January 9th, 2012 Newsletter
Dear Friends,
Tangents: Full moon tonight .
Birthdays today:
Joan Baez turns 71 today.
Simone de Beauvoir, writer, born January 9th, 1908.
No man is an island,
No man stands alone,
Each man’s joy is joy to me,
Each man’s grief is my own.
We need one another,
So I will defend,
Each man as my brother,
Each man as my friend…
When I help my brother,
Then I know that I,
Plant the seed of friendship,
That will never die.
-Joan Baez
Market Commentary:
Canada
By Matt Walcoff
Jan. 9 (Bloomberg) — Most Canadian stocks fell as producers of base metals and energy declined with copper and natural gas futures after Germany reported a drop in industrial production and above-normal temperatures continued in the U.S.
Teck Resources Ltd., Canada’s largest base-metals and coal producer, decreased 1.8 percent after agreeing to buy SilverBirch Energy Corp. for C$435 million ($424 million).
Enbridge Inc., the country’s biggest pipeline company, lost 0.6 percent. Valeant Pharmaceuticals International Inc., Canada’s biggest drugmaker, rose 2.7 percent after at least four analysts raised their price estimates on the shares.
Among Standard & Poor’s/TSX Composite Index stocks, 134 retreated, 109 advanced and 10 were unchanged. The S&P/TSX increased 8.08 points, or 0.1 percent, to 12,196.72.
“Things are mixed south of the border, and Europe, even if they add money to the system, they’re still trying to be austere at the same time, which means you either get slowing or potentially negative growth, which doesn’t bode well for the commodity sector,” Arthur Salzer, chief executive officer of Northland Wealth Management in Toronto, said in a telephone interview. The firm oversees about C$200 million.
The S&P/TSX climbed 2 percent last week, its third straight weekly advance, as raw-materials and energy stocks rose after economic data indicated global manufacturing is strengthening.
The two industries make up 48 percent of Canadian stocks by market value, according to Bloomberg data.
German industrial production fell 0.6 percent in November, the Economics Ministry said today in Berlin. The drop exceeded most economists’ forecast in a Bloomberg survey.
Teck slipped 1.8 percent to C$37.65 after the cash portion of its acquisition agreement with SilverBirch amounted to a 32 percent premium relative to the 20-day volume-weighted average price of the target company’s shares, according to Bloomberg data. SilverBirch, which owns a 50 percent stake in the Frontier oil-sands project, soared 33 percent, the most since it began trading in October 2010, to C$9.61.
Among other base-metals producers, First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper-mining company, fell 2 percent to C$21.58 to end a six-day streak of advances. Ivanhoe Mines Ltd., Rio Tinto Group’s partner in the Oyu Tolgoi project in Mongolia, dropped 2.8 percent to C$18.51.
The S&P/TSX Energy Index declined for a third day as crude oil retreated and natural gas slipped on forecasts for above- normal U.S. temperatures. Enbridge lost 0.6 percent to C$37.57.
Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, decreased 2.2 percent to C$12.40 a day before the release of its 2012 financial forecasts.
Progress Energy Resources Corp., which produces natural gas and oil in Canada, slumped 5.1 percent to C$12.72 after Stacey McDonald, an analyst at GMP Capital Inc., cut her rating on the stock to “hold” from “buy.”
Valeant gained 2.7 percent to C$50.14 after at least four analysts raised their 12-month price estimates on the shares.
The company forecast cash earnings higher than most analysts had projected on Jan. 6.
Lennox Gibbs, an analyst at Toronto-Dominion Bank, boosted his forecast to $70 from $60, saying in a note to clients that Chief Executive Officer J. Michael Pearson’s “strong strategic vision and the ongoing execution bode well for value creation at Valeant.”
The S&P/TSX Financials Index advanced as the country’s three largest banks climbed. Bank of Nova Scotia, the third- biggest lender by assets, increased 0.6 percent to C$51.71.
Canadian Imperial Bank of Commerce, the fifth-largest bank, rose
0.5 percent to C$74.99. Sun Life Financial Inc., Canada’s third- biggest insurer, gained 0.9 percent to C$19.81.
Trucking company TransForce Inc. rallied 7.7 percent, the most since October 2010, to C$14.85 after Walter Spracklin, an analyst at Royal Bank, raised his rating on the shares to “top pick” from “outperform.”
“The company has now assembled a group of assets that are high-quality in nature,” Spracklin wrote in a note to clients.
TransForce “shares are not being properly valued by the marketplace.”
Rare Element Resources Ltd., which is developing a rare- earths project in Wyoming, advanced 18 percent to C$6.85 to extend its six-day surge to 109 percent. The shares jumped after the company said Jan. 4 that it had more resources on its property than previously disclosed. The six-day climb was the biggest since 2001.
Imax Corp., the maker of giant-screen movie-projection systems, climbed 5.8 percent to C$20.71 after the Wall Street Journal’s “Heard on the Street” column said its profits are likely to increase.
US
By Rita Nazareth
Jan. 9 (Bloomberg) — U.S. stocks advanced, extending last week’s rally for the Standard & Poor’s 500 Index, as European leaders discussed shoring up the region’s currency and investors awaited the start of the fourth-quarter earnings season.
Measures of industrial, energy and financial shares had the biggest gains in the S&P 500 among 10 groups. Alcoa Inc., the largest U.S. aluminum producer, increased 2.9 percent before reporting its quarterly results. Broadcom Corp. rallied 2.5 percent as Deutsche Bank AG said soft fourth-quarter results for chipmakers create a buying opportunity for the industry.
The S&P 500 rose 0.2 percent to 1,280.70 at 4 p.m. New York time. The benchmark gauge for American equities gained 1.6 percent last week, the second-best start of a year since 2006.
The Dow Jones Industrial Average climbed 32.77 points, or 0.3 percent, to 12,392.69. About 6 billion shares changed hands on U.S. exchanges, or 16 percent below the three month-average.
“We’ll see some earnings growth this year, but not a lot,” said Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co, which has more than $107 billion in client assets. “As long as U.S. fundamentals continue to move in a positive direction and as long as investors are comforted by the actions taken to maintain liquidity in Europe, the markets will be more complacent.”
Equities rose as German Chancellor Angela Merkel and French President Nicolas Sarkozy sought to craft a plan for rescuing the euro over the next three months. Euro-area leaders may complete their new budget rulebook by Jan. 30, one month ahead of schedule, and are considering accelerating capital contributions to the bailout fund being set up this year to stem the debt crisis.
U.S. corporations ended 2011 with the slowest profit growth in two years as the mending economy was met by a European slump that vexed companies more tied to global sales. S&P 500 companies, which beat analysts’ estimates in the previous 11 quarters, are forecast to report a 6 percent increase in per- share profit during the September-December period, according to projections compiled by Bloomberg.
American companies “are the cleanest dirty shirt but we have to ask the question to what extent are they being hit on revenue and to what extent can they continue to contain costs,”
Mohamed El-Erian, the chief executive officer of Pacific Investment Management Co., the world’s largest manager of bond funds, said during an interview on Bloomberg Television’s “In the Loop” with Betty Liu.
Alcoa, the first Dow company to announce results for the fourth quarter, rose 0.3 percent to $9.45 at 5:09 p.m. New York time, after gaining 2.9 percent to $9.43 in regular trading.
After the market close, Alcoa reported its first quarterly loss in more than two years as aluminum prices tumbled. The loss of 3 cents a share, excluding restructuring costs, matched the average projection from 18 estimates compiled by Bloomberg.
Seven out of 10 groups in the S&P 500 rose today, led by industries most tied to the economy. Caterpillar Inc. added 1.4 percent to $97.10. Schlumberger Ltd. advanced 1.5 percent to $68.82. Bank of America Corp. increased 1.5 percent to $6.27.
Semiconductor shares rallied after Deutsche Bank raised the industry to “overweight” from “equalweight.” Broadcom climbed 2.5 percent to $30.88. Intel Corp. gained 0.9 percent to $25.47. The Philadelphia Semiconductor Index rose 2 percent.
Netflix Inc. surged 14 percent to $98.18, for the biggest advance in the S&P 500. The owner of the streaming and DVD-by- mail service forecast it will attract millions of subscribers within a few years to the Internet film and television service it started in the U.K. and Ireland today, taking on Amazon Inc.’s Lovefilm.
Inhibitex Inc. soared 140 percent, the biggest gain in the Russell 2000 Index, to $23.70. Bristol-Myers Squibb Co. agreed to buy the Alpharetta, Georgia-based biopharmaceutical firm to boost its position in hepatitis C medicines.
Other hepatitis C drug developers also rallied. Idenix Pharmaceuticals Inc. surged 37 percent to $9.66. Achillion Pharmaceuticals Inc. jumped 23 percent to $9.72.
Costco Wholesale Corp. lost 2.6 percent to $79.01 after Sanford C. Bernstein & Co. cut its rating for the largest U.S.
warehouse-club chain to “underperform” from “market perform.”
GameStop Corp. dropped 3.5 percent to $23.99. The world’s largest video-game retailer cut its fourth-quarter and year comparable sales forecast.
CareFusion Corp. dropped 8.6 percent, the most in the S&P 500, to $23.28. The maker of infusion pumps and hospital supplies lowered the bottom end of its fiscal year earnings forecast.
Rallies in stocks and gasoline will push prices toward the highest levels ever in 2012 even as U.S. Treasury yields hold near record lows.
So say Douglas Kass of Seabreeze Partners Management Inc., Citigroup Inc.’s Edward L. Morse and Christopher Low of FTN Financial, forecasters whose predictions for equities, energy and bonds proved prescient in 2011. Repeating the feat with their calls for 2012 would require an unprecedented breakdown in price relationships across markets after correlations reached the tightest levels ever.
“They can’t all be right,” Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus & Co., which oversees more than $107 billion in client assets, said in a telephone interview on Jan. 5. “Strategists provide a valuable role in the financial community, but flexibility of institutional and individual investors is paramount.”
Have a wonderful evening everyone.
Be magnificent!
The universe is not ruled by arbitrary, temporary martial law.
No force exists that is powerful enough to derail it, or to continue indefinitely on its own path unregulated,
like an outlaw who disrupts all harmony around him. On the contrary, every force must return
to a state of equilibrium along a preordained curve. Waves rise, each to its own level,
with an apparent attitude of relentless rivalry, but only up to a certain point. We can thus understand
the vast serenity of the sea, to which all the waves are connected,
and to which they must all subside in the rhythm of marvelous beauty.
-Rabindranath Tagore, 1861-1901
As ever,
Carolann
Fall seven times,
stand up eight.
-Japanese Proverb
Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor
Queensbury Securities Inc.,
St. Andrew’s Square
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7
Tel: 778.430.5808
(C): 250.881.0801
Toll Free: 1.877.430.5895
Fax: 778.430.5838