January 23, 2013 Newsletter

Dear Friends,

Tangents:

We went to the service of one of our most treasured clients who passed away last week.  He was 102 years old and probably died more from a broken heart than anything else.  His wife of 70 years passed away  just over a year ago.  His son stated in the eulogy he gave today at the service that only a week ago his father had inquired about the exchange rate of the pound to the Canadian dollar, and when told, did the mental calculation of what his UK pension was going to be in January.   We smiled because we knew it was true.

Bonnie and I  have known him as our client and friend for almost 25 years.  He emanated the best qualities a human being could possibly hope to possess in their lifetime – honesty, integrity  and loyalty.   When he stopped driving many years ago, he would take the bus from his home in Oak Bay and come to our office and sit in the waiting room where we would serve him tea and he would read the papers – in between interesting conversation.  He gave everyone who knew him hope and inspiration  just through being – the fact that people like him actually do exist!

Things come to those who wait, but only the things left by those who hustle. -Abraham Lincoln

photo of the day

01/23rd/2013

One of the ‘Clavie Crew’ puts wood on the burning Clavie during the Burning Of The Clavie event in Burghead, Scotland January 11, 2013. The Burning Of The Clavie is an ancient Scottish custom, dating roughly from the 1700’s, still observed in Burghead near the Moray Firth. The Clavie, which is a half-cask filled with wood shavings and tar, is set alight and paraded before it becomes a fire beacon on nearby Doorie Hill. Receiving a piece of the burning Clavie is said to bring good luck for the coming year.

Photo: David Moir/Reuters

Market Closes for January 23rd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Leslie Picker

Jan. 23 (Bloomberg) — Canadian stocks fell, following a four-day rally, as commodity shares retreated amid a vote by U.S. lawmakers to temporarily suspend the debt limit.

Iamgold Corp., a producer of gold in Suriname and Burkina Faso, slumped 15 percent after forecasting higher operating costs for 2013 as it mines lower-grade ore and starts up its Westwood project. Research In Motion Ltd. dropped 2.6 percent after surging 25 percent over the previous five days.

The Standard & Poor’s/TSX Composite Index fell 30.58 points, or 0.2 percent, to 12,794.05 at 4 p.m. in Toronto.

Trading volume was 7.5 percent above the 30-day average.

“Markets are meandering after a fairly strong run-up at the beginning of the year,” said Bob Decker, a money manager at Toronto-based Aurion Capital, overseeing C$6 billion ($6 billion). “There’s a small positive influence from pushing out the debt ceiling debate to the May time frame, causing people to unwind some of their protective strategies.”

The U.S. House voted to temporarily suspend the nation’s borrowing limit, removing the debt ceiling for now as a tool for seeking deeper spending cuts. The measure, passed 285-144, lifts the government’s $16.4 trillion borrowing limit until May 19. It goes to the Senate, where Majority Leader Harry Reid said lawmakers will pass the measure unchanged and send it to President Barack Obama.

The Canadian dollar fell to parity against its U.S. counterpart after the Bank of Canada said the need to raise interest rates is less urgent as the economy will take longer to reach full output. The International Monetary Fund cut its global growth forecasts and now projects a second year of contraction in the euro region as progress in battling Europe’s debt crisis fails to produce an economic recovery.

Canadian stocks yesterday rose to the highest level in more than 17 months as producers of raw materials gained after the Bank of Japan said it will introduce open-ended asset purchases.

The benchmark gauge has risen 2.9 percent this year as technology and health-care shares surged at least 8.4 percent.

Commodity producers, which comprise 18 percent of the S&P/TSX, had the biggest decline among 10 industries today. The group dropped 1.2 percent. Measures of telephone and health-care shares in the benchmark gauge rose.

Iamgold slumped 15 percent to C$9.22, the lowest since April 2009. The company’s estimated net present value was cut by about 10 percent because of higher costs, David Haughton, an analyst at BMO Capital Markets in Toronto, said in a note yesterday. Haughton lowered his target price to $14 from $16 and cut his recommendation to hold from buy. Steven Butler, an analyst at Canaccord Financial Inc. in Toronto, reduced his target to $12.75 from $15.25 and cut his rating to hold from buy.

Centerra Gold Inc. dropped 8.2 percent, the most since Dec. 13, to C$8.60. The shares were rated sector perform in new coverage at RBC Capital Markets by equity analyst Jonathan Guy.

The 12-month share-price estimate is C$11.00 per share.

RIM fell 2.6 percent to C$17.30. The shares yesterday jumped to a one-year high as Chief Executive Officer Thorsten Heins reiterated the BlackBerry maker is considering strategic options, including selling its hardware unit.

Metro Inc. rallied 3.3 percent to C$64.79. Canada’s third- largest supermarket chain sold almost half of its stake in Alimentation Couche-Tard Inc. for C$479 million. Metro may seek grocery and pharmacy acquisitions after selling the stake, Keith Howlett, an analyst at Desjardins Securities in Montreal, said in a note today. Marie-Claude Bacon, a spokeswoman for Metro, declined to comment.

US

By Nikolaj Gammeltoft and Sarah Pringle

Jan. 23 (Bloomberg) — U.S. stocks rose, after benchmark indexes reached five-year highs, as lawmakers voted to temporarily suspend the federal debt limit and technology stocks rallied amid better-than-forecast earnings.

Futures on the Nasdaq 100 Index slid 1.8 percent following the close of U.S. markets as Apple Inc. tumbled 11 percent after reporting first-quarter sales below forecasts. Google Inc. and International Business Machines Corp. jumped more than 4.4 percent in regular trading after earnings topped estimates.

Advanced Micro Devices Inc. surged 11 percent after revenue beat forecasts, helped by sales of chips that run servers.

The Standard & Poor’s 500 Index gained 0.2 percent to 1,494.81 at 4 p.m. in New York. The Dow Jones Industrial Average rose 67.12 points, or 0.5 percent, to 13,779.33. About 6.1 billion shares changed hands on U.S. exchanges, in line with the three-month average. Nasdaq 100 futures dropped 1.7 percent to 2,712 as of 6:18 p.m. on Apple’s earnings report.

“Right now it’s all earnings related and the fact that maybe we can put the debt ceiling to rest for maybe a couple more months,” Frank Ingarra, who helps manage $1.4 billion at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a phone interview.

The U.S. House voted to temporarily suspend the nation’s borrowing limit, removing the debt ceiling for now as a tool for seeking deeper spending cuts. The measure, passed 285-144, lifts the government’s $16.4 trillion borrowing limit until May 19. It goes to the Senate, where Majority Leader Harry Reid said lawmakers will pass the measure unchanged and send it to President Barack Obama.

Global investors say the state of U.S. finances is the greatest risk to the world economy and almost half are curbing their investments in response to budget battles, a Bloomberg poll showed. Thirty-six percent of respondents cited the nation’s fiscal woes as the biggest threat, compared with 29 percent who chose Europe’s sovereign debt crisis and 15 percent who named a slowing Chinese economy, according to the Jan. 17 survey of Bloomberg subscribers.

The International Monetary Fund cut its global growth forecasts and now projects a second year of contraction in the euro region as progress in battling Europe’s debt crisis fails to produce an economic recovery. The world economy will expand 3.5 percent this year, less than the 3.6 percent forecast in October, the Washington-based IMF said today in an update of its World Economic Outlook report.

Improving corporate earnings and political steps to resolve fiscal issues in the U.S. have pushed the Dow within 2.8 percent of its October 2007 record of 14,164.53. The S&P 500 is 4.5 percent below its record of 1,565.15. The index rose 4.8 percent in January through yesterday for the best start to a year since 1997, and has rallied six straight days for the longest streak in a month.

Some 75 percent of the 106 companies in the S&P 500 that have released results so far exceeded profit projections, according to data compiled by Bloomberg. Analysts on average forecast growth of 3.8 percent in fourth-quarter profit, the data show.

“Earnings expectations were optimistic and it’s very possible that they will be right,” Bernard Delattre, president of Altimeo Asset Management in Paris, said in a phone interview today. “The situation is improving in the U.S. Growth is sustained and companies will benefit.”

Apple lost 11 percent to $458.94 as of 6:18 p.m. New York time. The world’s most valuable company reported first-quarter sales below analysts’ predictions, adding fuel to investor pessimism that has sent shares down 27 percent since September.

Profit was little changed at $13.1 billion, or $13.81 a share, in the period that ended Dec. 29, Cupertino, California- based Apple said today in a statement. Sales rose 18 percent to $54.5 billion. Analysts had predicted profit of $13.53 a share on revenue of $54.9 billion, the average of estimates compiled by Bloomberg.

Technology shares had the largest gain among 10 groups in the S&P 500, advancing 1.2 percent. Google, owner of the biggest Internet search engine, jumped 5.5 percent to $741.50 as fourth- quarter profit, excluding certain items, rose to $10.65 a share.

Analysts had projected earnings of $10.50, according to data compiled by Bloomberg.

IBM rallied 4.4 percent to $204.72 as per-share earnings exceeded projections. The largest computer-services provider’s profit forecast also topped analyst estimates as the company shifts to data analysis and cloud computing.

AMD rose 11 percent to $2.73. The second-biggest maker of processors for personal computers reported fourth-quarter revenue that topped analysts’ estimates, helped by sales of chips that run servers. AMD is firing workers and selling assets to free up cash for new products, aiming to mitigate its dependence on the PC market.

Symantec Corp. advanced 2.9 percent to $21.46. The biggest maker of antivirus software company reported fiscal third- quarter sales and profit that beat estimates, aided by strong demand for data-management tools.

US Airways Group Inc. rallied 1.5 percent to $15.07. The Tempe, Arizona-based carrier, which is pushing for a merger with bankrupt American Airlines, reported fourth-quarter profits that topped forecasts on strong travel demand and record revenue.

An S&P index of homebuilders climbed 1.8 percent to the highest level since July 2007 as all 11 members advanced. U.S. home prices rose 5.6 percent in the 12 months through November as buyers competed for a dwindling inventory of properties, according to a report by the Federal Housing Finance Agency today.

KB Home surged 8.9 percent to $18.63. The Los Angeles-based homebuilder reported a 54 percent increase in orders for the first seven weeks of its fiscal first quarter. Trulia Inc., the operator of a residential-property listings website, rallied 4.7 percent to $24.50, while its larger rival Zillow Inc. added 3.3 percent to $34.69 on optimism that gains in home prices would help boost advertising revenue.

Cree Inc., a maker of energy-efficient lighting products, gained 22 percent to $40.85 after quarterly profit jumped 69 percent amid surging demand for its light-emitting diodes.

Map Pharmaceuticals Inc. rallied 59 percent to $24.71.

Allergan Inc., the maker of the wrinkle filler Botox, agreed to buy Map in a deal valued at $958 million to gain an experimental inhalable migraine treatment.

Coach Inc., the largest U.S. luxury handbag maker, tumbled 16 percent to $50.75. Sales at stores open at least a year in North America fell 2 percent in the quarter. Chief Executive Officer Lew Frankfort said the company had a “challenging” holiday season amid increased competition for women’s handbags and economic pressure on consumers.

Texas Instruments Inc. lost 1.1 percent to $33.08. The largest maker of analog chips predicted first-quarter sales that fell short of some analysts’ estimates as electronic-device makers postpone orders to keep inventory low amid lackluster demand.

Have a wonderful evening everyone.

Be magnificent!

Nations cohere because there is a mutual regard among

individuals composing them.

Some day we must extend the national law

to the universe,

even as we have extended the family law

to from nations – a larger family.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Everything you can imagine is real.

-Pablo Picasso, 1881-1973

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