May 25th 2011, Newsletter

Dear Friends,

I read this poem in this week’s edition of The New Yorker:

THE FACEBOOK SONNET

Welcome to the endless high-school

Reunion. Welcome to past friends

And lovers, however kind or cruel.

Let’s undervalue and unmend

The present. Why can’t we pretend

Every stage of life is the same?

Let’s exhume, resume, and extend

Childhood. Let’s all play the games

That occupy the young. Let fame

And shame intertwine. Let one’s search

For God become public domain.

Let church.com become our church

Let’s sign up, sign in, and confess

Here at the altar of loneliness.

                     -Sherman Alexie

Facebook CEO Mark Zuckerberg arrives for a meeting at the Elysee Palace in Paris.John Schults/Reuters

US President Barack Obama is escorted to address both Houses of Parliament in London. Flanking Obama are Speaker of the House of Commons John Bercow (l.) and Speaker of the House of Lords Baroness Helene Hayman. Obama was the first US president to speak in Westminster Hall.

Kevin Lamarque/Reuters

Market Commentary:

Canada

By Matt Walcoff

     May 25 (Bloomberg) — Canadian stocks advanced to a three- week high, led by energy and raw-materials producers, as fuels and metals gained on analyst reports speculating that prices will rebound.

     Suncor Energy Inc., Canada’s largest oil and gas company, increased 2 percent after a drop in U.S. distillate-fuel inventories. Potash Corp. of Saskatchewan Inc., the world’s No.1 fertilizer producer, rose 2.6 percent as investors speculated wet weather will delay U.S. planting. Teck Resources Ltd., Canada’s biggest base-metal producer, climbed 2.5 percent after Deutsche Bank AG said copper will rise to an average of $11,500 a metric ton in 2012 from about $9,483 this year.

     The Standard & Poor’s/TSX Composite Index advanced 156.35 points, or 1.2 percent, to 13,751.47, the highest close since May 2. The index fell 0.4 percent yesterday, breaking a five-day streak of gains.

     “There’s not much going on in the bounce-back in commodities except the bullish reports from some saying they think they got oversold in recent weeks,” said Danielle Park, a partner at Venable Park Investment Counsel Inc. in Barrie, Ontario, which manages at least C$1 million ($1.02 million) each for more than 250 families. “It’s just traders hoping to get back in some momentum in those sectors.”

     The Canadian stock benchmark fell 4.7 percent from April 5 to yesterday as commodities including oil, copper, corn and wheat dropped. Energy and raw-materials companies make up 48 percent of Canadian stocks by market value. Commodities have declined as economic data reflected a slowing global recovery, the European debt crisis intensified and investors speculated emerging-market countries may raise interest rates.

     Crude oil rose to a two-week high after the U.S. Energy Department said inventories of distillates, such as heating oil and diesel fuel, fell by 2.04 million barrels last week. The decline exceeded all 14 estimates in a Bloomberg survey of analysts.

     Suncor gained 2 percent to C$40.37. Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, advanced 2.7 percent to C$20.35. Encana Corp., Canada’s biggest natural gas producer, increased 2.6 percent to C$33.34 as that fuel climbed.

     Cinch Energy Corp., which explores for oil and gas in western Canada, soared a record 39 percent to C$1.76 after agreeing to be bought by Tourmaline Oil Corp. in a deal Tourmaline valued at about C$205 million ($210 million).

Tourmaline fell 2.5 percent from a record close to C$28.27.

     Agricultural futures rose as storms in the central U.S. threatened to extend planting delays, boosting prices of corn and wheat. Potash prices will continue to rise in the second half of the year, Patricio de Solminihac, deputy general manager of Soc. Quimica y Minera de Chile SA, said in a conference call.

     Potash Corp. gained 2.6 percent to C$53.10. Agrium Inc., Canada’s second-largest fertilizer producer, advanced 3.5 percent, the most since December, to C$82.06.

     Copper climbed 2.3 percent after Deutsche Bank followed similar comments from Goldman Sachs Group Inc. and JPMorgan Chase & Co. in saying prices are likely to rebound.

     Inmet Mining Corp., which produces base metals in Europe, increased 2.8 percent to C$69.21. Northern Dynasty Minerals Ltd., Anglo American Plc’s partner in the Pebble project in Alaska, rallied 8 percent to C$12.19. Teck Resources rose 2.5 percent to C$48.40.                          

     Cameco Corp., the world’s largest uranium producer, climbed 4.1 percent to C$27.77 after Financial Times Deutschland said Germany may drop a five-month-old tax on nuclear fuel.

Government spokesman Steffen Seibert said no decision has been made on the tax.

     Gold gained for a fourth day, and silver surged 4.2 percent.

     Barrick Gold Corp., the world’s largest producer of the metal, advanced 1 percent to C$46.10. Silver Wheaton Corp., Canada’s fourth-largest precious-metals company by market value, climbed for a sixth day, increasing 2.9 percent to C$35.83.

Harry Winston Diamond Corp., the owner of the Diavik mine featured on the TV show “Ice Road Truckers,” jumped 5.4 percent to C$16.75.

     The six largest S&P/TSX banks each rose after Bank of Montreal reported earnings that topped the average analyst estimate and Fitch said German banks’ potential losses from Greece are manageable.

     BMO, Canada’s fourth-largest bank, gained 0.9 percent to C$62.05 after topping the average of 14 analyst estimates by 2.4 percent, excluding certain items. Toronto-Dominion Bank, the country’s second-biggest lender by assets, advanced 1.8 percent to C$85.29 before releasing second-quarter financial results.

Sun Life Financial Inc., Canada’s third-biggest insurer, increased 0.8 percent to C$29.85.

     Westport Innovations Inc., which develops natural-gas engines, rallied 5.9 percent to C$24.76. The shares have soared 17 percent since May 16, the day before it said it will develop fuel-system technologies with Caterpillar Inc.

US

By Rita Nazareth

     May 25 (Bloomberg) — U.S. stocks advanced, with benchmark indexes snapping a three-day decline, as commodity shares rallied on expectations for higher raw material prices.

     Occidental Petroleum Corp. and Halliburton Co. gained at least 1.6 percent as oil climbed following a report showing that U.S. distillate fuel supplies dropped to a two-year low.

Freeport-McMoRan Copper & Gold Inc. advanced 2.4 percent as copper rose after Deutsche Bank AG said prices are likely to rebound. Fifth Third Bancorp and BB&T Corp. increased more than 1 percent after Fitch Ratings said it probably won’t downgrade German banks because of their holdings of Greek debt.

     The Standard & Poor’s 500 Index added 0.3 percent to 1,320.47 at 4 p.m. in New York. The Dow Jones Industrial Average rose 38.45 points, or 0.3 percent, to 12,394.66 today. Both benchmark gauges fell to one-month lows yesterday.

     “It’s a risk-on day,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc., which oversees $3.65 trillion as the world’s largest asset manager. “On days when you get a little bit more conviction about the economic recovery, stocks and commodities move up. The risk-on day is also a manifestation of companies most-tied to the economy.”

     The S&P 500 has fallen 3.2 percent from an almost three- year high on April 29 on concern about Europe’s debt crisis and weaker-than-forecast economic data. Indexes of commodity producers slumped at least 5 percent during that period. Still, the benchmark gauge rose 5 percent since the end of 2010 on government stimulus measures and higher-than-forecast profits.

     Gauges of energy and raw material shares rose at least 1.3 percent today, the two biggest gains in the S&P 500 within 10 industries. The Thomson Reuters/Jefferies CRB Index of 19 raw materials rallied 1.6 percent. Oil rose above $101 a barrel in New York. Copper gained the most in a week as Deutsche Bank said prices are likely to rebound, following similar comments from Goldman Sachs Group Inc. and JPMorgan Chase & Co.

     Occidental Petroleum, the biggest onshore oil producer in the continental U.S., added 1.7 percent to $104.22. Halliburton rose 5 percent to $49.87 after Morgan Stanley raised its recommendation for the world’s second-largest oilfield services provider to “overweight” from “equal-weight.” Freeport, the largest publicly traded copper producer, gained 2.4 percent to $49.98.                      

     “The rally in stocks and commodities reflects the view that the global economic recovery is in place,” said Eric Teal, chief investment officer at First Citizens Bancshares Inc. in Raleigh, North Carolina, which manages $4 billion. “There had been some concern about softness in recent data and that’s why we saw a pullback. Profits and margins should be sustained at these levels. The trend is higher and the rally will be driven by companies most-exposed to economic growth.”

     Financial companies helped pace a rebound in benchmark indexes as Fitch Ratings said German banks have “manageable” risks related to Greek sovereign debt and the Mediterranean country’s economy.

     “The worst consequence of any Greek sovereign default for German and other European banks would be a sharp increase in general capital market and creditor risk aversion at a time when many banks are still in rehabilitation mode,” Michael Dawson- Kropf, a Frankfurt-based analyst at Fitch, said in an e-mailed statement today.

     Fifth Third Bancorp, Ohio’s largest lender, added 1 percent to $12.61. BB&T rose 1.8 percent to $26.67.

     RF Micro Devices Inc. climbed 5.7 percent to $6.08. The U.S. maker of chips and radio systems for mobile phones was added to the focus list at Morgan Keegan.                    

     Take-Two Interactive Software Inc. rose 3.2 percent to $16.62. The producer of the “Grand Theft Auto” video games reported a fourth-quarter loss, excluding some items, that was 55 percent narrower than the average analyst estimate.

     Stock futures extended declines before the start of regular trading as a report showed that orders for durable goods dropped more than forecast in April, reflecting less demand for aircraft and disruptions in supplies of auto parts stemming from the earthquake in Japan.

     Bookings for goods meant to last at least three years fell 3.6 percent, the most since October, after a 4.4 percent jump in March, a Commerce Department report showed. Economists projected a 2.5 percent drop in April, according to the median forecast in a Bloomberg News survey. A measure of demand for business equipment declined by the most this year.

     Costco Wholesale Corp. lost 1.3 percent to $80.32. The largest U.S. warehouse-club chain reported fiscal third-quarter profit of 73 cents a share, missing the average analyst estimate by 4.8 percent.

     American International Group Inc. declined 4 percent to $28.28. The Treasury sold 200 million shares yesterday at $29 each, compared with the closing price of $29.46 on the New York Stock Exchange. The government, which retains a majority stake, needs to sell shares at an average of about $28.73 to recover a $47.5 billion investment. AIG disposed of 100 million shares, raising $2.9 billion, according to a statement from the company.

     AIG, once the world’s largest insurer, is seeking private capital after a government rescue that swelled to $182.3 billion, including Federal Reserve support. The Treasury in 2010 sold the last of its holdings in Citigroup Inc. and reduced its ownership in General Motors Co. to a minority stake. New York- based AIG is the only insurer that hasn’t repaid its bailout.

     First Solar Inc. slumped 2.6 percent to $120.62. Jim Chanos, the short seller known for predicting Enron Corp.’s collapse, said investors should bet against the biggest producer of thin-film solar panels and Vestas Wind Systems A/S, the largest wind-turbine manufacturer.

     Vestas “will be under financial strain and best avoided,” Chanos, the president and founder of Kynikos Associates LP, said today at the Ira Sohn Conference in New York. First Solar is “losing whatever edges they have not only because of technology but increasingly because of operational problems.”

Have a wonderful evening everyone.

Be magnificent!

Fearlessness is the first requirement of spirituality.

Cowards can never be moral.

-Mahatma Gandhi, 1869-1948

As ever,

Carolann

Life’s most urgent question is: what

are you doing for others?

-Martin Luther King Jr., 1929-1968

Carolann Steinhoff, B.Sc., CFP, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor