December 3, 2012 Newsletter

Dear Friends,

Tangents:

December, Latin 10^th month: December was the tenth month in the Roman calendar when the year began in March with the vernal equinox.  The Old English name was aerra gëola, meaning earlier Yule.  In the French revolutionary calendar, it was Frimaire, meaning hoarfrost month, from November 22^nd to December 21^st.

“Silence slips peacefully over the black-and-white world.  The wind moans.  The Earth is hard as iron.  Mist and cold penetrate to the bone.  The days grow shorter, the snowfalls heavier.  Bare trees and hunched figures in overcoats and heavy jackets dot the streets.  But inside it is warm, and the kitchen windows are steamed up.  People gather in expectation of the rebirth of light.  There is almost the sense that the Sun will break forth again from the interior of the Earth – or from within our own souls.  Christmas and Hanukkah, among other celebrations, hold forth the promise that, by our dedication and self-sacrifice a new green world of meaning, love, and compassion can be born.  As the solstice, the heavens show us the rebirth of the light, Dies Natalis Solis Invicti – the Birthday of the Unconquerable Sun.  May the power of the world’s being grow strong!  May life’s power to act blossom forth!  May the past bear what is to come!” -fromCosmos Doogood’s Urban Almanac.

Birthstone: Lapis Lazulli

Flower: Narcissi

On this day in 1965, the Beatles released Rubber Soul, their sixth studio album. –Steven Russolillo, WSJ, 12/03/2012.

And also on this day in…

1857 – Joseph Conrad, author, was born.

1923 – Maria Callas was born.

1950 – The Chinese close in on Pyongyang, Korea, and UN forces withdraw southward.

1977 – The State Department proposes the admission of 10,000 more Vietnamese refugees to the United States.

1979 – Eleven are dead and eight injured in a mad rush to see a rock band (The Who) at a concert in Cincinnati, Ohio.

1984 – Toxic gas leaks from a Union Carbide plant and results in the deaths of thousands in Bhopal, India.

1989 – Presidents George Bush and Mikhail Gorbachev announce the official end to the Cold War at a meeting in Malta.

The most important persuasion tool you have in your entire arsenal is integrity. – Zig Ziglar

photos of the day

December 3, 2012

A workman walks on the the roof of the Le Louvre Lens Museum, by Japanese architects Kazuyo Sejima and Ryue Nishizawa, on the eve of the inauguration of the museum in Lens, northern France, December 3, 2012.

Pascal Rossignol/Reuters

A silhouetted man is reflected in the glass of ‘L’Ete,’ a painting by Arcimboldo Giuseppe in the Louvre Museum in Lens, northern France. The museum in Lens, to open the 12 Dec, is part of a strategy to spread art beyond the traditional bastions of culture in Paris.

Michel Spingler/AP

A boy somersaults at Marina beach in Chennai, India.

Babu/Reuters

Market Closes for December 3rd, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Dec. 3 (Bloomberg) — Canadian stocks fell, snapping a three-day advance, as banks and gold miners slid after manufacturing in the U.S. unexpectedly contracted in November on weaker business demand and disruptions from superstorm Sandy.

Goldcorp Inc., the world’s second-largest gold producer, slipped 3.7 percent after Mexico announced it will create a new mining law and review royalties. Bank of Nova Scotia fell 0.7 percent as the lender prepares to report fourth-quarter earnings this week. Saputo Inc., Canada’s largest dairy processor, advanced 3 percent after it agreed to buy Dean Foods Co.’s Morningstar Foods unit for $1.45 billion.

The Standard & Poor’s/TSX Composite Index fell 69.62 points, or 0.6 percent, to 12,169.74 in Toronto. The equity gauge has gained 1.8 percent this year.

“All the economic data this week will have a bit of an asterisk due to Hurricane Sandy,” said Greg Taylor, fund manager with Aurion Capital Management in Toronto. The firm manages about C$8 billion ($8 billion). “Unfortunately the biggest theme of the month is going to be the fiscal cliff. It’s going to cause a lot of people to stay on the sidelines and look again in January. The economy is setting up for a Santa Claus bounce, but we might run out of time.”

The Santa Claus rally is a traditional upswing in stocks in the last five days of the year and the first two in January, according to the Stock Trader’s Almanac.

Government leaders in Washington are negotiating a budget compromise to avoid automatic spending cuts and tax increases scheduled to activate in the new year. House Republicans submitted a new proposal to President Barack Obama today that includes $1.4 trillion in spending cuts and $800 billion in new revenue by limiting tax breaks and capping deductions for top earners.

The Institute for Supply Management’s U.S. factory index decreased to 49.5, the lowest since July 2009, from 51.7 a month earlier, the Tempe, Arizona-based group said today. Economists projected the index would ease to 51.4, according to the median forecast in a Bloomberg survey. A reading of 50 marks the dividing line between expansion and contraction.

Raw-materials stocks contributed most to losses in the S&P/TSX as seven of 10 industries declined. Trading volume was 4.6 percent higher than the 30-day average.

Scotiabank, which will report its fourth-quarter earnings on Dec. 7, slipped 0.7 percent to C$55.62.

Goldcorp dropped 3.7 percent to C$37.29 after Mexican President Enrique Pena Nieto and leaders of the nation’s three largest parties agreed to revise mining royalties. Operations in Mexico accounted for 34 percent of Goldcorp’s revenue in 2011.

Barrick Gold Corp., the largest producer of the metal, slipped 2.7 percent to C$33.55 and Yamana Gold Inc. fell 2.5 percent to C$18.26.

Saputo, which manufactures as well as owns the trademark and brand rights to Hostess Twinkies in Canada, added 3 percent to C$47.41 after agreeing to buy Morningstar Foods, a maker of creams, ice-cream mixes and cheese. The deal is the largest takeover of a dairy company globally this year, according to data compiled by Bloomberg.

Labrador Iron Ore Royalty Corp. rose 2.8 percent to C$30.50 after Robin Kozar, analyst with RBC Capital Markets, raised the stock rating to outperform from sector perform while lifting the price target to C$35 from C$33. Higher production volumes and lower unit costs will drive free cash flow growth, the analyst said.

US

By Lu Wang and Michael P. Regan

Dec. 3 (Bloomberg) — U.S. stocks fell, halting a three-day gain, and commodities trimmed an early advance as a contraction in American manufacturing and concern about the budget debate overshadowed optimism on China’s economy. Treasuries and the dollar fell.

The S&P 500 fell 0.5 percent to close at 1,409.46 at 4 p.m. in New York after climbing as much as 0.5 percent. The Stoxx Europe 600 Index pared gains after rising above its highest closing level in 18 months. The S&P GSCI Index of raw materials was up 0.1 percent after rallying 1.1 percent. The Dollar Index slid to a one-month low while 10-year Treasury yields added one basis point to 1.62 percent.

Equities extended losses as House Republicans, rejecting President Barack Obama’s demand for tax rate increases, proposed $1.4 trillion in spending cuts and $800 billion in new revenue by limiting tax breaks and capping deductions for top earners.

Benchmark indexes opened higher before erasing gains as the Institute for Supply Management’s manufacturing index unexpectedly fell below 50, the threshold signaling growth.

Today’s manufacturing data “is just a confirmation that the fiscal-cliff concerns are actually affecting decision making at the business level,” Andres Garcia-Amaya, New York-based global market strategist at JPMorgan Chase & Co.’s mutual funds unit, which oversees $400 billion in assets, said in a phone interview. “For that reason, the market obviously doesn’t like it, considering that we probably won’t get an answer either at the last minute prior to the holidays or right before” New Year’s, he said.

The S&P 500 also erased early gains after briefly climbing above 1,421, its average over the past 50 days, a level watched by traders to gauge the market’s trend. The index has closed below its 50-day average since Oct. 19, data compiled by Bloomberg show.

DuPont Co., General Electric Co. and Coca-Cola Co. lost at least 1.4 percent for the biggest declines in the Dow Jones Industrial Average. Newmont Mining Corp. declined 3 percent after the largest U.S. gold producer appointed Gary Goldberg to replace Richard O’Brien as chief executive officer.

An index of airlines fell 1.9 percent as Delta Air Lines Inc. slipped 3.8 percent. The company is mulling a bid for Singapore Airlines Ltd.’s stake in Virgin Atlantic Airways Ltd., according to people familiar with the plans who declined to be identified because the matter is private.

Dell Inc. added 4.4 percent after Goldman Sachs Group Inc. recommended buying the shares.

December has been the best month for the S&P 500 since 1950 with an average gain of 1.7 percent, according to the Stock Trader’s Almanac. The stock market may also get a year-end boost from a so-called Santa Claus rally — an upswing in the last five days of the year and the first two in January, the almanac said.

While JPMorgan Chase & Co.’s chief U.S. equity strategist Thomas Lee told Bloomberg Television today that American equities are in a secular bull market, his counterpart at Wells Fargo & Co. predicted a drop next year. The S&P 500 will fall 1.8 percent to 1,390 by the end of 2013 as global growth slows and policymakers struggle to reach a budget agreement, according to Wells Fargo’s Gina Martin Adams.

Adams, who has the lowest projection for the U.S. equity benchmark next year among Wall Street strategists surveyed by Bloomberg, says investors should buy companies that are least- tied to economic growth. The average estimate from eight other forecasters implies a 9.2 percent rally to 1,546 from Nov. 30.

“The U.S. economy is likely to flirt with recession in the near term, as slowing exports and falling investment likely lead to a weaker consumer at the start of 2013,” Adams wrote in a report today. “The market will suffer downward pressure until policymakers act decisively to convince investors that the U.S. debt house is ‘in order’.”

Stocks, bonds, commodities and the dollar all posted monthly gains in November for the second time this year amid optimism central bank stimulus programs are bolstering growth in the world’s biggest economies.

Today’s report showing manufacturing unexpectedly contracted in November for the fourth month signaled factory managers grew more concerned about the potential economic toll stemming from the so-called fiscal cliff. Data may show on Dec. 7 that U.S. payrolls rose by 90,000 last month, the smallest gain since June, as superstorm Sandy forced businesses to close.

Republicans are renewing attempts to use a debt-limit increase to force deeper spending cuts, replicating the 2011 showdown that led to a credit-rating downgrade. Many congressional Republicans see the need to raise the $16.4 trillion limit on public debt in early 2013 as leverage to force President Barack Obama to cut spending. House Republicans view the U.S. budget deficit, which topped $1 trillion in each of the past four years, as a crisis requiring immediate action.

There’s “clearly a chance” that there won’t be an agreement in time to avert the fiscal cliff, House Speaker John Boehner told “Fox News Sunday.” “I would say we’re nowhere, period,” he said.

American companies are supplanting China from the world’s 500 biggest stocks faster than at any time in the past decade, as an improving U.S. economy and investor confidence in free markets overcomes the lure of equities offering twice the profit growth.

U.S. corporations led by Apple Inc. and Exxon Mobil Corp. make up 171 of the top 500 with a market capitalization of $10.6 trillion, or 40.3 percent of the total, compared with 159 valued at $8.24 trillion in 2009, data compiled by Bloomberg show.

PetroChina Co. and Industrial & Commercial Bank of China Ltd. lead the 24 Chinese firms worth $1.74 trillion qualifying today, down from 34 with a capitalization of $2.19 trillion.

Among European stocks, Cable & Wireless Communications Plc rose 1.2 percent after agreeing to sell its Monaco and Islands unit to Bahrain Telecommunications Co. for $680 million. Colruyt SA slid 1.9 percent after first-half earnings before interest and taxes missed analysts’ estimates.

The Stoxx Europe 600 Index advanced 0.1 percent at the close in London as three stocks rose for every two that fell.

The equity benchmark has rallied 18 percent from this year’s low on June 4 as the European Central Bank announced an unlimited bond-buying plan and the Federal Reserve started a third round of asset purchases.

Ten-year Greek bond yields fell below 15 percent for the first time since July 2011 as the nation offered to buy back bonds.

The euro strengthened 0.5 percent to $1.3054 and climbed as high as $1.3076, the strongest level since October. The dollar weakened against 11 of 16 major peers, dropping 0.3 percent to 82.27 yen. The Dollar Index declined to as low as 79.799, the weakest since Oct. 31.

The Australian dollar dropped versus 15 of 16 major counterparts, sliding 0.6 percent to 0.7982 euro. The Reserve Bank of Australia will return interest rates to a half-century low of 3 percent tomorrow, economists predict, as data today showed manufacturing contracted and retail sales stagnated. New Zealand’s dollar weakened versus most peers after data showed the nation’s terms of trade worsened.

China’s official Purchasing Managers’ Index was 50.6 in November, while a private gauge of manufacturing climbed to 50.5, separate reports showed. Nine of 16 analysts surveyed over the past two weeks by Bloomberg forecast China will set an economic growth goal of 7.5 percent, unchanged from 2012, in a sign that new leadership headed by Xi Jinping won’t tolerate a bigger slowdown from the lowest target since 2004.

The S&P GSCI Index of commodities trimmed gains after reaching 657.11, the strongest level since Oct. 22. Sugar, natural gas, aluminum and silver rose at least 0.9 percent to lead gains in 15 of 24 commodities tracked by the index, while hogs, nickel and Kansas wheat fell the most.

Gold futures rose 0.5 percent to $1,721.10 an ounce, rebounding from the biggest weekly drop in five months, as the dollar weakened and investors boosted holdings of exchange- traded products backed by bullion to a record 2,621.73 metric tons Nov. 30, according to data compiled by Bloomberg. Silver increased 1.4 percent to $33.759 an ounce.

The MSCI Emerging Market index was little changed following a two-day gain. Hong Kong’s Hang Seng index slumped 1.5 percent, the steepest drop since Nov. 15. The BSE India Sensex 30 Index slipped 0.2 percent, retreating from the highest level since April 2011.

Turkey’s ISE National 100 Index rose 1.7 percent to the highest close in records dating to January 1988 as the nation’s inflation rate fell to the lowest in 14 months, giving the central bank more room to reduce borrowing costs.

Have a wonderful evening everyone.

Be magnificent!

As long as individuality survives, that is,

as long as you continue to see others as separate from you,

a feeling of hostility towards them cannot fail to prevail.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

I believe it is harder to be fair to oneself

than to others.

-Andre Gide, 1869-1951

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