September 25, 2012 Newsletter

Dear Friends,

Tangents:

Today is Yom Kippur, the Day of Atonement, the holiest day of the year in Judaism – a time for solemnity and soul searching.  It  begins after sunset today and ends almost 26 hours later tomorrow.

Know any good essayists?  Pass this information along – I read it in The Financial Times this past weekend:

The Financial Times and The Bodley Head, an imprint of Random House, UK, are running their first annual essay prize for the best young talent in long-form essay writing.  “We are looking for a dynamic, authoritative and lively essay of no more than 3,500 words on a topic of your choice.  It can be journalistic, it can be a case study; it can be wide-ranging or minutely focused.  It can address any topic – from finance to history, from current affairs to a scientific discovery.  We aren’t looking for a particular subject – we are simply looking for quality.

The prize for the winner will be £1,000, an e-publication with Bodley Head and a mentoring session with the Financial Times/Bodley Head.  If you are aged between 18 and 35 and would like your work to be read by a Bodley Head/FT judging panel including FT contributing editor Simon

Schama, submit your entry by midnight of November 18, 2012.

Entry forms are online at www.ft.com/BodleyHeadFTcompetition. “

photos of the day September 25, 2012

Thirty penguins walk to the ocean during their release on the outskirts of the city of Cape Town, South Africa. More than two hundred penguins found covered in oil following a spillage by a stricken bulk carrier were washed clean of oil, fed and restored to health by workers from the South African Foundation for the Conservation of Coastal Birds.

Schalk van Zuydam/AP

A model presents a creation by Belgian designer Jean-Paul Lespagnard as part of his Spring/Summer 2013 women’s ready-to-wear fashion show during Paris fashion week.

Charles Platiau/Reuters

Boats cross the water in front of the 100-story Princess Tower (c.), the world’s tallest residential building at 414 meters, in Dubai, United Arab Emirates. Princess Tower opened on Sept. 13.

Kamran Jebreili/AP

Market Closes for September 25th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Lu Wang and Eric Lam

Sept. 25 (Bloomberg) — Canadian stocks fell for a fourth day, extending the longest losing streak in three weeks, as commodity companies retreated after a Federal Reserve official said the U.S. central bank’s bond-buying program probably won’t boost growth.

Energy producers fell the most among the 10 groups in the Standard & Poor’s/TSX Composite Index. Valeant Pharmaceuticals International Inc. added 1.3 percent, leading health-care stocks to the best performance among the industry groups.

The S&P/TSX dropped 56.36 points, or 0.5 percent, to 12,257.18 in Toronto, after rising as much as 0.6 percent. The benchmark index has slipped 1.4 percent over the past four days, the longest streak since Aug. 30. The gauge is up 2.5 percent this year.

“There is a natural second-guessing that goes on after a policy change,” Bob Decker, a money manager at Aurion Capital in Toronto, said in a telephone interview. The firm oversees about C$5.5 billion ($5.6 billion). “If that debate becomes very public, especially by a Fed governor, that creates uncertainty and nervousness.”

Canadian equities joined U.S. markets in a selloff after Fed Bank of Philadelphia President Charles Plosser said new bond buying announced by the U.S. central bank this month probably won’t boost growth or hiring and may jeopardize the central bank’s credibility. Stocks climbed earlier as better-than- expected data on retail sales and America’s housing market eased concern about economic growth.

“The main thing right now is the psychology of investors in the stock market,” Irwin Michael, a fund manager at ABC Funds, said in an interview from Toronto. His firm manages about C$800 million. “If there is any hint that we’ve passed the bottom and things are looking better, I suspect a lot of money is going to look for places to go.”

Energy producers in the S&P/TSX fell 1 percent. Encana Corp. slipped 1.9 percent to C$21.47 while Precision Drilling Corp. declined 3.6 percent to C$8.10.

The S&P/TSX Health Care index advanced 1.5 percent. Valeant climbed 1.3 percent to C$54.43. Canada’s largest publicly traded drug-maker cut the interest rate on a $1 billion term loan it’s seeking to support its purchase of Medicis Pharmaceutical Corp., according to a person with knowledge of the transaction.

Bank of Nova Scotia increased 0.1 percent to C$54.22. Darko Mihelic, an analyst with Cormark Securities Inc., boosted the stock to buy from market perform, citing the lender’s purchase of the online bank from ING Groep NV.

GoldQuest Mining Corp. plunged 33 percent to C$1.22 after updating drill results from a coal and copper project in the Dominican Republic.

Research In Motion Ltd. jumped 5.2 percent to C$6.50. Chief Marketing Officer Frank Boulben said in an interview with Bloomberg that the BlackBerry smartphone now has 80 million subscribers, up from 78 million.

Thorsten Heins, RIM’s chief executive officer, demonstrated some of the upcoming BB10 operating system’s new features during a presentation at the BlackBerry 10 Jam conference in San Jose, California.

Novadaq Technologies Inc., a Canadian medical-imaging company, soared 8.6 percent to C$9.99, the highest level in almost seven years, after presenting positive feedback from surgeons and announcing a trial at an investor day yesterday.

US

By Rita Nazareth

Sept. 25 (Bloomberg) — U.S. stocks declined, erasing earlier gains after benchmark indexes approached five-year highs, amid concern that global stimulus measures won’t be enough to boost growth at the world’s largest economy.

Apple Inc. dropped 2.5 percent, extending a two-day decline to 3.8 percent, the most since July. Caterpillar Inc., the world’s biggest construction and mining equipment maker, slumped 4.3 percent after cutting its forecast for 2015 earnings.

Staples Inc., the largest U.S. office supplies chain, decreased 4.5 percent after announcing plans to close stores. Red Hat Inc., the largest seller of the open-source Linux operating system, lost 4.3 percent amid disappointing earnings.

The Standard & Poor’s 500 Index retreated 1.1 percent to 1,441.59 at 4 p.m. New York time, the biggest decline since June 25. The index dropped a fourth day. The Dow Jones Industrial Average decreased 101.37 points, or 0.8 percent, to 13,457.55.

Volume for exchange-listed stocks in the U.S. was 6.7 billion shares today, or 12 percent above the three-month average.

“Things won’t get better as fast as people think they will,” Malcolm Polley, who manages $1.1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania, said by phone. “The Fed’s actions are not going to lead to higher growth.”

Federal Reserve Bank of Philadelphia President Charles Plosser said new bond buying announced by the Fed this month probably won’t boost growth or hiring and may jeopardize the central bank’s credibility. Stocks gained earlier today as data showed confidence among American consumers rose in September to a seven-month high. Home prices climbed more than forecast in July from a year earlier.

Both the S&P 500 and the Dow average are near their all- time highs of October 2007 as investors bought equities amid optimism about better-than-estimated earnings and central bank stimulus measures. The Dow needs to rise 5.3 percent to reach its peak of 14,164.53, while the S&P 500 needs an increase of 8.6 percent to reach its record of 1,565.15.

“The economic numbers are decent,” Burt White, who oversees about $350 billion as chief investment officer at LPL Financial Corp. in Boston, said in a telephone interview. “The housing healing is here. The fact that you’re starting to see stabilization in housing is a real boost to confidence.”

All 10 groups in the S&P 500 retreated as technology, financial and commodity shares had the biggest declines.

Apple dropped 2.5 percent to $673.54 and trimmed this year’s gain to 66 percent. Jim Chanos, who oversees $6 billion as the founder and president at Kynikos Associates Ltd., said he’s skeptical on Apple after the shares surged this year. He prefers owning Microsoft Corp. to hedge wagers on declines in companies such as Hewlett-Packard Co., he said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu.

“We’re getting afraid of heights,” Chanos said about Apple’s share price. “It has had an enormous run. Something about it is holding us back in that it’s had such a run.”

Caterpillar lost 4.3 percent to $87.01. The company said profit will be $12 to $18 a share, compared with a previous projection of $15 to $20.

Staples retreated 4.5 percent to $11.80. The company plans to shut 45 locations in Europe and accelerate the closing of 15 stores in the U.S. as part of a plan to save about $250 million a year. The closings, the impairment of goodwill in the European business and other actions will result in total pretax charges of as much as $1.12 billion in the fiscal year ending in January, Staples said in a statement.

Red Hat decreased 4.3 percent to $55.08. The company cited a slowdown in the services side of its business for the lower forecast. Demand for subscriptions to its software remains strong, Chief Executive Officer Jim Whitehurst said on the conference call.

Tesla Motors Inc. dropped 9.8 percent to $27.66. The electric-car maker led by Elon Musk cut its revenue outlook for the third quarter because of supplier shortcomings and other delays in accelerating production of its Model S sedan.

Gevo Inc. slumped 35 percent to $2.14, a record low. The U.S. biofuel producer backed by French oil company Total SA and specialty-chemicals maker Lanxess AG announced plans to stop producing isobutanol at its facility in Luverne, Minnesota.

Merrimack Pharmaceuticals Inc. tumbled 17 percent to $9.09.

The developer of cancer drugs fell after insiders were allowed to sell shares for the first time following the company’s initial public offering.

David Einhorn’s Greenlight Capital Inc. suffered in the past year by favoring gold-mining stocks over the precious metal, a strategy that Scotia Capital Inc. recommended last week. Two exchange-traded funds that Greenlight was buying in the third quarter of last year have declined since Sept. 30, 2011. Gold has risen about 9 percent during the same period in New York trading. Einhorn declined to comment on the performance.

Greenlight has stayed with one of the funds, the Market Vectors Gold Miners ETF, which invests in the metal’s biggest producers. The New York-based hedge fund is the third-largest shareholder even after cutting its stake by 17 percent in the second quarter, according to data compiled by Bloomberg.

The other ETF is also one of Van Eck Associates Corp.’s Market Vectors funds and tracks smaller mining companies, known as juniors. Greenlight finished last year’s third quarter with 1.9 million shares and sold all of them in the first half of this year, according to filings.

“There is a case to be made that the equities should start to outperform bullion,” Tanya Jakusconek, an analyst at Scotia Capital, wrote in a Sept. 20 report. Capital-spending cutbacks may lead to greater cash flow for many producers, the Toronto- based analyst wrote.

Five gold-mining stocks have the equivalent of buy ratings from Jakusconek, according to data compiled by Bloomberg. They are Agnico-Eagle Mines Ltd., Barrick Gold Corp., Eldorado Gold Corp., Goldcorp Inc. and Iamgold Corp.

Have a wonderful evening everyone.

Be magnificent!

I am proud to tell you that I belong to a religion in whose sacred language,

the Sanskrit, the word exclusion is untranslatable.

Swami Vivekananda, 1863-1902

As ever

Carolann

Not a shred of evidence exists in favor of

the idea that life is serious.

-Brendan Gill, 1914-1997

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