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April 18, 2007                                                                                                                                                                                            2007 issue 6

Between the Lines…
One can only shake one’s head in amazement. Overall markets have become sanguine again concerning risk, even after the recent market turbulence that
included frightening stock market slides echoed around the globe and serious and ongoing concerns surrounding the American housing market. Investors
even shrug off new concerns about corporate earnings to push US markets higher. And Asia markets, that had been so central to the turmoil just two
months ago, are marching on to new highs. It is important, however, to put all this into perspective. First, the inflation issue is becoming a more complex
equation. It is no longer just a concern emanating from energy costs. Food costs are now running in tandem with oil, a new connection that has emerged
with the push to ethanol. And productivity in the corporate sector is sliding, and no quick fix is on the horizon. Second, outside of the fractured housing
sector in the U.S., growth in credit remains abundant. Just look at the money and loan growth stats across the globe. A voracious appetite for lending
from structured credit vehicles such as CLOs is one of the key elements behind a seemingly endless demand for credit risk. But there is an important
lesson to be learned from the mortgage market ugliness. An intermediary may become too eager for product, or to get deals done. Perhaps there is not
enough differentiation between good deals and bad. To date there has been only modest spillover effects from the subprime mortgage breakdown. The
magnitude of the job growth associated directly and indirectly with the amazing U.S. housing machine continues to be underestimated. Do not dismiss the
potential for a more significant fallout both in the job market and then over into the broader corporate credit market.

                            “Signs of a Bubble.” are from comments made by GE’s chief financial
                            officer Keith Sherin to the Financial Times over the weekend about
                            problems in the subprime market and their spread to the Alt-A market. In
                            addition, he issued a broader warning on the health of the credit markets.
                            Beware the trends of increased leverage in the loan market, the lack of                                                                     Tighter Lending Standards Good For Housing
                            covenants, and the rising use of deferred payment structures all signal                                                                     Long Term, But Will Dampen Sales Near Term
                            potential future problems for the credit market.                                                                                            Tighter lending criteria and fallout from the subprime loan debacle
                                                                                                                                                                        will lead to a healthier housing market with greater assurance that
 Federal Reserve Chairman Ben Bernanke appeared                M&A volume tops $1 trillion                                                                              owners can handle mortgage adjustments, but higher loan
 to chide investors who may have looked past                   Global mergers and acquisitions topped $1                                                                standards will slow the housing recovery, according to the latest
 concerns about inflation … the Fed continues to see           trillion (€750bn) in the first three months of                                                           forecast by the National Association of Realtors

 the risks with respect to inflation as weighted to            this year, the busiest and most lucrative first
 the upside, with its greatest concern that inflation          quarter on record.
 will fail to moderate                                                                                           US Business investment is actually sliding, as evidenced
                                                                                                                 by the pattern over the past 6 months. And the second
                                                                                                                 revision of US GDP revised plant and equipment spending
 ABRAHAM GULKOWITZ                                                                                               lower – from a 3.2% quarterly annualized contraction to one
                                                                                                                 of 4.8%. This additional evidence of sluggish business                                                                                               investment and recent developments in the subprime market
 917-402-9039                                                                                                    suggest that the downside risks to growth have increased.
November 6, 2003                                                                                                                                                       The PunchLine...

                                                                               In This Issue
• Between the Lines…
     One can only shake one’s head in amazement. Overall markets have become                                          • Media Clips
     sanguine again concerning risk, even after the recent market turbulence that                                       Lots of pressure points                                        (pg 16)
     included frightening stock market slides echoed around the globe and serious and
     ongoing concerns surrounding the American housing market. Investors even                                         • Tech and the Business Cycle                                    (pg 17)
     shrug off new concerns about corporate earnings to push US markets higher.
     And Asia markets, that had been so central to the turmoil just two months ago,
                                                                                                                      • Real Estate and Construction                                    (pg 18)
     are marching on to new highs. It is important, however, to put all this into                                     • Breakout in Europe
     perspective. First, the inflation issue is becoming a more complex equation. It is
     no longer just a concern emanating from energy costs. Food costs are now
                                                                                                                        Growth prospects for 2007 remain strong but currency questions on
     running in tandem with oil, a new connection that has emerged with the push to                                     the rise; reform outlook murky; political bickerings abound   (pg 19)
     ethanol. And productivity in the corporate sector is sliding, and no quick fix is on                             • Japan Watch
     the horizon. Second, outside of the fractured housing sector in the U.S., growth
     in credit remains abundant. Just look at the money and loan growth stats across
                                                                                                                        Japan is in recovery and it is impressive – especially on the corporate
     the globe. A voracious appetite for lending from structured credit vehicles such                                   front; but it may be supported by a very particular currency alignment
     as CLOs is one of the key elements behind a seemingly endless demand for                                           and continued rapid growth in China and the US. Beware… (pg 20)
     credit risk. But there is an important lesson to be learned from the mortgage
     market ugliness. An intermediary may become too eager for product, or to get                                     • Will Life Ever be the Same?                                     (pg 21)
     deals done. Perhaps there is not enough differentiation between good deals and
     bad. To date there has been only modest spillover effects from the subprime
     mortgage breakdown. The magnitude of the job growth associated directly and
     indirectly with the amazing U.S. housing machine continues to be
     underestimated. Do not dismiss the potential for a more significant fallout both
     in the job market and then over into the broader corporate credit market.
     (pg 1)
• In This Issue                                                                                      (pg 2)
• Time to Recalibrate?…                                                                             (pg 3)

• Engines of Growth
     We have regularly raised the issue of excess global liquidity; it needs
     to be added to the list of growth engines that have fed the global
     expansion and financial markets. It became an element in the outlook
     as seen in recent headlines surrounding the flurry of massive buyout
     deals, as well as the boom in housing and the likely contours of its
     slide. China, commodity prices, the amazing U.S. consumer engine,
     and unprecedented business transformations have been elevated to
     critical elements of the growth outlook, but are difficult to forecast and
     even tougher to modulate.                                             (pg 4)

• Data Detective                                                                                    (pg 5)

• Weary Households?
     Lots of questions for a free spending sector…                                              (pg 6)

• US Regional Housing
     Amazing shift in some local markets…                                                        (pg 7)

•    Credit Concerns                                                                                (pg 8)

•    The DNA of Business – Unraveling                                                                (pg 9)

•    US Job Picture…                                                                               (pg 10)
•    More US Job Data…                                                                             (pg 11)
•    Logistics…                                                                                    (pg 12)                  Contact information:

•    The New Geography of Business                                                                 (pg 13)
•    Crude Analysis…                                                                               (pg 14)
                                                                                                                                            Abe Gulkowitz
•    Pumping Iron                                                                                  (pg 15)

                                                                                                                            phone: 917-402-9039               email:

    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.

November 6, 2003                                                                                                                                                    The PunchLine...

                                                Time to Recalibrate ?
Bernanke's testimony March 28:
This forecast is subject to a number of risks. To the downside, the
correction in the housing market could turn out to be more severe
than we currently expect, perhaps exacerbated by problems in the
subprime sector. Moreover, we could yet see greater spillover from
the weakness in housing to employment and consumer spending than
has occurred thus far. The possibility that the recent weakness in
business investment will persist is an additional downside risk.

Any spillover effects from the deteriorating subprime
mortgage market into the overall U.S. economy will not be
felt until the second half of 2007 -- meanwhile, 27% of
mortgage-backed securities exposed to collateralized debt
obligations are expected to be downgraded, Fitch Ratings
said on Monday.

Average hourly earnings rose by 0.3% during the month
and are rising at 4.0% y-o-y. The high rate of earnings
growth coupled with the low level of unemployment should
keep the Fed concerned about wage inflation and rising unit
labor costs and keep the Fed’s focus on the inflation outlook
going forward

US BLS: Corn/Ethanol Effect Keeps Hitting PPI Product Pipeline
                                                                                                    Personal Consumption Deflator
◘ March PPI Finished Goods Index +1.0%; March Core 0.0%
◘ Light Trucks Price Decline Helps Hold Down Core                                                   Inflation creeps up
    WASHINGTON - The March drop in light truck prices held the PPI core rate to a below-            On a year-over-year basis, core PCE inflation rose to 2.4% in
expectations zero, while the effect of rising ethanol feedstock corn prices filtered into animal    February, supporting the Fed’s continued emphasis on the
feeds and meats, a senior Bureau of Labor Statistics analyst said Friday morning. Higher            predominance of inflation risks in its recent statement and
petroleum-derived energy prices did their anticipated work on the overall Producer Price Index      clarification by Chairman Bernanke
finished goods index, with the help of food prices, elevating it a full 1 percent. The percentage
point disparity with the core rate in March was similar to the 0.9 point difference the previous
month. Food prices rose 1.4% in March and the overall energy index rose 3.6%, with gasoline
up 8.7%.

There are clear signs in this year's PPI that the relationship
between food and energy prices is becoming less random, with some
basic foodstocks continuing to respond to the demand for ethanol.

 November 6, 2003                                                                                                                                                                     The PunchLine...

                                                        Engines of Growth
  Asia Economies to Grow Faster                                                                                                                                                    Geopolitical tensions
                                                                                                                                                                                   are helping to push up
  Than Expected in 07, ADB Says…                                                                                                                                                   oil prices once more
  Asia's developing economies will grow 7.6
  percent this year, faster than earlier forecast, as
  a pick-up in spending by consumers and
  companies cushions the impact of weaker                                                                                                                                                Commerce Dept. sanctions
  exports, the Asian Development Bank said.                                                                                                                                              China over subsidy dispute
                                                                                                                                                                                         The U.S. Commerce Department
  Growth in Asia excluding Japan and Australia                                                                                                                                           announced sanctions against China on
  in 2007 will exceed a September estimate of                                                                                                                                            Friday in connection with a dispute
  7.1 percent, the Manila-based lender said                                                                                                                                              over paper subsidies. Secretary Carlos
                                                                                                                                                                                         Gutierrez said the U.S. has the right to
  today. This year's expansion compares with an                                                                                                                                          apply countervailing duties to Chinese
  ``exceptional'' 8.3 percent in 2006, according                                                                                                                                         paper imports, which he said threaten
                                                                                                                                                                                         U.S. products
  to the ADB, which is funded by governments
  to promote development in the region. Rising
  incomes in China, India and other Asian
  economies are boosting consumer spending
  and encouraging companies to lift investment.
  Reduced dependence on export-led growth will
  make the region's expansion more self-
  sustaining, as a slowdown in the U.S. and
  Europe damps demand for made-in-Asia

                                                                                                                                                                                    Growth in the US Service
                                                                                                                                                                                    Sector Slowed in March
                                                                                                                                                                                    Growth in the service sector fell to a
                                                                                                                                                                                    four-year low last month while the job
                                                                                                                                                                                    market      showed     only    modest
                                                                                                                                                                                    improvement, according to reports
                                                                                     Weak business investment poses risk                                                            yesterday that reinforced views of a
                                                                                     Federal Reserve Chairman Ben Bernanke disappointed those expecting an early return to          weakening economy. The Institute for
Retail expansion should                                                              monetary easing. Testifying before the Joint Economic Committee, he told lawmakers that        Supply      Management      said    its
                                                                                     the statement following the March 21 Fed meeting did not indicate a shift away from the        nonmanufacturing index slid to 52.4 in
boost consumption in Asia                           The Chinese central bank’s       inflation bias in monetary policy. Not expecting problems in the sub-prime mortgage            March, down from 54.3 in February,
                                                                                     lending market to spread to the broader economy, Bernanke instead flagged up risks
Carrefour's sales in China rose 53% and             decision to raise the reserve    associated with weakening business investment. The magnitude of the slowdown in
                                                                                                                                                                                    confounding expectations for a rise.
                                                                                                                                                                                    Despite the weakness, the institute‘s
Wal-Mart's sales by 30% last year,                  requirement ratio reflects       corporate spending has been greater than expected, he said. The Department of Commerce         inflation gauge rose.      The report
                                                    concern about excess liquidity
according to press reports today. Citing the                                         released figures showing that durable goods orders -- a proxy for business spending -- fell    coincided with unexpectedly weak
China     Chain     Store      &   Franchise                                         1.2% in February following an even larger drop of 7.4% in January. Despite a boom in           factory orders data for February,
Association, Carrefour's sales rose to 24.8         in the banking system.           profits, US firms have been cautious about capital investment. This means the economy will     released      by    the     Commerce
billion renminbi (3.2 billion dollars) and                                           continue to rely on exports and consumption for continued growth.                              Department.
Wal-Mart's to 15.0 billion renminbi. The
increase is partly due to rising demand, but
also to the expansion of shops nationwide,
Carrefour adding 33 outlets and Wal-Mart
15 last year. Consumption is rising in
China, but the government would like it to
play a larger part in overall growth; retail
sales grew 14.7% year-on-year in the first
two months of the year, to 1.45 trillion
renminbi. Increased activity in the retail
sector should help stimulate demand as
well as respond to it, helping to lift sales
further in coming years, boosting

November 6, 2003                    The PunchLine...

                   Data Detective

November 6, 2003                                                                                                                     The PunchLine...

                                                                   Weary Households?
                                                                                             Fed's Braunstein:
                                                                                             Subprime Woes to Drag Out
 Housing – Going from bad to worse -                                                         for 1-2 Yrs; No 'Easy Fix'
 40% of markets at record inventory levels                                                       WASHINGTON - The Federal Reserve's
 Inventory is already at record levels in 40% of the                                         head of consumer affairs Tuesday March 27
 top builder markets, seven months ahead of the                                              told a congressional committee that problems
 normal fall peak.                                                                           with the subprime lending market are expected
                                                                                             to last for the next one to two years, with no
                                                                                             "easy fix" for the increased amount of
                                                                                             borrowers foreclosing on the non-traditional
                                                                                             type of loans. Fed Director of Consumer and
 US Consumer Spending Outlook Turns                                                          Community Affairs Sandra Braunstein said in
                                                                                             testimony before the House Financial Services
 Hazy Despite Strong March Retail Sales                                                      subcommittee that although "the market is
 Higher gasoline prices and concerns over the                                                correcting itself," the Board finds the increased
 housing market are spooking the outlook.                                                    amount of delinquencies of subprime loans of
 The outlook for consumer spending turned hazy in April as warnings of weak                  "great concern."            "Existing subprime
 sales ahead overshadowed better-than-expected March sales at many of the                    borrowers, especially those with more recently
 nation's big retailers. Higher gasoline prices and concernns over the housing               originated ARMS, may face more difficulty,"
 market are spooking the outlook. Analysts said rising gasoline prices and the
                                                                                             she said. In the second hearing in less than a
 possibility of higher interest rates could lead shoppers to curtail their spending in
 the coming months. And Wal-Mart Stores Inc., whose customers cut back on                    week on the troubled subprime market,
 shopping when gas prices were high last year, warned that April's selling                   Braustein was one of six banking regulators
 environment will be tough, while Federated Department Stores Inc. said its first-           appearing before the subcommittee which is
 quarter sales will come in at the low end of expectations. The arrival of warmer            addressing the crisis.
 weather following an unusually cold January and February helped retailers like
 Wal-Mart recover from a slow start to the spring selling season. An early Easter,
 which occurred eight days earlier than a year ago, also helped, though it will
 depress April's results. Other winners for March included Costco Wholesale
 Corp., J.C. Penney Co. Inc. and teen retailer Pacific Sunwear of California Inc.
 Even Gap Inc., which has been mired in a sales slump, reported better-than-
 expected results for March. However, cooler weather in recent days has stifled
 sales of spring clothing. And the slowing economy, particularly the weakening
 housing market, could challenge shoppers in the coming months. An immediate
 concern is rising gas prices. Gas and oil climbed Wednesday and Thursday after
 the government reported a steeper-than-expected decline in gasoline inventories,
 and there are predictions of $3-a-gallon gasoline by summer.

November 6, 2003                        The PunchLine...

               U.S. Regional Housing Maps

November 6, 2003                                                                                                                                                             The PunchLine...

    Credit Concerns - Reality Programming
                                                                                                                                                                  FSA to monitor increased
                                                                                                                                                                  risks in commodity mkts
                                                                                                                                                                  The influx of new players and surging
                                                                                                                                                                  volumes have increased risks in the
                                                                                                                                                                  commodity markets, the UK‘s financial
                                                                                                                                                                  watchdog said on Monday.

In the weeks following the eruption of volatility across financial markets on
February 27, some of the most intense trading activity was seen in the US and
European credit derivative index markets. The fact that liquidity did not dry up,
as some had feared, and trading volumes surged, reflects the emergence of index
products as a commonplace hedge of choice among banks, asset managers,
pension funds and others. However, the volatility did prompt losses for some,
and expose a frailty of a much-vaunted new structured credit product, Constant
Proportion Debt Obligations (CPDO). Although still a niche product, CPDOs
are likely to become a significant part of this market and have the potential
to distort normal market dynamics.

Fallen Angels 2007… S&P: In number, the utility, telecommunications, high technology, media
and entertainment, consumer products, homebuilders/real estate, and health care sectors appear
most vulnerable to downgrades from investment grade to speculative grade globally. Of the
total tally, the utility sector led with nine entities, telecommunications followed with four entities.
Some additional sectors—high technology, media and entertainment, health care, homebuilders/real
estate, and consumer products—had three entities each.

                                                                                                                                                               The next wave of distress will be unlike the last in two
                                                                                                                                                               respects. First, commercial banks no longer dominate the
                                                                                                                                                               process. According to Standard & Poor's, a rating agency,
                                                                                                          The biggest buyers of high-yield (or                 non-banks such as hedge funds now make roughly half of
                                                                                                          leveraged) loans tend to be the                      all high-yielding leveraged loans and hold the lion's share
                                                                                                          managers of collateralised loan                      of the secondary market. Indeed for many distressed
                                                                                                                                                               borrowers, hedge funds have become the last, best hope
                                                                                                          obligations, or CLOs. Such managers
                                                                                                                                                               of salvation. Accredited, a troubled subprime lender, was
                                                                                                          bundle together a group of loans, then               recently propped up by a $200m loan from San
                                                                                                          slice them up, according to their                    Francisco-based Farallon after banks withdrew support.
                                                                                                          riskiness, and sell them to investors.               The hedge fund charged a credit-card-like rate of interest.
                                                                                                          Once a CLO manager has raised its                    It also secured the right for ten years to buy over 3m
                                                                                                                                                               Accredited shares for $10 each, a deal that will bring it
                                                                                                          capital, it needs to put that money to
                                                                                                                                                               huge returns if the lender pulls through. This is a
                                                                                                          work quickly to earn higher interest.                variation on the ―loan-to-own‖ strategy now popular
                                                                                                          That makes the manager an eager                      among hedge funds: credit is extended in the hope that it
                                                                                                          loan-buyer,     forced     to   accept               can be converted to equity when the company fails to
                                                                                                          whatever terms the borrowers offer.                  recover, allowing the lender-turned-owner to restructure
                                                                                                                                                               the firm thoroughly.

                                                                                                                                                   THOMAS FRIEDMAN NYTimes…
                                                                                                                                                   That is because of what I call the First Law of Petropolitics: The
                                                                                                                                                   price of oil and the pace of freedom always move in opposite
                                                                                                                                                   directions in states that are highly dependent on oil exports for
                                                                                                                                                   their income and have weak institutions or outright authoritarian
                                                                                                                                                   governments. And this is another reason that green has become
                                                                                                                                                   geostrategic. Soaring oil prices are poisoning the international system
                                                                                                                                                   by strengthening antidemocratic regimes around the globe.

 November 6, 2003                                                                                                                                                                                           The PunchLine...

                                                                 The DNA of Business
Best Buy Co., Inc. has agreed to acquire Speakeasy,                                                                                                                                     The end for Endesa
Inc., one of the largest independent broadband voice,                                                                                                                                   The 18-month saga to take control of Endesa, Spain's
data and IT service providers in the United States.                                                                                                                                     biggest power company, seemed to reach a conclusion.
This move strengthens Best Buy's technology                                                                                                                                             E.ON, a German utility, agreed to drop its euro42 billion
                                                                                                                                                                                        ($56 billion) bid in return for some of Endesa's assets. It had
portfolio in the small business space, delivered
                                                                                                                                                                                        faced both competition from an Italian-Spanish alliance that
through the company's Best Buy For Business unit.                                                                                                                                       holds a 46% stake in the company and strong opposition from
                                                                                                                                                                                        the Spanish government (which is being sued by the European
                                                                                                                                                                                        Commission for hindering E.ON). Endesa will now be split
                                                                                                                                                                                        among E.ON, Enel, an Italian rival, and Acciona, a Spanish
                                                                                                                                                                                        construction firm.

                                      Bottomless pockets
                                      Kohlberg Kravis Roberts said it would take over
                                      First Data, which processes credit-card and
                                      other payments, in a $29 billion buy-out. The
                                      deal is unusual in that, given its size, it was
                                      made by a single private-equity firm (and not a
                                      ―club‖ of firms) with the backing of several
                                      banks that are committing equity as well as debt.    Deals, Deals, Deals…
                                                                                           ● Now biggest in baby food business… Nestle to buy Gerber for $5.5
                                                                                           Billion from pharmaceutical maker Novartis
                                                                                           ● Education lender Sallie Mae agreed to be sold to two private funds and                          Flying into a new dawn
                                                                                           banks JP Morgan Chase and Bank of America for $25bn                                               Delta Air Lines applied for permission to
                                                                                           ● Suitors raise bid for Clear Channel… The two private equity firms
                                                                                           seeking to buy Clear Channel Communications have sweetened their
                                                                                                                                                                                             list shares again, starting in May. The
                                                                                           offer, fearing that their initial bid may be rejected by shareholders                             carrier entered bankruptcy protection in
                                                                                           ● BCE, the parent of Bell Canada, said Tuesday that it was in                                     September 2005 and expects to leave it
                                                                                           discussions with a consortium of Canadian pension funds about a deal to                           at the end of April.
                                                                                           take the company private.

EUROPEAN UNION: Roaming charges may be capped
The Industry, Research and Energy Committee of the European Parliament (EP) voted today in favour of
automatically capping roaming charges for all mobile phone customers to 0.40 euros (0.54 dollars) per minute for
outgoing calls and 0.15 euros for incoming calls, thus cutting current rates by as much as 70%. The committee
backed the European Commission proposal, which claimed that current charges are unjustified. The Commission,
trying to portray itself as a consumer champion, estimates that the industry makes an annual profit of 8.5 billion
euros from the charges. European telecoms companies fiercely oppose any regulation, saying that market
competition is already driving down prices and that revenue losses would have to be passed on to customers. The
proposal will now have to be approved by the full EP and EU member states. While there is general consensus
among EU lawmakers and governments about the need for capping roaming charges and regulation is likely to
come into force by the summer, disagreements persist about whether the caps should be automatic or offered as an
'opt in' option to customers.

                                                                                                                                                                      Productivity and profit growth rarely diverge

November 6, 2003                      The PunchLine...

                   U.S. Job picture

November 6, 2003                           The PunchLine...

                   More U.S. Job Details

 November 6, 2003                                                                                                                                                                        The PunchLine...

     Warehouse Locations Multiplying, Reversing Previous Trend
     Third-party logistics executives said the industry is adapting
     to a chronic shortage of truck drivers by utilizing rail services
     and reopening shuttered warehousing facilities to cut down on
     transportation time and costs. As demand softens slightly,
     trucking capacity constraints have also eased, they said.                                                                               Some Inventories Fattening; Firms More Prepared
                                                                                                                                             for Supply Chain Shocks…             while inventories
                                                                                                                                             continue to turn faster overall, some clients are
                                                                                                                                             fattening their safety stock rather trimming their
                                                                                                                                             product supply. They don't want to be caught short if
                                                                                                                                             shocks to the pipeline, like weather disruptions or port
  A recent trend toward more safety stock in the supply chain                                                                                congestion, should recur.
  Beginning mid-year 2006, some clients started to "expand their warehouse footprint
  around the country," for transportation and customer-service reasons. These are the
  same forces that compelled importing retailers to diversify points of entry to the U.S.                                                    The slowdown in automotive             and  residential
  and to establish distribution centers in a variety of regions, particularly after the                                                      construction might be providing some of the recent
  congestion that snarled Southern California ports in 2004                                                                                  slack in trucker supply. As much as 20% of truck
                                                                                                                                             capacity was at one time dedicated to the automotive
                                                                                                                                             industry, but part of that is now freed up. The
                                                                                                                                             American Trucking Associations' for-hire truck
                                                                                                                                             tonnage index      rose 1.6% in February from a
  Pressing signs of inflation in the supply chain include                                                                                    particularly weak January, but fell 1.7% compared to a
  labor, insurances and land costs. Clients are increasingly                                                                                 year ago, the eighth monthly year-over-year decline.
  turning to rail for goods transportation in response to
  high diesel prices and tight trucker supply during the past
  few years

                                                                                                                        Three events clearly illustrate the type of problems facing Brazilian ports:
BRAZIL: Reports cite urgent need for ports investments                                                                     * In March 2007, Lula indicated that he planned to create a special Secretariat for Ports (later
Given that approximately 95% of all Brazilian exports pass through its ports and that exports have been the main        also including airports), separate from the Transport Ministry, as part of the ministerial reform
driver of growth in recent years, the precarious condition of ports is of great concern to both businesses and the      process. However, many critics saw this as blatantly yielding to pressures to satisfy patronage
government. A long-term strategic vision with a clear plan of action is still missing, while regulatory uncertainties   demands from political parties in his coalition.
linger. Notwithstanding a stream of studies on the inadequacies and urgent requirements of Brazilian ports, the            * In November 2006, seven containers of tropical fruit from the Sao Francisco valley were left
government has failed to make any definitive commitments beyond vague promises to improve transport                     stranded for lack of containers at the Bahian ports of Suape and Salvador, resulting in the loss
infrastructure and to deal with some of the more immediate problems. Business has found it equally difficult to         of merchandise worth some 260,000 dollars.
make meaningful investment plans and lasting commitments.                                                                  * Although construction of the TEV in Santos was completed in August 2005, operations
                                                                                                                        could not begin until after customs clearance was granted in April 2006.

November 6, 2003                                                                                                                                                                                           The PunchLine...

                      The New Geography of Business
China's failure to curb investment may lead to
overcapacity and falling prices, turning its expansion
                                                                                        China facing urban skills shortages…                                  Access to a vast reservoir of surplus rural labour has
                                                                                        made a key contribution to meeting urban employment requirements and to accommodating China's rapid GDP
into a ``curse,'' the Asian Development Bank said. The                                  growth. However, the government faces severe challenges in its efforts to meet both the quantitative and qualitative demands
economy has expanded at least 10 percent for the past four years,                       of securing high and stable urban employment. Migration from the countryside will continue to play an essential role in
boosted by exports and spending on factories and real estate. Fixed-                    supporting industrialisation, but there will be shortages of such labour in some places. Furthermore, as China moves towards
asset investment surged 24 percent in 2006, exceeding a target                          higher value-added activities, the human capital demands of more skill and knowledge-intensive industries will place a
aimed at keeping the rate below 18 percent. ``Should investment                         premium on workers with higher educational attainments.
continue to run at more than 20 percent a year, what has been a
source of growth for many years could turn out to be a curse,'' the
Manila-based lender said in its Asian Development Outlook 2007
report yesterday. It could lead to ``excess capacity and deflation.'‗
China raised interest rates to the highest in almost eight years and                                                                Import and Export Price Index
increased the amount of money lenders must set aside as reserves                                                                    Release for: March 2007
five times in eight months to slow investment. The government has                                                                   Source: U.S. Labor Department
also urged local governments to focus on efficiency and                                                                             Percent change from previous month, unadjusted
environmental programs rather than spending money on new                                                                                                        yr/yr      Dec-06                          Jan-07      Feb-07    Mar-07
factories.                                                                                                                          Imports, all                   2.8%       1.1%                           -1.1%        0.1%      1.7%
                                                                                                                                     Petroleum imports             2.4        4.0                            -6.6         0.6       9.0
                                                                                                                                     Non-petroleum imports         2.9        0.5                            -0.1         0.1       0.3
                                                                                                                                     Non-fuel imports              2.6        0.3                             0.3        -0.1       0.2
                                                                                                                                    Exports, all                   5.3        0.6                             0.4         0.7       0.7
                                                                                                                                     Agricultural exports         20.2        2.4                             0.7         2.8       2.1
                                                                                                                                     Non-agricult exports          4.2        0.5                             0.5         0.5       0.6
                                                                                                                                    Imports by origin:
                                                                                                                                     Canada                        4.1        1.6                             -1.2        0.8      1.6
                                                                                                                                     EU                            3.0        0.0                              0.7        0.2      0.4
                                                                                                                                     Latin America                 1.5        0.5                             -1.8       -0.4      1.9
                                                                                                                                     Japan                        -0.7        0.0                             -0.1       -0.2      0.1
                                                                                                                                     NICs                         -0.1        0.1                             -0.6        0.1      0.0
                                                                                                                                     China                        -0.6        0.0                             -0.1       -0.1      0.2

INDIA: RBI moves to ease concerns over growth...                               The Reserve Bank of India
(RBI) today stressed that "low and stable" inflation will be key to sustaining economic expansion. The         The number of foreign acquisitions by Russian firms has been
comments come amid concerns about the implications of the bank's surprise Friday move to increase              growing, as has foreign direct investment into Russia. In
interest rates by 25 basis points. With annual inflation running at over 6.0%, the RBI has been under
pressure to tighten monetary policy. However, its response, to increase interest rates to 7.75% (and           combination, these trends suggest that Russian business is
the cash reserve ratio from 6.0% to 6.5%), has raised fears that consumption may stall, with serious           becoming increasingly integrated into the world economy. Some
consequences for growth. Stock markets fell by around 5% on Monday (but have since partially
recovered). With an important state election approaching, Minister of Finance Palaniappan
                                                                                                               leading Russian companies are turning themselves into
Chidambaram has eased his opposition to monetary tightening to back the RBI's latest move. High                transnationals, which is for the most part a commercially driven
inflation and interest rates pose a serious threat to growth. Chidambaram's focus on supply-side               process. State intervention may affect this process, particularly in
issues has made little impact on prices, particularly for non-food items, intensifying pressure on the
RBI to tighten monetary policy. It was the timing of the interest rate increase that was a surprise, and       the oil and gas industries, but it will not block it.
further upward moves can be expected if inflation fails to ease.

November 6, 2003                                                                                                                                                       The PunchLine...

      Crude Analysis - Commodity Futures

Ethanol Demand Boosts Corn Planting
High demand from the ethanol industry and strong export
sales are expected to translate this year into the biggest U.S.
corn planting since 1944, according to a report

Gas-to-liquids (GTL) technology offers an alternative source
of refined oil products, particularly premium ultra-low
sulphur products. However, few countries offer the right                                                   Producers   of ready-mix concrete pushed prices up for the third
conditions to make acceptable the associated high capital and                                              consecutive month. April started with a 1.4% average price hike for
price risks. The countries with most GTL potential are Qatar,
                                                                                                           3,000, 4,000 and 5,000-psi concrete. This follows monthly increases
Nigeria and Algeria. A big expansion of the GTL industry is
dependent on Qatar's review of its North field reservoir. In the                                           of 0.6% in March and 0.8% in February. The combined monthly
meantime, projects are highly vulnerable to cost inflation,                                                increases have kept prices 5.8% above a year ago. This compares to
developments in the traditional refining sector and the                                                    year-to-year increases of 7.0% in April 2006 and 3.8% in April 2005.
relationship between oil and gas prices.                                                                   Portland cement prices rose another 0.2% this month, capping a
                                                                                                           nine-month increase that has left prices 6.5% above a year ago

                                                                       Aluminum and stainless steel costs are still very high. Nickel, which makes steel stainless, has
                                                                       been setting monthly price records.    Gypsum wallboard prices, however, are headed in the
                                                                       other direction. Used heavily for homes as well as schools, hospitals, offices and stores, gypsum
                                                                       prices fell about 4.4% from November to February

                                                        Buoyant energy prices may hit US growth
                                                        The producer price index (PPI) rose 1.0% last month, the Labor Department reported on April 13. Although
                                                        core producer prices (which exclude volatile food and energy prices) were flat, the headline figure was well
                                                        above Wall Street's expectations and has raised concerns that higher fuel costs may cut into consumer
                                                        spending. In a separate report, the Commerce Department indicated that the US trade deficit declined to
                                                        58.4 billion dollars in February, from 58.9 billion dollars the previous month. However, exports, which have
                                                        helped boost faltering growth, fell marginally. Falling energy prices have helped reduce inflationary
                                                        pressures since the third quarter of 2006. However, US energy prices are increasingly buoyant, which may
                                                        put pressure on the Federal Reserve to maintain a monetary 'tightening bias', deepening the current

November 6, 2003                                                                                                         The PunchLine...

                   Pumping Iron - The Old Economy
                            Absurd construction costs…                                 China's crude steel output in 2007 is expected to rise 13.4
                            Prices for sewer and water PVC pipe started the            pct to 475 mln tons, a senior official from the China Iron
                            month with a strong rebound that wiped out declines        and Steel Association said. Qi Xiangdong, CISA's vice
                            during the previous two months. Despite the rebound,       secretary, told reporters at an industry conference that
                            April prices for PVC water pipe are still 5 to 7% below    output of steel products is also expected to rise 12.85 pct
                            a year ago. Prices for PVC sewer pipe have been more       to 527 mln tons. In 2006, China produced 466.85 mln
                            resilient and are just slightly below last year's level.   tons of steel products, up 24.45 pct, while crude steel
                            After a few months of downward adjustments from last       output totaled 418.78 mln tons, up 18.48 pct.
                            year's spike, copper water tubing prices have stiffened.
                            This month's 2% rebound keeps copper tubing prices
                            27% above last year's level                                China, the world's biggest steel producer, said it will cut tax breaks
                                                                                       on exports of some steel products as the nation seeks to reduce a
                                                                                       record trade surplus.     Rebates on exports of 76 products including
                                                                                       stainless steel and cold-rolled coils will be cut to 5 percent from April
                                                                                       15, the State Administration of Taxation said in a statement posted
                                                                                       on the China Iron and Steel Association's Web site. Tax breaks on
                                                                                       other 83 grades will be abolished.        The reduction in tax incentives
                                                                                       may squeeze margins for mills including Angang Steel Co., whose
                                                                                       exports account for 20 percent of sales, UBS AG has said. Still,
                                                                                       higher global prices may allow producersÿto pass on tax costs, analysts
                                                                                       said. The changes may not slow exports because mills can still make
                                                                                       money given the gap between global and Chinese prices

November 6, 2003                                                                           The PunchLine...

                                                                        Media Clips

The bet in newspaper sector… As newsprint prices continue to head south,
publishers should get even more relief on newsprint costs as the year progresses.
If the pressure on the top line abates somewhat in the 2H, the companies could
see some positive operating leverage then.

  Google made its biggest foray into television advertising by
  announcing a partnership with EchoStar. The deal will allow the
  internet company, which has been experimenting with “offline”
  advertising over the past few months, to replicate its online
  system for buying, selling and measuring the impact of ads on
  EchoStar's 125 satellite channels in the United States.

Newspaper Internet ad growth moderating…                              After growing
32.5% in 2006 at the companies we cover, median newspaper Internet growth slowed to
17% YTD. Key drivers: slowing help-wanted, intensifying online help-wanted
competition, online growth shift toward streaming video, and reduced online upsell
opportunities from weakening print trends.

Help-Wanted Ad Index
Release for:   February 2007; Source: The Conference Board
Index base 1987=100, seasonally adjusted
                              Feb-07 Jan-07 Dec-06 Nov-06 Oct-06 Feb-06
National Index                   31      32      34      29      29      39
New England                      18      21      18      15      14      20
Middle Atlantic                  18      19      20      18      18      21
East N. Central                  24      26      31      23      22      27
West N. Central                  36      37      34      35      34      49
South Atlantic                   19      20      20      18      19      25
E. South Central                 81      61      65      59      59      87
W. South Central                 62      63      70      61      63      83
Mountain                         80      79      80      67      65      95
Pacific                          21      22      22      22      24      29

November 6, 2003                                                                                            The PunchLine...

                        Tech and the Business Cycle
                                                                          Singapore's exports posted their smallest increase in 18
                                                                          months    in   March     as   companies      shipped    fewer
                                                                          semiconductors, disk drives and other electronics.    Non-oil
                                                                          domestic exports rose 1.6 percent from a year earlier, after a
                                                                          decline of 6.6 percent in February, the government's trade
                                                                          promotion body said in a report today. That was worse than
                                                                          the median forecast of a 2 percent gain. Slowing growth in
                                                                          the U.S. and Europe is hurting sales forAsian electronics

                                                                            US IT new orders in February continued their soft-
                                                                            patch – a trend that has been in place since last
                                                                            October. The YoY growth rate of orders fell back to
                                                                            near-zero in Feb from 2% in Jan. But the MoM growth
                                                                            rate rebounded from -3.4% in Jan.

                                                  Start-Up Fervor Shifts to Energy in Silicon Valley

                                                                                                Internet sales save US retail sales…
     ``The global electronics cycle could turn                                                  While several categories were revised upward, the
 in 2007, which would negatively affect export                                                  most significant revision was to sales at nonstore
                                                                                                retailers, now estimated at up 5.3% in February
 prospects particularly for East and Southeast                                                  (vs. 2.8% initially reported). The surge at
 Asia,'' the report from the Asia Development                                                   nonstore retailers likely reflects the activities of
 Bank said. ``The relief that lower prices are                                                  consumers hampered by bad weather and
 currently bringing to budgets, to inflationary                                                 using the internet for an increasing share of
 pressures and to import bills is welcome, but                                                  purchases. Retail sales rose 0.7% in March, near
 should not be counted on.''                                                                    the median of analysts‘ forecasts (according to
                                                                                                Bloomberg). The previous month‘s very soft rise
                                                                                                was revised upward to a 0.5% gain (from 0.1%
                                                                                                first estimated). Non-auto sales rose 0.8% in
                                                                                                March, also near the median of analysts‘ forecasts.
                                                                                                February non-auto sales are now estimated at up
                                                                                                0.4% (vs. -0.1% first estimated). Sales due to high
                                                                                                gasoline prices however were a main driver.

November 6, 2003                                                                                                                                                                           The PunchLine...

            Real Estate and Construction Outlook
Boom in Hotel Sector… US hotel sales for 2006 were $35.3 billion, an increase of 68%
from $21 billion in 2005, according to a recent report on national hotel investment by Jones Lang     Lodging pros see 'an anxious
LaSalle Hotels. The company tracked all hotel sales of $10 million and higher. Last year was the      time' as they chart an economy
third year in a row of “record transaction volume for the hotel industry,” says Kristina Paider,
senior vice president of research for Jones Lang LaSalle Hotels. The largest hotel transaction was    slowing faster than expected.
the sale of the Four Seasons Hualalai for $502 million, she says. The increase in sales is due to
both an increase in the number of hotel sale transactions and an increase in the sales price. The
growth is due to many factors, including high and increasing operating returns, more and
diversified buyers, an increased ability to obtain financing and a limited amount of newly
constructed hotels, according to the report. “Many choose to buy and renovate over building
because of those high [construction] costs,” she says. There is a greater “transparency” regarding
hotels’ operating results, which allows investors, who may not have a lot of experience with                                                             Construction boosts
buying and managing hotels, to enter the market, according to the report. “Hotels are seen as
becoming more of a mainstream asset class,” Paider says. More hotels are also entering the                                                               outlook in Singapore
marketplace as some of the publicly held companies involved in hotel real estate are selling the                                                         The economy expanded by 6.0% year-on-year in the first quarter, the
hotel buildings but continuing to operate the hotel. “They are moving to an owner-operator                                                               government said today. Construction was a key driver, expanding by
structure,” she says. A recent trend is groups of buyers pooling their resources to buy large hotel                                                      7.0% compared to 4.7% in the previous quarter. The city-state is
portfolios, which is something Paider sees continuing.                                                                                                   looking to revived dynamism within the sector to offset the impact of
                                                                                                                                                         slowing external demand for its exports, particularly electronics, over
                                                                                                                                                         the year. A recent ban by Indonesia on sand exports to Singapore
Total government construction spending in the US
                                                                                                                                                         threatens to push up prices, but the development of casino resorts and
increased for the seventh consecutive month. After a                                                                                                     housing are nevertheless among the investment and construction
1.6% advance in January, February’s gain was 0.4%.                                 Moody's Investors Service ... will require more                       projects that are boosting the economic outlook. Both manufacturing,
State and local construction advanced by 0.6% in                                   protection for investors in securities backed by                      which accounts for one quarter of the economy, and services grew by
February while federal government construction                                     mortgages on apartment buildings, offices and                         6.1%. The figures strengthen government forecasts for annual growth
                                                                                   other commercial properties because of "a                             this year to reach 4.5-6.5%, although much still depends on the global
spending, a small and highly volatile series, tumbled
                                                                                   continued slide" in lending standards.                                economy remaining relatively benign.
1.8%. The January-February average of state and local
government construction spending is up a stunning
14.4% (annualized) versus the 4Q average, implying
                                                                                                            China… investment in real estate grew 26.9% year-on-
that state and local government construction spending
                                                                                                            year to 354.4 billion renminbi (45.8 billion dollars) in the
will be a positive contributor to 1Q GDP growth.                                                            first quarter, according to National Development and
                                                                                                            Reform Commission figures today. This represented an
                                                                                                            important acceleration on the rate of increase a year earlier,
                                                                                                            and suggests that the government will continue to tighten
                                                                                                            policy to rein in sectors such as real estate, despite signs
                                                                                                            elsewhere that measures taken to date are beginning to work.
                                                                                                            Foreign interest in real estate appears to be rising fast. The
                                                                                                            government will continue to encourage more balanced
                                                                                                            investment in real estate, and will want to tighten control
                                                                                                            further on property development.

                                                                                                                                  Eurozone Total Construction Output
                                                                                                                                  Release For:     February 2007
                                                                                                                                  Percent change vs previous period, Workday adjusted
                                                                                                                                  Source: Eurostat
                                                                                                                                                         Sep06 Oct06 Nov06 Dec06 Jan07 Feb07
                                                                                                                                  EMU-13                  4.0    5.4   6.5    8.9    9.1   10.4
                                                                                                                                  EU-27                   2.8    6.9   6.2    7.4    9.2    9.2

                                                                                                                                  EMU-12                 3.9    5.3    6.4    8.8    9.0   10.3
                                                                                                                                  EU-25                  2.7    6.8    6.1    7.1    9.0    9.0
                                                                                                                                  Year-over-year percent change
                                                                                                                                  Workday adjusted

                                                                                                                                  Belgium                3.5    4.3    4.9   12.2   10.7    8.6
                                                                                                                                  Czech Republic         5.8    3.1    7.2   18.5   28.8   32.5
                                                                                                                                  Germany                7.9    4.6   11.7   13.5   35.6   30.7
                                                                                                                                  Spain                  0.1    3.7    5.7    7.6   -3.1    6.4
                                                                                                                                  France                 4.3    6.7    3.9   10.3    2.2    3.1
                                                                                                                                  Luxembourg             2.0    5.6   -1.5   10.5   11.7     na
                                                                                                                                  Hungary               -3.8    7.5   -5.0    0.0   -2.9     na
                                                                                                                                  Netherlands            6.9    4.1    4.4    2.3    5.5    8.2
                                                                                                                                  Austria                3.0    3.0    2.2    0.3   27.5     na
                                                                                                                                  Poland                22.2   27.3   21.8   19.3   60.1   57.1
                                                                                                                                  Portugal              -9.2   -4.7   -6.5 -10.8    -6.7   -6.6
Though the Phoenix condo conversion craze is officially dead,                                                                     Romania               21.2   20.4   22.1   24.2   27.2   28.6
certain markets still boast a high demand for ground-up                                                                           Slovenia              38.0   41.2   23.2   30.3   37.3   31.0
condominiums while others have projects barely limping toward                                                                     Slovakia              14.4    8.8   15.9   20.4   20.4   25.6
the finish line. The dichotomy is especially apparent in two                                                                      Finland                6.8    7.2    5.1   12.4   16.4     na
submarkets in the Greater Phoenix metro. In Scottsdale, local                                                                     Sweden                10.2    8.2   10.8   11.4   13.4   15.4
developer Urban Home Development Corp. is betting $220                                                                            United Kingdom        -7.6    9.9    2.0   -2.5    4.7    0.5
million on two developments, the 288-unit Citro Camelback at                                                                      -------------------------------------------------------------
78th Street and Camelback Road and 68-unit Citro Biltmore,
situated at Missouri Avenue and 18th Street. But farther south, in
Chandler, Signature Properties West's Elevation Chandler
project has been stalled once again--and is now on the market.

November 6, 2003                                                                                                                               The PunchLine...

                                                               Breakout in Europe?
                                                                                                                           German Business Indicators
                                                                                                                                         IFO      ZEW Investor
                                                                                                                                      Sentiment   Expectations
                                                                                                                           Jun   02     91.3          69.6
                                                                                                                           Jul          89.9          69.1
                                                                                                                           Aug          88.8          43.4
                                                                                                                           Sep          88.2          39.5
                                                                                                                           Oct          87.7          23.4
                                                                                                                           Nov          87.3           4.2
                                                                                                                           Dec          87.1           0.6
                                                                                                                           Jan   03     87.4          14.0
                                                                                                                           Feb          89.3          15.0
                                                                                                                           Mar          88.9          17.7
                                                                                                                           Apr          88.4          18.4
                                                                                                                           May          89.4          18.7
                                                                                                                           Jun          90.6          21.3
                                                                                                                           Jul          91.6          41.9
                                                                                                                           Aug          92.8          52.5
                                                                                                                           Sep          93.0          60.9
                                                                                                                           Oct          95.3          60.3
                                                                                                                           Nov          96.2          67.2
                                                                                                                           Dec          97.0          73.4
                                                                                                                           Jan   04     97.5          72.9
                                                                                                                           Feb          96.4          69.9
                                                                                                                           Mar          95.4          57.6
                                                                                            EU Commission                  Apr          96.3          49.7
                                                                                                                           May          96.1          46.4
                                                                                            EMU Bus. Climate Indicator     Jun          94.6          47.4
                                                                                            Release For:    March 2007     Jul          95.6          48.4
                                                                                            ----------------------------   Aug          95.3          45.3
                                                                                                              Business     Sep          95.2          38.4
                                                                                                              Climate      Oct          95.3          31.3
                                                                                                              Indicator    Nov          94.1          13.9
                                                                                            ----------------------------   Dec          96.2          14.4
                                                                                            Mar07               1.55       Jan   05     96.4          26.9
                                                                                                                           Feb          95.4          35.9
                                                                                            Feb07               1.55
                                                                                                                           Mar          93.9          36.3
EMU Mar New Car Registrations -2.4% YY; German VAT                                          Jan07               1.38       Apr          93.3          20.1
Still Felt… Eurozone new car registrations fell 2.4% on the year in                         Dec06               1.58       May          92.9          13.9
March, after a 3.8% decline in February, according to Market News                           Nov06               1.52       Jun          93.3          19.5
calculations based on data released Friday by the European Automobile                       Oct06               1.38       Jul          95.0          37.0
                                                                                            Sep06               1.40       Aug          94.6          50.0
Manufacturers Association (ACEA). For the entire first quarter, eurozone
                                                                                            Aug06               1.19       Sep          96.0          38.6
registrations were down 2.3% compared to the same period of 2006. The                                                      Oct          98.8          39.4
sales tax hike that went into effect in Germany at the start of the year played             Jul06               1.29
                                                                                            Jun06               1.38       Nov          97.8          38.7
a major role in reducing new car sales.                                                                                    Dec          99.5          61.6
                                                                                            May06               0.98
                                                                                                                           Jan   06    101.7          71.0
                                                                                            Apr06               1.11       Feb         103.3          69.8
                                                                                            Mar06               0.75       Mar         105.4          63.4
AT&T pulled out of talks to buy a stake in Olimpia, a major shareholder in Telecom          Feb06               0.53       Apr         105.9          62.7
Italia, after increasing political pressure within Italy for the sale to be blocked. This   Jan06               0.27       May         105.7          50.0
is one in a series of recently failed takeover bids, showing EU governments'                Dec05               0.31       Jun         106.8          37.8
willingness to intervene in defence of national champions or preferred European             Nov05               0.06       Jul         105.6          15.1
configurations. Moreover, cases such as Airbus show how former exemplars of
                                                                                            Oct05               0.10       Aug         105.0          -5.6
European cooperation can be compromised by national political considerations.                                              Sep         104.9         -22.2
The European Commission has, with some success, pursued a clear policy                      Sep05              -0.01
                                                                                                                           Oct         105.3         -27.4
in trying to limit such behaviour. However, some difficult issues -- principally            Aug05              -0.15
                                                                                                                           Nov         106.8         -28.5
concerning corporate governance -- and political pressures remain a                         Jul05              -0.15       Dec         108.7         -19.0
challenge in some member states.                                                            Jun05              -0.37       Jan   07    107.9          -3.6
                                                                                            May05              -0.45       Feb         107.0           2.9
                                                                                            Apr05              -0.37       Mar         107.7           5.8
                                                                                            Mar05              -0.18       Apr                        16.5
                                                                                            Feb05               0.11
                                                                                            Jan05               0.32

 November 6, 2003                                                                              The PunchLine...

                                                                             Japan Watch
Auto exports are soaring but
Japanese local sales have
Downside Surprises on Machinery Orders
and Bank Loans: Temporary Lull in Activity

Household sentiment…           the seasonally adjusted quarterly figure of
46.7 for March was down 0.3 percentage points relative to December, and
therefore roughly flat. Household sentiment as measured by the survey
improved in October-December 2006, but no further improvement has been
evident since the beginning of this year--a result that is somewhat

  Tankan report in Japan... The index
 for sentiment among large manufacturers fell to 23 in
 March from 25 in the December survey, the first
 quarter-on-quarter drop in a year, but it was slightly
 better than the 22 expected by those firms three
 months ago. The Tankan, which was conducted from
 Feb. 23 to Mar. 30, showed the main index will dip
 further to 20 in the three months ahead. The index of
 large non-manufacturers was at 22, unchanged from
 December and is expected to rise to 23 in the next
 three months. Sentiment among retailers worsened
 further in March but is forecast to post a sharp pickup
 by June while other service industries also showed a
 gradual recovery.

 Domestic sales of new cars, trucks and buses, excluding mini vehicles, fell 12.6%
 year on year in March to 487,738 units, declining for the 21st straight month,
 the Japan Automobile Dealers Association said Monday. Car sales last month were
 down 12.4% year-on-year at 420,586 units, while sales of buses fell 12.3% to 3,151
 units and truck sales dropped 13.8% to 64,001 units.          For the year to March,
 domestic sales of new cars, trucks and buses, excluding mini vehicles, fell 8.3% year-
 on-year in the year to March, to 3,587,930, according to the JADA data.

 Japan Real Estate: It is particularly interesting to note that the
 March survey showed a further improvement in sentiment among
 firms in the real estate sector, with the business conditions DI for
 large firms rising 7 points from the previous survey to +53, thereby
 surpassing the level of +50 that was reached when Japan was in the
 midst of a land price bubble back in March 1988

November 6, 2003                                                                                                                                                                       The PunchLine...

                    Will Life Ever Be the Same?

                               Where’s the diversification ?

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