June 25, 2012 Newsletter

Dear Friends,

Tangents:

A thoughtful and timely article that appeared in a recent edition of the Wall Street Journal:

10 Things Your Commencement Speaker Won’t Tell You

-By Charles Wheelan

1. Your time in fraternity basements was well spent. The same goes for the time you spent playing intramural sports, working on the school newspaper or just hanging with friends.  Research tells us that one of the most important causal factors associated with happiness and well-being is your meaningful connections with other human beings.  Look around today.  Certainly one benchmark of your postgraduation success should be how many of these people are still your close friends in 10 or 20 years.

2. Some of your worst days lie ahead. Graduation is a happy day.  But my job is to tell you that if you are going to do anything worthwhile, you will face periods of grinding self-doubt and failure.  Be prepared to work through them.  I’ll spare you my personal details, other than to say that one year after college graduation I had no job, less thatn$500 in assets , and I was living with an elderly retired couple.  The only difference between when I graduated and today is that now no one can afford to retire.

3. Don’t make the world worse. I know that I’m supposed to tell you to aspire to great things.  But I’m going to lower the bar here: Just don’t use your prodigious talents to mess things up.  Too many smart people are doing that already.  And if you really want to cause social mayhem, it helps to have an Ivy League degree.  You are smart and motivated and creative.  Everyone will tell you that you can change the world.  They are right, but remember that “changing the world” also can include things like skirting financial regulations and selling unhealthy foods to increasingly obese children.  I am not asking you to cure cancer.  I am just asking you not to spread it.

4. Marry someone smarter than you are. When I was getting a Ph.D., my wife Leah wanted to start a software company.  I had  a job with health benefits.  (To clarify, having a “spouse with benefits” is different from having a “friend with benefits.”)  You will do better in life if you have  a second economic oar in the water.  I also want to alert you to the fact that commencement is like shooting smart fish in a barrel.  The summa cum laude graduates have their names printed in the program.  Seize the opportunity!

5. Help stop the Little League arms race. Kids’ sports are becoming ridiculously structured and competitive.  What happened to playing baseball because it’s fun?  We are systematically creating races out of things that ought to be a journey.  We know that success isn’t about simply running faster than everyone else in some predetermined direction.  Yet the message we are sending from birth is that if you don’t make the traveling soccer team or get into the “right” school, then you will somehow finish life with fewer points than everyone else.  That’s not right.  You’ll never read the following obituary:  “Bob Smith died yesterday at the age of 74.  He finished life in 186^th place.”

6. Read obituaries. They are just like biographies, only shorter.  They remind us that interesting, successful people rarely lead orderly, linear lives.

7. Your parents don’t want what is best for you. They want what is good for you, which isn’t always the same thing.  There is a natural instinct to protect our children from risk and discomfort, and therefore to urge safe choices.  Theodore Roosevelt – soldier, explorer, president – once remarked, “It is hard to fail, but it is worse never to have tried to succeed.”  Great quote, but I am willing to bet that Teddy’s mother wanted him to be a doctor or a lawyer.

8. Don’t model your life after a circus animal.  Performing animals do tricks because their trainers throw them peanuts or small fish for doing so.  You should aspire to do better.  You will be a friend, a parent, a coach, an employee – and so on.  But only in your job will you be explicitly evaluated and rewarded for your performance.  Don’t let your life decisions be distorted by the fact that your boss is the only one tossing you peanuts.  If you leave a work task undone in order to meet a friend for dinner, then you are “shirking” your work.  But it’s also true that if you cancel dinner to finish your work, then you are shirking your friendship.  That’s just not how we usually think of it.

9. It’s all borrowed time. You shouldn’t take anything for granted, not even tomorrow.  I offer you the “hit by bus” rule.  Would I regret spending my life this way if I were to get hit by a bus next week or next year?  And the important corollary:  Does this path lead to a life I will be happy with and proud of in 10 or 20 years if I don’t get hit by a bus.

10. Don’t try to be great. Being great involves luck and other circumstances beyond your control.  The less you think about being great, the more likely it is to happen.  And if it doesn’t, there is absolutely nothing wrong with being solid.

Adapted from 10 ½ Things No Commencement Speaker Has Ever Said, by Charles Wheelan, W.W. Norton & Co., 2012.

And on this day in…

1903 – Geoge Orwell was born

1903 – Marie Curie announces her discovery of radium.

1945 – Carly Simon was born.
1946 – Ho Chi Minh travels to France for talks on Vietnamese independence.
1948 – The Soviet Union tightens its blockade of Berlin by intercepting river barges heading for the city.
1950 – North Korea invades South Korea, beginning the Korean War.
1973 – White House Counsel John Dean admits President Nixon took part in the Watergate cover-up.
1986 – Congress approves $100 million in aid to the Contras fighting in Nicaragua.

photos of the day June 25, 2012

Canada’s Governor General David Johnston talks with a member of the Ceremonial Guard while performing the annual inspection at Rideau Hall in Ottawa.

Chris Wattie/Reuters

Construction workers Canny Conca (l.) and Brian Shelley unfurl an American flag attached to the final steel beam to be installed on 4 World Trade Center during a ceremony to mark its installation in New York.

Keith Bedford/Reuters

Market Closes for June 25, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Dmitrieva

June 25 (Bloomberg) — Canadian stocks fell, sending the benchmark index to a five-week low, as Morgan Stanley cut its rating on Research In Motion Ltd. and oil slid on concern European leaders may fail to calm the debt crisis.

RIM tumbled 7.5 percent after Morgan Stanley cited “rapidly deteriorating fundamentals” at the BlackBerry maker.

The three largest energy providers in Canada, Suncor Energy Inc., Imperial Oil Ltd. and Canadian Natural Resources Ltd., dropped at least 1.2 percent as oil traded below $80 a barrel for a third day.

The Standard & Poor’s/TSX Composite Index decreased 105.15 points, or 0.9 percent, to 11,330.39. The index has fallen 1.6 percent in June, heading for a fourth straight month of losses.

“It’s a very negative sentiment when it comes to Europe,”

Jeff Parent, who manages more than $100 million at Toronto-based Quadrexx Asset Management Inc., said in a phone interview. “Oil will be sold off as a result.”

Failure by leaders at the summit to come up with measures to shore up the weakest countries may be “fatal” for the euro, billionaire investor George Soros said yesterday.

Energy and financial stocks contributed most to the drop in the S&P/TSX out of 10 industries. Among stocks in the gauge, 190 declined and 48 gained.

Research In Motion declined 7.5 percent to C$9.36, the lowest level since October 2003.

“The only way RIM remains a viable entity is at a fraction of its current size, a transformation that erases much of its earnings power,” Ehud Gelblum, an analyst at Morgan Stanley in New York, wrote in a note to investors today.

Suncor Energy, the nation’s largest oil provider, declined 1.9 percent to C$27.72. Imperial Oil, the second-largest, slipped 1.4 percent to C$40.24. Canadian Natural Resources lost 1.2 percent to C$26.68.

Oil for August delivery declined 0.7 percent to $79.21 a barrel on the New York Mercantile Exchange. Brent oil rose 3 cents to $91.01 a barrel. Brent crude dropping to $70 dollars a barrel may be a “real possibility,” Citigroup Inc. chief technical analyst Tom Fitzpatrick wrote in a note.

Gold futures climbed the most in three weeks as European debt concerns mounted, spurring demand for the metal as a hedge.

The metal rose 1.4 percent to $1,588.40 an ounce on the Comex in New York.

Barrick Gold Corp., the world’s largest gold producer, added 1.5 percent to C$39.42. Centerra Gold Inc. rose 3.2 percent to C$8.99, snapping a three-day loss.

US

By Rita Nazareth

June 25 (Bloomberg) — U.S. stocks tumbled on concern this week’s European Union summit will fail to tame a crisis which put American earnings on pace for the first decline since 2009.

Technology, financial and energy shares dropped the most among 10 groups in the Standard & Poor’s 500 Index. Bank of America Corp. and Chesapeake Energy Corp. slumped at least 4.2 percent. Microsoft Corp. sank 2.7 percent after agreeing to acquire Yammer Inc. for $1.2 billion in cash. Constellation Brands Inc. surged 13 percent as it may benefit from a potential deal between Grupo Modelo SAB and Anheuser-Busch InBev NV.

The S&P 500 slid 1.6 percent to 1,313.72 at 4 p.m. New York time as 470 of its 500 stocks declined. The Dow Jones Industrial Average fell 138.12 points, or 1.1 percent, to 12,502.66. Volume for exchange-listed stocks in the U.S. was about 5.9 billion shares, or 13 percent below the three-month average.

“There are reasons for investors to be concerned,” Stephen Wood, the New York-based chief market strategist for Russell Investments, said in a telephone interview. His firm oversees $140.8 billion. “In addition to the ongoing wounds of Europe, we’ll begin to see softness in corporate earnings.”

Equities slumped as Chancellor Angela Merkel hardened her resistance to euro-area debt sharing, setting Germany on a collision course with its allies at a summit on June 28. Cyprus said it will seek a financial lifeline from the euro area’s firewall funds. Greek Prime Minister Antonis Samaras consented to the resignation of his finance minister, Vassilios Rapanos.

Billionaire investor George Soros warned that a failure by leaders meeting this week to produce drastic measures could spell the demise of the currency.

“There is a disagreement on the fiscal side,” Soros, 81, said in an interview with Bloomberg Television’s Francine Lacqua at his home in London. “Unless that is resolved in the next three days, then I am afraid the summit could turn out to be a fiasco. That could actually be fatal.”

Europe’s debt crisis is putting pressure on corporate results. Analysts predict members of the S&P 500 will report a 1.1 percent average drop in second-quarter earnings, after estimating a gain as recently as last month, according to data compiled by Bloomberg. That would follow a 6.2 percent average increase in the first quarter.

Earnings pessimism reached levels last seen during the financial crisis. Fifty-nine corporations issued profit projections that trailed analyst estimates during the 20 days through June 22, or 3.1 times the number of those that exceeded them. The ratio has been greater than 3 for eight straight days, the longest stretch in three years. It was at least that high the majority of the time between October 2008 and April 2009, climbing to 11.5 in December 2008, the data show.

“There is a lot of trepidation about second-quarter earnings,” Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York, said in a June 22 interview.

He oversees about $2 billion. “You are very unlikely to see companies coming out with favorable outlooks given the problems in Europe and the slowing growth in the U.S. and China.”

Alcoa Inc., traditionally the first company in the Dow to report quarterly earnings, is scheduled to release its second- quarter figures on July 9.

All 10 groups in the S&P 500 fell as technology, financial and energy shares dropped at least 1.8 percent. The Morgan Stanley Cyclical Index of companies most-tied to the economy slumped 2.6 percent even as data showed demand for new homes rose more than forecast. Bank of America slid 4.3 percent to $7.60. Chesapeake Energy retreated 8.5 percent to $17.03.

Microsoft dropped 2.7 percent to $29.87. San Francisco- based Yammer provides features — similar to those found on Facebook Inc. — to more than 200,000 companies such as Ford Motor Co. and EBay Inc. It will become part of Microsoft’s Office division and the team will continue to report to current Yammer Chief Executive Officer David Sacks.

Facebook, the biggest social-networking operator, decreased 3 percent to $32.06. The decline followed a 22 percent advance over the previous two weeks.

Pfizer Inc. fell 1.1 percent to $22.47, while Bristol-Myers Squibb Co. sank 3.5 percent to $34.13. The companies failed to gain approval of the blood thinner Eliquis from U.S. regulators, who said they needed more data on the treatment.

Sprint Nextel Corp. slipped 6.1 percent to $3.09. The third-biggest U.S. wireless carrier declined amid concern over the management of its fourth-generation network expansion.

GeoEye Inc. tumbled 22 percent, the biggest decline since 2004, to $14.24. The provider of satellite imagery said a federal agency may scale back a $3.8 billion contract.

Constellation surged 13 percent to $21.86. The world’s largest winemaker gained the most in almost a decade as Anheuser-Busch InBev seeks to acquire the rest of Corona maker Grupo Modelo in a deal that a person familiar with the talks said could bring a payment to Constellation.

Quest Software Inc. jumped 5.6 percent to $27.70. The software maker that agreed to be bought by a group led by Insight Venture Partners said it has received a higher offer of $27.50 a share in cash.

Newmont Mining Corp., the largest U.S. gold producer, advanced 1.7 percent to $48.79. Gold futures gained the most in three weeks as Europe’s debt concern spurred demand for the metal as a hedge.

Fertilizer producers rallied after Dahlman Rose & Co. raised its recommendation for the industry. CF Industries Holdings Inc. increased 3.4 percent to $183.66. Mosaic Co. gained 1 percent to $51.10.

At a time of record fuel demand, bountiful oil and natural gas, and expanding economies, no stocks are doing worse in the world than energy producers from BP Plc to Hess Corp.

The MSCI World Energy Index has declined 9.6 percent this year through last week, more than any other group, according to data compiled by Bloomberg. The gauge has climbed 45 percent since equities bottomed in 2009, less than any industry with earnings tied to economic growth. In the U.S., the stocks are at the cheapest levels relative to the S&P 500 since 2009.

The divergence reflects the transformation of an industry where growing consumption of energy has been met with even bigger gains in supply. U.S. crude inventories are the highest since 1990 and natural gas prices have lost 38 percent in 12 months amid a glut spurred by hydraulic fracturing. Bears say energy producers, making up about 10 percent of global stocks, will keep equities from advancing. Bulls say the market will rally when their shares rebound.

“The S&P 500 will have a tough time making meaningful progress until the energy sector bottoms and begins to move higher,” Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $116 billion, said in a phone interview on June 20. “Even though the valuations of the stocks are cheap, the fundamentals have not yet bottomed.”

Have a wonderful evening everyone.

Be magnificent!

Wise people are concerned only with what lies behind all these things.

Just as bees fly from one blossom to another, looking only for the essence of each one,

wise people look only for the essence of every person they meet.

Wise people, who know and understand the soul, are indifferent to both pleasure and pain;

they have risen above sensations.  They are indifferent to the past and the future, they have risen above time.

They are indifferent to danger; they have risen above fear.

Wise people know that what is here, is also there;

that what was, will also be.

They see unity, not division.

Katha Upanishad

As ever,

Carolann

Here is the test to find whether your mission

on Earth is finished: if you’re alive, it isn’t.

-Richard Bach, 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