March 12, 2012 Newsletter

Dear Friends,

Tangents:

Birthday, Jack Kerouac, March 12, 1922.  In a conversation with the writer John Clellon Holmes, Jack Kerouac coined the term “Beat Generation” to describe the “beatness” or “weariness with the world of his post-war generation.  As a young man, he criss-crossed the country, studying Buddhism, working at odd jobs, and staying with his friends Allen Ginsberg and William S. Burroughs.  Eventually he wrote On the Road, the book that catapulted him into reluctant fame in 1957.  Other books followed, including The Dharma Bums and Big Sur.  By the time he died of alcoholism in 1969, Kerouac had left his mark on American literary history with his spontaneous prose style, and continues to inspire legions of young people to live life on their own terms…

“… and everything is going to the beat.  It’s the beat generation, it be-at, it’s the beat to keep, it’s the beat of the heart, it’s being beat and down in the world and like oldtime lowdown and like ancient civilizations the slave boatmen rowing galleys to a beat and servants spinning pottery to a beat…”  -Jack Kerouac.

We saw the wonderful opera Orphée et Eurydice for the first time on the weekend, presented  by Seattle Opera.   This French opera, with music composed by Christoph Willibald Gluck, and the libretto by Pierre Louis Moline, premiered on August 2^nd, 1774 in Paris, but we had never experienced it before.  It is probably the most brilliant choreography by Yannis Adonious of Athens, Greece, ever – absolutely magical.  Art indeed can transform our lives…

photos of the day

March 12, 2012

Budding cherry blossom trees along the tidal basin are seen with the Washington Monument in the background in Washington, D.C. This year marks the 100th anniversary of the gift of the trees from Japan, with peak bloom expected between March 24-31, according to the National Park Service.

Jacquelyn Martin/AP

People walk at a park near the river Main in Frankfurt, Germany.

Alex Domanski/Reuters

Market Closures for March 12, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada:

By Matt Walcoff

March 12 (Bloomberg) — Canadian stocks fell for the first time in four days as fuels and metals dropped after China reported a smaller gain in exports than most economists in a Bloomberg survey had forecast.

Suncor Energy Inc., Canada’s largest oil and gas producer, lost 3.1 percent as the fuels declined on the New York Mercantile Exchange. Goldcorp Inc., the world’s second-biggest gold producer by market value, decreased 1.4 percent as precious metals retreated. Viterra Inc., Canada’s largest grain handler, rose 6.4 percent after an analyst at Bank of Montreal said the company may be bought for as much as C$17.50 a share.

The S&P/TSX Composite Index slipped 75.61 points, or 0.6 percent, to 12,428.01.

“There’s been a number of cautionary straws in the wind, such as the slowdown in China: How deep is it?” Bob Decker, a money manager at Aurion Capital in Toronto, said in a telephone interview. The firm oversees about $5.5 billion. “If you’re looking for growth, and equity markets typically live and die on growth, you’re going to have to see it somewhere, and emerging markets are where most people are expecting a resumption of growth to be most robust.”

The index fell 1.8 percent in the previous two weeks in its first back-to-back weekly decline since Dec. 16 as commodity producers dropped with the prices of oil, natural gas and precious metals. Energy and raw-materials companies make up 47 percent of Canadian stocks by market value, according to Bloomberg data.

Chinese exports increased 18 percent in February from a year earlier, the country’s customs bureau said March 10.

Economists had forecast a gain of 31 percent, according to the median estimate in a Bloomberg survey. China also reported smaller-than-forecast increases in retail sales and industrial production for February last week.

Crude oil futures retreated for the first time in four days, while natural gas slipped on forecasts for above-normal temperatures in the U.S.

Suncor lost 3.1 percent to C$33.19. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, decreased 3.1 percent to C$34.40. Canadian Oil Sands Ltd., the largest owner of the Syncrude project, slipped

2.6 percent to C$21.86.

Precious-metals producers in the S&P/TSX retreated as gold and silver fell on the Comex in New York. Barrick Gold Corp., the world’s largest gold-mining company, dropped 0.4 percent to C$45.29, extending its streak of losses to nine days. Goldcorp declined 1.4 percent to C$46.25. New Gold Inc., which mines in Mexico, the U.S. and Australia, slumped 4.9 percent to C$10.06.

China Gold International Resources Corp. soared 19 percent, the most since October 2009, to C$4.56. The surge probably reflects Van Eck Associates Corp.’s increase in China Gold’s weighting in the Market Vectors Junior Gold Miners Index, which is used for a $2.41 billion exchange-traded fund, Marcus Xu, director of equity investments at Genus Capital Management in Vancouver, said in a telephone interview. Xu’s firm oversees about C$1.7 billion ($1.7 billion).

Base-metals companies retreated after the data release from China, the world’s largest user of the commodities. Teck Resources Ltd., Canada’s biggest company in the industry, lost

2.9 percent to C$35.48. Copper, zinc and gold producer HudBay Minerals Inc. decreased 5.6 percent to C$11.49.

SouthGobi Resources Ltd., which mines coal in Mongolia for Chinese steel mills, fell 9.9 percent to C$6.19 after S&P said it will cut the stock from the S&P/TSX.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, fell 2.1 percent to C$42.75. China was the fourth-biggest importer of Canadian fertilizer in 2011, according to Statistics Canada.

Viterra advanced 6.4 percent to C$14.45 after surging 24 percent March 9, when it said it had “received expressions of interest from third parties.”

The company may sell for C$14.50 a share to C$17.50 a share, Kenneth B. Zaslow, an analyst at BMO, wrote in a note to clients today. Glencore International Plc, the world’s largest publicly traded commodities supplier, is among the companies that expressed an interest in a potential offer for Regina, Saskatchewan-based Viterra, according to a person familiar with the situation who declined to be identified because the details haven’t been made public.

US:

By Rita Nazareth

March 12 (Bloomberg) — Most U.S. stocks retreated, capping the thinnest trading day in 2012, as investors weighed whether a Chinese slowdown will lead to an easing of monetary policy.

Newmont Mining Corp. and Schlumberger Ltd. lost more than

1.9 percent as commodities fell. Financial companies slid on concern about how banks will perform in Federal Reserve stress tests and as the cost of insuring against default on European sovereign bonds rose to the highest in eight weeks. Gauges of utility and telephone providers in the S&P 500, which are least- tied to economic growth, gained. Apple Inc. rose 1.3 percent.

Seven stocks declined for every five rising on U.S.

exchanges at 4 p.m. New York time, with about 5.2 billion shares changing hands. The S&P 500 advanced less than 0.1 percent to

1,371.09 today. The Dow Jones Industrial Average increased 37.69 points, or 0.3 percent, to 12,959.71. The Russell 2000 Index of smaller companies retreated 0.3 percent to 814.29.

“The U.S. is in good shape, yet China is a big question mark,” said Erick Maronak, chief investment officer of Victory Capital Management Inc. in New York. His firm oversees $28 billion. “How much will they have to ease to get things back on track? Europe is still going to be a huge work in progress. Now that there’s some greater visibility on the Greece situation, everyone starts looking at dominoes two and three.”

The S&P 500 advanced 2.1 percent in the past four weeks amid better-than-expected economic data and as companies beat analysts’ profit forecasts for a 12th straight quarter. The benchmark gauge is up 9 percent this year.

Equities swung between gains and losses as China had the biggest trade deficit in at least 22 years, the weakest January- February factory-production gain since 2009 and retail sales were below the median economist estimate. Euro-area finance ministers gather in Brussels to sign off on the 130 billion-euro

($170 billion) second package for Greece as they focus on Spain’s budget-cutting efforts and Portugal’s aid program.

Energy and raw material shares fell as the S&P GSCI index of 24 commodities dropped 0.4 percent. Newmont Mining, the largest U.S. gold producer, dropped 2 percent to $55.75.

Schlumberger, the world’s largest oilfield-services provider, declined 2.4 percent to $74.02.

“Some people are pointing to the evidence of a slower growth in China as the catalyst for today’s weakness,” said Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas. His firm oversees $754 billion.

“Incremental demand for commodities still largely comes from Asia. The central banks are not going to be providing as much liquidity as they had in the past.”

The KBW Bank Index lost 0.7 percent as 17 of its 24 stocks retreated. JPMorgan Chase & Co. slid 1.2 percent to $40.54.

Regions Financial Corp. slumped 2.9 percent to $5.63.

Investors may be disappointed by how U.S. banks perform in Fed stress tests as examiners expect consumer-loan losses to surpass the industry’s estimates if there’s another severe recession, analysts say.

The Fed generally has predicted firms would suffer greater losses on mortgages and credit cards than what banks estimated in capital plans submitted in January, two people with knowledge of the situation said last week, without identifying specific firms. The divergence may endanger some of the $9 billion in dividend increases and share buybacks analysts estimate may be announced after the Fed releases results this week.

“The concern is that while banks may not have to raise capital, they might not be able to return capital as fast as shareholders want,” Walter Todd, who oversees $950 million as chief investment officer at Greenwood Capital in Greenwood, South Carolina, said in a telephone interview.

Oracle Corp. slipped 1.4 percent to 29.71. The software maker was cut to hold from buy at Jefferies Group Inc., citing “greater challenges” to its engineered systems strategy.

The Bloomberg U.S. Airlines Index retreated 1.5 percent.

United Continental Holdings Inc. slumped 1 percent to $19.62.

Southwest Airlines Co. declined 2.4 percent to $8.28. The shares were cut to neutral from buy at Bank of America Corp.

Dynegy Inc. tumbled 35 percent to 50 cents, a record low.

The third-largest independent U.S. power producer’s bankruptcy should be taken over by a court-approved trustee who will better protect creditors, the U.S. Trustee monitoring the case for the federal government said in court papers.

Companies which are least-dependent on economic activity rose today. Constellation Energy Group Inc. advanced 3 percent to $37.23. Wal-Mart Stores Inc. added 1 percent to $60.68.

Apple rallied 1.3 percent to $552, a record high. The shares have risen 4.1 percent in four days.

Harley-Davidson Inc. added 2.6 percent to $48.11. The biggest U.S. motorcycle maker had its share-price estimate boosted to $50 from $46 by Citigroup Inc., which said the company’s retail sales have increased 16 percent to 18 percent so far in the first quarter.

Equifax Inc. climbed 3.4 percent, the most in the S&P 500, to $44.09. The provider of consumer-credit information was increased to buy from neutral at SunTrust Robinson Humphrey Inc., which said the company is poised to deliver “sustainable above-average” growth in sales and earnings.

Transportation and industrial shares are diverging in the U.S., a signal that equity investors are starting to agree with what the bond market already knows: this economic recovery will remain sluggish for months to come.

The Dow Jones Transportation Average has fallen 3.9 percent from its six-month high on Feb. 3, while the Dow Jones Industrial Average added 0.5 percent. The gauge of 20 shipping companies peaked before the rest of the market when the technology bubble popped in 2000 and began slipping into a bear market three months before broader benchmark indexes in 2007.

While Laszlo Birinyi, the founder of Birinyi Associates Inc., says falling transport stocks don’t signal an end to the three-year bull market that doubled the S&P 500, money managers at Robert W. Baird & Co. and Legg Mason Inc. say the 25 percent rise in the index since October may have gone too fast.

Transport stocks are falling as 10-year Treasury yields stay near 2 percent, with economists forecasting the slowest post-recession recovery since World War II.

“In a healthy market, everything is going in the same direction,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $85 billion.

“When that starts to diverge, that raises a flag that potential trouble may be brewing.”

Monster Beverage Corp.’s escalating profit from energy drinks pumped full of caffeine and nitrous oxide may tempt acquirers to chase what would be the most expensive takeover in the industry’s history.

After the stock more than doubled in the last year, Monster Beverage is valued at 20 times earnings before interest, taxes, depreciation and amortization, the priciest multiple of any North American soft-drink maker greater than $500 million, according to data compiled by Bloomberg that includes net debt.

“What Monster’s so successfully done in the last few years is proven that demand for energy drinks is fairly universal among young people,” Caroline Levy, a beverage and household products analyst for Credit Agricole Securities USA Inc. in New York, said in a telephone interview. “This business is now too big to ignore. If you’re a player in soft drinks, I think it’s very hard not to be in the highest-margin, highest-growth category out there.”

Have a wonderful evening everyone.

Be magnificent!

Knowledge relieves all suffering.  Knowledge liberates.

Which knowledge?  Chemistry?  Physics?  Astronomy? Geology?

They help a little, but only a little.  The true knowledge is the knowledge of our own nature.

Know yourself.  You must know who you are, understand your inner nature.

You must become conscious of this infinite nature in yourself.  Then you will break free of your shackles.

-Swami Vivekananda, 1863-1902

As ever,

Carolann

The wind and waves are always on the side

of the ablest navigator.

-Edward Gibbon, 1737-1852

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

Senior Vice-President &

Senior Investment Advisor