The Week of August 15th to August 21st, 2009

The Week of August 15th to August 21st, 2009

“A Brief Look Back Into Tomorrow”

Following a week away in British Columbia’s sunny Okanagan and watching from afar as the major North American markets fell for the first week in three as investors on both sides of the border took mid summer profits while evaluating 2nd quarter economic reports, the weekend media reported that -

As we reviewed the market statistics from last Friday, August 14th, we saw that for the 32nd week of  the year the Dow Jones Industrial Average had corrected by a very mild 0.52%, with the S&P 500 Index off by 0.59% and the NASDAQ Exchange off on the week by 0.70%. To the sunny north, the TSX composite index gave back only 0.34% over the week, while the TSX Venture Exchange ended the week unchanged at 1,193. Some of the new TSX 52-week highs of note from last week were Canadian Tire Corporation (CTC.A-T) at $60.75, Canaccord Capital Corporation (CCI-T) at $9.95, IAMGOLD (IMG-T) at $12.37, Pacific Rubiales Energy (PRE-T) at $12.80, and Silver Bullion Trust (SBT.UN-T) at $11.00, while a notable new low was HAP Gartman Fund (HAG.UN) at $8.79.

Credit Suisse reports with 90% of S&P 500 companies having reported 2nd quarter earnings, 75% of them have beaten consensus earning estimates and 48% have beaten revenue estimates.

BMO Capital Markets – “While stocks may face some important seasonal challenges in coming months, we do not see the market rebound as particularly overdone. However, it is fair to conclude that the easy gains have been made, and further advances will have to be earned the old fashion way – through a solid recovery in earnings.”

Sprott Asset Management – “If you had just returned from a 16-month vacation on a deserted island, you might not even know that a market crash had occurred.”

PFG Best – “Consumers are worried about the economy, and that’s raising concerns about commodity demand.”

Schaeffer’s Investment Research – “Certainly, this combination of technical resistance, an overbought condition, evidence of short-term optimism creeping into the marketplace and professional traders bracing for a surge in volatility is cause for concern.”

Dalia Lama – “I find hope in the darkest days, and focus in the brightest.”

And then on Monday, August 17th –

Metals investors are encouraged when Credit Suisse, sighting an improving global outlook, raises its 2nd half of 2009  price for copper by 50¢  to US $2.90 a pound.

Meanwhile, copper takes a sudden 7-cent drop to US $2.76 a pound after the London Metal Exchange (LME) reports that copper inventories rose by 11% last month and that China imports of copper fell by 15%.

The Wall Street Journal reports that Chinese auto sales in July were 64% higher that just one year ago and have just surpassed 5-consecutive months of sales of 5-million unit’s a month.

Lithium stocks suddenly come into play as Global Strategic Analysts predicts that with the introduction of new electric cars such as the Chevrolet Volt, the market for lithium-ion batteries is likely to grow by a compounded 32% over the next year.

The New York Empire State Manufacturing Index for August rose to an unexpected 33-month high of 12.08.

Similarly, the U.S. National Association of Home Builders Housing Market Index rose in August to a 1-year high of 18.

And similarly, U.S wholesale inventories fell in June by an additional 1.7%.

Lowes (LOW-N) shares drop by $2.36 or 10.34% to US $20.47 when America’s 2nd largest home improvement retailer reported less than expected 2nd quarter earnings of $0.51 a share.

JPMorgan (JPM-N) reports that its credit card defaults have now dropped for two consecutive months.

Boeing (BA-N) share’s lose $1.75 or 3.75% of altitude to US $44.87 when the world’s largest aircraft manufacturer reports that its long anticipated ‘787 Dreamliner’ has been put back in the hanger while the company investigates reports of “wrinkles” in its fuselage.

Albert Camus – “I’ll tell you a big secret my friend. Don’t wait for the last judgment. It takes place every day.”

Tuesday, August 18th –

Monday’s triple digit ‘let’s continue to lock in profits’ market loses still left the TSX to report 54 new 52-week trading highs to go along with 11 new lows. Three new highs of interest were AltaGas Utility Group (AUI-T) at $8.96, First National Financial (FN.UN-T) at $14.50 and Petro Andina Resources (PAR-T) at $9.75, while two new lows of note were Precious Metals Bullion Trust (PBU.UN-T) at $11.40 and Royal Host REIT (RYL.UN-T) at $1.85.

Citigroup Capital – “The roller-coaster mentality that we saw in the first half will persist and there will be some ups and downs and rounds of profit taking…especially given the 50% rebound in equities since markets bottomed in March.”

Under our continuing heading of ‘Leading Indicator’ – General Motors, surprises the market by announcing it will hire an additional 1,350 workers in order to keep up with new vehicle demand.

And similarly, the National Association of Home Builders reports that new American residential housing starts increased for the fifth consecutive month in July, this time by 1.7% over June and are now 37% higher than they were in February.

Standard Charter Bank – “Strong buying by China has driven aluminum imports up to unprecedented levels. China has traditionally been an exporter of aluminum, but its imports of primary aluminum and products have surged recently.”

Old Farmer’s Advice – “Most of the stuff people worry about ain’t  never gonna happen anyway.”

Wednesday, August 19th –

Yesterday’s ‘holy crap! GM’s hiring back workers!’ triple digit market rebound allowed Canaccord’s Morning Coffee to report a respectable 66 new 52-week trading highs and only 5 new lows. A few of the new highs of note were Andean Resources (AND-T) at $2.09, Glentel (GLN-T) at $13.45, Linear Gold (LRR-T) at $1.93, and SXC Health Solutions (SXC-T) at $46.94, while a new low of note was Petroflow Energy (PEF-T) at $0.80.

Technical analysts Olaf Sztaba & Ron Meisels – “Despite a grueling marathon out of the March lows, this mini-bull is still in no mood for a summer vacation. It appears that the brief R&R in June was enough, and the markets are once again ready to climb to higher levels….This “sunny” technical picture doesn‘t exclude a possibility of a brief resting period. Any pullback, however, should be viewed as a buying opportunity.”

Notley’s Notes – “The latest short term decline, now two weeks old or so, has failed to demonstrate much meaningful magnitude. The inability of the short term swing to decline indicates that a stronger force is working at cross purposes to it and so as the short term downtrend matures, say by the last week of August on, the possibility exists for yet a further extension of the intermediate uptrend which originated in March and which showed the first signs of maturity in June. For new money, we prefer to execute long positions using short term bottoms that are associated with intermediate trend structures which are youthful, with reasonable prospects of trend longevity.”

Five years ago today that search engine company Google (GOOG-Q) came to the market with an US $85 initial public offering (IPO). After surging to about US $750 a couple of years ago, Google currently trades at about US $450 a share.

While Bigger, Saskatchewan is big, this is bigger, as Exxon Mobil (XOM-N) and PetroChina (PTR-N) jointly announce the world’s biggest trade agreement where two of the world’s largest  oil companies agree to a US $41-billion deal to develop and ship liquefied natural gas from the Greater Gorgon gas field 200 kilometers off the coast of Western Australia.

Under the heading of ‘Home Entertainment’ – The share’s of La-Z-Boy (LZB-N) improve by $0.59 or 7.96% to US $8.00 when the retailer of reclining chairs and sofas reported a better than expected 1st quarter profit.

Yogi Berra – “Even Napoleon had his Watergate.”

Crude oil surges by $3.89 when the U.S. Energy Department reports of a greater than expected

8-million barrel drop in inventories to once again cross above US $70 and close at US $73.83 a barrel.

Thursday, August 20th –

Wednesday’s mixed day of trading still produced 60 new TSX 52-week trading highs to go along with 7 new lows. A few of the interesting new highs were Magma Energy (MXY-T) a $2.10, Queenston Mining (QMI-T) at $6.08 and Sun-Rype Products (SRF-T) at $9.24, while a new notable new low was Claymore Gold Bullion Trust (CGL.UN-T) at $8.50.

Warren Buffet – “The U.S economy is out of the emergency room and appears to be on a slow path to recovery.”

Canaccord Capital’s Chief Portfolio Strategist Nick Majendie – “The TSX has been at the forefront of performance amongst the developed world’s equity markets this decade and we continue to believe it has the characteristics to continue that outperformance over the next 5 to 10-years if one continually holds top-quality, dividend paying companies, (as well as their bonds), buttressed by good exposure to the cyclical sectors with the correct timing.” (Very well said….)

Under the heading of ‘Double Your Fun’ – The share price of Osisko Mining (OSK-T) improve by $0.22 or 3.23% to $7.26 when the Government of Quebec gives the ‘green light’ to construction of their giant Canadian Malartic gold project and Goldcorp (G-T) announces they have bought about 3.2% of the company.

The World Gold Council reports that, led by a 38% decline from India, global gold demand fell by 8.6% in the 2nd quarter to a 6-year low of 719.5 tonnes. China went against the grain and increased its gold purchases by 11% to 89.6 tonnes.

And with figures that bring home just how fast technology is advancing, tech analysts Gartner report that while the global sales of mobile phones are about flat over the past year, the global 2nd quarter sales of ‘smart phones’ increased by 27% over the same quarter just one year ago to about 41-million units.

Pop Quiz – What is the world’s fastest growing company? ……. answer …………  Fortune Magazine says that with a 3-year average sales growth of 77% and average earnings per share (EPS) growth of 84%, Research In Motion (RIM-T), the maker of the very smart ‘Blackberry’ is the world’s fastest growing company.

AIG (AIG-N) shares surge by $5.66 or 21.25% to US $32.30 when new CEO, Robert Benmosche states “I don’t liquidate things, I build them” and that the once giant insurer’s recovery was on track.

Winston Churchill – “Success is not final, failure if fatal: it is the courage to continue that counts.”

The frontline September natural gas contract sinks by 17¢  on reports of greater than expected inventories, to break below $3 and close at a new 7-year low of US $2.95 per million BTUs.

Friday, August 21st, Short Strokes –

Thursday’s continued market mild optimism left the TSX with 54 new 52-week trading highs to go along with only 5 new lows. Three of the new highs of note were Avalon Rare Metals (AUI-T) at $9.04, Boyd Group Income Fund (BYD.UN-T) at $4.08 and Neo Material Technologies (NEM-T) at $3.45, while a notable new low was the Claymore Natural Gas Commodity E.T.F. (GAS-T) at $4.63.

The last trading day of the week begins enthusiastically when investors hear that U.S existing home sales increased by a much better than expected 7.2% in July to an annualized 5.24-million units.

Statistics Canada reports the country’s wholesale sales, led by auto and foodstuffs, increased by 0.6% in June to $40.4-billion, the 1st increase in the last 9-months.

Under the heading of ‘Rig Counts’ – The U.S. Energy Information Agency (EIA) reports that there are only 691 natural gas drilling rigs currently working in the United States, down from 1,569 rigs a year ago, while there are only 175 rigs working in Western Canada, down from 585 rigs working in 2008.

Brent Musburger – “Nothing dissects a man in public quite like golf.”

The near term September natural gas contract falls by a further 16¢ to close at a new

7-year low of US $2.79mmbtu.

For the Week –

The DJIA gained 185 points to 9,506 the S&P 500 gained 24 to 1026 the TSX lost 18 points to 10,830, the NASDAQ gained 35 to 2,021, and JVX lost 1 points to 1,192.

Gold gained $6.40, to $955.10, Silver lost $0.54 to $14.18, and Oil gained $4.36 to $73.96.  Natural Gas lost $0.40 to $3.24, and Copper gained $0.04 to $2.89.

The CRB Commodities Index followed crude oil, gold bullion, base metals and soft commodities higher to gain 1.92 points to end the week at 259.24.

The Canadian dollar gained 8/10ths of a cent against its US counterpart to end the week at US $0.9242.  The Euro gained 1.1¢ against the greenback to end the week at US $1.4338.

And Finally –

with a report that may let you enjoy one of your favourite movie snacks with a lower level of guilt, scientists have established that popcorn, because it is a whole grain food, contains the same amount of healthy antioxidants as fruit and vegetables. (Although, no mention was made of the health benefits of all of that extra butter and salt…)

Interesting times, and…….thanks

Rod Blake and Manjeet Sohi

(604) 643-7567

www.rodblake.com

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“The information contained in this commentary is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does Rod Blake, Canaccord Capital Corporation (“Canaccord Capital”) or its subsidiaries, or affiliated companies, assume any liability. This information is current as of the date appearing in this commentary, and neither Canaccord Capital nor Rod Blake assume any obligation to update the information or advise on further developments relating to these securities. This commentary is intended for distribution in those jurisdictions where Canaccord Capital and Rod Blake are registered as advisors or dealers in securities. Any distribution or dissemination of this commentary in any other jurisdiction is strictly prohibited. The information does not constitute an offer or solicitation in any jurisdiction in which such an offer or solicitation is not authorized, or to any person to whom it is unlawful to make such an offer or solicitation. Canaccord Capital and holdings of its respective directors, officers and employees and their associations, from time to time may buy or sell any securities mentioned herein. This message is intended only for the use of the individual or entity to which it is addressed and may contain information which is privileged, confidential or subject to copyright. Internet communications cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, arrive late or contain viruses.”

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