January 28, 2013 Newsletter

Dear Friends,

Tangents:

Birthday: January 28^th: Today Alan Alda, who played Hawkeye Pierce on M*A*S*H turns 77.

And also on this day in…

1521 – The Diet of Worms began, at which Protestant reformer Luther was declared an outlaw by the Roman Catholic church.

1547 – England’s King Henry VIII died. He was succeeded by his 9 year-old son, Edward VI.

1807 – London’s Pall Mall became the first street lit by gaslight.

1965 – General Motors reported the biggest profit of any U.S. company in history.

It is good to have an end to journey toward, but it is the journey that matters in the end. -Ursula K. Le Guin

photo of the day

01/28th/2013

Birds fly across a field on the planned location of new HS2 high speed rail link as it passes Polesworth, central England. Darren Staples/Reuters

‘Joaldunak’ carnival revelers wearing big copper bells on their backs and carrying horse tails cross a bridge on their way to Ituren during a traditional carnival celebration in the northern Spanish region of Navarra. Every year, men from Zubieta parade to the neighboring town of Ituren to join the traditional carnival, which is considered a festival to welcome the spring after a tough winter in the deep valleys of the northern Navarra region. Susana Vera/Reuters

Market Closes for January 28th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Leslie Picker

Jan. 28 (Bloomberg) — Canadian stocks fell, erasing an earlier gain and sending the benchmark index lower for a second day, as a slump in technology companies and raw-materials producers overshadowed a rise in financial shares.

Agrium dropped 1.1 percent after its chief executive officer said there is no reason to compromise with an activist shareholder’s demands for change. Research in Motion Ltd. fell 7.6 percent on concern its new BlackBerry 10 phones won’t reverse the company’s decline in smartphone sales. Royal Bank of Canada and Bank of Nova Scotia each rose 0.8 percent. Arc Resources Ltd. and TransCanada Corp. added at least 1.1 to lead an advance among energy producers.

The Standard & Poor’s/TSX Composite Index decreased 0.72 point, or less than 0.1 percent, to 12,815.91 at 4 p.m. in Toronto. The benchmark gauge erased an earlier gain of as much as 0.3 percent. The S&P/TSX has climbed 3.1 percent this year.

“Canadian banks offer a very compelling value proposition,” said David Baskin, president of Toronto-based Baskin Financial Services Inc., overseeing C$480 million. “That’s a trend we expect to continue. It’s a good place to be.”

Oil advanced to a four-month high as orders for durable goods in the U.S. jumped, adding to economic optimism. Crude prices rose as much as 1 percent, reversing an earlier drop of as much as 0.4 percent, after the U.S. Commerce Department said orders increased 4.6 percent in December.

“People are certainly buying the oil stocks,” said Brian Huen, managing partner at Toronto-based Red Sky Capital Management Ltd., which oversees C$225 million in assets . “Oil, given that it’s a late-cycle commodity, will benefit from people being more confident with the macro-economic environment.”

Arc Resources increased 1.7 percent to C$24.24 and TransCanada advanced 1.1 percent to C$49.32.

Materials producers declined for the fourth-straight day, the longest losing streak for the group since November.

Agrium lost 1.1 percent to C$114.15 after Chief Executive Officer Mike Wilson said there is no reason for his company to compromise with activist shareholder Jana Partners LLC’s demands for change at the largest retailer of fertilizer and seeds to U.S. farmers. Jana is seeking to replace five of Agrium’s directors with its own board nominees and has proposed that the Calgary-based company spin off its retail business to boost profitability.

Financial shares rose 0.4 percent after Fitch affirmed the ratings of six Canadian banks and said their outlooks were stable. The group pared gains after Moody’s Investors Service downgraded the long-term ratings on the six banks because of high consumer debt and elevated home prices. Canada’s banks are “sound and well regulated,” Finance Minister Jim Flaherty said in an emailed statement from Ottawa after the downgrade.

Royal Bank of Canada, the country’s largest lender, increased 0.8 percent to a record C$62.61. Bank of Nova Scotia added 0.8 percent to C$58.95.

Nordion added 7.3 percent, the most since January 2011, to C$6.90 after saying it is reviewing alternatives to boost shareholder value. The Ottawa-based company, whose isotopes help treat diseases such as cancer, also reported adjusted earnings of 34 cents a share for the quarter ended Oct. 31. That beat estimates of 26 cents a share, according to analysts surveyed by Bloomberg.

Rogers Communications Inc. jumped 1.6 percent to C$47.02, the highest level since November 2007, after BMO Capital Markets analyst Tim Casey raised Canada’s largest wireless carrier to outperform from market perform.

RIM slumped 7.6 percent to C$16.27. CEO Thorsten Heins is set to take the stage in New York on Jan. 30 to unveil the new phones. The new product line is RIM’s attempt to keep its current customers and win back people who have switched to Apple Inc.’s iPhone and Samsung Electronics Co.’s Galaxy, which runs on Google Inc.’s popular Android platform.

“Everything we’ve seen suggests they are catching up to the competition, but there’s nothing here that says this is why you need this device more than anything else,” said Jan Dawson, chief telecommunications analyst with the New York office of London-based Ovum Ltd.

US

By Lu Wang and Sarah Pringle

Jan. 28 (Bloomberg) — U.S. stocks fell, following the longest rally for the Standard & Poor’s 500 Index since 2004, as a drop in pending home sales overshadowed a rise in durable- goods orders while investors watched earnings.

AK Steel Holding Corp. lost 7.4 percent after Goldman Sachs Group Inc. downgraded the shares. Caterpillar Inc. added 2 percent as it forecast faster growth in the year’s second half.

Facebook Inc. rose 3 percent as options traders were the most bullish on the shares on record. Apple Inc. climbed 2.3 percent, after its worst weekly slump since 2008. Yahoo! Inc. jumped 4.7 percent in late trading after posting its results.

The S&P 500 fell 0.2 percent to 1,500.18 at 4 p.m. in New York. The equity benchmark closed above 1,500 last week for the first time since December 2007 after an eight-day rally. The Dow Jones Industrial Average lost 14.05 points, or 0.1 percent, to 13,881.93 today. The Nasdaq 100 Index added 0.2 percent to 2,742.43. About 6.1 billion shares traded hands on U.S. exchanges today, or 1.1 percent below the three-month average.

“The sentiment is really, really bullish,” Barry James, who helps oversee $3.5 billion as president of James Investment Research in Xenia, Ohio, said in a phone interview. “That is a little bit of a warning sign to us that we could be more in a topping phase than actually a new bull phase. It would take a lot to really convince everyone that happy days are here, and we can just ride this off into the sunset.”

The index of contracts for the purchase of previously owned homes fell 4.3 percent to 101.7 in December after a revised 1.6 percent increase in November, the National Association of Realtors reported today. The median forecast in a Bloomberg survey projected no change in the gauge.

A separate report showed orders for durable goods in the U.S. rose 4.6 percent in December after a 0.7 percent gain the prior month. The median forecast of 76 economists surveyed by Bloomberg called for a 2 percent gain.

Eight companies on the S&P 500 were scheduled to report earnings today. Of the 152 companies that have released results so far this quarter, 75 percent have exceeded profit projections, while 66 percent have beaten sales estimates, according to data compiled by Bloomberg.

The S&P 500 has more than doubled from a 12-year low in 2009 as corporate earnings have climbed for three years and the Federal Reserve has increased its bond purchases to keep interest rates low to spur growth. The S&P 500 is about 4.2 percent below its all-time high of 1,565.15 set in October 2007.

“The earnings numbers at this point really have to come through and validate where the market is,” Mark Freeman, who oversees about $14 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said in a phone interview. “The market wants to see the numbers, if you will.”

The S&P 500 has rallied 5.2 percent this month for the best start of a year since 1987. Pension funds may need to sell stocks and buy fixed income to rebalance their asset allocations by the end of the month, according to Societe Generale SA. U.S. pensions may pull $22 billion from equities, strategist Ramon Verastegui wrote in a note.

The equity rally prompted options traders to step up protection against stock losses. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, jumped 5.3 percent, the most in a month, to 13.57 today. The gauge has climbed 9.2 percent after sliding to the lowest level since 2007 on Jan. 22.

Six out of 10 S&P 500 groups fell today as raw-material shares dropped the most, sinking 1 percent. An S&P index of homebuilders snapped a six-day rally, losing 2 percent, as PulteGroup Inc. slid 3.3 percent to $20.96.

AK Steel tumbled 7.4 percent to $4.11 and Century Aluminum Co. lost 4.1 percent to $8.50 as Goldman Sachs downgraded the companies to sell from neutral. The brokerage also lowered its recommendation for the U.S. steel industry to cautious, saying the sector is “poised for a correction.”

U.S. Steel Corp. slipped 3.3 percent to $23.72.

PetSmart Inc. dropped 9.1 percent to $63.64 for the biggest retreat in the S&P 500. The pet-store chain was cut to reduce from neutral by Nomura Holdings Inc. The company faces increased competition from Internet retailer Amazon.com Inc., analyst Aram Rubinson wrote in a note.

Jos. A. Bank Clothiers Inc. plunged 15 percent, the most in more than four years, to $39.28. The century-old maker of men’s apparel said annual profit will fall 20 percent amid lost sales from unseasonably warm weather and U.S. political uncertainty as lawmakers wrangled over tax increases and budget cuts.

Caterpillar increased 2 percent to $97.45 after predicting “better growth” in the second half. The company also said that production will decline this quarter until inventories more closely match demand from customers.

Facebook rose 3 percent to $32.47. The ratio of outstanding calls to buy the stock versus puts to sell reached 1.51-to-1 last week, the highest level since the options began trading after the company’s initial public offering in May, according to data compiled by Bloomberg. The shares have surged 83 percent from their record low in September.

Raymond James also upgraded the operator of the world’s most-popular social network to outperform from market perform, meaning that the firm recommends investors buy the shares.

Apple gained 2.3 percent to $449.83. The maker of iPad and iPhone makers on Jan. 23 reported the slowest quarterly profit growth since 2003, sending the stock down 12 percent over the week.

Yahoo, the biggest U.S. Web portal, rallied 4.7 percent to $21.26 as of 4:46 p.m. in New York. The company’s profit and sales, posted after the close of regular trading, topped analysts’ estimates as Chief Executive Officer Marissa Mayer benefited from an increase in the prices charged for advertisements.

Hess Corp. climbed 6.1 percent, the most in the S&P 500, to $62.48. The energy producer will sell its terminal network and exit the refining business as activist shareholder Elliott Associates LP announced plans to buy a more-than $800 million stake and seek board seats.

Biogen Idec Inc. rose 2.6 percent to $149.99. The company reported fourth-quarter profit that exceeded analysts’ estimates after adjusting for a correction in tax accounting related to a Denmark facility, as sales of its multiple sclerosis drugs rose.

Furiex Pharmaceuticals Inc. soared 66 percent to $35.34 after the company and its partner Takeda Pharmaceutical Co. received clearance from the Food and Drug Administration for their Nesina product to treat Type 2 diabetes. Takeda climbed to a four-year high in Tokyo trading today.

Have a wonderful evening everyone.

Be magnificent!

An eye for an eye only ends up making the whole world blind.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

We do not really ‘come into’ the world;

we come out of it, as leaves from a tree.

As the ocean ‘waves,’

and the universe ‘peoples.’

-Alan Watts, 1915-1973

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