March 1, 2013 Newsletter

Dear Friends,

Tangents:

March: The month is so called from Mars.  The old Dutch name for it was Lentmaand.  The old Saxon name was hrethmonath, perhaps meaning “rough month” , form its boisterous winds.  This subsequently became lenctenmonath, “lengthening “ because in this month, the days notably lengthen J.  In the French Revolutionary Calendar the corresponding month was called Ventose, meaning windy, and it extended from February 20^th to March 21^st. – excerpted from Brewster’s.

When I discover who I am, I’ll be free- Ralph Ellison, writer, born March 1^st,1914

Photos of the Day –March 1st, 2013

Competitors ski during the Cross Country men’s 4x10km Relay competition at the Nordic Ski World Championships in the northern mountain resort of Tesero in Val di Fiemme, Italy. Yves Herman/Reuters

A German police officers reacts to protesters as they protect a part of the former Berlin Wall in Berlin. Construction crews stopped work on removing a small section from one of the few remaining stretches of the Berlin Wall to make way for a condo project after hundreds of protesters blocked their path. Markus Schreiber/AP

Market Closes for March 1st, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

March 1 (Bloomberg) — Canadian stocks fell for the first time in four days after data showed the economy grew at its slowest pace since 2011 and a measure of China’s manufacturing missed forecasts.

Atlantic Power Corp. plunged 29 percent as the electric power company cut its dividend 65 percent after reporting worse- than-estimated fourth-quarter earnings. Cenovus Energy Inc. and Suncor Energy Inc. slumped at least 1.1 percent as the price of crude slipped to its lowest level this year.

The Standard & Poor’s/TSX Composite Index fell 48.71 points, or 0.4 percent, to 12,773.12 at 4 p.m. in Toronto. The S&P/TSX rose 0.6 percent for the week.

“On the global scene you have softer PMI data in China and in the U.K.,” said Michael O’Brien, director and fund manager with TD Asset Management Inc. in Toronto. He manages about C$3 billion ($3 billion). “It’s reminding people that this isn’t a straight-line recovery, that there will be bumps in the road. There are still things that need to heal.”

The official Purchasing Managers’ Index in China was 50.1 in February, the weakest in five months and down from 50.4 in January, a report from the National Bureau of Statistics and China Federation of Logistics and Purchasing showed today in Beijing. A gauge of U.K. manufacturing based on a survey of purchasing managers slid to 47.9 last month from a revised 50.5 in January, according to Markit Economics and the Chartered Institute of Purchasing and Supply.

Canada’s gross domestic product grew at a 0.6 percent annualized pace from October to December, the slowest since the second quarter of 2011, as gains in investment and consumer spending were blunted by companies scaling back inventories.

Raw-materials companies contributed the most to losses in the S&P/TSX as seven of 10 industries retreated. Trading volume was 2.2 percent lower than the 30-day average.

Barrick Gold Corp. dropped 3.4 percent to C$30.20 after gold for April delivery fell 0.4 percent to settle at $1,572.30 an ounce in New York, capping a fourth straight week of declines.

Atlantic Power lost C$2.96 to C$7.30, for its biggest decline since listing in 2004. The company cut its annual dividend 65 percent to 40 Canadian cents a share after reporting a wider loss than analysts forecast.

Cenovus lost 65 Canadian cents to C$32.74 and Suncor slipped 35 Canadian cents to C$30.90 as crude for April delivery tumbled 1.5 percent to settle at $90.68 a barrel, the lowest level since December.

US

By Sarah Pringle

March 1 (Bloomberg) — U.S. stocks rose, erasing earlier losses in the Standard & Poor’s 500 Index, as better-than- estimated data on consumer confidence and manufacturing offset concerns about federal spending cuts.

Groupon Inc. rallied 13 percent after firing its chief executive officer. Salesforce.com Inc. jumped 7.6 percent after posting better-than-estimated results for the fourth quarter.

Apple Inc. fell 2.5 percent to its lowest level in more than a year. Freeport-McMoRan Copper & Gold Inc. lost 1.4 percent as metals tumbled on a report showing China’s manufacturing slowed.

The S&P 500 gained 0.2 percent to 1,518.20 at 4 p.m. in New York, after dropping as much as 0.9 percent earlier. The benchmark index climbed 0.2 percent this week. The Dow Jones Industrial Average added 35.17 points, or 0.3 percent, to 14,089.66. About 6.8 billion shares traded hands on U.S. exchanges today, or 7.4 percent above the three-month average.

“The sequester panic, if this was 18 months ago, we could have seen multi-hundred point swings in the market,” Kevin Divney, chief investment officer at Beaconcrest Capital Management in Boston, said in a phone interview. “What has happened is that the policy makers have lost credibility with the stock market.”

Democrats and Republicans are in a standoff over how to replace the cuts, known as sequestration, totaling $1.2 trillion over nine years. Of that total, $85 billion would occur in the remaining seven months of this fiscal year. President Barack Obama said the automatic spending cuts set to kick in today will be a “slow grind” on the economy and that it may take weeks to win over enough lawmakers from both parties to reach a deal on a replacement deficit-cutting plan.

“There seems to be some belief that some sort of deal will come up that would postpone the sequestration,” Jordan Irving, who helps oversee $175 million at Irving Magee Investment Management in Philadelphia, Pennsylvania, said in a phone interview. “We didn’t think the deal would get done, so it’s just another headwind to the overall economy. I think people are going to take the weekend to really look at this.”

U.S. stocks rose as American factories expanded in February at the fastest pace in almost two years. The Institute for Supply Management’s factory index climbed to 54.2, the highest reading since June 2011, the Tempe, Arizona-based group said today.

Consumer spending in the U.S. rose in January even as incomes dropped by the most in 20 years, showing households were weathering the payroll-tax increase by socking away less money in the bank. Outside the U.S., data showed China’s manufacturing slowed for a second month while factory output in the euro area contracted for the 19th straight month.

Federal Reserve Bank of Chicago President Charles Evans said the Fed should press on with $85 billion in monthly bond buying, warning that a premature withdrawal of stimulus risks hobbling the recovery.

“We need to be careful not to undermine our own policies and remove accommodation prematurely, as the Japanese did,” Evans said yesterday in a speech in Des Moines, Iowa.

The S&P 500, which is trading at about 3 percent below its record, has gained 6.5 percent this year as lawmakers agreed on a compromise on taxes and amid better-than-estimated earnings.

The benchmark index rose 1.1 percent in February, capping a four-month rally, the longest stretch since September. The Dow is 0.5 percent from its record high reached in October 2007.

Eight of 10 groups in the S&P 500 advanced today as health- care and consumer-discretionary companies rose the most, climbing at least 0.5 percent. A Bloomberg gauge of U.S. airlines rallied 2.4 percent to $43.16, its highest level since December 2010. All 10 members advanced, as Delta Air Lines Inc. jumped 3.9 percent to $14.82 and United Continental Holdings Inc. gained 2.5 percent to $27.38, a two-year record high.

Groupon advanced 13 percent to $5.10. The daily-deals company ousted Andrew Mason as chief executive officer a day after reporting results that disappointed investors. Executive Chairman Eric Lefkofsky and Vice Chairman Ted Leonsis will oversee the company as it seeks a successor.

Salesforce.com increased 7.6 percent to $182. The largest maker of online customer-management software rose to a record high after reporting sales and profit that topped estimates as it expanded in marketing and customer-service tools.

Intuitive Surgical Inc. jumped 8.5 percent to $553.40 for the largest advance in the S&P 500. The manufacturer of surgical systems rebounded following yesterday’s 11 percent loss amid a safety probe by U.S. regulators of the company’s robots.

Deckers Outdoor Corp. advanced 15 percent to $46.62 after the owner of the Ugg brand forecast a gain of about 7 percent in 2013 revenue that exceeded analysts estimates.

Gap Inc. rose 2.9 percent to $33.87. The biggest U.S. specialty-apparel retailer posted fourth-quarter profit that topped analysts’ estimates, fueled by its best holiday shopping season in six years.

Best Buy Co. rose 4.6 percent to $17.16. The company posted adjusted profit that topped analysts’ estimates and said the retailer will focus on continuing its turnaround after failing to receive a takeover offer from its founder.

Chief Executive Officer Hubert Joly, who took over in September, has closed stores and matched rivals’ prices to reverse the retailer’s slide, all while founder Richard Schulze was analyzing the company’s financial data in preparation for a potential takeover offer. Best Buy said today that it didn’t receive an offer from Schulze by its deadline yesterday.

Apple dropped 2.5 percent to $430.47, its lowest level since January 2012. David Einhorn’s Greenlight Capital Inc. will drop its lawsuit against Apple over a preferred share measure after the iPad maker agreed to withdraw the disputed proposal.

Greenlight won an injunction Feb. 22 barring Apple from moving forward with a shareholder vote on the measure that could have curtailed the company’s ability to issue preferred shares.

Freeport-McMoRan, the biggest industrial metals user, fell 1.4 percent to $31.49 as copper and aluminum fell to three-month lows.

Coal producers slumped, as Consol Energy Inc. dropped 4.7 percent to $30.64 and Peabody Energy Corp. tumbled 4.6 percent to $20.56. European coal for 2014 fell as much as 0.7 percent to a record $97.50 a ton as Deutsche Bank AG said China’s anti- pollution efforts may turn the country into a net exporter of the fuel in 2015.

Halliburton Co. erased 2.1 percent to $40.63, while Chesapeake Energy Corp. slide 2.4 percent to $19.67. Caterpillar Inc. slumped 1.1 percent to $91.36 and Alcoa Inc. lost 0.9 percent to $8.44 for the biggest declines in the Dow.

Warren Buffett mocked executives who held back investments because of “uncertainty” in the economy and said he will probably accelerate capital expenditure at his Berkshire Hathaway Inc. this year.

“There was a lot of hand-wringing last year among CEOs who cried ‘uncertainty’ when faced with capital allocation decisions despite many of their businesses having enjoyed record levels of both earnings and cash,” Buffett wrote in an annual letter to shareholders of Omaha, Nebraska-based Berkshire posted online today. “We will keep our foot to the floor and will almost certainly set still another record for capital expenditures in 2013. Opportunities abound in America.”

The S&P 500 has returned 24 percent on average in years it’s risen in both January and February, a bullish sign for 2013, according to S&P.

The index climbed in both January and February 26 times since 1945, Sam Stovall, S&P’s New York-based chief equity strategist, wrote in a note. All 26 years ended with positive returns when including dividends, the data show. The benchmark gauge for U.S. equities returned 5.2 percent in January and 1.4 percent in February this year including dividends.

“Even though the investing community faces economic and legislative hurdles in the near and long term, equity prices have risen in both January and February signaling, in our view, that many of these worries are unwarranted,” Stovall wrote in the note dated Feb. 25. “Since 1945, bucking the typical groundhog giveback has been a plus.”

Have a wonderful weekend everyone.

Be magnificent!

I often ask myself at what point can a man and a beast that cannot talk recognize each other.

From the early paradise, at the dawn of creation, runs the path where their hearts meet.

Although their connection has long been forgotten,

traces of their continuing association has not been erased.

And, suddenly, in a wordless harmony,

a dim memory awakens and the beast looks on the face of the man with tender trust

and the man casts his eyes upon the beast with an amused tenderness.

It is as if two friends, both wearing masks, meet

and vaguely recognize each other through their disguises.

Rabindranath Tagore, 1861-1901

As ever,

Carolann

So little done, so much to do.

-Cecil Rhodes, 1853-1902

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