September 23, 2011 Newsletter
Dear Friends,
Tangents:
This is pretty amazing:
Scientists at the world’s largest physics lab, the European Organization for Nuclear Research, said Thursday they have clocked neutrinos traveling faster than light. That’s something that according to Einstein’s 1905 special theory of relativity just doesn’t happen. On Thursday night Antonio Ereditato, leader of the Opera experiment at the Cern Laboratory in Switzerland, said beams of neutrinos, or subatomic particles, consistently arrived about 60 nanoseconds sooner on a 730km journey from Cern outside Geneva to the Gran Sasso underground lab in central Italy than if they would have been travelling at the speed of light – about 300,000km per second. Although the neutrinos are only travelling 0.01 per cent faster than light, the result would shake the theoretical foundations of physics that have been built up since Albert Einstein published his theory of relativity. The speed of light is regarded as an absolute limit for fast travel, unless you invoke unproven factors such as extra dimensions, or “wormholes”, in space.
Another fundamental tenet of science is that extraordinary claims require extraordinary proof, so no one is going to accept the Opera results until they have been verified independently by another experiment.
Something to think about:
Scared and sacred are spelled with the same letters. Awful proceeds from the same root word as awesome. Terrify and terrific. Every negative experience holds the seed of transformation. – Alan Cohen
Photos of the day:
September 23, 2011
A farmer puts name tags of the cheesemakers on the loaves of cheese made during the summer in the mountain pastures in the Justistal above the lake of Thun, Switzerland. The cheese, about 30 tons, will be shared among the farmers’ families according to the number of cows owned. The event represents a traditional process called ‘chaesteilet,’ distribution of cheese. Peter Klaunzer/Keystone/AP.
Dancers in traditional attire take a break during rehearsals for the garba dance ahead of the Navratri festival in Ahmedabad, India. Navratri, held in honour of Hindu Goddess Durga, is celebrated over a period of nine days where thousands of youths dance the night away in traditional costumes. Navratri starts on Sept. 28. Amit Dave/Reuters.
Market Commentary:
Canada
By Matt Walcoff
Sept. 23 (Bloomberg) — Canadian stocks fell, drawing closer to a bear market at any time since rebounding from a five-year low in March 2009, as investors were forced to sell precious metals to cover losses in other assets.
Barrick Gold Corp., the world’s largest gold producer, declined 4.5 percent as the metal completed its biggest two-day retreat since 1983. Silver Wheaton Corp., Canada’s fourth- largest precious-metals company by market value, lost 8.9 percent as silver futures plunged the most in a day since at least 1979. Canadian Oil Sands Ltd., the biggest owner of the Syncrude project, decreased 2.9 percent as crude oil settled below $80 a barrel for the first time since Aug. 9.
The Standard & Poor’s/TSX Composite Index fell 99.64 points, or 0.9 percent, to 11,462.87, extending its weekly decline to 6.5 percent, the most since March 2009. The index has decreased 19.7 percent since closing at a post-2008 high on April 5. A decline of 20 percent is a common definition of a bear market.
“Gold is not a safe haven,” Robert “Hap” Sneddon, the president of Oakville, Ontario, money manager CastleMoore Inc. and the Canadian Society of Technical Analysts, said in a telephone interview. “When margin clerks call, people go to any position that’s been strong to get that liquidity, and that’s what’s happened with gold.”
The S&P/TSX sank 5.3 percent in the previous two sessions as the U.S. Federal Reserve said the economic recovery is at risk and economic data from Europe, North America and China were more indicative of a slowdown than most economists had forecast in Bloomberg surveys. The Canadian stock measure is set to drop for a seventh straight month, the longest streak since 1984.
Gold futures dropped 5.9 percent in New York today. Silver sank 18 percent after tumbling 9.6 percent yesterday. The S&P/TSX Gold Index, which according to Bloomberg data includes 48 percent of the world’s publicly traded gold companies by market value, completed its biggest two-day decline since April 2009.
Barrick Gold Corp., the world’s largest gold producer, decreased 4.5 percent to C$47.90. Goldcorp Inc., the world’s second-biggest company in the industry by market value, slipped 4.24 percent to C$46.95. Centerra Gold Inc., which mines in Kyrgyzstan and Mongolia, tumbled 9.8 percent to C$20.64. Silver Wheaton lost 8.9 percent to C$33.24 for its biggest two-day plunge since October 2008.
The S&P/TSX Energy Index fell to a two-year low as crude futures completed a weekly drop.
Canadian Oil Sands lost 2.9 percent to C$19.95, the lowest close since March 2009. Canadian Natural Resources Ltd., the country’s second-biggest energy company by market value, slipped 2.2 percent to C$30.23 for a sixth-straight drop.
Petrominerales Ltd., which produces oil and gas in Colombia, declined 8.9 percent to an 11-month low of C$23.66 after Jamie Somerville, an analyst at Toronto-Dominion Bank, cut his rating on the shares to “buy” from “action list buy.” The company said yesterday it had failed to find oil in three exploration wells. Base-metal and coal producers in the S&P/TSX retreated for a sixth day as copper completed its biggest two-day plunge since October 2008. Teck Resources Ltd., Canada’s largest company in the industry, decreased 3.2 percent to C$30.73.
Copper producer First Quantum Minerals Ltd. fell 7.3 percent to C$13.71 after Michael Sata, who has called for higher mining taxes, won Zambia’s presidential election. Shares of the Vancouver-based company plunged 35 this week, the most since October 2008.
SouthGobi Resources Ltd., which mines coal in Mongolia, dropped 11 percent to C$6.65, the lowest since January 2009. Shares of companies with operations in Mongolia have plunged this week on concern the Asian country will seek to revise ownership accords.
Financial and industrial companies rose after an internal working paper showed European governments are exploring speeding up the setup of a permanent rescue fund.
Royal Bank of Canada, the country’s largest lender by assets, gained 1.6 percent to C$46.09 after closing at the lowest since July 2009 yesterday. Bank of Nova Scotia, Canada’s No. 3 lender, increased 1.5 percent to C$50.73. Canadian Pacific Railway Ltd., the country’s second-biggest railroad, advanced 5.1 percent from a 22-month low to C$48.59.
Valeant Pharmaceuticals International Inc., Canada’s largest drugmaker, climbed 5.2 percent to C$39.36 after Annabel Samimy, an analyst at Stifel Financial Corp., said in a note to clients that the shares “have been unduly punished.” Valeant had declined 9.1 percent in the previous four days.
Westport Innovations Inc., which develops natural-gas engine technology, rallied 6.4 percent to C$31.15 after saying it replaced C$36 million ($35 million) in matured debt with lower-cost debt.
US
By Rita Nazareth
Sept. 23 (Bloomberg) — U.S. stocks advanced, trimming the biggest weekly decline since October 2008 for the Dow Jones Industrial Average, amid speculation that policy makers will act to prevent a global financial crisis from getting worse.
Home Depot Inc. and Intel Corp. added at least 2 percent, pacing gains in companies most-tied to economic growth. Bank of America Corp. rallied 4.1 percent, the most in the Dow, as the lender prepared more asset sales to bolster capital. Nike Inc., the world’s largest sporting-goods maker, jumped 5.3 percent after profit topped analysts’ estimates and it raised a sales forecast. Newmont Mining Corp. and Halliburton Co. retreated more than 3.2 percent as gold and oil prices slumped.
The Standard & Poor’s 500 Index rose 0.6 percent to 1,136.43 at 4 p.m. New York time, trimming its weekly drop to 6.5 percent. The Dow added 37.65 points, or 0.4 percent, to 10,771.48. The gauge lost 6.4 percent since Sept. 16.
“Policy is viewed as inept, inert and basically out of bullets,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, wrote in an e-mail. His firm oversees $550 billion. “If there was a good policy response, we could see the stock market rally 10 percent very quickly.”
A four-day rout this week erased $1.1 trillion in U.S. market value on speculation that central bankers would fail to prevent a financial crisis. The S&P 500 has slumped 17 percent since April 29 on concern that Europe’s debt crisis could derail the global economic recovery.
The European Central Bank may step up efforts to boost growth and ease financial-market tensions as early as next month, Governing Council members said. European governments are exploring speeding the setup of a permanent rescue fund, an internal working paper shows.
“There was a mention that if things continue to deteriorate in Europe that there would be a policy announcement, a pro-active response,” said Peter Kenny, a managing director in institutional sales at Knight Capital Group Inc. in Jersey City, New Jersey. “That could give the market some lift, but that doesn’t resolve the underlying problem.”
The S&P 500 started the session trading for 12.4 times earnings in the last 12 months, within 2 percent of a low of 12.2 reached Aug. 8, data compiled by Bloomberg show. The ratio would have to narrow another 18 percent to match its level on March 9, 2009, the start of the bull market in which the gauge rose as much as 102 percent, the data show.
The price-earnings ratio as of yesterday was 5.1 percent below the S&P 500’s average valuation of 13 at its lowest point in the last nine bear markets, data compiled by Bloomberg show.
To reach the lowest of those, 7 on June 21, 1982, the index would have to fall 43 percent to about 640, based on profit in the last 12 months of $91.41 a share.
“Stocks are starting to get pretty cheap,” Jack Ablin, chief investment officer for Chicago-based Harris Private Bank, which oversees $55 billion, said in a telephone interview.
“It’s reality versus expectations. I don’t know where reality is going to be, but if their expectations are pretty low, that’s a good sign for me.”
The Morgan Stanley Cyclical Index of companies most-tied to the economy rallied 1.1 percent. Home Depot, the largest U.S. home improvement retailer, gained 2 percent to $33.72. Intel rose 2.5 percent to $22.16.
The Dow Jones Transportation Average advanced for the first time in a week, stopping the worst five-day decline since Aug. 8, as airline shares rallied and traders were lured by the lowest valuations in about two years.
Delta Air Lines Inc. and United Continental Holdings Inc. surged at least 6.3 percent to lead gains as the average rallied 1.7 percent. Con-way Inc., a freight hauler, advanced 3.5 percent while railroad operator CSX Corp. climbed 3.4 percent.
The benchmark gauge for transportation companies had slipped 11 percent in five days through yesterday, driving its price-earnings ratio down to a 26-month low of 18.7. The period marked the worst slump since early August when S&P stripped the U.S. of its AAA rating and policy makers struggled to reach a compromise on raising the nation’s debt ceiling, sending the S&P 500 to its 2011 low.
Bank of America rose 4.1 percent to $6.31. The lender is in exclusive talks to sell its stake in NPC International Inc., the biggest U.S. Pizza Hut franchisee, for more than $800 million, said two people with knowledge of discussions. The lender also agreed to sell about $880 million in commercial mortgages at a discount of as much as 25 percent, said another person.
Nike rallied 5.3 percent to $88.64. Chief Executive Officer Mark Parker has been trying to overcome rising costs for raw materials and transporting goods by cutting operating expenses.
Nike’s gross margin, the percentage of sales left after the cost of goods sold, narrowed by 2.7 percentage points, less than the company’s projection for a 3 percentage point decline.
Gauges of energy and raw material producers had the two biggest declines in the S&P 500 within 10 industries, falling at least 0.3 percent. Newmont Mining, the largest U.S. gold producer, slumped 3.7 percent to $62.86. Halliburton decreased 3.2 percent to $31.67.
Stocks are having the worst quarter on record relative to U.S. Treasuries and gold, which may force investors to buy equities to rebalance their allocations, JPMorgan Chase & Co.’s Marko Kolanovic said.
U.S. and emerging-market equities have returned 43 percentage points less, the most during a quarter since at least 2002, according to data compiled by Kolanovic, whose analysis is based on a model portfolio composed of stocks, bonds and gold.
“This underperformance may trigger significant quarterly rebalance flows into equities and out of Treasuries at the end of next week,” Kolanovic, the New York-based global head of equity derivatives strategy at JPMorgan, wrote in a note to clients yesterday.
Have a wonderful weekend everyone.
Be magnificent!
As ever,
Carolann
Variety is the mother of enjoyment.
–Benjamin Disraeli, 1804-1881