December 19, 2012 Newsletter

Dear Friends,

Tangents:

Today, Obama is named Time’s Person of the Year for 20012.

The Poem:

Winter Travels

–by Bei Dao (translated by David Hinton with Yanbing Chen)

who’s typing on the void

too many stories

they’re twelve stones

hitting the clockface

twelve swans

flying out of winter

tongues in the night

describe gleams of light

blind bells

cry out for someone absent

entering the room

you see that jester’s

entered winter

leaving behind flame.

From the new edition of Poems on the Underground

On this day in 1776, Thomas Paine published his American Crisis essay that began “these are the times that try men’s souls.” The essay was read to Washington’s troops camped on the west side of the Delaware River, and would inspire them to the famous Christmas crossing and attack. –Paul Vigna, WSJ, 12/19/12.

And also on this day in…

1790 – William Parry, explorer, was born.

1915 – Edith Piaf was born.

1941 – Adolf Hitler assumes the position of commander in chief of the German army.

1959 – Reputed to be the last civil war veteran, Walter Williams, dies at 117 in Houston.

1974 – Nelson Rockefeller is sworn in as vice president of the United states after a House of Representatives vote.

1984 – British Prime Minister Margaret Thatcher and Chinese Premier Zhao Ziyang sign an agreement that committed Britain to return Hong Kong to China in 1997 in return for terms guaranteeing a 50-year extension of its capitalist system. Hong Kong was leased by China to Great Britain in 1898 for 99 years.

1998 – President Bill Clinton is impeached. The House of Representatives approved two articles of impeachment against President Clinton, charging him with lying under oath to a federal grand jury and obstructing justice. Clinton was the second president in American history to be impeached.

Logic will get you from A to B. Imagination will take you everywhere.- Albert Einstein.

Photos of the day

12.19.12 »

Market Closes for December 19th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Dec. 19 (Bloomberg) — Canadian stocks rose a second day, led by bank and energy stocks, after the International Monetary Fund said the nation’s central bank should avoid raising interest rates until the end of 2013 to help fuel growth.

Uranium One Inc. added 7.1 percent for a fourth day of gains after the pro-nuclear Liberal Democratic Party won a landslide election victory in Japan on Dec. 16. Royal Bank of Canada and Toronto-Dominion Bank rose at least 1.1 percent as financial stocks contributed most to gains in the Standard & Poor’s/TSX Composite Index. Taseko Mines Ltd. gained 6 percent after reaching a tentative labor deal with workers at its mine in British Columbia.

The S&P/TSX rose 69.29 points, or 0.6 percent, to 12,403.63 in Toronto. The equity gauge has gained 3.8 percent this year.

“Today is a day of risk-off with financials leading the way,” said John Goldsmith, deputy head of equities with Montrusco Bolton Investments Inc. in Toronto. His firm manages about C$5.2 billion ($5.27 billion).

The IMF said the Canadian central bank has room for further monetary easing if growth fades. The federal government is on track to balance its budget by 2015 and has room for new temporary fiscal stimulus if needed, the IMF said in a report.

The Bank of Canada has kept its key lending rate at 1 percent for more than two years, the longest pause since the 1950s. The country’s expansion is estimated to be “just below 2 percent” in 2013, the IMF said.

Canadian wholesale sales rebounded in October from the biggest drop in almost two years, led by higher food and motor vehicle receipts. Other reports published this month have shown greater-than-forecast increases in employment and building permits.

Royal Bank of Canada, the nation’s largest lender, advanced 1.1 percent to C$60.53 and Toronto-Dominion added 1.2 percent to C$83.10. Bank and energy stocks contributed most to gains in the S&P/TSX as nine of 10 industries advanced. Trading volume was 17 percent higher than the 30-day average.

Cenovus Energy Inc. increased 1.3 percent to C$33.35 and Husky Energy Inc. rose 1.2 percent to C$29.13 as oil rallied for a fourth day. Crude for January delivery climbed 1.8 percent to settle at $89.51 a barrel in New York.

Uranium One soared 7.1 percent to C$2.26. The LDP, led by Shinzo Abe, captured a two-thirds majority in Japan’s lower house of parliament in an election on Dec. 16. The country shut down its atomic reactors after last year’s tsunami and earthquake triggered a meltdown at the Fukushima Dai-Ichi nuclear power plant. The LDP campaigned on Japan’s need to restart the reactors.

Taseko, a copper and molybdenum mining company working in British Columbia, rallied 6 percent to C$3. The company said it has reached a tentative labor agreement at its Gibraltar copper mine in southern British Columbia. The deal is subject to ratification by the union.

US

By Nikolaj Gammeltoft

Dec. 19 (Bloomberg) — U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from a two-month high, as deteriorating federal budget negotiations fueled concern that automatic tax increases and spending cuts will be triggered.

Alcoa Inc. fell 3 percent as Moody’s Investors Service placed the aluminum producer’s credit rating under review for a downgrade. Consumer-staples, health-care and phone stocks lost more than 1 percent for the worst performance among 10 S&P 500 groups. General Motors Co. jumped 6.6 percent on plans to purchase 200 million shares from the government. Knight Capital Group Inc. rose 5.4 percent on plans to be bought by Getco LLC.

The S&P 500 lost 0.8 percent to 1,435.81 today. The Dow Jones Industrial Average slipped 98.99 points, or 0.7 percent, to 13,251.97. The Chicago Board Options Exchange Volatility Index, known as the VIX, jumped 12 percent to 17.36 for the biggest gain since Oct. 23.

“The underlying situation for U.S. equities isn’t bad, but a lot hinges on the fiscal cliff negotiations,” George Feiger, chief executive officer of Contango Capital Advisors Inc., the San Francisco-based wealth management arm of Zions Bancorporation, said in a phone interview. He manages about $3.6 billion at Contango and Western National Trust Co. “If we get through the fiscal cliff with a reasonable result, then the odds are quite substantial that things are going to be better than many people expect by the middle of 2013,” he said. “All of this can be postponed for a year if they screw up on the negotiations and we slide into a recession.”

The S&P 500 has rallied 14 percent this year and is up 1.4 percent in December after the Federal Reserve extended its unprecedented monetary-stimulus efforts. Stocks retreated today as White House Communications Director Dan Pfeiffer said President Barack Obama would veto a tax and spending proposal presented by House Speaker John Boehner because it would put “too big a burden on the middle class.”

The House may vote tomorrow on Boehner’s “Plan B,” which would raise tax rates on income over $1 million, rather than the $400,000 threshold the president proposed in his latest offer.

Boehner said Obama will be responsible for “the largest tax increase in American history” if Democrats don’t accept a measure the House plans to pass tomorrow.

General Electric Co. slipped 3.1 percent, the most in the Dow, to $21.01. AT&T Inc., the largest U.S. telephone company, decreased 1.3 percent to $33.91. Phone stocks lost 1.2 percent as all of the 10 main industry groups in the benchmark gauge for U.S. equities fell. Consumer staples stocks slumped 1 percent, while health-care companies retreated 1.1 percent.

Housing starts in the U.S. fell 3 percent to a 861,000 annual rate from a revised 888,000 annual pace in October, the Commerce Department reported today in Washington. The median estimate of 85 economists surveyed by Bloomberg called for a drop to 872,000.

Alcoa, the largest U.S. aluminum producer, fell 3 percent to $8.64 for the second-biggest retreat in the Dow. Moody’s placed Alcoa’s Baa3 senior unsecured rating, the lowest investment-grade level, under review for downgrade, the ratings company said in a statement. The review applies to all of Alcoa’s $8.3 billion of debt.

American Express Co., the biggest U.S. credit-card issuer by purchases, fell 1.8 percent to $56.79. White House officials have approached Chief Executive Officer Kenneth Chenault about joining President Obama’s second-term administration, possibly as Treasury secretary, according to two people familiar with the matter.

The S&P reached its highest level in two months yesterday amid signs of progress in efforts by Obama and Republicans to reach agreement on a new budget in Washington.

“The stock market has rallied in anticipation that a deal on the fiscal cliff will be reached soon,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, wrote in an e-mail today. His firm oversees $350 billion. “In theory, an agreement could be reached and signed into law after Christmas, but that’s unlikely. There’s simply not enough time to iron out the details.”

GM surged 6.6 percent to $27.18. The automaker will purchase 200 million shares of its stock from the U.S. Treasury as part of the department’s plan to sell its entire holding of GM stock within 15 months. At $27.50 a share, the transaction, which is expected to close by the end of the year, provides a 7.9 percent premium over yesterday’s closing price. The Treasury plans to begin selling its remaining shares as soon as January, the company said.

Smith & Wesson Holding Corp. and Sturm Ruger & Co. rebounded after sliding for three days following a school shooting in Newtown, Connecticut, that killed 20 children and six adults. Smith & Wesson rose 7.2 percent today after plunging 18 percent in the previous three sessions, its biggest drop in three years. The stock had more than doubled this year before the shooting.

Obama said his administration will come up with “concrete proposals” by next month to help stem gun violence in the U.S. and endorsed restrictions on military-style assault weapons and high-capacity ammunition clips. Obama said there is a growing consensus in the country for restricting high-powered weapons and urged Congress to hold votes on such measures early next year.

Oracle Corp. gained 3.7 percent to $34.09. The largest database-software supplier reported fiscal second-quarter sales and profit that topped analysts’ estimates on growing demand for Internet-based software.

Profit excluding some items was 64 cents a share on adjusted revenue of $9.11 billion, the Redwood City, California- based company said yesterday. That compares with analysts’ average projection for profit of 61 cents on sales of $9.02 billion, according to data compiled by Bloomberg.

Knight Capital added 5.4 percent to $3.51. The company, pushed to the brink of bankruptcy in August by a trading error, chose Getco’s proposal yesterday over a competing offer from Virtu Financial LLC, three people with direct knowledge of the matter said yesterday. The high-frequency trader offered $3.75 a share for Knight, one-third of it in stock, for a total price of $1.4 billion, according to a statement from Knight today.

Markel Corp. fell 10 percent to $436.24. The seller of property-casualty coverage agreed to buy Alterra Capital Holdings Ltd. for about $3.13 billion in cash and stock to expand in reinsurance. Alterra surged 22 percent to $28.18.

First Solar Inc., the world’s biggest thin-film solar manufacturer, added 3.2 percent to $33.03. Bank of America Corp. analysts raised their share-price target for the company to $35 from $30, saying that rapid declines in crystalline solar module prices are over for the medium term and the company will remain competitive with Chinese rivals.

Herbalife Ltd., the maker of namesake nutritional supplements, tumbled 12 percent to $37.34. Activist investor William Ackman’s hedge fund Pershing Square Capital Management LP is betting against the stock, CNBC reported.

Have a wonderful evening everyone.

Be magnificent!

For me, nonviolence is not a mere philosophical principle.

It rules my life.  It is the rule and breath of my life.

It is a matter not of the intellect but of the heart.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

People as you for criticism but they

only want praise.

-Somerset Maugham, 1874-1965

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