February 15, 2012 Newsletter

Dear Friends,

Tangents:

Birthday: Harold Arlen, songwriter, born February 15, 1905

Somewhere, over the rainbow, way up high, there’s a land that I heard of, once in a lullaby. ~Harold Arlen

photos of the day

February 15, 2012

The moon is seen above a cross at the Kranji Commonwealth War Memorial Cemetery

before an Australian memorial service in Singapore. The dawn service was held to

commemorate the 70th anniversary of the fall of Singapore during World War II.

Tim Chong/Reuters

An aerial view of shipping containers stacked at the port of Singapore.

Edgar Su/Reuters

Market Closes for February 15, 2012:

North American Markets

Market Commentary:

Canada

By Matt Walcoff

Feb. 15 (Bloomberg) — Canada’s main stock index was little changed as banks fell after European officials postponed a decision on an aid package for Greece, while energy stocks rose.

Bank of Montreal, Canada’s fourth-biggest lender by assets, declined 0.6 percent after Euro-region finance ministers canceled an in-person meeting scheduled for today. Suncor Energy Inc., the country’s biggest oil and gas producer, gained 1.5 percent as crude advanced to the highest in a month. Canadian National Railway Co., the country’s largest railroad, lost 0.9 percent as North American carriers retreated on concern coal shipping will drop.

The S&P/TSX Composite Index climbed 7.56 points, or 0.1 percent, to 12,362.03 Toronto time after closing at a three-week low yesterday.

“The market is waiting for continued good news,” Greg Eckel, a money manager at Morgan Meighen & Associates Ltd. in Toronto, said in a telephone interview. The firm oversees about

C$1 billion ($1 billion). “The bias is to run a little skittish until some more information comes out that can establish some firmer footing as to the way forward” on Greece.

The S&P/TSX has lost 0.7 percent this month after rallying

4.2 percent in January. Gold stocks led the decline as the U.S.

dollar advanced on concern Greece’s efforts to reduce its budget deficit won’t avert a default. Seven of the world’s 20 largest gold companies by revenue are Canadian, according to Bloomberg data.

The group of Euro-region finance ministers won’t decide on the new Greek rescue package until its next meeting on Feb. 20, Luxembourg Prime Minister, Jean-Claude Juncker, the panel’s chairman, said yesterday. Instead of meeting in person today, the finance chiefs held a conference call.

The S&P/TSX Commercial Banks Index fell for the first time in three days. BMO dropped 0.6 percent to C$57.94. Royal Bank of Canada, the country’s largest lender by assets, slipped 0.3 percent to C$53.46. Mortgage insurer Genworth MI Canada Inc.

declined 1.2 percent to C$21.30.

Energy companies advanced after the U.S. Energy Department said crude supplies retreated last week. Most analysts in a Bloomberg survey had forecast an increase.

Suncor increased 1.5 percent to C$34.22 after Highfields Capital Management LP reported it boosted its stake in the company. Talisman Energy Inc., an oil and gas producer with operations in North America, the North Sea and Indonesia, climbed 4.9 percent to C$13.13 after cutting its exploration- spending forecast.

Cenovus Energy Inc., Canada’s fifth-biggest energy company, slid 1.4 percent to C$38.08 after reporting fourth-quarter earnings that missed the average estimate of analysts in a Bloomberg survey by 17 percent, excluding certain items.

Canada’s two publicly traded railroads retreated along with their U.S. peers after Matthew Troy, an analyst at Susquehanna Financial Group LLLP, said in a note dated yesterday that rail stocks “will struggle in the first quarter as investors digest the reality that coal will be weak through the first half and earnings-per-share revisions skew downward in coming weeks.”

Railroad coal shipping has fallen this year from the same period of 2011, according to the Association of American Railroads.

CN dropped 0.9 percent to C$77.55. Canadian Pacific Railway Ltd. declined 2.2 percent to C$73.03.

Harry Winston Diamond Corp., a diamond-mining company and jewelry retailer, rallied 9.2 percent, the most in a year, to

C$13.01 after Oliver Chen, an analyst at Citigroup Inc., began coverage of the company with a “buy” rating. Diamond prices are likely to increase due to limited supply and growing demand from emerging markets, Chen wrote in a note to clients.

The S&P/TSX Materials Index slipped less than 0.1 percent, extending its streak of declines to nine days, the longest since June 2001. Teck Resources Ltd., Canada’s largest base-metals and coal producer, lost 1.3 percent to C$38.48 as copper retreated for a fourth day on the Comex in New York. First Quantum Minerals Ltd., the country’s second-biggest publicly traded copper producer, decreased 1.1 percent to C$21.93.

US

By Rita Nazareth

Feb. 15 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a second day, as concern grew that Greece was moving closer to default and the Federal Reserve said policy makers were divided on buying more assets.

Apple Inc. decreased 2.3 percent, reversing a 3.3 percent rally and snapping an eight-day advance. Industrial shares had the biggest decline in the S&P 500 among 10 groups as Deere & Co. tumbled 5.4 percent after lowering its 2012 U.S. farmer revenue forecast. The Dow Jones Transportation Average, a proxy for the economy, slumped 2 percent as CSX Corp. and Union Pacific Corp. retreated more than 2.8 percent.

The S&P 500 declined 0.5 percent to 1,343.23 at 4 p.m. New York time, reversing an earlier increase of as much as 0.4 percent. The Dow Jones Industrial Average decreased 97.33 points, or 0.8 percent, to 12,780.95 today.

“People just keep trying to delay the Greece situation,”

Peter Sorrentino, a fund manager who helps oversee $14.5 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “What’s haunting everyone is that if this thing is delayed too much longer, you’ve another series of hurdles. We’re a prisoner of that.”

Stocks fell as concern that Greece will miss a debt payment next month grew. A decision slated for tonight on 130 billion euros ($171 billion) of aid was postponed until at least Feb. 20 and possibly until after a full-time Greek government emerges from elections later in the year. Minutes of the Fed’s last meeting showed a few policy makers said the central bank may have to consider purchasing more securities soon, while others said the economic outlook would have to worsen.

Equities gained earlier today as China said it will “get more involved” in supporting Europe and sustain its holdings of euro assets, spurring optimism the debt crisis would be overcome.

“It’s very clear that China realized the costs of a possible European recession that spreads to the rest of the world,” James Swanson, who oversees about $200 billion as chief investment strategist at Boston-based MFS Investment Management, said in a telephone interview. “Yet they haven’t fixed their problems and China can’t fix their problems.”

The S&P 500 has rallied 6.8 percent this year as the U.S.

economy showed signs of accelerating and European leaders moved closer to a solution on the region’s debt crisis. The U.S economy is forecast to grow 2.2 percent in 2012, according to the median projection in a survey of economists, up from the estimate of 2.1 percent in December.

Nine out of 10 groups in the S&P 500 fell today. The Morgan Stanley Cyclical Index dropped 0.8 percent amid concern about economic growth.

Apple retreated 2.3 percent to $497.67, two days after closing above $500 for the first time. The shares rose earlier today as CEO Tim Cook yesterday asked for forbearance from investors while the company discusses how to best use its growing cash pile.

“Apple’s CEO Tim Cook indicated that the board of directors continues to focus more time on the use of cash, which seems to increase the likelihood of a dividend and/or stock buyback,” William Power, a Robert W Baird & Co. analyst, wrote in a note to clients today. “We continue to believe that even a conservative 2 percent dividend yield could help attract an additional wave of investors.”

Deere lost 5.4 percent to $84.28. Total U.S. farm receipts will be $371.9 billion in 2012, down from a November forecast for $374.2 billion and lower than the record $381.4 billion in 2011, as corn, wheat and soybean prices decline, the Moline, Illinois-based company said today in a presentation accompanying its fiscal first-quarter results.

A measure of transportation shares had the biggest decline in the S&P 500 among 24 industries, slumping 2 percent as a group. CSX decreased 2.9 percent to $21.19. Union Pacific retreated 3.3 percent to $109.41.

The biggest component of Warren Buffett’s most-watched index is falling, and the decline may depress first-half earnings at U.S. railroads. Buffett follows a gauge of freight- train traffic that’s compiled by the Association of American Railroads, as he told ABC News in a 2009 interview. This indicator tracks the number of carloads, and coal accounts for a bigger percentage of the shipments than any other category.

“Coal results have been significantly below our prior expectations for the first quarter,” Gary Chase, a Barclays Capital analyst, wrote yesterday in a report. Shipments in the first five weeks of this year dropped 2.9 percent from the same period of last year. The total of 120,052 carloads for the week ended Feb. 4 was the lowest for that time of year since 2004.

Earnings per share swing by 0.5 percent at CSX and Norfolk Southern Corp. and by 0.2 percent at Union Pacific for every 1 percent change in the amount of coal they ship, Chase wrote. The New York-based analyst cut first- and second-quarter profit estimates on the railroads because of the current slump.

Buffett’s Berkshire Hathaway Inc. owns a competitor, Burlington Northern Santa Fe.

Zynga Inc. retreated 18 percent to $11.80. The biggest developer of games for Facebook Inc.’s site fell the most since it first started trading after product-development costs weighed on profit in the fourth quarter.

Dean Foods Co. rallied 10 percent, the most in the S&P 500, to $11.99. The biggest U.S. milk processor reported lower raw- milk costs at its fresh dairy business.

Abercrombie & Fitch Co. increased 8.3 percent to $48.30.

The operator of its namesake and Hollister teen-clothing stores said international sales growth would boost profit this year.

Kellogg Co. jumped 5.1 percent to $52.87 after agreeing to acquire Procter & Gamble Co.’s Pringles potato chip business for about $2.7 billion in cash to triple its global snacks sales after a deal with Diamond Foods Inc. fell through.

Comcast Corp. added 4.7 percent to $28.52. The largest U.S.

cable company climbed after fourth-quarter profit rose more than analysts estimated and video-customer losses narrowed for the fifth straight period.

Blackstone Group LP’s Byron Wien, whose prediction for the U.S. economy and stock market in 2011 proved too optimistic, said he may need to lift his estimate for the S&P 500 for this year. Wien, chairman of Blackstone’s advisory services unit, said in January in his annual “10 Surprises” list the benchmark gauge for U.S. stocks may exceed 1,400. He said today in a Bloomberg Radio interview he may have to raise the projection.

“1,400 when the market was 1,250 at the beginning of the year was a reasonable target, a conservative target,” Wien said in an interview today on Bloomberg Radio’s “Bloomberg Surveillance” with Tom Keene. “But I think we could well exceed it. Look, S&P 500 operating earnings are going to be in excess of $100. Very often, almost always, the S&P 500 sells at

15 times, that would take you over 1,500.”

Have a wonderful evening everyone.

Be magnificent!

Those who are focused on the objects of the senses, become attached to those objects.

From attachment comes desire; and from desire comes anger; from anger comes confusion of mind;

from confusion of mind comes loss of memory; from loss of memory comes loss of intelligence;

and from loss of intelligence comes destruction.

The Bhagavad Gita

As ever,

Carolann

Be thankful for what you have.  You’ll end up having more.  If you

concentrate on what you don’t have, you will never, ever

have enough.

-Oprah Winfrey, 1954-

Carolann Steinhoff, B.Sc., CFP, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor