May 9th, 2011 Newsletter
Dear Friends, I saw an amazing film at the UVic cinema on Saturday night. It is director Xavier Beauvois’s 2010 film Of Gods and Men which is the true story of a group of French Trappist monks living in a remote village in the Algerian mountains in the 1990’s. The story is haunting and the music is mesmerizing. It is truly an unforgettable film so do try to see it sometime.
From The Globe & Mail: “Last month, the Boston Globe reports, Britain’s Astronomer Royal Sir Martin Rees told a gathering at The Royal Institution of Great Britain: ‘Our sun formed 4.5 billion years ago, but it’s got six billion more before the fuel runs out. It won’t be humans who witness the sun’s demise. It will be entities as different from us as we are from a bug.’”
Jay Leno
Prince William and Kate Middleton are now planning their honeymoon. They say they want to go somewhere where they can have complete privacy and be assured that no one in the country would give away their location. So I think they’re going to Pakistan.
David Letterman
Well, the Republicans were so pleased by the Osama bin Laden raid that today, they granted President Obama full citizenship.
Jimmy Fallon
President Obama is going to host a poetry night at the White House next week. Obama will recite some Yeats, Hillary will recite some Frost, and Biden will recite some Seuss.
Today’s Lyrics
With your kiss my life begins,
You’re spring to me, all things to me,
Don’t you know, you’re life itself.
-David Bowie, Wild is the Wind
photos of the day
May 9, 2011
A worker sets up a giant canvas of the official poster of the 64th Cannes Film Festival, featuring US actress Faye Dunaway, on the facade of the Festival Palace in Cannes, France. The Cannes film festival runs from May 11 to 22.
Eric Gaillard /Reuters
Shaven-headed young boys wearing 3-D glasses touch smart phones at SK Telecom Ubiquitous Museum in Seoul, South Korea. A group of children entered the main temple of Korean Buddhism’s Chogye Order to experience a monk’s life for a month to celebrate Buddha’s birthday on May 10.
Lee Jin-man/AP
Market Commentary:
Canada
By Matt Walcoff
May 9 (Bloomberg) — Canadian stocks rose for a second day, led by raw-materials and energy producers, as an index of commodities rebounded from its biggest weekly drop since 2008.
Goldcorp Inc., the world’s second-biggest gold producer by market value, increased 2.2 percent as precious metals rallied.
Suncor Energy Inc., Canada’s largest oil and gas producer, climbed 1 percent as oil gained the most in two months. Forzani Group Ltd., Canada’s largest sporting-goods retailer, soared 49 percent after agreeing to be bought by Canadian Tire Corp.
The Standard & Poor’s/TSX Composite Index gained 110.53 points, or 0.8 percent, to 13,677.13.
“Things got overdone in the short term,” said Doug Davis, vice chairman of Davis-Rea Ltd. in Toronto, which manages C$450 million ($465 million). “The economy is still recovering, both in Canada and the U.S.”
The S&P/TSX fell 2.7 percent last week as the Thomson Reuters/Jefferies CRB Commodity Price Index plunged 9 percent.
Precious metals dropped as CME Group Inc., the owner of the Comex exchange, raised the amount of cash that must be deposited when borrowing from brokers to trade silver futures. Fuels declined after the U.S. reported a decline in gasoline consumption and increase in natural gas inventories.
Producers of precious metals gained today as investors speculated last week’s 4.2 percent retreat in gold and 27 percent tumble in silver were overdone.
Barrick Gold Corp., the world’s largest producer of the metal, advanced 1.2 percent to C$45.96. Goldcorp increased 2.2 percent to C$48.42. Silver Wheaton Corp., Canada’s fourth- biggest precious-metals company by market value, climbed 2.4 percent to C$35.47. First Majestic Silver Corp., which mines in Mexico, jumped 8.1 percent to C$19.02.
Crude oil, which sank 15 percent last week, rose 5.5 percent today after Germany said exports advanced to a record last month.
Canadian Oil Sands Ltd., the largest owner of the Syncrude project, increased 3.2 percent to C$31.85. Suncor advanced 1 percent to C$40.66. Oilfield-services company Flint Energy Services Ltd. soared 12 percent, the most since June 2009, to C$15.47 before the release of its first quarter financial results.
Contract driller Ensign Energy Services Inc. climbed 4 percent to C$17.71 after reporting first-quarter earnings that beat the average of 10 analyst estimates by 36 percent, excluding certain items.
Nexen Inc., an oil and gas producer with operations on five continents, declined 2.7 percent to C$23.14. The company said it has suspended operations in Yemen due to a strike and that its North Sea Buzzard oil field is operating at reduced rates due to problems with the platform’s cooling system.
Industrial-metals producers rose as copper rallied from a five-month low.
First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, gained 3.1 percent to C$127.50.
Ivanhoe Mines Ltd., which is developing a copper and gold mine in Mongolia with Rio Tinto Group, advanced 5.7 percent to C$24.67. Taseko Mines Ltd., which produces copper in British Columbia, jumped 5.2 percent to C$4.90.
Molybdenum Producer Thompson Creek Metals Co. sank 5.2 percent to a seven-month low of C$10.30 after cutting its 2011 production forecast.
Copper Fox Metals Inc., which is developing a base- and precious-metals project in British Columbia, jumped 18 percent to C$2.38. On May 6, two federal-government agencies said a proposed power line to the region “is not likely to cause significant adverse environmental effects.”
Forzani surged a record 49 percent to C$26.25 after agreeing to be bought by Canadian Tire, the country’s largest general-goods retailer, for C$26.50 a share in cash. Canadian Tire rose 2.7 percent to C$60.19.
Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, increased 1.6 percent to C$52.62 as corn and wheat rose. Viterra Inc., Canada’s biggest grain handler, climbed 3.8 percent to C$11.50.
Manulife Financial Corp., North America’s fourth-largest insurer, rose 1.4 percent to C$17.71 after surging 5.1 percent May 6. On May 5, the company reported first-quarter profit that topped the average analyst estimate by 56 percent, excluding certain items.
BlackBerry maker Research In Motion Ltd. fell 2.6 percent from a four-year low to C$43.39 after T. Michael Walkley, an analyst at Canaccord Financial Inc., reduced his 12-month price estimate on RIM’s U.S.-traded shares to $49 from $61. In a note to clients, Walkley cited RIM’s market-share losses to Apple Inc.’s iPhone and smartphones using Google Inc.’s Android operating system.
US
By Rita Nazareth
May 9 (Bloomberg) — U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a second straight day, as commodity prices rebounded from the biggest weekly drop since 2008 and McDonald’s Corp. rallied after sales topped estimates.
Newmont Mining Corp. and Halliburton Co. added at least 1.7 percent as oil halted a five-day retreat and metal prices climbed. McDonald’s, the world’s biggest restaurant chain, increased 0.8 percent as smoothies and McCafe beverages drew U.S. customers in April. Dollar Thrifty Automotive Group Inc. surged 14 percent as Hertz Global Holdings Inc. made a $2.08 billion offer. Citigroup Inc., the most-traded U.S. stock in 2011, slumped 2.3 percent following a 1-for-10 reverse split.
The S&P 500 rose 0.5 percent to 1,346.29 at 4 p.m. in New York. It snapped a four-day slide on May 6 amid stronger-than- forecast growth in jobs. The Dow Jones Industrial Average climbed 45.94 points, or 0.4 percent, to 12,684.68 today.
“Commodities look oversold as we get more evidence that the economy is rebounding,” said Peter Jankovskis, who helps manage about $2.8 billion at Oakbrook Investments in Lisle, Illinois. “The jobs report we got on Friday and McDonald’s sales provided further evidence that the recovery is in place.
The equity market is in a reasonable position given where earnings are.”
The S&P 500 fell 1.7 percent last week following a rout in raw materials that knocked off $99 billion of market value from commodities. The S&P 500 was still up 7.1 percent this year amid government stimulus measures and higher-than-projected corporate profits. Earnings-per-share have beaten analyst estimates at 72 percent of the 421 companies in the S&P 500 that reported results since April 11, Bloomberg data show.
U.S. trading slowed following Citigroup’s reverse stock split. The bank accounted for 6 percent of U.S. trading in 2011 through last week, with average daily volume of 464.8 million shares, according to data compiled by Bloomberg. Volume on exchanges today totaled less than 5.8 billion shares, second only to the day after Easter as the slowest trading day of the year. Citigroup slumped 2.3 percent to $44.16.
“We’ve seen anemic volume,” said Bruce McCain, who oversees $22 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “A reverse stock- split reminds you of how much you can lose when a stock craters.
It probably shifts a little bit of the buying that might otherwise have gone into Citigroup, particularly for those who like to purchase low-priced shares in the hopes of rebound.
Those investors will probably refocus on other parts of the market.”
Commodities rose, with the S&P GSCI Index of raw materials up 3.6 percent in its biggest gain since 2009 after plunging 11 percent last week, amid signs that an improving U.S. economy may boost raw-material demand and on speculation last week’s selloff was excessive.
Gauges of stocks of energy and raw-material producers rallied at least 1.5 percent, the two biggest gains in the S&P 500 within 10 industries.
Newmont Mining, the largest U.S. gold producer, added 1.8 percent to $54.68. Halliburton, the world’s second-largest oilfield services provider, rose 3 percent to $48.06.
U.S. oil companies’ profits have grown so fast that they’ve become the cheapest equities in the S&P 500, just as the debate about taxing crude producers heats up.
Energy suppliers in the S&P 500 have earned $481.1 billion since 2006, more than last year’s gross domestic product of Argentina, according to data compiled by Bloomberg. The 41 drillers, refiners and oilfield service providers may generate another $134.8 billion in 2011, based on analyst estimates that jumped 8.5 percent in April. The growth reduced valuations to 11.5 times projected income from 13.7 in March.
McDonald’s gained 0.8 percent to $79.31. The world’s biggest restaurant chain said sales at stores open at least 13 months rose 6 percent in April as smoothies and McCafe beverages drew customers in the U.S. Analysts projected comparable-store sales would rise 4.1 percent, according to the average of seven estimates compiled by Bloomberg News. Sales in the U.S. climbed 4 percent, the Oak Brook, Illinois-based company said today.
Dollar Thrifty surged 14 percent to $79.27. Hertz offered $72 a share in cash and stock for Dollar Thrifty, 24 percent more than Avis’s offer and 18 percent higher than the 60-day average share price. The offer values Dollar Thrifty at 3 percent more than the company’s closing value on May 6.
Sysco Corp. jumped 11 percent, the most in the S&P 500, to $31.57. The biggest North American distributor of food to restaurants rose as much as 15 percent, the most since 1987, after sales beat projections and Chief Executive Officer William DeLaney said he’s focused on acquisitions.
Stock-index futures reversed early gains before the open of U.S. exchanges after Greece’s credit rating was cut two levels to B from BB- by S&P, which said further reductions are possible as the risk of default rises. Another cut would make Greece the lowest-rated country in Europe as today’s reduction, the fourth by S&P since April 2010, left it even with Belarus.
“The impact of Greece’s downgrade is psychological,” said Brian Lazorishak, money manager at Chase Investment Counsel Corp., which manages more than $1.5 billion in Charlottesville, Virginia. “It just reminds investors that there are more problems over there.”
Tyson Foods Inc. dropped 6 percent to $17.75. The largest U.S. meat processor posted fiscal second-quarter profit that missed analysts’ estimates as higher feed costs partially offset gains in beef and chicken prices.
Chipmakers slumped after Wells Fargo & Co. said the industry’s inventory rose during the first quarter and memory prices continued to fall last week. Intel Corp. fell the most in the Dow, sliding 2.1 percent to $22.76. Micron Technology Inc sank 3.8 percent to $10.46.
Have a wonderful evening everyone.
Be magnificent!
A diamond is lost in the mud;
all are seeking it.
Some go to the East – or to the West,
Wishing to find it.
Is it lost in the river?
Or in the rocks?
Kabîr, your servant, appreciates it
for its just value.
He will take it away,
warmly sheltered
in a corner of his heart.
-Kabir, 1440-1518
As ever,
Carolann
Silence is one of the hardest arguments
to refute.
-Josh Billings, 1818-1885
Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor