November 13, 2012 Newsletter

Dear Friends,

Tangents: Today is World Kindness Day.

The new James Bond film, Skyfall had the best North American opening this past weekend for a Bond movie ever, grossing $87.8 million.  Gary and I went to see it and we loved it!

To commemorate 50 years of James Bond, from his screen debut in 1962 in Dr. No, Maclean’s has produced a special edition of pictures and stories about villains, the guns, the gadgets and the girls that crossed paths with 007. Check out  www.macleans.ca/bond.

On this day in 1997, the Lion King made its debut on Broadway.  –Steven Russolillo, WSJ, 11/13/12.

And also on this day in…

1856 – Louis Brandeis, jurist was born.

1850 – Robert Louis Stevenson, author was born.

1927 – New York’s Holland Tunnel officially opens for traffic.

1945 – Charles de Gaulle is elected president of France.

1949 – Whoopi Goldberg, actress was born.

1952 – Harvard’s Paul Zoll becomes the first man to use electric shock to treat cardiac arrest.

1956 – The U.S. Supreme Court unanimously strikes down two Alabama laws requiring racial segregation on public buses.

Ask yourself: Have you been kind today?  Make kindness your daily modus operandi and change your world. –Annie Lennox, 1954-

photos of the day

November 13, 2012

A Sumatran tiger stands on a tree at a zoo in Medan, North Sumatra, Indonesia. There are only around 250 of the cats left in the wild, compared to about 1,000 in the 1970s, according to the World Wildlife Fund, meaning that the Panthera tigris sumatrae could become the first large predator to go extinct in the 21st century.

Binsar Bakkara/AP

The Sheldon Glacier with Mount Barre in the background, is seen from Ryder Bay near Rothera Research Station, Adelaide Island, Antarctica. A new NASA/British Antarctic Survey study examines why Antarctic sea ice cover has increased under the effects of climate change over the past two decades.

British Antarctic Survey/Reuters

An Indian Hindu woman holds a tray filled with earthen lamps and steps out of the door during Diwali in New Delhi, India. Diwali, the festival of lights dedicated to the Goddess of wealth Lakshmi, is being celebrated across the country.

Altaf Qadri/AP

Market Closes for November 13th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Nov. 13 (Bloomberg) — Canadian stocks fell for a second day after Finance Minister Jim Flaherty said he will delay plans to balance the country’s budget by one year and run larger-than- anticipated deficits.

Inmet Mining Corp. slipped 5.3 percent after saying it is not in talks about a sale of the company. Suncor Energy Inc., Canada’s largest oil producer, declined 2.5 percent after the International Energy Agency cut its forecast for world oil demand. CML HealthCare Inc. jumped 7.8 percent, the most in almost seven years, after National Bank Financial analysts raised their recommendation on the stock.

The Standard & Poor’s/TSX Composite Index fell 56.80 points, or 0.5 percent, to 12,134.66 in Toronto, erasing earlier gains of as much as 0.2 percent. The benchmark Canadian equity gauge is up 1.5 percent this year.

Flaherty released a budget update that projects a return to balance by the fiscal year beginning April 2016, one year later than forecast in his March budget, as he cut the government’s revenue projections by C$36.2 billion ($36.1 billion) over the next five years. European lawmakers gave Greece two more years to lower its deficit.

“The Canadian economy is getting weaker and the fiscal cliff is just one other reason to be very cautious on growth and deficit targets,” said Stephen Gauthier, a fund manager with Fin-XO Securities Inc. in Montreal. His firm manages about C$600 million. “The Greek situation is not sustainable for two years. It’s a bankruptcy delay. Do they really have another two years? You have to do something at some point.”

The U.S., Canada’s largest trading partner, faces $607 billion in automatic tax increases and spending cuts scheduled to come into effect in 2013 that may push the nation into a recession in Congress doesn’t act to avert the so-called fiscal cliff.

European policy makers have given Greece until 2016 to cut the deficit to 2 percent of gross domestic product, pledging to plug the resulting financing gaps in order to keep the country in the single currency. Finance ministers put off until Nov. 20 a decision on how to cover additional Greek needs of as much as 32.6 billion euros ($41 billion) and left unclear whether the International Monetary Fund will continue to contribute.

Gold mining and energy companies contributed most to losses in the S&P/TSX as eight of 10 industries fell. Trading volume was 14 percent lower than the 30-day average.

CML HealthCare rose 7.8 percent to C$6.22, the biggest gain since November 2005. Trevor Johnson, an analyst at National Bank Financial, raised the stock to sector perform from underperform, citing the company’s cheap valuation. The stock is down 36 percent this year, compared with a 21 percent gain for the S&P/TSX Health Care Index.

Inmet retreated 5.3 percent to C$54.44, after denying it was considering a sale of the company. The Daily Mail reported yesterday without citing anyone that First Quantum, advised by Goldman Sachs Group Inc. and Jefferies Group Inc., held informal takeover talks with Inmet. First Quantum lost 2.5 percent to C$22.19.

Harry Winston Diamond Mines Ltd. fell 2.2 percent to C$13.15 after agreeing to pay $500 million for BHP Billiton Ltd.’s interest in the Ekati diamond mine in the Northwest Territories as well as its marketing operations for the precious stones.

Suncor, Canada’s largest oil producer, declined 2.5 percent to C$32.55 as oil dropped for a second day. Global consumption for this quarter will average 90.1 million barrels a day, which is 0.3 percent less than previously forecast, the IEA said in a monthly report today.

Shoppers Drug Mart Corp. rose 3.3 percent to C$42.46 after reporting third-quarter revenue of C$3.21 billion, ahead of analysts’ estimates of C$3.2 billion. The retail pharmacy chain’s adjusted earnings of 81 Canadian cents was in line with expectations.

US

By Nikolaj Gammeltoft and Adria Cimino

Nov. 13 (Bloomberg) — U.S. stocks fell, halting a two-day gain in the Standard & Poor’s 500 Index, as concern about the federal budget debate erased a rally led by Home Depot Inc.

Microsoft Corp. slipped 3.2 percent after saying its Windows president is departing. AK Steel Holding Corp. tumbled 18 percent as it forecast a wider-than-anticipated fourth- quarter loss with a decline in prices for the last three months of the year. Home Depot, the largest U.S. home improvement retailer, rallied 3.6 percent after profit beat estimates.

The S&P 500 dropped 0.4 percent to 1,374.53 at 4 p.m. in New York, after rallying as much as 0.6 percent earlier in the day. The Dow Jones Industrial Average decreased 58.90 points, or 0.5 percent, to 12,756.18. Volume for exchange-listed stocks in the U.S. was 6.2 billion shares, 3.7 percent above the three- month daily average.

“The stock market is going to be captive to Washington for the time being,” Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston, said in a phone interview. “The market would like to go up a little bit from here after it has been beaten down, but it’s going to be hard pressed to sustain a rallying state until we have resolution on the fiscal cliff.”

The S&P 500 lost 2.4 percent last week, the biggest decline in five months, as President Barack Obama’s re-election set up a budget showdown with the Republican-controlled House of Representatives. The benchmark gauge for U.S. equities has lost 6.2 percent since its high for the year on Sept. 14, paring its 2012 gain to 9.3 percent.

If Congress doesn’t act by the end of the year, $607 billion in automatic spending cuts and tax increases are scheduled to take effect starting in January. Obama invited the top Democratic and Republican leaders to the White House this week to begin talks on a plan to avert the fiscal cliff.

Obama is meeting with labor leaders today and business executives such as David Cote of Honeywell International Inc., Alan Mulally of Ford Motor Co., and Kenneth Chenault of American Express Co. tomorrow. He’s trying to build support for extending middle-class tax cuts now and designing a “balanced” approach that relies on spending cuts and tax increases that would require immediate concessions from Republicans.

“The budget uncertainty is a risk,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “All will depend on Obama’s leadership. The Greek debt problem is a risk that remains. We’re not out of the woods yet.”

Stocks rose earlier after Spanish 10-year bonds reversed a decline, leaving the yield on the securities four basis points lower at 5.85 percent as European policy makers worked to alleviate the region’s debt crisis. Equities also gained as Greek Finance Minister Yannis Stournaras told a European Parliament hearing that yesterday’s euro-area meeting was “constructive” and he expects an accord to be reached on rescue funding at a Nov. 20 meeting.

The euro-area finance ministers gave Greece two extra years until 2016 to wrestle down its budget deficit to 2 percent of gross domestic product, pledging to plug the resulting financing gaps in order to keep the country in the single currency.

Finance ministers put off until Nov. 20 a decision on how to cover additional Greek needs of as much as 32.6 billion euros ($41 billion) and left unclear whether the International Monetary Fund will continue to contribute.

Technology companies had the largest decline out of 10 groups in the S&P 500 today, losing 0.8 percent. Microsoft retreated 3.2 percent, the most in the Dow, to $27.09. Windows President Steven Sinofsky is departing, while Julie Larson-Green will take charge of all software and hardware related to the flagship operating system. The changes are effective immediately, the world’s largest software maker said.

Cisco Systems Inc. jumped 6.9 percent to $18.02 as of 5:13 p.m. in New York. After the market close, the biggest maker of computer networking equipment reported a quarterly profit that exceeded analysts’ estimates as price reductions helped spur sales and cost cuts kept margins intact.

AK Steel fell 18 percent to $4.50. The supplier of the metal to U.S. automotive and construction customers said average steel selling prices will be down 5 percent compared with the third quarter in part because of worsening global business conditions. Lower raw-material costs won’t fully make up for the decline in prices, it said.

Weatherford International Ltd. lost 16 percent to $9.15.

The world’s fourth-largest oilfield-services provider reported third-quarter revenue of $3.82 billion, less than the $3.9 billion average of 24 estimates compiled by Bloomberg.

Big Lots Inc. slumped 5 percent, the biggest decline in the S&P 500, to $27.48. The discount chain was cut to sell from hold by Deutsche Bank analyst Charles Grom. The Columbus, Ohio-based company’s increasing use of promotions and “lackluster” store checks raise concern margins will become challenged, New York- based Grom wrote in a note.

Home Depot added 3.6 percent to $63.38, its highest level since 2000. U.S. real estate values are rebounding after a five- year decline, sending homeowners back to stores for remodeling supplies. Sales at Home Depot locations open at least a year rose 4.2 percent, the sixth straight quarterly increase, as customers visited more often and spent more per trip.

Xerox Corp. gained 1.4 percent to $6.42 after it boosted its quarterly dividend by 35 percent to 5.75 cents a share. The company also increased its share buyback plan by $1 billion and gave a fourth-quarter profit forecast that missed analysts’ estimates while it moves to become a services-led business amid declining printing revenue.

Greenbrier Cos. jumped 20 percent to $16.73. Activist investor Carl Icahn is planning talks with the railcar maker that may include strategic opportunities after buying a 9.99 percent stake in the business, which he described as undervalued.

Advanced Micro Devices Inc., the second-largest maker of processors for personal computers, rose 5 percent to $2.09.

Reuters reported that the company hired JPMorgan Chase & Co. to explore options including a sale. AMD said it isn’t actively pursuing a sale of the company or a significant sale of assets.

U.S. stocks will continue to advance toward the end of the year as this is traditionally a strong period for equities, according to Bank of America Corp.’s Mary Ann Bartels. There may be a “sharp correction” in stock prices at the beginning of 2013 as the bull market that began in March 2009 enters its fourth year, she said.

December has been the best month for the S&P 500 since 1950 with an average gain of 1.7 percent, according to the Stock Trader’s Almanac. The stock market may also get a year-end boost from a so-called Santa Claus rally — an upswing in the last five days of the year and the first two in January, the almanac said.

“The market is oversold and is still likely to have a choppy year-end rally,” Bartels, a New York-based technical analyst with Bank of America, wrote in a note yesterday. “The hurdle after the election is typically the first quarter in the following year,” she said. “Where we will be wrong is if the S&P 500 can not hold 1370.”

Have a wonderful evening everyone.

Be magnificent!

Knowledge is the annihilation of the separation between me and the other.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Free speech is life itself.

-Salman Rushdie, 1947-

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