June 23rd, 2011 Newsletter

Dear Friends,

 Tangents: Michael Bloomberg, Mayor of New York City, addressing graduates of The George Washington University in Washington, D.C. earlier this month: 

As you think about your career, whatever you do, don’t worry about mapping it all out.  Just don’t play it safe.  Don’t be the person who quits a start-up company, or a band, before giving it a chance to make it big.  And don’t be afraid to start over or change direction.  The more risks you take, the happier you will be, even if they don’t work out,  And I can assure you, sometimes they won’t.  But I can also assure you this: No matter what job you have, no matter who your employer is, the harder you work, the luckier you will get….My advice is relatively simple: Continue learning.  Continue asking difficult questions.  Continue thinking independently.  Continue volunteering your time to help others.

Photo of the day

June 23, 2011

A motocross rider participates in the ‘Rocket Ride’ race during Erzberg Rodeo near the village of Eisenerz in the Austrian province of Styria. Erzberg Rodeo is one of the biggest Enduro races in the world and takes place from June 23 until June 26, 2011. Lisi Niesner/Reuters

Market Commentary: 

Canada

By Matt Walcoff

June 23 (Bloomberg) — Canadian stocks fell for a second day after European Central Bank President Jean-Claude Trichet said the continent is at a “red” level of risk and the U.S. reported an increase in initial jobless claims.

Nexen Inc., an oil and gas producer with operations on five continents, dropped 2.1 percent as crude futures slumped to a four-month low. Toronto-Dominion Bank, Canada’s second-largest lender by assets, lost 1.5 percent as world financial stocks retreated. Barrick Gold Corp., the world’s biggest gold-mining company, declined 1.4 percent as the U.S. dollar rose against 14 of 16 other major currencies.

 The Standard & Poor’s/TSX Composite Index decreased 80.98 points, or 0.6 percent, to 12,979.58. The index had rallied 2.1 percent on June 20 and June 21 on speculation Greece will pass austerity measures to address its debt crisis.

“You get these momentary distractions, like we’ve figured out a solution, then the next day you realize, ‘Oh darn, there isn’t a Santa Claus,’” said Danielle Park, a partner at Venable Park Investment Counsel Inc. in Barrie, Ontario, which manages at least C$1 million ($1.02 million) each for more than 250 families. “We’re piled to the outer solar system in debt, and banks are full of all these bad bonds.”

The stock benchmark fell 7.5 percent this quarter through yesterday as concern that Greece will default on its debts mounted and data on employment and manufacturing in the U.S. indicated a slowdown in the economic recovery. The S&P/TSX hasn’t ended a quarter with a drop of more than 6.2 percent since 2008.

When asked yesterday the level of the European Systemic Risk Board’s planned risk “dashboard,” board chairman Trichet said “red.”

“The message of the board is that” the link between debt problems and banks “is the most serious threat to financial stability in the European Union,” Trichet said after a board meeting in Frankfurt. First-time unemployment claims in the U.S. climbed to 429,000 last week from 420,000 the week before, the Labor Department said today in Washington. None of the 47 economists in a Bloomberg survey had forecast a reading that high.

The Thomson Reuters/Jefferies CRB Commodity Price Index declined to the lowest level since January as 16 of 19 commodities in the index retreated. Crude oil sank 4.6 percent in New York.                   

Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, decreased 2.1 percent to C$18.53. Husky Energy Inc., Canada’s third-largest energy company by revenue, plunged 5.7 percent, the most in two years, to C$26.55 after saying it will sell shares at C$27.05 each.

Every S&P/TSX bank and all but one insurer retreated. TD fell 1.5 percent to C$78.50. Royal Bank of Canada, its larger rival, dropped 1.3 percent to C$53.82. Manulife Financial Corp., North America’s fourth-biggest insurer, declined 1.2 percent to C$16.

The U.S. dollar gained as much as 1.6 percent against the euro after Markit Economics’s composite index of euro-area purchasing managers’ surveys trailed all 16 estimates in a Bloomberg survey.

Gold futures fell the most since May 5, ending a seven-day streak of gains, and silver slumped 4.7 percent. Barrick dropped 1.4 percent to C$42.98. Goldcorp Inc., the world’s second- largest gold producer, slipped 1.3 percent to C$47.59. European Goldfields Ltd., which is developing precious- and base-metal projects, declined 6.4 percent to C$9.24.                   

BlackBerry maker Research In Motion Ltd. increased 5.5 percent to C$29.14. RIM’s smartphones are less likely than competitors’ to develop hardware problems, WDS, a Poole, England-based company that tracks customer-support calls, said in a statement today.

RIM shares remain down 50 percent for the year. Teck Resources Ltd., the country’s biggest base-metals and coal producer, climbed 3.1 percent to C$45.54. The company said it may buy back up to 40 million shares over the next year.

TMX Group Inc., the owner of the Toronto Stock Exchange, advanced for a fifth day, rallying 2.4 percent to a three-year high of C$45.30. Maple Group Acquisition Corp. raised its unsolicited bid for the company to C$50 a share from C$48 a share.

 US

By Rita Nazareth and Cecile Vannucci

June 23 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index down for a second day, as concern grew that Europe’s debt crisis will hurt banks and an increase in jobless claims added to signs the economy is slowing.

JPMorgan Chase & Co. and Wells Fargo & Co. dropped at least 1.2 percent as European Central Bank President Jean-Claude Trichet said the debt crisis threatens to infect banks. Chevron Corp. and Exxon Mobil Corp. slid more than 1.6 percent as oil tumbled. Stocks pared losses on reports that austerity measures proposed by Greece to win a bailout were endorsed by officials from the European Union and the International Monetary Fund.

The S&P 500 declined 0.3 percent to 1,283.50 at 4 p.m. in New York, after earlier falling as much as 1.9 percent. The Dow Jones Industrial Average retreated 59.67 points, or 0.5 percent, to 12,050 today. About 8.3 billion shares changed hands on U.S. exchanges, 17 percent more than the three-month average.

“It’s discouraging,” said Randy Bateman, chief investment officer of Huntington Asset Management in Columbus, Ohio, which oversees $14.8 billion. “The Band-Aid being placed isn’t really to bail out Greece. It’s to bail out the banks that hold Greek paper. If you lead people to think that their banks are going to be insolvent, that creates more problems.”

The benchmark gauge of U.S. stocks fell 4.6 percent this month amid concern that Greece will default on its debt and weaker-than-expected economic reports. The S&P 500 was still up 2.1 percent this year amid government stimulus measures and better-than-expected corporate earnings.                        

Global stocks tumbled today as Trichet said risk signals for financial stability in the euro area are flashing “red” as the debt crisis threatens to infect banks.

“On a personal basis I would say ‘yes, it is red’,” Trichet said late yesterday in Frankfurt after a meeting of the European Systemic Risk Board, referring to the group’s planned “dashboard” to monitor risks. “The message of the board is that” the link between debt problems and banks “is the most serious threat to financial stability in the European Union.”

Measures proposed by Greek Finance Minister Evangelos Venizelos to complete a 78 billion-euro ($111 billion) austerity package required to win a bailout were endorsed by officials from the European Union and International Monetary Fund, said a person familiar with the matter.

A “solidarity levy” of between 1 percent and 5 percent would apply to all Greek wage earners, with members of parliament paying the top rate, Venizelos said at a news conference in Athens today. Self-employed Greeks will have to pay a separate charge estimated at around 300 euros a year on average, he said.

“It would be nice to put that European crisis behind us,” said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion. “Some market participants may be reassured by the dedication of the European countries to addressing the issues. It may be they patch together some near-term way of addressing it. I’m not terribly hopeful that they can put this to bed any time soon.”

Stocks also fell as applications for jobless benefits increased by 9,000 to 429,000 last week, Labor Department figures showed, exceeding the highest estimate in a Bloomberg News survey of economists. Purchases of new U.S. houses fell in May for the first time in three months, showing the industry is struggling to gain momentum. Sales dropped 2.1 percent to a 319,000 annual pace last month, figures from the Commerce Department showed.                       

“We’re just ending QE2 and the intent of that was to build employment and sustain the economy,” Huntington’s Bateman said. “That hasn’t accomplished half of those objectives.”

The S&P 500 yesterday snapped a four-day rally after the Federal Reserve lowered its forecast for economic growth and said it will end its $600 billion bond-purchase program this month as planned. The second round of so-called quantitative easing, nicknamed “QE2” by investors, helped propel a 23 percent rally in the S&P 500 from when Fed Chairman Ben S.

Bernanke foreshadowed the plan on Aug. 27.

The S&P 500 traded today near its average price of the last 200 days of 1,262.65, a level monitored by analysts who study charts to make forecasts. A decline below the 200-day moving average could herald more losses, according to Schaeffer’s Investment Research.

“This is a key level,” said Ryan Detrick, senior technical strategist at Schaeffer’s in Cincinnati. “With all of the uncertainty and all the things that are out there, it makes it that much more important. Fear is definitely coming back.”

 The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, jumped 4.2 percent to 19.29.

The KBW Bank Index declined 1.1 percent as 21 of its 24 stocks retreated. JPMorgan retreated 1.5 percent to $40.07. Wells Fargo dropped 1.2 percent to $27.04.

Energy producers declined. Oil tumbled, erasing its gains for the year, after the International Energy Agency said its members would release crude from strategic reserves.

Chevron, the second-largest U.S. oil company, dropped 1.7 percent to $99.36. Exxon Mobil retreated 1.7 percent to $78.44.

 The Bloomberg U.S. Airlines Index of 11 stocks rallied 3.7 percent amid expectations for lower costs as oil fell. US Airways Group Inc. gained 5.1 percent to $8.91. AMR Corp. added 5.2 percent to $6.05.

Bed Bath & Beyond Inc. rose 5.3 percent to $56.93. The home furnishings retailer said profit will rise 15 percent to 20 percent in the year ending February 2012, increasing its estimate from a range of 10 percent to 15 percent.

Bristol-Myers Squibb Co. jumped 5.7 percent to $29.33. The pharmaceutical company’s blood thinner apixaban, being developed with Pfizer Inc., prevented more strokes with less major bleeding than traditional treatment in patients with irregular heartbeats in a key study. Pfizer rose 1.8 percent to $20.65.

  Have a wonderful evening everyone.

Be magnificent!

There will have to be rigid and iron discipline

before we achieve anything great and enduring,

and that discipline will not come by mere academic argument

and appeal to reason and logic.

Discipline is learnt in the school of adversity.

-Mahatma Gandhi, 1869-1948

As ever,

 Carolann

 Joy is not in things; it is in us.

       -Richard Wagner, 1813-1883