November 25th, 2011 Newsletter

Dear Friends,

  “There are but two levers which move men – Fear and Interest…”

 -Napoleon Bonaparte

Photo of the Day:

Ed Manders makes final adjustments to lighting artist Bruce Munro’s latest installation Field of Light in the grounds of the Holbourne Museum in Bath, England. (Getty Images)

Market Commentary:

Canada 

By Kaitlyn Kiernan

 Nov. 25 (Bloomberg) — Canadian stocks fell for a third day, heading for a fourth straight weekly decline, as the country’s Finance Minister said contagion from the European debt crisis is spreading.

 Suncor Energy Inc., Canada’s biggest oil and gas producer, fell 1.7 percent. Royal Bank of Canada, the nation’s biggest lender, fell 1.2 percent, leading a decline in financial shares. The Standard & Poor’s/TSX Composite Index fell 49.91 points, or 0.4 percent, to 11,441.30 at 2:08 p.m. in Toronto. The index has dropped 3.8 percent in five days, heading for the longest streak of weekly losses since July 2008. “The Canadian economy is a very open economy with exports making up a large part of GDP, so there are a lot of worries about the global situation,” Stephen Gauthier, a portfolio manager at Fin-XO Securities in Montreal, said in a telephone interview. The firm oversees about C$600 million ($573.5 million). “We’ve been losing a lot of ground the last few days because we are waiting to see what is going to happen on a worldwide basis.”

The S&P/TSX fell 15 percent this year though yesterday as it heads toward its first yearly decrease since 2008 and second in nine years. S&P/TSX Materials and Energy indexes lost 19 percent and 18 percent, respectively, this year as the European debt crisis threatened to curb global growth. Energy and raw- materials companies make up 47 percent of Canadian stocks by market value, the most among major developed markets, according to Bloomberg data.

 Stocks erased earlier gains after Reuters reported that Greece is demanding that new bonds issued to investors as part of a debt swap have a net present value of 25 percent, lower than the “high 40s the banks have in mind.” Jim Flaherty, the Canadian Minister of Finance, said in the text of a speech in Toronto that Europe’s debt crisis is creating “contagion” outside the region and policy makers must act while the situation can still be stabilized.

Energy shares fell 0.7 percent as a group after climbing as much as 0.5 percent earlier. Suncor fell 1.7 percent to C$28.27. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, fell for a seventh day, slipping 1.8 percent to C$34.13. TransCanada Corp., the owner of the country’s largest pipeline system, lost 0.7 percent to C$40.69. Royal Bank of Canada slid 0.8 percent to C$43.57. Bank of Nova Scotia, the third-biggest lender, fell 0.6 percent to C$48.05. Toronto-Dominion Bank, the country’s second-largest lender by assets, lost 0.6 percent to C$68.30.

Guyana Goldfields Inc. gained 5.1 percent to C$8.53. The gold explorer signed confidentiality agreements with six parties interested in buying the company and its Aurora gold project in the South American country, Chief Operating Officer Claude Lemasson said. Harry Winston Diamond Corp., the co-owner of the Diavik mine, climbed 1.8 percent to C$10.36 as diamond prices rose 0.2 percent this week.

  US

 By Michael P. Regan and Rita Nazareth Nov. 25 (Bloomberg) — U.S. stocks slipped, capping the worst Thanksgiving-week loss since 1932, and commodities fell as a reduction in Belgium’s credit rating and reports that Greece is demanding bondholders accept larger losses fueled concern Europe’s debt crisis is worsening. Treasuries fell.

 The S&P 500 declined for a seventh straight day, losing 0.3 percent to close at 1,158.67 at 1 p.m. in New York and extending its weekly retreat to 4.7 percent. The S&P GSCI Index of commodities slipped 0.3 percent. The euro lost 0.9 percent to $1.3229. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments lingered near a record, up 6 basis points at 386. The dollar rallied against most peers. U.S. equities erased earlier gains as Reuters reported Greece is demanding that new bonds issued to investors as part of a debt swap have a net present value of 25 percent, lower than the “high 40s the banks have in mind.” Greece’s 10-year bond traded at about 24.3 percent of face value as of today’s close. Equities rose earlier amid reports European leaders were discussing sparing private investors from sharing the costs of bailing out troubled nations.

 “The demands of Greece now totally change the game,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said in an e-mail. “The situation can no longer be called voluntary by any stretch of the imagination.

The equity markets in the United States may test the lows again as there is increasing concern of a major recession in Europe.” Energy producers and retailers had the biggest declines among 24 industries in the S&P 500, with Exxon Mobil Corp. down 0.9 percent and Amazon.com Inc. slumping 3.5 percent. 

Twenty-two of 30 retailers in the S&P 500 retreated as Black Friday, the biggest retail day of the year, arrived with consumer sentiment at levels previously reached during recessions, as a record share of households said this is a bad time to spend, according to the Bloomberg Consumer Comfort Index. The measure has reached minus 50 or less in nine of the past 10 weeks, an unprecedented performance in its 26-year history. Banks advanced following reports that some European officials oppose forcing private investors to share the cost of bailing out countries with the region’s permanent rescue fund.

German Chancellor Angela Merkel and French President Nicolas Sarkozy “confirmed their support for Italy, saying that they are aware that the collapse of Italy would inevitably lead to the end of the euro,” Italian Prime Minister Mario Monti told a Cabinet meeting, according to an e-mailed statement.

 European governments may ease provisions in a planned permanent rescue fund requiring bondholders to share losses in sovereign bailouts, German Finance Minister Wolfgang Schaeuble suggested. Schaeuble signaled that Germany may retreat from demands that private creditors contribute to rescues in exchange for European treaty amendments toughening rules on budget oversight. The S&P 500 Financials Index rose 0.4 percent today and has tumbled 13 percent in November to lead the S&P 500’s 7.6 percent slide.

 U.S. financial shares “had been knocked down dramatically and there’s a better tone today,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a telephone interview. “We have to hope they can get their act together in Europe and we go back to concentrating on what we’re doing here.” Treasuries fell on speculation investors seeking refuge from volatility in the European sovereign-debt markets may have pushed U.S. government yields too low. The 10-year note’s yield rose eight basis points to 1.97 percent. The rate is up from a record low of 1.67 percent on Sept. 23.

 The dollar increased against 15 of 16 major peers, surging 1.2 percent against the Swiss franc and at least 1 percent against the Norwegian krone and Swedish krona. The euro weakened against 12 of 16 major peers. Silver and gasoline lost at least 1.9 percent to lead declines in 19 of 24 commodities tracked by the S&P GSCI. Crude oil 1.2 percent to $97.36 a barrel as of 1:44 p.m. in New York.

  Have a Wonderful Weekend Everyone!

As Always,

 Kyle, for Carolann.