December 6, 2011 Newsletter
Dear Friends,
Tangents:
Lord Byron, Journal, December 6th, 1813.
Awoke, up an hour before being called; but dawdled three hours in dressing. When one subtracts from life infancy (which is vegetation), sleep, eating, and willing – buttoning and unbuttoning – how much remains of downright existence? The summer of a dormouse.
Birthdays:
Ira Gershwin, lyricist, b. 1896
Old Man Sunshine – Listen, you!
Never tell me Dreams Come True!
Just try it –
And I’ll start a riot.
Beatrice Fairfax – don’t you dare
Ever tell me he will care;
I’m certain
It’s the Final Curtain.
I never want to hear
From any cheer-
Ful Polyannas,
Who tell you Fate
Supplies a Mate –
It’s all bananas!
They’re writing songs of love,
But not for me;
A lucky star’s above,
But not for me.
With Love to Lead the Way,
I’ve found more Clouds of Gray
Than any Russian play
could guarantee…
-Gershwin, 1930
Alfred Eisenstaedt, photographer, b. 1898
Market Commentary:
Canada
By Matt Walcoff
Dec. 6 (Bloomberg) — Canadian stocks fell for the third time in four days, led by financial companies, after Bank of Montreal reported fourth-quarter earnings that missed the average analyst estimate in a Bloomberg survey.
BMO, Canada’s fourth-biggest lender by assets, lost 3.5 percent after its profit excluding certain items missed the average estimate by 3.4 percent. Copper producer Quadra FNX Mining Ltd. soared 40 percent after agreeing to be bought by KGHM Polska Miedz SA. Petrominerales Ltd., which produces oil and gas in Colombia, plunged 16 percent after halting some production.
The Standard & Poor’s/TSX Composite Index slipped 38.08 points, or 0.3 percent, to 12,081.25. “People are saying, ‘Where’s the significant growth going to come from for the Canadian banks?’” Anil Tahiliani, a money manager at McLean & Partners in Calgary, said in a telephone interview. The firm oversees about C$1 billion ($989 million). “It’s hard to say what’s going to drive the banks forward other than the global economic picture getting better.”
The S&P/TSX climbed 5.7 percent in the previous six days as central banks in Europe, Asia and North America cut lenders’ borrowing costs and Italy’s cabinet passed a package of spending cuts and tax increases. Canada’s benchmark stock gauge has fluctuated with developments in the European debt crisis this quarter, which has overshadowed growth in Canadian companies’ earnings.
The S&P/TSX Financials Index fell after Toronto-based BMO missed the analyst estimate for the first time in five quarters. Bank of Montreal slumped 3.5 percent to C$57.74. Royal Bank of Canada, the country’s biggest lender, slipped 1.5 percent to C$48.50. Regional lender Canadian Western Bank dropped 4.7 percent, the most since July 2009, to C$27.13 after Sumit Malhotra, an analyst at Macquarie Group Ltd., reduced his rating on the shares to “neutral” from “outperform.”
The U.S. Dollar Index declined and raw-materials companies rose after the Financial Times said the European Union was in talks to almost double its bailout fund. The newspaper cited unnamed European officials.
Potash Corp. of Saskatchewan Inc., the world’s biggest fertilizer producer by market value, increased 2.9 percent to C$43.90 as corn advanced for the first time in four days. Goldcorp Inc., the world’s second-largest gold producer by market value, climbed 1.4 percent to C$52.54 as the metal erased its losses in electronic trading.
Ivanhoe Mines Ltd., Rio Tinto Group’s partner in the Oyu Tolgoi copper mine in Mongolia, rose 5.1 percent to C$22.71 after Australia’s Business Spectator said Rio Tinto is “widely expected” to buy the shares of Ivanhoe it doesn’t already own. The website didn’t cite any sources. Luke Distelhorst, a spokesman for Ivanhoe, said the company has no comment on the report.
Quadra FNX, which operates in the U.S., Canada and Chile, jumped a record 40 percent to C$15.88 after saying Lubin, Poland-based KGHM, the biggest copper producer by European output, will buy it for C$15 a share in cash. The purchase would be the biggest acquisition of a Canadian base-metals company by price since Rio Tinto bought Alcan Inc. for $43 billion in 2007.
European Goldfields Ltd., which is developing mines in Greece and Romania, surged 22 percent, the most since December 2008, to C$12.12 after Sky News said Eldorado Gold Corp. has approached it about a potential takeover. The network didn’t say where it got its information. European Goldfields said in a statement it received “preliminary and indicative approaches from third parties” regarding potential deals.
Petrominerales plunged 16 percent, the most since September 2008, to C$17.10 after saying it has suspended some production until it improves water-disposal capacity. Pacific Rubiales Energy Corp., which also operates in the country, retreated 4.2 percent to C$20.27.
Athabasca Oil Sands Corp., PetroChina Co.’s partner in oil- sands development, rallied 6.1 percent to C$13.35. The companies may be close to receiving regulatory approval for the MacKay project, Jeff Martin, an analyst at Peters & Co. in Calgary, said in an e-mail message.
Yoga-wear retailer Lululemon Athletica Inc. slumped 6.5 percent to C$45.98 after Taposh Bari, an analyst at Jefferies & Co., reduced his 12-month share-price estimate to $54 from $59. Bari cut his 2012 profit forecasts after the Vancouver-based company reported sales that missed the average analyst estimate in a Bloomberg survey last week.
Canadian National Railway Co., the country’s largest railroad, slipped 1.8 percent to C$78.39 after Gary Chase, an analyst at Barclays Plc, cut his rating on the shares to “underweight” from “equal weight.” CN is more-expensive relative to forecast earnings for 2012 than other North American railroads, Chase wrote in a note to clients.
Capstone Infrastructure Corp., which owns stakes in alternative-energy power plants, sank 37 percent to a record-low C$3.54 after cutting its earnings forecast and saying it may reduce its dividend.
Sandvine Corp. tumbled 35 percent, the most since March 2008, to C$1.20. The maker of hardware and software for Internet service providers said fourth-quarter revenue was C$19.5 million ($19.3 million) to C$20 million, compared with an average analyst estimate in a Bloomberg survey of C$29 million.
US
By Rita Nazareth
Dec. 6 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index higher a second day, on speculation European leaders may act to contain the debt crisis after S&P put 15 euro nations on review for possible downgrade.
3M Co. added 1.5 percent as revenue may increase as much as 6 percent next year amid a boost from acquisitions. General Electric Co. rose 2.4 percent as Sanford C. Bernstein & Co. raised its recommendation. Darden Restaurants Inc., operator of the Red Lobster chain, tumbled 12 percent after cutting its full-year sales and profit growth forecasts.
The S&P 500 advanced 0.1 percent to 1,258.47 at 4 p.m. New York time, rebounding from an earlier drop of 0.3 percent. The Dow Jones Industrial Average added 52.30 points, or 0.4 percent, to 12,150.13. About 6.3 billion shares changed hands on U.S. exchanges, or 19 percent below the three-month average.
“The market wants to go higher,” Dan Veru, chief investment officer at Fort Lee, New Jersey-based Palisade Capital Management LLC, which manages $3.4 billion, said in a telephone interview. “Europe is finally talking on a constructive manner to solving its problems. If they come up with something that’s credible, this market has another 7 percent to 10 percent to the upside.”
German Finance Minister Wolfgang Schaeuble said S&P’s warning will help force European leaders to ratchet up efforts to resolve the crisis. S&P said today the European Financial Stability Facility may lose its top credit rating if any of its guarantors have their own debt grade cut.
Stocks turned higher in the afternoon as the Financial Times reported that officials are negotiating a bigger rescue effort to discuss at this week’s European Union summit, including running two separate bailout funds simultaneously. Bloomberg News reported discussions about the combination of the temporary and permanent rescue funds on Oct. 20.
“Europe is going to be an ongoing story,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which oversees about $75 billion, said in a telephone interview. “It seems like every day they’ve got a new solution of the problem. I hear at least one new story of a bailout package every day. Is this really what’s going to bail them out?”
3M rallied 1.5 percent to $82.13. Sales may be $30.2 billion to $31.5 billion, according to a presentation on the company’s website, in line with the $30.6 billion average estimate from analysts surveyed by Bloomberg. The maker of Scotch-Brite sponges and Nexcare thermometers expects earnings per share of $6.25 to $6.50 next year, also tracking estimates.
GE added 2.4 percent to $16.72. Sanford C. Bernstein raised its recommendation for the Fairfield, Connecticut-based company to “outperform” from “market perform,” citing rising dividends and energy orders starting in 2012. Eli Lilly & Co. advanced 3.9 percent to $38.86, the highest price since Nov. 8. Shares of the drugmaker could rise more than 50 percent should its drug for Alzheimer’s disease succeed, Sanford C. Bernstein said in a note to clients.
A gauge of 12 homebuilders in S&P indexes rallied 1.2 percent. Toll Brothers Inc. gained 2.7 percent to $21.30. The largest U.S. luxury-home builder reported earnings that beat analysts’ estimates as prices rose and sales improved at its East Coast communities. MetroPCS Communications Inc. added 7.8 percent to $9 for the biggest gain in the S&P 500. The pay-as-you-go U.S. wireless carrier was raised to “outperform” from “market perform” at William Blair & Co., which said the stock’s price doesn’t reflect the company’s “healthy balance sheet.”
Darden fell 12 percent, the most in three years, to $41.82. The restaurant operator said sales and profit this year will grow more slowly than previously forecast as the company works to revive its Olive Garden chain.
A measure of transportation shares had the biggest decline in the S&P 500 among 24 industries, falling 0.8 percent. Union Pacific Corp. lost 1.7 percent to $102.84. Laszlo Birinyi says he knew it would be hard to make predictions for 2012 in October, when he saw a headline suggesting that markets would rise or fall depending on whether the tiny nation of Slovakia approved a bailout plan for Europe.
Birinyi, president of stock market research and money- management firm Birinyi Associates Inc., says markets are so volatile that it doesn’t take much to send them reeling, reports Bloomberg Markets magazine in its January issue.
“There are so many exogenous factors that to try to forecast the market with a degree of confidence is difficult,” Birinyi says. The best strategy for stock investors, he says, is to stick with iconic brands, such as Apple Inc. or Ralph Lauren Corp., and with companies that offer “meaningful dividends” of at least 5 percent.
Have a wonderful evening everyone.
Be magnificent!
The whole universe is to us a writing of the Infinite in the language of the finite.
-Swami Vivekananda, 1863-1902
As ever,
Carolann
If you think you can, you can. And if
you think you can’t, you’re right.
-Mary Kay Ash, 1918-2001