubble? What is supporting it? What could pop it?

JM: I don’t think we’re in an asset bubble. We’re in a period of very high valuations, but it doesn’t look like bubble territory. We have seen serious bear markets start at this level, but there is nothing to say that it couldn’t go higher, and I’m not talking about in terms of valuations or price. What’s driving the market is sentiment, the story. What’s driving it is trust in the central bank. I’ve been writing for years that if there is a bubble, it’s the bubble in the belief that the Federal Reserve can actually control things, that it is actually in charge and that the markets themselves don’t have do anything but just follow the path of the Fed. That’s a lesson that always ends in tears. Central banks and policymakers can’t control things. When valuations get stretched too far, they snap back. When it comes to popping this current valuation expansion, it could be a China slowdown or international debt challenges. Bill White, former chief economist for the Bank for International Settlements, who is now at the Organisation for Economic Co-operation and Development, is arguing that we spent the last five years trying to increase demand in the economy when we should have been repairing the balance sheet. We haven’t addressed the primary cause of the crisis, which was out-of-whack balance sheets. We haven’t reduced the debt. We haven’t been reducing leverage. There are ways to deal with debt, but none of them are pleasant. None of them are going to make people happy. The reality is we still have too much debt and we haven’t dealt with it, especially in Europe. Europe is still a problem.

German banks are significantly overleveraged; they have a lot of bad debt on their books. We are a few sovereign debt crises away from a serious banking crisis there. Think about this. We have allowed Spanish, Italian and Greek bond rates to fall to precrisis levels, and yet the debt/ GDP ratios for every one of those countries are significantly higher. Spain and Greece have 25% unemployment and 50% youth unemployment. France’s GDP is shrinking, not rising. I think that Europe could be a serious problem when markets realize some European countries can’t pay their debts and start asking for higher interest rates. And it accelerates rapidly. It’s the old Ernest Hemingway line, when one of his characters asks how the other went bankrupt. And the guy said, well, slowly, then all at once.

TGR: We have been talking about the market as if it’s one thing, but are commodities, technology, banking and energy all reacting differently, both in the rise and what sounds like the inevitable fall? Will some do better than others?

JM: Yes, they all do act differently. Not everything is going to fall. There are always stocks that create value, businesses that have figured out a new approach. There are things that are solid. We are still going to buy Coca-Cola, soap, food. We’re going to need to consume energy. The price that we pay for a dollar’s worth of earnings may change, but the underlying true value of the company will still be there. Sometimes we just have to recognize that we need to accumulate assets that are going to be valuable at the other end of the crisis.

Governments are going to have spastic-type movements if they want to monetize debt as they try to minimize the effects of their bad policies. And it doesn’t work. The cure central banks and governments have come up with is quantitative easing (QE). That makes the problem worse and can lead to catastrophic problems.

TGR: How close are we at this point in Europe or in the U.S. to a catastrophic problem?

JM: We could see another crisis in Europe within the next few years. The U.S. is still some time away. Japan is in the process of destroying its currency. I’m hedging a significant part of my mortgage in yen, and I’m buying 10-year options on the yen with out-of-the money strike prices because I think the yen is going to go to 200 over the next 10 years. It may go much higher. Currency markets are terrible in Japan. Japan has been called a widowmaker for very good reasons. I think Japan is committed to a serious process of monetization. It could be putting as much as $8 trillion ($8T) into the world’s economy through QE. That would be the equivalent of the U.S. printing $32T for its balance sheet. At 250% debt/GDP, it has painted itself into the mother of all bad corners. If you’re sitting with a long bond position entirely in Japan, you’re not going to be very happy at the end of this 10-year process. If you are short the yen and you’re sitting in the U.S., you’re going to be able to buy a Lexus cheaper than you can buy a Kia. Sony TVs are going to get cheaper and cheaper. Their robots might be cheaper. So it might be a good thing from our point of view, but not from the Japanese retiree’s point of view.

The same problem could be lurking in the U.S. if we don’t get our act together. I’m still optimistic that we will. We did it in the 1990s. Who knew we’d be nostalgic for Clinton and Gingrich? We could make the same decisions again. I’m less confident that France and Italy will be able to make those decisions. I think there could be some problems.

TGR: If we’re looking at a looming sovereign debt crisis in Europe and Japan, what asset classes should U.S. investors be considering?

JM: My view is that given the rise of energy production, we’re going to see the dollar get stronger, not weaker. I know people are talking about the end of America, the end of treasuries—I don’t believe that’s going to happen. If we go back into a QE program in a few years, we could see an inflationary period at the beginning of that cycle. But that’s off a ways.

U.S. investors do need to watch out for disruptions in the rest of the world. That could reduce the consumption of commodities. That’s not a very good prospect if you’re in South Africa, Canada, Australia or Brazil, one of the commodity-producing countries.

TGR: John, you’ve named China as one of the biggest macroeconomic problems in the world today. Is the problem the debt from recent expansion, or a slowdown in the expansion?

JM: The answer is, probably both. Since the end of World War II, we have had the Italian miracle, then the Latin American miracle and the Japanese miracle, followed by American, Irish and Spanish housing miracles. All those ended in rather spectacular busts. China’s miracle has the same two components: rising leverage and excess construction. China’s leaders are very cognizant of this. The proposals they’ve made are some of the most far-reaching since Deng Xiaoping. They could really be dramatic change-makers if they do what they say they’re going to do, but that path is going to produce slower growth. The Chinese have to figure out how they are going to restructure their debt while protecting consumers and depositors. They seem to be doing that. But it’s a very difficult path, because they’ve expanded their debt by massive amounts, which historically hasn’t ended well. Now they are trying to be proactive about it rather than just pushing it to the end. So I’m hopeful that it’s just a slowdown, but I’m cautious in saying it could be more if they make a policy mistake or something happens out of the ordinary.

TGR: Even with the slowdown, China is growing. It’s just not growing as fast. Wouldn’t that be good for stocks?

JM: When I was in South Africa, I met business owners who had factored in 7% and 8% growth to their business plans. Chinese growth has fallen pretty seriously. The world has gotten used to its built-in models.

TGR: There has been a lot of news recently about conflict in the South China Sea and Ukraine. To what extent do you think that war might be a black swan that will impact markets?

JM: God, I hope not. War would certainly affect markets, potentially significantly. I just hope cooler heads will prevail. I can’t see the U.S. going to war over Ukraine. We’ll just increase sanctions. Will that hurt Russia? Yes. It’s already hurting. Money is fleeing the country. Stock markets are down. Russia seems to be willing to pay the price to have Crimea. Maybe it’s going to try to figure out how to absorb part of eastern Ukraine directly or as an autonomous region so that it doesn’t have to worry about its border.

TGR: John, you’re always very positive about technology and the impact technology will have on our lives. What technological advances are you most excited about now?

JM: I continue to be mostly excited about biotech, maybe because that is what’s going to personally affect me. We got rid of smallpox, diphtheria and polio—those were big changes. We’re going to see those types of events happening every year now. I think there’s potential for a cure for cancer on the horizon, for liver disease, for chronic heart disease, for arthritis, Alzheimer’s. Those things are coming soon. What those dramatic changes mean for many of your readers is that they need to plan to live a lot longer.

Energy is also exciting. After a couple more decades of improving solar technology, sun power will be cheap enough to replace oil. In the next 20 years, we’re going to become natural gas exporters. That will do great things for the economy.

Most of the developed world is still trying to rise up through the second industrial revolution. They’re coming at it much faster, but they have a long way to grow. As they go through that, they’re going to want more protein, more metals. The growth in biotechnology is a function of Moore’s law. We’re seeing more change. We’re going to see, in the next 10 years, some of the most incredible advances in human history.

We’re going to see changes in computing power. I’m talking to you on a mobile phone that is 1,000 times more powerful than the phone I had 15 years ago. In another 15 years, I will be talking on a phone that will be 1,000 times more powerful than the one I have today. If the trend keeps going, it will be the size of a button, but the possibilities will only be limited by the scope of our imagination. Facebook and Google are buying high-altitude balloons and solar-powered drones with advanced communications systems that can track anything. Everyone will be connected, not just in the U.S. but throughout the Middle East and India. Those kids are going to have access to systems that will allow them to improve their lives and their families’ lives.

The amount of change that we’re going to see is simply an accelerating trend. That’s in juxtaposition to the amount of growth we’re seeing in sovereign debt, which is destructive. The question becomes: Can government and central banks destroy wealth faster than technology and humans create it? And it’s going to be a race. In some countries, citizens will lose. Some countries’ citizens are going to win. I think each country, each region, has to be responsible for deciding that it wants to be in the winner’s category.

TGR: John, thank you for your insights.

John Mauldin is a world-renowned economist and financial writer of the New York Times best-selling books Bull’s Eye Investing, Just One Thing, and Endgame. His most recent book is The Little Book of Bull’s Eye Investing. Mauldin’s free weekly e-letter, Thoughts from the Frontline, is one of the most widely distributed investment newsletters in the world. Launched in 2000, it was one of the first publications to provide investors with free, unbiased information and guidance.

Mauldin is also the chairman of Mauldin Economics, a company created to provide individual investors with his big-picture thoughts on the global economy, as well as actionable investment and trading strategies typically deployed by institutional money managers on behalf of their high-net-worth clients, but at a fraction of the cost.

Mauldin is the president of Millennium Wave Advisors, an investment advisory firm registered with multiple states. His track record of success vetting and consulting with money managers spans over three decades. His passion is to understand the world of economics, investment, politics and science, and to determine how it may all come together in the future. As a highly sought-after market pundit, Mauldin is a frequent contributor to publications such as The Financial Times and The Daily Reckoningand is a regular guest on CNBC, Yahoo! Daily Ticker and Breakout, and Bloomberg TV and Radio.

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Czech cuts inflation forecast, may extend cap on koruna

By CentralBankNews.info
    The central bank of the Czech Republic, which earlier today maintained its interest rates, said there is an increased likelihood that it will continue to intervene in foreign exchange markets in 2015 to keep a lid on the koruna currency due to lower-than-expected inflation.
    The Czech National Bank (CNB) began using the exchange rate as an additional tool for monetary easing in November 2013, committing itself to keeping the koruna close to 27 to the euro until the beginning of 2015.
    However, after discontinuing the use of the exchange rate as a monetary policy instrument, the CNB said it now expects interest rates to remain lower than previously forecast, mainly due to a lower outlook for foreign interest rates and prices in 2015, along with a lower outlook for domestic administered prices and net inflation.
    In its latest forecast, the CNB said it had cut its forecast for headline inflation by 0.4 percentage points to an average 0.8 percent in 2014 and 2.2 percent in 2015. The forecast for monetary-policy relevant inflation, which is adjusted for effects of changes to indirect taxes, calls for inflation to return towards the bank’s target by the end of this year and stay close to target in 2015.
    “In a debate of the new forecast, however, the Bank Board stated that the probability of a later exit from the exchange rate commitment was increasing,” the CNB said, adding that it would prefer to maintain the exchange rate commitment if economic developments require a further easing of policy.

    The new forecast shows that a return to conventional monetary policy will not imply an appreciation of the koruna’s exchange rate before the central bank started intervening because the weaker exchange rate will have passed through to the price level, the CNB said.
    Immediately before the CNB’s decision to intervene on Nov. 7, 2013, the koruna was trading around 25.8 to the euro and even hit a 2012-high of 24.4 that September before gradually easing as the central bank’s board made clear that it was considering intervention to ease policy further to avoid the threat of deflation.
    “The weaker koruna, without which inflation would have been deep in negative territory at the start of this year, will continue to affect inflation through import prices. However, this effect will gradually fade from the second quarter of this year onwards,” the CNB said.
    The central bank also said in is statement today that its board doesn’t expect domestic interest rates to rise as fast as indicated by the latest forecast, which sees the 3-month interbank rate (PRIBOR) steady at 0.4 percent, rising to 0.9 percent in 2015, up from the previous forecast of 1.1 percent.
    Headline inflation in the Czech Republic was steady for the third month in a row at 0.2 percent, well below the CNB’s target of 2.0 percent, plus/minus one percentage point.
    “Starting in the second half of this year, consumer price inflation will also be strongly affected by continuing growth of the domestic economy and a recovery in wages,” the CNB said, with a moderation of the annual decline in administered prices fading in early 2015.
    At the same time, the CNB expects food price inflation to accelerate slightly following a recent rise in world prices of agricultural commodities.
    After the Czech economy contracted in 2012 and 2013, the CNB said economic growth is now accelerating due to external demand, an easing of domestic monetary conditions via the exchange rate and relatively robust growth in domestic demand in an environment of expansionary fiscal policy.
    The CNB revised upwards revised upwards its economic growth forecast for this year to 2.6 percent from a previous 2.4 percent and the 2015 forecast to 3.3 percent from 2.8 percent, mainly due to higher investment activity in both the private and government sectors and fiscal policy expansion.
    In the fourth quarter of 2013, the Czech Gross Domestic Product jumped by 0.8 percent from the third quarter for annual growth of 2.1 percent, the first quarter of growth since the fourth quarter of 2011.
   The CNB also expects economic growth in the euro area to gradually pick up this year and next. Producer prices are currently falling due to the economic downturn, lower energy prices and a strong euro. But producer price are expected to return to positive, albeit subdued, growth while euro area consumer prices are rising slightly due to recovering demand.
    “Overall, the outlook for the euro area has shifted towards lower inflation and easier monetary policy,” the CNB said.
    Its latest forecast sees euro area consumer prices rising by only 1.1 percent this year, down from a February forecast of 1.5 percent, and 2015 prices rising by 1.7 percent, down from 1.9 percent. The 2014 forecast for euro area GDP was raised to 1.6 percent from 1.5 percent while 2015 growth was seen unchanged at 2.0 percent.

    http://ift.tt/1iP0FNb

Poland holds rate, repeats steady rate until end-Q3

By CentralBankNews.info
    Poland’s central bank held its reference rate steady at 2.50 percent, as widely expected, and confirmed its guidance that “interest rates should be kept unchanged for a longer period of time, i.e. at least until the end of the third quarter of 2014.”
    In March the National Bank of Poland (NBP) pushed back its time frame for any rate change to at least the end of September from the end of the second quarter due a lower inflation forecast and the potential impact of the conflict between neighboring Ukraine and Russia.
    The NBP, which cut its rate by a total of 225 basis points from November 2012 through July 2013, said the gradual economic recovery is likely to continue in coming quarters while inflationary pressures will remain subdued.
    Poland’s headline inflation rate was steady at 0.7 percent in March and February, markedly below the central bank’s 2.5 percent target, plus/minus one percentage point. Core inflation also remained low, the bank said, with producer prices continuing to fall and inflation expectations low.
    Recent data show that domestic economic activity is continuing to recover, the bank said, citing a slower-than-expected rise in industrial output and retail sales in March, a pick-up in construction and assembly output, while business climate indicators still point to further activity growth in coming quarters despite a weakening in March.

    The recovery is improving labour market conditions, but the unemployment rate is still elevated, holding back wage pressures in the economy, the bank said.
    Poland’s Gross Domestic Product rose by 0.6 percent in the fourth quarter from the previous quarter for annual growth of 2.7 percent, up from 2.0 percent in the third quarter. The unemployment rate eased to 13.5 percent in March from 13.9 percent in February and 14.0 percent in January.
    In its latest monetary policy report, the NBP forecast inflation this year of 0.8 percent to 1.4 percent, rising to 1.0 to 2.6 percent in 2015. Its next forecast will be issued in July.
    The economy is forecast to grow by 2.9 percent to 4.2 percent this year, up from 1.6 percent in 2013, and 2.7 to 4.8 percent in 2015.

    http://ift.tt/1iP0FNb

 

Central Bank News Link List – May 7, 2014 – Fed’s Yellen: Very low interest rate environment still warranted

By CentralBankNews.info

Here’s today’s Central Bank News’ link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

         http://ift.tt/1iP0FNb

Georgia holds rate on geopolitical risks, wants to tighten

By CentralBankNews.info
    Georgia’s central bank held its refinancing rate steady at 4.0 percent, saying it was maintaining its current policy stance due to geopolitical risks that have increased economic uncertainty.
    However, the National Bank of Georgia (NBG) said it still considers it necessary to exit the currency accommodative policy stance “given the improvements in economic activity and the increase in expected inflation, which gradually gets closer to the target value.”
    In February the bank’s monetary policy committee raised its rate by 25 basis points after cutting it by 150 points in 2013 as it started a gradual exit from the current policy stance. But in March it maintained the rate in light of the conflict between Russia and Ukraine.
    Georgia, which gained independence from the Soviet Union in 1991, is located in the Caucasus region. The country borders the Black Sea to the west, Turkey to the south and Russia to the north. The Crimean peninsula, which has been annexed by Russia from Ukraine, lies in the Black Sea.
    Georgia’s headline inflation rate eased marginally to 3.4 percent in April from 3.5 percent in March and 3.46 percent in February following deflation in most of 2012 and 2013.
    The central bank, which targets inflation of 6.0 percent, forecast that inflation will gradually rise and most likely reach its target value in the second half of this year. Last month it forecast inflation between 5 and 6 percent in the second half of 2014.

    The NBG said economic activity was continuing to grow at a moderate pace, with preliminary estimates showing first quarter growth of 7.4 percent, partly due to base effects.
    In the fourth quarter of 2013, Gross Domestic Product expanded by an annual 7.1 percent, sharply up from the previous four quarters where growth averaged 2 percent.
    But Georgia’s output gap remains negative, the bank said, noting a relative slowdown in credit activities.
    “The dynamics of further changes in monetary policy will depend on the dynamics of expected inflation, tendencies in economic growth, global and regional economic development,” NBG said.

    http://ift.tt/1iP0FNb
   
   

Stocks Markets Report 7th May

By HY Markets Forex Blog

Stocks – Asia

Stocks in the Asian region were seen trading lower on Wednesday, falling to a seven-week low as shares in Japan were dropping due to the stronger yen while investors raise concerns over the Chinese economy slowdown deepening.

In Japan, the benchmark Nikkei 225 index slid 2.93% lower closing the session at 14,033.45 points, while Tokyo’s broader Topix index lost 2.58% ending at 1,152.01points as the nation’s yen traded at 101.51 against the dollar, after rising to a the highest in three weeks on Tuesday.  Members of the Bank of Japan concluded to keep easing monetary policy until the inflation rate remains steady at 2%, according to minutes from the April 7-8 policy meeting.

Hong Kong’s Hang Seng Index fell 1.3% lower at the time of writing, while the Shanghai Composite Index lost 0.88% to 2,010.22 as the key Chinese manufacturing gauge contracted for the fourth month in a row, raising concerns that the world’s second largest economy’s slowdown is deepening.

HSBC’s Purchasing Managers’ Index (PMI) for April came in at 48.1 from 48.3, coming in lower than analysts forecast of 48.4. Readings below 50 indicates contraction, while China’s services Purchasing Managers’ Index (PMI) for April fell to 51.4 points from 51.9 seen in March, according to reports from HSBC.

Exports in Japan saw the most losses due to the stronger yen. Yaskawa Electric lost 5.80%, while the Japanese electronics company, Panasonic slid by 3.4%. Softbank, which is a major stakeholder in Alibaba, fell by 4.39% after the e-commerce company filed for an US initial public offering.

Stocks -Europe

European stocks opened lower on Wednesday, falling for a fourth day as investors continue to weigh on the ongoing escalated tensions in Ukraine.

The European Euro Stoxx 50 lost 0.57% starting at 3,131.78, while German’s DAX index slid 0.45% opening at 9,425.11 at the time of writing. At the same time the French CAC 40 gave up 0.44% to 4,408.47 as the UK benchmark FTSE 100 edged 0.34% lower to 6,775.31.

In other news, investors will be focusing on the Federal Reserve Chair Janet Yellen speech, which she will be delivering before the Joint Economic Committee of Congress in Washington.

Ukraine

Ukraine received its first cut of $3.2 billion of the financial aid from the International Monetary Fund (IMF) on Wednesday. The first cut is from the $17 billion two year financial aid that was agreed by the IMF in March.

Meanwhile the German Chancellor Angela Merkel and US President Barack Obama have set May 25 to vote on whether to impose more sanctions against Russia if the country fails to withdraw its support for separatists.

Australia

Sydney’s benchmark S&P/ASX 200 index fell 0.83% lower, ending the session at 5,435.80 points as retail sales in Australia rose 0.1% higher in March, but was still below analysts’ estimates of a 0.4% rise, reports from the Australian Bureau of Statistics showed.

 

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Article provided by HY Markets Forex Blog

Crude Futures Rise as US Stockpiles Drop

By HY Markets Forex Blog

Futures for crude climbed during the Asian trading session on Wednesday, rising for a second day after the weekly industry report from the American Petroleum Institute (API) showed that crude stockpiles in the US unexpectedly dropped in the last week.

Futures for the North American West Texas Intermediate (WTI) for June delivery increased by 0.62% to $100.12 a barrel on the New York Mercantile Exchange at the time of writing. While the European Brent crude gained 0.22% higher to %107.29 a barrel on the ICE Futures Europe exchange at the same time.

US Crude Supplies

Reports from the industry-fund American Petroleum Institute (API) showed that crude inventories in the US fell by 1.8 million barrels to 389.8 million in the week ending May2. Analysts were expecting to see a rise of 1.4 million barrels.

The US Energy Information Administration (EIA) is expected to release a report later in the day and expected to show a rise in supplies by 1.25 million barrels in the last week to approximately 400.6 million, according to market analysts’.

Ukraine

Over the weekend, the crises in Ukraine escalated, as Ukraine’s Interior Ministry forces were sent to drive out militants and release hostages, according to Minister Arsen Avakov.  The crises in Odessa left 46 dead.

Oil traders are concerned after Russia said it will reduce its natural gas supplies to Ukraine in June if there is no payment received this month, which could also weigh on the energy supplies to the European Union.

 

 

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Czech holds rate, confirms use of FX intervention

By CentralBankNews.info
    The central bank of the Czech Republic kept its benchmark two-week repo rate at 0.05 percent, as expected, and confirmed its commitment “to intervene on the foreign exchange market to weaken the koruna so that the exchange rate of the koruna against the euro is kept close to CZK 27/eur.”
    The Czech National Bank (CNB) began using the exchange rate as an additional tool to ease monetary conditions to avoid deflation in November last year, 12 months after it cut the repo rate to the current level. The CNB has committed itself to defend the limit on the koruna until at least 2015.
    Inflation in March in the Czech Republic was steady for the third month in a row at 0.2 percent, well below the CNB’s target of 2.0 percent, plus/minus one percentage point. In its inflation report from February, the CNB forecasts CPI of 2.1 percent this year and 2.2 percent in 2015.
    Since the decision to weaken the koruna’s exchange rate on Nov. 7, 2013, the koruna currency has been steady around 27 to the euro, trading at 27.42 today compared with 27.33 end 2013.
    Gross Domestic Product in the Czech Republic jumped by 0.8 percent in the fourth quarter from the third, the third quarter in a row with expanding activity. On a year-on-year basis, GDP grew by 1.2 percent, the first quarter of growth since the fourth quarter of 2011.
    The CNB forecasts 2014 growth of 2.4 percent, up from a contraction of 0.9 percent in 2013, rising to 2.8 percent in 2015.

    http://ift.tt/1iP0FNb