January 6th, 2012 Newsletter
Dear Friends,
Tangents:
Poetry is a packsack of invisible keepsakes.
-Carl Sandburg
Birthdays:
Carl Sandburg, January 6th, 1878
Joan of Arc, January 6th, 1412
Kahlil Gibran, January 6, 1883
Your children are not your children.
They are the sons and daughters of Life’s longing for itself.
They came through you but not from you,
And though they are with you yet they belong not to you.
You may give them your love but not your thoughts,
For they have their own thoughts.
You may house their bodies but not their souls,
For their souls dwell in the house of tomorrow, which you
cannot visit, not even in your dreams.
You may strive to be like them, but seek not to make them
like you.
For life goes not backward nor tarries with yesterday.
You are the bows from which your children as living arrows
are sent forth.
-Kahlil Gibran, 1883-1931
One of the books I read over the holidays is Herta Müller’s The Land of Green Plums, for which she won the Nobel Prize in Literature in 2009. It is a haunting description of a group of young friends trying to find their way under the oppression of Ceaucescu’s Romania. Hungary and Romania share the common history of Transylvania so it is disturbing to see what is happening on the political front in Hungary right now. I was watching the protests in the streets on BBC last night. I read Müller’s Nobel Prize acceptance speech after I read her novel and it is an amazing speech wherein she uses a handkerchief as a metaphor for so many things in life. Her mother would always ask her in the morning when she left for school if she had her handkerchief, the metaphor for love.
The Land of Green Plums is a remarkable insight into life before reforms in Eastern Europe, why we have to maintain steadfastly the fight for individual freedoms and defy the tyrants who would wish them away. It is a story worth reading.
Market Commentary:
Canada
By Matt Walcoff
Jan. 6 (Bloomberg) — Canadian stocks fell for the first time in six days after U.S. payrolls rose less than a private report had signaled and German factory orders declined the most in almost three years.
Talisman Energy Inc., an energy producer with operations in North America, the North Sea and Indonesia, decreased 5.4 percent after an analyst at Sanford C. Bernstein & Co. cut his share-price estimate. Royal Bank of Canada, the country’s biggest lender by assets, declined 0.6 percent as Canada’s unemployment rate increased. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, lost
2.3 percent after extending production cuts.
The Standard & Poor’s/TSX Composite Index slipped 48.76 points, or 0.4 percent, to 12,188.64, reducing its weekly rally to 2 percent.
“People had expectations for jobs to surprise to the upside” in the U.S., Philip Petursson, managing director of the Portfolio Advisory Group at Manulife Asset Management, said in a telephone interview from Toronto. The unit of Manulife Financial Corp. oversees about $217 billion. “So there wasn’t any reason to jump up and down and be overly enthusiastic about this jobs number. Global growth is moderating.”
The index climbed this week as raw-materials and energy stocks gained on economic data indicating strengthening global manufacturing and ADP Employer Services’ U.S. payrolls estimate.
Resources companies make up 48 percent of Canadian stocks by market value, according to Bloomberg data. The U.S. accounted for 75 percent of Canadian exports in 2010, according to Statistics Canada.
U.S. nonfarm employment increased by 200,000 in December as private payrolls grew by 212,000, the Labor Department said today in Washington. ADP had estimated a gain of 325,000 jobs yesterday. Canada’s unemployment rate rose to 7.5 percent from
7.4 percent in November, Statistics Canada said today.
Orders from German factories slumped 4.8 percent in November, the Economy Ministry said today in Berlin. Economists had forecast a decline of 1.8 percent, according to the median estimate in a Bloomberg survey.
The S&P/TSX Energy Index retreated as oil futures fell for a second day on the New York Mercantile Exchange. Penn West Petroleum Ltd., a western Canadian oil and gas producer, slipped
2.1 percent to C$21. Oil-sands developer MEG Energy Corp.
declined 2.5 percent to C$40.64.
Talisman Energy dropped 5.4 percent to C$12.68. Bob Brackett, an analyst at Bernstein, reduced his 12-month share- price estimate to C$14 from C$15, saying in a note to clients that warm weather will weaken demand for natural gas.
Canadian bank and insurance stocks fell. Royal Bank dropped
0.6 percent to C$52.05. Canadian Imperial Bank of Commerce, the country’s fifth-largest lender by assets, lost 0.7 percent to C$74.65. Intact Financial Corp., Canada’s biggest property and casualty insurer, decreased 1.9 percent to C$57.39.
Potash Corp. lost 2.3 percent to C$42.94 after saying it will shut its Allan, Saskatchewan, mine for four weeks beginning Feb. 4. The company halted production at its Rocanville mine for six weeks on Dec. 25 and plans to suspend its Lanigan mine for eight weeks on Jan. 8.
Gold futures retreated for the first time in five days as the U.S. Dollar Index climbed to the highest since 2010.
Goldcorp Inc., the world’s second-largest producer of the metal by market value, lost 1.6 percent to C$45.20. Iamgold Corp., which mines in West Africa, South America and Quebec, dropped
2.6 percent to C$17.03.
Magna International Inc., Canada’s largest auto-parts maker, rallied 7.3 percent to C$37.28. In a note dated yesterday, Neil Forster, an analyst at Bank of Nova Scotia, raised his earnings estimates for the company and boosted his 12-month share-price forecast to $61 from $60. Forster cited General Motors Co. and Ford Motor Co.’s estimates for sales increases this year in a note to clients.
Rare Element Resources Ltd., which is developing a rare- earths project in Wyoming, soared 18 percent to C$5.83 to extend its weekly surge to 77 percent, the most in three years. The company said Jan. 4 that it had more resources on its property than previously disclosed.
US
By Nikolaj Gammeltoft and Ksenia Galouchko
Jan. 6 (Bloomberg) — U.S. stocks fell as better-than- forecast jobs growth and a drop in the unemployment rate failed to extend a weekly rally and lift the Standard & Poor’s 500 Index above its October high.
Goldman Sachs Group Inc. and Morgan Stanley fell more than
1.2 percent after analysts lowered the banks’ fourth-quarter earnings estimates. Bank of America Corp. lost 2.1 percent after surging 8.6 percent yesterday. Alcoa Inc., due to start the earnings season on Jan. 9, slid 2.1 percent after saying it will close 12 percent of its global smelting capacity.
The S&P 500 fell 0.3 percent to 1,277.81 at 4 p.m. New York time. The index snapped a three-day advance, trimming its gain for the week to 1.6 percent. The Dow Jones Industrial Average dropped 55.78 points, or 0.5 percent, to 12,359.92 today.
“It’s definitely a solid report, but not a blowout surprise,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about
$44 billion, said in a phone interview. “The drop in the unemployment rate is good news, but it may reflect sluggishness in the labor force growth and it suggests that from a policy perspective we still have a lot of work to do.”
The S&P 500 has jumped 16 percent from its 2011 low as better-than-expected economic data boosted optimism that the world’s largest economy can weather Europe’s sovereign-debt crisis. The rally has brought the index toward the top of a trading range it has be stuck in since August.
U.S. employers added 200,000 workers to payrolls in December, Labor Department figures showed in Washington, more than the 155,000 gain projected in a Bloomberg News survey. The unemployment rate unexpectedly fell to 8.5 percent, the lowest since February 2009. The growth in payrolls did not beat estimates by as wide a margin as data from ADP Employer Services yesterday that helped trigger gains in equities.
Equities also dropped earlier as German factory orders fell
4.8 percent, the biggest decline in almost three years, fueling concern that Europe was heading into a recession. Most U.S. stocks rose yesterday as banks rallied and a private report showed payrolls climbed, offsetting reduced profit forecasts at companies including Target Corp. and J.C.Penney Co.
Alcoa fell 2.1 percent, the most in the Dow, to $9.16. The biggest U.S. aluminum producer said yesterday it would close 12 percent of its smelting capacity amid falling prices. Alcoa is scheduled to mark the unofficial start of the fourth-quarter earnings season next week. Profit at S&P 500 companies rose 6 percent during the September-December period, according to analyst estimates compiled by Bloomberg, which would mark the slowest growth since the third quarter of 2009.
Financial shares dropped 0.6 percent as a group in the S&P 500. Bank of America lost 2.1 percent, the second-most in the Dow, to $6.18. It surged 8.6 percent yesterday amid speculation the U.S. may introduce a new mortgage refinancing program. The shares retreated today after an Obama administration official, who asked for anonymity, denied that the White House is considering a trillion-dollar plan to refinance home loans.
Goldman Sachs slipped 1.2 percent to $93.42, while Morgan Stanley lost 2.3 percent to $15.90. The major U.S. banks most reliant on trading had their earnings estimates reduced by analysts at Sanford C. Bernstein & Co. and Ticonderoga Securities LLC as a weak fourth quarter dimmed prospects for a capital-markets rebound in the first half of 2012. Meredith Whitney Advisory Group LLC also cut fourth-quarter estimates on the banks.
Family Dollar Stores Inc. fell 7.5 percent to $53.63 for the biggest retreat in the S&P 500. The discount retailer reported fiscal first-quarter revenue of $2.15 billion, missing the average analyst estimate of $2.17 billion. Comparable store sales increased 4.1 percent, compared with the average analyst estimate of 4.9 percent.
Stocks of companies that rely on consumer discretionary spending had the biggest gain among S&P 500 industries, rising 0.2 percent as a group.
J.C. Penney advanced 3.5 percent to $34.96 after being raised to “outperform” from “neutral” at Macquarie Group Ltd. The third-largest department-store chain lost 2.7 percent yesterday after cutting its fourth-quarter profit forecast, citing declining sales and deeper discounts than anticipated during the holiday season.
Best Buy Co. gained 3.3 percent to $24.22. The world’s largest consumer-electronics retailer posted a same-store sales drop in December that was in line with analysts’ estimates and repeated its forecast for profit this year.
With the S&P 500 this week approaching its highest closing since Oct. 28 and Aug. 1, chart levels fixated investors today.
The S&P 500 ended yesterday at 1,281.06, within 0.4 percent of its highest level since Aug. 1. Its relative strength index, a measure of how fast prices have risen in the last two weeks, was 61.2. Readings above 70 are considered by some traders as evidence a rally has been too rapid.
“The feeling in the market is that we need more catalysts to break above the resistance levels we are bumping up against right now,” Dan McMahon, director of equity trading at Raymond James Financial Inc. in New York, said in a telephone interview.“We’re in the high end of the trading range that we’ve been stuck in since August.”
Have a wonderful weekend everyone.
Be magnificent!
The energy in the world flows from God at the centre, and back to God.
The sages see life as a wheel, with each individual going round and round through birth and death.
Individuals remain on this wheel so long as they believe themselves to be separate;
but once they realize their unity with God, then they break free.
-Svetasvatara Upanishad
As ever,
Carolann
Sometimes, when one person
is missing, the whole world
seems depopulated.
-Alphonse de Lamartine, 1790-1869
Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor
Queensbury Securities Inc.,
St. Andrew’s Square
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7
Tel: 778.430.5808
(C): 250.881.0801
Toll Free: 1.877.430.5895
Fax: 778.430.5838