November 1st, 2011 Newsletter

Dear Friends,

 Tangents:

 We were in Seattle on Saturday to see the opera Carmen and stopped by the Friesen Gallery earlier in the day.  We had a wonderful conversation with Andria Friesen; I was telling her about an article I had read in the FT that morning on William Aquavella, an art dealer in NYC, who represented and was friends with the artist Lucian Freud.   She said she was going to the shows this year in NYC and was going to visit him. 

When we arrived back at the hotel after the opera, there was a book from her which I had a chance to look through last night.  It is her compilation of art and poetry about trees, entitled Speak for the Trees. 

This is from that book and accompanies a photograph of a beautiful painting by Forrest Moses, October Memories.

              I love this decaying autumn

Yellow leaves tumble in wind and rain

Spots of white sway over rivers and lakes

You cannot get to those rivers and lakes

        It is hard labor to transplant trees

Silently a pair of wild ducks come flying

                   All this becomes a painting.

                                      -Su Tung-Po

Photo of the day 

November 1, 2011

A man walks through the Oakland section of Pittsburgh. With temperatures in the 30’s and high humidity a thick fog shrouded the Pittsburgh area, making rush hour slow going. Gene J. Puskar/AP

Market Commentary:

Canada

By Matt Walcoff

Nov. 1 (Bloomberg) — Canadian stocks fell a second day after a Chinese factory index dropped and concern mounted that Greek politics will make it harder for the country to avoid default.

Royal Bank of Canada, the country’s biggest lender by assets, retreated 3.3 percent as financial stocks fell for a third day. Suncor Energy Inc., Canada’s largest oil and gas producer, lost 2.6 percent as crude futures decreased the most intraday in a month. Teck Resources Ltd., the country’s biggest base-metals and coal producer, slumped 4.7 percent after China’s Purchasing Managers’ Index trailed all 16 economist forecasts in a Bloomberg survey.

The Standard & Poor’s/TSX Composite Index dropped 136.96 points, or 1.1 percent, to 12,115.10 after the biggest drop in almost a month yesterday.

“The debt crisis appears to be widening,” Robert McWhirter, a money manager at Selective Asset Management Inc. in Toronto, said in a telephone interview. McWhirter oversees about C$140 million ($138 million). “It has always been, ‘Let’s try to get Greece fixed up and put a firewall around the other countries.’ People seem to be having doubts that is going to be the case.”

The S&P/TSX increased 5.4 percent in October, the biggest monthly gain since May 2009, after seven straight months of losses. Crude oil surged 18 percent and copper advanced 15 percent as European leaders reached an agreement intended to prevent the continent’s sovereign debt crisis from weakening banks and the economy. Energy and raw-material companies make up 48 percent of Canadian stocks by market value, according to Bloomberg data.

 The China Federation of Logistics and Purchasing’s manufacturing index declined to 50.4, the lowest in almost three years, from 51.2 in September. Readings above 50 signal expansion.

Six members of Greek Prime Minister George Papandreou’s party urged him to resign in a letter after he called for a referendum on a new bailout package. Papandreou faces a confidence vote Nov. 4.

Stocks pared their losses after Dow Jones Newswires reported that a member of Papandreou’s Socialist Party said the referendum plan was “basically dead.” Angelos Tolkas, a spokesman for the Greek government, later told NET TV Papandreou will proceed with plans for the vote. All eight S&P/TSX banks retreated at least 1.7 percent.

Royal Bank decreased 3.3 percent to C$47.04. Toronto-Dominion Bank, its largest domestic rival, slipped 3.1 percent to C$72.88. Manulife Financial Corp., North America’s fourth- largest insurer, slumped 5.6 percent to C$12.42.

Crude oil retreated and natural gas tumbled the most since Sept. 15 on the New York Mercantile Exchange. Suncor decreased 2.6 percent to C$30.92. Encana Corp., the country’s largest natural gas producer, fell 4.2 percent to C$20.71. Bankers Petroleum Ltd., which operates in Albania, sank 6.2 percent to C$4.97. Base-metals and coal producers in the S&P/TSX dropped for a second day after jumping 21 percent last week.

Teck declined 4.7 percent to C$38.09. First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, lost 5.6 percent to C$19.73. Mercator Minerals Ltd., which operates in Arizona, sank 12 percent to C$1.78. Uranium One Inc., a mining company controlled by Moscow-based ARMZ Uranium Holding, plunged 6.7 percent to C$2.80.

Gold stocks rallied as the U.S. Dollar Index retreated from the highest intraday level since Oct. 12 after the report casting doubt on Papandreou’s referendum proposal.

Goldcorp Inc., the world’s second-biggest company in the industry by market value, gained 3 percent to C$49.95. Centerra Gold Inc., which mines in Kyrgyzstan and Mongolia, surged 8.6 percent to C$21.46. Jaguar Mining Inc., which operates in Brazil, soared 15 percent to C$5.93 after falling 9.2 percent yesterday.

Magna International Inc., Canada’s largest auto-parts maker, fell 5.3 percent to C$36 after General Motors Co. and Ford Motor Co. reported sales that trailed analysts’ average forecasts.

US

By Rita Nazareth

Nov. 1 (Bloomberg) — U.S. stocks dropped, driving the Standard & Poor’s 500 Index to the biggest two-day slump in a month, on concern that a Greece referendum pledged by Prime Minister George Papandreou may threaten Europe’s bailout.

All 10 groups in the S&P 500 fell as gauges of financial, energy and industrial shares lost at least 3 percent. Citigroup Inc. and Morgan Stanley retreated more than 7.6 percent, following a 6.2 percent tumble in European lenders. Exchange operators slumped after U.S. lawmakers said they will propose a tax on financial transactions such as stock and bond trades.

The S&P 500 decreased 2.8 percent to 1,218.28 as of 4 p.m. New York time, extending its two-day retreat to 5.2 percent, the biggest drop since Oct. 3. The Dow Jones Industrial Average declined 297.05 points, or 2.5 percent, to 11,657.96 today.

“I just don’t get it,” Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in a telephone interview. “A Greek referendum is a very risky proposition. Everybody thought last week that this crisis was behind us on a near-term basis, but Europe is going to be front and center.”

Today’s decline followed the best monthly gain for the S&P 500 since 1991. The drop cut the index’s price to 12.8 times reported earnings, 22 percent below its five-decade average of 16.4, according to data compiled by Bloomberg. The index trades close to the level where three rallies stopped in August and September, the top of a price range that prevailed for 10 weeks.

Greece’s referendum poses a threat to financial stability in the euro region and increases the risk of a “disorderly” default, Fitch Ratings said. Stocks extended losses as government spokesman Angelos Tolkas said Papandreou will proceed with plans for a referendum on the Greek financing package.                        

Papandreou’s announcement threatens to overshadow a Nov. 3- 4 Group of 20 summit in Cannes, France. German Chancellor Angela Merkel and French President Nicolas Sarkozy held emergency talks on Greece today and called on Europe to implement the package of measures thrashed out in Brussels last week. The plan, designed to aid Greece and stem the wider debt crisis, is “more necessary than ever today,” they said in a joint statement issued in Berlin and Paris. “It’s frustrating,” David Kelly, chief market strategist for JPMorgan Funds in New York, said in a telephone interview.

“The danger of having a referendum is that it could be defeated, in which case Greece presumably would end up defaulting on its debt. Europe is not addressing the basic problem. They are not giving the peripheral countries a way out of a recession.”                        

American banks tumbled following losses in European lenders. The KBW Bank Index slumped 4.9 percent as all of its 24 stocks retreated. Citigroup dropped 7.7 percent to $29.17. Morgan Stanley lost 8 percent to $16.23.

MF Global Holdings Ltd., which the New York Stock Exchange is delisting following the brokerage’s bankruptcy filing, will begin trading tomorrow on the over-the-counter venue run by OTC Markets Inc. MF Global shares haven’t changed hands during a regular trading session since Oct. 28, before yesterday’s Chapter 11 filing.

Stocks also fell after data showed a Chinese manufacturing index dropped to the lowest level since February 2009. In the U.S., manufacturing grew less than forecast in October, depressed by a drop in inventories that may set U.S. factories up for stronger growth heading into 2012.

The Morgan Stanley Cyclical Index lost 3.2 percent amid concern about an economic slowdown. The Dow Jones Transportation Average slid 2.6 percent. General Electric Co. retreated 4.1 percent to $16.02. Exxon Mobil Corp. slumped 2.8 percent to $75.94.

Exchange operators sank. Senator Tom Harkin, an Iowa Democrat, and Representative Peter DeFazio, an Oregon Democrat, said they will introduce bills tomorrow in their respective chambers to impose a transaction tax on financial firms. NYSE Euronext declined 6.8 percent to $24.76, while Nasdaq OMX Group Inc. fell 2.8 percent to $24.36. CME Group Inc. slumped 8.6 percent to $251.88.

MetroPCS Communications Inc. fell 9.9 percent, the most in the S&P 500, to $7.66. The pay-as-you-go U.S. wireless carrier reported third-quarter profit that missed analysts’ estimates as subscriber growth slowed for the second consecutive quarter.

Baker Hughes Inc. tumbled 7.7 percent to $53.54. The oilfield contractor reported third-quarter earnings excluding some items of $1.18 a share, missing the average analyst estimate by 3 percent, according to Bloomberg data.

Advanced Micro Devices Inc. sank 9.1 percent to $5.30. The Sunnyvale, California-based maker of chips for Apple Inc.’s computers failed to persuade a U.S. judge to halt a patent dispute S3 Graphics Co. has against Apple at the U.S. International Trade Commission, according to a filing with the trade agency.                      

 Volatility indexes are rising again after plunging in October. The benchmark European gauge rose the most in two days since May 2010. The VStoxx Index, which measures the cost of Euro Stoxx 50 Index options, rose 22 percent to 42.96, extending its two-day increase to 37 percent. The Chicago Board Options Exchange Volatility Index, or VIX, soared 16 percent to 34.77, bringing its two-day gain to 42 percent.

“The market doesn’t like unknowns, and the situation in Greece today was a definite unknown,” Stephen Solaka, who oversees about $50 million including options as co-founder of Belmont Capital Group in Los Angeles, said in a telephone interview. “Bad news is OK, as long as it’s known. Unknown news or surprises cause issues, cause sell-offs and fears to appear. Fear is back on the table.”

Have a wonderful evening everyone.

Be magnificent!

Non-possession is allied to non-stealing.

-Mahatma Gandhi, 1869-1948

As ever,

Carolann

We don’t see things as they are,

we see things as we are.

   -Anaïs Nin, 1903-1977