June 8th, Newsletter 2011
Dear Friends,
The Duke of Ever-blunt
The Duke of Edinburgh turns 90 this week. Some of his memorable comments, according to listverse.com:
- To the Queen, after her coronation: “Where did you get the hat?”
- When asked if he would like to visit the Soviet Union: “The bastards murdered half my family.”
- To Elton John after hearing he had sold his Gold Afton Martin: “Oh, it’s you that owns that ghastly car – we often see it when driving to Windsor Castle.”
- To the president of Nigeria, dressed in traditional robes: “You look like you’re ready for bed!”
- On key problems facing Brazil: “Brazilians live there.”
We shall all be old one day – provided, of course, we can
avoid being slaughtered on the roads or beaten up by some
hooligan in a peace demonstration.
-Prince Philip, Duke of Edinburgh, 1921-
-from The Globe & Mail, Wednesday, June 8th, 2011
photos of the day
June 8, 2011
A medium-sized solar flare erupted from the sun in an impressive display captured by NASA cameras aboard an orbiting satellite called the Solar Dynamics Observatory. NASA says the flare peaked Tuesday and created a large cloud that appeared to cover almost half the surface of the sun.
NASA/SDO/AP
A woman walks her dog past a wall near the seafront in Brighton, England.Cathal McNaughton/Reuters
A man looks at the work ‘Organ Mapping’ by Mariechen Danz at the Based in Berlin exhibition in Berlin. The exhibition shows the work of 80 emerging artists who live and work in Berlin.
Thomas Peter/Reuters
Canada
By Matt Walcoff
June 8 (Bloomberg) — Canadian stocks fell to a six-month low as metal prices dropped a day after U.S. Federal Reserve Chairman Ben S. Bernanke called his country’s economic recovery “frustratingly slow.”
Barrick Gold Corp., the world’s largest gold producer, declined 2 percent as the U.S. dollar rose. Contract driller Major Drilling Group International Inc. tumbled 6.6 percent after reporting earnings that missed analyst estimates. Sino- Forest Corp., the forestry company that plunged after a short seller said it manipulated financial data, gained 21 percent after analysts at Royal Bank of Canada and Dundee Securities Ltd. expressed confidence in the company.
The Standard & Poor’s/TSX Composite Index retreated 99.13 points, or 0.8 percent, to 13,183.79, the lowest close since Dec. 16 and the first under the 200-day moving average since Aug. 25. The S&P/TSX has declined seven straight days, the longest streak of losses since June 2006.
“We continue to have poor numbers” from the U.S., said Luc Girard, director of the portfolio advisory group at Desjardins Securities in Montreal, which manages C$18 billion ($18 billion). “With 70 percent or 80 percent of exports that go to the U.S., if you have an economy that’s not going as well as we thought, it’s certainly a negative for the TSX.”
The stock benchmark has dropped 4.7 percent since May 30 as data on U.S. employment and manufacturing and Canadian building permits reflected slowing growth. The index closed at its lowest price relative to earnings since September.
Bernanke’s speech in Atlanta yesterday indicated a third round of asset purchases known as quantitative easing is unlikely, according to Sung Won Sohn, an economics professor at California State University-Channel Islands and former chief economist at Wells Fargo & Co.
The U.S. Dollar index extended its gains after Germany said industrial production dropped in April and German Finance Minister Wolfgang Schaeuble said bondholders must contribute a “substantial” share of a second aid package for Greece.
Gold futures slipped while silver slumped 1.1 percent.
Barrick declined for a seventh day, losing 2 percent to C$43.36.
Eldorado Gold Corp., which mines in China and Turkey, decreased 2.5 percent to C$13.80 for an eighth-straight loss, the longest streak since 1997.
Silver Wheaton Corp., Canada’s fourth-biggest precious- metals company by market value, retreated 3.5 percent to C$31.76. Silvercorp Metals Inc., which produces the metal in China, sank 11 percent, the most in two years, to C$8.54.
Base-metals and coal producers fell as copper futures dropped. Teck Resources Ltd., Canada’s largest company in the industry, declined 1.3 percent to C$46.63. First Quantum Minerals Ltd., the country’s second-biggest publicly traded copper producer, lost 3.3 percent to C$122.05. Ivanhoe Mines Ltd., which is developing a copper and gold mine in Mongolia with Rio Tinto Group, decreased 2.3 percent to C$21.47 after closing at an eight-month low yesterday.
Major Drilling sank 6.6 percent to a six-month low of C$12.85 after its fourth-quarter profit trailed the average of six analyst estimates by 37 percent, excluding certain items.
Westport Innovations Inc., which develops natural-gas engine technologies, plunged 15 percent, the most since February 2009, to C$19.36 after reporting a larger fourth-quarter loss than all eight analysts in a Bloomberg survey had estimated.
Uranium producers retreated after the New York Times said energy and nuclear officials from several countries pledged to enhance nuclear-safety rules.
Cameco Corp., the world’s largest uranium producer, fell 2.4 percent to C$25.88. Uranium One Inc., a mining company controlled by ARMZ Uranium Holding, slumped 6.9 percent to a nine-month low of C$3.09. Denison Mines Corp. dropped 9.2 percent to C$1.78.
Sino-Forest advanced 21 percent to C$4.92. In a note dated yesterday and made public today, Paul Quinn, a Royal Bank analyst, reiterated an “outperform” rating on the company.
Richard Kelertas, an analyst at Dundee Securities, said on a conference call yesterday that the assertions made by short seller Carson Block are unfounded.
The shares had plunged 78 percent from June 1 to yesterday.
On June 2, Block, the founder of Hong Kong-based Muddy Waters Research, said Sino-Forest’s stated land holdings do not match Chinese city records and its disclosed production may be inaccurate. The company has denied the statements and published documents on its website it says support its published financial data.
BlackBerry maker Research In Motion Ltd. lost 2.7 percent to C$35.93, a four-year low. Stephen Patel, an analyst at Gleacher & Co., cut his 12-month price estimate on RIM’s U.S.- traded share to $43 from $56, citing competition and “uncertainty over new handset launches” in a note to clients.
US
By Rita Nazareth
June 8 (Bloomberg) — U.S. stocks retreated, sending the Standard & Poor’s 500 Index to the longest losing streak since February 2009, as raw-material and financial shares slumped amid growing concern the economy is slowing.
Visa Inc. and MasterCard Inc. fell at least 1.5 percent after the U.S. Senate rejected a six-month delay of a Federal Reserve rule capping debit-card swipe fees set by the companies.
Ciena Corp., the maker of network gear for the biggest U.S. phone companies, tumbled 16 percent after reporting a wider- than-estimated loss. Gap Inc. slumped 2.4 percent after Barclays Plc cut its recommendation for the largest U.S. apparel chain.
The S&P 500 fell 0.4 percent to 1,279.56 at 4 p.m. in New York, dropping for a sixth day. The Dow Jones Industrial Average slid 21.87 points, or 0.2 percent, to 12,048.94 today.
“There’s enough fear,” said Sara Zervos, a New York-based portfolio manager at OppenheimerFunds Inc., which managed more than $185 billion as of March 31. “We’re getting into that negative side of things. This is a soft spot granted it’s been a very significant string of bad data.”
Federal Reserve Chairman Ben S. Bernanke said yesterday the U.S. recovery was “frustratingly slow.” From March 16, when the S&P 500 fell to its lowest level of the year, industries less-tied to economic growth — health care, consumer staples, telecommunications and utilities — have risen the most among 10 groups in the index.
The Fed today said the economy expanded at a “steady pace” in most of the U.S. while slowing in four of 12 regions as consumers contended with higher food and fuel prices and shortages of parts reduced auto production.
Reports from the Fed’s district banks “indicated that economic activity generally continued to expand since the last report, though a few districts indicated some deceleration,” the Fed said today in its Beige Book survey of the economy in Washington.
Manufacturing “continued to expand in most parts of the country,” while slowing in some areas. Consumer spending was “mixed,” it said, while the job market improved “gradually across most of the nation.”
Stocks extended a worldwide slump today after the World Bank said global gross domestic product may expand 3.2 percent this year, less than the 3.3 percent forecast in January. German industrial production unexpectedly declined for the first time in four months in April, the government said.
Visa dropped 3.9 percent to $76.71. MasterCard declined 1.5 percent to $270.
Senator Richard Durbin of Illinois, the No. 2 Democrat in the chamber, led the opposition to the delay amendment, which was defeated in a 54-45 vote. The measure needed 60 votes for approval. The central bank now has until July 21 to implement the final rule on capping the fees, which accounted for more than $16 billion in 2009, according to the Fed.
In December, the Fed proposed capping the swipe fees, or interchange, at 12 cents a transaction, replacing a formula that averages 1.14 percent of the purchase price.
Ciena tumbled 16 percent to $20.29. The maker of network gear for the biggest U.S. phone companies reported second- quarter adjusted loss of 24 cents a share. On average, the analysts surveyed by Bloomberg estimated a loss of 11 cents. JDS Uniphase Corp. fell 5.5 percent to $17.40.
Gap retreated 2.4 percent to $17.49. Barclays cut its recommendation for the largest U.S. apparel chain to “equal weight” from “overweight,” citing risks to sales improvement.
A gauge of raw material stocks in the S&P 500 sank 1 percent, the most within 10 groups, amid concern about slower demand for metals. Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, dropped 1.9 percent to $48.82. Alcoa Inc. decreased 1.8 percent to $15.41.
Energy shares gained the most among 10 S&P 500 industry groups as crude oil rose. Secretary General Abdalla el-Badri of the Organization of Petroleum Exporting Countries said ministers were unable to reach a decision on production quotas at their meeting in Vienna today and will maintain their current output.
Exxon Mobil Corp. added 1 percent to $80.76 for the third- biggest gain in the Dow. The world’s largest energy company by market value discovered the equivalent of 700 million barrels of oil in three deep-water Gulf of Mexico wells.
Cabot Oil & Gas Corp. climbed 4.3 percent, the most in the S&P 500, to $58.31. The Houston-based natural gas producer was boosted to “buy” from “hold” at Canaccord Genuity, which cited “significantly higher” expected output at Marcellus Shale fields.
U.S. stocks whose earnings are most correlated to economic growth may decline more than other industries as a gauge of the shares nears its 200-day moving average, according to top-ranked UBS AG technical analysts.
The Morgan Stanley Cyclical Index of 30 stocks, including Alcoa Inc. and Ford Motor Co., may fall 3 percent to 980 if it breaches major support levels at 1,024 and 1,010, according to a report from UBS analysts Michael Riesner and Marc Muller yesterday. The gauge closed at 1,035.20 yesterday.
“From a cyclical standpoint, the month of June should be weak for risk assets,” Riesner and Muller wrote in the report.
“On a short-term basis, the U.S. market looks oversold and could bounce later this week, but given the poor picture in technical indicators and the increasing technical damage in key sectors, new lows in financials and cyclicals/energy complex sitting on key support, we are sticking to our cautious market stance.”
Have a wonderful evening everyone.
Be magnificent!
A child must be brought up to understand the word no. He should be taught yes first of all,
then, yes and no, then no and yes, in such a way that he gradually comes to realize, that there is really only no.
A child’s education is learning to understand no, and this enables him to grow.
Growing up means accepting the concept of no.
-Swami Prajnanpad,1891-1974
As ever,
Carolann
Maturity is only a short break in adolescence.
-Jules Feiffer, 1929-
Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor