February 9, 2012 Newsletter

Dear Friends,

Tangents:

I mentioned in my newsletter last night about seeing Michaël Jean on Tuesday evening in Vancouver.  Another poignant moment in the evening was when she was asked who was the person she most admired in the world.  Without a moment’s hesitation she answered, “a person with courage.”  I  thought of that this morning when I read that the last World War I veteran has died at the age of 110.  I’m reading The Paris Wife by Paula McLain right now, and is the tale of the love story between Ernest Hemmingway and Hadley Richardson.  They met in Chicago just after WW I, and it is a story about life during the 1920’s and the effect the great war had on the world and in its aftermath.

If you haven’t heard the new Leonard Cohen CD – Old Ideas –  yet I highly recommend you pick it up.  It is full of amazing lyrics.  There are 10 terrific songs, from Going Home, Darkness, Anyhow to name a few.   You will love the poetry of his words.

The Starbucks’ barista gave me a little sample of their new blonde roast coffee which they introduced in Canada on Monday.  It is very mild, but apparently has a higher caffeine content than dark roast coffee.  It comes from central and south America.  It’s apparently attracting a lot of buzz…

photos of the day

February 9, 2012

Lava flows down the mountain during an eruption of Mt. Etna, a volcano near Catania, Sicily, in the early hours of the day. The lava flowed on the snow toward a desert valley and did not pose a threat to the inhabited area.

Carmelo Imbesi/AP

A surfer cuts off the top of a wave while surfing just south of the Huntington Beach Pier in Huntington Beach, Calif.

Mark Rightmire/The Orange County Register/AP

Market Closes for February 9, 2012:

North American Markets

Market Commentary:

Canada

By Matt Walcoff

Feb. 9 (Bloomberg) — Canadian stocks fell after BCE Inc.’s failure to match analysts’ earnings estimates and a drop in wheat futures outweighed an agreement among Greek leaders on austerity measures.

BCE, Canada’s largest phone company, dropped 3 percent.

Potash Corp. of Saskatchewan Inc., the world’s biggest fertilizer producer by market value, slipped 1.1 percent as wheat futures retreated the most in four weeks after the U.S.

forecast a record world supply of the grain. Canadian Tire Corp., the country’s largest general-goods retailer, rallied 4.2 percent after beating the average analyst profit estimate in a Bloomberg survey.

The S&P/TSX Composite Index slipped 23.08 points, or 0.2 percent, to 12,497.94.

“With Greece, I think they forced an agreement so there could be a nice press conference, but nothing is really settled,” Stephen Gauthier, a money manager at Fin-XO Securities in Montreal, said in a telephone interview. The firm oversees about C$600 million ($600 million). “If it had been that Germany is guaranteeing everything, that would have pleased the market.”

The index gained 4.7 percent this year through yesterday as U.S. unemployment dropped to a three-year low, overshadowing the European debt crisis. Seventy-five percent of Canada’s exports went to the U.S. in 2010, according to Statistics Canada.

BCE fell 3 percent, the most since December 2009, to

C$39.62 after its fourth-quarter profit missed the average analyst estimate by 5.5 percent, excluding certain items. The company hadn’t trailed analysts’ earnings forecasts by so much since the second quarter of 2008, according to Bloomberg data.

Potash Corp. dropped 1.1 percent to C$45.79. Wheat inventories on May 31 will be 6.2 percent higher than a year earlier, the U.S. Agriculture Department said today. Most analysts in a Bloomberg survey had forecast a decrease.

The S&P/TSX Energy Index retreated for a fourth day after Suncor Energy Inc. shut down an operating unit at an oil-sands refinery in Edmonton, Alberta. The discount for oil from the Syncrude oil-sands project to West Texas Intermediate crude climbed to a record this week.

Canadian Oil Sands Ltd., which, like Suncor, owns part of the Syncrude project, fell 4.2 percent to C$22.61, a fifth straight drop. Penn West Petroleum Ltd., a western Canadian oil and gas producer, lost 2.1 percent to C$21.48. Suncor slipped

0.3 percent to C$34.59.

Manulife Financial Inc., North America’s fourth-largest insurer, slumped 1.9 percent to C$11.88 after saying its chief financial officer, Michael Bell, will leave the company to return to Philadelphia, where he lived before joining Manulife in 2009. “This is far from a positive as Michael had shown a very firm grasp on the company’s operations and, in our view, will be difficult to replace,” John Aiken, an analyst at Barclays Plc, wrote in a note to clients.

Canadian Tire rose 4.2 percent to C$66.15 after reporting fourth-quarter profit that surpassed the average analyst estimate in a Bloomberg survey by 10 percent, excluding certain items. Irene Nattel, an analyst at Royal Bank of Canada, raised her 12-month price estimate on the shares to C$85 from C$76.

Gildan Activewear Inc., Canada’s largest clothing maker, jumped 7.7 percent, the most since December 2009, to C$23.86.

The company reported a smaller first-quarter loss than it had forecast in December.

Canadian Pacific Railway Ltd. fell for the first time in seven days after closing at the highest price relative to earnings since at least 2002 yesterday. CP dropped 1.7 percent to C$75.25. The shares soared 66 percent from Sept. 22 to yesterday as William Ackman’s Pershing Square Capital Management LP bought a stake in the company and began a campaign to oust Chief Executive Officer Fred Green.

Lake Shore Gold Corp., which mines in Ontario, rallied 12 percent to C$1.55 after saying Franco-Nevada Corp. agreed to invest in and buy a royalty from the company.

US

By Rita Nazareth

Feb. 9 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a third day, as Greek political leaders struck a deal on a package of austerity measures needed to secure international rescue funds.

Technology shares had the biggest gain among 10 industries in the S&P 500, adding 1 percent. Akamai Technologies Inc., the operator of a server network that lets businesses speed data delivery, and Visa Inc., the world’s biggest payments network, advanced at least 3.7 percent as earnings topped analysts’

projections. United Technologies Corp. rallied 2.5 percent as it is said to be studying the sale of a pumps business.

The S&P 500 increased 0.2 percent to 1,351.95 as of 4 p.m.

New York time. The benchmark gauge declined as much as 0.4 percent earlier today. The Dow Jones Industrial Average advanced

6.51 points, or 0.1 percent, to 12,890.46. The Russell 2000 Index of small companies lost 0.4 percent to 824.99.

“I’d expect a better performance for stocks,” said Peter Jankovskis, who helps manage about $2.6 billion at Oakbrook Investments in Lisle, Illinois. “If the EU can show that they can deal with a small country with a big problem, then investors may be reassured that some of the larger countries with smaller problems can also be handled.”

Equities rallied around the world after Greece’s government reached a deal on austerity measures required for a 130 billion- euro ($173 billion) financing package. Greece faces a 14.5 billion-euro bond payment on March 20 and is struggling to secure financing to avert a collapse of the economy that could spark a new round of contagion in the euro area.

Today’s gain put the S&P 500 less than 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The benchmark gauge climbed 7.5 percent this year, as companies reported earnings that beat analysts’

estimates while better-than-expected data on manufacturing and employment bolstered optimism about the world’s largest economy.

A rally in stocks has pushed market momentum and breadth to levels that suggest any imminent retreat in the S&P 500 will be limited to 3 percent, according to JPMorgan Chase & Co.

Michael Krauss, head of technical research at JPMorgan in New York, this week boosted the higher end of his 2012 forecast for the S&P 500 to 1,440, from a November projection of 1,350, after the market had its best start of a year since 1991. While prices may have risen too fast, any pullback will attract investors who missed the rally, limiting the decline, he said.

“There is no setup right now that to me would suggest a 5-

to-10 percent correction is imminent,” Krauss said in a note today. “There is nothing worse than underperforming a rising market. Hence, we see 2-to-3 percent corrective ‘non-crisis’

pullbacks will find buyers.”

Akamai jumped 11 percent, the biggest gain in the S&P 500, to $38.06. The company, whose customers include Apple Inc., is benefiting from rising demand for its services as companies seek ways to push data-heavy digital content, such as videos, around the world more quickly.

Visa rallied 3.8 percent to $112.42, a record. Chairman and Chief Executive Officer Joseph W. Saunders is positioning Visa for its next phase of growth after U.S. regulators capped so- called swipe fees, or interchange, that the company charges merchants for debit-card purchases. Visa, which derived about 56 percent of revenue from the U.S. in fiscal 2011, has said it intends to generate more than half from markets abroad by 2015.

United Technologies gained 2.5 percent to $83.78. It is studying the sale of a pump- and compressor-making division to raise cash for the planned purchase of aerospace supplier Goodrich Corp., people with knowledge of the matter said. John Moran, a United Technologies spokesman, declined to comment.

The KBW Bank Index fell 0.3 percent as 18 of its 24 stocks retreated. Bank of America Corp., JPMorgan and three other U.S.

banks reached a $25 billion settlement with 49 states and the U.S. government to end a probe of abusive foreclosure practices stemming from the collapse of the housing bubble. Bank of America added 0.6 percent to $8.18. JPMorgan lost 1.2 percent to $37.86. Citigroup Inc. retreated 1.7 percent to $33.66.

Cisco Systems Inc. slumped 2.1 percent, the most in the Dow, to $20. The biggest maker of networking equipment predicted a third-quarter revenue gain of 5 percent to 7 percent. That equates to about $11.4 billion to $11.6 billion, compared with an average estimate of $11.5 billion. Excluding some costs, earnings will be 45 cents to 47 cents a share. Analysts had projected 45 cents.

PepsiCo Inc. fell 3.7 percent to $64.27. The company plans to cut 8,700 jobs and boost marketing spending for its brands by as much as $600 million as Chief Executive Officer Indra Nooyi works to turn around the world’s largest snack-food maker.

Groupon Inc. sank 14 percent to $21.17. The largest daily- deal site reported a tax-related fourth-quarter loss that analysts hadn’t predicted. Groupon, based in Chicago, has expanded to 47 countries and set up a new international headquarters in Switzerland. That contributed to a higher-than- expected $34.8 million in taxes, Chief Financial Officer Jason Child said.

As global stocks return to a bull market, the losers in the U.S. are companies least tied to economic growth.

For the first time since 1999, S&P 500 utilities, phone companies and providers of consumer staples posted the only monthly losses, slumping at least 1.5 percent with dividends in January, and continued to lag behind this month. It’s a reversal from 2011, when the three defensive industries returned more than 6.3 percent as investors embraced stocks thought to do well during a slowdown.

Investors are shifting toward riskier assets as U.S.

manufacturing expanded the most since June and the jobless rate fell to a three-year low of 8.3 percent. In 2011, the global equity measure suffered its biggest losses since the subprime- mortgage crisis.

“Last year, investors tended to hide in things which are stable, paying reasonable dividends,” said Sudhir Nanda, a money manager and head of the quantitative equity group at T.

Rowe Price Group Inc. in Baltimore, which oversees $489.5 billion. “This year, people looked at the U.S. and said, ‘Things are not really that bad.’ If the economy is humming, people tend to buy more of the sectors which will profit from growth, industrials, materials and things like that.”

Have a wonderful evening everyone.

Be magnificent!

To understand pleasure is not to deny it.

We are not condemning it or saying it is right or wrong but if we pursue it, let us do so with our eyes open, knowing that a mind that is all the time seeking pleasure must inevitably find its shadow in pain.

They cannot be separated, although we run after pleasure and try to avoid pain.

-Krishnamurti, 1895-1986

As ever,

Carolann

Courage is not the absence of fear, but rather

the judgment that something else is more

important than fear.

-Ambrose Redmoon, 1933-1996

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

Senior Vice-President &

Senior Investment Advisor