August 15, 2012 Newsletter

Dear Friends,

Tangents:

August 15^th, 1969: Over 400,000 young people attend a weekend of music at Woodstock, New York.

August 15, 1969 – The Woodstock Music Festival Poster:

Aerial shot of the 1969 Woodstock Music Festival

And also on  this day in…

1769 – Napoleon Bonaparte was born.

1912 – Julia Child was born.

1914 – The Panama Canal opens to traffic.

1930 – President Hoover looks to combat drought and economic depression.
1947 – Britain grants independence to India and Pakistan.
1945 – Gasoline and fuel oil rationing ends in the U.S.

photo of the day August 15, 2012

A couple talk as the sun sets at Enoshima beach in Fujisawa, near Tokyo.

Shizuo Kambayashi/AP

Market Closes for August 15, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Dmitrieva

Aug. 15 (Bloomberg) — Canadian stocks advanced after U.S. industrial production rose in July as investors awaited more signs of whether the Federal Reserve and European Central Bank would act to spur economic growth.

Royal Bank of Canada and Toronto-Dominion Bank advanced at least 0.9 percent. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, climbed 1 percent. Bank shares contributed most to gains on the Standard & Poor’s/TSX Composite Index. Energy shares reversed declines as oil rose.

The S&P/TSX gained 52.24 points, or 0.4 percent, to 11,905.85 at 3:21 p.m. in Toronto, after falling as much as 0.1 percent earlier.

“People are positioning themselves for a potential solution out of Europe by buying the financial stocks,” Brian Huen, who helps manage C$55 million at Toronto-based Red Sky Capital Management Ltd., said in phone interview. “I think the market is in an up-trend because people want to own this market, especially into the late August, early September events.”

Industrial production in the U.S. rose in July, led by a pick-up in motor vehicle output and a rebound in utility use during the hottest month on record. In a separate report by the Federal Reserve Bank of New York, manufacturing in the New York area contracted in August for the first time in 10 months.

The Federal Open Market Committee on Aug. 1 reiterated its pledge to ease policy further if necessary, and ECB President Mario Draghi promised last month that policy makers will do whatever is needed to preserve the euro. Investors are awaiting Fed Chairman Ben S. Bernanke’s speech Aug. 31 at the Kansas City conference in Jackson Hole, Wyoming, and an ECB meeting next month for more direction.

Royal Bank, the country’s largest lender, gained 1 percent to C$52.52. Toronto-Dominion Bank advanced 0.9 percent to C$80.06. Bank of Montreal added 0.4 percent to C$57.35.

Gold companies advanced as the metal rose 0.3 percent on the Comex in New York. Osisko Mining Corp., which holds interest in the Canadian Malartic gold deposit in Quebec, added 2.5 percent to C$9.28. Barrick Gold Corp., the largest producer of the metal, rose 1 percent to C$34.23. New Gold Inc. advanced 2.6 percent to C$10.21.

Great Basin Gold Ltd., a producer of the metal in South Africa and Nevada, plunged 45 percent to 24 cents, the most in almost 23 years. It warned investors it’s running out of cash after lower-than-expected production at the Burnstone mine. It will seek to raise at least C$60 million ($61 million) through a combination of asset sales or new shares. Chief Executive Officer Ferdi Dippenaar resigned.

Potash Corp. increased 1 percent to C$43.34. Agrium Inc., the largest farm retailer in the U.S., added 1.7 percent to C$97.60. The company is meeting with Jana Partners LLC and other shareholders today after rejecting the hedge fund’s proposal for Agrium to spin off its retail unit, according to two people familiar with the situation.

Oil reversed declines as the commodity gained 0.8 percent on the Comex in New York, having fallen as much as 0.8 percent in earlier trading. Cenovus Energy Inc. added 1 percent to C$32.64. Cameco Corp. advanced 2.4 percent to C$20.87.

US

By Lu Wang

Aug. 15 (Bloomberg) — Most U.S. stocks rose, after a two- day decline in the Standard & Poor’s 500 Index, as investors weighed manufacturing data for clues on whether the Federal Reserve will move to stimulate the economy.

Abercrombie & Fitch Co. and JDS Uniphase Corp. rallied at least 8.2 percent after earnings topped analysts’ estimates.

Deere & Co. dropped 6.3 percent as profit trailed analysts’ estimates and the largest maker of farm equipment cut its full- year forecast. Staples Inc. tumbled 15 percent after reducing its projections amid slower growth.

More than two stocks advanced for each declining on U.S. exchanges at 4 p.m. New York time. The S&P 500 rose 0.1 percent to 1,405.53, after falling as much as 0.2 percent. The Dow Jones Industrial Average slipped 7.36 points, or 0.1 percent, to 13,164.78. Volume for exchange-listed stocks in the U.S. was 4.8 billion shares, 26 percent below the three-month average.

“You’re getting back and forth data that sometimes confirm the potential for QE3, like today, and yesterday brings it into question,” said Andrew Slimmon, Chicago-based managing director of global investment solutions at Morgan Stanley Smith Barney, referring to another round of Fed stimulus known as quantitative easing. His firm has $1.7 trillion in client assets. “There is going to be no other expected major news between now and when the Fed meets on Aug. 31. There will be a lot of conjecture back and forth about what they are going to do.”

Industrial production in the U.S. increased in July, Fed data showed today, propelled by a pickup in motor vehicle output and a rebound in utility use during the hottest month on record.

A separate report showed manufacturing in the New York area unexpectedly contracted in August for the first time since October.

The S&P 500 slipped less than 0.1 percent yesterday as a slump in technology and financial shares reversed an earlier rally amid better-than-estimated retail sales. Intraday price swings in the benchmark index have narrowed to a daily average of 0.6 percent during the past eight days, the smallest fluctuation over a comparable period since January 2011, according to data compiled by Bloomberg.

The index has fluctuated around 1,400 for the past seven trading sessions, with U.S. equity volume reaching the lowest level since at least 2008 excluding holidays and volatility sliding to a five-year low.

“With the volume so light, it doesn’t take much to get a movement in either direction,” Scott Armiger, a money manager at Christiana Trust in Greenville, Delaware, which has $11 billion in client assets, said in a phone interview. “The market just seems to be resisting all the worries here.”

Trading has slowed as vacationing traders awaited policy clues from the Fed’s summit at the end of the month and the European Central Bank meeting in September. The index has rebounded 10 percent from a five-month low on June 1 amid speculation global central banks will introduce further stimulus measures. The Fed will hold off from a third round of bond buying in September amid better economic figures, Goldman Sachs Group Inc. said in a report today.

About 4.5 billion shares changed hands on all venues on Aug. 13, the lowest level in data compiled by Bloomberg going back four years that excludes the days surrounding New Year’s, Christmas, Thanksgiving and Independence Day. Volume averaged 5.8 billion shares a day this month, 13 percent below the average level during the first seven months of 2012.

The Chicago Board Options Exchange Volatility Index, known as the VIX, lost 7.1 percent to 13.70 on Aug. 13, the lowest level since June 2007. The VIX fell 1.5 percent to 14.63 today.

Investors are piling into securities that gain should equity volatility increase, a bearish bet on stocks that was last popular when the S&P 500 climbed above 1,400 in March.

Outstanding shares jumped to a record for the three most-used exchange-traded securities that profit from volatility gains in U.S. stocks, according to data compiled by Bloomberg.

Consumer discretionary, financial and commodities companies in the S&P 500 rose more than 0.3 percent as a group today while energy and utilities stocks performed worst, losing at least 0.3 percent.

Cisco Systems Inc. rose 1.1 percent to $17.35 during regular trading. After the market close, the biggest maker of computer-networking equipment posted profit and sales that beat analysts’ estimates and raised its quarterly dividend by 75 percent. The stock jumped 4.3 percent to $18.10 in extended trading at 5:21 p.m.

Abercrombie & Fitch rallied 9 percent to $35.23. The teen- clothing retailer authorized additional share buybacks and reported second-quarter profit that topped the company’s preliminary report earlier this month.

JDS Uniphase surged 8.2 percent to $11.56. The maker of fiber-optic testing equipment posted fourth-quarter profit excluding some items of 15 cents a share, beating the average analyst estimate of 12 cents in a Bloomberg survey. The company forecast first-quarter sales between $415 million and $435 million, compared with the average analyst estimate for $426.2 million at the time of the company’s release.

Target Corp. added 1.8 percent to $64.50, the highest level since October 2007. The second-largest U.S. discount retailer raised its annual profit forecast as it increases sales by adding groceries and enticing more spending from customers with a discount card.

Facebook Inc., which raised $16 billion in the largest-ever technology initial public offering, rose 4 percent to $21.20. A lockup on shares held by investors begins to expire tomorrow.

The owner of the world’s most popular social network plunged 46 percent from its May debut through yesterday amid concern over the company’s ability to make money from mobile users.

Deere lost 6.3 percent to $75.10. The world’s largest manufacturer of agricultural equipment cut its full-year profit forecast as sales slow in Asia and Latin America, undermining the company’s growth strategy. Profit for the full year will be $3.1 billion, Deere said, compared with its May forecast of $3.35 billion and the $3.33 billion average of 15 analyst estimates.

Staples tumbled 15 percent to $11.49, the lowest close since 2003. The office-supply retailer said results fell short of its expectations in the second quarter because U.S. growth decelerated and demand remained weak in Europe and Australia.

Staples said annual revenue will be unchanged, compared with a May forecast for low-single digit growth. Analysts had estimated a gain of about 1 percent.

The S&P 500 may reach 1,500 this year as the economy picks up momentum in the fourth quarter, according to Byron Wien, vice chairman of Blackstone Group LP’s advisory services unit.

“Housing is bottoming, gasoline is down from the beginning of the year, 90 percent of the people in the country have jobs,” Wien said in an interview this morning on Bloomberg Television’s “In the Loop” show. “The European situation is getting better, not resolved, but getting better. The fiscal cliff will be deferred,” he said, referring to higher taxes and spending cuts that will take effect at year-end unless Congress acts. “There will be more good news than bad.”

Have  a wonderful evening everyone.

Be magnificent!

Meditation is movement without any motive, without words, and the activity of thought.

It must be something that is not deliberately set about.

Only then is it a movement within the infinite, measureless to man, without a goal, without an end,

without a beginning.  And that has a strange action in daily life, because all life is one,

and then becomes sacred.

Krishnamurti, 1895-1986

As ever,

Carolann

For one human being to love another; that is perhaps the most difficult of all our tasks, the ultimate, the last test and proof, the work for which all other work is but a preparation.

-Rainer Maria Rilke, 1875-1926

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