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Turkey
Hats Off to Fiscal Performance July 06, 2010 By Tevfik Aksoy | London Noticeable improvement in fiscal performance: In late 2009, the government prepared its 2010 budget rule with a real GDP growth rate assumption of 3.5%, which was in harmony with the official three-year Medium-Term Plan. The outperformance in economic growth, which suggests a much faster-than-expected recovery from last year's recession, has resulted in a noticeable rise in tax revenues. This is particularly true for indirect taxes such as domestic VAT and the Special Consumption Tax (SCT). Other than the faster-than-anticipated growth, another contributing factor was the one-time hike in the VAT and SCT rates that was applied to certain items earlier this year - this hike reflected the re-introduction of higher rates that had been previously lowered as part of crisis-related measures introduced in 2009 (e.g., lower rates on automobiles and white goods). The government's pursuit of a sound fiscal policy - based mainly on the premise of containing the rise in non-interest expenditures at a reasonable level - is the other factor behind these commendable results. As such, during the January-May period, the yearly rise in non-interest expenditures was limited to around 10%, which translated into a real growth rate of zero. In combination with the strong rise in tax revenues and controlled spending, the primary surplus almost reached the levels seen in 2007 and 2008. While the month of May is not the best period to judge revenue trends, given its seasonal nature, even a similar trend interpolation suggests that the year-end numbers might surprise on the upside. Looking in detail at the revenue data, the most striking growth related to the collection of VAT and SCT during January-May. VAT revenues rose by 29.6%Y during this period. This included 32.4%Y for SCT revenues. Essentially, both the VAT (c.20%Y) and SCT (c.22%Y) revenues grew at significantly high real rates. In our view, the more significant portion of the rise can be attributed to a strong improvement in domestic demand. However, we also believe that the government's efforts to improve tax collection have seen results. Risks to fiscal outlook: Given the limited extent of fiscal deterioration during the peak of the crisis, when the budget deficit to GDP rose to 5.5% in 2009 from 1.8% of 2008, any weakening in fiscal policy should remain manageable, in our view. However, when it comes to risks on the fiscal front, especially when there is no solid fiscal rule in place, the political agenda is usually the number one determinant of the possible direction. We see the upcoming general elections scheduled for summer 2011 (and potentially to be held earlier, in the spring) to be the main risk. In the event that the polls indicate a comfortable margin for the governing party, and/or the unemployment rate does not decline during the course of the economic recovery (which is possible), the government might be tempted to hire personnel, increase discretionary spending and use the fiscal cushion that has been created so far. Looking back, there have been both positive and negative examples of this. In the 2004 local elections, the government refrained from raising spending ahead of the polls; this was somewhat less the case leading into the 2007 general elections, and in the run-up to the 2009 local elections non-interest spending rose by 28%Y, which coincided with the global crisis. The long-awaited fiscal rule soon to be in place: As we analysed in detail in Turkey Economics: Fiscal Rule to Set a Strong Anchor, May 12, 2010, the government has given final shape to a fiscal rule that will be implemented starting with the 2011 budget. The draft proposal has been approved by cabinet and sent to parliament, where it has been cleared by the relevant commission. At this point, we believe that it should be only a matter of days or weeks before the draft legislation is passed by parliament (given the ruling AKP's significant majority) and ratified by President Abdullah Gul. We think that the passage of the fiscal rule and the enactment of the control mechanisms within it are likely to allay fiscal concerns stemming from the political agenda, to a large extent. External backdrop might be a negative: Exogenous factors, such as general economic weaknesses in trading partner economies, pose a potential risk. Were the situation in Europe and the rest of the DM to deteriorate rather than improve, Turkey's growth potential would be capped, private consumption would be cut due to a more conservative stance and tax revenues would stall. Since a double-dip scenario is not our base case, we attach a low probability to this. Debt dynamics more than sustainable: Turkey's public debt to GDP stood at 46% at the end of 2009; we believe that this is likely to remain more or less stable in 2010, easing slightly in 2011 depending on the fiscal performance next year. According to our projections, based on conventional formulas of debt dynamics, Turkey's debt to GDP ratio will not only be on a declining path, but also a rather steep one. Our assumption of average real GDP growth of 4.5% (trend growth) with a reasonable and rather non-ambitious primary surplus of 2% (steady state) leads to a debt to GDP ratio of around 25% by 2020. This would not only be a fraction of the debt level that Turkey had post the 2001 financial crisis, but would also be one of the lowest in the DM and EM universe. We believe that the government's fiscal performance so far this year has been highly impressive and, despite potential risks ahead, that any potential deterioration will remain limited. In fact, this is the main reason (aside from improved growth prospects) why we maintain our budget deficit forecasts of 4.3% of GDP in 2010 and 4% in 2011.
Hungary
Sticking with the IMF July 06, 2010 By Pasquale Diana | London We visited Budapest on June 29-30 and had meetings with an Economy Ministry representative, three NBH officials, two private sector economists and the Debt Management Office. Please find below our key takeaways. Fiscal policy - risk of high print for the 2010 deficit has receded: In our meetings, we sensed still some confusion locally regarding: i) plans to use €6 billion of IMF money to set up a government fund to buy property from distressed borrowers; ii) ways to make it easier to widen the deficit without passing a supplementary budget; and iii) plans to exclude the losses of some SOEs from the budget. We think that none of the above will be implemented, but the fact all have been mentioned in some form highlights that some communication issues within the administration still exist. That said, we believe that serious PR problems of the recent weeks have taught the authorities a valuable lesson, and drawbacks associated with confusing communication are now better understood. Therefore, we think that the risk of more noise on a ‘high' print (7% of GDP or more) on the 2010 deficit has receded sharply. The underlying revenue and expenditure trends point in the direction of a deficit of around 5% of GDP compared to the 3.8% target agreed with the IMF. The authorities plan to cut spending (0.4% of GDP) and raise a bank tax (0.7% of GDP) to take the overall deficit close to the original target. The bank tax - the key to the adjustment: The bank tax is likely to be levied on end-2009 assets, though there is a chance that 2010 assets have to be used, requiring banks to declare their latest asset position and therefore delay implementation somewhat. The tax will be levied this year and next year, for a total of HUF 186 billion (0.7% of GDP) in each year (HUF 120 billion from banks, HUF 36 billion from insurance companies, HUF 30 billion from brokerage firms). The philosophy behind the tax is clear: the banks did incredibly well in Hungary over the last ten years, achieving handsome returns even during the recent recession. Also, some people close to the government have pointed to a subsidy on HUF mortgages, which costs the Min Fin around HUF 160 billion per year. In a nutshell, the view of the government is that the banks now ought to give back. Despite opposition from the banking sector, we believe that there is no concrete risk of withdrawal from Hungary, and banks understand the need for budget consolidation. However, this only strengthens the case for minimal loan creation in the next two years, and a very subdued recovery, which was already our working assumption. FX loans are still likely to be banned, and those who need to refinance may need to do so in HUF. However, the difference right now is ‘only' 100-200bp, as opposed to several hundred basis points historically. Still no clarity on 2011 - all eyes on IMF visit next week: While market focus is on the 2010 budget deficit number, our impression from the trip is that risks for 2010 are limited, provided that the bank tax is approved, but there is no visibility on 2011. Recall that the IMF-agreed deficit target is 2.8% for next year, which is ambitious but achievable with the help of some growth and some extra tightening. However, the decision to move to a flat tax (still unclear if it is in 2011 or 2012), which will in all likelihood have negative repercussions on tax revenues, makes it necessary to find savings elsewhere. Once again, the only thing that is thus far clear about 2011 is the lack of any detailed information. The IMF visit next week should provide some reassuring headlines regarding compliance and the willingness to stick to this year's original targets. The authorities want to extend the current programme to December 2010 (from October) and claim that they do not wish to draw the remaining tranches (€6 billion), given Hungary's rapidly evaporating funding needs (the current account deficit has turned, albeit temporarily we think, into a surplus). Matolcsy comments on the future fiscal path: The authorities want to set up a precautionary facility with the IMF for 2011 and beyond, possibly revolving around the undrawn funds. This would be similar to a credit line, though it would come with conditionality (unlike the FCL for Poland). The idea is that this facility would not be used, but its existence would allow Hungary to borrow at cheaper rates than otherwise. Economy Minister Matolcsy said on Friday that this facility would be valid for 2011-12 and be in the range of €10-20 billion, which seems plenty, given Hungary's shrinking funding needs and evaporating current account deficit. The minister also added that he intends to discuss with the IMF a broad set of structural reforms, in return for a deficit in the range of 3.0-3.8% of GDP, which is wider than the previous 2011 target of 2.8%. Matolcsy said that he intends to meet this year's budget deficit target (3.8%), though he adds that the June budget number may already see the year-to-date deficit reach the full-year target. We think that the reference to structural reforms is encouraging, though probably they have to be of a high calibre and very clearly thought out in order to persuade the IMF to agree to a higher target for next year and a supplementary precautionary facility. Monetary policy - CPI picture deteriorates, hiking bias a distinct possibility: The recent HUF depreciation against the CHF is particularly painful for households. FX mortgages (63% of total, mostly in CHF) are worth around 10% of GDP. We estimate that on average the installments on a CHF mortgage taken out in 2007-08 are up by over 50%. The NBH stress tests, published in the April financial stability report, show that even at the current CHF/HUF exchange rate, and assuming a much weaker macro outlook, the banking sector may require an increase in capital of just HUF 50 billion, which seems very manageable to us. That said, these stress tests are not enough to put the NBH's mind at ease, and the CHF/HUF cross is being watched carefully as a sign of potential stress. When discussing the inflation outlook, it is clear that the assumptions in the latest inflation report on the currency in particular (EUR/HUF at 265 and EUR/USD at 1.34) are already well out of date. Even with the future oil curve lower than it was in May, we believe that oil prices in 2011 in HUF terms are 5% higher, and of course the impact of a weaker HUF on tradeables inflation will be high. True, the lower consumption outlook as a result of the spike in mortgage payments (nearly all FX mortgages are in CHF) will provide some offset, but the overall impact on the inflation forecast is to push the 2011-12 profile higher, we think. So, by the time the next inflation report is due (August), the MPC could be facing a weak economy and above-target inflation, a difficult combination. The move to a tightening bias may well be an option. And while not our central case (we see rates on hold until 2H11), a rate hike seems more likely than a rate cut, especially given the risk environment and the fact that we don't really expect the HUF to rally meaningfully from here.
United States
Review and Preview July 06, 2010 By Ted Wieseman | New York Treasuries posted sizable further gains over the past week that were led by the longer end as investors early in the week continued to look to pick up yield and duration, with month- and quarter-end portfolio adjustments adding extra impetus, as expectations of a low volatility environment anchored by no Fed action for quite some time kept money flowing into positions that will benefit from carry and rolldown going forward in Treasuries and mortgages. The rally ran out of steam after Tuesday, however, and the market saw some consolidation even as key economic data were softer than expected. Maybe if we'd seen a negative ex census payroll number on Friday, a bigger rethinking of the outlook would have prompted further gains, but the data, while disappointing, weren't soft enough to fundamentally alter what is already a very dovish medium-term Fed outlook. Fed funds futures have the funds target rising to just 1 1/4% all the way through mid-2012 and averaging about 0.57% over that period, and the employment and ISM reports, while worse than expected, weren't soft enough to drive even more dovishness. And after the construction spending, motor vehicle sales, and factory orders reports, we still see 2Q GDP running at +3.8% and the initial trajectory heading into 3Q still looks solid at about +3 1/2%. A persistent decline in volatility had been substantially lowering term premia priced into the Treasury curve on top of this more dovish fed funds rate outlook recently as the prospect of a steady Fed policy for a long time and investor hopes that this would be accompanied by modest growth and inflation encouraged a steady flow of money out the Treasury curve and into mortgages, where carry looks particularly attractive still even after a very strong run to all-time low yields. In Treasuries, the rally has already just about removed the term premium in the 2-year yield, which at 0.62% is sitting just above the expected overnight rate over the next two years, and this pricing out of duration risk has been shifting out the curve. But the prior support from collapsing volatility faded somewhat in the latest week, contributing to the consolidation that began mid-week. On the week, benchmark Treasury yields fell 4-13bp and the curve hit its flattest levels since October on Thursday before reversing somewhat in a Friday sell-off. The 2-year yield fell 4bp to 0.62%, 3-year 6bp to 1.01%, 5-year 10bp to 1.81%, 7-year 12bp to 2.45%, 10-year 13bp to 2.98% and 30-year 13bp to 3.94%. There was far less of a quarter-end liquidity scramble this time than has been seen for a while, which apparently caught the Street by surprise as there was upward pressure on financing rates and bill yields after Wednesday morning, with the Treasury overnight general collateral repo rate averaging 0.25% Thursday and Friday and the 4-week bill yield up 11bp for the week to 0.16% and 3-month 4bp to 0.17%. With nominals continuing to gain, real rate focused investors losing interest in long-end TIPS yields that have moved with a quarter point of all-time low, commodity prices way down on the week (front-month oil by 8%), and supply unexpectedly boosted at the announcement of the upcoming week's 10-year auction, TIPS lagged badly. The 5-year TIPS yield rose 6bp to 0.30%, 10-year 5bp to 1.21% and 30-year 8bp to 1.80%. This lowered the benchmark 10-year inflation breakeven 19bp to 1.77%, low since October. The 5-year/5-year forward breakeven fell a bit more than this to near 2%, about an 80bp plunge from historically elevated levels that were reached in mid-April. Increasing market gyrations, dislocations in the MBS market as the Fed swapped out of its undelivered 5.5% positions for more readily settled lower coupons, and generally rising nervousness that was contributed to by the intensifying weakness in equities brought the steady recent decline in volatility to a stop over much of the past week. After having fallen from a recent high of 120bp on May 20 to 100bp on June 25 (compared to 125bp at the start of the year, a high above 200bp last June, and a low since late 2007 of 90bp reached in March), normalized 3-month X 10-year swaption volatility was up a bit to 103bp at the end of the latest week. Along with the break in the five-week trend of consistently declining volatility, mortgages also underperformed slightly after a similarly persistent run of strength. Performance by the 5.5% MBS that the Fed was shifting out of and 5% also for some reason was particularly poor, but lower coupon issues also lagged a bit. Still, given the big Treasury gains, 4% MBS trailing by a few ticks still made for another great week in absolute terms, with current coupon yields moving to all-time record lows mid-week below 3.7% before rising a bit above that level Friday, down from 3.84% at the end of the prior week, and average 30-year mortgage rates following with a move down to an all-time low just above 4 1/2%. Indeed, the rally has run far enough now that the big universe of 4.5% mortgages (with underlying mortgage rates near 5 1/4%) could become readily refinanceable with further upside. And unlike the higher coupon MBS where refinancing has been slowed by negative equity and tighter credit conditions, most of the mortgages underlying 4.5% MBS were written last year when credit conditions were tightest and home prices lowest, so refinancing should be as fast as normal if rates keep falling. A rough week for risk markets provided a supportive backdrop for rates markets, though the decline in yields Tuesday during the worst stock market losses was actually somewhat muted. At the futures close Friday, the S&P 500 was down 5% on the week, mostly because of Tuesday's 3% plunge but with five straight down days to a run of new lows for the year that extended the year-to-date drop to 8.5%. The worst performing sector was Financials, as disappointment over the delay in passing the financial reform bill added to the downside. Materials and industrials were the next worst performing areas on rising global growth concerns. Credit was also weak, but didn't perform as poorly as stocks. In late trading Friday, the investment grade CDX index was 9bp wider at 123bp and the HY index about 45bp wider near 650bp, better levels than the wide closes for the year of 131bp and just below 700bp hit June 9. Most states started their new fiscal years on Thursday, many without having managed to pass a budget yet and with Congress having left town without being able to agree on extending extra federal government payments to help states pay for Medicaid. Still, while there wasn't any notable improvement, the severe recent widening in the MCDX index at least stopped, with the 5-year MCDX moving out to 256.5bp at Tuesday's close, a 45.5bp widening in seven trading sessions, but then holding near there through the rest of the week. The initial run of key data releases for June were weaker than expected. In a reverse of May, ex census payrolls showed a decent gain in June (though less than we expected),but this was more than offset by weak results for earnings and hours. The manufacturing ISM pulled back more than expected in June, though to a still quite strong level from a longer-term perspective. Data on factory hours worked in the employment report pointed to a much weaker June industrial production report this month. And motor vehicle sales pulled back somewhat in June, though this was in line with expectations and appeared to be largely a result of lower fleet deliveries than weaker retail sales. Nonfarm payrolls fell 125,000 in June, with a 225,000 decline in census workers and a 100,000 gain in underlying jobs. This worse-than-expected result was driven by the smallest gain in manufacturing employment (+9,000) since December, a bigger-than-expected drop in construction (-22,000), and weak results for finance (-15,000) and retail (-7,000). Business services (+46,000, with another surge in temps), leisure (+37,000), and a weird jump in ex census federal government employment (+27,000) were the main positives. Other key details of the report were weak. The unemployment rate fell 0.2pp to 9.5% but only because of a plunge in the teenage labor force that likely reflected seasonal adjustment problems with the timing of the school year-end. And in a reversal of the strong May results, earnings and hours numbers were soft, with the average workweek down a tenth to 34.1 hours and average hourly earnings dipping 0.1%. This combination resulted in aggregate earnings falling 0.3% after surging 0.6% in each of the prior two months. The manufacturing sector has led the recovery since the recession ended in mid-2009, but growth appears to have moderated in June. The composite manufacturing ISM index fell 3.5 points in June to 56.2, low since December but still a strong reading from a longer-term perspective. Growth in orders (58.5 versus 65.7), production (61.4 versus 66.6), and employment (57.8 versus 59.8) slowed and growth was less broadly based, with 13 of 18 industries reporting upside in June compared to 16 in May. A lagged response to the European problems appears to have explained much of the moderation, with the export orders index down 6 points after surprisingly rising a point to a new high last month. The text also mentioned the Gulf oil spill as a negative. Against these still strong ISM results, details from the employment report pointed to a notably weaker IP report. Manufacturing hours worked fell 1.2% in June on the sluggish payroll gain and a half hour decline in the average workweek. Based on this and other data, we look for a 0.8% decline in manufacturing output in June, which would be the worst month in over a year after a 11% annualized surge from the June 2009 bottom through May, the biggest gain over such a period since 1984. While there appears to have been some moderation in growth at the end of the second quarter, for 2Q as a whole, incoming data continue to point to fairly strong GDP. Construction spending only dipped marginally in May after the broadly based surge seen in April, which left residential investment and state and local government construction spending (which only makes up about 15% of overall state and local spending but is a lot more volatile than most other categories) on pace for big gains near +20% and pointed to a small uptick in business investment in structures after a severe run of declines since mid-2008. The factory orders report indicated that the turn toward small growth in structures should add to another very big gain in equipment and software investment, leaving overall business investment in 2Q on pace for a gain near +14%. A big drop in nondurable inventories in the factory orders report, though likely mostly a result of lower prices, led us to trim our 2Q assumption for inventories somewhat. We now see inventories subtracting 0.4pp from 2Q GDP instead of being about neutral, which provides some upside potential for 3Q but lowered our 2Q GDP forecast slightly to +3.8%. The upcoming week should be one of the quietest of the year, with the holiday Monday and little in the way of economic data the rest of the week. The only economic reports of much note are nonmanufacturing ISM Tuesday and monthly company chain store sales reports Thursday. Otherwise, there is the 10-year TIPS auction and announcement of the 3-year, 10-year and 30-year supply to be auctioned the next Monday, Tuesday and Wednesday or Thursday. The 10-year TIPS size was surprisingly boosted by $2 billion to $12 billion, and this issue will be reopened twice, in September and November, so it will eventually be a very big issue for the TIPS market. Nominal supply is likely to continue coming down, however, and we look for a third straight $2 billion cut in the 3-year size to $34 billion (but we expect steady 10-year and 30-year reopening sizes of $21 billion and $13 billion, respectively).
United States
Growth Scare July 06, 2010 By Richard Berner & David Greenlaw | New York Still on track for moderate, sustainable growth. Despite market turmoil and softer incoming data, we think that the economy remains on track for moderate (3-3.5%), sustainable growth. To be sure, we have trimmed our second-half 2010 growth outlook fractionally in response to slightly more restrictive financial conditions. And we now expect a slower rise in underlying inflation. In response, we have substantially changed our expectations for Treasury yields and the Fed: We now think that 10-year Treasury yields will probably trade in a 2¾-3½% range for the balance of this year. While we do expect a significant rise in yields over the course of 2011, we think Fed officials will raise rates in 2011 a bit more cautiously than we expected in May/June, to 1.75% by the end of 2011, or 50bp lower than our earlier forecast. But cyclical forces still outweigh the threats from the contagion of the European sovereign credit crisis; the threat of fiscal drag, including likely tax hikes as soon as next year; and uncertainty about economic policies. Overwrought about the slowdown. There's no mistaking the recent string of weaker data, capped by the disappointing 83,000 June gain in private nonfarm payrolls and dip in the workweek. But the data certainly don't validate market fears of a 1-2% second half, much less a double-dip recession, in our view. Instead, they signal a step down from 3.8% growth in 2Q to about 3¼% in the second half. Most important, despite the June downdraft in wage income implied by the data, we think real income gains are sufficient both to sustain 2-2½% consumer spending growth and rebuild saving. Indeed, the data may well understate actual gains, given the stronger pace of withheld income and payroll taxes through June; we estimate that the three-month average of such receipts rose by 4.5% from a year ago. Even ignoring the tax data to be conservative, we estimate that real disposable income rose at a 5% annual clip in 2Q and will slow only slightly to 4% in 3Q, leaving scope for upside in spending if consumers have reason to turn less cautious. Forecast myths. In our view, three myths pervade current negative thinking about the outlook. One is that the ‘sugar high' from fiscal stimulus is over; now it's payback time. In our view, fiscal thrust - measured by the change in the standardized deficit/GDP - is peaking and probably will decline in the second half. But the impact of fiscal policy lags behind and is still supportive of growth, especially through stepped-up infrastructure outlays. Such outlays through May aren't close to reversing all of the decline since last summer, but the 20.1% annualized increase over the last three months is a favorable portent. Moreover, only about one-third of the infrastructure monies budgeted has been spent. And with state and local government revenue now improving, noticeable cutbacks in their spending seem less likely as they head into a new fiscal year. Inventories leaner by the day. A second myth is that the inventory ‘cycle' has run its course. In fact, we see inventories getting leaner in relation to sales by the day. Excluding motor vehicles, the real manufacturing and trade I/S ratio in April declined to 1.28 months, not far from all-time lows. Accumulation has just begun, and the pace of production in 2H10 and through 2011 will likely run a few tenths of a percent ahead of demand simply to keep I/S ratios from falling too low. For example, new production schedules from the automakers show significantly higher-than-expected production levels over the next few months. One OEM has decided to break tradition and keep production lines running in the first two weeks of July because dealers lack vehicles in showrooms needed to bring in traffic. Sustainable support from net exports. A third myth: The fast-growing EM economies are too small and fragile to provide a material boost to US exports, and rising US imports will swamp any gains. In contrast, we think strong growth in domestic demand in the larger EM economies in Asia and Latin America will promote strong gains in exports. Moreover, slower growth in US final demand seems likely to restrain imports. Imports have recently jumped, but we believe that much of the rise has reflected a significant swing in inventories as companies liquidated them more slowly. Between August 2009 and April 2010, real imports jumped by $16 billion (13.5%), while the swing in real manufacturing and trade inventories (the change in the change in the stocks) was more than five times that magnitude ($84 billion) over the same period. The magnitude of such changes likely will slow, as will the rise in imports. Slower rise in inflation. In our view inflation is bottoming and is poised to rise gradually. At work: narrowing slack in the economy and the Fed's ultra-accommodative policy stance, which will sustain inflation expectations. Both are lifting pricing power. Although slack in the economy remains significant, the change in slack also matters for inflation, and slack continues to narrow as companies cut back capacity and industrial production continues to boom. While factory operating rates probably slipped in June, they are up 660bp from the trough last June and at the highest level since October 2008. Surveys of consumers evince stable inflation expectations; in the June University of Michigan canvass, 5-10 year inflation expectations hovered at 2.8%. Climbing rents, accelerating prices at the early stages of the processing pipeline, and rising import prices all are starting to signal that inflation is bottoming. Apartment rents, which enter popular price gauges on a six-month moving average basis, have turned higher, and surveys suggest they are rising 3-5% from a year ago. Despite the dollar's recent strength, consumer import prices rose 0.4% in the year ended in May. Nonetheless, the ongoing slide in market-based inflation expectations implies a slower rise into 2011. By one measure, 5-year, 5-year forward breakevens have tumbled 70bp since April to 2.1%, and by the Fed's own measure they have declined by 50bp to 2.6%. Such declines likely will keep inflation tame for longer, and slow the pace at which inflation increases over the next year as businesses and consumers have turned more cautious. |
