July 27, 2012 Newsletter

Dear Friends,

Tangents:

On this day in 1911, A.C. Benson wrote in his diary:

Percy [Lubbock] and I  decided to bicycle.  We started about eleven: went slowly to Barton, and so to Haslingfield: then between Haslingfiedl and Harston we lay long on the grass, near ricks, listening to owls and the snorting of some beast that drew nigh, to far-off dogs barking, and cocks crowing.  The stars were like the points of pendants in the irregular roof of a cave – not an even carpet or se in a concave.  We went on about one, and then made a long halt near the GNR bridge on the way to Newton; but no trains passed, so we went on about 1:45 to Shelford; and this was very sweet, so fragrant and shadowed by dark trees, while Algol and Aldebaran and other great shining stars slowly wheeled above us.

We go to the GER bridge at Shelford – I was anxious to see trains – and half a dozen great luggers jangled through with a cloud of steam and coloured lights.  There was one that halted, and the guard walked about with a lantern; a melancholy policeman was here, in the shadow.  The owls again hooted and screamed and cocks roared hoarsely.

Suddenly we became aware it was dawn!  The sky was whitening, there was a green tinge to east, with rusty stains of cloud, and the stars went out.  We went on about 2:30 to Grantchester, where the mill with lighted windows was rumbling, and the water ran oily-smooth into the inky pool among the trees.  Then it was day; and by the time we rode into Cambridge, getting in at 3:30, it was the white morning light – while all the places so mysteriously different at night had become the places one knew.

And also on this day in…

1866 – Atlantic telegraph cable laid.

1921 – Canadians Sir Frederick Banting and Charles Best isolate insulin at the University of Toronto.
1909 – Orville Wright sets a world record for staying aloft in an airplane–one hour, 12 minutes and 40 seconds.
1974 – House begins impeachment of President Nixon.
1949 – First jet makes test flight.

Happiness is like a butterfly; the more you chase it, the more it will elude you, but if you turn your attention to other things, it will come and sit softly on your shoulder …

Henry David Thoreau

photos of the day July 27, 2012

A cyclist, left, is silhouetted as the sun rises behind the sculpture Molecule Man, designed by American artist Jonathan Borofsky, in Berlin, Germany.

Gero Breloer/AP

People walk along the Admiralteyskaya Embankment in front the Russian naval ships in the centre of St. Petersburg. The ships have been brought to Russia’s second largest city as part of celebrations for Navy Day on Sunday.

Alexander Demianchuk/Reuters

Market Closes for July 27, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Dmitrieva

July 27 (Bloomberg) — Canadian stocks rose, giving the benchmark index its second straight weekly gain, as commodities advanced amid expectations Europe will move toward a new round of bond purchases to ease borrowing costs in Spain and Italy.

Progress Energy Resources Corp. jumped 14 percent as Petroliam Nasional Bhd, Malaysia’s state-owned oil and natural- gas company, agreed to boost its cash bid for the company. Bank of Nova Scotia, the nation’s third-largest lender, climbed 1.4 percent. TransForce Inc. added 6.3 percent as North America’s largest mover of oil and gas-drilling rigs reported better-than- estimated profit.

The Standard & Poor’s/TSX Composite Index gained 126.61 points, or 1.1 percent, to 11,766.36. The gauge rose 1.2 percent this week, paring its 2012 losses to 1.6 percent.

“The political side will continue to drive the markets,” Jennifer Radman at Caldwell Investment Management Ltd. in Toronto, which manages about C$1 billion, said in a phone interview. “Depending on the commentary from the ECB and the U.S., they will be the big drivers moving forward.”

Global stocks rallied after two central bank officials said European Central Bank President Mario Draghi will hold talks with Bundesbank President Jens Weidmann in an effort to overcome the biggest stumbling block to a new raft of measures including bond purchases. German Chancellor Angela Merkel and French President Francois Hollande echoed Draghi in promising to do everything to protect the euro.

Crude climbed 0.8 percent to settle at $90.13 a barrel on the New York Mercantile Exchange.

Bonavista Energy Corp., the Calgary-based oil and natural- gas producer with operations in western Canada, added 6.3 percent to C$18.55.

Progress Energy rose 14 percent to C$22.85. Petronas, as the Malaysian bidder is known, raised its offer to C$22 a share from C$20.45, according to a statement from Calgary-based Progress Energy today. The bid amounts to 90 percent more than the closing price for the oil and gas producer on June 27 before the initial offer was announced.

Royal Bank of Canada, the nation’s largest lender, rose 1.7 percent to C$51.73. Toronto-Dominion Bank added 1.4 percent to C$79.48. Scotiabank advanced 1.4 percent to C$52.02.

TMX Group Inc., the Toronto Stock Exchange owner that agreed to be acquired by a group of Canadian banks and pension funds, said second-quarter profit fell 97 percent on takeover costs and a slowdown in trading. The stock slipped 0.3 percent to C$49.35.

TransForce Inc. jumped 6.3 percent, the most in six months, to C$17.63 after the company said it may acquire an unnamed U.S. company as it announced earnings. Adjusted earnings of 38 cents beat analysts estimates of 37 cents. Sales jumped 25 percent to C$812 million from last year.

US

By Rita Nazareth

July 27 (Bloomberg) — The Dow Jones Industrial Average climbed above 13,000, capping its longest weekly advance since January, amid speculation the European Central Bank will buy bonds to help lower borrowing costs and preserve the euro.

Alcoa Inc. and Caterpillar Inc. rose more than 3.1 percent to pace gains in the biggest companies. Merck & Co. and Amgen Inc. added at least 4 percent, driving health-care shares higher, as earnings beat estimates. Expedia Inc. surged 20 percent as the online-travel company raised its dividend.

Facebook Inc. fell 12 percent to a record low after its results.

About nine stocks rose for every two falling on U.S. exchanges at 4 p.m. New York time. The Standard & Poor’s 500 Index advanced 1.9 percent to 1,385.97. The Dow average rallied 187.73 points, or 1.5 percent, to 13,075.66. Both climbed to the highest levels since May and completed three straight weeks of gains. Volume for exchange-listed stocks in the U.S. was 7.9 billion shares, or 18 percent above the three-month average.

“They’ve got to buy bonds,” Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston, said in a phone interview. “There’s been a lot of rhetoric as far as opening up the checkbook for whatever needs to be done to stabilize the euroland. It’s a giant deal if they actually do what they say they are prepared to do.”

American stocks joined a global rally after two central bank officials said ECB President Mario Draghi will hold talks with Bundesbank President Jens Weidmann in an effort to overcome the biggest stumbling block to a new raft of measures including bond purchases. German Chancellor Angela Merkel and French President Francois Hollande echoed yesterday’s pledge by Draghi that they will do everything to protect the euro.

In the U.S., data showed that the economy expanded at a slower pace in the second quarter as a softening job market prompted Americans to curb spending. Consumer confidence in July dropped to the lowest this year, according to a separate report.

Cooling growth makes it harder to reduce unemployment, helping explain why Federal Reserve Chairman Ben S. Bernanke has said policy makers stand ready with more stimulus if needed.

“Growth has decelerated sharply,” said Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees $355.9 billion. He spoke in a telephone interview. “We need something to reverse that downtrend and that ‘something’ is policy.”

Consumers are cutting back just as Europe’s crisis and looming U.S. tax-policy changes dent confidence, hurting sales at companies from United Parcel Service Inc. to Procter & Gamble Co. Sales at almost 60 percent of S&P 500 companies which reported second-quarter results missed estimates, data compiled by Bloomberg show. Still, 72 percent beat profit forecasts.

Bets on global policy action paced a surge in companies that are most-dependent on economic growth. The Morgan Stanley Cyclical Index jumped 2.7 percent. Alcoa, the largest U.S.

aluminum producer, rose 3.2 percent to $8.45. Caterpillar, the largest maker of construction equipment, climbed 3.4 percent to $86.16. JPMorgan Chase & Co. added 3 percent to $36.89.

Better-than-estimated earnings helped drive health-care companies higher today. The group rallied 2.5 percent for the biggest advance among 10 industries in the S&P 500.

Merck gained 4.1 percent to $45.10, the highest price since 2008. The company, facing generic competition in August to its top-selling asthma drug Singulair, reported second-quarter profit that beat analyst estimates on higher sales of the diabetes medicines Januvia and Janumet.

Amgen advanced 5.8 percent to $83.92 to the highest since 2005. The largest biotechnology company reported profit topped analysts’ estimates on increased demand for its rheumatoid arthritis and bone drugs and it raised its 2012 forecast.

Coventry Health Care Inc. climbed 11 percent to $34.07. The company beat analysts’ second-quarter earnings estimates because of increased membership in its U.S. government insurance programs and lower costs for its Medicaid business in Kentucky.

Gilead Sciences Inc. added 7.4 percent to $55.50. It plans to start a combination study of two drugs in a single pill to treat hepatitis C by the end of the year, putting it on track to request U.S. regulatory approval for the medicine in 2014.

Expedia surged 20 percent to $54.90 amid a jump in sales.

The company saw stronger second-quarter demand for hotel rooms, Chief Executive Officer Dara Khosrowshahi said. Expedia will lift its dividend 44 percent to 13 cents a share.

Amazon.com Inc. rallied 7.9 percent to $237.32. The largest Internet retailer gained as investors bet that investments in its distribution network will pay off by the holiday season.

Arch Coal Inc. led a surge in producers of the fuel as second-quarter results beat estimates. Arch climbed 29 percent, the most since 2000, to $6.80. Alpha Natural Resources Inc. jumped 20 percent, the biggest gain in the S&P 500, to $7.02.

Peabody Energy Corp. advanced 5.6 percent to $20.80.

Goodyear Tire & Rubber Co. increased 6.9 percent to $10.57.

Michelin & Cie., the world’s second-largest tiremaker, reported a 36 percent jump in first-half earnings that beat estimates.

Chubb Corp. rallied 4 percent to $72.32. The insurer of commercial property and high-end homes reported profit that beat estimates and boosted its outlook for the second half.

Facebook tumbled 12 percent to $23.71, 38 percent below its initial public offering price of $38. Executives led by Chief Executive Officer Mark Zuckerberg, addressing analysts for the first time since the company’s May 17 IPO, issued no growth forecasts and said little else to reassure investors who fret that the company is overvalued.

Starbucks Corp. lost 9.4 percent to $47.47. The world’s largest coffee-shop chain forecast fourth-quarter profit that trailed estimates as consumers pull back around the globe.

Newmont Mining Corp. slid 3.4 percent to $44.53. The largest U.S. gold producer reported second-quarter profit that missed analysts’ estimates as costs rose faster and production was lower than projected.

CA Inc. slumped 7.2 percent to $24.43. The maker of software for managing information technology cut its annual revenue forecast. Chief Executive Officer Bill McCracken said on a conference call that a sluggish economy and a business reorganization led to a slow start for the year.

ATP Oil & Gas Corp. dropped 28 percent to $1.40, a record low. Bloomberg News reported bondholders are organizing for a potential restructuring, citing two people familiar with the matter. ATP Chief Financial Officer Albert Reese and Isabel Plume, a spokeswoman for the company, didn’t return calls for comment yesterday.

Amarin Corp. lost 12 percent to $13.51. U.S. approval for the company’s first product, a drug to combat high levels of blood fat that can lead to stroke and heart attack, included limits on its use that may have disappointed investors.

Abby Joseph Cohen, the senior U.S. investment strategist at Goldman Sachs Group Inc., said equities will generate better returns than bonds for investors in the medium-to-long term.

“If we were to look just at fair-value estimates over the next year to three, we think that returns that are roughly 8 to 10 percent on the stock market are sensible,” she said in an interview on “Bloomberg Surveillance” today with Tom Keene.

“It is sensible as well for a long-term outlook, even though we assume that economic growth will not be as robust as it was in the years immediately prior to the financial crisis.”

Have a wonderful weekend everyone.

Be magnificent!

When you abandon every desire that rises up within you,

and when you become content with things as they are, then you experience inner peace.

When your mind is untroubled by misfortune, when you desire no pleasures,

when your emotions are tranquil, and when you are free from fear and anger,

then you experience inner calm.  When you are free from all attachments,

when you are indifferent to success and failure,

then you experience inner serenity.

When you can withdraw your senses from pleasures of the senses,

just as a tortoise withdraws its limbs,

then you experience inner wisdom.

The Bhagavad Gita

As ever,

Carolann

Go to your bosom.  Knock there, and ask your heart

what it doth know.

-William Shakespeare, 1564-1616

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