January 13th, 2012 Newsletter

Dear Friends,

Tangents:

MLK remembrance

January 13, 2012

Birthday: January 15^th, Martin Luther King Junior, would have turned 83 years old this year.

The Rev. Martin Luther King Jr. is given a welcome home kiss by his wife, Coretta, upon his return to Atlanta, following his release from Reidsville State Prison on bond, on October 27, 1960. King’s children, Yolanda and Martin Luther III, join the welcome celebration.

AP/File

The Dr. Martin Luther King Jr. acknowledges the crowd at the Lincoln Memorial for his ‘I Have a Dream’ speech during the March on Washington on Aug. 28, 1963.

AP/File

Marchers cross the Alabama River on the Edmund Pettus Bridge in Selma, Alabama, on March 21, 1965. The civil rights marchers are led by the Rev. Martin Luther King Jr. This is the start of their five day, 50-mile march to the State Capitol of Montgomery. They are fighting for voter registration rights for African-Americans, who are discouraged from registering to vote.

AP/File

Our days begin to end the day we become silent about things that matter. –MLK

Freedom is never voluntarily given by the oppressor; it must be demanded by the oppressed. – MLK, Letter from Birmingham Jail, 1963.

In the end, we will remember not the words of our enemies, but the silence of our friends. –MLK, The Trumpet of Conscience, 1967.

The hope of a secure and livable world lies with disciplined nonconformists who are dedicated to justice, peace and brotherhood. -MLK

Market Closes for January 13th, 2012

Market Commentary:

Canada

By Matt Walcoff and Ksenia Galouchko

Jan. 13 (Bloomberg) — Canadian stocks fell, erasing a weekly gain, as the U.S. dollar climbed and fuels and metals dropped on concern Standard & Poor’s will cut the credit ratings of some euro-region countries.

Canadian Natural Resources Ltd., the country’s second- biggest energy company by market value, declined 2.6 percent after crude oil retreated to a three-week low as a European government official said France is among several euro-area countries facing downgrades. Teck Resources Ltd., Canada’s largest base-metals and coal producer, decreased 2.7 percent as copper retreated. Canadian National Railway Co., the country’s largest railroad, lost 1.7 percent after an analyst at JPMorgan Chase & Co. cut his rating on the shares.

The S&P/TSX Composite Index slid 120.40 points, or 1 percent, to 12,153.92 at 1:38 p.m. Toronto time, poised for a 0.2 percent decline since Jan. 6 after three straight weeks of advances.

“There are rumors someone’s going to downgrade somebody somewhere sometime,” David Baskin, president of Baskin Financial Services Inc. in Toronto, said in a telephone interview. The firm manages about C$440 million ($429 million).

“People feel there’s going to be a recession in Europe. The Greeks still can’t get their act together. People are still edgy about it.”

The index increased 6.4 percent from Dec. 19 to yesterday as economic data indicating growth in the U.S. and speculation China may ease monetary policy overshadowed the European debt crisis. The S&P/TSX fell nine of the 10 months ending in December as concern that the crisis would limit global economic growth weakened shares of commodity producers.

Stocks fell earlier after Dow Jones, citing an unnamed person familiar with the matter, reported an S&P downgrade of some euro-region countries “could be imminent.” Germany will retain its AAA grade in the rating company’s review, according to the European government official, who spoke on condition of anonymity because the announcement has yet to be made.

Stocks extended their losses after the Institute of International Finance, which represents Greece’s bank creditors, said talks with the government have halted after failing to produce a “constructive consolidated response by all parties.”

The euro headed for its sixth-straight weekly retreat against the U.S. dollar, which would be the longest streak since February 2010.

The S&P/TSX Energy Index dropped for a third day. Canadian Natural declined 2.6 percent to C$37.37.

Birchcliff Energy Ltd., a western Canadian oil and gas producer, decreased 5 percent to C$11.95 after Kurt Molnar, an analyst at Stifel Financial Corp., cut his rating on the stock to “hold” from “buy.” Molnar cited lower natural gas prices in a note to clients.

Raw-materials companies in the S&P/TSX retreated the most in two weeks as base and precious metals fell. Teck dropped 2.7 percent to C$38.90 as copper futures declined from a 10-week high.

A gauge of gold stocks in the S&P/TSX fell for the first time in five days. Barrick Gold Corp., the world’s largest producer, lost 1.6 percent to C$48.87. AuRico Gold Inc., which operates in Mexico, slumped 2.1 percent to C$8.72 after saying “adverse ground conditions” at its Ocampo mine reduced production.

Lake Shore Gold Corp. retreated 7.9 percent to C$1.40, the biggest drop in a month. The company forecast 2012 production of as much as 100,000 ounces of gold, 30 percent below Bank of Montreal’s estimate.

The S&P/TSX Financials Index declined for the first time in a week after JPMorgan reported fourth-quarter revenue that trailed the average analyst estimate in a Bloomberg survey.

Royal Bank of Canada, the country’s largest lender by assets, slipped 1.5 percent to C$51.96. Manulife Financial Corp., North America’s fourth-largest insurer, fell for the first time since Dec. 28, dropping 1.1 percent to C$11.76.

Canadian National decreased 1.7 percent to C$77.99 after Thomas R. Wadewitz, an analyst at JPMorgan, cut his rating on the shares to “underweight” from “neutral.” CN is likely to raise prices less quickly than its U.S. peers, Wadewitz wrote in a note to clients.

US

By Rita Nazareth

Jan. 13 (Bloomberg) — U.S. stocks retreated, snapping a four-day rally for the Standard & Poor’s 500 Index, as euro- region governments braced for credit downgrades by S&P and after JPMorgan Chase & Co.’s profit slumped 23 percent.

All 10 groups in the S&P 500 declined as financial, industrial and technology gauges slid at least 0.7 percent.

JPMorgan, the largest U.S. bank by assets, dropped 2.5 percent.

Bank of America Corp., Intel Corp. and Alcoa Inc. lost more than 1.3 percent to pace declines among the biggest companies.

Eastman Kodak Co. tumbled 23 percent as it is said to be in talks with Citigroup Inc. to provide bankruptcy financing.

The S&P 500 slid 0.5 percent to 1,289.09 as of 4 p.m. New York time, paring a drop of as much as 1.4 percent. The Dow Jones Industrial Average slid 48.96 points, or 0.4 percent, to 12,422.06. The market will be closed on Jan. 16 for a holiday.

“People are keeping a very careful eye on Europe and they are nervous with earnings,” Mark Bronzo, who helps manage $23.4 billion at Security Global Investors in Irvington, New York, said in a telephone interview. “It’s critical that any downgrades in Europe do not involve Germany. Most people expected France to be downgraded,” he said. In the U.S., “JPMorgan’s earnings were OK, but the quality is not good.”

Stocks slumped as France’s AAA rating will fall by one level at S&P, Finance Minister Francois Baroin told France 2 television today. Germany will keep its top rating, a person familiar with the matter said. Greece’s creditor banks broke off talks after failing to agree with the government about how much money investors will lose by swapping their bonds.

Concern about potential downgrades overshadowed data showing that confidence among U.S. consumers rose more than forecast in January to the highest level in eight months, a sign household spending may hold up early this year. Separate figures showed that the U.S. trade deficit widened more than forecast in November as American exports declined and companies stepped up imports of crude oil and automobiles.

The S&P 500 capped the second straight week of gains amid lower borrowing costs at auctions in Europe. Investors also watched fourth-quarter results. S&P 500 companies, which beat estimates in the previous 11 quarters, are forecast to report a 4.6 percent increase in per-share profit during the September- December period, according to projections compiled by Bloomberg.

Financial companies slumped 0.8 percent, the most among 10 groups in the S&P 500. JPMorgan dropped 2.5 percent to $35.92.

Investment-banking revenue declined 30 percent to $4.36 billion from a year earlier as many clients stayed on the sidelines on concern the European debt crisis would lead to a global economic slowdown.

“Financials would have to participate for the market to do well,” James Dunigan, who helps oversee $104 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “We’ll look to see whether all that disruption in Europe had an effect in overall earnings reports. If that bleeds over into our export numbers, it may have an impact on the earnings side.”

Bank of America lost 2.7 percent to $6.61, while Morgan Stanley retreated 3.2 percent to $16.63. Citigroup fell 2.7 percent to $30.74. Goldman Sachs Group Inc. slid 2.2 percent to $98.96.

The Morgan Stanley Cyclical Index retreated 1.1 percent amid concern about global economic growth. The Dow Jones Transportation Average dropped 0.6 percent. Intel, the world’s biggest chipmaker, declined 2.4 percent to $25.14. Alcoa slumped 1.3 percent to $9.80.

Kodak tumbled 23 percent to 52 cents. The imaging company may seek protection from creditors within weeks and then hold an auction to sell its patent portfolio, said three people familiar with the matter, who asked not to be identified because the talks are private. Kodak may seek about $1 billion in so-called debtor-in-possession financing, though terms may change, two people said.

Patriot Coal Corp. declined 13 percent to $7.87. The U.S.

mining company said it will idle production in West Virginia because of a weaker market for coal used by steelmakers. Other coal producers fell. Alpha Natural Resources Inc. dropped 10 percent, the most in the S&P 500, to $20.19. Arch Coal Inc. retreated 9.8 percent to $14.13.

Charles Schwab Corp. lost 2.5 percent to $12.16. The independent, San Francisco-based brokerage was downgraded to “market perform” from “outperform” at Wells Fargo & Co.

BankUnited Inc. rallied 5.8 percent to $24.48 as it is exploring a sale one year after its private-equity owners took the lender public, according to a person with knowledge of the matter. BankUnited is working with Goldman Sachs Group Inc., said the person, who declined to be identified because the discussions are private. The company could still decide against a sale.

Stock investors shouldn’t get used to the relative calm that markets are now showing, according to Andrew Garthwaite, a global equity strategist at Credit Suisse Group AG.

Volatility is likely to rise this year, Garthwaite wrote yesterday in a report. He attributed the outlook to excessive borrowing in developed economies, which ensures that investors will be “abnormally sensitive” to shifts in economic growth and government policy, he added.

“Sentiment in the market has clearly changed over the past three months,” wrote Garthwaite, who is based in London.

Even so, developed-country debt is still $8 trillion too high, the report said. Garthwaite came up with that estimate by comparing the borrowing relative to gross domestic product with a figure based on the debt-to-GDP ratio’s trend during the past three decades.

The need to reduce this burden creates “a considerable amount of tail risk,” or potential for unlikely stock-market outcomes, the report said. He mentioned 11 possible surprises for this year. One was a breakup of the euro region, which he estimated would send the S&P 500 falling to 800, or 38 percent less than yesterday’s close.

Have a wonderful weekend everyone.

Be magnificent!

If you see the soul in every living being, you see truly.

If you see immortality in the heart of every mortal being, you see truly.

The Bhagavad Gita

As ever,

Carolann

I shut my eyes in order to see.

-Paul Gauguin, 1848-1903

Carolann Steinhoff, B.Sc., CFP, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor