February 13, 2013 Newsletter

Dear Friends,

Tangents:

I went to a lecture last night to hear Valerie Plame Wilson.  It was scintillating.  Valerie is married to Joe Wilson, who wrote an op-ed column in the New York Times in 2003, questioning Bush’s motive for the Iraqi war when intelligence sources revealed there were no Weapons of Mass Destruction.  After that incident, as political payback, Valerie’s covert identity as an CIA spy was leaked to the press by Senior White House officials.  It resulted in the loss of her career and privacy.  In retaliation she wrote the New York Times best –selling autobiography, Fair Game: My Life as a Spy, My Betrayal by the White House.  Her story was made into a major motion picture, Fair Game, starring Sean Penn and Naomi Watts.  You can watch it on Netflix.

She  denounced the media as being manipulated and the obvious vacuum of serious investigative journalism, which she maintains, no longer exists.

Photos of the Day – February 13^th, 2013

A skier makes his way down from top of the mountain at the plateau of Rosa Khutor, a venue for the Sochi 2014 Winter Olympics near Sochi. Kai Pfaffenbach/Reuters

Banana Joe, an Affenpinscher, stands after winning the 137th Westminster Kennel Club Dog Show at Madison Square Garden in New York, February 12, 2013. Shannon Stapleton/Reuters

Market Closes for February 13th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Sarah Pringle

Feb. 13 (Bloomberg) — Canadian stocks fell as a slump in technology and raw-material shares offset a rally in financial companies amid corporate earnings.

Gold producers declined as Barrick Gold Corp. and Eldorado Gold Corp. dropped at least 2.6 percent. BlackBerry, formerly known as Research In Motion Ltd., fell 8.1 percent, retreating for a fourth straight day. Thomson Reuters Corp. slid 2.3 percent after predicting tightening profit margins. Talisman Energy Inc. rallied 2.1 percent after posting a fourth-quarter profit for the first time in four years.

The Standard & Poor’s/TSX Composite Index slid 13.74 points, or 0.1 percent, to 12,775.28 at 4 p.m. in Toronto. The benchmark gauge has gained 2.8 percent this year. About 753 million shares traded hands on Canadian exchanges today, or 1.6 percent below the three-month average.

“People are focused on earnings, you’ve seen stock selection become more important,” Jeff Young, chief investment officer at NexGen Financial Corp, said in a phone interview. The Toronto-based firm manages just over C$1 billion. “It’s turning into a more normalized market, but whether we’re completely out of the woods in the macro side, the reality is nothing’s really been fixed.”

Gold producers fell as the price of the metal slipped 0.3 percent to $1,645.10 an ounce on the Comex in New York. Barrick Gold lost 83 Canadian cents to C$31.72. Eldorado Gold dropped 35 Canadian cents to C$10.68, its lowest level since August.

BlackBerry slumped C$1.25 to C$14, for the worst performance in the benchmark index. The Waterloo, Ontario-based company, which is rolling out its new BlackBerry 10 lineup, has tumbled 18 percent over the past four days. The stock has rallied 19 percent this year on optimism that the phones can make the company competitive again with Apple Inc.’s iPhone and Samsung Electronics Co.’s Galaxy lineup.

Chorus Aviation Inc. tumbled 3.6 percent to C$4.34 after Fairfax Financial Holdings Ltd. sold its stake in the regional airline. Chorus operates regional flights for Air Canada, the country’s largest carrier, under the Jazz and Air Canada Express banners. Fairfax, an insurer and investment management company based in Toronto, was the third-biggest holder of Chorus stock.

Thomson Reuters stumbled 70 Canadian cents to C$30.02. The provider of financial news and information services predicted slow growth and tightening profit margins in 2013, and announced plans to cut 2,500 jobs. Thomson Reuters is midway through an effort to turn around its financial and risk-management operations, Chief Executive Officer James C. Smith said in today’s statement.

CAE Inc. slid 2 percent to C$10.58. The simulation manufacturer posted third-quarter revenue of C$522.1 million, falling short of the average estimate of C$546.3 million.

Financial shares rose as a group. Genworth MI Canada Inc. rallied 1.3 percent to C$24.88 and Canadian Imperial Bank of Commerce climbed 0.7 percent to C$83.33.

Talisman jumped 26 Canadian cents to C$12.82, its highest level since October. The Calgary-based oil and natural gas producer with operations on six continents posted per-share net income of 37 Canadian cents. Hal Kvisle, who took over as chief executive officer in September, has announced plans to reduce spending, cut debt and exit certain regions, including Peru, to refocus the company on near-term cash flow.

Orko Silver Corp., based in Vancouver, surged 22 percent to C$2.60, its highest level since March. Coeur d’Alene Mines Corp., an Idaho-based silver producer, offered to buy Orko Silver for C$379.9 million in cash and shares in an attempt to trump a rival bid from First Majestic Silver Corp.

Coeur d’Alene tumbled 10 percent to C$21.09, while First Majestic Silver rose 1 percent to C$18.17.

US

By Lu Wang and Leslie Picker

Feb. 13 (Bloomberg) — Most U.S. stocks rose, sending the Standard & Poor’s 500 Index to the highest level since October 2007, as investors weighed economic reports and President Barack Obama’s State of the Union address.

General Electric Co. climbed 3.6 percent after agreeing to sell its remaining stake in NBC Universal to Comcast Corp. for $16.7 billion. Comcast, the largest U.S. cable company, jumped 3 percent. Retailers in the S&P 500 rose as a group after government data showed purchases increased in January for the third consecutive month. McDonald’s Corp. lost 1.2 percent after Obama announced his plan to raise the minimum wage.

The S&P 500 advanced 0.1 percent to 1,520.33 at 4 p.m. in New York. The Dow Jones Industrial Average lost 35.79 points, or 0.3 percent, to 13,982.91. Four stocks gained for every three that fell on U.S. exchanges, with about 6 billion shares changing hands, 2.9 percent lower than the three-month average.

“I think the bias has been consistently green on the screen,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which oversees $55 billion, said in a telephone interview. “We didn’t hear anything shockingly different from Obama’s speech that would have pulled investors’ enthusiasm for stocks out of the marketplace.”

The S&P 500 has rallied 6.6 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 index is 2.9 percent below its record of 1,565.15 reached in October 2007.

Obama called for raising the federal minimum wage to $9 an hour and pledged to expand trade with Europe in the State of the Union speech late yesterday. He also proposed spending $50 billion on “urgent” infrastructure projects. He lauded steps by companies such as Apple Inc., Caterpillar Inc. and Ford Motor Co. to bring manufacturing jobs back to the U.S.

The president repeated his demand that Republicans accept raising tax revenue along with spending cuts as part of any “balanced” approach to his goal of $1.5 trillion in additional deficit reduction over a decade. He said the balance could be achieved by “getting rid of tax loopholes and deductions for the well-off and well-connected.”

“What I sense today is the ongoing zig and zag of the market after there’s been a major speech given by the president and just trying to sift out what it means,” Matthew Kaufler, fund manager at Federated Clover Investment Advisors, said in a phone interview. The Rochester, New York-based firm manages about $3 billion.

McDonald’s lost $1.10 to $94 for the biggest drop in the Dow. The company’s franchisees, as well as other restaurant chains, spent money lobbying against minimum-wage increases.

Brinker International Inc., owner of the Chili’s and Maggiano’s dining chains, slipped 3.2 percent to $31.99, while Darden Restaurants Inc. retreated 2 percent to $45.86.

Retail sales in the U.S. rose 0.1 percent last month, matching the median forecast of economists surveyed by Bloomberg, which showed household spending is holding up even as an increase in the payroll tax takes a bigger bite from paychecks.

Retailers gained 0.6 percent among 24 groups in the S&P 500. Netflix Inc. added 4.7 percent to $186.27. Amazon increased 4.2 percent to $269.47. The world’s largest online retailer is expanding its content licensing agreement to bring shows from CBS Television Distribution and Showtime Networks to Amazon’s Prime Instant Video service.

Six out of the 10 groups in the S&P 500 rose as industrial and raw-material shares gained at least 0.3 percent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, advanced 2.7 percent to 12.98.

GE rallied 81 cents to $23.39 and Comcast advanced $1.16 to $40.13. The cable company will buy GE’s 49 percent stake in NBC Universal, following through on its purchase of a controlling stake two years ago. The sale will result in a pretax gain of about $1 billion for GE and it will use proceeds to help increase repurchases of its shares by $10 billion a year, the company said.

Comcast also released its fourth-quarter results, saying net income rose to 56 cents a share from 47 cents a year earlier. Sales climbed almost 6 percent to $15.9 billion.

U.S. Airways Group Inc. gained 2.7 percent to $14.66. The board of bankrupt American Airlines parent AMR Corp. is meeting to vote on an $11 billion merger after the two sides reached a tentative agreement that would create the world’s largest air carrier, people familiar with the matter said.

Lorillard Inc. gained 4.9 percent to $41.68. The cigarette maker posted quarterly earnings that exceeded analysts’ estimates for the first time in a year, according to data compiled by Bloomberg. The company boosted its dividend 6.5 percent to 55 cents a share.

Groupon Inc. surged 5.4 percent to $5.58. A local e- commerce marketplace Groupon began a few months ago in Chicago and New York will boost revenue as it expands nationwide over the coming quarters, according to Arvind Bhatia, an analyst at Sterne Agee & Leach Inc., who raised the online coupon provider to buy from neutral.

The KBW Bank Index, made up of 24 U.S. lenders, lost 0.6 percent. Citigroup Inc. fell 0.8 percent to $44, JPMorgan Chase & Co. dropped 0.9 percent to $48.68 and Bank of America Corp. declined 0.6 percent to $12.17. A Sheldon H. Solow-led New York realty company sued the three banks and several others for allegedly conspiring to manipulate the U.S. dollar Libor rate.

Cliffs Natural Resources Inc. tumbled 20 percent to $29.29.

The biggest U.S. iron-ore producer cut its quarterly dividend by 6 percent after the price of the commodity declined and a Canadian mining project was delayed.

WellPoint Inc. fell 4.6 percent to $63. The second-biggest U.S. health insurer named Joseph Swedish, chief executive officer of the nonprofit Catholic hospital system Trinity Health Corp., as its next leader after a six-month search. He replaces Angela Braly, who left WellPoint last year amid investor discontent over the insurer’s performance.

Dean Foods Co. slipped 9.2 percent to $16.70. The largest U.S. dairy processor said total volume will decline in a percentage of “low single digits” this year.

Deere & Co., the world’s largest agricultural-equipment maker, fell 3.5 percent to $90.68. U.S. farm cash receipts for crops, one indicator for equipment sales, will fall 1.7 percent as corn and soybean prices decline, the Moline, Illinois-based company said today in a presentation on its website.

Industrywide farm equipment sales in the U.S. and Canada will be unchanged to 5 percent higher in fiscal 2013, which ends Oct. 31, Deere said. The company got 64 percent of sales from that region in fiscal 2012.

Have a wonderful evening everyone.

Be magnificent!

It is this desire to express himself that leads him to search for riches and power.

But he must understand that to accumulate material wealth is not to find this fulfillment.

What brings him back to himself is the interior light, and not exterior objects.

Rabindranath Tagore1861-1901

As ever,

Carolann

Whenever you find yourself on the side of the majority,

it is time to pause and reflect.

-Mark Twain, 1835-1910

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