August 10, 2012 Newsletter

Dear Friends,

Tangents:

The last few weeks have really been inspiring news-wise. The Olympics have showcased the pinnacle of human physical ability and the landing of the Mars Curiosity rover shows the best of the human mind. I was also reminded of the selfless compassion people can posses when I came across the story of Scott Neeson. Neeson was a hot-shot Hollywood executive who gave up his mansion, his Porsche and his million dollar paycheck to help homeless children in Cambodia. His life changing epiphany came to him in 2004 while standing in the hot Cambodian sun watching the local children of the Phnom Penh area scour for scraps through the recently dumped rubbish. While watching this scene, his ear was glued to his cell phone. On the other end was a representative for a Hollywood star, whose client was unhappy about the in-flight entertainment. Neeson overheard the actor griping in the background. ” ‘My life wasn’t meant to be this difficult.’ Those were his exact words,” Neeson says. “I was standing there in that humid, stinking garbage dump with children sick with typhoid, and this guy was refusing to get on a Gulfstream IV because he couldn’t find a specific item onboard,” he recalls. “If I ever wanted validation I was doing the right thing, this was it.”

Neeson has since gone on to manage a multitude of charitable efforts that help Cambodia children. His office is lined with the before and after pictures of those he’s helped. Neeson says that for him, each of the children he helps is an individual. He knows what all of them look like and nearly all of their names. Through Neeson’s efforts his organization manages four residential homes around town for more than 500 other deprived children and is building another. He operates after-school programs and vocational training centers and he’s built day cares and nurseries. His charity provides some 500 children with three meals a day and runs a bakery where disadvantaged youths learn marketable skills while making nutrient-rich pastry for the poorest kids. It pays for well over 1,000 children’s schooling and organizes sightseeing trips and sports days for them.

Neeson admits there’s a lot to miss about Hollywood. He says he misses Sundays playing paddle tennis on the beach with friends and taking the boat out to the islands. When asked how it compares to his life now, Neeson said “Sundays here, I’m down at the garbage dump. But I’m really happy.”

And on this day in…

1846 – The Smithsonian was established.

1876 – Alexander Graham Bell (1847-1922) makes the world’s first long-distance call from Brantford to the Bell homestead in Paris, Ontario, using a 13-mile long line strung from Brantford.

1911 – The House of Lords (Monarch) in Great Britain cedes power to the House of Commons (Democratic), making it the more powerful house.

1949 – Avro Canada C.102 Jetliner takes maiden flight; designed to meet a Trans-Canada Airlines requirement; first jet transport to fly in North America and second to fly in the world, 13 days after the flight of the De Havilland 106 Comet; government halts development in 1951 to force Avro to concentrate on the CF-100 jet fighter.

1950 – President Truman calls the National Guard to active duty to fight in Korean War.

photos of the day August 10, 2012

Devotees try to form a human pyramid to break a clay pot containing curd during the celebrations to mark the Hindu festival of Janmashtami in Mumbai, India.

Danish Siddiqui/Reuters

A two-week-old Chilean Flamingo stretches its wings beneath its father, Maurice, who stands guard at Drusillas Park in Alfriston, south east England. Earlier in the year Barry White songs were played to encourage the birds to breed.

Gareth Fuller/PA

Market Closes for August 10, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Aug. 10 (Bloomberg) — Canadian stocks rose as gains by mining and technology companies tempered disappointment after the nation’s employers unexpectedly shed jobs and China’s export growth slowed.

Barrick Gold Corp and Kinross Gold Corp. climbed at least 1.2 percent. Open Text Corp. soared 10 percent. Research In Motion Ltd. jumped 6.5 percent after two people familiar with the situation said the BlackBerry device maker’s enterprise- services unit has attracted the attention of International Business Machines Corp.

The Standard & Poor’s/TSX Composite Index rose 32.76 points, or 0.3 percent, to 11,890.89, with most of the advance coming in the last 30 minutes after the index swung between gains and losses throughout the day. The benchmark index has gained 2 percent for the week, its biggest weekly gain since May.

“This is a very good sign,” Ian Nakamoto, director of research with MacDougall MacDougall & MacTier Inc. in Toronto, said in a phone interview. The firm manages about $4 billion.

“People want to buy the market and are willing to overlook bad news in the hope central banks will come to the rescue.”

Canadian employers unexpectedly shed 30,400 jobs in July, and the unemployment rate rose to 7.3 percent, as the country’s retailers and wholesalers let go part-time workers. The job losses, all in part-time work, were the most since October 2011, Statistics Canada said today from Ottawa.

China’s outbound shipments increased 1 percent from a year earlier, the customs bureau said today in Beijing, after an 11.3 percent rise in June.

Kinross advanced 2.6 percent to C$8.17. Barrick, the largest gold producer in the world, rose 1.2 percent to C$34.30.

Gold futures for December delivery climbed for a third day to settle at $1,622.80 an ounce on the Comex in New York, extending its weekly gain to 0.8 percent. The metal has risen 3.6 percent in 2012.

Argent Energy Trust traded for the first time on the S&P/TSX today, closing at C$10.07. Its initial public offering price was C$10 a unit. The Calgary-based company raised C$212.3 million in Canada’s largest IPO of the year to purchase oil and gas assets in Texas.

Magna International Inc. advanced 5.1 percent to C$43.90, the highest since May, a day after posting better-than-expected second-quarter results. North America’s largest auto-parts supplier posted adjusted earnings of $1.48 a share, ahead of analysts’ estimates of $1.28 based on a Bloomberg survey.

Open Text Corp. soared 10 percent to C$54.19, its biggest gain since February. The networking software maker was raised to a buy from a neutral rating by analyst Tom Liston with Versant Partners.

RIM jumped 6.5 percent to C$8.22. IBM made an informal approach about possibly acquiring the enterprise-services division, which operates a network of secure servers used to support RIM’s BlackBerry devices, said one of the people familiar with the situation, who asked not to be named because the matter is private.

The business, seen as the company’s most valuable asset, may be valued at $1.5 billion to $2.5 billion depending on the mix of assets included, according to Berenberg Bank. RIM said in May that it had hired JPMorgan Chase & Co. and RBC Capital Markets to study strategic options. The stock is up 18 percent this week.

US

By Rita Nazareth

Aug. 10 (Bloomberg) — U.S. stocks rose, giving the Standard & Poor’s 500 Index its longest advance since December 2010, as optimism the Federal Reserve will act to stimulate the economy helped the market recover from an earlier decline.

J.C. Penney Co. rose 5.9 percent as Chief Executive Officer Ron Johnson said his overhaul of the department-store chain is “on track.” Facebook Inc. added 3.8 percent as Chief Financial Officer David Ebersman is said to be meeting with investors in New York days before the lifting of a ban on stock sales by some of the company’s biggest shareholders. Broadcom Corp. gained 3 percent as the maker of chips that help mobile devices connect to the Internet was raised at Sanford C. Bernstein & Co.

The S&P 500 rose 0.2 percent to 1,405.87, reversing a loss of as much as 0.5 percent and rising for a sixth day. It capped a fifth weekly advance, the longest streak since March. The Dow Jones Industrial Average added 42.76 points, or 0.3 percent, to 13,207.95. Volume for exchange-listed stocks in the U.S. was 5 billion shares, 24 percent below the three-month average.

“The weaker the data the higher the likelihood of stimulus,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “The weakness in China is likely to prompt a move there. While the Fed has been clear it will do anything to support growth, some people tend to think it’s inevitable.”

Stocks rebounded after the San Francisco Chronicle reported that Fed Bank of San Francisco President John Williams said the lack of progress in reducing the unemployment rate and the slow economic recovery have convinced him it’s time to move ahead with a third round of asset purchases. Earlier losses were driven by a worse-than-expected Chinese trade report which intensified concern that global economic growth is slowing.

“The market is looking at the worldwide slowdown,” said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees about $40 billion. “China is slowing down, Europe is in a recession.

Everybody realizes that we’re on a tough situation. The question is — can it get weaker or not?”

Bets on global central bank action to stimulate the economy have driven the S&P 500 up 10 percent since June 1. The index rose for five straight days through yesterday amid better-than- estimated corporate profits and data on the jobs market. About 72 percent of the S&P 500 companies which reported second- quarter results so far have beaten earnings estimates, according to data compiled by Bloomberg.

David Bianco, Deutsche Bank AG’s chief U.S. equity strategist, cut his 2012 earnings estimate for S&P 500 companies amid lower commodity prices, weak capital markets, a stronger dollar and a “midyear stall” in global manufacturing. His forecast was cut to $102 a share from $105.

Eight out of 10 groups in the S&P 500 rose today as phone, industrial and health-care shares had the biggest gains. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against S&P 500’s declines, slid 3.5 percent to 14.74, the lowest since March.

J.C. Penney rallied 5.9 percent to $23.40. Johnson, the former Apple Inc. retail chief who joined as CEO in November, is tweaking his pricing strategy after the previous plan confused customers by reducing sales events and coupons.

Facebook gained 3.8 percent to $21.81. Goldman Sachs Group Inc., Microsoft Corp. and other large investors that bought equity before the initial public offering will have freedom to sell their stakes starting Aug. 16. That’s after the lifting of limits imposed by underwriters on the sale of shares for a preset period after an IPO. A person with knowledge of the meetings declined to elaborate on the plans, which are private.

Broadcom rose 3 percent to $35.35. The company was raised to outperform at Sanford C. Bernstein.

Research In Motion Ltd. jumped 6.3 percent to $8.29. The company’s enterprise-services unit has attracted the interest of International Business Machines Corp., according to two people familiar with the situation.

Yahoo! Inc. lost 5.4 percent to $15.15. Chief Executive Officer Marissa Mayer has embarked on a strategy review that may result in a reversal of plans to restructure operations and return billions of dollars in cash to shareholders.

Monster Beverage Corp. tumbled 11 percent to $54.27. The largest U.S. energy drink maker by volume sales said an unspecified attorney general is investigating the company’s flagship drink and ingredients.

Chesapeake Energy Corp. slid 3.1 percent to $19.68. The second-largest U.S. natural-gas producer received a subpoena in June from the antitrust division of the U.S. Justice Department’s Midwest Field Office.

Cisco Systems Inc. retreated 0.9 percent to $17.54. The outlook for the biggest maker of computer-networking equipment may be worse than estimated, said Ryan Hutchinson, an analyst at Lazard Capital Markets LLC.

Big Lots Inc. dropped 7 percent to $38.44. The discount retailer was downgraded to underweight from neutral at JPMorgan Chase & Co. by equity analyst Matthew Boss. The 18-month share- price estimate is $34.

Manchester United Plc was unchanged at $14. The English soccer club with a record 19 championships raised $233.3 million in its U.S. initial public offering, less than first sought. The 134-year-old team and the Glazer family that bought it in 2005 sold 16.7 million shares for $14 each yesterday.

Investors put $356 billion into U.S. checking and savings accounts in the first six months of this year, almost double the $188 billion they deposited into bond mutual funds and exchanged-traded funds, according to TrimTabs Investment Research.

Equity mutual funds and ETFs attracted $6 billion in net deposits, Sausalito, California-based TrimTabs said in a statement yesterday. Retail money-market funds lost $21.3 billion to withdrawals in the first half, according to the firm.

“People are risk-averse in a risky world and don’t trust the powers that be to manage the economy and the markets,”

Charles Biderman, chief executive officer of TrimTabs, said in a telephone interview. “When that happens, you hunker down and put money away for better times.”

Some investors are avoiding equities even as stock markets have rallied this year. The MSCI All-Country World Index rose 7.9 percent and the S&P 500 increased 12 percent through yesterday. Europe’s crisis has sent some investors into the perceived safety of bonds.

Economic indicators may need to change for the better by October in order for U.S. stocks to sustain this year’s gains, according to Myles Zyblock, chief institutional strategist at RBC Capital Markets.

Shares of companies most affected by the pace of economic growth have been out of favor for months, according to data tracking the ratio of Morgan Stanley indexes for cyclical and consumer-product shares since 2009, when a bull market began.

“We see one of two likely scenarios” unfolding for stocks, Zyblock wrote two days ago in a report. The first is that the economic gauges will rebound during the next month or two to confirm the gains in stocks. The second is that share prices will decline as the indicators fall further.

The cyclical-consumer ratio, cited in the Toronto-based strategist’s report, rose only 0.2 percent for the year through yesterday as the S&P 500 gained 12 percent. The contrast became more pronounced in the past two months as the S&P 500 rebounded from its second-quarter low.

Rather than tracking the S&P 500, the cyclical-consumer ratio tended to move in lockstep with the Institute for Supply Management’s factory index, as the report showed. ISM readings for June and July were less than 50, pointing to a contraction in manufacturing.

Based on the backdrop, Zyblock wrote, higher stock prices can be attributed to “fast money investors who’ve been caught short, corporations with excess cash, and international equity investors running away from their home markets.”

Have a wonderful weekend everyone!

Be magnificent!

The healing of the mind takes place gradually on contact with nature,

with the orange on the branch, the blade of grass eating its way into the cement,

and the hills hidden by the clouds.

Krishnamurti, 1895-1902

As ever,

Carolann

Be kind, for everyone your meet is fighting a hard battle.

-Plato, 427 BC-347 BC

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