October 5th, 2011 Newsletter

Dear Friends,

Tangents

October 5^th in History:

• Ø 1789 – French Revolution: Women of Paris march to Versailles to confront Louis XVI about his refusal to promulgate the decrees on the abolition of feudalism, demand bread, and have the King and his court moved to Paris.

• Ø 1947 – The first televised White House address is given by U.S. President Harry S. Truman.

• Ø 2004 – Death of Rodney Dangerfield, American comedian (b. 1921).

Photo of the Day:

Men play Polo on the beach in Karachi, Pakistan October 5, 2011. AP.

Market Commentary:

Canada

By Matt Walcoff

Oct. 5 (Bloomberg) — Canadian stocks rose for the first time in four days as financial and energy shares advanced on better-than-forecast economic reports from the U.S. Royal Bank of Canada, the country’s biggest lender by assets, advanced 2 percent. Suncor Energy Inc., Canada’s largest oil and gas producer, gained 8.4 percent as crude oil rebounded from a one-year low after U.S. supplies fell. BlackBerry maker Research In Motion Ltd. increased 11 percent on speculation the company may explore strategic options.

The Standard & Poor’s/TSX Composite Index rose 261.24 points, or 2.3 percent, to 11,439.15 at 2:23 p.m. Toronto time. “That’s really the economic data,” Jeff Bradacs, a money manager at Manulife Financial Corp. in Toronto, said in a telephone interview. Bradacs’s team oversees C$1.7 billion ($1.6 billion). “A lot of people are expecting a significant slowdown. We’re not really seeing that in the U.S.”

The S&P/TSX dropped 4.4 percent in the previous three days to the lowest since July 2010 as banks and energy companies declined on concern Greece may default and the European Union may require bondholders to face bigger losses on Greek debt.

Canada’s stock benchmark lost 17 percent this year through yesterday, which would be the second-biggest annual retreat in the past 20 years behind 2008’s 35 percent plunge.

The Institute for Supply Management’s non-manufacturing index slipped to 53 from 53.3 last month. Economists had forecast the index would fall to 52.8, the median estimate in a Bloomberg survey. Readings above 50 indicate expansion. U.S. companies added 91,000 jobs last month, ADP Employer Services said, exceeding the median economist forecast of 75,000.

Financials Rally

The eight S&P/TSX banks and the three largest insurers all rose. Bank of Nova Scotia, Canada’s third-largest lender by assets, gained 2.5 percent to C$51.45. Royal Bank advanced 2 percent to C$46.86. Manulife, North America’s fourth-biggest insurer, increased 4.9 percent to C$11.95. Crude oil climbed as much as 5 percent in New York after the U.S. Energy Department said inventories declined 4.68 million barrels last week. All 15 analysts in a Bloomberg survey had forecast a gain.

Suncor advanced 8.4 percent, the most intraday in 11 months, to C$27.56. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, rose 9.4 percent, the most intraday since March 2009, to C$30.58. Oil-sands developer Ivanhoe Energy Ltd. gained 16 percent to C$1.13 after earlier rallying as much as 23 percent, the most intraday since September 2009.

Merger Rumors

RIM jumped 11 percent to C$24.64 after soaring as much as

15 percent, the most intraday since April 2009. Vodafone Group Plc may seek to buy Canada’s largest technology company, the Independent said, citing “vague rumors.”

Simon Gordon, a Vodafone spokesman, declined to comment. Marisa Conway, a spokeswoman for Waterloo, Ontario-based RIM, didn’t immediately return a call seeking comment. Base-metals and coal producers in the S&P/TSX gained 4.7 percent after rallying 8.1 percent, the most since May 2009, yesterday. Teck Resources Ltd., Canada’s largest company in the industry, advanced 8.3 percent to C$33.55. Quadra FNX Mining Ltd., which operates in the U.S., Canada and Chile, increased 11 percent to C$9.26 after soaring as much as 15 percent, the most intraday since May 2010. Exploration Orbite VSPA Inc., which is developing an alumina project in Quebec and extraction technology, surged 22 percent to C$1.80.

Takeover Speculation

Capstone Mining Corp. climbed 14 percent to C$2.65 on speculation the Vancouver-based copper producer may be a takeover target, George Topping, a Toronto-based analyst at Stifel Financial Corp., said today in a telephone interview. The shares surged as much as 18 percent, the most intraday in 11 months.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, climbed 6.5 percent, the most since August 2010, to C$46.25 as corn and wheat futures rose. World agriculture stocks gained after Monsanto Co.forecast a bigger profit than analysts had estimated.

Gold stocks climbed as the U.S. Dollar Index fell from the highest level since January.

Goldcorp Inc., the world’s second-largest gold producer by market value, rose 2.9 percent to C$47.25. Yamana Gold Inc., Canada’s fourth-biggest company in the industry by market value, advanced 5.1 percent to C$14.25. Kirkland Lake Gold Inc., which operates in Ontario, surged 10 percent to C$16.95 after reporting a profit increase.

Industrial Companies

Sixteen of 19 S&P/TSX industrial companies gained. SNC- Lavalin Group Inc., Canada’s largest engineering and construction company, advanced 7.7 percent to C$43.07 after closing at the lowest since July 2009 yesterday. Bombardier Inc., the maker of trains and airplanes, increased 5.5 percent from a 26-month low to C$3.82.

MacDonald, Dettwiler & Associates Ltd., an aerospace and defense contractor, plunged 9.9 percent to C$44.14 after sinking as much as 11 percent, the most intraday since February 2009.

The drop reflects the completion of a Dutch auction share buyback and wasn’t unexpected, Thanos Moschopoulos, an analyst at Bank of Montreal, said in an e-mail message. Neo Material Technologies Inc., which makes rare-earths and zirconium products, climbed 12 percent to C$6.61 after gaining as much as 15 percent, the most intraday since July 2009. The shares’ recent decline was an “overreaction,” Steve Arthur, an analyst at Royal Bank, said in a note to clients. The shares tumbled 38 percent from Aug. 17 to yesterday.

US

By Rita Nazareth

Oct. 5 (Bloomberg) — U.S. stocks rallied, sending the Standard & Poor’s 500 Index to its biggest two-day gain in more than a month, as economic data topped estimates and investors speculated Europe will act to contain the region’s debt crisis.

The S&P 500 advanced 1.8 percent to 1,143.87 at 4 p.m. New York time, according to preliminary closing data. The index has climbed 4.1 percent in two days, the most since Aug. 29.

“Ring-fence, contain, firewall,” Peter Boockvar, an equity strategist at Miller Tabak & Co., wrote in a note today.

“Three of the words that European authorities are finally understanding right now to prevent the debt crisis spreading to Italy and Spain as they prepare to ask private sector bondholders of Greek debt to price their bonds to market.”

Stocks reversed losses yesterday amid speculation European Union officials are examining how to recapitalize the region’s banks. The S&P 500 jumped 2.3 percent yesterday, rebounding in the final hour after extending its plunge from an April peak to more than 20 percent, the threshold for a bear market. The index has fallen 16 percent since April 29 on concern about Europe’s debt crisis.

The International Monetary Fund said EU officials are working on plans to boost bank capital. France and Belgium said a “bad bank” will be set up to hold Dexia SA’s troubled assets. German Chancellor Angela Merkel said Europe’s rescue fund will only be used as a last resort to save banks and that investors may have to take deeper losses as part of a Greek rescue.

Economic Reports

Investors also weighed economic reports that topped forecasts. Private employment expanded last month, while the Institute for Supply Management’s non-manufacturing index fell to 53. The median forecast of 75 economists surveyed by Bloomberg News was for a drop to 52.8. Orders picked up.

“The jury is still out,” Bruce Bittles, who helps oversee $85 billion as chief investment strategist at Milwaukee-based Robert W. Baird & Co., said in a telephone interview. “There’s no easy, painless solution out of the European situation. The market’s ability to continue to rally will depend on whether the economy will slip into recession or continue in slow growth.”

The U.S. stock market probably hit bottom yesterday and will rebound as investors refocus on fundamentals and earnings after weeks of distraction from the European debt crisis, Oppenheimer & Co.’s Brian Belski said.

Defensive Positioning

The U.S. stock market is positioned for a rally after weeks of defensive positioning and indiscriminate selling that has led to record declines, Belski, chief investment strategist at Oppenheimer in New York, said on Bloomberg Television’s “Inside Track With Deirdre Bolton and Erik Schatzker.” Investors have become overly focused on the daily news on the the Greek sovereign debt crisis and have forgotten that earnings drive stock prices, not macroeconomic news, he said.

“Earnings will surprise to the upside — earnings estimates have been slashed too much,” Belski said.  “The market’s going to get squeezed and we’re going to have a nice year-end rally.”

Be Magnificent!

Have a Wonderful Evening Everyone!

As Always,

Kyle,

For Carolann.