March 9th, 2011 Newsletter

Dear Friends,

Space Shuttle Discovery lands at the Kennedy Space Center in Cape Canaveral, Fla. Discovery ended its career as the world’s most-flown spaceship today, returning from orbit for the last time and taking off in a new direction as a museum piece.

Revelers of Unidos do Peruche samba school perform atop of a float during the opening night of parades at the Sambadrome, as part of Carnival celebrations in Sao Paulo, Brazil, late on March 4. Brazil’s Carnival kicked off on the eve with millions of people taking to the streets of the northeastern city of Salvador de Bahia to dance and party, effectively putting the nation on a week-long hiatus. (Mauricio Lima/AFP/Getty Images)

Children revelers of Nene de Vila Matilde samba school get ready at a concentration area before the start of the second night of Carnival parades at the Sambadrome, in Sao Paulo, Brazil, late on March 5. (Maurcicio Lima/Getty Images)

Market Commentary:

Canada

Bloomberg: By Jennifer A. Johnson

Canadian stocks fell for a third day, led by raw material producers, as Potash Corp. of Saskatchewan Inc. slipped on an analyst rating cut and Teck Resources Ltd. (TCK/B) slumped along with copper prices.

Potash Corp., the world’s largest fertilizer producer, dropped 4.6 percent after Citigroup Inc. cut the shares to “hold” from “buy.” Teck Resources declined 3.5 percent as copper slid on concern higher oil prices will slow the global economic recovery. First Quantum Minerals Ltd. (FM) fell 5.6 percent.

The Standard & Poor’s/TSX Composite Index declined 128.26 points, or 0.9 percent, to 13,884.71 in Toronto.

“At the beginning as oil prices go higher, energy producers benefit,” said Marcus Xu, director of equity investments at Genus Capital Management in Vancouver, which manages C$1.7 billion ($1.8 billion). “But you have to think about the other side as well, which is how higher oil prices will impact the consumer.”

A subgroup of materials producers in the Canadian benchmark equity index has dropped 4.5 percent this week. Copper futures have dropped 9.4 percent since Feb. 14. Oil soared 23 percent in the same period.

Crude oil fell for a second day in New York after the U.S. reported a surge in supplies at Cushing, Oklahoma, the delivery point for West Texas Intermediate, the U.S. benchmark grade. Brent oil traded in London climbed as Libyan leader Muammar Qaddafi stepped up attacks on insurgents.

Futures rose as much as 0.9 percent before erasing gains after Cushing supplies climbed 1.69 million barrels to 40.3 million last week, the highest level since the Energy Department began gathering data at the hub. Oil climbed earlier as Libyan government forces launched air and artillery strikes on central oil ports to halt a rebel advance.

“Even if the Libyan situation settles, there are still other countries to worry about,” Xu said. “The unrest in the Middle East isn’t going away anytime soon.”

Suncor Energy Inc. (SU), Canada’s biggest energy producer, fell 1.4 percent to C$43.07. Talisman Energy Inc. dropped 1.6 percent to C$22.96.

A group of gold producers in the S&P/TSX Index fell for a third day, declining 1.3 percent. Barrick Gold Corp. (ABX) slumped 1.6 percent to $49.99, while Goldcorp Inc. (G) sank 1.6 percent to C$47.12.

Potash Corp. fell 4.6 percent to C$54.06 after Citigroup Inc. cut its rating, citing a lack of catalysts to drive the shares higher.

Teck, Canada’s largest base-metals producer, fell 3.5 percent to C$50.87, after copper for May delivery fell 2.9 percent on concern demand may wane as higher energy costs slow the global economy. First Quantum Minerals Ltd., the country’s second-largest publicly traded copper producer, fell 5.6 percent to C$111.92.

Cineplex Inc. advanced 1.8 percent to C$23.30. The company that owns interests in Canadian movie theaters was raised to “outperform” from “market perform” at Raymond James Securities. The 12-month price estimate is C$25.

Aastra Technologies Ltd. (AAH) gained 3.3 percent to C$24.05, after the maker of telecommunications equipment was raised to “buy” from “hold” at TD Newcrest Inc. The 12-month price estimate is C$32.

TMX Group Inc., the owner of the Toronto Stock Exchange and the Montreal Exchange derivatives market, dropped 2 percent to C$39.07 after Toronto-Dominion Bank and other Canadian lenders expressed concern about the proposed sale of TMX Group to London Stock Exchange Group Plc because the country will cede regulatory control of its main stock exchange.

US

Bloomberg: By Rita Nazareth and Adam Haigh

U.S. stocks fell, sending the Standard & Poor’s 500 Index lower a third time in four days, as escalating violence in Libya tempered optimism that the biggest equity rally since 1955 will extend into a third year.

Caterpillar Inc. (CAT) and DuPont Co. dropped at least 1 percent, pacing losses in industrial shares. Texas Instruments Inc. (TXN) slumped 3.1 percent as the largest analog chipmaker narrowed its earnings forecast. Finisar Corp. (FNSR) tumbled 39 percent, leading other network-equipment makers lower, as its profit estimate missed analysts’ projections. International Business Machines Corp. (IBM) rose 2.2 percent as Deutsche Bank AG lifted its share- price estimate for the largest computer-services provider.

The S&P 500 dropped 0.1 percent to 1,320.02 at 4 p.m. in New York. The Dow Jones Industrial Average fell 1.29 points, or less than 0.1 percent, to 12,213.09 as IBM, which makes up about 10 percent of the Dow, propped up the 30-stock gauge. Oil slid 0.6 percent to settle at $104.38 a barrel as a surge in supplies at a U.S. hub overshadowed concern about violence in Libya.

“You’d be crazy not to be concerned about geopolitical risks,” said Philip Dow, director of equity strategy at Minneapolis-based RBC Wealth Management, which oversees $164 billion. “Oil touches everything. However, if you’ve paid attention to every near-term uncertainty of the last two years, you would have missed the big move in stocks. You can’t see the forest for the trees. There’s not enough evidence that this could derail the global recovery. This is an expansion.”

The S&P 500 has fallen 1.7 percent from this year’s highest level on Feb. 18 as crude oil surged amid unrest in Libya and the Middle East. The benchmark for U.S. equities has rallied 95 percent from its bear-market low two years ago on government stimulus measures and as corporate earnings beat analysts’ estimates for eight straight quarters.

Libya’s Ras Lanuf refinery, the country’s largest crude- processing plant, was shut amid fighting between government forces and rebels, an official with the Libyan Emirates Oil Refining Co. said. Oil tanks at the nearby Es Sider terminal were damaged by bombings today, according to Al Jazeera television.

While some use “these issues to paint a gloomy picture, we remain optimistic and believe this ‘wall of worry’ will help elongate the bull run,” said Kully Samra, who manages U.K.- based clients for Charles Schwab Corp., which has $1.5 trillion in client assets. “The general trend in stocks continues to be higher despite increasing concerns over inflation, debt, global conflict, rising interest rates and oil prices.”

Laszlo Birinyi, who told clients to buy as the S&P 500 fell to a 12-year low of 676.53 on March 9, 2009, says gains that added about $28 trillion to global share values will outlast previous increases as investors who missed the first phase play catch-up. Valuations are still below historical averages, said Barton Biggs, the hedge-fund manager who purchased stocks before the S&P 500 almost doubled.

“These kinds of strong beginnings lead to long and durable bull markets,” Birinyi, who founded Westport, Connecticut-based research and money management firm Birinyi Associates Inc. in 1989 after a decade on the trading desk at Salomon Brothers, said in a March 7 phone interview. “While there will be corrections and while there will be pauses, we’re still of the view that this is a bull market that we expect to go on for several years.”

Five straight quarters of U.S. profit growth and the biggest yearly increase since 1988 have held down valuations, according to data compiled by Bloomberg. The U.S. benchmark index is trading at 15.5 times reported earnings, compared with the average ratio of 19.7 at bull-market peaks.

The proportion of investment publications that are forecasting a stock market correction, or 10 percent drop, declined to a four-month low of 26.7 percent between March 2 and yesterday, according to Investors Intelligence, which has examined forecasts in newsletters since 1963. Newsletter writers who are bullish rose to 52.2 percent, the highest since Jan 11, while bearish publications climbed to 21.1 percent, the highest in a month.

Stocks of industries which are most dependent on economic growth, including commodity producers, technology and industrial companies, led the declines in the S&P 500.

Caterpillar, the world’s largest maker of construction equipment, lost 1.7 percent to $102.36. DuPont, the third- biggest U.S. chemical maker, slid 1 percent to $53.71.

Texas Instruments fell 3.1 percent to $34.74. The largest analog chipmaker narrowed its first-quarter profit estimate to 56 cents to 60 cents a share from 54 cents to 62 cents. The average analyst estimate in a Bloomberg survey was 59 cents.

Finisar tumbled 39 percent to $24.61 for its biggest decline since going public in 1999. The maker of fiber-optic transmission gear said it won’t earn more than 35 cents a share excluding some items in the fourth quarter, missing the average analyst estimate of 48 cents.

Other makers of networking equipment also slumped. JDS Uniphase Corp. (JDSU) fell 17 percent, the biggest drop in the S&P 500, to $21.14. Ciena Corp. (CIEN) slumped 5.3 percent to $24.33.

IBM rose 2.2 percent to $165.86, the biggest increase in the Dow, and touched an all-time high of $167.72. Deutsche Bank raised its share-price estimate for the computer-services provider to $200 from $175. There is “ample flexibility” for IBM to beat its forecast of generating at least $20 a share by 2015 given its revenue growth, productivity gains and share buybacks, analyst Chris Whitmore wrote in a note to clients.

Retailers advanced as American Eagle Outfitters Inc. (AEO) reported fourth-quarter profit from continuing operations of 44 cents, beating the average analyst estimate by 1 cent. The Pittsburgh-based company climbed 5.1 percent to $15.56.

J.C. Penney Co. rallied 4.8 percent to $36.94, the biggest increase in the S&P 500. Macy’s Inc. (M) rose 3 percent to $24.08.

Yoga is concerned with freedom from spiritual disturbance. The first step in yoga is to engage in introspection, and thereby understand the inner obstacles that must be overcome. The purpose of yoga is to weaken the hindrances which obstruct knowledge of the soul. There are five hindrances: ignorance, egoism, attachment, aversion and tenacity.

~Patanjali

Warmest regards,

Chelsey for Carolann

“As a single footstep will not make a path on the earth, so a single thought will not make a pathway in the mind. To make a deep physical path, we walk again and again. To make a deep mental path, we must think over and over the kind of thoughts we wish to dominate our lives.”  ~Henry David Thoreau (1817-1862)