August 22, 2011 Newsletter
Dear Friends,
Tangents:
100 YEARS AGO DA VINCI DISAPPEARANCE
A painter visiting the Louvre on August 22, 1911, discovers only hooks where the Mona Lisa, Leonardo da Vinci’s 1503-6 portrait of Lisa Gherardini, should be. The museum shuts down for days as police comb for evidence. Suspicion falls briefly on writer Guillaume Apollinaire and Pablo Picasso, and rumors are rife – the masterpiece has been taken to America, Russia, Switzerland. More than two years pass before former Louvre employee Vincenzo Perugia is nabbed trying to sell the painting to a dealer in Florence.
“The picture smiled down at me,” he says of the theft, and claims he stole it to restore the work to Italy. He is sentence to time served. – The Smithsonian.
If you haven’t had the chance to see Woody Allen’s Midnight in Paris yet, don’t delay much longer. You will be transported – you’ll love it. It is the most marvelous film – the vistas of Paris are amazing – so beautiful.
Photos of the day
August 22, 2011
People pay tribute to Jack Layton in front of the Centennial Flame on Parliament Hill in Ottawa, Canada. Layton, the charismatic leader of the New Democratic Party, died on Monday just months after guiding his party to its strongest ever performance in the May federal election. Chris Wattie/Reuters.
The statue of Dr. Martin Luther King, Jr. is seen unveiled from scaffolding during the soft opening of the Martin Luther King, Jr. Memorial in Washington, DC. Jacquelyn Martin/AP.
Market Commentary:
Canada
By Matt Walcoff
Aug. 22 (Bloomberg) — Canadian stocks rose for the first time in three days as gold and silver gained on concern the U.S. economic recovery is slowing.
Goldcorp Inc., the world’s second-biggest gold producer by market value, climbed 4.8 percent as futures rallied for a sixth day in New York. BCE Inc., Canada’s biggest phone company, advanced 1.6 percent as telecommunications companies jumped.
Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, rose 1.1 percent as wheat and corn jumped to two-month highs.
The Standard & Poor’s/TSX Composite Index gained 60.89 points, or 0.5 percent, to 12,068.36.
“There’s a lot of worry going on in the world, and one of the true safe havens is gold,” Robert Cohen, a resources-fund manager at Bank of Nova Scotia’s Goodman & Co. Investment Counsel unit, said in a telephone interview. Cohen oversees C$1.8 million ($1.8 million). “There is a very high level of fear in stocks.”
The index has dropped less this month than all other major developed-market stock benchmarks except New Zealand’s as gold futures have surged to a record. S&P/TSX gold stocks have soared 15 percent this month while energy companies have plunged 13 percent and financial stocks fell 7.6 percent.
Economists at Goldman Sachs Group Inc. cut their forecast of 2011 U.S. gross domestic product growth to 1.5 percent from 1.7 percent in a note published Aug. 19. Credit Suisse Group AG and JPMorgan Chase & Co. also lowered their growth estimates for the U.S. last week.
The S&P/TSX Gold Index jumped to the highest level since December as gold and silver futures each rose 2.1 percent.
Goldcorp gained 4.8 percent to a record C$53.65. Barrick Gold Corp., the world’s largest producer, advanced 2.6 percent to C$51.64. Silver Wheaton Corp., Canada’s fourth-biggest precious-metals company by market value, increased 4.8 percent to C$39.88. Silver Standard Resources Inc., which mines in Latin America, soared 9.1 percent, the most since December 2009, to C$27.47.
An index of S&P/TSX telecommunications stocks climbed 1.3 percent to extend its 2011 surge to 10 percent. The shares have gained as investors seek higher-yielding assets with bond yields near record lows. The index has a dividend yield of 4.6 percent, compared with 2.8 percent for the S&P/TSX Composite Index.
BCE rose 1.6 percent to C$38.84. Rogers Communications Inc., Canada’s largest wireless carrier, advanced 1.5 percent to C$37.01. Telus Corp., the third-biggest phone company, increased 1 percent to C$52.12.
Potash Corp. climbed 1.1 percent to C$50.72 as corn and wheat futures gained on speculation dry weather in the U.S. will cut yields.
Also today, Ben Isaacson, an analyst at Scotiabank, increased his rating on Potash Corp. shares to “sector outperform” from “sector perform.” In a note to clients, Isaacson cited the shares’ underperformance relative to Potash Corp.’s peers. The company’s U.S.-traded shares sank 18 percent from July 25 to Aug. 19, compared with 17 percent for Agrium Inc.’s U.S. shares and 14 percent for Mosaic Co.
The S&P/TSX Banks Index dropped after sinking 3.4 percent, the most in two years, on Aug. 19. Royal Bank declined 1 percent to C$48.48. Scotiabank, Canada’s third-largest lender by assets, slipped 2 percent to a one-year low of C$49.23. Canadian Imperial Bank of Commerce, the country’s No. 5 lender, lost 1.2 percent to C$68.60.
First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, sank 5.4 percent to C$20.06 as copper decreased 0.7 percent. Teck Resources Ltd., Canada’s largest company in the industry, slipped 1 percent to an 11- month low of C$37.57. Ivanhoe Mines Ltd., which is building a copper and gold mine in Mongolia with Rio Tinto Group, retreated 4.8 percent to C$17.12 to extend its August plunge to 32 percent.
US
By Rita Nazareth
Aug. 22 (Bloomberg) — Most U.S. stocks fell after Goldman Sachs Group Inc.’s decline in the last 15 minutes of trading wiped out the day’s second Standard & Poor’s 500 Index rally, overshadowing gains by technology shares.
Goldman Sachs slumped 4.7 percent to the lowest level since March 2009 after Reuters said Chief Executive Officer Lloyd Blankfein hired a defense attorney. The company confirmed the report after the close of trading. Bank of America Corp. retreated 7.9 percent, the most in the S&P 500, amid concern about the lender’s capital raising plans. Computer stocks in the S&P 500 added 0.7 percent, including Hewlett-Packard Co.’s 3.6 percent advance following last week’s 27 percent plunge.
About 10 stocks fell for every nine that rose on U.S. exchanges at 4 p.m. in New York. The S&P 500 added less than 0.1 percent to 1,123.82 today. The benchmark gauge rallied as much as 2 percent, and posted an advance of 1.1 percent about three hours before markets closed. The Dow Jones Industrial Average rose 37 points, or 0.3 percent, to 10,854.65.
“We’ve been watching mood swings and lack of good news to offset the concerns out there,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in telephone interview. “Investors are skittish about the financials. There’s still not a lot of confidence in the sector for a couple of years now. When you hear anything that brings back memories of the financial crisis, you’ll see the market reacting like it did today. In addition, the fear of a recession comes and goes.”
Financial institutions in the S&P 500 have tumbled 25 percent in 2011, the most among 10 groups, amid speculation the government debt crisis in Europe will spur banking losses. The industry has the second-biggest weighting in the benchmark measure of U.S. shares at 14 percent. Goldman Sachs and Bank of America have slumped 37 percent and 52 percent, respectively, the most since 2008, so far this year.
Stocks rallied earlier amid optimism the Federal Reserve will announce a plan to stimulate the economy. Chairman Ben S. Bernanke is scheduled to speak on Aug. 26 at a meeting of central bankers in Jackson Hole, Wyoming.
“People are of the belief that there’s an increasing likelihood of a new quantitative easing program,” Mark Luschini, the chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a phone interview. “We hold no expectation that we’re going to see that. The hurdle remains pretty high. I’m concerned that if we get some rally on that expectation and it doesn’t come through, that the equity market would be set for a decline.”
The S&P 500 rose 28 percent between Aug. 26, 2010, and Feb. 18 after Bernanke foreshadowed a $600 billion bond-purchase program a year ago in Jackson Hole. Record-low yields on Treasuries show traders expect Bernanke to signal that the central bank will begin a third round of asset purchases to boost the economy, known as quantitative easing, a scenario the world’s biggest bond dealers said is unlikely.
Barclays Plc said 10-year yields indicate traders have priced in $500 billion to $600 billion of Treasury purchases by the Fed. Citigroup said current rates can only be justified by more central bank bond buying or assuming the economy will shrink by 2 percent.
“Without additional Fed stimulus, it is unlikely our target for the S&P 500 of 1,400 is reached this year,” Mary Ann Bartels, Bank of America’s technical research analyst, wrote in a note to clients. “We suggest using rallies to raise cash and/or become more defensive until our trip wires to a bottom generates a buy signal.”
The S&P 500 trimmed its rally this morning after rising within 5 points of 1,150, a level where rebounds stalled in the prior two days. Today’s slide tracked losses in Germany’s DAX Index, which fell 2.1 percent from the open of U.S. exchanges to close down 0.1 percent, even as the Stoxx Europe 600 Index rallied 0.7 percent. The benchmark index for American equity erased an increase of 2 percent over the same period.
Financial shares in the S&P 500 lost 1.3 percent, the most among 10 groups. The KBW Bank Index fell 1.1 percent to the lowest level since July 2009.
Goldman Sachs tumbled 4.7 percent to $106.51. Blankfein and other people hired attorneys in relation to a U.S. probe of matters raised by the Senate’s Permanent Subcommittee on Investigations, the company said in an e-mailed statement.
Bank of America lost 7.9 percent to $6.42 after China Construction Bank Corp. said the U.S. lender will keep at least half its stake. Bank of America agreed to retain at least half its 10 percent holding, China Construction President Zhang Jianguo told reporters. Analysts including Charles Peabody of Portales Partners LLC said the firm would sell all its shares.
Boeing Co. gained 1.5 percent to $58.38. Delta Air Lines Inc. plans to order 100 Boeing 737 single-aisle jets, a rebuff to Airbus SAS, as it refreshes its fleet with planes valued at $8.58 billion, two people familiar with the matter said.
Lowe’s Cos. rose 1.1 percent to $19.53. The second-largest U.S. home-improvement retailer said it plans to buy back $5 billion in stock during the next two to three years.
Hewlett-Packard rallied 3.6 percent, the most in the Dow, to $24.45. The shares plunged the most since the October 1987 market crash last week after a strategy shift undermined confidence in its managers.
At a time when U.S. equities have lost $2.9 trillion in market value, stock analysts are twice as bullish as they’ve been over the past 56 years when compared with economists. Wall Street firms pushed up estimates for Standard & Poor’s 500 Index earnings for a 10th straight quarter, forecasting a 17 percent gain in 2011, data compiled by Bloomberg show. That’s 9.9 times more than economists say gross domestic product will grow. The average ratio since 1954 is 5.4 times, the data show.
The split underscores the skittishness among investors, whose confidence has been shaken by Europe’s debt crisis and the slowing global economy. The S&P 500 is experiencing the biggest swings on record and has lost 18 percent since April 29, dragging its valuation down to 12.3 times earnings, almost the lowest since the bull market began in March 2009. Benchmark indexes in Germany, Brazil and Hong Kong have fallen more than 20 percent from their highs, the common definition of a bear market.
“Everyone’s struggling right now with two questions,”
Keith Wirtz, the Cincinnati-based chief investment officer at Fifth Third Asset Management, which oversees $16.7 billion, said in a telephone interview on Aug. 19. “Is there a recession on the horizon, and where will earnings go? There’s a void of information. People are discounting the chances of a recession and what that could mean for earnings.”
Have a wonderful evening everyone.
Be magnificent!
The golden rule of conduct therefore, is mutual toleration,
seeing that we will never think alike and we shall see the Truth
in fragments and from different angles of vision,
Conscience is not the same thing for all.
While, therefore, it is a good guide for individual conduct,
imposition of that conduct upon all will be an insufferable interference
with everybody’s freedom of conscience.
-Mahatma Gandhi, 1869-1948