August 17th, 2011 Newsletter

Dear Friends,

Tangents: 

Everybody should do at least two things each day that he hates to do, just for practice. – William James, 1842-1910

Smiling

It’s interesting that we smile when we’re happy but also when we’re anxious and afraid.  We revel in our smiles when laughter descends and pull them out of the psychological drawer to fend off anxiety or if there’s no one around to give us a much-needed hug.  This makes the smile a Darwinian arrow of optimism through the DNA of humanity.  Smiling is all there is left when your breath leaks away. –Don Kieran, The Book of Idle Pleasures.

Piecing together a masterpiece

 On the surface, it’s a simple remastering of a masterpiece: The Chinese landscape scroll “Dwelling in the Fuchan Mountains,” normally kept in two pieces, has been brought together for the first time in 360 years at Taiwan’s National Palace Museum.

  Some critics call the nearly 23-foot long painting one of the Top 10 works of Chinese art, and this month, museumgoers can finally see why.  “It’s a model of the landscape paintings done since the Song Dynasty using simple, pure  strokes to express an artist’s idea or feeling,” says curator He Chuan-hsin. 

  More than 90,000 people have already braved lines to see the scroll made in 1350 by Huang Gongwang.  Back then, an adoring collector ordered that the scroll be burned at his death.  The fire claimed 7% before the rest was saved – in two pieces.  A nearly 21-foot long segment landed in the Qing Dynasty’s imperial collection and was taken to Taiwan after the Chinese civil war in 1949.  The smaller piece stayed in China.  “I should think it wouldn’t be easy at all to keep both parts separate for so long,” said museum visitor and high school teacher Yao Lifang, from China.

  Mr. Yao’s government sees the scroll as a metaphor for China and Taiwan after more than 60 years of political separation,  Beijing claims the self-ruled island as its own.  The museum near Shanghai, China, that houses the smaller piece suggested uniting the pieces in 2008 following the election of a conciliatory president in Taiwan.  The small piece returns to China in September, however, and Taiwanese are not keen to reconcile.  –Ralph Jennings, correspondent.

Photos of the day 

August 17, 2011

While it’s summer in some parts of the world…

Children play in a fountain at sunset near the beach in Tel Aviv, Israel. Baz Ratner/Reuters.

Snow-covered fields are seen in Argentina’s Patagonian resort town of San Martin de Los Andes.Patricio Rodriguez/Reuters.

Market Commentary:

Canada

By Matt Walcoff

Aug. 17 (Bloomberg) — Canadian stocks rose, led by financial and precious-metals stocks, as companies including Target Corp. and AP Moeller-Maersk A/S reported earnings that beat their average analyst estimates and gold gained.

Bank of Nova Scotia, Canada’s third-largest lender by assets, advanced 1.3 percent as bank stocks erased their losses for the month. Kinross Gold Corp., the country’s third-biggest gold producer, increased 2.4 percent as the metal climbed for a third day. Valeant Pharmaceuticals International Inc., Canada’s largest drugmaker, surged 6.8 percent.

The Standard & Poor’s/TSX Composite Index gained 87.95 points, or 0.7 percent, to 12,618.66 at 3:11 p.m. in Toronto. “The Canadian market has been pretty resilient to a lot of the fears and concerns out there, especially the problems in Europe and debt-ceiling issue in the U.S.,” Gerry Brockelsby, a money manager at Marquest Asset Management Inc. in Toronto, said in a telephone interview. The firm oversees C$250 million ($255 million). “It’s not a direct hit on our banking system.”

The S&P/TSX declined 3.2 percent this month through yesterday, the least among major developed-market stock benchmarks. Besides the rebound in bank shares, gold stocks surged on concern over U.S. and European sovereign debt.

The eight S&P/TSX banks and three largest insurers advanced. Scotiabank rallied 1.3 percent to C$54.03. Bank of Montreal, the country’s fourth-largest lender by assets, increased 1 percent to C$60.14. Manulife Financial Corp., North America’s fourth-biggest insurer, rose 1.5 percent to C$13.91.                         

  Precious-metals producers climbed as the U.S. Dollar Index slipped to an August low and the U.S. reported higher wholesale inflation for July than most economists had forecast.

Kinross gained 2.4 percent to C$16.36. Barrick Gold Corp., the world’s largest gold producer, advanced 0.8 percent to C$49.65. Lake Shore Gold Corp., which mines in Ontario, soared 5.1 percent to C$2.28 to extend its two-day surge to 17 percent, the most since 2009. The company reported a new discovery yesterday.

Valeant rallied 6.8 percent to C$41.85. The shares have rebounded 10 percent since Aug. 5, the day after the company reported second-quarter net income that trailed analysts’ forecasts, as at least seven insiders bought shares.

Progressive Waste Solutions Ltd., the waste-management company formerly known as IESI-BFC Ltd., surged 6.6 percent, the most since April 2010, to C$20.83 after saying it will buy back shares.

Neo Material Technologies Inc., which makes rare-earths and zirconium products, increased 6.4 percent to C$9.53. The shares have climbed 33 percent since Aug. 8 after closing at the lowest level relative to earnings since March 2009.

US

By Jeff Sutherland and Rita Nazareth

Aug. 17 (Bloomberg) — Most U.S. stocks fell, wiping out an earlier rally, as Dell Inc. forecast weaker sales and two Federal Reserve officials warned against applying too much stimulus to the economy. Treasuries, commodities and the Swiss franc climbed.

About 21 stocks retreated for every 20 that advanced on U.S. exchanges. The Standard & Poor’s 500 Index rose 0.1 percent to 1,193.88 at 4 p.m. in New York, after jumping as much as 1.3 percent and falling as much as 0.7 percent. The yield on 30-year Treasury bonds dropped 11 basis points after stocks erased their rally. The S&P GSCI index of 24 commodities advanced 1 percent as oil jumped 1.1 percent. The franc strengthened against most of its 16 major peers.

Technology shares fell the most among S&P 500 groups, losing 0.9 percent as Dell said slower spending on PCs and consumer technology crimped its sales forecast. Charles Plosser and Richard Fisher, two Fed officials who dissented from the central bank’s latest policy statement, spoke out against unnecessary stimulus measures. The Swiss National Bank said it will expand liquidity, refraining from tougher moves such as adopting a currency target.

“People started to reevaluate the odds of a QE3,” James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $340 billion, said in a telephone interview. “There are a lot of people that have been saying we’re going to get a QE3,” he said, using a nickname for a third round of quantitative easing. “The fact that Fisher came out today with a very explicit comment brought some selling in. It reduces the odds of a QE3. Dell’s figures are important because they say something about the consumer.”                      

 The S&P 500 dropped 1 percent yesterday after rallying 7.5 percent over the three prior days amid a decline in jobless claims, an increase in retail sales and better-than-estimated profits. The S&P 500 is down 13 percent from April 29 on concern about Europe’s debt crisis and an economic slowdown.

Dell, the second-largest personal-computer maker, sank 10 percent. Lackluster demand from consumers and market-share gains by Apple Inc. weighed on its results, offsetting stronger corporate orders for server computers. Renewed concerns that the economy will fall back into recession also may be curbing spending.

Rival Hewlett-Packard Co. dropped 3.7 percent. The biggest personal-computer maker was cut to “market perform” from “outperform” at BMO Capital Markets. Apple fell less than 0.1 percent while Microsoft Corp. lost 0.4 percent. Target gained 2.4 percent. The second-largest U.S. discount retailer said profit jumped 3.7 percent in the second quarter on higher sales.

Per-share earnings increased 17 percent among the S&P 500 companies that have released quarterly results since July 11, according to data compiled by Bloomberg. About three-quarters of the companies have topped the average analyst profit forecast, the data show.

Stocks reversed earlier gains on investor speculation that the Fed may not consider another economic stimulus program to avert a recession. The Fed finished its second round of so- called quantitative easing at the end of June. The program helped propel a rally of as much as 28 percent in the S&P 500 after Fed Chairman Ben S. Bernanke foreshadowed the plan on Aug. 27, 2010.

Bernanke’s pledge last week to keep interest rates near zero percent until mid-2013 was “inappropriate policy at an inappropriate time,” Plosser, president of the Fed Bank of Philadelphia, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. Dallas President Fisher said the central bank shouldn’t enact policy to protect stock investors. Both officials dissented from the Fed’s Aug. 9 statement.                        

Stocks rose earlier after producer prices advanced 0.2 percent in July, following a 0.4 percent drop in June, the Labor Department said today. Economists in a Bloomberg survey forecast a 0.1 increase. The report showed the cost of crude goods dropped in July for a third consecutive month, led by declining petroleum and food prices.

Slowing sales and the drop in raw-materials mean companies will be less likely to raise prices, which may give Fed policy makers more room to act to spur growth after the world’s largest economy almost stalled. Bernanke may announce policy intentions at a conference in Jackson Hole, Wyoming, on Aug. 26.

The extra yield Treasury investors get to hold 30-year bonds instead of two-year notes shrank to the narrowest in a week on speculation the U.S. economic recovery is stalling.

The difference between yields on two-year notes and 30-year bonds fell to 3.37 percentage points at 2:45 p.m. in New York, from 3.48 yesterday. The spread was the narrowest since Aug. 10, when it was the smallest since October 2010. 

 The yield on 10-year Treasury notes slipped six basis points to 2.16 percent.

Crude rose to the highest level in almost two weeks as the dollar fell against the euro, increasing the appeal of dollar- denominated commodities as an investment. Futures climbed as much as 2.7 percent before trimming their advance to settle 1.1 percent higher, following an unexpected increase in U.S. inventories.

Gold advanced to a record for the second day, gaining 0.5 percent to settle at $1,793.80. Copper increased. Wheat futures climbed 0.8 percent to a two-month high on speculation that dry weather in the U.S. Great Plains will cut acreage of winter crops set to be planted next month.

In Europe, Carlsberg A/S sank 17 percent as the world’s fourth-largest brewer cut its profit forecast because of faltering sales in Russia. Deutsche Boerse AG lost 5.8 percent and London Stock Exchange Group Plc fell 2.8 percent after French President Nicolas Sarkozy said France and Germany will propose a financial-transaction tax.

German Chancellor Angela Merkel and Sarkozy rejected an expansion of a 440 billion-euro ($633 billion) rescue fund yesterday and rebuffed calls for joint euro borrowing.

The MSCI Emerging Markets Index rose 0.5 percent. Russia’s Micex Index added 1.9 percent, and India’s Sensex Index climbed 0.7 percent. Dell suppliers in Taiwan slid, helping to push the Taiex Index down 0.7 percent. Quanta Computer Inc. sank 4.3 percent and Compal Electronics Inc. dropped 4 percent.

The franc rose against most of its major peers. The currency advanced 0.9 percent against the dollar and 0.6 percent versus the euro. The Swiss National Bank said it will expand banks’ sight deposits to 200 billion francs ($253 billion) from 120 billion francs. It will also continue to repurchase outstanding SNB bills and use foreign-exchange swap transactions.

The yield on two-year Greek notes rose 55 basis points to 34.98 percent. Portuguese two-year securities yielded 11.85 percent, up eight basis points from yesterday. The cost of insuring sovereign debt increased, with the Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments climbing one basis point to 278 basis points.

Have a wonderful evening everyone.

Be magnificent!

To love is to understand and feel that the other person is different.

-Swami Prajnanpad, 1891-1974

As ever,

Carolann

Stop worrying  

nobody gets out of this world alive.

          -Clive James, 1939-