February 16, 2012 Newsletter

Dear Friends,

Tangents:

On this day, in 1932, the firs patent was issued for a tree to James Markham for a peach tree.

Nature Note: TREE FORMS IN WINTER

On a walk in the winter you can observe tree forms.  Each species has its own characteristic shape.  But you can also see how a group of two or more trees, perhaps of different species, have grown in concert to form one crown.  Here you are observing a key element in life: when given a chance, nature forms unified wholes. –CH

We all travel the milky way together, trees and men; but it never occurred to me until this storm-day, while swinging in the wind, that trees are travelers in the ordinary sense.  They make many journeys, not extensive ones it is true; but our own little journeys, away and back again, are only little more than tree-wavings – many of them not so much.  –John Muir

The first oil painting I made, when I was five or six years old, was a picture of a tree.  I am sure that I have painted and drawn hundreds of other versions since then.  In their complexity, variety, and particular specificity, trees are among the world’s special archetypal forms.  They offer endless opportunities for artistic invention and rich metaphorical allusion.  In [this] recent painting, Branches and Lines, the branches of the “tree” are made of careening, sweeping railroad trains.  I think of the painting as a metaphor for the experience of contemporary life at the nexus of nature and culture.  –Christopher Brown, Artist.

photos of the day

February 16, 201

People dressed for carnival pose for photographers at the start of the Luzern-Carnival in Lucerne in the early morning hours. The history of Lucerne’s carnival can be traced back over more than 600 years and is best known for its individually hand-crafted masks and costumes paraded in the town’s streets and squares by thousands of revellers during the three-day carnival festival.

A worker looks at an Eiffel tower made from lemons and oranges during the lemon festival in Menton. Some 145 metric tons of lemons and oranges were used to make displays during the 79th festival, which is themed ‘The regions of France,’ and runs from February 17 through March 7.

Eric Gaillard/Reuters

Market Closes for February 16, 2012:

North American Markets

Market Commentary:

Canada

By Matt Walcoff

Feb. 16 (Bloomberg) — Canadian stocks rose for a second day, led by gold and energy producers, after U.S. employment and housing reports beat estimates and natural gas inventories in Canada’s biggest trade market declined more than forecast.

Canadian Natural Resources Ltd., the country’s second- largest energy company by market value, gained 1.5 percent.

Goldcorp Inc., the world’s second-biggest gold producer by value, advanced 4.3 percent after topping analysts’ average earnings estimate. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by value, increased 2 percent after the U.S. reported higher corn exports.

The S&P/TSX Composite Index climbed 107.35 points, or 0.9 percent, the most in three weeks, to 12,469.38 at 2:03 p.m. Toronto time.

“There’s positive news out of the U.S.,” said Luciano Orengo, who oversees C$1.6 billion ($1.6 billion) as a money manager at Manulife Financial Corp. in Toronto. “Those are the two things that have been weighing the heaviest in the U.S.: the housing picture and the employment picture.”

The S&P/TSX fell 0.7 percent this month through yesterday after rallying 4.2 percent in January. Gold stocks led the decline as the U.S. dollar advanced on concern Greece’s efforts to reduce its budget deficit won’t avert a default. Seven of the world’s 20 largest gold companies by revenue are Canadian, according to Bloomberg data.

Americans filed 348,000 first-time unemployment claims last week, the Labor Department said today in Washington. None of the 45 economists in a Bloomberg survey had estimated a total that low. New-home construction advanced 1.5 percent to an annual rate of 699,000 in January, the Commerce Department said. That beat the median economist estimate of 675,000.

Energy stocks gained with natural gas futures after the U.S. Energy Department said inventories dropped more than 21 of 24 analysts in a Bloomberg survey had forecast.

Canadian Natural increased 1.5 percent to C$36.93. Encana Corp., the country’s biggest natural gas producer, climbed 3.3 percent to C$19.96. Nexen Inc., an oil and gas producer with operations on five continents, rose 3.8 percent to C$19.66 after reporting fourth-quarter earnings that surpassed the average analyst estimate in a Bloomberg survey by 55 percent, excluding certain items.

The S&P/TSX Materials Index gained for the first time in 10 days, ending the longest streak of losses since June 2001.

Goldcorp Inc., the world’s second-largest gold producer by market value, increased 4.3 percent to C$47.19 after beating the average fourth-quarter earnings estimate of analysts in a Bloomberg survey by 9.8 percent, excluding certain items.

Kinross Gold Corp., Canada’s third-biggest gold producer by market value, advanced 7.1 percent, the most since May 2010, to C$11.08 after Tony Lesiak, an analyst at Macquarie Group Ltd., raised his rating on the shares to outperform from neutral. An outperform rating means the analyst forecasts the company will return at least 5 percentage points more than its benchmark over 12 months.

Agnico-Eagle Mines Ltd., which produces gold in Canada, Mexico and Finland, surged 6.6 percent to C$36.37. The shares sank as much as 7.7 percent earlier, after Agnico-Eagle took a $644.9 million writedown on its Meadowbank project and posted a quarterly loss.

Investors who had sold borrowed shares of the company to make a profit on a decline probably took advantage of the tumble to close their positions, John Stephenson, a money manager at First Asset Investment Management Inc. in Toronto, said in an e- mail message. The firm oversees $2.7 billion.

Potash Corp. climbed 2 percent to C$45.73 as corn futures rebounded on the Chicago Board of Trade after settling at the lowest since Jan. 24 yesterday. U.S. exporters sold more corn last week than in any week since October, the Agriculture Department said today in Washington.

Finning International Inc., the world’s biggest Caterpillar dealer, rallied 5.2 percent to C$28.15 after its fourth-quarter earnings surpassed the average analyst estimate by 19 percent, excluding certain items.

Stantec Inc., an engineering and architecture services company, surged 5.1 percent to C$30.79 after initiating a quarterly dividend. The company will pay 15 Canadian cents a share, with the first payment on April 17. Stantec touched C$31.25, the highest intraday since May 2008.

Property-services company FirstService Corp. jumped 5.3 percent to C$31.84 after Frederic Bastien, an analyst at Raymond James Financial Inc., raised his rating on the shares to outperform from market perform. Higher profit margins at the company’s commercial-real-estate unit in the fourth quarter “marked a turning point for the division,” Bastien wrote in a note to clients. An outperform rating means the analyst forecasts the stock will outgain the S&P/TSX over the next year.

Parex Resources Inc., an oil and gas producer with operations in Colombia and Trinidad, plunged 16 percent to C$7.08 after releasing production results that Darren B. Engels and Martin P. Molyneaux, analysts at FirstEnergy Capital Corp., called “disappointing.” At least three firms, including FirstEnergy, cut their ratings on the shares.

US

By Rita Nazareth

Feb. 16 (Bloomberg) — U.S. stocks advanced, sending the Standard & Poor’s 500 Index near the highest level in about three years, amid better-than-estimated economic reports and optimism that Greece will receive a second bailout.

Financial shares rebounded from earlier losses as Bank of America Corp. rose 4 percent. Microsoft Corp. climbed 4.1 percent on a report that S&P is likely to increase its weighting in the S&P 500. General Motors Co. jumped 9 percent after the automaker posted the biggest annual profit in its 103-year- history. NetApp Inc. increased 7.2 percent as the maker of data- storage products reported revenue that beat analysts’ estimates.

The S&P 500 rose 1.1 percent to 1,358.04 at 4 p.m. New York time. The benchmark gauge for American equities is 0.4 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The Dow Jones Industrial Average increased 123.13 points, or 1 percent, to 12,904.08.

“I don’t see what the case is for the market collapsing,” Brian Barish, who helps oversee about $7 billion as Denver-based president of Cambiar Investors LLC., spoke in a phone interview.

“The U.S. economy is doing pretty well. Taking the possibility of a euro-Lehman type of event off the table, that has a big effect on sentiment.”

Stocks rose as Americans filed the fewest claims for jobless benefits since 2008 and builders broke ground on more homes than forecast. Manufacturing in the Philadelphia region expanded in February at the fastest pace in four months as orders and sales picked up.

Benchmark gauges extended gains and banks rallied as three euro-area officials said the European Central Bank is swapping its Greek bonds for new ones to ensure it isn’t forced to take losses in a debt restructuring. European governments are considering cutting interest rates on emergency loans to Greece and using contributions from the ECB to plug a new financing gap in the second bailout program for Athens, two people familiar with the discussions said.

“We’re more important to Europe than Europe is to us,” Liz Ann Sonders, the New York-based chief investment strategist at Charles Schwab Corp., said in a telephone interview. Her firm has $1.68 trillion in client assets. “U.S. economic numbers have been much better than expected. I’m pretty optimistic, but I don’t think we’re going to boom. The debt overhang puts a lid on how fast the U.S. economy can grow.”

Financial shares underperformed the S&P 500 earlier today as Moody’s Investors Service is reviewing 17 banks and securities firms with global capital markets operations.

The KBW Bank Index rose 2.2 percent as all of its 24 companies gained. The gauge fell as much as 0.6 percent earlier today. Bank of America added 4 percent to $8.09. Morgan Stanley rose 1.2 percent to $19.19, after tumbling as much as 4 percent.

Twenty-nine out of 30 companies in the Dow gained today.

Microsoft jumped 4.1 percent, the most in the Dow, to $31.29. The shares rose to the highest price since April 2010. S&P is likely to increase Microsoft’s weighting in the S&P 500 by about 12 percent later this year because Chairman Bill Gates’s stock sales are increasing the amount of shares available for public trading, Adam Holt, an analyst at Morgan Stanley, wrote in a report today.

GM surged 9 percent to $27.17. North America earnings before interest and taxes more than tripled for the year to $7.19 billion. The automaker’s Europe business, including the Opel brand, lost $747 million for the year.

NetApp rallied 7.2 percent, the most in the S&P 500, to $42.74. The maker of data-storage products said revenue in the third quarter was $1.57 billion, above the average analyst estimate of $1.56 billion. The company said it won a record number of new customers and significantly increased the amount of units shipped.

CVR Energy Inc. surged 5.8 percent to $29.20. Carl Icahn offered to pay $30 a share in cash and give stockholders the right to collect an additional $7 a share if any other bidder tries to buy the oil-refining company.

Even with the stock’s 24 percent gain since Icahn disclosed an investment in January, a buyer could offer about a 40 percent premium and still purchase CVR at the lowest valuation relative to earnings of any takeover greater than $500 million in the U.S. oil refining and marketing industry, according to data compiled by Bloomberg. Icahn, CVR’s biggest investor, urged the company this week to put itself up for sale.

Amazon.com Inc. sank 2.5 percent to $179.93. The world’s largest Web retailer fell after Morgan Stanley downgraded the stock, citing competition from Apple Inc. and the decline of traditional media such as CDs and video games.

J.M. Smucker Co. slumped 8.4 percent to $71.60. The maker of Folgers coffee forecast 2012 earnings excluding some items of $4.65 a share at most. On average, the analysts surveyed by Bloomberg estimated profit of $5.

A gauge of homebuilders in S&P indexes dropped 0.8 percent. PulteGroup Inc., the largest U.S. homebuilder by revenue, declined 1.8 percent to $8.87. The shares retreated after David Goldberg, an analyst at UBS AG, cut the rating to “neutral” from “buy,” citing valuation concern.

Price swings by the S&P 500 have narrowed to a nine-month low following the measure’s biggest rally to start a year since 1997. The distance between its intraday low and high has averaged 0.86 percent since Feb. 2, a 10-day level last seen on May 5, according to data compiled by Bloomberg.

Volatility has diminished after the S&P 500 advanced 6.8 percent in 2012. When the 10-day average swing was this low in May, the index had just peaked on April 29 and went on to slump 19 percent through October. The current narrowing signals the rally may be running out of steam, said Katie Stockton, chief market technician at Greenwich, Connecticut-based MKM Partners.

“It reflects a loss of momentum, which had been very strong until last week,” Stockton wrote in an e-mail.

Have a wonderful evening everyone.

Be magnificent!

When a man is deprived of the foundation that provides him everything,

his poverty loses its best virtue, simplicity, to become no more than disgraceful and sordid.

His wealth is no longer splendid, but becomes merely extravagant.

His appetites no longer remain within natural limits; they no longer have the one goal

of meeting the needs of his life; they become an end in themselves,

setting fire to his existence, and dancing madly by the light of the flames.

-Rabindranath Tagore, 1861-1901

As ever,

Carolann

Inspiration comes very slowly and quietly.

-Brenda Ueland, 1891-1985

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

Senior Vice-President &

Senior Investment Advisor