March 18, 2013 Newsletter

Dear Friends,

Tangents:

Poem:

Two Propositions about Time

By Iain Bamforth

What can we do for grief?

Grief goes on and on like the small

still voice after the fire,

mumbling to itself, in the original way.

Grief is weak and at a loss.

It doesn’t know what to make of hope

reusing the very sense

it was thought to be hoping for.

It is a moiling in the heart

(not in its usual place);

it goes on living, wanting

us to remember too we only live

what grief says hope meant.

–from The Crossing Fee.

Photo of the Day – March 18^th, 2013

A young woman attempts to launch her kite on ‘CleanMonday’ at Filopappos hill with the ancient Parthenon temple seen in the background in Athens, Greece. Petros Giannakouris/AP

Market Closes for March 18^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

March 18 (Bloomberg) — Canadian stocks dropped for the first time in three days after an unprecedented levy on Cypriot bank deposits threatened to worsen Europe’s debt crisis and hurt demand for raw materials.

Suncor Energy Inc. and Canadian Natural Resources Ltd. retreated at least 0.7 percent as energy shares slumped. Teck Resources Ltd. and First Quantum Minerals Ltd. declined more than 1.4 percent after copper slid to a four-month low. Potash Corp. of Saskatchewan Inc. retreated 1.4 percent after employees of Israel Chemicals Ltd. went on strike to protest a possible takeover by the Canadian company. Barrick Gold Corp. gained 1.3 percent as gold rallied.

The Standard & Poor’s/TSX Composite Index fell 48.27 points, or 0.4 percent, to 12,781.76 at 4 p.m. in Toronto. The S&P/TSX has risen 2.8 percent this year. Trading volume was 0.9 percent higher than the 30-day average.

“Certainly the Cyprus news is affecting the market today,” said Paul Gardner, a fund manager with Avenue Investment Management, in Toronto. He helps oversee about C$300 million ($294 million). “We have to worry about the bigger problem of contagion, but the fact is Greece is still there, and they are accepting their cuts. This is collateral damage from a very small country that means not too much to the European Union.”

Euro-region finance ministers forced depositors in Cypriot banks to share in the cost of rescuing the island nation, reducing the cost of the bailout by 5.8 billion euros ($7.5 billion) to 10 billion euros. The country accounts for less than half a percent of the 17-nation euro-area economy.

Energy shares contributed most to declines in the S&P/TSX, falling 0.7 percent, as seven of 10 industries retreated. Suncor slumped 1.9 percent to C$31.08, and Canadian Natural Resources lost 0.7 percent to C$33.31.

Crude for April delivery rose 0.3 percent to settle at $93.74 a barrel, erasing earlier losses of as much as 1.8 percent. European policy makers signaled flexibility on the application of a bank tax in Cyprus, saying easing the cost to smaller savers was up to the local government.

Teck, Canada’s largest diversified miner, fell 2.2 percent to C$29.85. First Quantum lost 1.4 percent to C$21.43. Copper futures for delivery in May tumbled 2.6 percent to settle at $3.428 a pound at 1:12 p.m. on the Comex in New York after touching $3.4175, the lowest since Nov. 9.

Barrick Gold, the world’s largest gold producer, rose 1.3 percent to C$29.59. Gold for April delivery climbed 0.8 percent to settle at $1,604.60, a two-week high, as the metal’s appeal as a haven increased amid concerns about European debt.

Potash Corp. fell 1.4 percent to C$41.04. Hundreds of employees from Israel Chemicals blocked a plant entrance to protest the Canadian fertilizer maker’s proposed acquisition, a union representative said in an e-mailed statement. Israel Chemicals said the protest was motivated by issues not related to the potential deal.

US

By Lu Wang and Sarah Pringle

March 18 (Bloomberg) — U.S. stocks fell, after the Dow Jones Industrial Average reached record highs last week, as a levy imposed by euro-area leaders on Cypriot bank deposits sparked concern the region’s debt crisis is intensifying.

Nine of 10 groups in the S&P 500 fell as financial shares dropped the most, sinking 1 percent. Schlumberger Ltd. retreated 3.9 percent after saying North American activity was below estimates. Carnival Corp. declined 3 percent amid analyst downgrades. Apple Inc. and Hewlett-Packard Co. climbed at least 2.7 percent for the biggest gains among technology shares.

The Standard & Poor’s 500 Index slid 0.6 percent to 1,552.10 at 4 p.m. in New York. The Dow declined 62.05 points, or 0.4 percent, to 14,452.06 today. About 5.8 billion shares traded hands on U.S. exchanges today, 8.5 percent below the three-month average.

“We’ve had a wonderful market and somewhat carefree attitude,” Richard Sichel, who oversees about $1.8 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “Now here’s sort of a dose of reality, and although it’s such a small country, what they’re doing sort of sends shivers through investors and other countries.”

Euro-region finance ministers forced depositors in Cypriot banks to share in the cost of rescuing the island nation, reducing the cost of the bailout by 5.8 billion euros ($7.5 billion) to 10 billion euros. The country accounts for less than half a percent of the 17-nation euro-area economy.

A parliamentary vote on the levy due to take place today was postponed. Equity markets are closed in Cyprus and Greece for a scheduled bank holiday today. Cypriot banks will remain closed tomorrow and March 20, a government official said, asking not to be identified.

The bull market in U.S. equities entered its fifth year this month as the S&P 500 more than doubled from its bottom in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases by the Federal Reserve. The S&P 500 rose to within two points of its 2007 record last week while the Dow reached an all-time high.

The Federal Open Market Committee is scheduled to begin a two-day meeting tomorrow. The committee in December agreed to link its zero-rate policy to thresholds for unemployment and inflation so investors and households know what conditions will prompt the Fed to consider raising its record-low interest rate.

Financial and energy companies fell the most among 10 S&P 500 groups, losing at least 0.9 percent. The KBW Bank Index slid 0.9 percent as 23 of its 24 members retreated. Morgan Stanley tumbled 2.5 percent to $22.99 while Citigroup Inc. sank 2.2 percent to $46.24.

Goldman Sachs Group Inc. slumped 1.9 percent to $151.95.

The U.S. Supreme Court rejected an appeal by the trading firm in an investor lawsuit over mortgage-backed securities whose value plummeted during the 2008 financial crisis.

Schlumberger fell 3.9 percent to $76.34. The world’s largest oilfield-services provider said North American customers are re-activating fewer-than-estimated rigs during the first quarter. Pricing is under pressure in the region, the company said in a conference hosted by Howard Weil Inc.

Carnival slid 3 percent to $33.92. At least three analysts cut their ratings on the cruise operator. The company, beset by mishaps at sea this year, last week reduced its annual earnings forecast to reflect costs from an engine fire that crippled the Carnival Triumph in February.

J.C. Penney Co. rallied 6.2 percent, the most in the S&P 500, to $16.44. The department store chain could turn its top 300 stores into a real estate investment trust-like entity that would sublet space to other brands, ISI Group analyst Omar Saad said in a note.

Apple added 2.7 percent to $455.72. The company is poised to boost its dividend by more than a half, according to analysts surveyed by Bloomberg, providing investors hit by a share slump with one of the highest yields in the U.S. technology industry.

Chief Executive Officer Tim Cook, who a year ago this month reinstated a dividend and announced a $10 billion buyback, faces mounting pressure to take bolder steps to pay out more of Apple’s $137.1 billion in cash and investments. Investors including David Einhorn’s Greenlight Capital Inc. are pushing for more money as growth slows and competition from rivals such as Samsung Electronics Co. intensifies.

“The accumulation of cash has become excessive,” Brian White, an analyst at New York-based Topeka Capital Markets Inc., said in an interview. He rates the shares a buy, with an $888 price target. “It doesn’t matter which bearish scenario you forecast, they’re never going to need this much cash.”

Hewlett-Packard gained 2.9 percent to $22.83, rising the most in the Dow. Morgan Stanley raised its rating on the stock to overweight, citing potential for the company to return more cash to investors. Hewlett-Packard may generate free cash flow of about $6.7 billion in the 2013 fiscal year, almost 35 percent more than the company’s $5 billion forecast, according to Katy Huberty, an analyst at Morgan Stanley.

Phone stocks had the only gain among S&P 500 groups, adding 0.1 percent. Verizon Communications Inc. climbed 1.5 percent to $48.75 as Citigroup lifted its rating to buy from neutral, saying a buyout of Vodafone Group Plc’s stake in their wireless venture would add to earnings.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 18 percent to 13.36, after dropping 10 percent last week to its lowest level since February 2007. The gauge, known as the VIX, is down 26 percent this year.

Traders are placing a record number of bets that U.S. stock-market swings will increase after a six-year low in the VIX fueled speculation volatility has fallen too far, too fast.

The shares outstanding for the iPath S&P 500 VIX Short-Term Futures ETN, the most-active security that tracks changes in VIX futures, has climbed 95 percent to an all-time high of 61.9 million this year, data compiled by Bloomberg show. The total for the ProShares Ultra VIX Short-Term Futures is up 10-fold to 39.9 million last week, data compiled by Bloomberg show.

“If you look at the economy and all the political issues, then there are a lot of headwinds out there. And yet the market just continues to go,” Frank Braddock, senior portfolio manager with the Braddock Group of JHS Capital Advisors, said by phone from Columbia, South Carolina, on March 15. JHS oversees about $3.4 billion. “The fear I have is that if this psychology of wanting to push the market higher changes, then we’ll see a pretty sharp pullback and a spike in volatility.”

Have a wonderful evening everyone.

Be magnificent!

The world in its essence is the reconciliation of opposite forces.

These forces, like the right hand and left hand of the creator, act in perfect harmony,

and yet in opposite directions.

Rabindranath Tagore, 1861-1901

As ever,

Carolann

Man’s greatness lies in his power of thought.

-Blaise Pascal, 1623-1662

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