December 4, 2012 Newsletter

Dear Friends,

Tangents:

The Poem

First Signs of Ageing

by John Burnside

Being was never my forte; cold red wine

and glimmer of herd instinct bearing me into a night

that any fool could travel, if he chose.

I much prefer the moment’s

absence, like the scent

of tulips in the hall and women calling

softly, from one landing to the next,

a moment since.

I never understood what they were saying,

but something they love

is retrieved from the huddle of knowing

again and again the justice of should-have-been

in place of what never was.

I think of them now as sisters, as I think

each footfall is a mirror where I keep

the secret I never told, a childhood game

persisting on the cold side of away –

and should-have-been a house

I know, the way a blind man knows the house

he lives in, blind from birth and every room

laid out for none to see, in steps and echoes.

On this day in 1980, Led Zeppelin announced it was disbanding after drummer John Bonham unexpectedly passed away. –Steven Russolillo, WSJ, 12/04/2012.

And also on this day in…

1835 – Samuel Butler, writer, was born.

1875 – Rainer Maria Rilke, poet, is born.

1942 – U.S. planes make the first raids on Naples, Italy.

1947 – Tennessee William’s play A Streetcar Named Desire premieres on Broadway starring Marlon Brando and Jessica Tandy.

1952 – The Grumman XS2F-1 makes its first flight.

1959 – Peking pardons Pu Yi, ex-emperor of China and of the Japanese puppet-state of Manchukuo.

1981 – President Ronald Reagan broadens the power of the CIA by allowing spying in the United States.

1991 – The last American hostages held in Lebanon are released.

Blow, blow, thou winter wind.  Thou art not so unkind.  As a man’s ingratitude.  –William Shakespeare.

photos of the day

December 4, 2012

Chalets are pictured in Barboleuse near the alpine ski resort of Villars-sur-Ollon. In March 2011, Switzerland accepted an initiative to limit the number of holiday homes to a 20 percent cap in every village in the country. The law will be enforced, beginning January 1, 2013.

Denis Balibous/Reuters

A woman stands in front of a doll display in a traditional Christmas market in Rome, Italy.

Tony Gentile/Reuters

Market Closes for December 4th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Nikolaj Gammeltoft and Eric Lam

Dec. 4 (Bloomberg) — Canadian stocks fell for a second day as energy shares slumped amid a decline in oil prices while the Bank of Canada maintained a bias to raise interest rates.

Canadian Natural Resources Ltd. retreated 2.6 percent as oil fell for the first time in four days. ShawCor Ltd., which provides coatings and other services to the pipeline industry, plunged 14 percent after the company said a sale was unlikely.

Bank of Montreal, Canada’s fourth-largest lender, rose 0.6 percent after reporting fourth-quarter profit that topped analysts’ estimates.

The Standard & Poor’s/TSX Composite fell 32.56 points, or 0.3 percent, to 12,137.18 in Toronto. The equity gauge has gained 1.5 percent this year.

“People have an understanding that the economy is weakening, so while there may be this bias toward raising I don’t think it will happen and the market can see through it,” said Robert McWhirter, fund manager with Selective Asset Management Inc. in Toronto. His firm manages about C$60 million ($60 million). “People are still trying to figure out where to go from here with regards to the fiscal cliff.”

Bank of Canada Governor Mark Carney kept his bias to raise interest rates, saying economic growth will accelerate next year after temporary disruptions in energy output and weak global demand curbed the country’s expansion. Canada’s gross domestic product slowed to a 0.6 percent annualized pace of growth in the third quarter, the slowest in more than a year.

The benchmark rate on overnight loans between commercial banks remained 1 percent, where it’s been for more than two years, and policy makers said a “small degree of slack” in the economy will gradually disappear, bringing inflation to the 2 percent target over the next 12 months. Today’s decision was expected by all 26 economists surveyed by Bloomberg News.

U.S. President Barack Obama said in a Bloomberg Television interview that a Republican offer on averting the so-called fiscal cliff doesn’t go far enough and won’t raise the revenue needed to shrink the deficit by $4 trillion over the next decade.

“We have the potential of getting a deal done,” Obama said at the White House today in his first television interview since winning re-election. “Unfortunately,” he said, House Speaker John Boehner’s proposal “right now is still out of balance.”

Crude for January delivery fell 0.7 percent as Republicans and Democrats try to avert more than $600 billion in automatic tax increases and spending cuts that start in January.

Energy companies contributed the most to losses in the S&P/TSX as seven out of 10 industries retreated. Trading volume was in line with the 30-day average.

Canadian Natural Resources dropped 2.6 percent to C$27.43 and Encana Corp. slipped 2.2 percent to C$21.14.

ShawCor plunged 14 percent to C$39.31, its biggest loss since March 2000, after the Toronto-based company said it’s “highly unlikely” that a sale of all of its shares will occur “at this time.” A special committee and the board are continuing to review strategic solutions, the company said in a statement yesterday. ShawCor had said on Sept. 5 it was considering selling itself.

Bank of Montreal added 0.6 percent to C$59.63 after the lender said fourth-quarter profit rose 41 percent on gains from investment banking and trading. The bank said earnings for the quarter were C$1.59 a share, up from C$1.11 a year earlier.

OceanaGold Corp. sank 8.1 percent to C$3.08 after the gold mining company, with projects in New Zealand and the Philippines, said yesterday it plans to raise C$93 million by selling 30 million shares to a group of investors at a discount.

The deal, expected to close Dec. 18, sells each share at C$3.11, a 7.1 percent discount to yesterday’s close.

The company plans to use the cash to reduce outstanding debt and provide balance sheet flexibility.

US

By Rita Nazareth and Lu Wang

Dec. 4 (Bloomberg) — U.S. stocks fell, sending the benchmark Standard & Poor’s 500 Index lower for a second straight day, after President Barack Obama held his ground about raising tax rates for the highest-income Americans.

Las Vegas Sands Corp. and Wynn Resorts Ltd. dropped at least 2.7 percent, joining a slump in Macau casinos, on speculation China may increase scrutiny of junket operators, who provide credit to high-stake gamblers. Intel Corp. advanced 2.2 percent on plans to sell bonds in a four-part offering to repurchase stock that’s trading at the lowest in 16 months.

The S&P 500 retreated 0.2 percent to 1,407.05 at 4 p.m. New York time. The Dow Jones Industrial Average fell 13.82 points, or 0.1 percent, to 12,951.78. More than 5.9 billion shares traded hands on U.S. exchanges, or 4.7 percent below the three- month average, according to data compiled by Bloomberg.

“The clock is ticking,” said Quincy Krosby, market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than 1 trillion. She spoke in a phone interview. “The focus is on what goes on in Washington. The market will be volatile. You’ve got to be very well hedged given that the market is so much headline-driven.”

U.S. President Obama’s administration rejected a Republican plan for tackling the fiscal cliff that omitted higher tax rates for top-earning Americans, leaving the issue unresolved with about four weeks left before more than $600 billion in tax increases and federal spending cuts start taking effect.

European stocks rose as finance ministers met to discuss moves to stem the debt crisis.

Obama said in a Bloomberg Television interview that the Republican offer on resolving the fiscal cliff doesn’t go far enough and won’t raise the revenue needed to shrink the deficit by $4 trillion over the next decade. Obama, in his first television interview since winning re-election, said, “We have the potential of getting a deal done.”

The president said he’s willing to make further cuts in entitlements and realizes he won’t get “100 percent” of what he wants. Still, he insisted that Republicans accept higher tax rates for top earners if the U.S. is to avoid automatic spending cuts and tax increases at the start of 2013.

“We’re going to have to have higher rates for the wealthiest,” Obama said today. “It’s just a matter of math.”

Casino shares tumbled. Police in mainland China and Macau have detained people from at least three of the biggest junket operators in recent weeks, the Wall Street Journal reported, citing people familiar with the situation. By acting as middlemen, junket operators help drive the VIP business that accounts for about two-thirds of casino revenue in the world’s largest gambling hub. Las Vegas Sands fell 2.8 percent to $45.46. Wynn Resorts dropped 2.9 percent to $110.12.

MetroPCS Communications Inc. sank 7.5 percent to $9.96. The company, which agreed to merge with T-Mobile USA Inc. in October, fell after Reuters reported that Sprint Nextel Corp. is unlikely to make a counteroffer.

Darden Restaurants Inc. fell 9.6 percent to $47.40. The owner of the Red Lobster and Olive Garden chains reported preliminary fiscal second-quarter profit of 25 cents to 26 cents a share, trailing analysts’ estimates. Chief Executive Officer Clarence Otis said the company’s promotions didn’t resonate with consumers and were affected by rivals’ offers.

Oshkosh Corp. lost 3.8 percent to $28.96. Billionaire activist investor Carl Icahn dropped his bid to buy Oshkosh after failing to receive enough shareholder support.

IAC/InterActiveCorp. declined 7.8 percent to $43.50. The Internet company founded by Barry Diller fell after Goldman Sachs Group Inc. cut its rating on the stock to sell.

Intel gained 2.2 percent to $19.97. The world’s largest semiconductor maker, whose attempt with Microsoft Corp. to combat Apple Inc.’s iPad in the $63.2 billion tablet market is getting off to a slow start, may issue five-year securities to yield about 80 basis points more than similar-maturity Treasuries, 10-year bonds at a relative yield of about 115 basis points, 20-year securities at about 135 basis points and 30-year debt at about 150, according to a person familiar with the offering.

Big Lots Inc. rose 12 percent to $31.27. The discount retailer boosted its earnings forecast, saying it now expects to earn as much as $3.05 a share this year. The company had projected profit of $2.95 at most.

Netflix Inc. rallied 14 percent to $86.65. The online video service signed a multiyear accord to carry Walt Disney Co. animated and live-action films, marking the first time a major studio has bypassed traditional cable-TV outlets.

Options traders are speculating the worst is over for Hewlett-Packard Co., pushing bearish contracts to the cheapest level in almost seven years.

Puts priced 10 percent below shares in the world’s largest computer maker cost 2.17 points more than calls betting on a 10 percent increase, according to three-month data compiled by Bloomberg. The price relationship known as skew fell to 1.54 on Nov. 26, the lowest since February 2006. Hewlett-Packard shares have lost 50 percent this year.

The stock is cheapest in at least four years after the company accused Autonomy Corp., the software maker it bought last year, of a broad range of financial falsehoods contributed to a $8.8 billion writedown. Hewlett-Packard Chief Executive Officer Meg Whitman is cleaning up the business and her strategy of paring product lines and cutting staff to make the company more competitive will benefit stock, according to Keith Trauner of GoodHaven Capital Management LLC.

“The stock appears significantly undervalued,” Trauner, a Miami-based money manager at GoodHaven Capital Management LLC, said in a phone interview. “Whitman’s strategies of foregoing large acquisitions, focusing on product design and development, and retooling the sales force are all sensible thoughts going forward.”

Have a wonderful evening everyone.

Be magnificent!

When there is space between you and the object you are observing

you well know there is no love, and without love, however hard you try to reform the world

or bring about a new social order or however much you talk about improvements,

you will only create agony.

So it is up to you.

Krishnamurti, 1895-1986

As ever,

Carolann

Science is what you know, philosophy is

what you don’t know.

-Bertrand Russell, 1872-1970

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