May 18th 2011, Newsletter

Dear Friends,

I thought of this poem today for some reason – a comment someone made in passing about someone I know…

The Soul Selects Her Own Society

The soul selects her own society,
Then shuts the door;
On her divine majority
Obtrude no more.

Unmoved, she notes the chariot’s pausing
At her low gate;
Unmoved, an emperor is kneeling
Upon her mat.

I’ve known her from an ample nation
Choose one;
Then close the valves of her attention
Like stone.

-Emily Dickinson, 1862

I went to see Joan Rivers last night and laughed non-stop for 1 ½ hours. She began with jokes on the Arnold, “We’re paying her $8,000/hour because she’s a GUTE CLEANER…” (explanation to his wife Maria Shriver) and went on from there. She is 78 years old and looks fantastic. She offered no remorse for plastic surgery, “Why do people spend so much on cars? You bring your face to the party and leave your car at the curb?”

Market Commentary:

Canada
By Matt Walcoff
May 18 (Bloomberg) — Canadian stocks rose for a third day as oil gained after a government report showed a decline in U.S.
supplies and base metals advanced on speculation demand from China will increase.

Canadian Natural Resources Ltd., the country’s second- largest energy company by market value, gained 2.5 percent after a rating increase by Menno Hulshof, an analyst at Toronto- Dominion bank. Ivanhoe Mines Ltd., which has a copper and gold project in Mongolia with Rio Tinto Group, rose 7.2 percent as copper gained for a fifth day. BlackBerry maker Research In Motion Ltd. rallied 3.8 percent after AllianceBernstein Holding LP removed its “underperform” rating.

The Standard & Poor’s/TSX Composite Index advanced 166.19 points, or 1.2 percent, to 13,607.25, erasing its loss for the year.

“Commodities have come down to the point where some are looking relatively cheap,” said Blair Falconer, who oversees C$800 million ($822 million) as a money manager at HSBC Securities (Canada) Inc. in Toronto. “Energy, for example, is looking a lot better than it did a short while ago.”

The index increased 0.5 percent this week through yesterday, narrowing its quarterly loss to 4.8 percent, as raw- materials companies climbed on rebounding copper, corn and wheat prices. The materials industry accounts for 21 percent of Canadian stocks by market value, according to Bloomberg data.

Crude futures rose 3.3 percent after the U.S. Energy Department said oil inventories fell last week. Most analysts in a Bloomberg survey had forecast an increase.

Suncor Energy Inc., Canada’s largest oil and gas producer, advanced 2.7 percent to C$39.56. Cenovus Energy Inc., the country’s fifth-biggest energy company, increased 3.5 percent to C$33.88. ARC Resources Ltd., a western Canadian oil and gas producer, climbed 4.3 percent to C$25.09 after reporting first- quarter cash flow that beat the average analyst estimate.

Canadian Natural gained 2.5 percent to C$40.74 after Hulshof raised his rating on the stock to “action list buy” from “buy.” In a note to clients, Hulshof cited the company’s growing oil-sands resources and forecasts of higher processing- equipment reliability.

Sterling Resources Ltd., which explores for oil and gas in Europe, plunged 29 percent to C$1.78 after encountering wet sands in North Sea drilling. The shares have tumbled 54 percent since April 28, when the company declared force majeure on its Romanian offshore blocks due to trouble getting government permits.

Oilfield-services provider North American Energy Partners Inc. sank 26 percent to C$7.39. The company said it will take a writedown of C$40 million to C$45 million due to the impact of inflation at the Horizon oil-sands project.

Base-metals and coal producers gained after China’s statistics bureau said home prices advanced in 67 of 70 cities in April from last year. Copper demand from Chinese cable makers will more than double in the next 10 years, Dai Zhixiang, chairman and chief executive officer of Hu An Cable Holdings Ltd., said in an interview.

Ivanhoe Mines increased 7.2 percent to C$24.58. Teck Resources Ltd., Canada’s largest company in the industry, climbed 4.2 percent to C$48.70. First Quantum Minerals Ltd., the country’s second-biggest publicly traded copper producer, rose 2 percent to C$135.

Nevsun Resources Ltd., which produces gold in Eritrea, rallied 13 percent, the most in 11 months, to C$5.87 after saying it will begin paying dividends.

Jaguar Mining Inc., which mines gold in Brazil, soared 23 percent, the most since October 2008, to C$5.14 after its first- quarter earnings beat the average analyst estimate.

Fertilizer producers climbed as wet weather delayed corn and wheat planting in the U.S. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, rose 2.3 percent to C$53.49. Agrium Inc. gained 2.1 percent to C$79.67.

RIM advanced for a second day after falling to a four-year low May 16, rallying 3.8 percent to C$44.11. Pierre Ferragu, a Bernstein analyst, raised his rating on the shares to “market perform, telling clients in a note, ‘‘We do not see RIM’s situation deteriorating fast enough in the next 12 months to frighten the market beyond today’s negative sentiment.”

US
By Rita Nazareth
May 18 (Bloomberg) — U.S. stocks rose, snapping a three- day drop, as the Federal Reserve signaled continued low interest rates, commodities rebounded and earnings at companies including Dell Inc. beat analyst estimates.

Chevron Corp. and Monsanto Co. advanced at least 2.4 percent as commodities climbed for the first time in three days amid signs of increasing demand. Dell, the world’s second- largest computer maker, jumped 5.4 percent as corporate spending helped the company withstand a slump in consumer demand. Teen retailer Abercrombie & Fitch Co. increased 3.4 percent as earnings beat analysts’ projections.

The Standard & Poor’s 500 Index rose 0.9 percent to
1,340.68 at 4 p.m. in New York, after losing 1.5 percent over the last three days. The Dow Jones Industrial Average added 80.60 points, or 0.7 percent, to 12,560.18. Stocks extended gains as records from the Fed’s April policy meeting said that talks about an exit strategy from record stimulus measures don’t mean monetary tightening “would necessarily begin soon.”

“I see a lot of green on my screen,” said Timothy Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York, which manages $2 billion. “We got Dell as a turnaround story. Commodities were looking for an opportunity to bounce and traders will take advantage of it. In addition, the Fed wants to encourage the movement of assets out of fixed income and into equities by keeping rates low.”

The S&P 500 has advanced 6.6 percent in 2011 amid government stimulus measures and higher-than-estimated corporate earnings. More than two-thirds of the 446 companies that reported results since April 11 topped the average analyst earnings projection, according to data compiled by Bloomberg.

Fed policy makers began to coalesce last month on a strategy to reverse record monetary stimulus by first ending their reinvestment policy and later raising interest rates and selling assets.

Almost all officials agreed that the “first step toward normalization” should be ceasing reinvestment of principal payments on mortgage debt that began in August, the Federal Open Market Committee said in records of its April 26-27 session, released today. A majority preferred to sell the Fed’s securities after raising short-term interest rates, and most wanted to put asset sales on a preannounced schedule while using federal-funds rate increases as an “active tool.”

The Morgan Stanley Cyclical Index of companies most- dependent on economic growth rose 1.2 percent as 25 of its 30 stocks gained. The Dow Jones Transportation Average of 20 stocks advanced 1.6 percent.

Gauges of energy and raw-material producers rallied more than 1.9 percent, the two biggest gains within 10 S&P 500 groups. Crude oil climbed above $100 a barrel in New York after an Energy Department report showed an unexpected drop in U.S. inventories as refineries bolstered operating rates and imports declined. Metal prices also gained.

Chevron, the second-largest U.S. oil company, added 2.4 percent to $102.86. Monsanto, the world’s largest seed company, rose 3.9 percent to $65.62.

Dell climbed 5.4 percent to $16.75. It’s the second straight quarter that the company’s results outshined those of rival Hewlett-Packard Co. A slowdown in home-computer sales has roiled industry leader Hewlett-Packard, which cut its annual sales forecast yesterday. While Dell also saw its consumer revenue drop, the company said it was able to squeeze more profit out of each sale.

Abercrombie & Fitch rose 3.4 percent to $75.69. The teen retailer reported first-quarter earnings from continuing operations of 27 cents a share. On average, the analysts surveyed by Bloomberg estimated profit of 13 cents a share.

Analog Devices Inc. had the biggest gain in the S&P 500, adding 5.9 percent to $42.60. The maker of chips used in cars, consumer electronics and phone networks forecast third-quarter adjusted earnings of as much as 75 cents a share, topping the average analyst estimate by 5 cents.

“We’ve got good earnings surprises,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St.
Petersburg, Florida, who helps manage $275 billion. “The numbers will continue to be a lot stronger than people think. Of the developed world, I like the U.S. by far. From a 50,000-foot level, I’m avoiding Europe because they have a huge bunch of problems.”

Fed Bank of St. Louis President James Bullard said the European sovereign-debt crisis has surpassed rising oil prices to become the biggest risk to the economic outlook in the U.S.

“I would have said oil a few weeks ago, but now with those prices retreating, just sitting here today, I’m a little more worried about Europe than anything else,” Bullard said today in an interview.

The yield on Greece’s 10-year bond rose 18 basis points today to 15.8 percent, more than twice the rate at the time of the country’s 110 billion-euro ($156 billion) rescue a year ago.

European Union finance ministers for the first time this week floated the idea of extending Greece’s debt-repayment schedule as the nation struggles to meet the terms of the rescue.

U.S. stocks are more vulnerable to a rising dollar than at any other time in the past four decades, according to Myles Zyblock, chief institutional strategist at RBC Capital Markets.

Through the first four months of the year, the Dollar Index dropped 7.7 percent. The indicator of the dollar’s value against the currencies of six major U.S. trading partners ended April at its low for the year. Since then, the index has risen as much as 3.9 percent.

“The dollar rally is a headwind” that may cause stocks to drop in the next three months, Zyblock wrote today in a report.
By his reckoning, the so-called inverse correlation between the currency’s value and shares is the strongest since 1971.

Disappointing economic reports also indicate share prices are poised to fall, the report said. He cited a Citigroup Inc. index that compares indicators with estimates for 10 of the largest economies. The gauge fell last week to minus 23.7, its lowest reading in two years.

Have a wonderful evening everyone.

Be magnificent!

Wise people are concerned only with what lies behind all these things.
Just as bees fly from one blossom to another, looking only for the essence of each one,
wise people look only for the essence of every person they meet.
Wise people, who know and understand the soul, are indifferent to both pleasure and pain;
they have risen above sensations. They are indifferent to the past and the future; they have risen above time.
They are indifferent to danger; they have risen above fear.
Wise people know that what is here, is also there;
that what was, will also be.
They see unity, not division.

-Katha Upanishad

As ever,

Carolann

Everybody pities the weak;
jealousy you have to earn.
-Arnold Schwarzenegger, 1947-

Carolann Steinhoff, B.Sc., CFP, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor