May 15, 2012 Newsletter

Dear Friends,

Tangents:

Another reason to get moving:

“[There is an] easy-to-achieve, scientifically proven way to make ourselves smarter,” writes Gretchen Reynolds in the New York Times Magazine.  Go for a walk or a swim. For more than a decade, neuroscientists and physiologists have been gathering evidence of the beneficial relationship between exercise and brainpower.  But the newest findings make it clear that this isn’t just a relationship; it is the relationship.  Using sophisticated technologies to examine the workings of individual neurons – the makeup of brain matter itself – scientists in just the past few months have discovered that exercise appears to build a brain that resists physical shrinkage and enhances cognitive flexibility.  Exercise, the latest neuroscience suggests, does more to bolster thinking than thinking does.”

And on this day, in,

1940 – the first McDonald’s opened

1988 – Soviet forces begin their withdrawal from Afghanistan

1958 – Sputnik III is launched by the Soviet Union
1942 – The U.S. begins rationing gasoline in seventeen states
1973 – Nolan Ryan pitches his first n0-hitter
1885 – Louis Riel surrenders to Middleton’s troops – the 100 day North West Rebellion ends

And as we let our own light shine, we unconsciously give other people permission to do the same. As we are liberated from our fear, our presence automatically liberates others. – Marianne Williamson

photos of the day May 15, 2012

Sheep rest in front of furnaces in Duisburg, Germany. Germany’s economy grew 0.5 percent in the first quarter of 2012.

Frank Augstein/AP

New French President Francois Hollande, looks out the sunroof of his car as he rides up the Avenue des Champs-Élysées after the presidential handover ceremony in Paris.

Michel Euler/AP

Market Closes for May 15, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

May 15 (Bloomberg) — Canadian stocks fell to a seven-month low as energy and raw-material shares declined after Greek Pasok party leader Evangelos Venizelos said new elections will be held after attempts to form a government failed.

Canadian Natural Resources Ltd., the country’s third- biggest energy company, decreased 2.7 percent. Bankers Petroleum Ltd. slid 7.4 percent, extending yesterday’s 34 percent slump following lower-than-estimated earnings. Barrick Gold Corp., the world’s largest producer of the metal, slipped 3.9 percent.

Research In Motion Ltd. dropped 5.7 percent to its lowest price since December 2003.

The Standard & Poor’s/TSX Composite Index fell 145.48 points, or 1.3 percent, to 11,343.05 in Toronto, the lowest level since Oct. 4.

“The Canadian market has been particularly hit in materials and energy, the two big sectors that affect the market,” Sebastian van Berkom, a money manager at Van Berkom & Associates in Montreal, said in a telephone interview. The firm oversees about C$1.8 billion ($1.8 billion). “These two major sectors are affected by global headwinds that are affecting the outcome for commodities.”

The benchmark gauge on May 11 completed a second straight weekly decline as concerns mounted that the Greek debt crisis and a weakening Chinese economy may curb demand for commodities.

Energy and mining shares account for 43 percent of Canadian stocks by market value.

Energy companies fell as oil prices slumped to their lowest since December after the euro fell against the dollar on Greece’s failure to form a government. The U.S. Dollar Index, a gauge of the currency against six major peers, climbed for a 12th day in its longest rally ever.

Suncor Energy Inc., Canada’s largest oil and gas producer, fell 1.1 percent to C$27.67. Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, declined 3.2 percent to C$9.98.

Canadian Natural Resources decreased 2.7 percent to C$29.44.

Bankers Petroleum, which operates in Albania, slid 7.4 percent to C$2.12 a day after missing first-quarter earnings estimates. The two-day loss of 39 percent is the company’s biggest since December 2008.

Materials stocks in the S&P/TSX declined as gold fell to a 19-week low and copper decreased for a third day as the dollar’s rise curbed demand for the metals as alternative investments.

Barrick slipped 3.9 percent to C$35.23. Eldorado Gold Corp., a Vancouver-based mining company, fell 5 percent to C$10.38.

Teck Resources Ltd., the country’s biggest base-metals producer, sank 4.1 percent to C$30.40. Ivanhoe Mines Ltd., Rio Tinto Group’s partner in the Oyu Tolgoi Mongolian gold and copper mine, fell 5.3 percent to C$8.70.

Financial shares decreased for a second day. Toronto- Dominion Bank, the country’s second largest lender, declined 1 percent to C$79.13. Sun Life Financial Inc., Canada’s third- biggest insurance company, slipped 2.4 percent to C$22.34.

“Given that Greece is now more at risk, the impact on the banking system with the current European environment is obviously exacerbating the outlook for banks,” Van Berkom said.

“They’ve been trying to recapitalize themselves. They can’t really absorb bad loans.”

Research In Motion, the maker of the BlackBerry smartphone, slid 5.7 percent to C$11.18.

US

By Rita Nazareth

May 15 (Bloomberg) — The Dow Jones Industrial Average fell to an almost four-month low as Greece’s failure to form a new government offset better-than-estimated American economic data.

Commodity shares tumbled as the Dollar Index extended its longest rally ever, reducing the appeal of raw materials. Avon Products Inc. slumped 11 percent as Coty Inc. withdrew its $10.7 billion offer for the biggest door-to-door cosmetics seller.

Home Depot Inc., the largest U.S. home-improvement retailer, slid 2.4 percent as it forecast slowing sales gains. Lennar Corp. and D.R. Horton Inc. jumped at least 2.5 percent as homebuilder confidence climbed to the highest level since 2007.

The Standard & Poor’s 500 Index fell 0.6 percent to 1,330.66 at 4 p.m. New York time, dropping 2 percent in three days. The Dow lost 63.35 points, or 0.5 percent, to 12,632, the lowest since Jan. 19. About 7.3 billion shares changed hands on U.S. exchanges, or 9 percent above the three-month average.

“It’s fear of European drama,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management. His firm oversees $160 billion. “It seems obvious that leaving the euro would be a disaster for Greece and very costly to its economy. Yet they seem to be on a path where that could happen. We’ve had some good U.S. economic data, but people are afraid to hold equities. It’s extremely frustrating.”

Stocks fell for a third day and the euro tumbled to a four- month low amid concern Greece will leave the shared currency.

The European country will hold new elections after President Karolos Papoulias failed to broker a governing coalition following an inconclusive May 6 vote. The impasse offset American reports showing that manufacturing in the New York region and homebuilder confidence grew more than forecast.

Investors’ demand for safety pushed up the Dollar Index, a gauge of the currency against six major peers, for the 12th straight day. The dollar gain helped send copper, gold and oil lower. Gauges of energy and raw material shares in the S&P 500 slumped at least 1.4 percent. Freeport-McMoRan Copper & Gold Inc. dropped 4.8 percent to $32.65. Alcoa Inc. slid 2.4 percent to $8.71.

Pacific Investment Management Co., which manages the world’s largest bond fund, doesn’t see the European currency union surviving in its present form. The most probable outcome is that the 17-nation euro area will evolve into a smaller union centered on France, Germany, Italy and Spain, and underpinned by much stronger coordination and financing, he said.

“The status quo is no longer an option for Europe over the three to five year horizon,” Pimco Chief Executive Officer Mohamed El-Erian wrote in a report outlining the Newport Beach, California-based company’s medium-term economic outlook.

Avon tumbled 11 percent, the most in the S&P 500, to $18.71. Coty, the maker of perfumes by Beyonce Knowles and Heidi Klum, said attempts to speak to Avon board members, including Chairman Andrea Jung and Chief Executive Officer Sheri McCoy, failed after it received a two-sentence e-mail requesting a deadline extension. Coty had given yesterday as a cutoff date for a response when it made its $24.75-a-share bid last week.

Home Depot retreated 2.4 percent to $48.67 after forecasting sales this year will slow from the first quarter because warm weather pulled forward purchases of plants and gardening equipment.

A measure of homebuilders in S&P indexes rallied 2.2 percent on signals of an improving outlook for construction.

Lennar increased 2.8 percent to $29.16. D.R. Horton advanced 2.5 percent to $17.33.

JPMorgan Chase & Co. rebounded from the biggest two-day drop since 2009, climbing 1.3 percent to $36.24. Chief Executive Officer Jamie Dimon, responding to shareholders at the annual meeting after disclosing a $2 billion trading loss last week, said he sees no reason the bank’s dividend would be affected.

Groupon Inc. rose 3.7 percent to $12.17, after soaring as much as 27 percent earlier. The largest daily-deal website reported first-quarter profit that topped estimates, helped by lower marketing costs and expanded international sales.

TJX Cos. rose the most in the S&P 500, climbing 6.9 percent to $42.45. The owner of the T.J. Maxx and Marshalls retail chains reported first-quarter profit that beat analysts’ estimates, driven by demand in Europe. Sales rose 11 percent to $5.8 billion from $5.22 billion a year earlier, matching analysts’ estimates.

Facebook Inc. boosted the price range on its initial public offering to seek as much as $12.8 billion, signaling that Chief Executive Officer Mark Zuckerberg expects demand for the social network to withstand recent market turmoil.

The new range is $34 to $38 a share, a regulatory filing today shows, indicating a market value of as much as $104.2 billion. That would make Facebook, co-founded in 2004 by Zuckerberg, worth more than Citigroup Inc. and McDonald’s Corp.

Facebook, which has spent more than a week pitching the IPO to investors across the U.S., raised the range even after the S&P 500 yesterday slumped to the lowest level since February.

That may spell disappointment for investors if the slump persists, said Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp.

“They get more money upfront if they can make it go, but if the enthusiasm is weak out of the gate, it makes it that much more difficult for the company going forward,” said McCain, who helps oversee more than $20 billion for the Cleveland-based bank. “You would think they would be a little more cautious.”

The S&P 500 took longer than usual to fall 5 percent from its peak this year, a sign that any further retreat in U.S. stocks will be “contained,” according to Sam Stovall of S&P.

The benchmark gauge reached the threshold yesterday after spending 28 days without losing 5 percent from its April high.

Since 1950, it has taken an average 19 days to fall 5 percent, based on a study by Stovall, S&P’s New York-based chief equity strategist.

Among those that took 28 days or longer to occur, only 25 percent eventually turned into corrections, or retreats of more than 10 percent, the data show. Stovall said in an e-mail that he views losses of less than 5 percent as “noise” and those of between 5 percent and 10 percent as pullbacks.

“The duration of this ‘noise’ likely indicates that the ultimate decline will be contained, unless new worries emerge or existing concerns become increasingly intensified in the coming weeks or months,” Stovall wrote yesterday. “The market will eventually bottom in a ‘pullback’ mode.”

Have a wonderful evening everyone.

Be magnificent!

We should never try to follow another’s path for that is his way, not yours.

When that path is found, you have nothing to do but fold your arms

and the tide will carry you to freedom.

Therefore when you find it, never swerve from it.

Your way is the best for you,

but that is no sign it is the best for another.

Swami Vivekananda, 1863-1902

As ever,

Carolann

We evolve into the images we carry

in our minds.  We become what

we see.

-Jerry Mander, 1936-

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7