September 16th, 2011 Newsletter
Dear Friends,
Tangents:
September 16th, 1620, Mayflower Day: Pilgrims deported from England.
September 18, 1851, New York Times first published.
I attended the Sauder School of Business Family Legacy Series dinner last night where the McLean family was celebrated. A very entrepreneurial family, their family business, The McLean Group, established in 1972, has grown from a successful real estate investment and development firm into a second-generation family business active in film and television production (Vancouver Film studios), communications (Signal Systems), construction (Harbour Landing Construction), real estate (Blanca Realty), aviation (Blackcomb Aviation), and philanthropy (the McLean McCuaig Foundation). The patriarch, David, was entertaining with some of his one liners (which he admitted he was famous for). In the 1980s when interest rates soared to 20%, almost devastating their business but they persevered. Dealing with banks, David’s advice was to never go to the bank with a problem (you’ll get nowhere), always go with a solution. With respect to building a business, entrepreneurship, he said, “Show me a man who has never lost money, and I’ll show you one who is about to.”
One of the characteristics of successful people, is determination. When you are tested, struck down, under attack, you find out what you are made of, and to be successful, you must have the resolve to soldier on…
Photos of the day
September 16, 2011
A rainbow appears over Citizens Bank Park between baseball games in a doubleheader between the Philadelphia Phillies and the Florida Marlins in Philadelphia. Matt Slocum/AP
A visitor touches a 220 kg (485 lbs.) gold bar, worth around $12.8 million at today’s price, on display at the Jinguashi Gold Ecological Park in Xinbei City, Taiwan. The Jinguashi Gold Ecological Park said the gold bar is Taiwan’s largest. Pichi Chuang/Reuters
Market Commentary:
Canada
By Matt Walcoff
Sept. 16 (Bloomberg) — Canadian stocks fell, erasing a weekly gain, as Research In Motion Ltd. plunged after reporting earnings that missed the average estimate in a Bloomberg survey.
RIM, the BlackBerry maker, tumbled 20 percent in Toronto Stock Exchange trading. Cenovus Energy Inc., Canada’s fifth- largest energy company, fell 4.4 percent as crude oil declined. Goldcorp Inc., the world’s second-largest gold producer by market value, climbed 0.9 percent as the metal rebounded from a September low.
The Standard & Poor’s/TSX Composite Index slipped 161.13 points, or 1.3 percent, to 12,263.71, ending the week down 1 percent.
RIM’s “net income was down over 50 percent from last year,” Jennifer Radman, a money manager at Caldwell Investment Management Ltd. in Toronto, said in a telephone interview. The firm oversees about C$1 billion ($1 billion). “That’s pretty scary to people.”
The S&P/TSX gained earlier this week as France and Germany expressed support for Greece’s place in the euro region and the European Central Bank coordinated with international policy makers to lend dollars to banks. Canada’s stock benchmark is set to decline for a seventh straight month, the longest streak since 1984, as energy and financial stocks have retreated on concern the global economic recovery is in jeopardy.
RIM reported second-quarter earnings of 80 cents a share, trailing the average analyst estimate by 9.4 percent, excluding certain items. The Waterloo, Ontario-based company sold fewer than half as many PlayBook tablets as analysts had forecast on average.
The company’s shares tumbled 20 percent to C$23.50 on the Toronto Stock Exchange. In composite trading, RIM fell 2.1 percent to C$23.50 after sinking 19 percent when the company disclosed its results yesterday. The shares have plunged 60 percent this year.
Crude futures dropped 1.6 percent in New York while European finance ministers met in Wroclaw, Poland, to address the continent’s debt crisis.
Canadian Natural Resources Ltd., the country’s second- largest energy company by market value, declined 2.9 percent to C$34.20. Cenovus lost 4.4 percent to C$32.61. Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, decreased 5 percent to C$14.30.
Canada’s six largest banks and all eight S&P/TSX insurance stocks fell. Toronto-Dominion Bank, the country’s second-largest lender by assets, dropped 2.1 percent to C$73.60. Royal Bank of Canada, its bigger domestic rival, declined 2.5 percent to C$46.30. Manulife Financial Corp., Canada’s largest insurer, lost 3.6 percent to C$12.45 after surging 6.3 percent yesterday.
The S&P/TSX Gold Index climbed for the first time in six days as the metal rose 1.9 percent. Goldcorp increased 0.9 percent to C$50.29. Barrick Gold Corp., its larger peer, gained 0.9 percent to C$52.52. OceanaGold Corp, which mines in New Zealand, soared 11 percent, the most since May 2010, to C$2.88.
Iamgold Corp. advanced 2.8 percent to C$21.59 after Sabrina Grandchamps, an analyst at HSBC Holdings Plc, raised her ratings on the shares to “overweight” from “neutral.” Higher gold prices will boost mining companies’ cash flow, HSBC said in a note to clients.
Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, slipped 3.2 percent to C$54.50. Investors should sell some of their shares of fertilizer producers now that farmers have bought most of what they need for the Northern Hemisphere autumn, Charles Neivert, an analyst at Dahlman Rose & Co., said in a note to clients.
Propane distributor Superior Plus Corp. climbed 5.9 percent from a record-low close to C$8.79. The shares had tumbled 12 percent since DBRS Ltd. cut its credit ratings on the company Sept. 12.
US
By Rita Nazareth
Sept. 16 (Bloomberg) — U.S. stocks advanced for a fifth straight day, the longest rally since July for the Standard & Poor’s 500 Index, amid optimism that European leaders will make further progress on controlling the region’s debt crisis.
Amazon.com Inc. jumped 5.5 percent to a record, while Procter & Gamble Co. gained 2.5 percent as a report showed that confidence among U.S. consumers rose. Textron Inc., Tyco International Ltd. and Rockwell Collins Inc. added more than 3.1 percent after a report that United Technologies Corp. is lining up financing for an acquisition. Bank of America Corp. and JPMorgan Chase & Co. slumped at least 1.1 percent.
The S&P 500 rose 0.6 percent to 1,216.01 at 4 p.m. New York time. The index gained 5.4 percent since Sept. 9, its third- biggest weekly rally since 2009. The Dow Jones Industrial Average added 75.91 points, or 0.7 percent, to 11,509.09. The rally trimmed the gauge’s drop this year to 0.6 percent.
“The stock market is extremely undervalued,” David Goerz, the San Francisco-based chief investment officer at Highmark Capital Management Inc., which oversees $17.2 billion, said in a telephone interview. “As things begin to improve, the market can rise back to a more normal valuation. The fact that we got some moderation in terms of thinking about the ECB and how it’s going to address the crisis helped reduce some of the risk. In addition, the most recent data points suggest that this pause in economic activity is in fact transitory.”
The S&P 500 lost 18 percent between April 29 and Aug. 8 amid concern that Europe’s crisis threatened the global economy. The decline left the index trading at 12.2 times earnings last month, the cheapest since 2009, according to data compiled by Bloomberg. Since then, the index rose 8.6 percent.
Equities rose yesterday as the European Central Bank and international policy makers coordinated to lend dollars to banks to tame the credit crisis. Earlier this week, French and German leaders confirmed they will support Greece’s continued participation in the shared euro currency. Ministers began meeting today in Wroclaw, Poland, to discuss ways of shoring up Europe’s most-indebted nations, with U.S. Treasury Secretary Timothy Geithner also in attendance.
European finance ministers ruled out efforts to prop up the faltering economy and gave no indication of providing aid for lenders to go along with yesterday’s liquidity lifeline from the ECB. Clashing with Geithner, finance chiefs from the euro region said the 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation.
“We’re hostage to the European crisis,” Dan Veru, chief investment officer at Fort Lee, New Jersey-based Palisade Capital Management LLC, said in a telephone interview. The firm manages $3.4 billion. “The fear is that there will be another systemic move that will put us into a recession. Sentiment has gotten too negative. There’s a case to be made that any pullback is going to be a buying opportunity.”
Household product and retail companies had the two biggest gains in the S&P 500 within 24 industries, rallying at least 1.7 percent. Amazon, the world’s largest online retailer, jumped 5.5 percent to $239.30, the highest level since it went public in 1997. Procter & Gamble, the world’s largest consumer-products company, climbed 2.5 percent, the most in the Dow, to $64.33.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 57.8 this month from 55.7 in August. The median estimate of economists surveyed by Bloomberg News called for a reading of 57. The group’s measure of consumer expectations six months from now dropped to the lowest level since May 1980.
United Technologies, the maker of Sikorsky helicopters and Carrier air conditioners, is seeking financing that may exceed $20 billion for a major U.S. acquisition, a person familiar with the matter said. The person wasn’t authorized to speak publicly because the details are confidential. John Moran, a spokesman for United Technologies, declined to comment.
Reuters reported the financing search earlier today, citing people it didn’t identify. The story said Goodrich Corp. and Rockwell Collins were attractive targets, according to people not directly involved in the matter, and said Textron and Tyco International were among companies mentioned in the past. Rockwell climbed 7.8 percent, the most in the S&P 500, to $56.21. Textron increased 6.8 percent to $18.63, while Tyco rose 3.1 percent to $43.70.
Banks had the biggest decline in the S&P 500 within 24 industries, falling 0.4 percent as a group. Bank of America, the biggest U.S. lender by assets, retreated 1.4 percent to $7.23. JPMorgan retreated 1.1 percent to $33.43.
Research In Motion Ltd. tumbled 19 percent to $23.93 after missing analyst estimates as sales of BlackBerry smartphone models slowed and the company shipped fewer PlayBook tablet computers than projected. The company is losing ground in that market to Apple Inc.’s iPhone and devices that use Google Inc.’s Android software. It has made little progress with its PlayBook in the tablet computer market, shipping just one device for every 46 iPads that Apple sold in the latest quarter.
“RIM is on a path to becoming a niche player,” said Ted Schadler, an analyst for Forrester Research Inc. “RIM has to essentially retrench its strategy. It has to focus on what about its products make them different or better than Apple or Google products.”
A gauge of energy shares in the S&P 500 dropped 0.1 percent, the only decline among 10 industries, as crude oil slumped the most in a week. Schlumberger Ltd., the world’s largest oilfield-services provider, fell 1.9 percent to $72.84.
Today was the expiration for U.S. futures and options contracts on indexes and individual stocks. So-called quadruple witching occurs once every three months.
Have a wonderful weekend everyone.
Be magnificent!
It is not others who must change, but you.
-Swami Prajnanpad, 1891-1974
As ever,
Carolann
Friendships, like marriage, depend on
avoiding the unforgiveable.
-John D. MacDonald, 1916-1986