July 14th, 2011 Newsletter
Dear Friends,
Tangents:
France celebrates Bastille Day today and it is a national holiday. Bastille was a medieval fortress and prison in east Paris, the symbol of Bourbon despotism. When it was stormed by a Parisian mob on this day in 1789, there were only 7 prisoners, but lots of gunpowder to fuel the French Revolution. Its destruction came to have a unique place in French revolutionary ideology as marking the end of the ancient régime.
On July 14th, 1906, A.C. Benson wrote in his diary: The scent and sound of the great lime tree, full of flowers and bees, came softly to us in the still afternoon. How strange it is that the lime tree smells so perilously sweet, and yet that single blossom has hardly any fragrance – only a vegetable catkin sort of smell.
Here’s a great idea – saw it in today’s Globe & Mail:
Book lovers’ paradises
“Twice annually, Bill Gates schedules a week-long ‘reading retreat’ during which he does nothing but pore over the books and papers he’s set aside during the year,” Salon says. “He’s not alone: The idea seems particularly popular in the U.K., where you can sign up at London’s School of Life to receive a customized book list (they have ‘bibliotherapists’ on staff to compile one based on a telephone consultation) and lodging in one of several modern country houses.”
Photos of the day
July 14, 2011
Nathalie zu Sayn-Wittgenstein of Denmark, riding Digby, competes in the FEI Grand Prix CDIO competition at the World Equestrian Festival CHIO in Aachen, Germany. Ina Fassbender/Reuters
A girl stands next to a section of a sand sculpture titled Andy Warhol by sculptors Inese Valtere-Ulande and Pedro Mira at the Festival of Sand Sculptures 2011 under the topic Masterpieces of World Culture at a beach near the Peter and Pawel Fortress in St. Petersburg, Russia. Alexander Demianchuk/Reuters
Market Commentary:
Canada
By Matt Walcoff
July 14 (Bloomberg) — Canadian stocks dropped for the first time in three days as energy and raw-materials producers fell on speculation the U.S. is unlikely to restart stimulus policies immediately.
Copper producer First Quantum Minerals Ltd. lost 3.1 percent after receiving a “reduce” rating from an analyst at Arbuthnot Banking Group Plc. Gabriel Resources Ltd., which is developing a gold and silver mine in Romania, surged 9.3 percent after getting government approval of its archaeological review.
BlackBerry maker Research In Motion Ltd. retreated 3.3 percent after an analyst at Needham & Co. cut his profit estimates for the company.
The Standard & Poor’s/TSX Composite Index slipped 72.02 points, or 0.5 percent, to 13,252.92. The index had advanced 0.6 percent before U.S. Federal Reserve Chairman Ben S. Bernanke said the central bank won’t soon begin a third round of bond purchases, a strategy known as quantitative easing.
“Some people were paying attention to Bernanke’s comments yesterday that he was ready to ease monetary policy if the economy did slow,” Jeff Bradacs, senior investment analyst on a Manulife Asset Management team that oversees about C$1.7 billion ($1.8 billion), said in a telephone interview. “People were expecting QE3 from those comments, and now not.”
The S&P/TSX gained 0.7 percent yesterday as Bernanke told a Congressional committee the bank might renew stimulus policies if the economy stalls.
Speculation that the Fed might return to stimulus policies helped propel gold futures to a record high yesterday. The S&P/TSX Materials Index rallied 6 percent this month through yesterday as gold advanced 5.5 percent. Precious-metals companies make up 13 percent of Canadian stocks by market value, according to Bloomberg data.
Bernanke told a U.S. Senate committee today that higher inflation will discourage the central bank from restarting quantitative easing quickly. “We’re not prepared at this point to take further action,” he said.
Precious-metals producers fell as gold fluctuated after seven days of gains. Barrick Gold Corp., the world’s largest gold producer, decreased 1.3 percent to C$46.01. Agnico-Eagle Mines Ltd., Canada’s fourth-biggest company in the industry by market value, slipped 1.4 percent to C$62.07. Extorre Gold Mines Ltd., which explores in Argentina, slumped a record 14 percent to C$12.57 after Michael Gray, an analyst at Macquarie Group Ltd., cut his rating on it to “neutral” from “outperform.”
Gabriel Resources Ltd., which is developing a gold and silver mine in Romania, soared 9.3 percent, the most since November, to C$8 after saying the country’s government has signed off on the company’s archaeological review of historic mining activity on the site.
Base-metals companies fell as copper and zinc futures dropped. Teck Resources Ltd., Canada’s largest producer of industrial metals and coal, declined 2.1 percent to C$48.70. HudBay Minerals, Inc., which mines copper and zinc in Canada, lost 2.3 percent to C$14.59.
First Quantum decreased 3.1 percent to C$131.21 after Gavin Wood, an analyst at Arbuthnot in London, set a 12-month price estimate for its U.K.-traded shares 14 percent below their closing price yesterday.
In a note to clients, Wood cited the shares’ performance since 2009 — they gained four times as much as the FTSE 300 Mining Index through yesterday — and the chance they may slump if copper retreats or new mines are delayed.
Energy stocks declined as crude oil futures retreated the most in three weeks in New York. Suncor Energy Inc., Canada’s largest oil and gas producer, lost 1.2 percent to C$37.60. Talisman Energy Inc., which operates in North America, the North Sea and Indonesia, decreased 2.1 percent to C$18.05.
The S&P/TSX Insurance Index slumped to the lowest level since June 17. Manulife Financial Corp., North America’s fourth- biggest insurer, lost 1.1 percent to C$16.03. Sun Life Financial Inc., Canada’s No. 3 insurer, fell for a seventh day, slipping 2 percent to an eight-month low of C$27.54 in Toronto Stock Exchange trading.
RIM declined 3.3 percent to C$26.18 after Charlie Wolf, an analyst at Needham & Co., cut his 2012 and 2013 profit estimates on the company. Unless the company improves its sales in the consumer market, “RIM is likely to become a shadow of its former self,” Wolf wrote in a note to clients.
Gildan Activewear Inc., Canada’s largest apparel maker, sank 4.6 percent, the most in seven months, to C$32.91. In a note to clients, Kenneth M. Stumphauzer, an analyst at Sterne Agee Group Inc., said his firm’s surveys indicate Gildan’s wholesale sales volumes dropped more than 10 percent in June.
US
By Nikolaj Gammeltoft and Victoria Stilwell
July 14 (Bloomberg) — U.S. stocks fell, driving the Standard & Poor’s 500 Index to the lowest level of the month, as Federal Reserve Chairman Ben S. Bernanke said he’s not prepared to take immediate action to stimulate the economy.
Raw-material producers, technology and industrial companies lost the most among the 10 main industries in the S&P 500 Index, which erased a gain of as much as 0.7 percent. Marriott International Inc. dropped 6.6 percent on a lower-than-estimated earnings forecast. JPMorgan Chase & Co. rallied 1.8 percent after investment banking profit surged and more customers paid their credit-card bills on time.
The S&P 500 slipped 0.7 percent to 1,308.87 at 4 p.m. in New York, its lowest level since June 29, as a stalemate continued in Washington on negotiations over the U.S. debt ceiling. The Dow Jones Industrial Average dropped 54.49 points, or 0.4 percent, to 12,437.12 after surging 90 points following JPMorgan’s report.
“The market is going to be volatile until we get the situation in Washington resolved,” said Don Wordell, a fund manager for Atlanta-based RidgeWorth Capital Management, which oversees about $48 billion. “Earnings have been coming in pretty good and corporate balance sheets are in great shape,” he said in a telephone interview. “The economic data reports were positive.”
Bernanke testified for a second day before lawmakers after saying yesterday he’s prepared to provide more stimulus if needed. Bernanke said today that inflation now is “higher” and “closer” to the central bank’s informal target than was the case in August and that’s one reason why the Fed won’t immediately embark on a third round of bond-buying. “We’re not prepared at this point to take further action,” he told the Senate Banking Committee.
The S&P 500 has rallied 93 percent since March 2009 as the Fed used large-scale asset purchases to buoy the economy and companies posted earnings that beat analysts’ estimates. The index has still fallen 4 percent since April 29 this year on concern the economic recovery is at risk and as Europe’s sovereign-debt crisis grows.
Stocks were also pressured today after Moody’s Investors Service said late yesterday the U.S. government may lose the Aaa credit rating it’s held since 1917 on concern the country’s debt limit will not be raised in time to prevent a missed payment of interest or principal. President Barack Obama is considering summoning congressional leaders to Camp David this weekend to work on a plan to raise the debt ceiling after yesterday’s negotiations on a deficit-cutting plan of at least $2 trillion stalled, two people familiar with the matter said.
“Rating agencies don’t tell us anything we don’t know, but Moody’s warning underlines the seriousness of the situation and the game of chicken at Capitol Hill,” said Philip Marey, senior U.S. economist at Rabobank in Utrecht, the Netherlands.
Equities gained early in the day as government data showed retail sales unexpectedly increased and jobless claims fell more than economists estimated. The 0.1 percent increase in retail sales reported by the Commerce Department compared with the median forecast of a 0.1 percent drop in the Bloomberg News survey of 80 economists. Excluding auto sales, purchases were little changed, the weakest performance since July 2010.
Separate data showed initial jobless claims fell by 22,000 to 405,000 last week. Industrial and technology companies retreated 1 percent each, while materials producers lost 0.9 percent.
Earnings are gaining attention as more companies post second-quarter results. S&P 500 profits are forecast to have grown 13 percent in the quarter, the smallest increase in two years, according to data compiled by Bloomberg.
Google Inc. jumped 11 percent to $585.97 at 4:58 p.m. in after-market trading in New York. The owner of the world’s largest Internet search engine reported sales and profit that topped analysts’ estimates, a sign the company is benefiting from an effort to expand into mobile and display advertising.
“The market is being driven by macro events such as the U.S. and European debt crises,” Giri Cherukuri, who helps manage $2.6 billion as money manager and head trader at Oakbrook Investments in Lisle, Illinois, said in a telephone interview.
“But we’re heading into the heart of earnings season, and people are getting ready for a change towards a market that’ll be focused on the earnings reports of major companies.”
Citigroup Inc., the third-largest U.S. bank, and Mattel Inc., the world’s largest toy maker, are among companies reporting earnings tomorrow.
JPMorgan, the second-largest U.S. bank, advanced 1.8 percent to $40.35 after the New York-based bank reported its highest half-year profit ever, at almost $11 billion. Second- quarter net income climbed 13 percent from a year earlier, to $5.43 billion, or $1.27 a share, six cents higher than the average estimate of analysts surveyed by Bloomberg.
MBIA Inc. jumped 9.2 percent to $10.02. Bank of America Corp., the biggest U.S. bank, has made a preliminary offer to the bond insurer aimed at settling a legal dispute tied to defective mortgages, according to two people briefed on the discussions.
ConocoPhillips jumped 1.6 percent to $75.61. The Houston, Texas-based oil company said it will separate its refining and marketing and exploration and production businesses.
Yum! Brands Inc. climbed 1.4 percent to $56.37 as the owner of the KFC and Pizza Hut restaurant chains boosted its earnings forecast for the year on increasing customer traffic at restaurants in China.
Hartford Financial Services Group Inc. declined 2.8 percent to $24.88. The seller of life insurance and property-casualty coverage said second-quarter net income plunged on catastrophe claims and the cost of asbestos liabilities.
Marriott International Inc. declined 6.6 percent to $34.69 after forecasting earnings that fell short of estimates. The largest publicly traded U.S. hotel chain said third-quarter earnings won’t be higher than 29 cents a share, missing the 30- cent average analyst projection.
Have a wonderful evening everyone.
Be magnificent!
“We ask ourselves
is it possible to break through this heavy conditioning of centuries immediately
and not enter into another conditioning – to be free,
so that the mid can be altogether new, sensitive,
alive, aware, intense, capable?”
-Krishnamurti, 1895-1986
As ever,
Carolann
“Never let a problem to be solved become
more important than the person to be
loved.”
-Barbara Johnson, 1947-2009