October 26, 2012 Newsletter

Dear Friends,

Tangents:

Off to  Seattle to see Fidelio on this rainy west coast day….but at least it’s not Sandy!

On this day in 1994, Israeli Prime Minister Yitzhak Rabin and Abdel Salam Majali of Jordan signed a peace treaty. –Steven Russolillo, WSJ, 10/26/12

And also on this day in…

1879 – Leon Trotsky, revolutionary, is born.1942 – Japanese attack Guadalcanal, sinking two U.S. carriers.

1942 – U.S. Navy aircraft carrier Hornet is sunk in the Battle of Santa Cruz Island, in the South Pacific.1947 – Hilary Rodham Clinton is born.

1950 – A reconnaissance platoon for a South Korean division reaches the Yalu River. They are the only elements of the U.N. force to reach the river before the Chinese offensive pushes the whole army down into South Korea.

1955 – The Village Voice is first published, backed in part by Norman Mailer.

1958 – The first New York – Paris transatlantic jet passenger service is inaugurated by Pan Am, while the first New York – London transatlantic jet passenger service is inaugurated by BOAC.
This above all: To thine own self, be true. -William Shakespeare

Jean Marie Brennan walks along the jetty at Lighthouse Point Park as Hurricane Sandy passes offshore in Ponce Inlet, Florida.  Steve Nesius/Reuters

Sri Lankan ethnic Tamil dancers perform during an annual festival at the Venkatvar Sri Vishnu Hindu temple in Colombo, Sri Lanka, Thursday, Oct. 25, 20112.  Eranga Jayawardena/AP

Market Closes for October 26^th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Lu Wang

Oct. 26 (Bloomberg) — Canadian stocks swung between gains and losses as technology and mining shares dropped while phone companies rose amid better-than-expected growth report from the U.S., the nation’s biggest trading partner.

Six out of 10 industry groups in the Standard & Poor’s/TSX Composite Index advanced. Technology and raw-materials producers erased more than 0.3 percent for the biggest losses. TransAlta Corp. rallied 2.6 percent after Warren Buffett’s MidAmerican Energy Holdings Co. agreed to fund half the cost of natural gas- fueled power plants built or bought by the Calgary-based company in Canada. Whitecap Resources Inc. jumped 6.6 percent after an analyst predicted a dividend next year.

The S&P/TSX advanced 4.38 points, or less than 0.1 percent, to 12,304.61 at 2:14 p.m. in Toronto, after falling 0.1 percent and rallying as much as 0.4 percent. The index has lost 0.9 percent for the week.

“You’re seeing some reflection on the GDP number out of the States, which is considered good,” Greg Eckel, a Toronto- based fund manager with Morgan Meighen & Associates, said in a phone interview. His firm manages about C$1 billion ($1 billion). “It’s a signpost as to where we’ve been. This number is probably anticipated in the run-up of the market. It’s confirmation that maybe it’s right, rather than wrong.”

U.S. gross domestic product grew at a 2 percent annual rate in the third quarter after climbing 1.3 percent in the prior quarter, Commerce Department figures showed. Economists polled by Bloomberg had expected a gain of 1.8 percent.

TransAlta gained 2.6 percent to C$15.62. The company and its partner MidAmerican Energy didn’t provide a value on the venture or planned spending on natural gas-fueled power plants.

They estimate Canada needs almost $200 billion in new investment over the next 20 years in the electricity generation market.

Whitecap rallied 6.6 percent to C$7.97. The oil and gas company agreed to sell non-core assets for C$56.4 million and said it increased a credit facility 13 percent to C$450 million.

The chance that the company will announce a dividend next year is “even higher,” Jim Byrne, an analyst with BMO Capital Markets, wrote in a note.

Rogers Communications Inc. climbed 1.2 percent to C$43.99, the highest price since May 2008. Canada’s largest wireless operator was boosted to neutral from sell by Goldman Sachs Group Inc. The company’s third-quarter results, released on Oct. 24, “demonstrated Rogers’ ability to not only execute on cost controls, but drive improvements on the top line,” analyst Matthew Niknam wrote in a note dated yesterday.

Progressive Waste Solutions Ltd. slipped 3.2 percent, the most since May 4, to C$19.25. The trash hauler reduced its full- year profit forecast, saying it now expects to earn C$1 a share at most. Analysts, on average, estimated C$1.05, according to a Bloomberg survey.

US

By Rita Nazareth

Oct. 26 (Bloomberg) — Most U.S. stocks retreated, driving the Standard & Poor’s 500 Index to a weekly decline, as investors watched economic and corporate earnings reports.

Goodyear Tire & Rubber Co., the largest U.S. tiremaker, dropped 10 percent after reporting a profit that was below estimates. VeriSign Inc., an operator of Web domain name registries, tumbled 15 percent after saying regulators have delayed a review of the company’s contract for that business.

Expedia Inc. surged 15 percent as the online travel agency reported third-quarter earnings that topped analysts’ estimates.

Eight stocks declined for every five that advanced on U.S. exchanges at 4 p.m. New York time. The S&P 500 decreased 0.1 percent to 1,411.94 as the benchmark measure extended its weekly decline to 1.5 percent. The Dow Jones Industrial Average increased 3.53 points, or less than 0.1 percent, to 13,107.21.

Volume for exchange-listed stocks in the U.S. was about 5.8 billion shares, or 2.3 percent below the three-month average.

“You’re getting a mix of data that don’t have a clear direction,” said Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, which oversees $152 billion. “It’s important for investors’ psychology to see GDP data beating estimates. Yet the earnings season has been a very challenging one.”

The benchmark gauge for American equities is poised to snap a four-month rally amid concern about corporate profits. The S&P 500 has slumped 2 percent so far in October. Third-quarter earnings at 71 percent of the index’s companies beat estimates, according to data compiled by Bloomberg. Sales missed forecasts at 59 percent of companies, the data showed.

The economy in the U.S. expanded more than forecast in the third quarter, paced by a pickup in consumer spending, a rebound in government outlays and gains in residential construction.

Separately, the Thomson Reuters/University of Michigan final index consumer sentiment for October increased to 82.6 from 78.3 the prior month. Economists projected 83 for the gauge after a preliminary October reading of 83.1, according to the median forecast of 60 economists surveyed by Bloomberg.

Concern about a worsening of Europe’s debt crisis grew after German Finance Minister Wolfgang Schaeuble said there are doubts on whether Greece will meet requirements for its European bailout, according to an e-mail release of an interview to be broadcast Oct. 30 on ZDF television.

“There’s still concern about Europe,” said Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc. His firm oversees about $80 billion.

“You have Greek debt crisis, problems in Spain and other areas. The market is going to be back and forth until those guys get things figured out over there.”

Goodyear dropped 10 percent to $11.02. The company posted a quarterly adjusted profit of 53 cents a share. The average estimate of eight analysts surveyed by Bloomberg was for a profit of 59 cents. The results excluded one-time items, such as accelerated depreciation and pension settlements in the U.K.

CA Inc. dropped 8.7 percent to $22.73. The maker of software for managing information technology cut its fiscal 2013 revenue forecast, citing lower-than-expected new product sales amid a weaker global economy.

Deckers Outdoor Corp. tumbled 17 percent to $29.48 after cutting its forecast for annual sales growth by almost two- thirds amid declining demand for its UGG brand sheepskin boots.

VeriSign plunged 15 percent to $39.39. The company, which operates the registry for .com names, submitted the agreement to provide that service to the U.S. Commerce Department on June 26 and anticipated an approval by Nov. 30, according to a statement yesterday. The agency, which along with the U.S. Department of Justice, is reviewing the agreement and may not complete the review on time, the Reston, Virginia-based company said.

Dean Foods Co. tumbled 11 percent to $16.74. The largest U.S. dairy processor was downgraded to hold from buy at Stifel Nicolaus & Co. by equity analyst Christopher Growe.

ImmunoGen Inc. sank 17 percent to $11.47 after the biotechnology company reported a royalty rate structure with partner Roche Holding AG that disappointed investors.

The S&P 500 Property & Casualty Insurance Index slipped 0.7 percent. The eight-member gauge has declined for six straight days, its longest losing streak since May. Travelers Cos., the lone insurer in the Dow, lost 0.8 percent to $71.56. Allstate Corp. fell 0.9 percent to $40.15.

Hurricane Sandy, dubbed “Frankenstorm” because it is forecast to reach the U.S. East Coast near Halloween next week, will cause insured losses of as much as $4.9 billion, Bloomberg Industries analyst Jonathan Adams estimated, citing Kenetic Analysis Corp.

Expedia Inc. surged 15 percent to $59.06. The company, which gets more than 40 percent of its business outside the U.S., expanded even as the European sovereign-debt crisis entered its third year. International revenue rose 22 percent in the period, surpassing domestic growth of 14 percent. Hotel reservations accounted for 77 percent of worldwide sales, while 7 percent came from airlines.

Amazon.com Inc. jumped 6.9 percent to $238.24 after posting a smaller operating loss than analysts had anticipated as the world’s largest online retailer ramped up spending on delivery services ahead of the holiday sales season.

Comcast Corp. added 3.3 percent to $37.56. The largest U.S. cable company and the majority owner of NBC said third-quarter profit more than doubled, boosted by advertising revenue, the sale of assets and a decrease in the loss of subscribers.

Eastman Chemical Co. climbed 12 percent to $60.19. The biggest U.S. producer of chemicals from coal surpassed third- quarter profit estimates and lifted its 2012 forecast.

Arch Coal Inc. gained 11 percent to $8.09. The fourth- largest U.S. producer of the fuel reported third-quarter results that exceeded analysts’ estimates after shipments increased more than projected and costs declined.

Moody’s Corp. rose 4.8 percent to $47.89 after saying profit increased 41 percent as companies took advantage of record investor demand and low borrowing costs by issuing debt.

NetSuite Inc. gained 15 percent to $65.40, a record. The software maker majority-owned by Oracle Corp.’s Larry Ellison surged after customer gains spurred higher than expected sales growth and the company raised its full-year forecast.

Julian Robertson, founder of Tiger Management LLC, said hedge funds that have positioned themselves for a “disaster” are making a mistake.

“I think right now they are all scared,” Robertson, who once ran one of the most successful hedge funds in world, said today in a television interview on “Bloomberg Surveillance” with Tom Keene. “They are really only going to be profitable in the event of a big disaster.”

Hedge funds have trailed markets this year after cutting risk to protect themselves against losses. The Bloomberg Global Aggregate Hedge Fund Index gained 3.1 percent through September, compared with a 16 percent increase in the Standard and Poor’s 500 Index and a 4.5 percent advance in the Barclays Capital Bond Composite U.S. Index.

Hedge funds that wager on rising and falling stocks are 22 percent net long, below the average of 35 percent to 40 percent, according to an Oct. 22 report published by Bank of America Merrill Lynch. A net position is the difference between bets on rising stocks and falling stocks.

Have  a wonderful weekend everyone.

Be magnificent!

We must learn to love those who think exactly opposite to us.

We have humanity for the background, but each must have his own individuality and his own thought.

Push the sects forward till each man and woman are sects unto themselves.

We must learn to love the man who differs from us in opinion.

We must learn that differentiation is the life of thought.

We have one common goal,

and that is the perfection of the human soul, the god within us.

Swami Vivekananda, 1863-1902

As ever,

Carolann

Take what you can use and let the rest go by.

-Ken Kesey, 1935-2001

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