August 12th, 2011 Newsletter

Dear Friends,

Tangents,

-Fitting for today’s photo I think:

“…A wise old owl sat on an Oak,

The more he sat, the less he spoke…

The less he spoke, the more he heard…

Why aren’t we like that wise old bird?…”

Photo of the Day:

An ornithologist releases a Krestel (Falcon) in the great Hungarian Plain, East of Budapest. -Laszlo Balogh (REUTERS)

Market Commentary

Canada

By Matt Walcoff and Victoria Taylor

Aug. 12 (Bloomberg) — Canadian stocks rose, completing their biggest weekly gain since July 2010, as medium-sized energy companies advanced after the U.S. reported an increase in retail sales.

Baytex Energy Corp., a western Canadian oil and gas producer, climbed 5.2 percent. Goldcorp Inc., the world’s second-largest gold producer by market value, fell 1.9 percent as the metal dropped a second day. First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, rose

5.1 percent after JPMorgan Chase & Co. recommended the stock.

The Standard & Poor’s/TSX Composite Index rose 2.4 points, or less than 0.1 percent, to 12,542.20, extending its weekly rally to 3.1 percent. The index rebounded after dropping to an 11-month low on Aug. 8 as gold advanced to a record and the U.S. reported a decline in initial jobless claims.

“The panic seems to be going out of the market,” David Cockfield, a managing director at Northland Wealth Management in Toronto, said in a telephone interview. The firm oversees about C$225 million ($227 million). “The debt ceiling thing really shook a lot of people, but they’re basically saying that’s a problem that’s behind us, and those employment numbers didn’t look too bad.”

The S&P/TSX has lost less than all other developed-market equity benchmarks this month, slipping 3.1 percent through yesterday. Precious-metals stocks make up 14 percent of Canadian equities by market value, according to Bloomberg data.

Medium-sized energy stocks gained after companies including Celtic Exploration Ltd. and Bonterra Energy Corp. reported quarterly financial results that surpassed some analysts’ estimates.

Recent economic data have encouraged investors to seek riskier assets such as shares of smaller companies, Robert McWhirter, a money manager at Selective Asset Management Inc. in Toronto, said in a telephone interview.

“The big debate revolved around, ‘Are we going into a double-dip recession?’” said McWhirter, who oversees C$140 million. “You’ve seen the U.S. consumer having at least spent a little bit of money.”

Baytex increased 5.2 percent, the most in two years, to C$50.24. Celtic advanced 8.2 percent to C$22.91 as at least four analysts raised their price estimates on the shares. Bonterra rallied 5.4 percent to C$52.71 after Ken F. Lin, an analyst at Paradigm Capital Inc., raised his rating on the shares to “buy” from “hold” after the company’s cash flow topped his estimate.

Gold futures fell 0.5 percent in New York after the U.S. said retail sales increased the most in four months in July. Goldcorp dropped 1.9 percent to C$49.48. Barrick Gold Corp., the world’s largest producer of the metal, slipped 1.3 percent to C$49.12. China Gold International Resources Corp. slumped 9.9 percent to C$3.92. Romarco Minerals Inc., which is developing a mine in South Carolina, sank 11 percent to C$1.45, the lowest since February 2010. First Quantum jumped 5.1 percent to C$23.96 after Ian Henderson, a money manager at JPMorgan, said copper may advance to a record due to supply disruptions and demand from emerging markets.

Valeant Pharmaceuticals International Inc., Canada’s largest drugmaker, climbed 4.1 percent to C$39.97 after tumbling 27 percent this month through yesterday. In a note to clients dated Aug. 10, Annabel Samimy, an analyst at Stifel Financial Corp., said the shares “fell victim to severe dislocation in the market” and that the company will successfully integrate acquisitions.

Directory publisher Yellow Media Inc. increased a record 19 percent to 94 Canadian cents. The shares plunged 87 percent this year through yesterday on concern it will be unable to maintain profitability as fewer people use printed phone books.

US

By Daniel Tilles and Rita Nazareth

Aug. 12 (Bloomberg) — U.S. stocks rose, capping a week of record swings for the Standard & Poor’s 500 Index, as an increase in retail sales tempered concern the economy is slowing. European shares extended a rebound from a two-year low after some nations banned short-sales. Treasuries gained.

The S&P 500, which fell or rose at least 4.4 percent in the previous four sessions, climbed 0.5 percent to 1,178.81 at 4 p.m. in New York to trim its weekly drop to 1.7 percent. The Stoxx Europe 600 Index jumped 3.7 percent as banks climbed for a second day, surging 4.5 percent as a group after sinking 6.7 percent on Aug. 10. The yield on the 10-year Treasury note fell nine basis points to 2.24 percent. The Swiss franc slid against all 16 major peers as the nation considers pegging it to the euro.

About $6.8 trillion was wiped off the value of global equity markets from July 26 through yesterday after S&P downgraded U.S. debt for the first time, riots swept across Britain and Europe’s debt crisis deepened. Government data today showed retail sales climbed in July by the most in four months, further easing concern about the economy following an unexpected drop in jobless claims yesterday. France, Spain, Italy and Belgium banned short-selling, or bearish bets placed with borrowed stock.

“You’ve got a couple of positive data points over the past week, including retail sales,” Stephen Wood, who helps oversee $163 billion as the New York-based chief market strategist for Russell Investments, said in a telephone interview. “Any information about the health of the consumer is important,” he said. “The short-selling ban in Europe may be providing some temporary relief to the market today. But it’s mostly another attempt to buy time to address larger structural issues.”

The swings in U.S. equities this week were unprecedented in the history of the American stock market, according to data compiled by Birinyi Associates Inc., Bloomberg and Howard Silverblatt, senior index analyst at S&P.

The S&P 500 plunged 6.7 percent on Aug. 8, its biggest slump since December 2008, in the first trading session after the U.S. was stripped of its AAA credit rating at S&P. The index rebounded 4.7 percent the next day as the Federal Reserve said it will leave its benchmark interest rate at a record low through at least the middle of 2013. The gauge then fell 4.4 percent on Aug. 10 and rebounded 4.6 percent yesterday. Never before has the index reversed moves that large each day over four sessions, the data show.

The S&P 500 rallied 5.2 percent over the past two sessions for its biggest back-to-back gain since March 2009. The index is down about 14 percent from a three-year high at the end of April. A gauge of retailers in the S&P 500 climbed 1.5 percent, as

26 of its 30 stocks advanced. Caterpillar Inc. added 2.9 percent, pacing gains among companies most-tied to the economy.

Hewlett-Packard Co. advanced 4.1 percent after Jefferies Group Inc. raised its recommendation for the shares.

The 0.5 percent increase in retail sales reported by the Commerce Department matched the median forecast of 81 economists surveyed by Bloomberg News and followed a 0.3 percent increase in June that was larger than previously estimated. Excluding auto sales, purchases rose more than projected.

The S&P 500 briefly erased gains today after confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.

Have a Wonderful Weekend Everyone!

As Always,

Kyle, for Carolann.