June 15, 2011 Newsletter

Dear Friends,

Tangents: 

Richard Stengel, Managing editor of Time  magazine, commencement address to Wheaton College graduating class of 2011: 

What I try to do every day in my job – and what I hope that you’ve learned over the last four years – is how to sort out the signal from the noise, how to separate the wheat from the chaff, how to separate information from knowledge and, even more importantly….how to create knowledge out of information….

One of the things I am certain about is that certainty and democracy don’t go together.  If you look at the leaders of the last 10 years who have had ironclad certainty, who are they?  Joseph Stalin, Fidel Castro, Saddam Hussein, Hosni Mubarak, Muammar Qaddafi.  Totalitarianism is the place for certainty, not democracy….

Democracy is based on doubt.  It’s based on wondering.  It’s based on questioning: Are we doing the fair thing?  Are we doing the right thing?  Are we doing the just thing?  It’s not about certainty.  So I’m telling you today: Beware of certainty.  Beware of ideas and theories that cannot be tested.  Beware of people who know that they’re right.

We’re going to win Game 7.

– Vancouver Canucks forward Daniel Sedin less than an hour after Game 6

 Full moon tonight.

Photos of the day 

June 15, 2011

Statues of angels fixed at the St. Isaak’s Cathedral are silhouetted on the full moon in St. Petersburg, Russia. Dmitry Lovetsky/AP

A robin delivers a mouthful of worms to a nest full of its baby birds, in North Andover, Mass. Mary Schwalm/AP

Market Commentary:

Canada

By Matt Walcoff

June 15 (Bloomberg) — Canadian stocks fell, led by banks and energy producers, as European leaders failed to agree on a new bailout for Greece and data on manufacturing and industrial production in the U.S. trailed economists’ forecasts.

Toronto-Dominion Bank, Canada’s second-biggest lender by assets, declined 1.2 percent after U.S. industrial production gained less than most economists had estimated. Suncor Energy Inc., the country’s largest oil and gas producer, dropped 2.6 percent as crude oil futures retreated the most in a month.

Breakwater Resources Ltd., a mining company with operations in Canada, Honduras and Chile, soared 43 percent after agreeing to be bought by Nyrstar NV.

The Standard & Poor’s/TSX Composite Index lost 125.79 points, or 1 percent, to 12,972.03.

“We’ve been getting some numbers that aren’t as robust as people would have liked,” said Jennifer Radman, a money manager at Caldwell Investement Management Ltd., which oversees about C$1 billion ($1 billion). “It’s hard to really tell where the economy’s going.”

The S&P/TSX fell 5.1 percent this month through yesterday as data on U.S. employment and manufacturing trailed economists’ forecasts. Seventy-five percent of Canada’s exports went to the U.S. last year, according to Statistics Canada.

A monthly index of manufacturing in New York, northern New Jersey and Connecticut dropped to the lowest level since November, the Federal Reserve Bank of New York said today.

National industrial production climbed 0.1 percent in May, the Federal Reserve said in Washington, missing the median economist forecast of 0.2 percent.

European finance officials meeting in Brussels were unable to break a deadlock on how to enroll investors in a second Greek bailout without causing a default. Greek Prime Minister George Papandreou will name a new government tomorrow and call a vote of confidence in parliament as he seeks to pressure rebel lawmakers to back the austerity plan that aims to secure a new bailout.

All S&P/TSX banks and all but one insurer dropped. TD, which has more than 1,000 U.S. branches, declined 1.2 percent to C$78.48. Royal Bank of Canada, the country’s largest lender by assets, slipped 1.1 percent to C$53.78. Bank of Nova Scotia, the No. 3 bank in the country, lost 0.8 percent to C$57.23.

Crude futures retreated to the lowest price since Feb. 22.

Suncor decreased 2.6 percent to C$37.36. Canadian Oil Sands Ltd., the largest owner of the Syncrude project, fell 2.5 percent to C$28.01. Crescent Point Energy Corp., a western Canadian oil and gas producer, dropped 2.3 percent to C$43.03. Oil-sands developer BlackPearl Resources Inc. slumped 5.5 percent to C$6.19.

Breakwater, which mines base and precious metals, surged 43 percent to C$7.42, reaching a three-year high after Nyrstar agreed to buy it for C$7 a share, plus a special dividend of 50 Canadian cents a share. Nyrstar, based in Balen, Belgium, is the world’s largest maker of refined zinc.

All of the major base metals traded on the London Metal Exchange declined. Teck Resources Ltd., Canada’s largest company in the industry, lost 1.9 percent to C$45.40. First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, decreased 1.5 percent to C$121.40. Mercator Minerals Ltd., which mines molybdenum and copper, sank 6.9 percent to C$2.56, an eight-month low.

Fertilizer producers declined as wheat and corn futures retreated. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, lost 1.3 percent to C$52.80. Agrium Inc. decreased 2.7 percent to C$81.42.

Sino-Forest Corp., the forestry company fighting a short seller’s assertions of financial manipulation, slumped 4.2 percent to C$3.22 after closing at a five-year low yesterday.

The shares have plunged 82 percent since the day before Carson Block, the founder of Muddy Waters LLC, said Sino-Forest’s stated land holdings do not match Chinese city records. The company has denied the assertions.

Mining company China Gold International Resources Corp. tumbled 8.5 percent to C$3.45, extending its monthly decline to 22 percent. An index of China-focused companies traded in Canada, other than Sino-Forest, has sunk 20 percent in May.

Other gold producers advanced as the European debt crisis led investors to seek out safe havens. Goldcorp Inc., the world’s second-largest gold producer by market value, increased 2.5 percent to C$46.76. Barrick Gold Corp., the biggest company in the industry, rose 1.2 percent to C$43.05.

Air Canada, the country’s largest airline, gained 6.4 percent to C$2.01 to extend its two-day surge to 12 percent, the most in 10 months. The Canadian government may introduce legislation to end a strike by call-center, check-in and gate staff tomorrow, Labor Minister Lisa Raitt said today outside Parliament. 

US

By Rita Nazareth

June 15 (Bloomberg) — U.S. stocks fell, threatening the 2011 gain for the Standard & Poor’s 500 Index, on concern Greece will default and signs the American economy is cooling down.

Wells Fargo & Co. and Bank of America Corp. slid at least 1.7 percent, following losses in European lenders, as officials failed to agree on a rescue plan for Greece. Alcoa Inc. and Exxon Mobil Corp. sank more than 2.1 percent as commodities slumped. The Morgan Stanley Cyclical Index of companies most- tied to the economy fell 2 percent on lower-than-forecast data on manufacturing, industrial output and homebuilder confidence.

The S&P 500 slumped 1.7 percent to 1,265.42 at 4 p.m. in New York, trimming this year’s gain to 0.6 percent. The Dow Jones Industrial Average fell 178.84 points, or 1.5 percent, to 11,897.27. Both indexes dropped to the lowest levels since March. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against the S&P 500’s declines, surged 17 percent to 21.32.

“It’s a classic ‘risk-off’ day,” said Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees $859 billion. “They keep talking about kicking the can down the road in Europe. The can is getting heavier and heavier. The dollar-euro trade is on. The economy is in a slow patch. The weaker economic data should put some pressure on commodity prices.”

The S&P 500 has fallen 7.2 percent since this year’s high at the end of April amid concern about an economic slowdown. Energy, financial and raw material companies led the decline, falling at least 9 percent. The S&P 500 traded at 12.7 times forecast 2011 earnings, the lowest multiple in almost a year.

Stocks from Hong Kong to London and Sao Paulo slumped today as European officials failed to agree on a rescue plan for Greece. Greek Prime Minister George Papandreou will name a new government tomorrow and call a vote of confidence in parliament as he seeks to pressure rebel lawmakers to back the austerity plan that aims to secure a new bailout.

The European Central Bank said the threat of the Greek debt crisis spilling over into the banking sector is the biggest risk to the region’s financial stability.

“Greece could have a contagion effect,” ECB Vice President Vitor Constancio said at a briefing in Frankfurt today, when presenting the bank’s semi-annual Financial Stability Review. “That’s the reason why we are against any sort of default with haircuts and any form of private-sector event that could lead to a credit event or a rating event.”                         

Benchmark gauges also fell as a report showed that manufacturing in the New York region unexpectedly shrank in June, a sign the industry still faces parts shortages following the disaster in Japan. Another report showed that confidence among U.S. homebuilders slumped in June to the lowest level in nine months as executives turned more pessimistic on the outlook for sales, a sign that any pickup will take time to develop.

Separately, figures from the Federal Reserve showed that industrial production in the U.S. rose less than forecast in May. The cost of living in the U.S. increased more than forecast last month, reflecting higher prices for everything from autos to hotel rooms, another report showed.

“The market will sell first and ask questions later,” said Mark Luschini, chief investment strategist at Philadelphia- based Janney Montgomery Scott LLC, which manages $54 billion. “The latest figures are cementing this mushy patch of economic data. Unless we get a data point or two that stops showing erosion, the stock market will be under some pressure.”                         

 The KBW Bank Index fell 1.6 percent as 23 of its 24 stocks retreated. Wells Fargo, the largest U.S. home lender, dropped 1.7 percent to $26.55. Bank of America slid 2.8 percent to $10.50.

Gauges of energy and raw material producers in the S&P 500 declined at least 2.2 percent as the dollar rose, reducing the appeal of commodities as alternative investments. The Thomson Reuters/Jefferies CRB Index of 19 commodities decreased 2.3 percent. Alcoa, the largest U.S. aluminum producer, retreated 2.9 percent to $14.96. Exxon declined 2.1 percent to $78.66.

Ford Motor Co. decreased 2.1 percent to $13.15. The automaker said pretax profit will be lower in the second half than in the first half as the company faces rising structural and commodities costs.

Owens-Illinois Inc. dropped 14 percent to $25.54 for the biggest retreat in the S&P 500. The world’s biggest maker of glass bottles lowered its forecast for second-quarter profit margin because of higher costs and weaker demand in Australia, where it may idle a glass furnace.                         

J.C. Penney Co. slumped 3.5 percent to $34.12. The third- largest U.S. department-store chain has earnings risk over the next several quarters because of market share loss, excess inventory and the inability to raise prices in a cost inflationary environment, according to Morgan Stanley.

Pandora Media Inc. surged 8.9 percent to $17.42. The online-radio company gained as much as 63 percent on its first day of trading, a sign of accelerating demand for the limited number of Internet companies issuing shares.

The Oakland, California-based company leapt to $26 after its debut on the New York Stock Exchange, under the symbol P. It sold 14.7 million shares yesterday at $16 apiece, raising $234.9 million in its initial public offering. That was above the top of the range of $10 to $12.

 Have a wonderful evening everyone.

 Be magnificent!

 When you abandon every desire that rises up within you,

and when you become content with things as they are, then you experience inner peace.

When your mind is untroubled by misfortune, when you desire no pleasures,

when your emotions are tranquil, and when you are free from fear and anger,

then you experience inner calm.  When you are free from all attachments,

when you are indifferent to success and failure,

then you experience inner serenity.

When you can withdraw your senses from pleasures of the senses,

just as a tortoise withdraws its limbs,

then you experience inner wisdom.

 -The Bhagavad Gita

As ever,

 Carolann

  Life’s under no obligation to give us

what we expect.  We take what we

get and are thankful it’s no worse

than it is.

    -Margaret Mitchell, 1900-1949

          Gone With the Wind