September 28th, 2011 Newsletter

Dear Friends,

Tangents:

Still Life with Basket of Apples, Paul Cézanne, 1890-94  

I read a wonderful article today on Apple entitled The Apple Effect, The Genius Behind The Company’s Success – And What That Could Teach Corporate America And Perhaps The Nation by Alan M. Webber.  Webber first met Steve Jobs back in 1991 when he was a managing editor of the Harvard Business Review.  When he met him, Jobs said to him “That was a great article….One of the best things I’ve ever read.  It’s absolutely right.  It’s not computers.  It’s computing.”  He was talking about an article that appeared in a 1991 issue of HBR, a provocative piece that came at a time when the United States was nervously watching Japanese companies win more than 40% of the American market for laptops, assert leadership in the production of memory chips, and rival US companies in the production of supercomputers.  Don’t worry, the piece argued.  The future isn’t in computers.  It’s in computing.  “Defining how computers are used, not how they are manufactured, will create real value – and thus market power, employment, and wealth – in the decades ahead.  A computer company is the primary source of computing for its customers.”  The future, in other words, is a verb, not a noun.

The article went on to praise the iconoclastic, rebellious culture that Jobs nurtured at Apple.

What I wanted to share with you tonight is the poignant ending of the article which resonates so well in these times:

“Change is in the air – challenges from companies and countries around the globe, in a world where business, politics, society all seem to be changing rapidly, unpredictably, simultaneously.  It is a global strategic inflection point we’re all struggling to adapt to.

Can Apple offer some useful ways of thinking and working differently?  Ways that apply to these challenging times?

There’s no formula, but there are Apple lessons:

Keep innovating and evolving.  Keep raising the bar on yourself and your own possibilities.  Keep learning and seeking.  Keep obsessing about how to be your own best self.   And most important, always remember that it’s better to be a verb than a noun.”

Market Commentary:

Canada

By Kaitlyn Kiernan

Sept. 28 (Bloomberg) — Canadian stocks fell for the first time in three days as copper and energy companies slipped on a decline in U.S. durable goods orders and concern that Europe’s debt crisis will linger.

Suncor Energy Inc., Canada’s biggest oil and gas producer, slipped 4.7 percent as crude headed for its biggest quarterly drop since 2008. Teck Resources Ltd., Canada’s biggest base- metals and coal producer, sank 5.3 percent as copper lost 2.3 percent. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, slid 4.9 percent as corn and wheat slumped.

The Standard & Poor’s/TSX Composite Index lost 235.22 points, or 2 percent, to 11,585.87.

“There is a wait-and-see mentality,” said Bob Decker, a money manager at Aurion Capital Management in Toronto who oversees about C$5.5 billion ($5.4 billion). “There is still concern about deceleration in the economy and that the commodity shake-ups have not run their course.”

The S&P/TSX had advanced 3.1 percent the past two days as mining and energy companies gained on signs that European policy makers were intensifying efforts to contain the region’s debt crisis.

The European Commission is resisting a push by as many as seven euro-area countries to impose bigger writedowns on banks’ holdings of Greek government debt than those agreed at a July 21 summit, a European official said today.

Canadian energy companies dropped after crude oil fell 3.8 percent on the discord among European leaders and a report that U.S. stockpiles increased last week to an eight-week high.

Natural gas sank 1.8 percent as drilling in the U.S., the biggest consumer of the nation’s gas output, increased supplies of the fuel and forecasts of moderating weather that may reduce demand.

Suncor Energy erased 4.7 percent to C$27.05. Penn West Petroleum Ltd., a western Canadian energy producer, decreased 3.3 percent to C$16. Encana Corp., the country’s largest natural gas producer, slid 4 percent to C$20.21, its lowest value since February 2005. Petrobank Energy and Resources Ltd., a western Canadian oil and gas producer, lost 12 percent to C$8.25, its lowest price since October 2006.

All 10 of the industry groups in the S&P/TSX fell, led by the S&P/TSX Materials Index, which lost 3.9 percent to erase this week’s gains. Base metal producers sank as copper declined more than 5 percent amid concern that a slowing global economy will reduce demand for the metal. A report showed orders for U.S. durable goods fell 0.1 percent in August after rising 4.1 percent in July.

Teck Resources Ltd. slipped 5.3 percent to C$30.40. Mercator Minerals Ltd., which mines copper and molybdenum, dropped 11 percent to C$1.51. Taseko Mines Ltd., which produces copper in British Columbia, declined 6.4 percent to C$2.76, its lowest value since October 2009.

Fertilizer producers sank as corn and wheat futures fell on speculation demand for food and animal feed will drop as the U.S. economy slows and Europe’s debt crisis reduces consumer confidence. Corn fell 1.5 percent after rising 2.2 percent the prior two sessions. Wheat fell 3 percent on signs that slowing economies and ample global supplies are eroding demand.

Potash Corp. dropped 4.9 percent to C$47.05, the lowest since December 2010. Agrium Inc., a fertilizer producer and farm retailer, declined 3.8 percent to C$73.25, its lowest price in more than a year.

US

By Whitney Kisling and Inyoung Hwang

Sept. 28 (Bloomberg) — U.S. stocks declined, halting a three-day rally for the Standard & Poor’s 500 Index, amid growing concern that European leaders are divided over how to handle Greece’s debt crisis.

All 10 industry groups in the S&P 500 fell at least 0.6 percent, with companies most-tied to economic growth dropping the most. Dow Chemical Co. and Alcoa Inc. slid at least 4.9 percent as commodities tumbled. Morgan Stanley and Bank of America Corp. lost more than 4.9 percent, pacing declines among financial shares. Amazon.com Inc. rose 2.5 percent after the company launched its Kindle Fire tablet computer, taking aim at Apple Inc.’s bestselling iPad.

The S&P 500 lost 2.1 percent to 1,151.06 at 4 p.m. New York time, after rising as much as 0.8 percent earlier and rallying 4.1 over the previous three days. The Dow Jones Industrial Average fell 179.79 points, or 1.6 percent, to 11,010.90 today, with all 30 stocks retreating.

“Europe is the issue that is first and foremost in everyone’s mind, so any news that comes out on that does have a strong impact on the market,” Peter Jankovskis, who helps manage about $2.6 billion at Oakbrook Investments in Lisle, Illinois, said in a telephone interview. “Any weakness there is going to be a drag worldwide.”

A four-day rout last week erased $1 trillion from U.S. equities amid concern Greek insolvency is inevitable and Europe can’t contain the damage. The decline left the S&P 500 trading at 12.4 times earnings in the past 12 months, 4.4 percent below its average valuation at the lowest point during the last nine bear markets, Bloomberg data shows.

Stocks fell today as an official said the European Commission is resisting a push to impose bigger writedowns on banks’ holdings of Greek government debt than those agreed at a July 21 summit. The commission opposes ideas that are being floated by some government officials to get banks to accept bigger so-called haircuts and doesn’t want to have talks about any such attempt, the official said on condition of anonymity because the deliberations are private.

Italian and Spanish financial market regulators extended temporary bans on short selling of financial shares that were introduced last month in a bid to stem market volatility, the European Securities and Markets Authority said.

 The S&P 500 had climbed over the past three days amid optimism that euro-area nations were making progress on plans to tame the region’s government debt crisis.                      

“The market is on pins and needles over the whole European debt problem,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which oversees about $75 billion, said in an e-mail. “Every new rumor or little piece of news moves the market in one direction or the other a percent or two. It’s frustrating!”

Stocks rose earlier today as a Commerce Department report showed orders for U.S. capital goods climbed in August by the most in three months, a sign business investment continues to support the recovery. Bookings for goods like computers and communications gear, excluding military hardware and aircraft, climbed 1.1 percent, the most since May. Demand for total durable goods dropped 0.1 percent, less than forecast.

The S&P 500 has been trading between about 1,100 and 1,300 since the beginning of August. The benchmark gauge for U.S. equities climbed as high as 1,363.61 on April 29, before starting a decline of as much as 18 percent through August. The index is down 8.5 percent for the year. Strategists estimate it will climb to 1,305 by year-end, representing a 13 percent advance, according to the average in a Bloomberg survey.                    

Raw-material companies fell the most among 10 groups in the S&P 500 today, tumbling 4.5 percent. Energy shares lost 3 percent as a group, as the Thomson Reuters/Jefferies CRB Index of 19 commodities fell 2.5 percent. The Morgan Stanley Cyclical Index of companies most-tied to the economy lost 3.3 percent.

The Dow Jones Transportation Average, a proxy for the economy, lost 2.9 percent. Alcoa fell 4.9 percent to $9.97. Dow Chemical, the largest U.S. chemical maker, slid 6.2 percent to $23.76.

The KBW Bank Index lost 3.5 percent, with Morgan Stanley falling 5.4 percent to $14.16. Bank of America slid 4.9 percent to $6.16, for the largest decline today for the Dow. A group of S&P 500 financial shares have plunged 27 percent since the April high, the biggest drop among the 10 industry groups. Utilities companies have been the only group to gain, adding 1.2 percent in the same period.

Amazon.com shares rose 2.5 percent, the second-most in the S&P 500, to $229.71. The world’s largest online retailer introduced its Kindle Fire, a device that’s smaller and less than half the price of Apple’s iPad. Chief Executive Officer Jeff Bezos is betting he can leverage Amazon’s dominance in e- commerce to pose a challenge to the iPad, after tablets from rivals such as Hewlett-Packard Co. and Research In Motion Ltd. have fallen short.

Jabil Circuit Inc., gained the most in the benchmark index, adding 8.4 percent to $18.84. The U.S. contract electronics manufacturer forecast first-quarter earnings will be at least 62 cents a share, exceeding the average analyst projection, data compiled by Bloomberg show.

Have a wonderful evening everyone.

Be magnificent!

We do not progress from error to truth, but from truth to truth.

Thus we must see that none can be blamed for what they are doing, because they are,

at this time, doing the best they can.  We learn only from experience.

-Swami Vivekananda, 1863-1902

As ever,

Carolann

In reality, humility means nothing other than

complete honesty about yourself.

        – Emma Thompson, 1959-