August 1, 2012 Newsletter

Dear Friends,

Tangents:

AUGUST: Formerly called Sextilis in the Roman calendar, as the sixth month from March, when the year began.  The name was changed to Augustus in 8 BC in honor of Augustus, 63 BC-14 AD, the first Roman emperor, whose lucky month it was.  It was the month in which he began his first consulship, celebrated three triumphs, received the allegiance of the legions on the Janiculum, reduced Egypt and ended the civil wars.

The Old English name for August was Weodmonath, weed month, weod meaning grass, herbs.  In the French Revolutionary calendar, the equivalent month was Thermidor – gift of heat – which lasted from 20^th July to 18^th of August.  –from Brewar’s Dictionary of Phrase and Fable.

And on this day in…

1789 – US Customs established

1819 – Herman Melville was born.

1914 – First World War erupts in Europe.

1936 – Yves St. Laurent was born.

1942 – Jerry Garcia was born.
1943 – PT 109 sinks; Lieutenant John F. Kennedy is instrumental in saving crew.

1981 – MTV launches.

1990 – World Wide Web established.

2007 – First drive-thru ATM opens in China.

Could a greater miracle take place than for us to look through each other’s eyes for an instant?  –Henry David Thoreau.

photos of the day

August 1, 2012

Mime artists Maciek, (R), and Viola, (L), painted in gold and silver take a break in the shade, near the Brandenburg Gate in Berlin, Germany.

Gero Breloer/AP

The skyline of the business district is silhouetted at sunset in Hong Kong.

Vincent Yu/AP

Market Closes for August 1, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Aug. 1 (Bloomberg) — Canadian stocks fell for a third day as gold declined and the U.S. Federal Reserve’s policy statement disappointed investors looking for more definitive signs the central bank would make additional stimulus moves.

Goldcorp Inc., the world’s second-largest producer of the metal, lost 1.3 percent. Intact Financial Corp., Canada’s largest property and casualty insurer, fell 3.2 percent after second-quarter profit missed analysts’ estimates. Energy shares advanced, lifted by rising oil prices.

The Standard & Poor’s/TSX Composite Index dropped 46.18 points, or 0.4 percent, to 11,618.53. The benchmark gauge has lost 1.3 percent in the last three sessions.

“The markets were expecting Bernanke would mention some type of easing,” John Goldsmith, portfolio manager with Montrusco Bolton Investments in Toronto, which manages C$5 billion ($5 billion) in assets, said in a phone interview. “If the market had been pricing in so much easing, it would be off huge right now. Clearly, the market wasn’t anticipating that much.”

Fed Chairman Ben S. Bernanke and his colleagues at the Federal Open Market Committee said they “will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” The statement, coming at the conclusion of a two-day meeting in Washington, also said that economic activity had decelerated somewhat over the first half of 2012.

Goldcorp lost 1.3 percent to C$35.74, as gold futures for December delivery slid 0.5 percent to settle at $1,607.30 an ounce on the Comex in New York.

Intact Financial fell 3.2 percent to C$62.46 after its earnings announcement. Net operating income was C$1.35 a share, missing the C$1.40 average adjusted estimate of eight analysts surveyed by Bloomberg.

Oil climbed 1 percent to $88.91 a barrel on the New York Mercantile Exchange. Talisman Energy Inc., an oil and gas producer with operations on three continents, soared 7.3 percent, the biggest increase since March 2009, to C$13.31.

Chief Executive Officer John Manzoni said the company is in discussions about converting its Montney output to liquefied natural gas.

Maple Leaf Foods Inc. surged 7.2 percent to C$10.72, the most since October 2008, after the food processor reported second-quarter earnings that beat analysts’ estimates.

US

By Rita Nazareth

Aug. 1 (Bloomberg) — U.S. stocks declined, reversing earlier gains, as the Federal Reserve’s pledge to provide additional support for the economy disappointed investors anticipating a more definitive sign of further monetary easing.

Knight Capital Corp., one of the largest market makers of U.S. stocks, plunged 33 percent as it experienced technology issues with trading. MasterCard Inc., the second-biggest payments network, slumped 2.2 percent as sales missed analysts’ estimates. Comcast Corp., the largest U.S. cable company, and Allstate Corp., the biggest publicly traded U.S. home and auto insurer, rose at least 3 percent as earnings topped projections.

Fourteen stocks fell for every five rising on U.S. exchanges at 4 p.m. in New York. The Standard & Poor’s 500 Index slid 0.3 percent to 1,375.32. The Dow Jones Industrial Average dropped 32.55 points, or 0.3 percent, to 12,976.13. The Russell

2000 Index of small companies slumped 2 percent to 771.11, led by Knight. Volume for exchange-listed stocks in the U.S. was 7.4 billion shares, 10 percent above the three-month average.

“The Fed basically passed,” said Michael Strauss, who helps oversee about $26 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut.

“They didn’t say anything new. The Fed is recognizing the economy is a bit weaker, but there’s not that much it can do.”

Equities fell a third day as Fed Chairman Ben S. Bernanke held off on stepping up record stimulus even as economic growth slowed. Before their next meeting starts Sept. 12, Bernanke and his colleagues will assess reports on unemployment in July and August, and the European Central Bank may take steps to ease Europe’s crisis at a meeting tomorrow.

“I wasn’t expecting anything new from the Fed,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “It would be premature to do something ahead of any European action and the jobs report. They are watching closely, at some point they may step in, but they need more information. We’ll wait for the next chapter I guess.”

U.S. stocks rose earlier as data showing manufacturing weakness from China and Europe boosted speculation policy makers will act to support the economy. Manufacturing in the U.S. unexpectedly contracted for a second month in July, indicating a mainstay of the economy was struggling to improve.

Dozens of stocks swung 10 percent or more without accompanying news in the first minutes of trading, whipsawing investors. Knight Capital told some clients of its market-making unit that a “technical issue” was affecting its systems and advised them to route orders elsewhere.

The company said the issue was confined to its market- making unit, which helps execute billions of dollars in equity transactions every day. The errors were caused by a malfunction in a so-called trading algorithm, according to a person at the company who asked to remain anonymous. The New York Stock Exchange canceled transactions in six securities that occurred during a period of heightened volatility after the open.

The volatility, occurring after three Dow stocks fluctuated in regular hourly patterns for a full trading day on July 19, may embolden critics of American market structure who say the computers that dominate trading have become too complex to control. Special curbs adopted after the May 2010 equity crash helped calm today’s fluctuations.

Goodyear Tire & Rubber Co. rose more than 10 percent just after the 9:30 a.m. open in New York. Manitowoc Co. gained 14 percent, Pandora Media Inc. climbed almost 11 percent and Level 3 Communications Inc. plunged 15 percent before the swings narrowed minutes later, according to data compiled by Bloomberg.

“All of a sudden, there was choppy trading and some stocks were halted,” Arthur Hogan, a strategist at Lazard Capital Markets LLC, said in a telephone interview. “People were scratching their heads, but it wasn’t a sense of panic. It was more curious. There’s got to be some human error here.”

NYSE Euronext said it will review trading in 140 securities, including Bank of America Corp., Caterpillar Inc. and Pfizer Inc. It canceled trades in six securities where prices swung at least 30 percent in the first 45 minutes.

Knight Capital shares dropped 33 percent to $6.94.

Investors also watched corporate results today. About 72 percent of the S&P 500 companies which reported second-quarter earnings beat estimates, data compiled by Bloomberg showed, even as 59 percent missed analysts’ sales forecasts.

MasterCard lost 2.2 percent to $427.20. The company is among global corporations whose earnings have been hit by currency fluctuations against the dollar. Chief Executive Officer Ajay Banga is pushing the company into emerging markets and gets about 60 percent of revenue from outside the U.S., more than larger rival Visa Inc.’s 45 percent.

Avon Products Inc. fell 1.2 percent to $15.30. The door-to- door cosmetics seller that rebuffed a takeover offer from Coty Inc. this year reported a 70 percent decline in second-quarter profit amid a sales slump in Europe and China.

Genworth Financial Inc. dropped 11 percent, the most in the S&P 500, to $4.48 after acting Chief Executive Officer Martin Klein listed potential obstacles to separating the U.S. mortgage-insurance unit from the company.

Facebook Inc. slumped 3.8 percent to a record low of $20.88. The shares are 45 percent below their initial public offering price of $38. The world’s largest social-networking service last week reported results that showed slowing growth.

Car companies had the biggest decline in the S&P 500 among 24 industries, falling 2 percent. Harley-Davidson Inc. retreated 3.6 percent to $41.67. The biggest U.S. motorcycle maker reported second-quarter revenue trailed analysts’ estimates and said currency exchange rates will hurt profit margins.

DreamWorks Animation SKG Inc. plunged 6.3 percent to $17.99. The independent film studio fell after second-quarter results missed analysts’ estimates on lower-than-expected results related to “Madagascar 3.”

Career Education Corp. tumbled 22 percent to $3.69. The for-profit college chain with more than 90 campuses fell a day after reporting a second-quarter loss and disclosing a regulatory investigation.

Take-Two Interactive Software Inc. slid 10 percent to $7.87. The publisher of the “Grand Theft Auto” video games reported first-quarter results and a full-year outlook that fell below analysts’ estimates.

Comcast added 3.1 percent to $33.55. The company improved its video guide, boosted Internet speeds and added phone features to fight competition from online video companies, satellite-television providers and Verizon Communications Inc.’s FiOS and AT&T Inc.’s U-verse. Comcast has curbed video losses for the seventh consecutive quarter on a year-over-year basis.

Allstate added 6.1 percent to $36.40. Chief Executive Officer Tom Wilson has been seeking rate increases and changing terms of policies to boost profitability as severe weather increases claims costs and low interest rates put pressure on investment income from the company’s bond portfolio.

Some casino companies gained as Macau gaming revenue rose 1.5 percent in July, beating estimates from some analysts who predicted a little changed or lower result on declining demand from mainland Chinese gamblers and the impact of a Hong Kong typhoon. Wynn Resorts Ltd. rose 1.7 percent to $95.30. Las Vegas Sands Corp. advanced 2.3 percent to $37.26.

Laboratory Corp. of America Holdings rallied 4.5 percent to $87.90. The company may be the target of a private equity buyout, Reuters reported, citing Mergermarket, a provider of news and data on acquisitions.

Phillips 66 gained 1.8 percent to $38.27. The company, which became the largest U.S. independent refiner after its spinoff from ConocoPhillips earlier this year, said second- quarter profit rose 13 percent on higher fuel margins and announced a plan to buy back shares valued at $1 billion.

Hyatt Hotels Corp. jumped 3.5 percent to $36.79. The chain controlled by the Pritzker family said second-quarter earnings climbed 5.4 percent amid strong demand in major U.S. cities.

Have a wonderful evening everyone.

Be magnificent!

Guard your tongue, for it is highly dangerous;

unguarded words can cause terrible distress.

A single bad word can destroy a vast quantity of good.

A wound caused by fire will eventually heal;

but a wound caused by the tongue leaves a scar that never heals.

Valluvar, 1479-1531

As ever,

Carolann

Jealousy is the tribute mediocrity

pays to genius.

-Fulton Sheen, 1895-1979

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