December 15th, 2011 Newsletter
Tangents: Tomorrow is Beethoven’s birthday (born 1770) and all week long, the Seattle radio station, Classical King FM, has been playing his music. Tomorrow will be no exception, they will be playing his music in his honor all day. It has been wonderful to listen to in the mornings getting ready for the day ahead.
The Globe & Mail reminds us that on this day, December 15th, 1979, Chris Haney and Scott Abbott conceived of Trivial Pursuit. John Allemang writes that “these two beer-loving Montreal newspapermen….[whose Scrabble pieces kept disappearing] so, instead of buying another Scrabble set, they combined their journalistic love of random facts and pub-based argumentation to create Trivial Pursuit – a game that became an eighties social phenomenon as party-going was transformed into trivia one-upmanship. It took them 45 minutes to craft the basic concept, but three hard years to break into the ruthless board-game market. How many copies did they sell in 1984 alone? Twenty million. And what effect did that have on the ex-journalists’ golf game? They built their own 36-hole course, and never had to stand in line again.”
Photos of the day
December 15, 2011
Large waves break on the shore of Quiberon during a winter storm in Brittany, western France. Stephane Mahe/Reuters.
Market Commentary:
Canada
By Lu Wang and Matt Walcoff
Dec. 15 (Bloomberg) — Canadian stocks fell for a fourth day as mining and industrial stocks dropped amid concern slowing growth in China and a prolonged European debt crisis will hinder a global economic recovery.
Barrick Gold Corp., the world’s largest gold producer, dropped 1.5 percent as the metal declined after settling at the lowest price since July yesterday. Canadian National Railway Co. decreased 1.6 percent as a report showed manufacturing in China may contract for a second month and International Monetary Fund Managing Director Christine Lagarde said Europe’s debt crisis is escalating.
The Standard & Poor’s/TSX Composite Index retreated 38.63 points, or 0.3 percent, to 11,504.42. The benchmark gauge has dropped 4.4 percent since Dec. 9, poised for its worst week since September.
“Clearly what’s happening is you’ve got this macro problem,” Irwin Michael, a money manager at ABC Funds in Toronto, said in a telephone interview. His firm oversees C$1 billion ($967 million). “It appears like the sky is falling. It’s scaring off a lot of investors — why do anything just before you take your Christmas holiday?”
The S&P/TSX fell this week after Moody’s Investors Service said it will review European Union countries’ ratings and the U.S. Federal Reserve declined to begin a third round of asset purchases to spur economic growth. The index has plunged 14 percent this year, which would be its second-biggest annual retreat in the last 20 years behind that of 2008.
Manufacturing in China probably contracted this month, according to a survey by HSBC Holdings Plc and Markit Economics. The country’s foreign direct investment fell last month for the first time since 2009, the Ministry of Commerce said.
U.S. industrial production slipped 0.2 percent last month, the Federal Reserve said today in Washington. Most economists in a Bloomberg survey had forecast an increase.
Lagarde, speaking at the State Department in Washington, said the European debt crisis is growing to the point that it won’t be solved by one group of countries. If countries don’t work together, the world will face a situation similar to the 1930s, before the world slid into World War II, she said.
The S&P/TSX Materials Index dropped, led by gold producers, after closing at the lowest since August 2010 yesterday. Barrick slipped 1.5 percent to C$45.79, a sixth-straight retreat.
Agnico-Eagle Mines Ltd., Canada’s sixth-biggest gold producer by market value, declined 5.6 percent to C$37.92, the lowest since December 2008. Nevsun Resources Ltd., which mines precious and base metals in Eritrea, sank 13 percent to C$5.10.
First Majestic Silver Corp., which operates in Mexico, jumped 9.3 percent to C$16.60. The company will be added to the NYSE Arca Gold Miners Index on Dec. 19, Todd Anthony, investor- relations manager for First Majestic, said in a telephone interview. The index is used for the $8.56 billion Market Vectors Gold Miners ETF.
Base-metals producers retreated as copper slumped to a seven-week low. Teck Resources Ltd., Canada’s biggest industrial-metals and coal producer, lost 1.9 percent to C$34.43. First Quantum Minerals Ltd., the country’s second- largest publicly traded copper producer, decreased 2 percent to C$18.18.
Suncor Energy Inc., Canada’s largest oil and gas producer, fell 1.9 percent to C$27.59 as crude oil dropped to the lowest in six weeks.
“The one thing that tends to move the Canadian market more is the price of commodities,” Timothy Lazaris, chief executive officer of Red Sky Capital Management Ltd. in Toronto, which oversees C$54 million, said in a telephone interview. “There’s been some weak data in China” where demand is especially important to Canada because “we sell a lot of base metals and a lot of material into the global commodity cycle.”
Industrial companies in the S&P/TSX retreated, led by railroads. CN, Canada’s biggest railroad, fell 1.6 percent to C$75 to extend its four-day drop to 5 percent. Canadian Pacific Railway Ltd. declined 2.5 percent to C$63.86, ending a six-day streak of gains.
Finning International Inc., the world’s largest Caterpillar dealer, tumbled 5.5 percent to C$22.05 after forecasting a 5 percent increase in sales next year. Analysts, on average, estimated C$6.11 billion, a 10 percent gain from C$5.55 billion this year, according to a Bloomberg survey.
Canaccord Financial Inc., Canada’s largest non-bank brokerage, fell 8.2 percent to C$7.80 after agreeing to buy London-based Collins Stewart Hawkpoint Plc for 253.3 million pounds ($393 million). Canaccord’s closing price was the lowest since July 2009.
US
By Inyoung Hwang
Dec. 15 (Bloomberg) — U.S. stocks rose, snapping a three- day decline in the Standard & Poor’s 500 Index, as data on jobless claims and manufacturing signaling a strengthening economy overshadowed concern over Europe’s debt crisis.
Utilities, health-care and consumer staples had the biggest gains out of 10 S&P 500 groups, advancing at least 0.9 percent.
FedEx Corp., the operator of the world’s biggest cargo airline, jumped 8 percent after earnings beat analysts’ estimates on increased holiday orders. Novellus Systems Inc. surged 16 percent as Lam Research Corp. agreed to acquire the company.
The S&P 500 rose 0.3 percent to 1,215.75 at 4 p.m. New York time, paring an earlier rally of 1.1 percent as oil declined and financial companies erased gains. The Dow Jones Industrial Average added 45.33 points, or 0.4 percent, to 11,868.81.
“The news on the U.S. front is surprisingly positive and provides some counterbalance to the uncertainty in Europe,” Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4 billion in Raleigh, North Carolina, said in a telephone interview. “We’re focusing increasingly on the domestic economy which looks to be on the recovery track.”
The S&P 500 lost 3.5 percent during the first three days of this week after posted its first back-to-back weekly gain since October. The benchmark stock measure slumped on Dec. 13 after the Federal Reserve refrained from taking new actions to bolster growth at the world’s largest economy. The central bank said the U.S. economy is maintaining its expansion even as the global economy slows.
Global stocks extended gains this morning after Labor Department figures showed initial jobless claims fell by 19,000 to 366,000 last week, the fewest since May 2008. The median of 47 economists had projected 390,000, according to a Bloomberg News survey. Two reports showed manufacturing in the New York and Philadelphia regions expanded more than forecast in December.
The Federal Reserve Bank of New York’s general economic index accelerated to the highest level in seven months, to 9.5 from 0.6 in November. Readings higher than zero signal expansion among companies in the region, which covers New York, northern New Jersey and southern Connecticut. The Federal Reserve Bank of Philadelphia’s index, covering eastern Pennsylvania, southern New Jersey and Delaware, increased to 10.3 from 3.6.
Equities pared early gains after International Monetary Fund Managing Director Christine Lagarde said at an event in Washington that Europe’s “crisis is not only unfolding, but escalating” and cannot be resolved by one group of countries.
“Investors are trying to get a sense of not only how the economy is performing but also looking at what happens with policy, what happens in Europe,” Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., said in a telephone interview. His firm has about $108 billion in client assets.
FedEx jumped 8 percent, the biggest rally since April 2009, to $83.47. The company, considered an economic barometer because it delivers goods ranging from pharmaceuticals to financial documents, posted a quarterly profit that beat analysts’ estimates as U.S. consumers increased holiday orders from online retailers. FedEx also ordered 27 Boeing Co. 767 jet freighters to retire some of its older planes. Boeing increased 1 percent to $70.61.
Novellus Systems surged 16 percent to $40.37 for the biggest gain in the S&P 500. Lam Research agreed to buy the maker of machinery used in semiconductor production for about $3.3 billion in stock, valuing it at $44.42 a share. Lam Research fell 8.4 percent to $36.17.
Financial companies were unchanged as a group after rallying as much as 1.6 percent after Spain sold more debt than it had planned. Shares in the group erased their gains as the Securities and Exchange Commission appealed a District Court judge’s decision to reject its proposed $285 million settlement with Citigroup Inc. The New York-based bank slumped 0.5 percent to $25.92, after earlier rising as much as 3.3 percent.
Michael Kors Holdings Ltd., the clothing company founded by the designer of that name, rose 21 percent to $24.20 in its trading debut. The company sold 47.2 million shares yesterday for $20 apiece to raise $944 million, 19 percent more than planned.
Technology and energy companies in the S&P 500 posted the only declines among 10 groups, falling at least 0.2 percent.
First Solar Inc., the world’s largest maker of thin-film solar panels, slumped 6 percent, the biggest drop in the S&P 500, to $31.45. The company was downgraded to “neutral” from “outperform” by Robert W. Baird & Co. Chevron Corp. slid 0.9 percent to $99.67, as the price of crude oil tumbled to its lowest level in six weeks.
Tomorrow is the expiration of futures and options contracts on indexes and individual stocks, an event known as quadruple witching, which occurs once every three months. The S&P 500 has slumped 3.3 percent in 2011 and 11 percent from its high on April 29. The index posted losses in six of the past seven months through November. The gauge’s decline this year may mean there are lower odds the measure will rally during the last two weeks of 2011, if history is any guide, according to Nautilus Capital LLC.
Since 1928, the benchmark index has rallied at year-end 60 percent of the time when it had fallen year to date, compared with 80 percent when it was up for the year, data from Nautilus show. The S&P 500 produced an average gain of 1.3 percent during the last two weeks of the year. Stocks favored by hedge funds fell more than the S&P 500 during the first three days of the week. A Goldman Sachs index of companies that appear most often in funds’ top 10 holdings lost 4.5 percent in the first three days of the week, a period in which the S&P 500 fell 3.5 percent. The index rose 0.4 percent today.
Hedge funds selling assets because of client redemptions may have exacerbated declines for equities and reinforced market volatility, according to Eric Green, a Philadelphia-based fund manager at Penn Capital Management. His firm oversees about $6 billion.
“The hedge fund exposure continues to go down — it’s year end, they’re squaring positions off, they’re preparing for redemptions,” Green said in a telephone interview. “The volatility is pretty extreme, the market is getting whipped around on nothing and most of them want to shut things down. They probably have to sell more things than buy because they have net redemptions.”
Have a wonderful evening everyone.
Be magnificent!
In his essence, man is not a slave to himself, nor to the world; he is a lover.
His freedom and accomplishments are in love,
which is another name for perfect understanding.
In this ability to understand, in this impregnation of everything that is,
he is one with the Spirit that penetrates everything,
and that is also the breath of the soul.
-Rabindranath Tagore, 1861-1974
As ever,
Carolann
With courage you will dare to take risks, have the
strength to be compassionate, and the wisdom to
be humble. Courage is the foundation
of integrity.
-Keshavan Nair, 1940-