June 30th, 2011 Newsletter

Dear Friends,

Tangents:

Music and mud: Glastonbury Festival 2011

Glastonbury, a festival held at Worthy Farm in England, has become Europe’s largest such gathering for music fans. Its five-day run ended Sunday, after entertaining nearly 175,000 fans. Heavy rain and mud greeted the attendees, who paid 195 pounds (about $310) for a basic ticket compared to the 1 pound when the show began in 1970. The next festival will take place in 2013. – Lloyd Young

Market Commentary:

 Canada

By Matt Walcoff

June 30 (Bloomberg) — Canadian stocks rose for a fourth day, trimming the biggest quarterly drop since 2008, as energy producers and financial shares advanced on speculation Greece will avoid defaulting on its debt.

Manulife Financial Corp., Canada’s largest insurer, increased 3 percent after Germany’s biggest banks and insurers and government agreed to reinvest money from maturing debt holdings into new Greek bonds. Nexen Inc., an oil and gas producer with operations on five continents, climbed 2 percent as natural gas futures rallied. Contract electronics manufacturer Celestica Inc. gained 5.3 percent after a Deutsche Bank analyst raised her rating on the shares.

The Standard & Poor’s/TSX Composite Index rose 55.93 points, or 0.4 percent, to 13,244.87 at 2:24 a.m. in Toronto, extending its weekly gain to 2.4 percent. The S&P/TSX has advanced this week as Greek lawmakers voted yesterday to approve an austerity package.

“There was likely some anxiety going into that Greek vote,” said Gareth Watson, vice president of investment management at Richardson GMP Ltd. in Toronto, which oversees about C$16 billion ($16.6 billion). “We’re just kind of carrying through today.”

The S&P/TSX retreated 6.6 percent this quarter through yesterday, the most since the fourth quarter of 2008. The stock benchmark declined as data on U.S. unemployment and manufacturing trailed economists’ forecasts, concern about Europe’s debt crisis intensified and crude oil fell 9.1 percent.

Germany’s biggest banks and insurers and its government have agreed on a draft proposal to reinvest money from maturing Greek debt into new bonds, Finance Minister Wolfgang Schaeuble said in Berlin today.

Seven of eight S&P/TSX banks and Canada’s three largest insurers rose after the German agreement. Also today, Statistics Canada reported gross domestic product was unchanged in April.

Most economists in a Bloomberg survey had forecast a decline.

Manulife Financial Corp., North America’s fourth-largest insurer, gained 3 percent to C$16.94. Toronto-Dominion Bank, Canada’s second-biggest lender by assets, advanced 0.9 percent to C$81.59. Sun Life Financial Inc., the country’s No. 3 insurer, increased 1.9 percent to C$28.82.

The S&P/TSX Energy Index climbed for a fourth day after U.S. natural gas inventories fell more than analysts estimated last week. Nexen, which operates on five continents, rose 2 percent to C$21.56. Cenovus Energy Inc., Canada’s fifth-largest energy company, gained 1.6 percent to C$36. Talisman Energy Inc., which operates in North America, the North Sea and Indonesia, advanced 1.9 percent to C$19.68.

Fertilizer producers retreated after the U.S. Agriculture Department said U.S. corn inventories totaled 3.67 billion bushels on June 1, surpassing all 25 forecasts in a Bloomberg survey of analysts.

Farmers planted about 92.3 million acres of corn, topping the USDA’s estimate from earlier this month of 90.7 million acres. Corn fell the most allowed on the Chicago Board of Trade.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, dropped for the first time in six days, losing 1.3 percent to C$54.43. Agrium Inc., an agricultural-products retailer and fertilizer producer, declined 1.9 percent to C$83.99.

Rubicon Minerals Corp., which explores for gold in Canada, slumped 9 percent to C$3.24 after plunging 24 percent yesterday as the company increased its cost estimates for its Phoenix Gold Project. Catherine Gignac, a Toronto-based analyst at NCP Northland Capital Partners Inc., cut her rating to “sector perform” from “sector outperform” today.

Among other mining stocks, First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, increased 3.1 percent to C$139.78 as the metal added to an eight-week high.

Uranium One Inc., a mining company controlled by Moscow- based ARMZ Uranium Holding, rose for a second day, gaining 6.4 percent to C$2.66 two days after closing at a 12-month low.

Celestica rallied 5.3 percent to C$8.43 after Sherri Scribner, an analyst at Deutsche Bank, boosted her rating on the share to “buy” from “hold.” The stock plunged 23 percent this quarter through yesterday as its largest customer, Research In Motion Ltd., sank 49 percent.

Power-plant owner Capital Power Corp. slumped 3.8 percent, the most intraday in 23 months, to C$25.01, after saying it will sell 8 million shares at C$25.10 a share.

An index of consumer-discretionary stocks in the S&P/TSX advanced after analysts in a Bloomberg survey said U.S. auto sales probably rebounded in this month.

Magna International Inc., Canada’s largest auto-parts maker, climbed for an eighth day, the longest streak in 25 months, rallying 1.7 percent to C$52.29. Linamar Corp., the second-biggest parts manufacturer in the country, rose 3.9 percent to C$21.81.

Shaw Communications Inc., Canada’s largest cable and satellite television provider by subscribers, gained 1.5 percent to C$21.91 a day after reporting earnings that surpassed analysts’ estimates.

 US

By Rita Nazareth and Cecile Vannucci

June 30 (Bloomberg) — U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest four-day gain since September, amid increased optimism Greece will avoid default and after American business activity improved.

Industrial, energy and technology companies led gains in the S&P 500, rising at least 1.4 percent, as investors bought stocks tied to economic growth. Caterpillar Inc., United Technologies Corp. and 3M Co. climbed at least 1.8 percent to help the Dow Jones Industrial Average erase its quarterly loss.

Hewlett-Packard Co. added 2.4 percent after a report that private-equity firms want the computer maker to split up.

The S&P 500 advanced 1 percent to 1,320.64 at 4 p.m. in New York, rising 4.1 percent in four days. The Dow average gained 152.92 points, or 1.3 percent, to 12,414.34 today.

“It’s not surprising that the market is rebounding,” said Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, which oversees $761 billion. “The Greece situation will work out, concerns about a soft patch were overdone and earnings will continue to be strong. The market will do better in the second half.”

The Dow fell 1.2 percent in June amid concern about Europe’s debt crisis and weaker-than-expected economic data. Over the last century, the 30-stock gauge had an average gain of 1.4 percent in July, according to data compiled by Bespoke Investment Group. The index was up 7.2 percent in 2011 amid better-than-estimated earnings and government stimulus measures.

Global stocks rose today on expectations that Greece will avoid defaulting on its debt. Greek Prime Minister George Papandreou’s drive to stave off the euro area’s first sovereign default stayed on track after lawmakers backed a bill to authorize an austerity plan required to keep rescue aid flowing.

Germany’s biggest banks agreed on a proposal to “roll over” Greek debt holdings, Finance Minister Wolfgang Schaeuble said. That means reinvesting money from maturing bonds into new Greek bonds. German banks have agreed to roll over at least the Greek bonds they’re holding that mature through 2014, which amount to about 2 billion euros ($2.9 billion), Schaeuble said.

“The big driver behind the rally has been Greece,” said Peter Jankovskis, who helps manage about $2.7 billion at Oakbrook Investments in Lisle, Illinois. “The implementation of an austerity plan is certainly an important step. That should be less of an overhang for the market in July.”

Stocks extended gains after the Institute for Supply Management-Chicago Inc. said its business barometer climbed to 61.1 this month from 56.6 in May. Economists called for the index to drop to 54, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion. Consumer confidence rose to the highest level in 10 weeks, the Bloomberg Consumer Comfort Index showed.

The Morgan Stanley Cyclical Index gained 1.5 percent as 29 of its 30 stocks rallied. The Dow Jones Transportation Average of 20 stocks, which is considered a proxy for economic growth, advanced 1.3 percent.

Caterpillar, the world’s largest maker of construction equipment, added 3 percent to $106.46. United Technologies rose 2.4 percent to $88.51. 3M increased 1.9 percent to $94.85.

Hewlett-Packard climbed 2.4 percent to $36.40. The world’s largest maker of personal computers is being urged by private equity firms including Blackstone Group to break up and sell some units to them, Reuters reported, citing people familiar with the matter.

EBay Inc. climbed 4.6 percent to $32.27. The world’s largest online marketplace was raised to “buy” from “neutral” by Bank of America Corp, which cited the Federal Reserve Board’s vote yesterday to approve a less severe cap on debit-card transaction fees than previously proposed.

First Solar Inc. jumped 2.2 percent to $132.27. The world’s largest maker of thin-film solar modules won $4.5 billion in conditional loan guarantees from the U.S. Energy Department for three projects it’s developing in California.

The S&P 500 today surpassed its average price of the last 50 days of about 1,317, which shows potential for further gains, according to analysts who study charts to make forecasts.

“It just confirms the strength of the rally that we’ve seen here,” said Richard Ross, global technical strategist at Auerbach Grayson & Co. in New York. “If it doesn’t provide any resistance at all and the market continues to power through that level, that would be a bullish signal for the market.”

The benchmark gauge has made a high on the last day of a week only once since peaking in April, and tomorrow may determine whether the market can build on its current rally, Strategas Research Partners said.

The S&P 500 had its weekly intraday high on a Friday only once over the past eight weeks, as the gauge sank 7 percent, according to data from Strategas and Bloomberg. That marked a shift in trend from the first four months of the year, when the S&P 500 rallied 8.4 percent and Fridays accounted for 10 of the 17 weekly highs.

“We need to see this trend re-emerge,” Christopher Verrone, head of technical analysis at the New York-based firm, wrote in a note yesterday. “The bulls have had trouble sustaining strength late in the week.”

The Institute for Supply Management is scheduled to release tomorrow the factory index, which may show a decrease to 51.8 this month from 53.5 in May, according to the median forecast from economists surveyed by Bloomberg. Worse-than-expected economic reports and concern about the debt crisis in Europe spurred losses for the S&P in six consecutive weeks from April 29 to June 10, the longest streak since July 2008. The index has since climbed 2.9 percent through yesterday.

“If this is going to be more than an ‘oversold bounce,’ it will be important for this trend to improve over coming weeks,” Verrone said.

Have a wonderful long weekend everyone.

 Be magnificent!

It is necessary that this be the aim of our entire life.

In all of our thoughts and actions,

we must be conscious of the infinite.

-Rabindranath Tagore, 1861-1901

As ever,

Carolann

There are more things to alarm us

than to harm us, and we suffer more

often in apprehension than reality.

-Seneca, 3 BC- 65 AD