March 14th, 2011 Newsletter

Dear Friends,  It is truly impressive how dignified and civil the Japanese behave in this monumental tragedy…

Don Quixote turned out to be an amazing opera.  The Seattle production had Quixote ride on a live horse and Sancho on a live mule – the choreography was spectacular.  The music is very beautiful and the opera is one of the very few sung in French.  It is not an opera that is performed very frequently, so if you ever have a chance to see it, do.

Today is Albert Einstein’s birthday, who was born on March 14, 1879 in Ulm, Germany, an only child of a featherbed salesman and his wife.  As a personality, Einstein was noted for his kindness and amiability.  Quirky and practical, he minimized his wardrobe – buying identical sets of clothing – so that he wouldn’t have to think about what to wear.  Though he had been an early advocate of nuclear energy, on April 5^th, 1955, he signed a letter to protest nuclear tests and bombs.   Days later, he died in his sleep on April 18, 1955.

Some famous Einstein words:

It would be possible to describe everything scientifically, but it would make no sense; it would be without meaning, as if you described a Beethoven symphony as a variation of wave pressure.

My religion consists of a humble admiration of the illimitable superior spirit who reveals himself in the slight details we are able to perceive with our frail and feeble mind.

Common sense is the collection of prejudices acquired by age 18.

I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.

A family rests in a shelter in the city of Soma, Fukushima Prefecture, Japan, three days after a massive earthquake and tsunami struck the country’s northeast coast. On top of the losses of family, friends, and property, evacuees in the area are now faced with the fears of radiation contamination from nearby damaged nuclear facilities. Wally Santana/AP

People in Bern, Switzerland, light candles during a vigil for victims of the earthquake and tsunami in Japan.

Pascal Lauener/Reuters

Market Commentary:

Canada

By Matt Walcoff

March 14 (Bloomberg) — Canadian stocks fell, led by producers of uranium and other raw materials, as a new stimulus package from the Bank of Japan failed to stem the impact of the March 11 earthquake on global equity markets.

Cameco Corp., the world’s second-largest uranium producer, sank 13 percent as Japan struggled to contain a disaster at a nuclear-power plant. Manulife Financial Corp., which had 120 life insurance sales offices in Japan as of Dec. 31, dropped 3.5 percent. West Fraser Timber Co., Canada’s largest lumber producer, rose 4.7 percent as forestry stocks jumped on the prospect of rebuilding in Japan.

The Standard & Poor’s/TSX Composite Index declined 55.06 points, or 0.4 percent, to a six-week low of 13,619.19.

The nuclear crisis “is affecting how people in the U.S. are thinking about their fledgling nuclear expansion,” said Doug Davis, vice chairman of Toronto-based money manager Davis- Rea Ltd., which manages C$425 million ($436 million). “Who are you going to sell your uranium to if the Americans don’t expand nuclear power plants and the Japanese don’t need it for a while?”

The S&P/TSX sank 4.1 percent last week, the most since July, as U.S. jobless claims increased, Moody’s Investors Service cut Spain’s debt rating and oil retreated from a post-2008 high. The Canadian benchmark has climbed 1.3 percent this year, less than half of the gain of the S&P 500.

The count of deaths from the 8.9-magnitude earthquake and subsequent tsunami reached 1,823, with 2,369 missing, Japan’s National Police Agency said today. A second explosion occurred at the Fukushima power plant north of Tokyo, where military staff members tried to prevent a meltdown.

Japan’s central bank deployed 15 trillion yen ($183 billion) into money markets to assure financial stability. The Nikkei-223 Stock Average tumbled 6.2 percent, the most since December 2008.

Japan is the fourth-biggest buyer of Canadian exports behind the U.S., U.K. and China, according to Statistics Canada.

The nuclear crisis may cause delays in plant construction, especially in earthquake-prone areas like China, Greg Barnes, a Toronto-Dominion Bank analyst, wrote in a note to clients today.

Japan accounts for about 12 percent of global demand for uranium, a nuclear fuel.

Cameco Corp. fell 13 percent, the most since October 2008, to C$31.70 after Barnes cut his rating on the shares to “hold” from “buy.”

Uranium One Inc., a mining company controlled by Moscow- based ARMZ Uranium Holding, slumped 28 percent to C$4.31.

Denison Mines Corp., which produces the metal in the U.S. and Canada, tumbled 22 percent to C$2.48.

Most S&P/TSX financial stocks fell after AIR Worldwide, a disaster modeler, said Japanese insurers and global reinsurance companies that backstop their policies may face as much as 2.8 trillion yen in claims related to the earthquake.

Manulife, which derived 18 percent of its revenue from Asia in the 12 months ending Sept. 30, declined 3.5 percent to C$16.74. Great-West Lifeco Inc., Canada’s second-largest insurer, dropped for a sixth day, slipping 1.4 percent to C$25.49. Fairfax Financial Holdings Ltd. lost 1.4 percent to a 19-month low of C$348.70.

EnCana Corp., Canada’s biggest natural gas producer, climbed 4.2 percent to C$31.07. Natural gas futures gained 0.7 percent on speculation Japan will need more of the fuel with nuclear-power production reduced.

Forestry companies surged. In a note dated March 11, Richard A. Kelertas, an analyst at Dundee Securities Ltd., told clients the rebuilding effort in Japan “should have a positive impact on most of the North American timber, lumber and building-materials stocks.”

West Fraser Timber gained 4.7 percent to C$53.22 after Kelertas raised his rating on the stock to “buy” from “neutral.” Canfor Corp., another lumber producer upgraded by Kelertas, advanced 3.3 percent to $13.50. Sino-Forest Corp., Canada’s largest forestry company by market value, increased 2.6 percent to C$21.32.

Teck Resources Ltd., Canada’s largest base-metals and coal producer, lost 2.7 percent to C$49.56 after saying weather conditions will lead to below-average first-quarter coal sales.

Equinox Minerals Ltd., which mines copper in Africa, slid 7.1 percent to C$4.84. The shares have plunged 23 percent since Feb. 27, the day before Equinox said it would bid C$4.8 billion for Lundin Mining Corp.

Petrobank Energy & Resources Ltd., a western Canadian energy producer, retreated 5.3 percent to C$19.64 after Philip R. Skolnick, an analyst at Canaccord Financial Inc., cut his rating on the company to “speculative buy” from “buy.” Petrobakken Energy Ltd., in which Petrobank has a majority stake, fell for a ninth day, decreasing 5.8 percent to a record- low C$17.75.

Gabriel Resources Ltd., which is developing a gold mine in Romania, tumbled 12 percent, the most since August 2009, to C$7.14. In a telephone interview, Chief Executive Officer Jonathan Henry attributed the decline to the removal of the stock from the Market Vectors Junior Gold Miners exchange-traded fund. The Van Eck Securities Corp. fund owned 10.7 million Gabriel Resources shares as of March 11.

US

By Rita Nazareth

March 14 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a third time in four days, as investors struggled to assess how much damage Japan’s worst earthquake on record will do to the global economy.

General Electric Co. slumped 2.2 percent as Japan worked to contain radiation at a damaged nuclear plant, compelling other nations to review atomic energy plans. Coach Inc. and Tiffany & Co. sank at least 5.2 percent on concern Japan sales will suffer. Las Vegas Sands Corp., the casino company with most of its business in Asia, lost 3.6 percent as Jefferies & Co. cut its rating on the stock. MEMC Electronic Materials Inc. surged 11 percent on bets demand for alternative energy will grow.

The S&P 500 slid 0.6 percent to 1,296.39 at 4 p.m. in New York, paring an earlier drop of as much as 1.4 percent as oil settled little changed at $101.19 a barrel. The Dow Jones Industrial Average sank 51.24 points, or 0.4 percent, to 11,993.16. The iShares MSCI Japan Index Fund, a U.S. exchange- traded fund, tumbled 7 percent, the most since 2008.

“The market is pricing in a better understanding of the enormity and complexity of the natural disasters that struck Japan,” said Mohamed El-Erian, chief executive officer at Newport Beach, California-based Pacific Investment Management Co. “The immediate impact will be felt through lower global aggregate demand, disrupted supply chains, and funds flows into Japan.”

U.S. stocks fell last week, sending the S&P 500 down 1.3 percent, after American and Chinese reports damped optimism about the global economy. The benchmark gauge of U.S. stocks is down 3.5 percent from its 32-month high in February, while still more than 90 percent above its bear-market low in 2009.

The selloff in Japan spread to Europe and the Americas as workers battled to contain radiation at a damaged nuclear plant north of Tokyo following a second blast. No large release of radiation was detected after the explosion, which didn’t breach the reactor and followed a build-up of hydrogen gas, Chief Cabinet Secretary Yukio Edano told reporters in Tokyo today. The risk of a large leak is very small, he said.

The Bank of Japan poured a record amount of cash into the financial system and doubled the size of its asset-purchase plan. The central bank pumped 15 trillion yen ($183 billion) into money markets today. Governor Masaaki Shirakawa and his board enlarged a program buying assets from government bonds to exchange-traded funds by 5 trillion yen, about one-tenth the size of the Federal Reserve’s quantitative easing.

“The Japanese earthquake has the potential to prompt further weakness in stock prices,” said David Sowerby, a Bloomfield Hills, Michigan-based money manager at Loomis Sayles & Co., which oversees $150 billion. “While you’ll see the Bank of Japan provide intense liquidity and economic activity increase due to rebuilding, there’s a lot of uncertainty. Still, if we have a 3 percent to 5 percent correction in stocks, we’d likely look at what’s attractively priced.”

General Electric declined 2.2 percent, the most in the Dow average, to $19.92.

The potential meltdown at a nuclear plant struck by Japan’s record temblor may be “a big dampener” on India’s program, Shreyans Kumar Jain, chairman of the Nuclear Power Corp. of India, said in Mumbai. The accident may become a factor in the drafting of China’s energy plans, Xie Zhenhua, vice chairman of the National Development and Reform Commission, said in Beijing.

Germany will suspend a planned extension of the lifespan of nuclear plants pending the outcome of an inquiry into their safety, Chancellor Angela Merkel said.

GE, which is in talks to sell reactors to India, won’t change its plans for the country after the Japan accident, Chief Executive Officer Jeffrey Immelt said today. Immelt expects the company’s Indian operations to grow 30 percent this year.

Uranium stocks slumped on concern demand will slow after the Japan accidents. U.S. shares of Canada’s Denison Mines Corp. plunged 22 percent to $2.55. Entergy Corp. declined 4.9 percent to $70.09. The operator of nuclear power plants was cut to “market perform” from “outperform” by BMO Capital Markets.

Las Vegas Sands slid 3.6 percent to $38.62 after Jefferies cut its recommendation for the shares to “hold” from “buy.” The 12-month share-price estimate is $45.

Solar stocks rallied amid investors’ expectations that the companies may benefit as demand for alternative energy grows.

MEMC Electronic Materials, the maker of wafers for the semiconductor and solar industries, advanced 11 percent to $13.37, the biggest gain in the S&P 500. First Solar Inc. increased 5.1 percent to $146.91.

Consol Energy Inc. gained 4.7 percent to $50.87. The coal and natural gas producer led other U.S. coal companies higher on expectations that the shutdown of Japanese nuclear reactors will lead to more coal use.

Lubrizol Corp. soared 28 percent to $134.68. Warren Buffett’s Berkshire Hathaway Inc. agreed to buy the largest producer of lubricant additives for about $9 billion in the company’s second-biggest acquisition in the past five years.

Caterpillar Inc. added 2.1 percent to $102.10 for the biggest gain in the Dow. The world’s largest construction equipment maker may be among the U.S. companies to benefit as Japan rebuilds after the world’s strongest earthquake since 2004 hit last week, according to analysts at Susquehanna Financial Group and Sterne Agee & Leach Inc.

Pfizer Inc. rose 1.8 percent to $19.81. The world’s biggest drugmaker is reviewing the sale or spinoff of business units that may shrink the company’s revenue by almost half, said Tim Anderson, an analyst with Sanford C. Bernstein & Co. Pfizer would split off four non-pharmaceutical businesses as well as other units to reduce annual revenue to $35 billion to $40 billion from $67 billion, Anderson said in a research report today, citing a meeting with Chief Executive Officer Ian Read.

U.S. industrial production probably rose in February for a third month in the last four, indicating manufacturing remains a stalwart of the expansion, economists said before a report this week. Output at factories, mines and utilities climbed 0.6 percent after a 0.1 percent decrease in January, according to the median forecast in a Bloomberg News survey ahead of Federal Reserve figures on March 17. Other data may show less home construction and contained inflation excluding food and fuel.

Have a wonderful evening everyone.

Be magnificent!

Man has accepted conflict as an innate part of daily existence because he has accepted competition, jealously, greed, acquisitiveness and aggression as a natural way of life. -Krishnamurti, 1895-1986

As ever,

Carolann

God may be subtle, but He isn’t plain mean. -Albert Einstein, 1879-1955