December 7, 2012 Newsletter

Dear Friends,

Tangents:

WE ARE THE DECISIVE ELEMENT

I have come to the frightening conclusion that I am the decisive element.

It is my personal approach that creates the climate.

It is my daily mood that makes the weather.

I possess tremendous power to make life miserable or joyous.

I can be a tool of torture or an instrument of inspiration.

I can humiliate or humor, hurt or heal.

In all situations, it is my response that decides whether a crises is escalated or de-escalated, and a person I humanized or de-humanized…

-Johann Wolfgang von Goethe, 1749-1832.

On this day in…

1941 – Japanese planes raid Pearl Harbor in a surprise attack.

1942 – The U.S. Navy launches USS New Jersey, the largest battleship ever built.

1949 – The A.F.L. and the C.I.O. organize a non-Communist international trade union.

1972 – The crew of Apollo 17, the last manned mission to the moon, lifts off at Cape Canaveral, Florida.

1981 – The Reagan Administration predicts a record deficit in 1982 of $109 billion.

1988 – An earthquake in Armenia kills an estimated 100,000 people.

Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment.  –Buddha.

photos of the day

December 7, 2012

Great Tit birds feed on nuts and seeds left by visitors in a bird feeder in a park in central Minsk, Belarus.

/Vasily Fedosenko/Reuters

A lobster boat heads out to sea at dawn in South Portland, Maine. A red sky in the morning often indicates a storm system is moving east.

Robert F. Bukaty/AP

Market Closes for December 7th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Inyoung Hwang

Dec. 7 (Bloomberg) — Canadian stocks rose, paring a weekly decline in the Standard & Poor’s/TSX Composite Index, as reports showing faster-than-estimated job growth overshadowed a decline in U.S. consumer confidence.

Transcontinental Inc. rallied 6.6 percent, the most in more than a year, after TD Securities recommended buying shares of the commercial printer. Viterra Inc. rose 2.1 percent after Glencore International Plc received Chinese regulatory approval to take over the grain handler. Harry Winston Diamond Corp. lost 1 percent after its chief executive officer said now isn’t the right time to sell its retail unit.

The S&P/TSX advanced 8.64 points, or 0.1 percent, to 12,159.77 in Toronto. The equity gauge lost 0.7 percent in the week after a report showed manufacturing in the U.S. unexpectedly shrank and the Bank of Canada maintained a bias to raise interest rates.

“The initial headline number for the jobs report was a beat,” Jeffrey Bradacs, a fund manager with Manulife Asset Management Ltd., said from Toronto. He oversees about C$1.5 billion. “It was less about how strong the economy was but more about analysts having difficulty predicting the effects of hurricane Sandy.”

U.S. employment climbed by 146,000 jobs last month, a Labor Department report showed today, exceeding the 85,000 forecast by 91 economists surveyed by Bloomberg. The jobless rate in the world’s largest economy dropped to 7.7 percent, its lowest level in four years.

A separate report showed Canadian employment rose almost six times faster than economists forecast in November with most of the increase coming from full-time and private-sector work.

The increase of 59,300 lowered the unemployment rate to 7.2 percent from 7.4 percent, the first decline in five months, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News projected a 10,000 gain in jobs and 7.4 percent unemployment, according to median forecasts.

The S&P/TSX pared early gains after a report showed confidence among U.S. consumers fell more than forecast in December. The Thomson Reuters/University of Michigan preliminary consumer sentiment index decreased to 74.5, the weakest in four months, from 82.7 in November. Economists projected a preliminary reading of 82 for December, according to the median of 67 estimates in a Bloomberg survey.

Investors also watched developments on U.S. budget negotiations. U.S. House Speaker John Boehner said “there’s no progress to report” on talks with President Barack Obama to avert tax increases and spending cuts set to take effect in January.

Transcontinental rallied 6.6 percent to C$10.66 after it was raised to “buy” from “hold” at TD Securities by analyst Michael Elkins. The 12-month target price is C$12.00 per share.

Viterra increased 2.1 percent to C$16.20. Glencore International’s C$6.1 billion takeover of Canada’s largest grain handler received Chinese regulatory approval. Approval from China’s Ministry of Commerce will allow for the takeover to be completed by Dec. 17. Glencore agreed to buy Viterra for C$16.25 a share.

The price of gold rose while oil fell. The S&P GSCI Index of commodities lost 0.4 percent today 2.6 percent this week.

Goldcorp, the world’s second-largest producer of the metal, rallied 1.2 percent to C$36.91. Suncor Energy Inc. lost 0.7 percent to C$32.24.

Lundin Mining Corp. slid 4.6 percent to C$5.01. The metal producer forecast copper production from 2013 through 2015 will be between 100,000 tons and 110,000 tons a year. The estimates were disappointing, George Topping, a Toronto-based analyst at Stifel Nicolaus & Co., said in an e-mail.

Harry Winston, the only gem producer and jewelry retailer in Canada, slumped 1 percent to C$14.13.

“We don’t have any great pressure to dispose of the diamond luxury retail business,” Chairman and Chief Executive Officer Robert Gannicott said today on Harry Winston’s earnings conference call. “It’s not a particularly good time to contemplate doing that anyway.”

US

By Lu Wang and Rita Nazareth

Dec. 7 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a third week, as optimism over better-than-estimated jobs data overshadowed a drop in consumer confidence amid continuing budget talks.

JPMorgan Chase & Co. and Bank of America Corp. advanced more than 1.7 percent as financial shares rallied. American International Group Inc. rose 2.6 percent after saying it is in talks to sell 90 percent of its plane-leasing unit. Apple Inc. lost 2.6 percent, sending the maker of iPhones and iPad tablet computers to its biggest weekly decline since May 2010.

The S&P 500 rose 0.3 percent to 1,418.07, the highest level since Nov. 6, at 4 p.m. New York time. The Dow Jones Industrial Average gained 81.09 points, or 0.6 percent, to 13,155.13, extending its weekly advance to 1 percent. Both gauges advanced for a third week, the longest winning streak since August. The Nasdaq Composite Index dropped 0.4 percent to 2,978.04. More than 5.48 billion shares changed hands on U.S. exchanges, or 12 percent below the three-month average.

“We’re increasing equities,” Barry James, who helps oversee $3.5 billion as president of James Investment Research in Xenia, Ohio, said in a phone interview. “People got too pessimistic about the whole fiscal cliff thing. The markets are in a way looking for a reason to go up.”

Stocks rallied as Labor Department figures showed employment climbed by 146,000 following a revised 138,000 gain in October that was less than initially estimated. The median estimate of 91 economists surveyed by Bloomberg called for a gain of 85,000. Superstorm Sandy “did not substantively impact” the data, the agency said. The unemployment rate fell to 7.7 percent, the lowest since December 2008, as the size of the labor force shrank.

U.S. equities briefly erased gains after a gauge of consumer confidence decreased more than forecast. The Thomson Reuters/University of Michigan preliminary index of U.S. consumer sentiment for December fell to 74.5 from 82.7 a month earlier. The median economist estimate was for a decrease to 82.

Investors also watched developments in federal budget negotiations. The White House has “wasted another week” and no progress has been made in budget talks, House Speaker John Boehner said in a news conference today in Washington. President Barack Obama and Republicans are working toward a compromise to avert what has been labeled a fiscal cliff — a Jan. 1 surge of more than $600 billion in automatic tax increases and spending cuts that could propel the nation into recession.

“There is a lot of confusion and there are a lot of cross currents here to consider,” Terry L. Morris, who helps oversee about $2.5 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said in a phone interview.

“Unemployment has improved, yet confidence deteriorated. How do you explain the market isn’t doing anything when Boehner comes out and says we’re nowhere? It seems like the market should have been going down, but the fact it’s not tells me that the market wants to go higher.”

Today’s gain pushed the S&P 500 above its average in the past 50 days for the first time since Oct. 19, according to data compiled by Bloomberg. The index had spent the previous 32 days below the threshold, the longest streak since a 52-day stretch that ended Oct. 7, 2011, the data show. The average is watched by traders to gauge the market’s trends.

Financial companies in the S&P 500 climbed 0.8 percent as a group to the highest level since Nov. 6. JPMorgan Chase rallied 2.6 percent, the most in the Dow, to $42.56, while Bank of America advanced 1.7 percent to $10.64.

AIG rose 2.6 percent to $34.13. The insurer said it is in talks to sell 90 percent of its plane-leasing unit to an investor group including New China Trust Co. A deal may value International Lease Finance Corp. at about $5.5 billion, according to one person with knowledge of the matter, who asked not to be identified because the talks are confidential.

After the close of regular trading, AIG said superstorm Sandy will cost the company about $1.3 billion after taxes and reinsurance, the highest sum disclosed by a U.S. insurer. The shares tumbled 1.8 percent as of 4:42 p.m. in New York.

Freeport-McMoRan Copper & Gold Inc. climbed 2.9 percent to $31.70. The world’s largest publicly traded copper producer was raised to strong buy from buy at Oracle Investment. The stock slumped 20 percent in the previous two days after agreeing to buy Plains Exploration & Production Co. and McMoRan Exploration Co. for $9 billion. The move was a “game changer and a wise use of capital,” Oracle analyst Laurence Balter said in a note.

Macy’s Inc. gained 1.3 percent to $39.41 after the department-store chain authorized a $1.5 billion increase in share repurchases.

McGraw-Hill Cos. gained 4.2 percent to $56.53. The global information-services provider announced a special dividend of $2.50 a share.

Computer and software makers in the S&P 500 fell 0.6 percent for the only loss among 10 industry groups.

Apple slipped 2.6 percent to $533.25. The shares slumped 8.9 percent this week amid concern that the company will lose ground in smartphones to Nokia Oyj in China while giving up market share to Google Inc. in tablets.

Amarin Corp. sank 19 percent to $9.69. The maker of the cholesterol-lowering drug Vascepa fell as investors lost confidence that the company will soon be acquired.

The cost of protecting against swings in financial shares from JPMorgan to Berkshire Hathaway Inc. has fallen to a 19- month low as banks fire workers to improve profitability and the housing market recovers.

Implied volatility for three-month contracts with an exercise price closest to the Financial Select Sector SPDR Fund was 21 percent higher than for the SPDR S&P 500 ETF Trust yesterday, according to data compiled by Bloomberg. That’s the smallest gap between the key measures of options prices since May 2011. A gauge of banks, brokerages and insurers in the S&P 500 has climbed 22 percent this year, the most among the 10 main groups.

Analysts forecast that financial companies will post the third-fastest profit growth among S&P 500 industries next year as mortgage interest rates near record lows help drive demand for a shrinking property supply and banks reduce costs. Home prices in October rose the most since 2006 and the U.S. economy expanded more than previously estimated in the third quarter.

“The market is recognizing that the financial sector is healing,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $170 billion, said in a phone interview yesterday. “Housing prices are rising, so the collateral of the banking system is getting more valuable, which helps banks weather any future problems.”

Have  a wonderful weekend everyone.

Be magnificent!

Our contribution

to the progress of the world must, therefore,

consist in setting own house in order.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Nothing will work unless you do.

-Maya Angelou, 1928-

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