December 12, 2012 Newsletter

Dear Friends,

Tangents:

Apparently tonight Barbara Walters has a special program featuring the 10 most fascinating people of 2012 (9:30PM, ABC).  Some rate a Meh.

December 12^th, 1901: Marconi makes the first radio transmission across the Atlantic.

-from the Globe & Mail today:

Three dots – pip, pip, pip – that in Morse code represents the letter “s” sent Newfoundland into the history books.  They were transmitted 2,735 km from Poldhu, Cornwall, in the United Kingdom to Signal Hill in St. John’s, where Italian inventor Guglielmo Marconi and his assistants hoisted an antenna with a kite above.  It was the first transatlantic wireless signal – but it almost didn’t happen there.  Marconi chose Signal Hill after storms destroyed transmitters he built in Cornwall and Cape Cod, Mass.  After the successful transmission, he expressed confidence that “mankind would be able to send messages without wires….between the farthermost ends of the Earth.”  Marconi left Newfoundland because of legal issues but returned in 1904, setting up a wireless station at Cape Race – famous for receiving the Titanic’s SOS call in 1912. –Jane Taber.

**Speaking of Cornwall, I have forgotten who sent me the recommendation to read When God was a Rabbit by Sarah Winman, but whoever it was, THANK YOU!  (Part of the setting for the novel is in Cornwall). I took your advice and bought it when it was first recommended, but only got around to reading it recently.  It is an amazing read.   I loved it.  I recommend it.

Also on this day in…

1787 – Pennsylvania became the second state to ratify the U.S. Constitution.

1821 – Gustav Flaubert was born.

1914 – The New York Stock Exchange re-opened for the first time since July 30. The market had shut down when World War I broke out.

1915 – Singer Frank Sinatra was born in Hoboken, N.J.

I feel sorry for people who don’t drink. When they wake up in the morning, that’s as good as they’re going to feel all day. –Frank Sinatra

1975 – Sara Jane Moore pleaded guilty to trying to kill President Gerald R. Ford.

1998 – The House Judiciary Committee approved a fourth article of impeachment against President Bill Clinton and submitted the case to the full House.

This is the last  triple date for almost a century: next time is 01/01/2101.

photos of the day

December 12, 2012

A street performer poses with an iPad with the time reading 12:12:12 in the Plaza Mayor in Madrid.

Paul Hanna/Reuters

Workers walk past clocks showing a time of 12 minutes past 12 noon, on this century’s last sequential date, in a plaza in the Canary Wharf business district of London.

Toby Melville/Reuters

Market Closes for December 12th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Dec. 12 (Bloomberg) — Canadian stocks rose for a fourth day after gold miners advanced as the U.S. Federal Reserve expanded its asset-purchase program and budget talks continued in Washington.

Lake Shore Gold Corp. climbed 14 percent after boosting its processing capacity. Barrick Gold Corp. and Goldcorp Inc. advanced at least 2.9 percent as the price of the metal traded at a one-week high. Just Energy Group Inc. added 4 percent after the natural gas and electricity supplier announced a C$105 million investment from the Canada Pension Plan Investment Board. Cenovus Energy Inc. fell 1.1 percent after it said cash flow will likely fall in 2013.

The Standard & Poor’s/TSX Composite Index advanced 70.73 points, or 0.6 percent, to 12,353.09 in Toronto.

A technical error caused the calculation of the benchmark equity index to be incorrect for a period during the trading day. The S&P/TSX didn’t receive accurate data for stocks with tickers from A through L starting at 10:42 a.m. in Toronto, Carolyn Quick, a spokeswoman for the Toronto Stock Exchange, said. The company said the data issue was resolved at 12:21 p.m.

“People’s portfolios are fairly de-risked already and the bulk of the protection selling is done, so there’s a slow drift upwards as we come closer to the culmination of these fiscal cliff talks,” said Bob Decker, a fund manager with Aurion Capital in Toronto. The firm manages about C$5.5 billion ($5.58 billion).

Negotiations for a U.S. budget compromise continued with President Barack Obama yesterday reducing his demand for tax increases to $1.4 trillion from $1.6 trillion. Democrats and Republicans remain hundreds of billions of dollars apart as a year-end deadline to avoid more than $600 billion in automatic tax increases and spending cuts approaches.

The U.S. central bank said it will buy $45 billion a month of Treasury securities starting in January, in addition to $40 billion a month of mortgage-debt purchases. Asset buying will continue “if the outlook for the labor market does not improve substantially,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington.

Toronto-Dominion Bank rose 0.6 percent to C$81.08 and Bank of Nova Scotia added 0.7 percent to C$56.88 as bank and raw materials stocks contributed most to gains on the S&P/TSX as eight of 10 industries advanced. Trading volume was 40 percent higher than the 30-day average.

Lake Shore Gold surged 14 percent to 82 Canadian cents after the gold mining company said it now has a processing capacity of 2,500 metric tons a day, a 25 percent increase. The company expects to push capacity to 3,000 metric tons a day in the second quarter of 2013.

Centerra Gold Inc. climbed 6.1 percent to C$8.93 after announcing it has purchased from Stratex International Plc the 30 percent stake in the Oksut gold project in Turkey it doesn’t already own for $20 million in cash and a 1 percent smelter royalty.

Barrick, the world’s largest producer of gold, added 3 percent to C$34.56 and Goldcorp rose 2.9 percent to C$37.63.

Gold for February delivery increased 0.5 percent to settle at $1,717.90 an ounce in New York.

Just Energy gained 4 percent to C$9.70 after the Mississauga, Ontario-based company said the CPPIB has purchased C$105 million in five-and-a-half year bonds with a coupon of 9.75 percent. Just Energy plans to use the cash to reduce its drawings on its working capital line, fund future growth and for general corporate purposes.

Sprott Resource Corp. jumped 11 percent to C$3.88, the most in more than two years, after the investment company initiated a monthly dividend of 3.8 Canadian cents a share.

Cenovus slipped 1.1 percent to C$33.34 as the oil producer spun off by Encana Corp. said cash flow will be C$3.1 billion to C$4 billion in 2013. The company’s 2012 estimate is for cash of C$3.7 billion in 2012. Cenovus blamed the lowered guidance on “expectations of lower realized oil prices.”

US

By Lu Wang and Inyoung Hwang

Dec. 12 (Bloomberg) — U.S. stocks erased gains as optimism about Federal Reserve plans to buy more bonds faded, with investor focus returning to the budget deadlock in Washington.

Berkshire Hathaway Inc. climbed 2.4 percent after lifting the threshold it will pay for stock, signaling Chief Executive Officer Warren Buffett views the shares as undervalued. DuPont Co. advanced 1.4 percent as the chemical maker announced a share buyback and said 2012 earnings will be at the high end of forecasts. Eli Lilly & Co. sank 3.2 percent after saying it’s conducting an added study for an experimental Alzheimer’s drug.

The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,428.48 in New York, erasing an earlier rally of as much as 0.8 percent. The Dow Jones Industrial Average slipped 2.99 points, or less than 0.1 percent, to 13,245.45. More than 6.6 billion shares changed hands on U.S. exchanges, or 6.3 percent above the three-month average, according to data compiled by Bloomberg.

“Traders have been poking holes in some of the Fed comments,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said in an e-mail.

“Nothing hugely ‘negative,’ just reason to be doing some selling with the strength we’ve had in the last couple days. Markets are very thin right now and subject to bigger swings this week.”

Stocks rallied after the central bank said it will buy $45 billion a month of Treasury securities starting in January, in addition to $40 billion a month of mortgage-debt purchases, as part of its effort to stimulate the economy. Asset buying will continue “if the outlook for the labor market does not improve substantially,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington.

The rally faded as Fed Chairman Ben S. Bernanke said monetary stimulus cannot offset the full effect of the so-called fiscal cliff of automatic tax increases and budget cuts set to go into effect next year.

President Barack Obama is seeking a deal with Republican lawmakers to avoid the fiscal cliff, lowering his demand for tax increases in the budget to $1.4 trillion from $1.6 trillion yesterday. House Speaker John Boehner said today that Obama’s revenue demand can’t pass the House or the Senate. Democrats and Republicans remain divided on taxes and spending, as well as on whether an agreement should include an increase in the debt limit and further programs to boost the economy.

“People finally realized that we still have the fiscal cliff waiting in the wings,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., said in an e-mail. His firm oversees about $80 billion. What the Fed “said in the minutes should be bullish for equities,” he said.

The S&P 500 has erased its losses since Election Day, advancing 0.9 percent so far this month to give the benchmark index a 14 percent rally for 2012. Its average gain for December is 1.5 percent, the highest of any month except July, according to data dating back to 1928 compiled by Bloomberg. 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, according to the Stock Trader’s Almanac.

The S&P 500 will surpass its record to reach 1,580 at the end of next year, according to Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co. His forecast is 0.9 percent higher than the benchmark equity measure’s all-time high of 1,565.15 and 11 percent above its closing level yesterday.

Stocks will rally as investors get clarity on political concerns in the U.S. and Europe, an acceleration in durable goods spending lifts price-earnings multiples and earnings growth picks up, according to New York-based Lee in a note dated today.

Phone, financial and energy companies had the biggest gains among 10 industry groups, adding at least 0.4 percent.

Technology, consumer staples and material stocks posted the largest losses, falling more than 0.2 percent each.

Berkshire climbed 2.4 percent to $89.32. The company said it will pay as much as 120 percent of book value, a measure of assets minus liabilities for stock buybacks. The limit was 110 percent. Buffett, 82, and Vice Chairman Charles Munger have been weighing buybacks as the company seeks to deploy part of its $47.8 billion cash hoard. Berkshire last year began a buyback program after shunning repurchases for four decades.

DuPont climbed 1.4 percent to $44.30. The biggest U.S. chemical maker by market value said 2012 earnings will reach the upper end of the company’s forecast and it will spend as much as $1 billion to repurchase shares. Earnings excluding one-time items will approach $3.30 a share this year and increase by the “low- to mid-single digits” for 2013, DuPont said.

Aetna Inc. rose 3.2 percent to $45.91. The third-biggest U.S. health insurer by membership said earnings excluding one- time items in 2013 will be at least $5.40 a share, while revenue will rise about 9 percent to $38.6 billion. The forecasts “should be good enough given low expectations, Chris Rigg, an analyst with Susquehanna Financial Group, wrote in a note.

Nasdaq OMX Group Inc. jumped 3.8 percent to $24.31. The second-largest U.S. equity exchange agreed to buy Thomson Reuters Corp. units that provide investor and public relations and multimedia services for $390 million in cash as it seeks to diversify.

An S&P index of homebuilders surged 3.5 percent as Mortgage Bankers Association’s index of applications rose 6.2 percent last week and the group’s purchase measure reached the highest level in a year. D.R. Horton Inc. increased 3.5 percent to $19.21 while Lennar Corp. advanced 4 percent to $37.87.

Dolby Laboratories Inc. added 2.4 percent to $35. The audio-technology company whose products are used in cinemas, announced a special one-time dividend of $4 a share.

Eli Lilly sank 3.2 percent to $49. The company said it will conduct an additional late-stage study of its experimental Alzheimer’s treatment solanezumab, a move that could push the drug’s introduction back three years to 2016. Lilly said it doesn’t believe it has enough data to gain U.S. marketing clearance for the medicine, based on conversations with the Food and Drug Administration.

Have a wonderful evening everyone.

Be magnificent!

That which is immoral is imperfectly moral,

just as that which is false is true to an inadequate degree.

Rabindranath Tagore1861-1901

As ever,

Carolann

Do not read, as children do, for the sake of entertainment,

or like the ambitious, for the purpose of instruction.  No,

read in order to live.

-Gustave Flaubert, 1821-1880

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