February 12, 2013 Newsletter

Dear Friends,

Tangents:

Daybreak

By Liu Xiaobo

Over the tall ashen wall, between

the sound of vegetables being chopped

daybreak is bound and severed

dissipated by a paralysis of spirit

What is the difference

between the light and the darkness

that seems to surface through my eyes’

apertures, from my seat of rust

I can’t tell if it’s the glint of chains

in the cell, or the god of nature

behind the wall

The day’s dissidence

makes the arrogant

sun stunned to no end

Daybreak a vast emptiness

you in  a far place

with nights of love stored away

Extract from June Fourth Elegies by Liu Xiaobo

Today is Shrove Tuesday and for those of you who follow the cultural tradition of having pancakes for dinner, Rowleigh Leigh (chef at Le Café Anglais in London) offers this recipe from the weekend edition of the Financial Times:

Photos of the Day – February 12^th, 2013

A reveller performs during the ‘Grand Parade of Tradition’ as part of Carnival celebrations in Barranquilla, Colombia, Feb.10, 2013.

Joaquin Sarmiento/Reuters

A reveller from the Mangueira samba school participates during the annual carnival parade in Rio de Janeiro’s Sambadrome, Feb. 11, 2013.

Sergio Moraes/Reuters

Market Closes for February 12th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Feb. 12 (Bloomberg) — Canadian stocks rose as energy companies advanced after Cnooc Ltd. won approval to acquire the U.S. assets of Nexen Inc. and crude oil climbed to the highest price in more than a week.

Nexen gained 2 percent as Cnooc cleared the last regulatory hurdle for the Chinese company’s $15.1 billion acquisition of the energy producer. Canadian Natural Resources Ltd. rose 3.4 percent as crude gained 0.5 percent. Gran Tierra Energy Inc. jumped 7.4 percent after the company announced an oil discovery in Peru. Agrium Inc. lost 2 percent after appointing two directors to its board as talks to avert a proxy fight with activist investor Jana Partners LLC fell apart.

The Standard & Poor’s/TSX Composite Index rose 40.87 points, or 0.3 percent, to 12,789.02 in Toronto. The S&P/TSX has risen 3.2 percent over the past 12 months, underperforming every developed market in the world except Italy and Spain, according to data compiled by Bloomberg.

“Giving the TSX a bit of a lift today is the final approval for the Nexen-Cnooc deal,” said Michael O’Brien, director and fund manager with TD Asset Management Inc. in Toronto. He manages about C$3 billion ($3 billion). “It’s a bit of a relief that we have a firm date now.”

Energy stocks contributed most to gains in the S&P/TSX as eight of 10 industries advanced. Trading volume was 2.6 percent above the 30-day average at this time of the day.

Nexen, based in Calgary, climbed 55 Canadian cents to C$27.48. The Committee on Foreign Investment in the U.S. approved the deal between Nexen and Cnooc, China’s biggest oil and natural gas producer. The acquisition is expected to close the week of Feb. 25, Nexen said in a statement today. Nexen owns oil and gas drilling and platforms in the Gulf of Mexico, accounting for about 8 percent of its output.

Canadian Natural Resources gained C$1.04 to C$31.55 to pace gains among energy companies.

Crude for March delivery added 48 cents to settle at $97.51 a barrel in New York, the highest level since Feb. 1. The Organization of Petroleum Exporting Countries boosted a demand forecast for its crude, saying it will have to provide 29.8 million barrels a day in 2013, a 0.3 percent increase from a January estimate.

Gran Tierra rose 41 cents to C$5.95 after finding crude oil in the Bretana Norte well of Block 95 in the Peruvian Amazon jungle. Gran Tierra is testing the reservoir’s productivity and expects results in late February.

Toromont Industries Ltd. advanced 2.8 percent to C$22.90 after Ben Cherniavsky, analyst with Raymond James Ltd., raised his rating for the stock to outperform from market perform while increasing his price target to C$25.75 from C$21. The equipment dealer reported fourth-quarter adjusted earnings of 59 cents a share, compared with analysts’ consensus estimate of 45 cents.

Agrium fell C$2.29 to C$112.71. The largest agricultural retailer in North America appointed Mayo Schmidt, former chief executive officer of Canadian grain handler Viterra Inc., and David Everitt, a retired Deere & Co. executive, at the end of three days of talks with Jana that failed to reach a compromise.

Jana, the New York-based hedge fund, is Agrium’s largest shareholder with a 6.2 percent stake and has sought to replace five of Agrium’s 11 directors. The activist investor has said the current board lacks experience in farm-product retailing and has also proposed spinning off Agrium’s retail network to boost profitability.

TransCanada Corp. lost 1.4 percent to C$47.56 after posting fourth-quarter profit short of analysts’ expectations. The Calgary-based company, which transports 20 percent of North America’s natural gas, said profit fell as shipments of the fuel on some pipelines declined.

Alacer Gold Corp. slumped 8.4 percent to C$4.16, its lowest since May 2010, after the company that explores for gold in Australia and Turkey had its rating reduced to underweight from neutral at JPMorgan by analyst Joseph Kim.

US

By Leslie Picker and Lu Wang

Feb. 12 (Bloomberg) — U.S. stocks advanced, sending benchmark indexes to five-year highs, as earnings topped estimates and investors awaited President Barack Obama’s State of the Union address.

Bank of America Corp. and Citigroup Inc. gained at least 2.8 percent as banks rallied. Avon Products Inc. soared 20 percent amid better-than-estimated profit and a plan to consider options for its Silpada jewelry unit. Michael Kors Holdings Ltd. rose 8.8 percent after raising its forecast in anticipation of a jump in same-store sales. Coca-Cola Co. fell 2.7 percent as volume sales missed forecasts. Apple Inc. lost 2.5 percent.

The Standard & Poor’s 500 Index gained 0.2 percent to 1,519.43 at 4 p.m. in New York. The Dow Jones Industrial Average increased 47.46 points, or 0.3 percent, to 14,018.70. Both gauges closed at the highest level since 2007. About 5.9 billion shares traded hands on U.S. exchanges today, 3.7 percent lower than the three-month average.

“This market is front-running better economic and earnings news,” John Augustine, who helps manage $27 billion as chief market strategist at Cincinnati-based Fifth Third Bancorp, said in a phone interview. “We all think of a correction coming in February. Guess what, we probably won’t get a correction in February. This market has got upward momentum.”

About 74 percent of the 355 companies in the S&P 500 that have released results during the earnings season have exceeded profit projections, and 66 percent have beaten sales estimates, data compiled by Bloomberg show.

The S&P 500 has rallied 6.5 percent in 2013 as U.S. lawmakers reached a budget compromise. It has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond-buying to lower interest rates and boost economic growth.

The gauge is 2.9 percent below its record of 1,565.15 reached in October 2007, while the Dow is about 1 percent from its all-time high of 14,164.53.

“Every strategist I’ve talked to says that we’re due for a 5 percent, 7 percent correction, and the reason why we haven’t seen it is because investors are buying on dips,” Diane Jaffee, the New York-based group managing director for U.S. equities who oversees about $5.9 billion in assets at TCW Group Inc., said in a phone interview. “The thought process is that people are willing to forgo the first 10 or 20 percent of the market rise to make sure it will really do it, and now they want in for the last 20 or 30 percent because they have more confidence.”

Obama is due to deliver his State of the Union address at 9 p.m. in Washington. He will make proposals for spending on infrastructure, clean energy and education, according to an administration official briefed on the speech. Obama will argue that fostering economic growth remains the best strategy to narrow a federal budget gap that has exceeded $1 trillion in each of the last four years.

Seven of the 10 industry groups in the S&P 500 rose today as financial, phone and industrial companies performed the best, adding at least 0.4 percent. The Morgan Stanley Cyclical Index, a measure of companies whose earnings are most tied to economic swings, climbed 1 percent.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, fell 2.3 percent to 12.64.

The KBW Bank Index, made up of 24 U.S. lenders, gained 1.1 percent. Bank of America advanced 3.3 percent to $12.25, Citigroup jumped 2.8 percent to $44.35 and Goldman Sachs Group Inc. gained 1.2 percent to $154.11. All three banks reached their highest levels since 2011. JPMorgan Chase & Co. added 1 percent to $49.14, it’s highest price since October 2008.

Investors are the most optimistic on banks since the top of the bull market in 2007, bolstered by record-low interest rates and an improving outlook for global growth and profits, a Bank of America Corp. survey showed. A net 6 percent of global fund managers, who together oversee about $555 billion, said they were overweight banks, the highest since February 2007.

Goldman Sachs Chief Financial Officer Harvey M. Schwartz said the banking industry’s average return on equity will rise above 12 percent as some firms shrink or exit businesses.

“I think the industry will migrate to higher returns because it will have to,” Schwartz, 48, said today at the Credit Suisse Financial Services Forum in Miami. It might be a “question of excess capacity coming out over a long period of time,” he said.

Avon Products jumped $3.51 to $20.79 for the biggest gain since at least 1974. The world’s largest door-to-door cosmetics seller reported fourth-quarter adjusted profit that topped analysts’ estimates as new Chief Executive Officer Sheri McCoy trimmed costs. McCoy said on a conference call that she would seek strategic alternatives for the company’s Silpada jewelry unit, where sales fell 18 percent in the fourth quarter.

Michael Kors, named for the designer who founded the company, increased $5 to $62. Profit excluding certain items will be as much as $1.82 a share in fiscal 2013, compared with a previous estimate of as much as $1.50, Michael Kors said.

Analysts estimated $1.57 a share, according to the average of 14 projections compiled by Bloomberg.

Masco Corp. rallied 12 percent to $20.01 for the second- largest gain in the S&P 500. The home improvement and building products maker reported fourth-quarter earnings and sales that exceeded analysts’ estimates.

An S&P 500 gauge of homebuilders advanced 4.5 percent, the most since December, as all of its 11 members gained. D.R. Horton Inc. jumped 4.9 percent to $24.05, PulteGroup Inc. added 5.3 percent to $20.32 and Lennar Corp. increased 4.1 percent to $40.87.

Fossil Inc. rose 3 percent to $110.65 after the maker of the namesake watch brand said its fourth-quarter sales increased 14 percent to a record $947.7 million, surpassing estimates.

J.M. Smucker Co. gained 2.5 percent to $90.92 after the Orrville, Ohio-based food products company was raised to outperform, the equivalent of a buy, from market perform by Alexia Howard, an analyst with Sanford C. Bernstein & Co.

Coca-Cola lost $1.05 to $37.56 for its biggest drop since October 2011. The world’s largest soft-drink maker said global volume sales rose 3 percent during the fourth quarter. That missed the 5.4 percent growth estimated by Mark Swartzberg, an analyst at Stifel Nicolaus & Co.

Facebook Inc. declined 89 cents to $27.37. Carlos Kirjner, an analyst at Sanford C. Bernstein in New York, downgraded the stock to market perform, the equivalent of hold, from outperform, citing a potential slowdown in price-per-ad growth in North America and Europe. BTIG LLC analyst Rich Greenfield also cut the social network, to sell from neutral, saying its mobile growth was not enough.

Apple retreated $12.03 to $467.90, ending a three-day rally. Chief Executive Officer Tim Cook said the iPhone maker will “thoroughly consider” a push by Greenlight Capital Inc.’s David Einhorn to use some of its $137.1 billion in cash and securities for preferred stock. The shares have lost more than 30 percent from a record in September amid concern over slowing sales growth and tightening competition.

Dun & Bradstreet Corp. sank 7.7 percent, the most in the S&P 500, to $78.68. The 171-year-old provider of business data and risk-management services reported fourth-quarter earnings that missed analysts’ estimates on sluggish North American sales.

Have a wonderful evening everyone.

Be magnificent!

If the recognized leaders of mankind who have control over the engines of destructions

were wholly to renounce their use, with full knowledge of its implications, permanent peace can be obtained.

This is clearly impossible without the Great Powers of the earth renouncing their imperialistic design.

This again seems impossible without great nations ceasing to believe in soul-destroying competition

and to desire to multiply wants and, therefore, increase their material possessions.

Mahatma Gandhi,1869-1948

As ever,

Carolann

Every man dies.  Not every man really lives.

-William Wallace, d. August 23^rd, 1305

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