April 29th, 2011 Newsletter

Dear Friends,

The most beautiful love means nothing when it is plain; it needs engraving and silversmithing.  ~La Fausse Maîtresse, Gustave Flaubert 

Royal wedding day

April 29, 2011

Prince William greets Kate Middleton as she arrives at the altar with her father Michael Middleton, prior to their marriage in London’s Westminster Abbey, on April 29.

Dominic Lipinski/AP

Britain’s Prince William and his wife Kate, Duchess of Cambridge, wave as they leave Westminster Abbey after the royal wedding in London, on April 29.

Alastair Grant/AP

In this image, the Battle of Britain Memorial Flight, comprising of a Spitfire (l.), Hurricane (r.) and Lancaster bomber, flies over Buckingham Palace as Britain’s Prince William and his wife, Catherine, Duchess of Cambridge appear on the balcony, following their wedding at London’s Westminster Abbey, on April 29.

Neil Chapman/Ministry of Defence/AP

In the wake of record losses, the U.S. Postal Service announced it is cutting 7,500 jobs. But a spokesman for the post office said those positions could be restored if this whole email thing turns out to be nothing but a fad.

– Jay Leno

Market Commentary:

Canada

By Matt Walcoff

     April 29 (Bloomberg) — Canadian stocks rose, trimming a monthly decline, as oil and gas climbed after the U.S. reported larger increases in personal income and spending than most economists had forecast.

     Canadian Natural Resources Ltd., gained 2.4 percent after companies including Caterpillar Inc. and Cliffs Natural Resources Inc. reported earnings that topped analyst estimates.

Research In Motion Ltd., the BlackBerry maker, plunged 14 percent after at least five analysts reduced their ratings on the shares. Lundin Mining Corp. jumped 11 percent after the Globe and Mail said a Chinese-led investment group is preparing a possible bid for the base-metals producer.

     The Standard & Poor’s/TSX Composite Index climbed 50.39 points, or 0.4 percent, to 13,944.79 after surging more than 80 points in the last 36 minutes of trading.

     “It’s just great awareness that economic revival is occurring,” said Greg Eckel, a money manager at Morgan Meighen & Associates Ltd. in Toronto, which oversees about C$1 billion ($1.06 billion). “We saw Cat reporting today. That would be representative of global industry still powering forward.”

     The index lost 1.2 percent this month, or 1 percent with dividends included, for the first negative total return since June. The streak of positive returns was the longest since 1983.

Energy and financial companies have led the decline as data and forecasts indicated a slowing recovery in the U.S., which bought 75 percent of Canadian exports last year, according to Statistics Canada.

     U.S. personal spending increased 0.6 percent in March, the Commerce Department said today in Washington. Economists had estimated a gain of 0.5 percent, according to the median of 69 forecasts in a Bloomberg survey.

     Crude oil finished April with a record eighth-straight monthly gain, and natural gas rose 2.8 percent as the U.S reported a decline in output.

     Canadian Natural, the country’s second-largest energy company by market value, increased 2.4 percent to C$44.51.

Pacific Rubiales Energy Corp., which produces oil in Colombia, advanced 2.4 percent to C$28.75.

     Canadian Oil Sands Ltd., the largest owner of the Syncrude project, rallied 3.1 percent to C$32.64 after its first-quarter earnings topped the average of nine analyst estimates by 8.4 percent, excluding certain items. The company also raised its quarterly dividend by 50 percent to 30 Canadian cents a share.

     Niko Resources Ltd., which produces oil and gas in South Asia, sank 3.7 percent to C$79.95 after Gavin Wylie, an analyst at Scotiabank, reduced his rating on the shares to “sector perform” from “sector outperform.” In a note to clients, Wylie wrote that an Indian government study of an offshore natural gas block in which Niko has an interest raises concerns about water encroachment and resource depletion.

     Gold rose to a record as the U.S. dollar fell for a ninth day against a basket of world currencies, the longest streak in four years. The U.S. currency had dropped to the lowest since July 2008 after the Federal Reserve indicated on April 27 that it will not take immediate steps to restrain inflation.

     Goldcorp Inc., the world’s second-largest producer of the metal by market value, gained 1.2 percent to C$52.89. Eldorado Gold Corp., Canada’s fifth-biggest gold producer by market value, advanced 3.6 percent to C$17.61. Agnico-Eagle Mines Ltd., a gold producer with operations in Quebec, Mexico and Finland, increased 2.6 percent to C$65.92 after reporting first-quarter profit that topped the average analyst estimate.

     Base-metals and coal producers gained after the Globe and Mail said a group including Jinchuan Group Ltd. and China Investment Corp. may bid for Lundin. The newspaper cited unnamed “people familiar with the discussions.”                         

     In a written response to the media, the company said its strategic review is ongoing and it has no “material developments” to announce.

     Lundin soared 11 percent to a three-year high of C$9.26.

First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, advanced 1.7 percent to C$134.83. Quadra FNX Mining Ltd., a copper producer with operations in the U.S., Canada and Chile, increased 3.5 percent to C$15.53.

     RIM, Canada’s largest technology company, forecast profit of $1.30 a share to $1.37 a share for the quarter ending May 28, down from last month’s estimate of $1.47 a share to $1.55 a share. Analysts had forecast a profit of $1.50 a share, on average, excluding certain items. In a press release, the company cited a shift toward cheaper smartphones by BlackBerry buyers.                          

     Shares of the Waterloo, Ontario-based company sank 14 percent, the most since February 2009, to an eight-month low of C$46.09. RIM has tumbled 36 percent over the last 12 months, behind only Jaguar Mining Inc. among S&P/TSX companies.

     Trucking company TransForce Inc. surged 7.4 percent, the most in six months, to C$14.09 after saying it has formed an alliance with Deutche Post AG’s DHL unit. TransForce will take over DHL’s Canadian domestic business. The deal will increase the Saint-Laurent, Quebec-based company’s annual revenue by more than C$275 million ($288 million).

     Extendicare Real Estate Investment Trust, which owns 265 senior-care centers in the U.S. and Canada, plunged 9.7 percent, the most since December 2008, to C$11.89 after the U.S. Health & Human Services Department proposed a rate cut for skilled- nursing facilities.

     In a note to clients, Neil Downey, an analyst at Royal Bank of Canada, said the rate reduction could lower Extendicare’s annual funds from operations by as much as 38 Canadian cents a unit. 

US

By Nikolaj Gammeltoft and Inyoung Hwang

     April 29 (Bloomberg) — U.S. stocks gained, extending a weekly rally in the Standard & Poor’s 500 Index, as companies such as Caterpillar Inc. and Goodyear Tire & Rubber Co. reported earnings that topped analysts’ estimates.

     Caterpillar jumped 2.5 percent after also raising its forecast amid a surge in sales in developing countries and Goodyear surged 12 percent after posting record sales. Microsoft Corp. lost 3 percent after sales missed analysts’ predictions.

Research In Motion Ltd., the maker of the BlackBerry, tumbled 14 percent after cutting its earnings forecast.

     The S&P 500 rose 0.2 percent to 1,363.61 at 4 p.m. in New York. The Dow Jones Industrial Average climbed 47.23 points, or 0.4 percent, to 12,810.54. Both gauges are trading at their highest levels in almost three years.

     “The earnings reports have been as expected or slightly better,” said Michael Shinnick, a South Bend, Indiana-based money manager at Wasatch Advisors Inc., which oversees $10.5 billion. “Companies like Caterpillar with exposure to global growth were very strong. However, there are some pockets of softness with debate over future strength as we saw with Microsoft.”

     The S&P 500 rose 2 percent this week and gained 2.9 percent this month. The measure has rallied 8.4 percent in 2011 as higher-than-estimated profit and economic reports from manufacturing to housing bolstered investors’ confidence.

Earnings-per-share beat estimates at more than three-quarters of the 298 companies in the S&P 500 that reported since April 11, data compiled by Bloomberg show.

     Thomas J. Lee, JPMorgan Chase & Co.’s chief U.S. equity strategist, raised his 2011 year-end estimate for the S&P 500 to 1,475 from 1,425, citing first-quarter earnings growth. He also boosted his 2012 earnings-per-share estimate for companies in the U.S. equity benchmark gauge to $105 from $102.

     “First-quarter results have been impressive and are a reminder that S&P 500 earnings-per-share results can remain resilient despite weaker U.S. gross domestic product growth,”

Lee wrote in a report dated yesterday. “The most encouraging aspect of first-quarter earnings has been the strength in top- line growth.”

     Sales have grown 10 percent for S&P 500 companies that have reported quarterly results since April 11, exceeding analysts’ estimates at 71 percent of the companies. Stocks rallied yesterday, as higher-than-estimated sales at companies such as Sprint Nextel Corp. outweighed a report that the U.S. economy grew at a slower pace than forecast in the first quarter.

     Lower-than-estimated data on business activity and consumer confidence underscored the Fed’s assessment this week that it will probably keep interest rates near zero for an extended period to bolster a “moderate” economic expansion.

     The Institute for Supply Management-Chicago Inc. said today its business barometer fell to 67.6 in April from 70.6 the prior month, trailing the median forecast in a Bloomberg News survey of economists for a drop to 68.2. The Thomson Reuters/University of Michigan final index of consumer sentiment rose to 69.8 from March’s 67.5 reading that was the lowest since November 2009.

The gauge was projected to increase to 70, according to the median economist estimate.

     Government data showed consumer spending in the U.S. climbed in March as Americans spent more on food and fuel, indicating further income gains are needed to boost the biggest part of the economy.                         

     Caterpillar climbed 2.5 percent to $115.41 for the biggest gain in the Dow. The world’s largest maker of construction equipment is betting on higher mining-equipment sales with its $8.6 billion acquisition of Bucyrus as Asian demand drives up commodity prices. Business outside the U.S. is “booming,”

Chief Executive Officer Doug Oberhelman told investors and analysts at a construction-equipment conference in Las Vegas last month.

     Industrial companies in the S&P 500 climbed 0.3 percent collectively, the second-most among 10 industries in the benchmark index.

     Goodyear Tire & Rubber rallied 12 percent to $18.15 for the biggest gain in the S&P 500. The largest U.S. tiremaker reported first-quarter adjusted earnings of 51 cents a share, more than quadrupling the 11-cent average estimate made by analysts.

     Motorola Mobility Holdings Inc. rose 8.6 percent to $26.06.

The handset maker, spun off in January from parent Motorola Inc., reported a narrower first-quarter loss than analysts projected as it sold more Droid and Atrix phones.

     SunPower Corp. jumped 35 percent to $21.69. Total SA, Europe’s third-biggest oil producer, offered to buy as much as 60 percent of the second-largest U.S. solar module manufacturer at a price of $23.25 a share.

     Energy stocks surged 1.5 percent, the biggest rally out of 10 industries in the S&P 500, as the price of oil climbed higher, capping an unprecedented eighth straight month of gains.

     “Earnings numbers are so far looking pretty strong,” said Thomas Nyheim, a Greenville, Delaware-based money manager for Christiana Trust, which oversees $7.5 billion. “But the one thing that keeps coming up is inflation risk, and we’re beginning to see some of that cost pressure coming through in the reports. There’s still a lot of caution in the market.”

      Microsoft declined 3 percent, the most in the Dow, to $25.92. The world’s biggest software maker reported third- quarter sales in the Windows division that missed analysts’ predictions as consumers shunned its products in favor of tablets such as Apple Inc.’s iPad.

     RIM sank 14 percent, the most since September 2009, to $48.65. The Waterloo, Ontario-based company cut its earnings forecast for the quarter ending May 28 to a range of $1.30 a share to $1.37 a share. Last month, the company had forecast profit of $1.47 a share to $1.55 a share. Before today, it had lost 2.7 percent this year.

     Mike Abramsky, an analyst at RBC Capital Markets in Toronto, slashed his price estimate for RIM stock to $55 from $90 and his rating to “sector perform” from “top pick.” At least four other analysts — Jefferies & Co. Inc.’s Peter Misek, Cormark Securities Inc.’s Richard Tse, Gleacher & Co.

Securities’ Stephen Patel and National Bank Financial’s Kris Thompson — reduced their ratings on the stock.

     Bank of America Corp. and JPMorgan paced losses in financial companies after the two were listed as among 16 investment banks facing the first-ever European Union antitrust probes into the swaps market. Charlotte, North Carolina-based Bank of America slid 1.1 percent to $12.28, while New York-based JPMorgan slumped 0.5 percent to $45.63.

Have a wonderful weekend everyone.

Be magnificent! 

Every day a man must solve the problem of widening the field of his life and adjusting his burdens.

These are too complex and numerous for him to carry himself,

but he knows that by being methodical he can lighten the load.

When the burdens are too complicated and difficult to manage, he must understand the reason:

he has not found a system that will put everything in place and distribute the weight he carries more evenly.

The search for this system is actually the search for the whole, for synthesis;

it is our effort to create harmony, thanks to an interior adaptation, in the heterogeneous complex of exterior material.

-Rabindranath Tagore, 1861-1901 

As ever,

Carolann

 It’s not whether you win or lose,

it’s how you place the blame.

     -Oscar Wilde, 1854-1900

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

Senior Vice-President &

Senior Investment Advisor