June 17, 2011 Newsletter
Dear Friends,
Tangents:
I attended the 125th anniversary party for Mercedes-Benz early Friday evening put on by the local dealership – they had the first Benz model ever made shipped over for the event. It looked like a bicycle….Wow – have we ever come a long way in car design! They had an old gull-wing like former Prime Minister Trudeau drove and we were reminiscing about the image of Trudeau driving it with the top down and his neck scarf blowing in the wind. This month also marks the anniversary of UNIVAC, the first commercially successful computer. It had its first initial public workout in Philadelphia in June, 1951. Five years in the making by J. Presper Eckert and John Mauchly (investors or the earlier ENIAC), UNIVAC (universal automatic computer) was 14 ½ feet long, 7 ½ feet wide and 8 feet high. Bought by the Census Bureau, it spat out demographic data at 120 facts per second. Forty-six UNIVACS, with prices starting at $600,000, were sold for inventory, payroll, insurance and other business applications.
Photos of the day
June 17, 2011
Jack Merriam plays with the interactive ‘Silver Clouds’ art installation in The Prints of Andy Warhol (From A to B and Back Again) exhibit at the Washington Pavillion in Sioux Falls, S.D., on Friday. The exhibit, which opened Friday and runs through Sept. 11, features 63 original works, one interactive art installation and a video by Andy Warhol.Devin Wagner/Argus Leader/AP
Jacquie O’Brien cleans up during installation of a sculpture by Nancy Rubins at the Albright-Knox Art Gallery in Buffalo, N.Y. on Friday. The yet untitled sculpture is made from more than 60 used aluminum canoes and other boats. David Duprey/AP
Market Commentary:
Canada
By Matt Walcoff
June 17 (Bloomberg) — Canadian stocks fell, completing a third-straight weekly decline, after Research In Motion Ltd. cut its earnings forecasts and oil futures dropped to the lowest level in almost four months.
RIM, the BlackBerry maker, plunged 22 percent. Royal Bank of Canada, Canada’s biggest lender by assets, increased 1.2 percent after people familiar with the situation said it is in advanced talks to sell its U.S. retail unit to PNC Financial Services Group Inc. Suncor Energy Inc., Canada’s biggest oil and gas producer, declined 0.9 percent as oil slumped after the International Monetary Fund cut its estimate of U.S. growth.
The Standard & Poor’s/TSX Composite Index slipped 63.18 points, or 0.5 percent, to a seven-month low of 12,789.95, extending its weekly retreat to 2.3 percent.
“The U.S. has slowed down dramatically,” said Blair Falconer, a money manager who oversees about C$800 million ($816million) for HSBC Securities (Canada) Inc. in Toronto. “It looks like we’re going to have an extended slow-growth period.”
The S&P/TSX sank 6.9 percent this month through yesterday as the risk of a default on Greek government debt climbed and data on employment and manufacturing trailed economists’ forecasts. The stock benchmark has tumbled 10 percent since April 5, meeting the common definition of a correction. RIM sank 22 percent, the most since September 2008, to C$27.24. The company forecast 2012 earnings of $5.25 a share to$6 a share, excluding certain items, after estimating $7.50 a share in April. At least five analysts cut their ratings on the stock.
Celestica Inc., which makes electronics for companies including RIM, slumped 7.5 percent, the most in two years, to C$7.91. Jim Suva, an analyst at Citigroup Inc., lowered his rating on Celestica to “sell” from “hold,” citing RIM’s outlook in a note to clients.
Royal Bank rallied 1.2 percent to C$54.33 after people who spoke on condition of anonymity said PNC is likely to prevail over a rival bid from BB&T Corp. The business may fetch as much as $3.7 billion, Peter Routledge, an analyst at National Bank Financial, said in April.
The S&P/TSX Energy Index fell to a six-month low as oil futures extended their weekly drop to 6.3 percent. Suncor declined 0.9 percent to C$37.17. Cenovus Energy Inc., Canada’s fifth-largest energy company, lost 1.5 percent to C$32.65.
Magna International Inc., Canada’s biggest auto-parts maker, rose 5.1 percent to C$47.47 for a fifth-straight gain as lower fuel prices boosted world transportation-equipment stocks.
Fertilizer producers dropped for a second day a day after the U.S. Senate voted to eliminate a tax credit for ethanol. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, decreased 2.8 percent to C$49.55. Agrium Inc. lost 2.6 percent to C$78.01.
First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, advanced 3.2 percent to C$119.01 after saying it split its shares five-to-one effective Aug 9, pending shareholder approval.
Bridgewater Systems Corp., which makes software for wireless carriers, soared 28 percent, the most in three years, to C$8.10 after agreeing to be bought by Amdocs Ltd. for C$8.20.
Mosaid Technologies Inc., a semiconductor developer, sank 14 percent, the most since 2005, to C$26.97 after forecasting 2012 earnings below analysts’ estimates. Brian J. Piccioni, an analyst at Bank of Montreal, and Sean Peasgood, an analyst at Wellington West Capital Inc., cut their ratings on the shares to “market perform.”
US
By Rita Nazareth
June 17 (Bloomberg) — U.S. stocks snapped a six-week decline as European leaders moved closer to a compromise on a financial rescue for Greece and an index of leading American economic indicators advanced more than forecast. Wells Fargo & Co. and Fifth Third Bancorp rose at least 1.9 percent, following gains in European banks. The Bloomberg U.S. Airlines Index of 11 stocks gained 2.7 percent as oil fell to the lowest level in four months. Research In Motion Ltd. tumbled 21 percent, sparking a slump in technology shares, after forecasting revenue and profit that missed analysts’ estimates.
The Standard & Poor’s 500 Index advanced 0.3 percent to 1,271.50 at 4 p.m. in New York. The benchmark gauge has added less than 0.1 percent since June 10, preventing the longest weekly slump since March 2001. The Dow Jones Industrial Average increased 42.84 points, or 0.4 percent, to 12,004.36 today.
“This may be an excellent entry point for stock investors,” said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $340 billion. “There are expectations that an agreement on Greece’s bailout may be reached. If we can get rid of the fears over Europe, it all comes down to — do we believe the economy will reaccelerate in the second half of this year? If that’s the case, stocks have room to rally.”
The S&P 500 has retreated 6.8 percent from this year’s high at the end of April amid weaker-than-expected economic data and concern about Europe’s debt crisis. The decline threatened the 2011 gain for the S&P 500 this week and left the index up 1.1 percent this year.
Global stocks rose today as Chancellor Angela Merkel retreated from German demands that bondholders be forced to shoulder a “substantial” share of a Greek rescue, saying she’ll work with the European Central Bank to avoid disrupting markets.
“We would like to have a participation of private creditors on a voluntary basis,” Merkel told reporters in Berlin today at a joint press conference with French President Nicolas Sarkozy. This “should be worked out jointly with the ECB and there shouldn’t be any dispute with the ECB on this.”
Merkel and Sarkozy signaled a reconciliation between German calls for investors to help bail out Greece with warnings from the ECB and France that a compulsory move risked triggering the euro area’s first sovereign default. Attention now shifts to Athens, where Prime Minister George Papandreou overhauled his Cabinet to try and secure passage of austerity measures needed for a bailout.
Stocks extended gains after data showed that the index of U.S. leading indicators rebounded in May after declining for the first time in almost a year, a sign economic growth may pick up by the end of 2011. The Conference Board’s gauge of the outlook for the next three to six months rose 0.8 percent after a revised 0.4 percent decline in April, the New York-based group said today. Economists forecast a 0.3 percent gain, according to the median estimate in a Bloomberg News survey.
Benchmark gauges rose even after the Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 71.8 from 74.3 in May. Economists forecast a reading of 74, according to the median estimate in a Bloomberg News survey.
“The economy is not as good as hoped, not as bad as feared,” said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages about $161 billion. “It’s most likely a soft patch and the economy is going to do better toward the end of the year. We expect a volatile ‘risk-on, risk-off’ market.”
A gauge of banks in the S&P 500 rose 1.3 percent, the biggest gain within 24 industries. Wells Fargo added 2 percent to $27.33. Fifth Third advanced 2.2 percent to $12.55.
Airlines rallied amid expectations for lower costs as crude oil fell. U.S. oil supplies rose to the highest level in 31 years for the month of May as refineries processed less crude amid a decline in gasoline demand, according to the American Petroleum Institute.
Ten of 11 stocks in the Bloomberg U.S. Airlines Index gained. United Continental Holdings Inc. added 5.8 percent to $24.04. AMR Corp. gained 1.3 percent to $5.69.
Energy shares had the second-biggest decline in the S&P 500 within 10 industries, falling 0.3 percent as a group. Halliburton Co. dropped 0.8 percent to $46.02. Occidental Petroleum Corp. retreated 0.6 percent to $102.19.
Gauges of computer companies and chipmakers had the two biggest declines in the S&P 500 within 24 industries. RIM tumbled 21 percent to $27.75, the lowest since September 2006. RIM is losing market share in the U.S. to Apple Inc.’s iPhone and handsets running Google Inc.’s Android software, in part because it hasn’t introduced a major new BlackBerry model since August. Cheaper Google phones are also making inroads in Latin America, Asia and Europe, threatening the popularity of less expensive BlackBerry models.
Marvell Technology Group Ltd., the maker of chips for personal computers and mobile phones, slumped 4.2 percent to $13.21. Jabil Circuit Inc., a contract electronics manufacturer, dropped 1.7 percent to $18.29.
Credit-rating companies declined after the Wall Street Journal reported that the U.S. Securities and Exchange Commission is considering laying civil fraud charges against some of the firms for their actions on mortgage-backed bonds, which helped trigger the financial crisis.
Moody’s Corp. slipped 5 percent to $36.35 for the biggest loss in the S&P 500. McGraw-Hill Cos. retreated 3.6 percent to $39.61.
Have a wonderful weekend everyone. Happy Fathers’ Day!
Be magnificent!
The healing of the mind takes place gradually on contact with nature,
with the orange on the branch, the blade of grass eating its way into the cement,
and the hills hidden by the clouds.
-Krishnamurti, 1895-1986
As ever,
Carolann
I think, therefore
Descartes exists.
-Saul Steinberg, 1914-1999