May 30, 2013 Newsletter
Just spent a few days in England, touring beautiful gardens and attending the Chelsea Flower Show, which celebrated its 100th anniversary this year. It has been a cold and damp spring, so gardens are six weeks behind, meaning lots of beautiful tree blossoms, tulips still blooming, and most other spring blooms which are normally over by now. We flew to Krakow for a few days before returning home last night. Krakow is a very beautiful city with many medieval buildings and the largest medieval square in Europe. Ever since Steven Spielberg’s movie, Shindler’s List was released so many years ago, Shindler’s factory has become an interest destination for visitors to the city. We didn’t visit the factory, but we did go to Auschwitz and Birkenau, something that will chillingly stay with me forever.
And on this day in…
1431 – Joan of Arc was burned at the stake for heresy, becoming a martyr for France and eventually a saint.
1672 – Peter the Great was born.
1783 – The first US newspaper was published.
Bureaucracy defends the status quo long past the time when the quo has lost its status. –Laurence Peter, 1919-1990.
Photos of the Day – May 30th, 2013
A chipping sparrow tugs on some loose threads of weathered clothing while gathering nest-building materials in a garden in Freeport, Maine. Robert F. Bukaty/AP
Archers of the Purbrook Bowmen, dressed in Tudor looking clothes, fire a volley of flaming arrows from Southsea Castle into The Solent, towards where the Mary Rose sank in 1545, at Portsmouth on the south coast of England. Henry VIII’s flagship sank during a battle against the French navy and was raised from the seabed in 1982. Chris Ison/PA/AP
Market Closes for May 30th, 2013
|Bonds||% Yield||Previous % Yield|
10 Year Bond
10 Year Bond
30 Year Bond
|WTI Crude Future||93.61||93.13|
By Eric Lam
May 30 (Bloomberg) — Canadian stocks rose as gold producers climbed on rising bullion prices, offsetting losses among lenders after Royal Bank of Canada reported weaker-than- estimated earnings.
Detour Gold Corp. and Barrick Gold Corp. jumped at least 6.4 percent as the metal rallied to a two-week high on speculation the U.S. will maintain stimulus spending. Royal Bank slid 2.1 percent after earnings trailed analysts’ forecasts.
Talisman Energy Inc. advanced 1.9 percent after saying it may reduce its stake in some properties.
The Standard & Poor’s/TSX Composite Index rose 17.28 points, or 0.1 percent, to 12,749.89 at 3:02 p.m. in Toronto, erasing earlier losses of as much as 0.1 percent. The index has gained 2.6 percent this year. Trading volume was 15 percent higher than the 30-day average at this time of the day.
“Gold has sparked a nice couple-day comeback,” Barry Schwartz, fund manager with Baskin Financial Services Inc., said from Toronto. He helps manage C$500 million ($485 million) with the firm. “It’s not a no-growth or negative growth environment, which is how they are being priced,” he said, referring to bank earnings. “They’re being priced as if we’re headed into some kind of nasty, negative downturn.”
Detour Gold advanced 6.4 percent to C$10.64 and Barrick Gold, the world’s largest producer of the metal, jumped 6.6 percent to C$21.83. Gold futures rose 1.5 percent to $1,412 an ounce in New York, headed for the biggest gain since May 23.
The U.S. Federal Reserve has said it may slow its $85 billion of monthly debt purchases if the economy shows sustained improvement.
Data today showed the U.S. economy expanded less than previously estimated, growing at a 2.4 percent annualized rate in the first quarter, as slower inventory building and cutbacks in government spending overshadowed the biggest gain in consumer purchases since the end of 2010. Initial jobless claims rose more than expected, a separate report showed.
Raw-materials producers paced gains in the S&P/TSX, rising 3 percent as a group and heading for a seven-week high.
Silvercorp Metals Inc. advanced 6 percent to C$3.20 and Silver Standard Resources Inc. rallied 5.5 percent to C$8.30 as the metal rose 1.2 percent to $22.72 an ounce.
Royal Bank slumped 2.1 percent to C$62.67 after reporting second-quarter adjusted earnings of $1.31 a share, short of the C$1.32 average estimate of 12 analysts surveyed by Bloomberg.
Talisman Energy added 1.9 percent to C$12.40 after CEO Hal Kvisle said at a conference in New York the company may reduce its stakes in Kurdistan and in the North Sea. Foreign buyers would prefer joint ventures on its Duvernay shale assets in western Canada, Kvisle said.
Athabasca Oil Corp. jumped 8.2 percent to C$6.90 and Niko Resources Ltd. surged 11 percent to C$9.34 as crude rose 0.4 percent to $93.48 a barrel in New York.
By Inyoung Hwang
May 30 (Bloomberg) — U.S. stocks rose, following the Dow Jones Industrial Average’s biggest drop in four weeks, as weaker-than-expected data on economic growth and jobless claims boosted speculation the Federal Reserve will maintain stimulus.
Financial companies gained the most out of 10 groups in the Standard & Poor’s 500 Index, increasing 1.1 percent. Bank of America Corp. jumped 2.6 percent for the biggest advance in the Dow. NV Energy Inc. surged 23 percent after Warren Buffett’s MidAmerican Energy Holdings Co. said it will pay $5.6 billion for Nevada’s biggest utility. Clearwire Corp. rallied 29 percent after Dish Network Corp. raised its bid for the company.
The S&P 500 advanced 0.4 percent to 1,654.41 in New York.
The Dow added 21.73 points, or 0.1 percent, to 15,324.53. About 6.5 billion shares traded hands on U.S. exchanges today, or 3.7 percent more than the three-month average.
“The take away from today’s statistics is that there’s going to continue to be a bias to keep QE in place,” Matthew Kaufler, fund manager at Federated Investors Inc. in Rochester New York, said by telephone. The firm manages about $380 billion. “As long as that perception exists, it’ll be positive for financial assets.”
The S&P 500 sank 1.1 percent last week as Fed Chairman Ben S. Bernanke said the central bank could reduce monetary stimulus, known as quantitative easing, if officials see signs of sustained improvement in growth. Data earlier this week showed consumer confidence climbed to the highest level since 2008 and house prices jumped the most in seven years.
U.S. equities advanced today after data that missed estimates fueled speculation the Fed will continue to support the world’s largest economy through bond buying. Gross domestic product expanded at a 2.4 percent annualized rate in the first quarter, less than the estimated 2.5 percent. Separate data showed more Americans filed claims for unemployment insurance payments last week, and an index of pending home sales rose less than forecast in April.
“Bernanke was misunderstood,” Patrick Spencer, head of U.S. equity sales at Robert W. Baird & Co. in London, said in an interview today. “Though his testimony implied that if the Fed curtails bond purchases too soon a premature exit would hurt the stock market, he said he’ll only start to cut that back if economic growth is sustainable. You’ve only had a few indicators that have shown that so far. The jury is still out.”
The S&P 500 has advanced 3.6 percent so far in May, poised for a seventh month of gains. That’s the longest winning streak since September 2009. The gauge has surged 145 percent since March 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases from the Federal Reserve.
Equity futures retreated as much as 0.4 percent earlier today as Japan’s Topix sank 3.8 percent to extend losses from its May 22 high to more than 10 percent, the threshold for a correction. Japanese stock-index futures climbed following a report that the nation’s public pension fund may boost its equities holdings.
“If you see that pullback continue, that’s a risk to the U.S. market,” Gary Flam, who helps oversee $7 billion at Bel Air Investment Advisors LLC in Los Angeles, said of Japan’s stock market by phone. “It’s been a tailwind over the last six months. Right now, the equity markets in the U.S. have been ignoring it, but if it continues, it’s a risk near term.”
The Chicago Board Options Exchange Volatility Index, or VIX, slumped 2 percent to 14.53. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, is down 19 percent for the year after rising 12 percent last week.
Six out of 10 groups in the S&P 500 advanced today. The KBW Bank Index jumped 1.4 percent as all 24 lenders in the gauge rose. The measure closed at its highest level since October 2008. Bank of America climbed 2.6 percent to $13.83, its highest in more than two years.
Utility stocks increased 0.2 percent. The gain today snapped a five-day streak of losses spurred by rising Treasury yields that made dividends paid by utility companies less attractive.
NV Energy rallied 23 percent to $23.62. MidAmerican Energy, a subsidiary of Buffett’s Berkshire Hathaway Inc., agreed to buy the Las Vegas-based energy producer for $23.75 a share in cash.
The deal would make MidAmerican the largest U.S. utility by customer accounts.
Clearwire jumped 29 percent to $4.50 as Dish Network raised its takeover bid for the company to $4.40 a share in cash. The satellite-TV provider had previously offered $3.30 a share for Clearwire, leading Sprint Nextel Corp. to raise its bid to $3.40 last week.
EMC Corp. gained 5.4 percent to $24.93. The world’s biggest maker of storage computers said it plans to buy back $6 billion of its own shares, six times more than the company had initially authorized earlier this year. EMC also said it will pay investors a quarterly dividend of 10 cents a share in July.
First Solar Inc. jumped 6.6 percent, the most in the S&P 500, to $55.15. The largest U.S. solar manufacturer by shipments was lifted to a buy from neutral at Goldman Sachs Group Inc., which cited visibility on near-term earnings and a project backlog. MEMC Electronic Materials Inc. added 9.6 percent to $8.35. The second-biggest U.S. supplier of polysilicon was added to Goldman’s conviction buy list.
Alcoa Inc. slipped 1.1 percent to $8.49. Moody’s Investors Service lowered its rating on the debt of the largest U.S. aluminum producer to Ba1 from Baa3, after the price of the metal has declined as global production exceeds demand.
Baker Hughes Inc. slumped 1.9 percent to $46.50, while Halliburton Co. slid 2.2 percent to $42.63. Morgan Stanley cut its rating on the global oil services drilling and equipment sector to in-line from attractive, citing a slowdown in key revenue drivers. Both companies were lowered to underweight from equal-weight.
Big Lots Inc. sank 9 percent to $34.93. The discount retailer cut its forecast for annual earnings from continuing operations to no more than $3.12 a share. That compares to an earlier projection of as much as $3.25 and falls short of analysts’ average estimate of $3.16.
Have a wonderful evening everyone.
The lamp is empty; the oil is used up.
The tambourine is dead, the dancer lies down,
The fire is out, and no smoke rises from it.
The soul is absorbed into the Unique, and there is no longer a duality.
Always remember that the future comes
one day at a time.
-Dean Acheson, 1893-1971
Carolann Steinhoff, B.Sc., CFP®, CIM, FCSI
Senior Vice-President &
Senior Investment Advisor
Queensbury Securities Inc.,
St. Andrew’s Square
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7