January 24th, 2012 Newsletter

Dear Friends,

Tangents:

–from Globe Life:

Return of the gladiators

“Accountants and bank clerks in Germany’s oldest city have decided to forsake their familiar beer and sausages for tunics and swords instead and have joined the country’s latest sports craze – gladiator dueling….This is no mere re-enactment.  Many of those joining in the fun in Trier’s 2,000-year-old Roman arena end up with bruises and some with a broken nose.  Courses at the gladiator school in the city have been devised with the help of historians to come as close as possible to the practices of ancient Rome.  They combine martial arts training with the wielding of battle axes, swords, spears, daggers and casting nets.  At the beginner’s level, the participants use wooden weapons.  These are replaced with real, albeit blunt ones when the participants have acquired enough skill to prevent serious injuries.”

A poem,

Memorial

He who was so boastful and anxious

And used to nip home deafened by weapons

To stand in full armour in the doorway

Like a man rushing in leaving his motorbike running

All women loved him

His wife was Andromache

One day he looked at her quietly

He said I know what will happen

And an image stared at him of himself dead

And her in Argos weaving for some foreign woman

He blinked and went back to his work

Hector loved Andromache

But in the end he let her face slide from his mind

He came back to her sightless

Strengthless expressionless

Asking only to be washed and burned

And his bones wrapped in soft cloths

And returned to the ground

Extract from ‘Memorial’ by Alice Oswald

photos of the day

January 24th, 2012

Artist Frank Buckley poses in the house he has built out of 1.4 billion euros in decommissioned euro notes from the Irish Central Bank’s mint, in Dublin. Bricks of money make up the walls and shredded bills carpet the ground on the first floor of the empty office building for let on Coke Lane in Smithfield where Buckley has set up camp. He has been building for 12 hours every day, and living on-site since Dec. 1, 2011.

Cathal McNaughton/Reuters

A spider silk shawl, designed by Simon Peers and Nicholas Godley, is seen on display at the Victoria and Albert Museum in London. The shawl is woven and embroidered in Madagascar and is made from the silk of more than a million female Golden Orb Weaver spiders collected in the highlands of Madagascar. The hand-woven textile is naturally golden in color and took over four years to create.

Sang Tan/AP

Market Closes for January 24th, 2012

Market Commentary:

Canada

By Matt Walcoff

Jan. 24 (Bloomberg) — Canadian stocks fell for the first time in five days, led by banks, as talks between European finance ministers and holders of Greek debt reached a stalemate.

Toronto-Dominion Bank, the country’s second-largest lender by assets, declined 1.2 percent. Canadian National Railway Co., the country’s largest railroad, dropped 3.9 percent after forecasting a smaller earnings increase this year than most analysts in a Bloomberg survey had estimated. Semiconductor designer Gennum Corp. soared 119 percent after agreeing to be bought by Semtech Corp. for about C$500 million ($494 million).

The S&P/TSX Composite Index slipped 134.15 points, or 1.1 percent, to 12,387.55 at 1:45 p.m. Toronto time after closing at a four-month high yesterday.

“The clock is really ticking for the Greeks,” Sebastian van Berkom, a money manager at Van Berkom & Associates in Montreal, said in a telephone interview. The firm oversees about C$1.7 billion. “If it’s finally confirmed that one of the euro members actually defaults, the next question is, ‘Who’s next?’”

The index gained 4.7 percent this month through yesterday as improving employment and manufacturing data in the U.S. overshadowed the European debt crisis. The S&P/TSX slumped 11 percent in 2011 as concern the crisis would hamper global growth led to declines in commodity producers’ shares.

European finance ministers refused to increase their offer of 130 billion euros ($169 billion) in public funds for a second Greek debt program. They sought to make bondholders accept lower interest rates on new bonds than the investors want.

The S&P/TSX Financials Index declined for the first time in seven days. TD lost 1.2 percent to C$79.19. Royal Bank of Canada, its bigger rival, slipped 0.7 percent to C$53.89. Bank of Nova Scotia, Canada’s third-largest lender by assets, decreased 1.3 percent to C$53.85.

Canadian National retreated 3.9 percent to C$76.50 after forecasting earnings of as much as C$5.32 a share, excluding certain items, in 2012. Analysts had estimated profit of C$5.39, according to the average estimate in a Bloomberg survey.

Barrick Gold Corp., the world’s largest gold producer, fell 2.5 percent to C$46.10 after Stephen D. Walker, an analyst at Royal Bank, cut his rating on the shares to “sector perform” from “outperform.” Walker had had an “outperform” rating on Barrick since June 2009.

Alacer Gold Corp., which mines in Turkey, tumbled 7.3 percent to C$10.10 after issuing a 2012 production forecast that trailed the estimate of David Haughton, an analyst at Bank of Montreal.

Potash Corp. of Saskatchewan Inc., the world’s biggest fertilizer producer by market value, dropped 2.6 percent to C$44.73 after Jeffrey Zekauskas, an analyst at JPMorgan Chase & Co., reduced his rating on the stock to “neutral” from “overweight.” In a note to clients, Zekauskas cited the 18 percent gain in the company’s U.S.-traded shares from Dec. 19 to yesterday and a preference for shares of Agrium Inc.

Gennum surged 119 percent, the most since at least 1987, to C$13.44 after Camarillo, California-based Semtech agreed to buy it for C$13.55 a share. Last month, Sterling Partners bought Ottawa-based Mosaid Technologies Inc., which licenses semiconductor patents, for about C$590 million.

Westport Innovations Inc., which develops natural-gas engine technology, rallied 6.4 percent to C$38.15 after closing at a 10-year high yesterday. U.S. President Barack Obama may call for a goal for natural gas production in his State of the Union address today, the Wall Street Journal reported, citing unnamed people familiar with the plans.

US

By Rita Nazareth

Jan. 24 (Bloomberg) — U.S. stocks retreated, ending a five-day advance in the Standard & Poor’s 500 Index, amid a stalemate between European finance ministers and Greek bondholders over how to resolve the nation’s debt crisis.

Travelers Cos., the only insurer in the Dow Jones Industrial Average, sank 3.8 percent as earnings fell.

McDonald’s Corp. slid 2.2 percent as the restaurant chain said foreign-currency fluctuations will cut 2012 profit. Verizon Communications Inc. lost 1.6 percent after the phone company reported a loss. Peabody Energy Corp., the biggest U.S. coal producer, dropped 1.7 percent as earnings missed estimates.

The S&P 500 fell 0.1 percent to 1,314.63 at 4 p.m. New York time, after rising 2.1 percent over the previous five days. The Dow lost 33.07 points, or 0.3 percent, to 12,675.75.

“It’s all about the negotiations of Greek debt,” Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview. His firm oversees $715 billion. “There’s concern that, if it spills over, it undermines some of the progress being made. I’m still not convinced that they solved all of their problems. The next question, of course, is how deep of an impact that will have on corporate earnings and how the markets price that in.”

Global stocks slumped as European finance ministers pushed bondholders to provide greater debt relief for Greece, spurring concern the nation may fail to make a March 20 bond payment. The International Monetary Fund cut its forecast for the global economy. President Barack Obama tonight will lay out what he calls a “blueprint” for revitalizing the economy in his third State of the Union address before a joint session of Congress.

The Federal Reserve began a two-day policy meeting.

The S&P 500 yesterday capped its longest rally since December as data bolstered confidence in the economy and most quarterly reports exceeded forecasts. Of the 74 companies in the S&P 500 that reported results since Jan. 9, 48 posted per-share earnings that beat projections, Bloomberg data show.

Travelers retreated 3.8 percent, the most in the Dow, to $58. The insurer said fourth-quarter profit fell on lower investment income and a smaller reserve benefit, capping the company’s least profitable year since 2004.

McDonald’s declined 2.2 percent to $98.75. The company, which gets about 60 percent of its revenue outside the U.S., said profit may be trimmed as the European debt crisis sinks the region’s currency. Foreign-exchange fluctuations may cut 2012 profit by as much as 18 cents a share and first-quarter earnings by as much as 3 cents, Chief Financial Officer Peter Bensen said today on a conference call.

A measure of phone companies had the biggest loss in the S&P 500 among 10 groups, slumping 1.3 percent. Verizon slid 1.6 percent to $37.79. The second-largest U.S. phone company reported a fourth-quarter loss after booking a pension charge and having higher subsidy costs for rising iPhone sales. On a conference call, Verizon gave a 2012 earnings-forecast range whose bottom trailed analysts’ estimates. AT&T Inc. lost 1 percent to $30.09.

Peabody retreated 1.7 percent to $36.86. The coal producer reported fourth-quarter profit that missed analysts’ estimates because of lower output at its Australian operations.

Zions Bancorporation had the biggest loss in the S&P 500, falling 7.6 percent to $17.15. The Salt Lake City-based bank was cut to “hold” from “buy” at Stifel Nicolaus & Co. after reporting fourth-quarter earnings that missed the average analyst estimate.

Coach Inc. jumped 5.8 percent to $67.97. The largest U.S. luxury handbag maker reported a 15 percent increase in quarterly profit that topped analysts’ estimates, driven by holiday sales in North America as consumer confidence rose to an eight-month high in December.

EMC Corp. advanced 7.3 percent to $25.14 after reporting a 32 percent increase in fourth-quarter earnings as data growth spurs demand for its products and software from majority-owned VMware Inc.

Waters Corp. soared 8 percent, the most in the S&P 500, to $85.04. The maker of laboratory products and instruments posted quarterly profit and sales that beat analysts’ estimates.

Earnings probably grew 3.4 percent for S&P 500 companies in the fourth quarter, according to a Bloomberg survey of analysts.

The projection has fallen from 6.2 percent at the end of last year. The global economy is forecast to grow 2.3 percent in 2012, according to the median projection in a survey of economists, down from the estimate of 3.4 percent in July.

“The market is not terribly disappointed by what appear to be soft earnings compared to where we’ve been,” David Joy, the Boston-based chief market strategist at Ameriprise Financial Inc., said in a telephone interview. His firm oversees $600 billion. “There’s a creeping sense of optimism that things are going to improve. That lessens the fear that along with softness in Europe we’ll have a global recession.”

Collective Brands Inc. rallied 6.4 percent to $15.89. The company may extract the biggest takeover premium of any apparel retailer in the world as the maker of Saucony and Sperry Top- Sider shoes lures private equity buyers.

Collective Brands, which said in August it was reviewing options to boost shareholder value, may attract interest from buyout firms and rivals such as Wolverine World Wide Inc. when bids are due next week, according to people familiar with the process. The company, which also owns the Payless ShoeSource chain, could be worth as much as $27 a share based on the value of its separate businesses, Morningstar Inc. said.

While the 87 percent premium would be the largest of any deal in the industry worth at least $100 million, it still allows acquirers to get Collective Brands at half the price of its competitors relative to sales, according to data compiled by Bloomberg. In a breakup, an apparel company could keep the wholesale brands, which boosted sales by 25 percent in the first nine months of 2011, while a private equity firm would run the Payless chain for its cash flow, Auriga USA LLC said.

“On the retail side of the business, this seems like almost a perfect set-up for a private equity company,” R.J. Hottovy, director of consumer research at Chicago-based Morningstar, said in a telephone interview. “The wholesale brands alone would be an attractive acquisition target for any of the major branded footwear players.”

Have a wonderful evening everyone.

Be magnificent!

A man is a universe in miniature, and the universe, a giant living body;

the cosmos is similar to a large man,

and a man is similar to a small cosmos; so say the Sufis.

-Kabir, 1440-1518

As ever,

Carolann

Anxiety is the dizziness of freedom.

-Soren Kierkegaard, 1813-1855

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

Senior Vice-President &

Senior Investment Advisor