April 27th, 2011 Newsletter
Dear Friends,
DANDELION: The French “dent de lion” means lion’s tooth, perhaps in reference to the jagged teethe of the leaves. Taraxacum officinale – “Taraxacum” derives from the Greek: “taraxos” means disorder and “akos” means remedy.
A few days ago, Gary and I were walking in the English countryside near Ascot and because there has been such splendid warm weather over there, record breaking temperatures on some days in fact – in the 25-27 degree range – so many summer plants are already in bloom. Indeed, it really felt like summer. Among a cluster of bluebells under a big old oak tree, we glimpsed some dandelions peeking through. Even though it is a weed, I believe it is a virtuous weed. They are reminiscent of the summers of our childhoods. Emerson wrote, “a weed is a plant whose virtues have not yet been discovered.” The virtues of the dandelion are many. Craig Holdrege writes,
“Prolific and hardy, its bursting yellow flower heads, rising above a rosette of sharply toothed leaves, [dandelions] can be found almost everywhere….The dandelion-sea of yellow in yet unmowed parks and lawns provides a feast for the winter weary eye. Thrusting its way up between cracks in the expanses of concrete and asphalt, a single dandelion can remind us of the power of life in a seemingly barren world. Dandelions won’t be held back.
When you look closely at its flower, you’ll discover many (one to two hundred) yellow ribbons. You might think that they are petals, like those of a rose or tulip. But no, each one is a complete tiny flower, so that the dandelion blossom as a whole is in fact a bouquet of tiny flowers! This development of a superflower made of individual flowers represents the pinnacle of flower differentiation in the plant kingdom.
When the sun shines, dandelion flower heads open in the morning and close again in the afternoon. When clouds shield them from the sun they close up, as if they were saying: we are of the sun and for the sun. Dandelion flowers attract bees and nearly a hundred species of other insects that enjoy their nectar. This is a true gift of plant to animal, since – remarkably – their seeds can develop without fertilization. One day the flower head opens as a white feathery globe. The parachute-bearing seeds drift off to some new place just waiting for a dandelion to take root.”
MYTHOLOGY: The Greek Goddess Hecate fed Theseus dandelions for 30 days to give him strength to defeat the Minotaur.
photos of the day
April 27, 2011
A pack of riders climb up a vineyard in the Lavaux near Vevey during the first stage of the Tour de Romandie cycling race.
Denis Balibouse/Reuters
A peacock watches visitors at a bird park on Kish Island, 1,250 kilometers (777 miles) south of Tehran.
Caren Firouz/Reuters
Market Commentary:
Canada
April 27 (Bloomberg) — Canadian stocks fell, led by fertilizer producers and financial companies, after the U.S. Federal Reserve raised its inflation forecast and cut its growth estimate.
Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, declined 2.5 percent as wheat fell after Statistics Canada forecast more planting. Silver Wheaton Corp., Canada’s fourth-largest precious-metals company, rallied 6.9 percent after the U.S. Federal Reserve’s Open Market Committee said commodity prices “have pushed up inflation in recent months.” Toronto-Dominion Bank, Canada’s second-biggest lender by assets, dropped 1.1 percent.
“There’s a lot of concern about the inflation that’s happening in food and energy,” said Danielle Park, a partner at Venable Park Investment Counsel Inc. in Barrie, Ontario, which manages at least C$1 million ($1.05 million) each for more than 250 families. “That will be the area where any kind of tightening at all will be the hardest hit.”
The Standard & Poor’s/TSX Composite Index lost 16.53 points, or 0.1 percent, to 13,892.57. The S&P/TSX slipped 0.6 percent from the beginning of the current earnings season on April 11 to yesterday, while the S&P 500 advanced 1.7 percent. Fifty-two percent of S&P/TSX companies that have reported financial results in the period have surpassed their average analyst forecast, compared with 77 percent of S&P 500 companies.
The Fed today said prices will rise between 2.1 percent and 2.8 percent this year before moderating. In January, the central bank had forecast inflation of 1.3 percent to 1.7 percent.
Wheat futures sank after Statistics Canada forecast Canadian planting will increase 17 percent this year.
Potash Corp. retreated 2.5 percent to C$54.18. Agrium Inc., Canada’s second-largest fertilizer producer, fell 1.9 percent to C$86.36.
S&P/TSX financial companies dropped the most in seven days as the Fed reduced its forecast for economic growth.
Toronto-Dominion Bank, Canada’s second-largest lender by assets, declined 1.1 percent to C$81.95. Bank of Montreal, the country’s No. 4 bank, lost 1 percent to C$62.48. Intact Financial Corp., Canada’s largest property and casualty insurer, slipped 2 percent to C$48.61.
Precious-metals producers gained as gold futures advanced to a record and silver jumped in electronic trading.
Silver reseller Silver Wheaton surged 6.9 percent to C$39.91. Barrick Gold Corp., the world’s largest producer of the metal, increased 1.2 percent to C$48.34. First Majestic Silver Corp., which mines in Mexico, soared 8.7 percent to C$21.31 after tumbling 12 percent in the previous two days.
Natural gas declined for a third day after Commodity Weather Group in Bethesda, Maryland forecast below-average temperatures for the U.S. South.
Suncor Energy Inc., Canada’s largest oil and gas producer, lost 1 percent to C$42.52. Canadian Natural Resources Ltd., the country’s second-biggest energy company by market value, decreased 0.6 percent to C$43.60. Crescent Point Energy Corp., which produces oil and gas in western Canada, retreated 0.8 percent to C$43.20.
US
By Rita Nazareth
April 27 (Bloomberg) — U.S. stocks rose, giving the Standard & Poor’s 500 Index the fifth gain in six days, as the Federal Reserve renewed its pledge to stimulate growth with low rates and said a pickup in inflation is likely temporary.
General Electric Co. added 2.7 percent after saying it wants to boost its dividend. Moody’s Corp., whose founder John Moody created credit ratings more than a century ago, climbed 6.7 percent as profit beat estimates by 25 percent. Amazon.com Inc. gained 7.9 percent as the world’s largest online retailer reported sales that topped predictions and Deutsche Bank AG increased its share-price estimate to $215.
The S&P 500 added 0.6 percent to 1,355.66 at 4 p.m. in New York. The Dow Jones Industrial Average gained 95.59 points, or 0.8 percent, to 12,690.96. The Russell 2000 Index of small companies rose 0.6 percent to 858.31, a record. The Fed left its benchmark interest rate in a range of zero to 0.25 percent and retained a pledge in place since March 2009 to keep it “exceptionally low” for an “extended period.”
“It’s a sigh of relief,” said Eric Teal, chief investment officer at First Citizens Bancshares Inc. in Raleigh, North Carolina, which manages $4 billion. “The Fed kept the language.
At least for the rest of this year and into next year, we see accommodative policy. In addition, there’s a perception that the signs of inflation are fairly tamed at this juncture. That’s another positive. Before the announcement, we also got good corporate earnings releases. So, that combination is lifting the equity markets at this point.”
The S&P 500 has rallied 29 percent since Fed Chairman Ben S. Bernanke suggested on Aug. 27 that he would pursue a second round of asset purchases to stimulate the economy, a tactic known as quantitative easing. Earnings per share beat estimates at 77 percent of the 197 companies in the S&P 500 that have reported quarterly results since April 11, according to data compiled by Bloomberg.
Bernanke has signaled he’ll maintain record stimulus until job growth accelerates and the recovery is robust enough to withstand tighter credit. The Fed chief has said he expects that a surge this year in fuel and food costs will have only a passing inflationary impact, differing with Fed regional bank presidents who say borrowing costs may need to rise to contain prices.
“The economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually,” the Federal Open Market Committee said today in its statement after a two-day meeting in Washington. “Increases in the prices of energy and other commodities have pushed up inflation in recent months,” and the Fed expects “these effects to be transitory,” the statement said. Bernanke said the end of the Fed’s $600 billion bond-buying program in June probably won’t have a “significant” effect on financial markets or the economy, and the central bank will likely continue reinvesting maturing debt after June.
“We are going to complete the program at the end of the second quarter,” he said at his first press conference following a policy meeting. “The end of the program is unlikely to have a significant effect on financial markets or the economy.”
A report before the open of exchanges showed that orders for durable goods rose in March for a third consecutive month, showing businesses intend to keep spending to update equipment.
Bookings for equipment meant to last at least three years climbed 2.5 percent after a 0.7 percent gain the prior month that was revised from a previously reported drop, the Commerce Department said.
GE added 2.7 percent, the most in the Dow average, to $20.65. Chief Executive Officer Jeffrey Immelt said the global economy continues to improve even as oil prices rise.
“It’s always something to be concerned about because of consumer confidence, but from a GE context, we have such great technology” in energy products, Immelt told reporters today before the Fairfield, Connecticut-based company’s annual meeting in Salt Lake City. “It’s something to think about, but it doesn’t seem to be hurting the economy. So far.”
Moody’s climbed 6.7 percent to $38.33 after saying that first-quarter profit rose 37 percent as companies issued a record amount of debt, boosting demand for its services.
Corporate bonds sales in the U.S. increased 24 percent to $398.3 billion last quarter from a year earlier, spurring demand for ratings. Moody’s also raised its annual earnings forecast and said it would boost its quarterly dividend to 14 cents a share.
Amazon.com climbed 7.9 percent to $196.63. The world’s largest online retailer reported first-quarter sales that topped predictions. Deutsche Bank increased its share-price estimate to $215 from $192, saying profit growth will resume in the fourth quarter.
DeVry Inc. gained 7.2 percent to $53.70. The for-profit education company reported third-quarter earnings excluding some items of $1.32 a share, beating the average analyst estimate of $1.23, Bloomberg data show.
“We’re seeing pretty healthy signs,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion. “We have a combination of better economic data, strong earnings and new highs for the market. Companies are making money and willing to spend some money to reinvest into their businesses. They are confident enough about the economy and about their own prospects.”
Broadcom Corp. slumped 12 percent to $35.45. The biggest maker of chips for television set-top boxes forecast second- quarter revenue that missed analysts’ estimates as customers such as Nokia Oyj and Samsung Electronics Co. struggle to boost sales. Chief Executive Officer Scott McGregor cited a slowdown in sales to cellphone makers for the forecast, though he said Broadcom is holding or gaining market share.
ConocoPhillips dropped 1.7 percent to $79.83. The third- largest U.S. oil company reported first-quarter profit of $1.82 a share on an adjusted basis. Analysts surveyed by Bloomberg had estimated profit of $1.92 on average.
Financial stocks are poised to rally after lagging behind the S&P 500 because the two groups are echoing a pattern set last year, Oppenheimer & Co.’s Carter Worth said.
The Financial Select Sector SPDR Fund, an exchange-traded fund tracking 82 S&P 500 companies in the industry, lost 2 percent in the past year through yesterday, while the SPDR S&P 500 ETF Trust, an ETF linked to the entire index, jumped 11 percent. The ratio of their prices fell to 0.121 in November from 0.141 in April 2010, meaning the financial ETF trailed the S&P 500, before rebounding to 0.129 in January. It has since fallen to 0.12.
“Our hunch is that the disconnect is resolved this time just as it was resolved late last autumn, with the financials coming to life and playing catch-up with the market,” New York- based Worth wrote in a note sent to clients yesterday.
“Something has to give.”
Have a wonderful evening everyone.
Be magnificent!
In the song of the rushing torrent,
hold onto the joyful assurance:
I will become the sea.
And this is not a vain supposition;
it is absolute humility because it is the truth.
-Rabindranath Tagore, 1861-1901
As ever,
Carolann
The folly which we might have ourselves committed
is the one which we are least ready to pardon in
another.
-Joseph Roux, 1834-1886
Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor