November 14th, 2011 Newsletter

Dear Friends,

Tangents:

Birthdays:

Prince Charles, Prince of Wales, b. 1948

Aaron Copeland, composer,  b. 1900

Claude Monet, painter, b. 1840

To stop the flow of music would be like the stopping of time itself, incredible and inconceivable. ~ Aaron Copland

One of the speakers at the World Business Forum this year was Benjamin Zander, conductor of the Boston Philharmonic Orchestra since 1979.  He has co-authored a book, The Art of Possibility, in which he claims that art and music can be used in the modern world to energize our interpersonal connections, add value to our new global society, and lead to innovation and the successful adoption new practices.    

He demonstrates that a conductor does not only direct orchestras, but with the right ear, can conduct through words and actions. 

From complexity to possibility: challenging assumptions.  He states “We are about contribution.  It’s not about impressing people….It’s about contributing something.”  The contributor mindset: being present, staying connected to reality, unleashing inner passion, expanding reach.  A great performance results from creating opportunities for individual and collective talent to bloom.

You can listen to him too at www.wbfny.net/2011/zander – a very inspirational, amazing man.

Photo of the day:

November 14, 2011

British soldiers from the King’s Troop Royal Horse Artillery, the saluting battery of Her Majesty’s Household Division, arrive to retrieve their guns after firing a Gun Salute for Britain’s Prince of Wales’ birthday, in central London’s Hyde Park. Lefteris Pitarakis/AP

Market Commentary:

Canada

By Matt Walcoff

Nov. 14 (Bloomberg) — Canadian stocks fell for the third time in four days, led by gold and energy producers, as the U.S. dollar rose on concern the European Central Bank may have to do more to quell the region’s debt crisis.

Barrick Gold Corp., the world’s largest gold producer, dropped 1.1 percent as the U.S. Dollar Index gained for the first time in three days. Encana Corp., Canada’s largest natural gas producer, declined 1.6 percent as the fuel dropped to a one- year low.

The Standard & Poor’s/TSX Composite Index slipped 52.66 points, or 0.4 percent, to 12,224.19.

“The market believes the ECB is going to have to provide more liquidity to prevent a longer recession than what is expected,” Andrew Pyle, an associate portfolio manager for Bank of Nova Scotia in Peterborough, Ontario, said in a telephone interview. Pyle’s team oversees about C$200 million ($197 million). “If there’s a risk the euro is going to decline, the U.S. dollar’s going to pick up. That’s clearly a negative for commodities.”

The S&P/TSX decreased 1.9 percent in the previous two weeks, led by financial stocks, as bond yields in the most- heavily indebted euro-region countries climbed and Manulife Financial Corp. and Sun Life Financial Inc. reported earnings that trailed analysts’ estimates.

Italy sold five-year bonds at the highest yield in more than 14 years today, on renewed concern over the debt crisis.

The country’s Treasury sold the bonds to yield 6.29 percent, up from 5.32 percent at the previous auction Oct. 13.                        

Precious metals declined as the U.S. dollar gained. Barrick lost 1.1 percent to C$53.12. Kinross Gold Corp., Canada’s third- largest company in the industry market value, slipped 1 percent to C$14.27. NovaGold Resources Inc., which is developing projects in Alaska and British Columbia, slumped 4 percent to C$8.97.

Alacer Gold Corp., which operates in Turkey, fell 4 percent to C$11.98 after saying Stuart Brown won’t become the company’s chief financial officer as the company announced Oct. 16. Brown had served as CFO and acting chief financial officer of Anglo American Plc’s De Beers unit.

Crude oil retreated from a three-month high on the New York Mercantile Exchange. Natural gas fell for a fourth day on forecasts for warmer-than-normal weather in the northern U.S.

Canadian Natural Resources Ltd., the country’s second- largest energy company by market value, dropped 1.4 percent to C$37.37. Encana slipped 1.6 percent to C$20.26.

Natural gas and oil producer Trilogy Energy Corp. climbed 4.7 percent to a record C$36.97 after analyst at Stifel Financial Corp. and GMP Capital Inc. raised their 12-month share-price estimates. The company’s 2012 production forecast surpassed the estimates of Kurt Molnar, the Stifel analyst, according to a note to clients.

Yoho Resources Inc., which explores for oil and gas in British Columbia, soared 21 percent, the most since December 2008, to C$3.81 after disclosing a reserves estimate for its Nig property.

Ivanhoe Mines Ltd., which is developing Mongolia’s Oyu Tolgoi copper and gold mine with Rio Tinto Group, rallied 3.6 percent to C$21.49 after reporting a third-quarter profit. All five analysts in a Bloomberg survey had forecast a net loss.

Hathor Exploration Ltd., which owns uranium properties in Saskatchewan, jumped 9 percent to a record C$4.87 after Cameco Corp. raised its hostile bid for the company to C$4.50 a share.

Hathor agreed to be bought for C$4.15 a share by Rio Tinto Oct. 19.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, fell 0.9 percent to C$46.99 as corn and wheat dropped for a fourth day. Migao Corp., which produces fertilizer in China, plunged 14 percent to C$3.18 after reporting earnings that missed all eight analyst estimates in a Bloomberg survey.

US

By Rita Nazareth

Nov. 14 (Bloomberg) — U.S. stocks declined, snapping a two-day advance in the Standard & Poor’s 500 Index, as an increase in Italian borrowing costs deepened concern Europe will struggle to contain its sovereign debt crisis.

Morgan Stanley and Citigroup Inc. fell more than 2.6 percent. Bank of America Corp. slid 2.6 percent after agreeing to sell most of its China Construction Bank Corp. stake to boost capital. Bank of New York Mellon Corp. slid 4.5 percent as the world’s largest custody bank said it would book a charge of as much as $100 million this quarter. Boeing Co. added 1.5 percent after winning a record $26 billion order from Emirates.

The S&P 500 retreated 1 percent to 1,251.78 at 4 p.m. New York time. The Dow Jones Industrial Average decreased 74.70 points, or 0.6 percent, to 12,078.98. About 5.5 billion shares changed hands on U.S. exchanges, the lowest since April 25.

“These blip-ups in yields put more uncertainty in the market,” Peter Tuz, who helps manage about $800 million as president of Chase Investment Counsel Corp. in Charlottesville, Virginia, said in a telephone interview. “Just because they’ve had a bit of good news coming out of Europe last week, it doesn’t mean they don’t still have a lot of work to do to get their financial houses in order.”

Stocks fell as the yield on the Italian five-year bond rose following an auction and Spanish 10-year rates surged to a euro- era record above German yields. The S&P 500 extended its decline after German Finance Minister Wolfgang Schaeuble said Europe’s permanent bailout fund may not be implemented before 2013. The equity index also dropped after German Chancellor Angela Merkel’s Christian Democratic Union party voted to offer euro states a “voluntary” means of leaving the currency area.                          

Stocks rose last week, restoring the year-to-date gain for the S&P 500, as improving economic data and leadership changes in Greece and Italy bolstered investor optimism. Equities tumbled on Nov. 9 as yields on Italian government bonds surged, fueling concern European leaders will struggle to fund bailouts. “There’s a lot of risk to the global financial system,”

Hayes Miller, who helps oversee about $43 billion as the Boston- based head of asset allocation in North America at Baring Asset Management Inc., said in a telephone interview. “The size of the problem is huge. Until you solve this problem, you aren’t getting rid of the risk a large-scale default.”

Lenders in the Stoxx Europe 600 Index fell 1.8 percent and financial shares had the biggest decline in the S&P 500 among 10 industries, dropping 2 percent. Morgan Stanley decreased 2.7 percent to $15.92. Citigroup sank 3.2 percent to $28.38.

U.S. shares of Credit Suisse Group AG fell 3.4 percent to $24.19. The Swiss bank may have its long-term credit rating cut by Moody’s Investors Service after the investment banking unit posted a loss and income at the wealth-management division fell.

Bank of America slid 2.6 percent to $6.05. The second- biggest U.S. lender by assets will sell 10.4 billion CCB shares this month to a group of investors in private transactions for an after-tax gain of about $1.8 billion, the bank said today.

After the closing, the company will own about 1 percent of the common shares of CCB, the U.S. lender said.

Bank of New York Mellon slumped 4.5 percent to $20.55. The bank plans to save as much as $700 million before taxes by 2015, through operational improvements such as consolidating applications, insourcing software development and consolidating locations. BNY Mellon is cutting expenses as lawsuits over the pricing of foreign exchange transactions are pushing up legal costs and interest rates near zero erode revenue.

“The cuts do not have the impact that most people were hoping” for, Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine, said in an e-mail.                       

Boeing rallied 1.5 percent, the most in the Dow, to $67.94.

The company signed an agreement with Emirates at the Dubai Air show for 50 of its 777-300ER jets and an option for 20 more, in a deal valued at $26 billion. The accord extends their relationship in the wide-body market, with Emirates operating more than 90 of the 777s for the industry’s biggest such fleet.

Lowe’s Cos. advanced 1.7 percent to $23.50. The second- largest U.S. home-improvement retailer reported third-quarter profit that exceeded analysts’ estimates, helped by sales at older stores.

Salesforce.com Inc. increased 2.8 percent to $133.52. The supplier of online customer-management software was raised to “buy” from “neutral” at Citigroup, which cited “increasing confidence in long-term profitability.” Citigroup gave a price estimate of $158 a share. International Business Machines Corp. lost less than 0.1 percent to $187.35, after rallying as much as 1.3 percent.

Warren Buffett’s Berkshire Hathaway Inc. bought a 5.5 percent stake in the computer-services provider as the billionaire chairman accelerated stock purchases. Buffett, who spent more than $10 billion on IBM stock, paid near-record prices for the shares, recalling his winning 1988 investment in Coca-Cola Co.

Berkshire began buying IBM shares this year after Buffett read the Armonk, New York-based company’s annual report and saw the firm “through a different lens,” the billionaire told CNBC today in an interview. IBM had doubled in New York trading in the 27 months prior to the Feb. 22 release of its yearly 10-K filing. Coca-Cola had doubled in the four years through the end of 1987, and has risen more than 10-fold since.

“I think he looked at Coke through a different lens back in 1988,” said Jeff Matthews, a Berkshire shareholder and author of “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett.” In IBM, “he sees a business that supports the world’s IT infrastructure and has a lot of room to grow over the next couple decades.”                

Bank of America’s Savita Subramanian estimates the S&P 500 will rise to 1,350 in 2012, as the U.S. economy avoids a recession and earnings growth continues to push the gauge higher.

 Combined profit by companies in the benchmark equity measure will be $98.25 a share this year and $104.50 next year, according to Subramanian, the head of equity and quantitative strategy, in her first equity forecasts since taking over the role from David Bianco in September. The year-end projection is 6.8 percent higher than the S&P 500’s close on Nov. 11.

“While we expect uncertainty and volatility to remain high well into 2012, the avoidance of a U.S. recession and continued earnings growth could drive the S&P 500 toward the high end of its two-year trading range” of 1,100 to 1,365, a team led by Subramanian wrote in a note dated today.

Have a wonderful evening everyone.

Be magnificent!

In music, I am the melody.

The Bhagavad Gita

As ever,

Carolann

You may have to fight a battle

more than once to win it.

     -Margaret Thatcher, 1925-