January 11th, 2012 Newsletter
Dear Friends,
Tangents:
Entrance
Whoever you are: step out in to the evening
out of your living room, where everything is so known;
your house stands as the last thing before great space:
Whoever you are.
With your eyes, which in their fatigue can just barely
free themselves from the worn-out thresholds,
very slowly, lift a single black tree
and place it against the sky, slender and alone.
With this you have made the world. And it is large
and like a word that is still ripening in silence.
And , just as your will grasps their meaning,
they in turn will let go, delicately, of your eyes…
-Rainer Maria Rilke
Market Commentary:
Canada
By Matt Walcoff
Jan. 11 (Bloomberg) — Canadian stocks fell, led by energy producers, after Germany said its economy probably contracted and natural gas futures sank the most since May on forecasts for milder-than-normal weather in the U.S.
Canadian Natural Resources Ltd., the country’s second- largest energy company by market value, lost 3 percent as natural gas declined after settling at the lowest price in 28 months yesterday. Barrick Gold Corp., the world’s largest gold producer, gained 1.1 percent as the metal advanced. First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, decreased 3 percent after an analyst at Jefferies Group Inc. cut his price estimate on the shares.
The Standard & Poor’s/TSX Composite Index slipped 9.72 points, or 0.1 percent, to 12,260.94 after closing at the highest level since Nov. 11 yesterday.
“There’s so many question marks with respect to how they’re going to resolve their debt crisis” in Europe, Danielle Park, a money manager at Venable Park Investment Counsel Inc. in Barrie, Ontario, said in a telephone interview. The firm oversees at least C$1 million ($980,000) each for more than 250 families. “The U.S. dollar is continuing its breakout. The weak-euro story continues to be supportive of the dollar, and as the dollar strengthens, commodities weaken.”
The S&P/TSX had climbed 11 of the previous 13 days, led by raw-materials and energy producers, as data on U.S. employment, manufacturing and home sales signaled economic growth there. The U.S. accounted for 75 percent of Canadian exports in 2010, according to Statistics Canada.
German gross domestic product declined about 0.25 percent in the fourth quarter from the previous three months, the country’s statistics office said in an unofficial estimate today. The European Union’s statistics bureau cut its estimate of third-quarter euro-area economic growth to 0.1 percent from
0.2 percent today.
Gas futures fell as the U.S. National Weather Service forecast above-normal temperatures for much of the country for Jan. 18 to Jan. 24. Crude oil dropped 1.3 percent.
Canadian Natural lost 3 percent to C$38.31. Enbridge Inc., the country’s largest pipeline company, decreased 1.7 percent to C$36.80. Trilogy Energy Corp., a western Canadian natural gas and oil producer, tumbled 9.3 percent to C$32.90 after Grant Hofer, an analyst at Barclays Plc, reduced his earnings estimates for the company.
The S&P/TSX Materials Index climbed as gold futures rose after Hong Kong reported record exports of the metal to Mainland China for November.
Barrick gained 1.1 percent to C$49.74. Pan American Silver Corp., which mines in Latin America, surged 7.4 percent to C$25.02. Teck Resources Ltd., Canada’s largest base-metals and coal producer, increased 1.8 percent to C$39.35 as copper advanced to a four-week high.
First Quantum retreated 3 percent to C$22.40 after Christopher LaFemina, an analyst at Jefferies, cut his 12-month price estimate on its London-traded shares to 1,700 pence
($26.06) from 1,800 pence. Higher costs will reduce mining companies’ profits in 2012 and 2013, LaFemina wrote in a note to clients.
St. Elias Mines Ltd., which explores for gold in Peru and British Columbia, plunged 41 percent to 84 Canadian cents, the lowest since March 2010, after reporting drilling results from its Tesoro project in Peru.
Auto-parts companies Magna International Inc. and Linamar Corp. climbed as General Motors Co. rallied 5.3 percent in New York. The biggest U.S. carmaker may shift more production to Europe to cut costs with its German union, Reuters reported, citing unnamed people familiar with the matter. Alexander E.
Potter, an analyst at Piper Jaffray Cos., raised his rating on GM to “overweight” from “neutral.”
Magna, which has GM as its biggest customer and operates factories in Europe, gained 3.1 percent to C$39.52. Linamar, which also has plants in Europe as well as North America, jumped
7.4 percent, the most since September 2010, to C$15.45.
US
By Rita Nazareth
Jan. 11 (Bloomberg) — Most U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a third day, as a rally in banks helped the market recover from an early slump spurred by growing signs Europe may slip into a recession.
Citigroup Inc. climbed 4.2 percent as analyst Dick Bove said the shares could “easily” triple in five years. Lennar Corp. jumped 7.2 percent, pacing gains in homebuilders, after reporting a jump in new orders. Energy shares had the biggest decline in the S&P 500 among 10 industries as Chevron Corp.
dropped 1.2 percent. Urban Outfitters Inc. tumbled 19 percent as the company’s chief executive officer resigned.
About seven stocks rose for every five that fell on U.S.
exchanges at 4 p.m. New York time. The S&P 500 increased less than 0.1 percent to 1,292.48. The benchmark index gained 1.2 percent in three days. The Dow Jones Industrial Average retreated 13.02 points, or 0.1 percent, to 12,449.45 today. The Nasdaq Composite Index advanced 0.3 percent to 2,710.76.
“The U.S. economic backdrop is more favorable even as the international picture becomes murky,” Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4 billion in Raleigh, North Carolina, said in a telephone interview. “Companies most domestically oriented, including financials, are better positioned for this environment. The fundamentals will remain challenging, but valuations are attractive.”
The S&P 500 recovered from an earlier slump as a group of financial shares rose 1 percent, extending this year’s gain to
6.7 percent. That compares with a 2.8 percent advance in the benchmark measure. The industry slumped 18 percent last year for the biggest decline among 10 groups.
Citigroup added 4.2 percent to $31.27. “Earnings will skyrocket relative to where they are,” Rochdale Securities LLC’s Bove said today in a Bloomberg Television interview with Tom Keene on “Surveillance Midday.”
A gauge of homebuilders in S&P indexes jumped 4.1 percent.
Lennar gained 7.2 percent to $22.25. The third-largest U.S.
homebuilder by revenue reported a 20 percent jump in new orders for the fourth quarter from a year earlier.
Eastman Kodak Co. rallied 36 percent to 82 cents, surging
119 percent in three days. The unprofitable imaging company, seeking to sell or license a portfolio of more than 1,100 patents, sued Apple Inc. and HTC Corp. in an expansion of a legal strategy that may help boost the value of its inventions to fund a turnaround.
Brocade Communications Systems Inc. rallied 2.1 percent to $5.89. The maker of switches for data-storage networks, which had been trying to find a buyer with the help of Frank Quattrone for two years, was valued yesterday at 7.7 times its free cash flow, according to data compiled by Bloomberg. That was the cheapest among its closest competitors and less than half the median of 17 times for comparable companies.
While Brocade was passed over when Dell Inc. agreed to buy Force10 Networks Inc. in July, the company could give Oracle Corp. a networking product it currently doesn’t offer to businesses and enable it to better compete with Cisco Systems Inc., according to ThinkEquity LLC and Avian Securities LLC.
Brocade, which has more than doubled its free cash flow in the past five years, also makes sense for buyout firms and could command about $8 a share in a takeover, ThinkEquity said.
Equities fell earlier as Germany’s Federal Statistics Office said the economy probably shrank in the fourth quarter from the third, and the European Union cut euro-area growth to
0.1 percent in the third quarter, from 0.2 percent estimated earlier. The U.S. economic expansion improved last month across most of the country while hiring was limited and housing remained stagnant, the Federal Reserve said in its Beige Book.
“Nothing has really been done to stimulate growth in Europe,” Madelynn Matlock, who helps oversee about $14.5 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “Without growth, you can’t fix this issue.
If Germany slows down, then, you start to have a real problem on how to make that happen. There’s more risk on the earnings side as to how companies are going to come through all this.”
A measure of energy shares in the S&P 500 fell 1.3 percent as oil dropped on concern that slower global growth may curb demand and natural gas tumbled to a 28-month low. Chevron retreated 1.2 percent to $107.77.
Producers of natural gas dropped as the commodity sank to a 28-month low in New York after revised forecasts showed milder weather across much of the U.S. through late January, crimping demand for the furnace fuel. Southwestern Energy Inc. lost 8 percent to $29.92. Cabot Oil & Gas Corp. fell 11 percent to $69.62. Range Resources Corp. sank 6.3 percent to $54.36.
Urban Outfitters plunged 19 percent to $23.93. The clothing retailer said Glen Senk resigned as chief executive officer and will be succeeded by co-founder Richard Hayne as the retailer seeks to turn around falling profit.
Supervalu sank 13 percent to $7.34. Chief Executive Officer Craig Herkert said the company was working to keep prices low amid the “difficult economic environment and pressured consumer.” Supervalu said sales in its fiscal 2012 may be $36.1 billion. The average estimate of 13 analysts was $36.4 billion.
Rating downgrades from Goldman Sachs Group Inc. also contributed to losses at some of the biggest companies today. 3M Co., the maker of LCD television parts and Scotch-Brite sponges, lost 0.6 percent to $83.77. MasterCard Inc., the world’s second- biggest payments network, slumped 2.1 percent to $341.47.
Investors may be about to turn toward government bonds and away from stocks and other riskier assets, according to Bob Janjuah, global head of tactical asset allocation at Nomura International Plc. This shift may begin by the end of the week, Janjuah wrote yesterday in a report. Yields on 10-year U.S., U.K. and German notes will be closer to 1.5 percent than 2 percent during the first quarter, he predicted.
The first quarter “is going to be extremely bearish for risk,” according to Janjuah, based in London. He cited the possibility that Greece may default on its debt before the quarter ends, along with other concerns.
Have a wonderful evening everyone.
Be magnificent!
This universe is like an ocean in perfect equilibrium.
A wave cannot rise in one place, without creating a hollow elsewhere.
The sum total of the energy of the universe remains identical from one end to the other.
If you take from one place, you must give elsewhere.
-Swami Vivekananda, 1863-1902
As ever,
Carolann
Penguins mate for life. Which doesn’t surprise
me that much, because they all look alike – it’s
not like they’re gonna meet a better-looking
penguin one day.
-Ellen DeGeneres, 1958-
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