April 3, 2013 Newsletter

Dear Friends,

Tangents:

Keeping with the theme of poetry month, from W.H. Auden’s “September 1, 1938,” published in October 1939:

I sit in one of the dives

On Fifty-second Street

Uncertain and afraid

As the clever hopes expire

Of a low dishonest decade:

Waves of anger and fear

Circulate over the bright

And darkened lands of the earth,

Obsessing our private lives;

The unmentionable odour of death

Offends the September night….

Exiled Thucydides knew

All that a speech can say

About Democracy,

And what dictators do,

The elderly rubbish they talk

To an apathetic grave;

Analysed all in his book,

The enlightenment driven away

The habit-forming pain,

Mismanagement and grief:

We must suffer them all again.

I was reminded of this poem because I had a conversation tonight at my office with a friend who had some money to invest and wanted me to make sense for her of all the uncertainties that seem to plague mankind now:  The threats from North Korea, Iran, the Eurozone crises, government and corporate pensions in peril, the aftermath of the global financial crises with governments printing money, high unemployment, people living longer with not enough savings to really live longer.  What should investors do?  I told her what they should do and I also told her that if she could time travel back in time and immerse herself for a moment sometime in the ‘30’s after the 1929 financial crises and all the geopolitical turmoil facing the world, the rise of Nazism, fascism etc., she would feel much of the uncertainty that people are feeling today.   Read Auden’s poem again – he wrote this in 1938.  To paraphrase Mark Twain, history doesn’t repeat itself, but it rhymes.

Birthday: Marlon Brando, April 3, 1924

April 3^rd, 1948 – President Truman signs the Marshall Plan.

April 3^rd, 1968 – Martin Luther King Jr. delivers his “Mountaintop” speech in Memphis, Tennessee; less than 24 hours later he is assassinated.

Until you value yourself, you won’t  value your time. –M. Scott Peck

Photos of the Day –April 3rd, 2013

Stock prices displayed on an electronic board are reflected on raindrops on the window of the board outside a brokerage in Tokyo. Yuya Shino/Reuters

Kashmiri school children walk through a tulip garden on the outskirts of Srinagar, India. Kashmir is known for its mountains, lakes, forests, and moderate weather. Mukhtar Khan/AP

Market Closes for April 3^rd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Lu Wang

April 3 (Bloomberg) — Canadian stocks fell the most in nine months, erasing gains for the year, after a plunge in oil and worse-than-estimated U.S. economic data spurred declines in commodity shares.

Barrick Gold Corp., the largest producer of the metal, sank 5.6 percent for the biggest drop since November. Alacer Gold Corp., Alamos Gold Inc. and Torex Gold Resources Inc. dropped more than 6.5 percent. Suncor Energy Inc. and Canadian Natural Resources Ltd. slumped at least 3.3 percent as oil prices retreated the most this year.

The Standard & Poor’s/TSX Composite Index fell 259.98 points, or 2.1 percent, to 12,422.12 at 4 p.m. in Toronto for the biggest drop since June. The gauge has fallen 0.1 percent this year, erasing a gain of as much as 3.6 percent. Trading volume was 22 percent above the 30-day average.

“Commodity stocks in general have to do with global economic growth,” Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto, said in a phone interview. His firm manages about C$4 billion ($4 billion).

“When there is a question mark about the growth in the U.S. and the global economy, those companies tend to take it on the chin and do poorly.”

Reports today showed American companies added fewer workers than projected in March while service industries expanded at the slowest pace in seven months.

The S&P/TSX 60 VIX, a gauge for options to protect against losses in the index of largest stocks in the Toronto Stock Exchange, jumped 22 percent to 15.04 for the biggest rally since August 2011.

Among the 239 companies in the S&P/TSX, only 26 stocks rose, the fewest since August, data compiled by Bloomberg show.

The benchmark gauge for Canadian equities reached a 20-month high on March 12 and has since fallen 3.5 percent. Raw-materials and energy producers account for 40 percent of the index’s weighting.

Commodities’ supercycle is “probably” over and prices are unlikely to match their performance over the past decade, according to UBS AG. Growth in China is slowing and becoming less commodity-intensive, London-based strategists Stephane Deo and Ramin Nakisa wrote in a report dated yesterday.

“Because we’re so much driven by commodities and materials, we actually feel it before the rest of the data comes out to suggest that there is a threat,” Adrian Mastracci, a portfolio manager at KCM Wealth Management Inc. in Vancouver, said in a phone interview. “Maybe some people are saying the economic picture is not always as rosy as we’d like it to be.”

Raw-material producers in the benchmark gauge plunged 3.4 percent as a group, leaving the S&P/TSX Materials Index at its lowest level since July 2009. Gold futures for June delivery tumbled 1.4 percent to settle at $1,553.50 an ounce in New York, after touching $1,549.70, the lowest since June 28.

The metal has declined 7.3 percent in 2013, after rallying the past 12 years. Today’s settlement leaves prices down 18 percent from a record close of $1,891.90 on Aug. 22, 2011, bringing it closer to the threshold of the 20 percent benchmark for a bear market.

Global government stimulus has cut the likelihood of further banking and liquidity crises and reduced the need for a protection of wealth, Credit Suisse Group AG wrote in a report today. The bank cut its 2013 gold forecast by 9.2 percent to $1,580 and lowered its silver estimate by 11 percent to $28.50.

Silver sank 1.7 percent to $26.80 an ounce and copper fell to an eight-month low.

Gold and silver producers accounted for nine of the 10 worst performers in the S&P/TSX today. Barrick Gold dropped 5.6 percent to C$27.09, the lowest level since November 2008. Alacer tumbled 7.7 percent to C$3.60 while Alamos sank 6.5 percent to C$12.45, its worst close since February 2010. Torex Gold slumped 7.7 percent to C$1.55, the lowest in almost a year.

A measure of Canadian energy companies lost 2.9 percent, its biggest drop since June. Oil fell 2.8 percent, the most in more than four months, to settle at $94.45 a barrel in New York.

U.S. stockpiles reached the highest level in 22 years, a report today showed.

Suncor, which extracts crude from the Athabasca oil sands, slid 3.3 percent to C$30.17. Canadian Natural Resources lost 3.4 percent to C$31.48. Encana Corp., Canada’s biggest natural gas producer, tumbled 4 percent to C$18.66.

SNC-Lavalin Group Inc. slid 0.9 percent to C$42. The country’s biggest engineering company said it removed C$120 million from its first-quarter backlog after losing a mine construction project.

Toronto-Dominion Bank lost 1.2 percent to C$83.43. Chief Executive Officer Edmund Clark, who led Canada’s second-biggest bank in a $25 billion U.S. expansion, will retire in November 2014 after a dozen years in the post. Clark will be succeeded by Bharat Masrani, currently head of U.S. operations, the bank said.

Canadian equities fell earlier this week as data on South Korean exports and China factory output trailed forecasts. China is Canada’s second-largest trading partner, trailing only the U.S. The S&P/TSX is down 2.6 percent this month, worse than any of 23 developed markets, except for Greece and Portugal, data compiled by Bloomberg show.

“The Canadian market has become a little bit orphaned,” Greg Taylor, a fund manager with Toronto-based Aurion Capital Management, said in a phone interview. His firm oversees about C$8 billion. “Canada has spent too much time tied to emerging markets, China’s growth story, and with that coming into question, it seems like the guys who bought Canada have taken the money out.”

US

By Lindsey Rupp and Nikolaj Gammeltoft

April 3 (Bloomberg) — U.S. stocks fell, dragging the Standard & Poor’s 500 Index down from a record, as financial and energy shares tumbled after oil plunged and worse-than-estimated data spurred concern over economic growth.

Bank of America Corp. and Morgan Stanley dropped more than 2.7 percent as financial shares tumbled the most among 10 S&P 500 groups. Energy companies sank as oil prices slid the most in more than four months after inventories climbed. An S&P gauge of homebuilders fell 3.3 percent, with PulteGroup Inc. slipping 4.3 percent. Zynga Inc. rallied 15 percent after saying it will introduce real-money online gambling in the U.K.

The S&P 500 fell 1.1 percent to 1,553.69 at 4 p.m. in New York, for the biggest decline since Feb. 25. The Dow Jones Industrial Average lost 111.66 points, or 0.8 percent, to 14,550.35. The Russell 2000 Index dropped 1.7 percent to 918.71, extending its loss for the week to 3.5 percent. About 7.2 billion shares changed hands on U.S. exchanges, 14 percent above the three-month average.

“The two data points that came in below expectations have spooked the equity markets today,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., said in a phone interview. His firm oversees about $130 billion of assets. “People are focused on Friday’s jobs report and the ADP number made investors more skittish.”

Companies boosted employment by 158,000 workers in March, figures from the Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 39 economists surveyed by Bloomberg called for a 200,000 gain.

The data come before the non-farm payrolls report from the Labor Department on April 5, which may show employers hired a net 195,000 workers for the month, according to the median forecast of 87 economists surveyed by Bloomberg.

The Institute for Supply Management’s index of U.S. non- manufacturing businesses, which covers almost 90 percent of the economy, fell to 54.4 in March from 56 in the prior month, the Tempe, Arizona-based group said today. The median forecast of 73 economists surveyed by Bloomberg was 55.5. Readings above 50 signal expansion. The survey covers industries ranging from utilities and retailing to housing, health care and finance.

U.S. benchmark equity gauges rose to their highest closes ever yesterday as concern over Europe’s debt crisis eased and U.S. factory orders topped forecasts. The S&P 500 rallied 10 percent in the first quarter, extending a recovery that has added more than $10 trillion of value to the world’s largest stock market, according to data compiled by Bloomberg.

Investors will begin to focus on first-quarter earnings reports beginning next week, with Alcoa Inc. scheduled on April 8 to be the first company in the Dow to report results. Profits among S&P 500 companies are forecast to decline 1.9 percent for the period, for the first retreat since 2009, according to estimates compiled by Bloomberg. In January, analysts forecast earnings growth of 1.2 percent. Profit expanded by 8 percent in the fourth quarter of 2012.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against losses, jumped 11 percent to 14.21 today. The gauge, known as the VIX, is down 21 percent for the year.

Investors sold shares of companies most tied to economic growth, sending the Morgan Stanley Cyclical Index down 1.4 percent and the Dow Jones Transportation Index 1.3 percent lower. Intel Corp. declined 1.9 percent to $21.05 and General Electric Co. retreated 1.5 percent to $23.

The KBW Bank Index slumped 2 percent as all 24 of its members declined. Bank of America lost 2.8 percent to $11.81.

Morgan Stanley fell 2.7 percent to $21.11. JPMorgan Chase & Co. slipped 2.4 percent to $46.85.

Oil and metals led the S&P GSCI index of 24 commodities to a 2 percent drop, the largest decline since November. Crude registered its biggest drop of the year, falling 2.8 percent to $94.45 a barrel, after a government report showed that U.S. oil stockpiles climbed to the highest level in more than 22 years.

Gold futures sank 1.4 percent, to the lowest since June and on the brink of a bear market.

Energy companies declined 1.6 percent as a group. Exxon Mobil Corp. slumped 0.7 percent to $89.93 and Chevron Corp. tumbled 1 percent to $117.78.

Phillips 66, the largest U.S. independent refiner by revenue since its spinoff from ConocoPhillips last year, dropped 6.6 percent to $62.46. Tesoro Corp., the independent petroleum refiner based in San Antonio, slid 5 percent to $52.26 and Marathon Petroleum Corp. declined 4.8 to $81.39.

Refiners in the S&P 500 have tumbled more than 10 percent as a group this week, their worst slump since 2011, after the Environmental Protection Agency proposed rules aimed at cutting the sulfur in gasoline. The EPA said its standards will prevent as many as 2,400 premature deaths annually by 2030. The rules will require an additional $10 billion in infrastructure investment and $2.4 billion in annual operating costs, according to the American Fuel & Petrochemical Manufacturers trade group.

All of the 11 stocks in the S&P Supercomposite Homebuilding Index retreated. The ADP payroll report showed no jobs growth in the construction industry in March. The index has fallen 9.8 percent since reaching a five-year high on March 20. KB Home, the best-performing stock among U.S. homebuilders this year, fell 5.5 percent to $20.02 today. PulteGroup slipped 4.3 percent to $19.01.

The Bloomberg U.S. Airlines Index capped its biggest three- day decline since October 2011, falling an additional 2.1 percent today. Nine of the 10 companies in the index slid, as Delta Air Lines Inc. dropped 2.5 percent and United Continental Holdings Inc. erased 2.5 percent to $28.66.

ConAgra Foods Inc., the Omaha, Nebraska-based packaged- foods manufacturer, slipped 1.9 percent to $34.85 after it reported third-quarter earnings that missed analysts’ estimates.

Operating profit from consumer foods fell to $284.4 million from $331.3 million for the same period a year ago.

Global Payments Inc. lost 9.2 percent to $44.52. The bank- card processor said revenue was $578.7 million in the three months that ended in February, compared with the average analyst estimate of $581 million.

Zynga, which makes games for Facebook Inc.’s social network, rose 15 percent to $3.53. The company said the two new real-money games, called “ZyngaPlusPoker” and “ZyngaPlusCasino,” will be available to players in the U.K. from today. Facebook added 3.3 percent to $26.25.

Have a wonderful evening everyone.

Be magnificent!

The characteristic of my nation is this transcendentalism,

this struggle to go beyond, this daring to tear the veil off the face of nature

and have at any risk, at any price,

a glimpse of the beyond.

Swami Vivekananda, 1863-1902

As ever,

Carolann

Eighty percent of success is showing up.

-Woody Allen, 1935-

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