March 17th, 2011 Newsletter

Dear Friends,  HAPPY SAINT PATRICK’S DAY!

I wanted to mention a wonderful Irish musician whom we heard for the first time a couple of weeks ago.  Her name is Lisa O’Neill and she is a youthful and energetic twenty-something-year-old, living in Dublin.  We had tickets to the David Gray concert for the Friday night on March 4^th, who, by the way  was incredible – one of the best musicians I’ve ever heard, one of the best bands I’ve ever heard and certainly one of the best concerts I’ve been to in awhile on many levels.  Gary commented afterward that it was an evening of pure art, and on reflection, I agree.  Anyway, when the concert was slated to begin, David Gray appeared from behind the curtain, and said he wanted to introduce to the audience a talented musician from Ireland named Lisa O’Neill, who has produced a CD, of which she wrote all music and lyrics.  She sang for about an hour, played guitar and harmonica – and yes, she is fun to listen to and talented.  When she finished her performance, she announced that there would be a half hour intermission and she would be in the lobby autographing her CD.  I stood in line to get one and the name of it is lisa o’neill has an album.  It has some great tunes including one entitled I painted my nails so pretty and a wonderful song about Bob Dylan entitled bobby d,  both of which she sang at the concert.  You can find her at www.myspace.com/lisaconeill.

Market Commentary:

Canada

By Matt Walcoff

March 17 (Bloomberg) — Canadian stocks rose for the first time in four days as oil prices advanced with continuing unrest in the Middle East and northern Africa and economic data from Canada and the U.S. showed a strengthening recovery.

Suncor Energy Inc., the country’s biggest oil and gas producer, gained 4.5 percent as crude climbed above $101 a barrel. Teck Resources Ltd., the country’s biggest base-metals and coal producer, rallied 5.1 percent as copper and zinc gained. Sino-Forest Corp., which produces lumber in China, surged 7.1 percent as forestry companies rose on the prospect of rebuilding in Japan.

The Standard & Poor’s/TSX Composite Index advanced 221.33 points, or 1.6 percent, the most since Nov. 18, to 13,746.15. It fell to a six-week low yesterday.

Oil prices “have stabilized at the elevated levels,” said Greg Eckel, who helps oversee about C$1 billion ($1 billion) as a money manager at Morgan Meighen & Associates Ltd. in Toronto.

“If there are pipeline disruptions and production disruptions, it obviously reduces supply.”

The index had lost 4.3 percent this month through yesterday after eight months of gains. Oil companies dropped as crude prices retreated from the peak touched at the outbreak of the Libyan civil war, while mining and insurance stocks declined after the March 11 earthquake and tsunami in Japan.

Crude oil futures rallied 3.5 percent as fighting intensified in Libya. Natural gas jumped the most in eight months after the U.S. Energy Department said stockpiles declined more than 21 of 22 analysts in a Bloomberg survey had forecast.

The S&P/TSX Energy Index climbed 3.1 percent, the most since May 27. The Thomson Reuters/Jefferies CRB Commodity Price Index, which includes 19 items, soared the most in 19 months.

Suncor advanced 4.5 percent to C$43.96 after being named a “key call” by George Toriola, an analyst at UBS AG. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, rose 5 percent to C$48.23. Petrobank Energy & Resources Ltd., a western Canadian oil and gas producer, gained 5.3 percent to C$20.03. Oilfield-services provider Precision Drilling Corp. jumped 8.3 percent to C$11.92.

Pacific Rubiales Energy Corp., which produces oil and gas in Colombia, surged 7.2 percent to C$27.94 after releasing details of its contract with Ecopetrol SA to develop the Quifa Block. The shares sank to a six-month low on March 14 on concern the contract may lead to a smaller participation interest in the project for Pacific Rubiales than previously thought.

Wholesale sales increased 1.5 percent in January, Statistics Canada said today. The figure exceeded nine of 11 economists’ estimates in a Bloomberg survey.

In the U.S., first-time unemployment claims fell to 385,000 last week from a revised 401,000 the previous week, the Labor Department said in Washington. Economists had forecast a total of 388,000 claims, according to the median of 44 estimates in a Bloomberg survey.

An index of S&P/TSX base-metals and coal producers advanced the most in three months as all major base metals gained on the London Metal Exchange.

Teck rose 5.1 percent, the most since Sept. 1, to C$53.72.

First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, gained 5.6 percent to C$121.20. Mercator Minerals Ltd., which mines copper and molybdenum, increased 9.1 percent to C$3.82.

Minera Andes Inc., which explores for precious and base metals in Argentina, surged 20 percent to C$2.69 after announcing plans to spin off its Los Azules copper project into a new company.

Cameco Corp., the world’s second-largest uranium producer, decreased 5.8 percent to C$27.73. The shares have plunged 24 percent this week as the Japanese nuclear crisis has jeopardized a renaissance in nuclear power.

Forestry companies rallied as lumber jumped the most allowed in a day on the Chicago Mercantile Exchange.

Sino-Forest advanced 7.1 percent to C$23.21. Canfor Corp., which derived 38 percent of its revenue from Asia last quarter, soared 7.8 percent to C$14. Western Forest Products Inc., which also exports forest products to Asia, surged 24 percent to C$1.18, extending its five-day gain to 90 percent.

Martinrea International Inc., Canada’s second-largest auto- parts maker, increased 8.6 percent to C$9.74. Analysts at Paradigm Capital Inc., Canaccord Financial Inc. and Clarus Securities Inc. raised 12-month share-price estimates on the company two days after it reported fourth-quarter profit that topped the average analyst estimate.

US

By Rita Nazareth

March 17 (Bloomberg) — U.S. stocks rallied, breaking a three-day losing streak for the Standard & Poor’s 500 Index, amid investor speculation that Japan will contain a nuclear crisis and as FedEx Corp.’s profit forecast beat estimates.

The iShares MSCI Japan Index Fund tracking 323 securities rose 4.6 percent, following a 14 percent slump over the previous five days. FedEx, which runs the biggest cargo airline and is considered a proxy for economic growth, gained 3.1 percent.

JPMorgan Chase & Co. and Bank of America Corp. added at least 1.7 percent as a person familiar with the matter said the Federal Reserve will tell some of the largest U.S. banks tomorrow whether they can raise their dividends or buybacks.

The S&P 500 advanced 1.3 percent to 1,273.72 at 4 p.m. in New York. The gauge, which had declined 3.6 percent over the last three days, yesterday traded at 14.7 times reported earnings, the lowest valuation since November, according to data compiled by Bloomberg. The Dow Jones Industrial Average added 161.29 points, or 1.4 percent, to 11,774.59 today.

“The market is oversold,” said Mike Ryan, the New York- based head of wealth management research for the Americas at UBS Financial Services Inc., which oversees $741 billion. “The major focus is on whether or not Japan will be able to get any kind of containment on the nuclear reactors. The G-7 meeting is constructive as they are probably going to talk about what type of aid they may provide. There’s also the unrest in northern Africa and the Middle East. The corporate outlook will help, but it’s still going to be about headline and geopolitical risks.”

The S&P 500 had tumbled 6.4 percent from its 32-month high in February through yesterday amid concern Japan’s worst earthquake on record and uprisings in the Middle East and northern Africa will derail the global economic recovery. The yen strengthened to a post-World War II high as Group of Seven officials prepare to meet tomorrow to discuss the threat to the world’s third-largest economy from a worsening nuclear crisis.

Tokyo Electric Power Co. said efforts to use water cannons and helicopters to cool its damaged Fukushima nuclear plant may have had some success as workers try to stop radioactive pollution spreading. A bid to spray water onto the No. 3 reactor may have worked, a Tokyo Electric official said at a briefing. The company is trying to connect a power cable to the plant.

The International Atomic Energy Agency said the situation at three loaded reactor cores in Japan’s Fukushima nuclear complex has been “relatively stable” in the last 24 hours. All of the units are damaged and don’t have cooling, IAEA Director Graham Andrew said today at a press briefing in Vienna. The situation remains “very serious,” he said.

Pacific Investment Management Co., the world’s biggest manager of bond funds, hasn’t seen redemptions from Asia investors following last week’s earthquake in Japan, Chief Executive Officer Mohamed El-Erian said.

“It’s too early,” as the immediate effect is to worry about the human consequences first, El-Erian said on Bloomberg Television’s “InBusiness” in an interview with Margaret Brennan. “There is a period of shock until people fully understand the enormity of what happened.”

In Japan, the Nikkei 225 Stock Average slid 1.4 percent after losing as much as 5 percent. The iShares MSCI Japan Index Fund gained 4.6 percent to $10.10 in U.S. trading, after yesterday dropping to the lowest level since September.

The slide in stocks has left both developed and emerging market equities “mildly oversold,” according to Citigroup Inc. global strategist Robert Buckland.

“Perhaps ongoing fears will provide the impetus for global equities to get even more oversold,” he wrote. “Unless these events have a meaningful impact upon the economy, then a further sell-off would offer an opportunity to get more bullish. The best time to take risk on is when others want to take it off.”

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slumped 10 percent to 26.37. The VIX jumped 21 percent to 29.40 yesterday for its highest close since July.

The VIX benchmark index for U.S. stock options will average 18.50 this year, below its historic average, as the continuing economic recovery reduces stock-market swings, Susquehanna Financial Group LLLP said. S&P 500 fluctuations are likely to decrease as the Federal Reserve keeps interest rates near record lows to boost economic growth, according to a report from Trevor Mottl, the firm’s head of derivative strategy.

“Improving U.S. economic conditions, accommodative monetary policy, and increased real financial activity will act to collectively stabilize risk-asset prices, supporting our forecast of lower realized S&P 500 volatility,” Mottl wrote.

The Morgan Stanley Cyclical Index of companies most-tied to economic activity advanced 1.4 percent as 26 of its 30 stocks gained. The Dow Jones Transportation Average of 20 stocks rallied 1.4 percent.

FedEx rose 3.1 percent to $87.89. Per-share earnings for the fiscal fourth quarter ending May 31 will be $1.66 to $1.83 a share, the company said today. Analysts had projected $1.66, the average of 22 estimates in a Bloomberg survey.

The KBW Bank Index gained 1.4 percent as 23 of its 24 stocks rallied. JPMorgan rose 1.7 percent to $44.56. Bank of America added 2.1 percent to $13.98.

Qualcomm Inc. added 3.6 percent to $52.32. The largest producer of mobile-phone chips said it expects last week’s Japanese earthquake and tsunami to have a limited effect on its supplies.

Hewlett-Packard Co. rallied 3.2 percent to $41.43, while Apple Inc. gained 1.4 percent to $334.64. Credit Suisse rated the stocks “outperform” and the hardware industry “overweight,” citing the outlook for growth in demand.

Energy producers had the biggest gain in the S&P 500 within 10 industries, rising 3.1 percent. Crude oil climbed the most in three weeks on concern that unrest in North Africa and the Middle East will spread, reducing shipments from the region. Oil advanced 3.5 percent to $101.42 a barrel.

Schlumberger Ltd., the world’s largest oilfield services provider, gained 4.8 percent to $87.05. ConocoPhillips added 4 percent to $76.72.

The S&P 500 will fall to 1,232 by March 31, marking the bottom of a “modest correction,” according to Birinyi Associates Inc., which cited data measuring average drops of at least 5 percent since 1945.

The decrease would represent a 2 percent retreat from yesterday’s close of 1,256.88. When the S&P 500 loses 5 percent during a rallying period, the decline lasts an average of 41 days and extends to 8.3 percent, according to a report today by Cleve Rueckert, an analyst at Birinyi Associates.

“History suggests that the current decline will be short- lived, and most likely presents a buying opportunity,” the Westport, Connecticut-based research and money-management firm said in a report today.

Have a wonderful evening everyone.

Be magnificent!

Not only must we be aware of the nature and structure of the problem and see it completely, but meet it as it arises and resolve it immediately, so that it does not take root in the mind. If one allows a problem to endure for a month or a day, or even for a few minutes, it distorts the mind. -Krishanmurti, 1895-1986

As ever, Carolann

You’ve got to do your own growing, no matter how tall your grandfather was. -Irish Proverb