March 10th, 2011 Newsletter

Dear Friends,

A couple of anniversaries to ponder today…On March 10, 1876, The Globe & Mail reminds us today, Alexander Graham Bell made his first successful telephone call.  “He spent three years trying to figure out how to transmit speech across electrical cables.  Three days after securing the patent for the electromagnetic telephone, [he] successfully tested it at his workshop in Boston.  As he spoke into one end, his assistant, electrical designer Thomas Watson, listened on the other in the next room.  Although Elisha Gray would lay claim to having invented the device first, Bell’s purported words that day – ‘Mr. Watson, come here.  I want to see you’  – had the ring of history.   Bell himself would be claimed by three countries: Scotland, where he was born; the United States, where he created his most famous inventions; and Canada, where he studied the Mohawk language as a young man and where, many decades later, he died.”  -Adrian Morrow

The other anniversary is that paper money was issued for the first time in the US on March 10, 1862.

The sculpture ‘The Dog’ from 1951 is pictured in front of the sculpture ‘The Chariot’ from 1950 during a media preview of an exhibition of late Swiss artist Alberto Giacometti (1901-1966) at the Kunsthaus Zurich art museum in Zurich, Switzerland. The exhibition, ‘Alberto Giacometti – The Art of Seeing,’ which shows some ninety works of the Swiss sculptor, painter and graphic artist, runs from March 11 until May 22, 2011. Arnd Wiegmann/Reuters

Market Commentary:

Canada

By Jennifer A. Johnson

March 10 (Bloomberg) — Canadian stocks fell for a fourth day as energy and materials producers tumbled after Spain’s debt rating was cut and U.S. jobless claims rose, spurring concern that global growth will slow.

Suncor Energy Inc., Canada’s biggest energy producer, fell

2.5 percent as crude oil dropped. Canadian Natural Resources Ltd. fell 2.8 percent. Potash Corp. of Saskatchewan Inc.

declined 2.3 percent as corn and wheat futures slipped. Barrick Gold Corp. slumped 1.5 percent as the precious metal retreated.

The Standard & Poor’s/TSX Composite Index declined 195.28 points, or 1.4 percent, to 13,689.43 at 2:30 p.m. in Toronto.

The benchmark Canadian equity index dropped as much as 2.2 percent, the most intraday since Aug. 11.

“After eight months on the TSX of unstoppable rally, we’ve hit a lull,” said Barry Schwartz, vice president at Baskin Financial Services Inc. in Toronto, who helps manage about C$390 million ($400 million). “The geopolitical crises are finally getting investors’ attention and the front page news on potential defaults and downgrades of European debt, combined with non-stop bad news out of the Middle East and northern Africa have finally taken the upper hand.”

A subgroup of energy producers in the S&P/TSX has dropped 6.2 percent since March 4 on concern higher oil prices will slow the global economic recovery. Energy and material producers make up 49 percent of Canadian stocks by market value.

U.S. applications for first-time unemployment benefits increased by 26,000 to 397,000 in the week ended March 5, Labor Department figures showed. Economists forecast claims would climb to 376,000, according to the median estimate in a Bloomberg News survey.

The U.S. trade deficit increased 15 percent to $46.3 billion, from $40.3 billion in December, Commerce Department figures showed today in Washington, as a surge in imports led by costlier oil overshadowed record exports.

China’s export growth was the slowest since 2009 and German exports dropped 1 percent in January from December. Moody’s Investors Service cut Spain’s rating by one level to Aa2, saying the government underestimated the cost of shoring up its banking industry.

Libyan rebels fled a key oil hub on the Mediterranean coast even as the insurgency’s leaders won recognition from French President Nicolas Sarkozy of the transitional government set up to oppose Muammar Qaddafi.

Crude oil pared losses after the Associated Press reported that police in Saudi Arabia, the Middle East’s biggest producer, opened fire at a rally in the east of the country.

Oil for April delivery declined 1.4 percent to $102.93 a barrel in New York.

Suncor slumped 2.5 percent to C$42.01. The energy producer fell to C$41.25, the lowest intraday price since Feb. 14.

Canadian Natural dropped 2.8 percent to C$45.06. Cenovus Energy Inc. declined 2.3 percent to C$35.77.

“The sectors that have done so well over the last two years commodities like base metals, energy, and food are the ones that will take the biggest hits,” Schwartz said.  “These are the sectors that are the most volatile and the ones tied most to economic growth.”

Potash Corp. declined 2.3 percent to C$52.81. Earlier, the fertilizer producer fell to C$51.72, the lowest intraday price since Jan. 4. Agrium Inc. slipped 1.6 percent to C$86.68. Corn futures fell 1.1 percent and wheat sank 2.2 percent.

Gold producers fell after gold futures dropped the most in a week. A stronger U.S. dollar prompted some investors to sell the metal after unrest in the Middle East and northern Africa pushed prices to a record.

Barrick Gold declined 1.5 percent to C$49.26, after falling to C$48.74, the lowest intraday price since Feb. 16. Goldcorp Inc. fell 2.2 percent to C$46.10.

Transat A.T. Inc., Canada’s largest tour operator, slumped 25 percent to C$12.40. It fell as much as 26 percent intraday, the biggest drop since March 2010. The Montreal-based company reported first-quarter revenue of C$810.2 million, missing the average analyst estimate of C$837.2 million, Bloomberg data show.

Alimentation Couche-Tard Inc. advanced 3.1 percent to C$25.50, the biggest gain in the Canadian benchmark equity index. The owner of Circle K convenience stores reported third- quarter profit of 38 cents a share, beating the average analyst estimate by 2.2 percent, Bloomberg data show.

US

By Claudia Carpenter and Nikolaj Gammeltoft

March 10 (Bloomberg) — Stocks slid, while the dollar and Treasuries gained, as U.S. jobless claims rose, China’s export growth slowed and Spain’s credit rating was cut. Equities extended losses and oil pared declines as the Associated Press reported Saudi Arabian police fired into a crowd of protesters.

The Standard & Poor’s 500 Index retreated 1.8 percent to 1,296.76 at 3:14 p.m. in New York. The Stoxx Europe 600 Index sank 1.2 percent to 277.88, its lowest close of the year. The Dollar Index, which tracks the currency against six major peers, rose 0.8 percent. Crude slipped 1.6 percent after tumbling as much as 3.6 percent earlier. Treasuries extended gains after a 30-year bond auction produced the highest demand since 2000. The euro fell to $1.3783 as the dollar gained against all 16 peers.

Investors fled riskier assets after first-time applications for U.S. unemployment benefits and the American trade deficit topped economists’ estimates, China’s export growth was the slowest since 2009 and German exports dropped 1 percent in January from December. The Bank of Korea raised borrowing costs after inflation exceeded its target. Moody’s Investors Service cut Spain’s rating by one level to Aa2, saying the government underestimated the cost of shoring up its banking industry.

“We may be seeing indications of an economic slowdown,” said Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages $3 billion. “The market has been whistling past the graveyard of higher oil prices and consumers pulling back, but now it’s starting to weigh down on stocks and we’ve probably seen the highs until we get first-quarter earnings results in April. The only thing that is going up today is the bond market as people run to safety.”

The S&P 500 fell for the fourth time in five days, with energy, financial and technology companies falling more than 1.7 percent to lead declines among all 10 industry groups.

Caterpillar Inc. and General Electric Co. slumped at least 2.1 percent, pacing losses among industrial companies, and 28 of 30 stocks in the Dow Jones Industrial Average fell.

The S&P 500 has retreated 3.2 percent from its high for the year on Feb. 18 amid concern higher oil prices will stifle the economic recovery. The gauge is trading near its average from the past 50 days, according to data compiled by Bloomberg. The S&P 500 hasn’t closed below that threshold, a level watched by analysts who make forecasts based on chart patterns, since Sept. 1. The index has rallied 93 percent from its bear-market low in March 2009.

“The down move we’re seeing today is a corrective phase within a longer-term uptrend,” said Christopher Verrone, lead technical analyst at New York-based Strategas Research Partners.

“The integrity of the uptrend since the 2009 low is still intact, but if the 1,294-level on the S&P 500 fails to hold in the next couple of days, we’ll probably come down to 1,260. And that’s a range which we would look at as a buying opportunity.”

Applications for first-time unemployment benefits increased by 26,000 to 397,000 in the week ended March 5, Labor Department figures showed. Economists forecast claims would climb to 376,000, according to the median estimate in a Bloomberg News survey.

The U.S. trade deficit widened to the highest level in seven months as a surge in imports led by costlier crude oil overshadowed record exports. The gap increased 15 percent to $46.3 billion, from $40.3 billion in December, Commerce Department figures showed. Imports jumped 5.2 percent, the most since 1993, while exports grew 2.7 percent. The deficit was wider than the most pessimistic forecast in a Bloomberg survey.

The yield on the 10-year U.S. Treasury note slipped eight basis points to 3.40 percent. U.S. debt extended gains after the government sold $13 billion of 30-year bonds, the final of three note and bond auctions this week totaling $66 billion, and rallied further after the report of violence in Saudi Arabia.

The 30-year bond yield dropped eight basis points to 4.54 percent. The securities sold today yielded 4.569 percent, compared with an average forecast of 4.610 percent in a Bloomberg News survey of 7 of the Federal Reserve’s 20 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.02, compared with an average of 2.66 at the last 10 auctions.

The cost of protecting corporate bonds from default in the U.S. climbed. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 2 basis point to a mid-price of 86.75 basis points, according to index administrator Markit Group Ltd. The cost to protect debt from Morgan Stanley, Bank of America Corp., Goldman Sachs Group Inc. and Merrill Lynch & Co. climbed. Six stocks dropped for each that gained in the Stoxx 600.

Rio Tinto Group and BHP Billiton Ltd. helped lead basic-resource producers to the biggest decline among 19 industry groups. Home Retail Group Plc sank 5.9 percent as the owner of the Homebase do-it-yourself store chain lowered its profit forecast. The MSCI Asia Pacific Index and China’s Shanghai Composite Index tumbled at least 1.5 percent.

The dollar appreciated against all of its 16 most-traded counterparts, gaining 0.3 percent to 82.99 yen and 1.6 percent versus the Norwegian krone. The pound slid against 13 of 16 major peers as the Bank of England policymakers kept the benchmark rate at a record 0.5 percent low.

The Australian dollar depreciated against all but two of its most actively traded peers after the nation’s employers unexpectedly cut workers in February for the first time in 18 months as floods and a cyclone disrupted hiring in the nation’s northeast.

Crude oil traded in New York fell 1.6 percent to $102.72 a barrel. In London, Brent oil retreated 0.5 percent to $115.31 after sliding as much as 2.1 percent.

Prices rebounded after AP quoted an unnamed witness in the city of Qatif saying gunfire and stun grenades were fired at several hundred protesters, leaving at least one person injured.

Futures slipped as much as 3.6 percent earlier.

Copper declined 0.4 percent to $4.1975 a pound in New York, its lowest settlement price of the year.

The Thomson Reuters/Jefferies CRB index of commodities slumped 1.6 percent, the most on a closing basis since Nov. 16.

Have a wonderful evening everyone.

Be magnificent!

Knowledge relieves all suffering.  Knowledge liberates. Which knowledge?  Chemistry?  Physics?  Astronomy?  Geology?

They help a little, but only a little.  The true knowledge is the knowledge of our own nature. Know yourself.  You must know who you are, understand your inner nature. You must become conscious of this infinite nature in yourself.  Then you will break free of your shackles.

-Swami Vivekananda, 1863-1902

As ever,

Carolann

Courage is the ladder on which all the other virtues mount.

-Clare Booth Luce, 1903-1987