August 3, 2012 Newsletter

Dear Friends,

Tangents:

National Geographic photographer Jim Richardson identifies 10 places every photographer should visit, creating an impressive list.   Richardson includes tips on the great shot to get at each.  Check out the full list at http://bit.ly/natbucket.

For us, there is only the trying. The rest is not our business. – T.S. Eliot

And on this day in…

1492 – Christopher Columbus leaves Spain on his Voyage to the New World.

1610 – Henry Hudson discovers a great bay in Eastern Canada, and names it for himself.

1914 – Germany and France declare against each other.

1941 – Martha Stewart is born.

1949 – The NBA is born.

1958 – the USS Nautilus travels under the North Pole.

1996 – the “Macarena” tops U.S. pop charts.

photos of the day August 3, 2012

Dark clouds cover the sky in downtown Shanghai.

Aly Song/Reuters

Jamaica’s Rosemarie Whyte stands in the pouring rain during a women’s 400-meter heat during the athletics in the Olympic Stadium at the 2012 Summer Olympics, London.

Anja Niedringhaus/AP

Market Closes for August 3, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Aug. 3 (Bloomberg) — Canadian stocks snapped a four-day losing streak as oil and gold prices rebounded after U.S. payrolls in July increased more than forecast.

Suncor Energy Inc., Canada’s biggest oil company, gained 3.6 percent as the price of oil rose 4.9 percent. Ivanhoe Mines Ltd. jumped 7.1 percent, the most since April, as gold futures advanced the most in more than a week. Royal Bank of Canada, the nation’s largest lender, climbed 1.5 percent. Energy and bank shares contributed most to the rise in the Standard & Poor’s/TSX Composite Index among 10 industries.

The S&P/TSX surged 156.09 points, or 1.4 percent, to 11,662.59 in Toronto. The benchmark gauge pared its losses for the week to 0.9 percent.

“Every day brings a new story and the market reacts, sometimes quite violently, both up and down,” Greg Eckel, a fund manager with Morgan Meighen & Associates, which manages about C$1 billion ($1 billion), said in a phone interview. “A couple of positives in Europe and in the U.S. seems to be enough for today.”

Non-farm payrolls for the U.S., the world’s largest consumer of crude and Canada’s biggest trade partner, increased 163,000 in July boosted by a pickup in employment at automakers.

The median estimate of 89 economists surveyed by Bloomberg News called for a gain of 100,000. Unemployment rose to 8.3 percent.

In Europe, members of German Chancellor Angela Merkel’s coalition parties signaled they won’t stand in the way of European Central Bank chief Mario Draghi’s plan to buy government bonds.

Suncor rose 3.6 percent to C$31.63. Oil futures surged 4.9 percent, the biggest gain since June 29, climbing to $91.40 in New York.

Ivanhoe Mines, which is developing the massive Oyu Tolgoi gold and copper mine in Mongolia, jumped 7.1 percent to C$8.60 as gold futures for December delivery increased 1.2 percent to settle at $1,609.30 an ounce in New York, the biggest gain since July 25.

Royal Bank of Canada climbed 1.5 percent to C$51.60.

Toronto-Dominion Bank rose 1.3 percent to C$79 and Bank of Nova Scotia gained 1 percent to C$51.86.

Stantec Inc. soared 10 percent to C$31.22, the most in three years, after the engineering and architecture services company posted second-quarter earnings the topped analyst expectations.

“We are impressed with Stantec’s modest but consistent growth profile in a difficult environment, particularly in the U.S.,” Sara O’Brien, analyst with RBC Capital Markets, said in a note upgrading the company to outperform.

Telus Corp., Canada’s third-largest wireless carrier, rose 1.3 percent to C$63.17 after reporting second-quarter profit that beat analysts’ estimates as customer spending on smartphone data surged. The company raised its forecast for annual revenue.

US

By Lu Wang

Aug. 3 (Bloomberg) — U.S. stocks rose for a fourth week, giving the Dow Jones Industrial Average the longest rally since October, as better-than-forecast jobs data erased a four-day drop amid investor disappointment with global stimulus efforts.

Technology companies climbed the most among the 10 industry groups in the Standard & Poor’s 500 Index. Apple Inc. jumped 5.2 percent amid speculation the company may join the Dow, while First Solar Inc. soared 18 percent on surging profit. Better- than-expected earnings at MetLife Inc. and Frontier Communications Corp. sent their stocks up at least 9 percent.

Knight Capital Group Inc. plunged 61 percent after a trading error spurred a $440 million loss.

The S&P 500 added 0.4 percent for the week to 1,390.99. The benchmark index for American equities extended its 2012 gain to 11 percent. The Dow climbed 20.51 points, or 0.2 percent, to 13,096.17, the highest level since May 3.

“We’ve come to fall into this trap if you will, when it comes to central banks, we want something from them immediately and if we don’t get it, the market gets disappointed,” Mark Freeman, who oversees about $13 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said in a phone interview. “At the end of the day, the fundamentals matter, and the fundamentals are doing OK.”

Equities reversed weekly losses on the final day, with the S&P 500 jumping 1.9 percent, after a Labor Department report showed American payrolls climbed more than forecast even as the jobless rate unexpectedly rose. The benchmark index slumped 1.5 percent in the previous four days as European Central Bank President Mario Draghi and Federal Reserve Chairman Ben S. Bernanke failed to reassure investors on immediate efforts to bolster the economy.

The S&P 500 slipped as much as 9.9 percent from an almost four-year high on April 2 amid concern Europe’s debt crisis is worsening and the global economy is slowing. The equity gauge has since climbed 8.8 percent after central banks in Europe and China cut interest rates.

U.S. stocks fell on Aug. 1 as the Fed held off on stepping up record stimulus, saying it will “closely monitor” economic and financial developments and “will provide additional accommodation as needed.” Equities slid the next day as Draghi kept interest rates on hold and signaled the ECB intends to join forces with governments to buy bonds, while conceding that Germany’s Bundesbank had reservations about the plan.

The rally in stocks on the final day gained strength as members of German Chancellor Angela Merkel’s coalition parties signaled they won’t stand in the way of Draghi’s bond plan.

“The U.S. economy is continuing to plod along, not going into a recession,” James McDonald, chief investment strategist at Northern Trust Corp., said in the phone interview. The Chicago-based firm oversees $704.3 billion. “While Mario Draghi did not give us the magic bullet, they’re clearly working towards further intervention to help support the European Monetary Union.”

Computer and software makers in the S&P 500 climbed 1.5 percent as a group. Apple rose 5.2 percent to $615.70, the highest since April. The world’s largest company by market value is considering a stock split and its decision in March to pay its first dividend in 17 years makes it more likely the shares could be added to the Dow index, Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., wrote in a July 31 note.

First Solar surged 18 percent to $17.06 after second- quarter earnings increased 81 percent. The world’s biggest maker of thin-film panels boosted its full-year profit forecast.

About 73 percent of S&P 500 companies which reported quarterly results have beaten estimates, according to data compiled by Bloomberg. Sales missed estimates at 59 percent of companies.

MetLife, the largest U.S. life insurer, jumped 9 percent to $33.19 after profit beat analysts’ estimates on gains from derivatives it uses to protect against a drop in interest rates.

Prudential Financial Inc. rallied 8.2 percent, the most since December, to $52.03. The second-largest U.S. life insurer said profit more than doubled as its international business improved and the company recorded gains on derivatives.

Frontier Communications Corp. advanced 18 percent to $4.40 for the biggest increase in the S&P 500. The company, which sells voice and broadband service to individuals and businesses, reported per-share earnings that topped the average analyst estimate by 70 percent, the most since 2006, according to data compiled by Bloomberg.

Knight plunged 61 percent to $4.05. Errors related to the company’s trading software sent stocks moving as much as 151 percent on Aug. 1, prompting the New York Stock Exchange to review trading in 140 companies from Molycorp Inc. to AT&T Inc.

Transactions that occurred during the height of the volatility were canceled in six securities, where prices swung at least 30 percent in the first 45 minutes.

Knight fought to preserve its business as concern grew about its solvency. On the final day of the week, Knight told brokers it received short-term financing, according to a person familiar with the matter. As the company opened its books to potential saviors, people with knowledge of the matter said KKR & Co., TPG Capital and Silver Lake were among buyout firms that had an initial interest — while one said chances of a private- equity deal are small.

Abercrombie & Fitch Co. slumped 20 percent to $29.37 for the biggest retreat in the S&P 500. The teen retailer cut its annual forecast, citing an anticipated drop in same-store sales in the second half of 2012.

Coach Inc., the largest U.S. luxury handbag maker, tumbled 15 percent, the most since August, to $52.66, after reporting revenue that trailed analysts’ estimates amid slowing sales growth in North America.

Facebook Inc. declined 11 percent to $21.09 for the week.

The world’s biggest social-networking website dropped to its lowest level on Aug. 2. It was Facebook’s fifth straight day of losses after reporting earnings that showed slowing growth. The company snapped its losing streak on the final day of the week, jumping 5.2 percent, after Brian Wieser, an analyst at Pivotal Research Group, said the company could step up revenue growth with ad sales.

Have a wonderful weekend everyone.

Be magnificent!

All things are linked together through cause and effect.  There is no such thing as an accident.

When we cannot find the link between cause and effect in an event, we call it an accident.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Knowledge is the only instrument of production

that is not subject to diminishing returns.

-John Clarke, 1948-

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