August 9, 2012 Newsletter

Dear Friends,

Tangents:

An article in the most recent edition of Maclean’s informs that hundreds of abandoned and semi-abandoned villages up and down the Italian peninsula are for sale.   “These were farming towns and woodsmen’s towns and nobody does that anymore,” says Richard Ingersoll, an urban studies professor at Florence’s Syracuse University.  “Less than two per cent of Italians are involved in agriculture.”   For years, the owners of Pratariccia, a medieval Italian village perched atop the hills above Tuscany’s Casentino valley, have been trying to sell their abandoned town.  Now the religious order that reportedly owns the remote 800-year-old town has turned to eBay, where the 25 crumbling stone cottages and thousands of acres of farmland is on offer for US $3 million.  The agency that is handling the sale says that the best use would be as a resort since tourism is such a hot industry in Italy.  The thought depresses Ingersoll, who thinks the ideal alternative would be to re-agriculturalize the town or turn it into a spiritual retreat, without electricity or computer connections.  “St. Francis spent the most important part of his life here,” he notes.  Interested buyers should be aware of hidden costs.  It could take up to three times Pratariccia’s asking price to make the village habitable.  “But perhaps there would be some crazy-rich person who, instead of paying $140 million for a Damien Hirst work of art, would pay $6 million to put back a town,” says Ingersoll.  –Michelle Tarnopolsky, Maclean’s, August 13^th edition. Oh how I wish!

And on this day in…

480 BC – The Persian army defeats Leonidas at the Battle of Thermopylae.

1883 – Coco chanel was born.

1945 – B-29 bomber, Bock’s Car, drops an Atomic bomb on Nagasaki.

1957 – Melanie Griffith was born.
1969 – Charles Manson’s cult kill 5 people including Roman Polanski’s wife, Sharon Tate.
1974 – Unusual succession makes Gerald Ford President of the U.S.

photos of the day August 9, 2012

A performer is silhouetted in a sea of cloth during a national celebration in Singapore which celebrated its 47th year of independence. Singapore declared independent on August 9, 1965.

Wong Maye-E/AP

The last pieces of about 5,000 Lego blocks are added by elementary school girl Yuka Takahashi to complete a reproduction of Jonannes Vermeer’s, ‘Girl with a Pearl Earring’ in Tokyo. A total of 380 children participated in a nine-day workshop to create the Lego art at the newly opened Legoland Discovery Center.

Shizuo Kambayashi/AP

Market Closes for August 9, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Aug. 9 (Bloomberg) — Canadian stocks rose on better-than- forecast earnings and as U.S. jobless claims unexpectedly fell, signaling economic growth may increase in the world’s biggest crude-producing country.

Canadian Natural Resources Ltd. gained 4.8 percent after the country’s third-largest oil company reported second-quarter earnings that beat estimates. Teck Resources Ltd. rose 3.3 percent. Energy and mining shares contributed most to the advance in the Standard & Poor’s/TSX Composite Index among 10 industries.

The S&P/TSX rose 64.87 points, or 0.6 percent, to 11,845.91 at 12:35 p.m. in Toronto. The benchmark equity index for Canada has retreated 0.9 percent so far this year.

“It’s all earnings-driven. There’s a slew of earnings coming across the tape today,” Paul Taylor, chief investment officer with BMO Harris Private Banking in Toronto, which manages about C$18 billion ($18.1 billion), said in a phone interview. “U.S. jobless claims data was pretty positive as well. Both earnings and economic data give some reason for comfort.”

Jobless claims unexpectedly dropped by 6,000 to 361,000 in the week ended Aug. 4, Labor Department figures showed today in Washington. The median forecast of 43 economists surveyed by Bloomberg News called for an increase to 370,000.

Canadian Natural Resources added 4.8 percent to C$31.

Excluding one-time items, earnings were 55 cents, beating the 53-cent average of 15 analyst estimates compiled by Bloomberg.

Teck Resources rose 3.3 percent to C$29.53.

Canadian Tire Corp. jumped 5 percent to C$69.68 after the retailer reported second-quarter revenue jumped 16 percent.

Shares are headed for their biggest percentage gain since August 2011.

Research In Motion Ltd. rose 1.3 percent to C$7.66 after the BlackBerry device maker won a U.S. judge’s order overturning a jury’s $147.2 million patent-infringement award to rival MFormation Technologies Inc.

Bombardier Inc. tumbled 3.2 percent to C$3.64 as profit dropped 14 percent in the second quarter on lower rail car sales, eroding growth generated by its aerospace business.

Kinross Gold Corp. rose 1.5 percent to C$7.89. J. Paul Rollinson, the company’s new chief executive, said he’s initiating a companywide review to cut costs that may require “tough decisions.”

“Given rising costs, I believe we need to get back to the fundamentals of our business,” Rollinson said yesterday in the company’s second-quarter earnings statement. Kinross has plunged 32 percent in 2012.

US

By Rita Nazareth

Aug. 9 (Bloomberg) — Most U.S. stocks rose, giving the Standard & Poor’s 500 Index its longest rally since March, as data showing an unexpected decline in jobless claims last week tempered concern about a worsening of Europe’s economy.

A measure of homebuilders in S&P indexes advanced 2.3 percent as JPMorgan Chase & Co. said it saw higher demand in the industry and data showed prices for single-family homes rose in most U.S. cities last quarter. E*Trade Financial Corp. increased 6.9 percent as Chief Executive Officer Steven J. Freiberg was ousted from the brokerage. Monster Beverage Corp. declined 9.7 percent after profit and sales trailed estimates.

Five stocks rose for every four falling on U.S. exchanges at 4 p.m. New York time. The S&P 500 added less than 0.1 percent to 1,402.80, rallying 2.8 percent in five days. The Dow Jones Industrial Average lost 10.45 points, or 0.1 percent, to 13,165.19. Volume for exchange-listed stocks in the U.S. was 5.5 billion shares, 18 percent below the three-month average.

“We acknowledge the positive news,” Wayne Lin, a money manager at Baltimore-based Legg Mason Inc., said in a telephone interview. His firm oversees $631.8 billion. “We’ve had some positive surprises on the jobs front and it seems that housing has found some footing. Yet people are aware of the risks. The risk in Europe is still out there.”

Labor Department data showing fewer firings signaled employers are seeing enough demand to retain staff, indicating the economy is sustaining the recovery. Stocks erased gains earlier after the Wall Street Journal reported that former European Central Bank official Otmar Issing said it was wrong to expect the ECB to buy government bonds to ease the region’s debt crisis. Economists surveyed by the ECB predicted the region’s contraction this year will be worse than previously forecast.

A five-day rally has taken the S&P 500 up almost 10 percent from a five-month low on June 1. About 72 percent of S&P 500 companies which reported second-quarter results so far have beaten analysts’ earnings estimates, according to data compiled by Bloomberg.

“It’s kind of blah,” said Malcolm Polley, who oversees about $1.1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania. “Growth is slowing in other parts of the world. It will take time. In addition, we’ve had a strong move up in stocks. It may be people just getting tired.”

All 11 stocks in a measure of homebuilders in S&P indexes gained. Data from the National Association of Realtors showed that values nationally jumped the most since 2006 as real estate markets stabilized.

PulteGroup Inc., the largest U.S. homebuilder by revenue, jumped 4.8 percent to $12.67 after being raised to overweight at JPMorgan. KB Home added 6.3 percent to $10.74, while Beazer Homes USA Inc. rallied 4.5 percent to $2.79 after the two companies were also raised at JPMorgan.

E*Trade added 6.9 percent to $8.57. Chairman Frank J. Petrilli will serve as interim CEO while the company seeks a new leader, the company said today in a statement. A board committee which includes the head of its biggest shareholder, Citadel LLC’s CEO Ken Griffin, will lead the search for a new chief executive, the company said.

Cisco Systems Inc. rose 3.2 percent to $17.70 after the biggest maker of computer-networking equipment was added to the “Conviction Buy” list at Goldman Sachs Group Inc. Piper Jaffray Cos. also raised its recommendation for the technology company today.

MBIA Inc. added 15 percent to $10.06. The bond insurer seeking reimbursement from Bank of America Corp. over faulty mortgages surged after pledging to carry on a court fight to force the lender to repurchase the loans.

James River Coal Co. soared 13 percent to $2.52. The producer of the fuel in Appalachia and the Midwest reported a smaller loss than analysts predicted as costs fell.

Lincoln National Corp. climbed 2.3 percent to $23.23. The insurer that hired Ellen Cooper from Goldman Sachs Group Inc. as chief investment officer said it increased the size of its share buyback authorization to $1 billion.

Elizabeth Arden Inc. soared 13 percent to $44.02. The maker of the Britney Spears and Elizabeth Taylor brand fragrances forecast annual profit and revenue that topped estimates.

Alliant Techsystems Inc. advanced 7.1 percent to $51.94.

The U.S. military’s largest ammunition maker rose as higher defense sales helped first-quarter earnings top estimates. It raised its full-year forecast.

Robbins & Myers Inc. surged 27 percent to $59.63. National Oilwell Varco Inc., the largest U.S. maker of oil equipment, agreed to buy the company for about $2.5 billion in cash.

Monster Beverage Corp. tumbled 9.7 percent to $61.20.

Monster and Atlanta-based Coca-Cola Co. are facing higher costs for ingredients such as sweeteners and plastic for bottles.

Knight Capital Group Inc. slid 2.9 percent to $3.07. The market maker that was driven to the verge of bankruptcy after a trading error said last week’s mishap may cause more losses and liabilities and customers may lose confidence in the firm.

Education Management Corp. plunged 19 percent to $3.24. The second-largest for-profit college chain by enrollment fell a day after posting a $1.2 billion loss in the fiscal fourth quarter.

SunPower Corp. declined 10 percent to $4.20. The solar- panel company majority-owned by Total SA tumbled after it cut its 2012 sales forecast.

Kohl’s Corp. slid 1.2 percent to $51.42. The third-largest U.S. department-store company reduced its fiscal 2012 profit forecast after sales fell in the second quarter.

NetApp Inc. dropped 2.6 percent to $32.13. The seller of hardware and software for storing data was downgraded to hold from buy at Cantor Fitzgerald LP by equity analyst Paul Mansky.

The 12-month target price is $38 per share.

Asian dealmaking in North America confirms energy and gold stocks are a bargain when compared with the underlying commodities, according to Frank Holmes, U.S. Global Investors Inc.’s chief executive officer. The shares have trailed commodity prices for more than a year.

“The disparities mean that the cheapest resources are not found in the ground — they’re listed” on stock exchanges, Holmes wrote three days ago in a blog posting.

Proposed multibillion-dollar takeovers of Canadian energy producers by Cnooc Ltd. and Petroliam Nasional Bhd show the value available in commodity stocks, according to Holmes.

Cnooc, China’s largest offshore-oil explorer, offered to acquire Nexen Inc. in July for 61 percent more than the stock’s market price. The proposed deal followed an offer in June from Petronas, Malaysia’s state-owned energy company, for Progress Energy Resources Corp. that was 77 percent above the market price. The bid was raised last month.

Holmes’s firm, based in San Antonio, runs three commodity- related mutual funds with total assets of about $1 billion. The biggest is the Global Resources Fund, which returned 12 percent during the two-year period depicted in the chart, according to data compiled by Bloomberg.

Have a wonderful evening everyone.

Be magnificent!

Watching and listening are a great art.

By watching and listening we learn infinitely more than we do from any books.

Books are necessary, but watching and listening sharpen your senses.

Krishnamurti, 1895-1986

As ever,

Carolann

Do not fear death so much but

rather the inadequate life.

-Bertolt Brecht, 1898-1956

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