April 22, 2013 Newsletter

Dear Friends,

Tangents:

Today is Earth Day.  Time to reflect on this beautiful planet we live on and how we can help it thrive.  There is much to be done.

Fittingly, I saw Edvard Munch’s The Scream at MOMA on the weekend.  It is on display until April 29^th.

Photos of the day – April  22nd, 2013

Bsam Ali, 11, swims in polluted water at a slum area on the outskirts of Sanaa, Yemen. Hundreds of countries mark International Earth Day on April 22 to help raise ecological awareness and to support environmental protection. Hani Mohammed/AP

Members of the King’s Troop Royal Horse Artillery arrive to fire a 41 Gun Royal Salute at Green Park in central London to mark the birthday of Britain’s Queen Elizabeth who turned 87 on Sunday. Toby Melville/Reuters

Market Closes for April 22^nd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam and Whitney Kisling

April 22 (Bloomberg) — Canadian stocks rose for a third day as rallies in gold and oil boosted commodities producers, offsetting a slump in financial shares.

Centerra Gold Inc. and Semafo Inc. climbed at least 9.5 percent as the precious metal touched a one-week high. Athabasca Oil Corp. advanced 3.4 percent after oil settled at its highest since April 12. Air Canada dropped 13 percent, the most in more than three years, after reporting a first-quarter loss wider than analysts estimated. Finning International Inc., which sells Caterpillar Inc. construction equipment, slid 2.3 percent after the U.S. company cut its 2013 forecast.

The Standard & Poor’s/TSX Composite Index rose 25.13 points, or 0.2 percent, to 12,090.68 at 4 p.m. in Toronto. The benchmark equity gauge has fallen 2.8 percent this year. Trading volume was 22 percent lower than the 30-day average at this time of the day.

“A lot of investors were shocked with what went on last week with oil and gold, and there’s been a little bit of a recovery today that’s giving Toronto a boost,” Irwin Michael, portfolio manager with ABC Funds in Toronto, said in a phone interview. His firm oversees about C$800 million ($780 million).

“We believe the glass is half full, and we wouldn’t be surprised to see the market firm up a bit more by the end of the month.”

Raw-materials producers rose the most in the S&P/TSX, adding 1.4 percent as a group. Gold futures climbed 1.8 percent to settle at $1,438.80 in New York, spurred by demand for bars and gold coins following the biggest price slump in three decades. The precious metal advanced to $1,438.80 earlier in the day, the highest since April 15.

Centerra Gold surged 13 percent, the most in the S&P/TSX, to C$4.18. Semafo gained 9.5 percent to C$1.84.

Energy producers rose 0.9 percent as a group, as oil increased for a third day, adding 0.9 percent to $88.76 a barrel. Athabasca Oil advanced 3.4 percent to C$8.14.

Petrobakken Energy Energy Ltd. jumped 5 percent to C$8.13.

Banks and insurers weighed most on the S&P/TSX, declining 0.5 percent as a group. Royal Bank of Canada, the nation’s largest lender, lost 0.8 percent to C$60.97 and Manulife Financial Corp. dropped 1.5 percent to C$14.03.

Purchases of previously owned houses in the U.S. fell 0.6 percent to a 4.92 million annual rate last month, a sign that the pace of progress in the housing industry is slowing. The median forecast of 75 economists surveyed by Bloomberg forecast an increase in sales to a rate of 5 million.

“The U.S. economy has hit a bit of a soft patch,” said John Goldsmith, deputy head of equities with Montrusco Bolton Investments in Toronto. He helps manage C$5.6 billion with the firm. “The question is, is this all it is? Things aren’t as robust as anticipated in February.”

Air Canada tumbled 13 percent, the most since October 2009, to C$2.62. The Montreal-based company posted an adjusted loss of C$143 million, short of the C$131 million average estimate of five analysts surveyed by Bloomberg. The nation’s largest airline blamed the loss on flight cancellations caused by bad weather.

Finning International, which sells, finances and services Caterpillar construction equipment in Canada, the U.K. and Chile, declined 2.3 percent to C$21.80, the lowest since November 2011. Caterpillar, based in Peoria, Illinois, lowered its full-year forecast as reduced Chinese demand for commodities prompted raw-materials producers to scale back equipment orders.

US

By Nikolaj Gammeltoft

April 22 (Bloomberg) — U.S. stocks rose, after the biggest weekly loss in five months for the Standard & Poor’s 500 Index, as Caterpillar Inc. jumped and a rally in commodity prices spurred energy and raw-material producers.

Caterpillar jumped 2.8 percent after saying it sees increased sales of building equipment and plans more production in China. Halliburton Co. gained 5.6 percent after reporting first-quarter profit that exceeded analysts’ estimates.

Microsoft Corp. soared 3.6 percent after activist investor ValueAct Holdings LP amassed about a $1.9 billion stake. Newmont Mining Corp. added 1.3 percent and Exxon Mobil Corp. advanced 0.7 percent as gold and oil prices rose.

The S&P 500 increased 0.5 percent to 1,562.50 at 4 p.m. in New York. The gauge fell 2.1 percent last week, its biggest drop since November, as earnings from Bank of America Corp. and International Business Machines Corp. missed estimates. The Dow Jones Industrial Average added 19.66 points, or 0.1 percent, to 14,567.17 today. About 5.6 billion shares traded on U.S. exchanges, 12 percent below the three-month average.

“We’re in the middle of earnings season and that continues to be a key driver,” Richard Sichel, who oversees about $1.8 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “It’s important to us to hear what management teams are saying, how optimistic or pessimistic they sound about future growth.”

Eight S&P 500 companies including Netflix Inc. and Texas Instruments Inc. posted their quarterly earnings today. Of the 111 that have reported so far, 72 percent have exceeded analysts’ predictions for earnings, data compiled by Bloomberg show. Profit at S&P 500 companies dropped 1.1 percent in the first three months of the year, according to forecasts compiled by Bloomberg. That would mark the first year-over-year decrease since 2009.

Equities slumped earlier as figures from the National Association of Realtors showed purchases of previously owned houses, tabulated when a contract closes, fell 0.6 percent to a 4.92 million annual rate last month. The median forecast of 75 economists surveyed by Bloomberg projected sales would increase to a 5 million rate. Prices climbed, reflecting more demand for higher-priced houses.

“The home sales number was disappointing for the market but we still think the housing market is showing modest improvement,” Thomas Nyheim, a Wilmington, Delaware-based fund manager for Christiana Trust, which oversees about $17 billion, said in a phone interview.

The S&P 500 has surged 131 percent from a 12-year low in 2009 as the Federal Reserve embarked on three rounds of bond purchases to stimulate the economy.

New York Fed Bank President William C. Dudley said European economic weakness and U.S. budget woes mean “more needs to be done” to shore up the global economy and financial regulation.

“In the United States, the good news is that the economic outlook appears to be gradually improving,” Dudley said today at a conference in New York. “For Europe, the near-term macroeconomic outlook seems less bright.”

At a meeting in Washington late on April 19, the Group of 20 finance chiefs didn’t oppose the Bank of Japan’s plan to buy more than 7 trillion yen ($70 billion) of bonds a month. The central bank’s Governor Haruhiko Kuroda said he would proceed with his campaign to end 15 years of deflation. The Bank of Japan aims to increase inflation to 2 percent within two years.

“Winning international understanding gives me more confidence to conduct monetary policy appropriately,” Kuroda told reporters after the meeting. “We will continue our qualitative and quantitative easing for the next two years.”

Caterpillar rose 2.8 percent to $82.71. The world’s largest maker of construction and mining equipment has seen “slightly increasing sales to users for a number of months” in construction, Doug Oberhelman, chairman and chief executive officer, said during a call with analysts. In China, Caterpillar will increase production this quarter after reducing output to let inventory levels fall.

The company also said it will start buying back stock in the second quarter and spend about $1 billion. Caterpillar fell earlier in the day after cutting its 2013 forecast and first- quarter earnings trailed analysts’ earnings estimates.

Microsoft increased 3.6 percent to $30.83. Chief Executive Officer Steve Ballmer is working to deliver more software and services over the Internet to bolster sales amid a global PC slump that’s eroding demand for pre-installed programs.

ValueAct, which has a history of investing in companies it believes are fundamentally undervalued, said that Microsoft can succeed in this effort, aided by the Azure cloud-computing platform.

Halliburton jumped 5.6 percent to $39.29. The world’s largest provider of hydraulic-fracturing services reported first-quarter profit that exceeded analysts’ estimates as the company reduced costs in North America. The company also benefited from lower prices on guar, an ingredient used in hydraulic fracturing to get oil and natural gas from dense rock formations.

Energy and raw-material companies rose the most among 10 S&P industries today, climbing more than 1 percent, while industrial and utility shares had the biggest declines. The S&P GSCI gauge of 24 commodities added 0.3 percent after falling 7.3 percent the past three weeks.

Newmont Mining increased 1.3 percent to $33.40. The price of gold has rebounded after reaching a more than two-year low on April 15. The metal entered a bear market this month amid decreased demand for a hedge against deflation and concern struggling European nations will sell gold to raise cash.

Exxon Mobil Corp. gained 0.7 percent to $88.09 and Chevron Corp. advanced 0.6 percent to $116.57 as West Texas Intermediate crude rose to a one-week high.

International Paper Co. climbed 3.2 percent to $47.15. The world’s largest maker of office paper is in talks about combining its xpedx unit with Unisource Worldwide Inc. to form the biggest distributor of office and copier paper. A deal may be in the form of a so-called Reverse Morris Trust in which International Paper would contribute xpedx’s assets, the Memphis, Tennessee-based company said today in a statement.

Power-One Inc. surged 57 percent to $6.33 after ABB Ltd., the world’s biggest builder of electricity networks, said it will buy the  maker of solar-power inverters for about $1 billion, or about $6.35 a share. The price is 7.7 times Power- One’s earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg.

U.S. equity volatility rose the most in almost four months last week after unexpectedly slow growth in China and a selloff in commodities triggered the biggest stock-market drop since November.

The Chicago Board Options Exchange Volatility Index climbed 24 percent to 14.97 on April 19, the most since December. The index known as the VIX surged 46 percent in four days, briefly erasing its year-to-date decline, before sliding 15 percent on the last day of the week. The VIX fell 3.9 percent to 14.39 today.

“Volatility is getting more sticky, it rushes up without going straight back down which we haven’t seen before this year,” Michael Purves, Greenwich, Connecticut-based Weeden & Co.’s head of derivatives research, said in a phone interview on April 19. “The markets are starting to process that the economic news has been getting softer and that we’re due for a correction. We obviously also had the extraordinary move in gold which has been enhancing volatility across asset classes.”

Have  a wonderful evening everyone.

Be magnificent!

When the life of a man, freed from all distractions, finds its unity in the spirit,

the knowledge of the infinite comes to him immediately and naturally,

like light from a flame.

Rabindranath Tagore,1861-1901

As ever,

Carolann

Think wrongly if you please, but in all cases

think for yourself.

-Doris Lessing, 1919-

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