December 7, 2012 Newsletter

Dear Friends,

Tangents:

It’s St. Nicholas Day in Europe.  St. Nicholas is the patron saint of merchants. 🙂

Today would have been Dave Brubeck’s 92^nd birthday.  The Jazz great died yesterday morning.

And also on this day in…

1865 – 13^th Amendment ratified; slavery abolished.

1877 –  Thomas A. Edison makes the first sound recording when he recites “Mary had a Little Lamb” into his phonograph machine.

1896 – Ira Gershwin was born.

1917 –  The Bolsheviks imprison Czar Nicholas II and his family in Tobolsk.

1938 –  France and Germany sign a treaty of friendship.

1976 –  Democrat Tip O’Neill is elected speaker of the House of Representatives. He will serve the longest consecutive term as speaker.
Whenever I hear anyone arguing for slavery, I feel a strong impulse to see it tried on him personally. –Abraham Lincoln.

photos of the day

December 6, 2012

View of Et Si? Installation by artist Daniel Knipper is seen during the rehearsal for the ‘Festival of Lights’ in central Lyon, France, late Wednesday night. The festival, with designers from all over the world, is one of Lyon’s most famous and will run from December 6 to 9.

Robert Pratta/Reuters

A NASA handout released December 5 shows a composite image of Asia and Australia at night, assembled from data acquired by the Suomi NPP satellite in April and October 2012. The image was made possible by the satellite’s ‘day-night band’ of the Visible Infrared Imaging Radiometer Suite (VIIRS), which detects light in a range of wavelengths from green to near-infrared and uses filtering techniques to observe dim signals such as city lights, gas flares, auroras, wildfires and reflected moonlight.

NASA Earth Observatory/Reuters

Market Closes for December 6th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Dec. 6 (Bloomberg) — Canadian stocks fell as bank shares slumped amid fourth-quarter earnings reports, overshadowing a jump in Loblaw Cos. after the company announced it will create a real estate investment trust.

Toronto-Dominion Bank and Canadian Imperial Bank of Commerce fell more than 0.5 percent after reporting results that included rising provisions for bad loans. Loblaw, Canada’s largest grocery chain by market value, soared the most in 25 years as it will sell units in the REIT in an initial public offering. Bombardier Inc. rose 1.5 percent after Delta Air Lines Inc. agreed to buy regional jets in a deal worth as much as $3.29 billion.

The Standard & Poor’s/TSX Composite Index lost 6.16 points, or 0.1 percent, to 12,151.13 in Toronto. The equity gauge has gained 1.6 percent this year. Trading volume was 27 percent higher than the 30-day average, according to data compiled by Bloomberg.

“Overall, the market is treading water. A lot of the direction is still being held hostage by the fiscal cliff,” said Luciano Orengo, a fund manager with Manulife Asset Management Ltd. in Toronto. His team manages about C$1.4 billion ($1.41 billion) in assets. “The headline stock today is Loblaw; I think people like that they’re unlocking the value in their real estate.”

In Washington, House Speaker John Boehner is under pressure as a few dozen Republicans have joined a bipartisan call to consider “all options” on taxes and entitlement programs in an effort to reach a budget compromise ahead of more than $600 billion in automatic tax increases and spending cuts scheduled for the new year.

Bank stocks lost the most in the S&P/TSX. Toronto-Dominion, the country’s second-largest lender, fell 1.8 percent to C$81.12. CIBC, the fifth-biggest bank, slipped 0.5 percent to C$80.14. National Bank of Canada, the No. 6 lender, dropped 1.4 percent to C$76.66.

Toronto-Dominion and CIBC posted profits that beat analysts’ estimates, helped by gains from their investment- banking units. National Bank of Canada matched estimates after posting a 20 percent earnings gain. Toronto-Dominion set aside C$565 million for bad loans, 66 percent more than a year ago, while CIBC had C$328 million in provisions, a 7.2 percent increase. National’s provisions fell 8 percent to C$46 million.

“The headlines beat, but when you look under the hood the quality of the beat wasn’t great,” said Manulife’s Orengo.

Loblaw surged 14 percent to C$38.20, its biggest gain since October 1987. The grocer said it plans to contribute about 35 million square feet of real estate with a current value of more than C$7 billion and plans to retain a “significant” majority interest, according to a statement today. The IPO is expected to be completed next year pending regulatory approvals and authorization to list on the TSX.

George Weston Ltd., which owns 60 percent of Loblaw, advanced 6.8 percent to C$67.71. Bombardier added 1.5 percent to C$3.33 after announcing it has sold 40 CRJ900 NextGen jets to Delta, along with options for 30 more aircraft.

The deal is Bombardier’s third major aircraft order in recent months. NetJets, a unit of Warren Buffett’s Berkshire Hathaway Inc., agreed to buy as many as 275 Challenger aircraft worth $7.3 billion in June, and luxury air-charter company VistaJet Holding SA ordered as many as 142 Global-series planes with a value of $7.8 billion in November.

DragonWave Inc., which sells wireless network equipment, lost 2.3 percent to C$2.16 after the company cut its forecast for third-quarter revenue to $39 million, from $43 million to $50 million previously. The stock pared earlier losses of as much as 16 percent.

The Ottawa-based company blamed the sales revision on “short-term supply challenges” that caused shipments to be delayed, as well as lower-than-expected orders from European customers.

US

By Rita Nazareth and Lu Wang

Dec. 6 (Bloomberg) — U.S. stocks rose for a second day as Apple Inc. rebounded from its biggest drop in four years and investors weighed prospects for a budget deal in Washington.

Apple advanced 1.6 percent, reversing an earlier loss.

Akamai Technologies Inc. increased 10 percent after agreeing to sell services with AT&T Inc. H&R Block Inc., the biggest U.S. tax preparer, advanced 5.1 percent after reporting a loss that was smaller than analysts estimated. Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, and MetLife Inc., the biggest U.S. life insurer, declined at least 1.2 percent following analysts’ rating downgrades.

The Standard & Poor’s 500 Index increased 0.3 percent to 1,413.94 at 4 p.m. New York time. The Dow Jones Industrial Average advanced 39.55 points, or 0.3 percent, to 13,074.04.

More than 5.7 billion shares changed hands on U.S. exchanges, or 8.9 percent below the three-month average.

“Apple stock is taking a breather after a sharp selloff and that’s helping the overall market,” said Alan Gayle, senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “Most analysts continue to like their story. We’re seeing some validation of that. In addition, the jobless claims were better than expected. The data suggest the U.S. economy continues to heal and that will be the case as long as we don’t fall off the fiscal cliff.”

A few dozen Republicans joined a bipartisan push to break an impasse between President Barack Obama and House Speaker John Boehner over taxes for the highest-earning Americans, signing a letter calling for openness to “all options.” Fewer Americans than projected filed applications for unemployment benefits last week as disruptions caused by superstorm Sandy waned.

Equities fell earlier as the European Central Bank forecast the economy will shrink 0.5 percent this year, more than the 0.4 percent contraction it predicted in September. The ECB cut its 2013 forecast to a contraction of 0.3 percent, and projected expansion of 1.2 percent in 2014. Risks to the outlook remain on the downside, ECB President Mario Draghi said.

“Weak activity is expected to extend into next year,” Draghi said at a press conference in Frankfurt after policy makers left the benchmark rate at a record low of 0.75 percent.

“Later in 2013, economic activity should gradually recover as global demand strengthens and our accommodative monetary-policy stance and significantly improved financial market confidence work their way through to the economy.”

The S&P 500 swung between gains and losses earlier today.

Intraday price fluctuations in the benchmark index averaged 0.8 percent over the past five days, the smallest since September, according to data compiled by Bloomberg.

“The market is showing not much conviction,” said Stephen Carl, head equity trader at Williams Capital Group LP in New York. “Fiscal cliff is on the forefront, stalling any moves at the moment. If there is a disparity one way or the other from tomorrow’s jobs report, you will probably see a move in the market.”

Data tomorrow is forecast to show U.S. payrolls rose by 85,000 workers last month, the smallest gain since June, according to the median forecast of economists.

Seven out of 10 groups in the S&P 500 rose today as technology and consumer discretionary shares had the biggest advances. Utilities and phone companies declined the most.

Apple rose 1.6 percent to $547.25, reversing an earlier decline of as much as 3.7 percent. It plans to spend more than $100 million next year on building Mac computers in the U.S., shifting a small portion of manufacturing away from China, the country that has handled assembly of its products for years.

The shares slumped 6.4 percent yesterday on concern that Apple will lose ground in smartphones to Nokia Oyj in China while giving up market share to Google Inc. in tablets. China Mobile Ltd. agreed to carry the Lumia 920T, a device based on Microsoft Corp.’s Windows Phone 8 software. In another announcement that may have fueled the stock’s slide, research firm IDC said yesterday that Apple’s share of the tablet market will slip to 53.8 percent this year from 56.3 percent in 2011, while Google’s will increase.

Akamai surged 10 percent to $39.06. The content-delivery services for AT&T’s business customers will be jointly sold and managed by both companies and be offered as a feature integrated into AT&T’s network, said Fletcher Cook, a spokesman for AT&T, the largest U.S. phone company. The contract is a multi-year, exclusive agreement, said Cook, who declined to disclose the terms.

H&R Block gained 5.1 percent to $18.26. The second-quarter results “reflect savings from our cost reduction initiatives and a strong tax season in Australia,” Chief Executive Officer Bill Cobb said in the statement.

Sirius XM Radio Inc. rose 0.7 percent to $2.79. The satellite-radio broadcaster said it will issue a special dividend of 5 cents a share and repurchase as much as $2 billion in stock.

Starbucks Corp. gained 5.7 percent to $53.70. The world’s biggest coffee-shop operator was raised to outperform from neutral at Robert W. Baird & Co. by analyst David Tarantino. The 12-month share-price estimate is $62.

Freeport-McMoRan dropped 4.2 percent to $30.81 after being downgraded to market perform from outperform at BMO Capital Markets and Macquarie Group Ltd.

The shares slumped 16 percent yesterday, the most in four years, after the mining company agreeing to buy Plains Exploration & Production Co. and McMoRan Exploration Co. for $9 billion. The move was criticized by BlackRock Inc., one of Freeport’s largest investors, and Dan Rohr, an analyst at Morningstar Investment Service, for failing to create any obvious cost savings.

MetLife declined 1.2 percent to $32.91. The shares were downgraded to equal-weight from overweight at Barclays Plc by analyst Jay Gelb. The share-price estimate is $37.

Traders are pushing the cost of protecting against J.C. Penney Co. swings to an all-time high relative to its competitors amid investor pessimism about Chief Executive Officer Ron Johnson’s turnaround plan.

Implied volatility, the key gauge of options prices, for three-month contracts closest to J.C. Penney shares has risen to 65.8, according to data through yesterday compiled by Bloomberg.

That is 3.3 times the level for the SPDR S&P Retail ETF, near the record reached last month. J.C. Penney, the fourth-largest U.S. department-store company, has lost 48 percent this year.

Johnson, who joined as chief executive officer about a year ago from Apple, is losing customers in a bid to implement an everyday low-pricing plan and turn the chain into a collection of branded shops. Revenue at J.C. Penney has declined by more than 20 percent for three straight quarters, sending the shares to their lowest price in almost four years. The company said earlier this week that its operating efficiency may be hurt after it fired employees while others left voluntarily.

“People are very focused on when the company will see some sort of bottom on the sales decline,” Jessica Bemer, a Sewickley, Pennsylvania-based senior analyst at Snow Capital Management LP, which oversees about $2.5 billion, said in a telephone interview yesterday. “The concern is that in order to be successful in that venture, the company will need to stabilize cash flow. It’s going to take some time to get there. How long are people going to wait?”

Have  a wonderful evening everyone.

Be magnificent!

Every day we see or read of appalling things happening in the world as the result of violence in man.

You may say, “I can’t do anything about it,” or “How can I influence the world?”

I think you can tremendously influence the world if you yourself are non violent,

if you lead actually every day a peaceful life – a life which is not competitive, ambitious, envious –

a life which does not create enmity.

Small fires can become ablaze.

Krishnamurti, 1895-1986

As ever,

Carolann

Fires can’t be made with dead embers, nor can enthusiasm be stirred

by spiritless men.   Enthusiasm in our daily work lightens effort and

turns even labor into pleasant tasks.

-James Baldwin, 1924-1987

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