February 18, 2013 Newsletter

Dear Friends,

Tangents:

I started to read a book last night entitled Quiet –The Power of Introverts in a World That Can’t Stop Talking (Random House, 2012).  The author is Susan Cain.

The book begins with a quote that I want to share with you:

A species in which everyone was General Patton would not succeed, any more than would a race in which everyone was Vincent van Gogh.  I prefer to think that the planet needs athletes, philosophers, sex symbols, painters, scientists; it needs the warmhearted, the hardhearted, the coldhearted, and the weakhearted.  It needs those who can devote their lives to studying how many droplets of water are secreted by the salivary glands of dogs under which circumstances, and it needs those who can capture the passing impression of cherry blossoms in a fourteen-syllable poem or devote twenty-five pages to the dissection of a small boy’s feelings as he lies in bed in the dark waiting for his mother to kiss him goodnight….Indeed the presence of outstanding strengths presupposes that energy needed in other areas has been channeled away from them.  –Allen Shawn

Note: The markets were closed in both Canada and the US today.  This information is from Friday’s market information:

Market Closes for February 15th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Sarah Pringle and Eric Lam

Feb. 15 (Bloomberg) — Canadian stocks fell for a third day as gold and oil producers retreated and factory sales dropped the most in almost four years.

Goldcorp Inc., the second-biggest gold miner by market value, lost 2 percent after quarterly sales fell short of analysts’ estimates and the metal traded below $1,600 for the first time since August. Energy producers slid as oil dropped amid declining euro-area exports. BlackBerry, formerly known as Research in Motion Ltd., fell 5.5 percent to extend its loss for the week to 14 percent. Rogers Communications Inc. soared 4.1 percent after posting better-than-estimated profit.

The Standard & Poor’s/TSX Composite Index fell 35.16 points, or 0.3 percent, to 12,686.63 at 4 p.m. in Toronto. The benchmark index lost 0.9 percent this week, the biggest weekly loss in three months. About 796 million shares traded hands on Canadian exchanges today, 4.3 percent above the three-month average. The market is closed Monday for Family Day.

“Commodities have not been in favor, that’s for certain,” Ian Nakamoto, director of research with MacDougall MacDougall & MacTier Inc., said from Toronto. His firm manages about $4 billion. “No one wants to push the market up significantly higher, but when the market comes down it seems like people are willing to step in. I still think it’s a forgiving market.”

Canadian factory sales fell 3.1 percent in December, the most since May 2009, as car assembly plants experienced longer- than-usual seasonal shutdowns, Statistics Canada said today in Ottawa. Existing home sales rose for the first time in four months in January on gains in Toronto and Vancouver, the Canadian Real Estate Association said today.

Commodity producers had the biggest decline among 10 groups in the benchmark index. Gold traders are the most bearish in more than a year on mounting speculation that improving economic growth from the U.S. to China will curb demand for this year’s worst-performing precious metal. Twenty analysts surveyed by Bloomberg this week expect prices to fall next week, while 11 were bullish and three were neutral, making the proportion of bears the highest since Dec. 30, 2011.

Barrick Gold Corp., the world’s largest gold producer, slumped 1.9 percent to C$31.82.

Goldcorp tumbled 68 Canadian cents to C$33.99, its lowest level since July. The company reported fourth-quarter sales of $1.44 billion, missing the $1.56 billion average of eight estimate, as rising prices for labor, raw materials and equipment pressured the company. Goldcorp also struggled last year with seismic activity that affected output at the Red Lake mine in Ontario, its top producer, and water shortages at the Penasquito operation in Mexico.

Energy producers also retreated, as Suncor Energy Inc. slumped 1.4 percent to C$31.75 and Penn West Petroleum Ltd. tumbled 4.2 percent to C$10.20.

Crude for March delivery fell 1.5 percent to $95.86 a barrel on the New York Mercantile Exchange. U.S. industrial production unexpectedly shrank and euro-area exports declined the most in five months, raising concern that fuel demand may be weakened.

Westshore Terminals Investment Corp. dropped 5.3 percent to C$27.02, the most since August 2011. The operator of North America’s largest coal-export facility said it will cap dividend payments to help pay for the replacement of aging equipment.

BlackBerry tumbled 82 Canadian cents to C$14.23. The stock dropped 14 percent in the week. Jim Balsillie, Research In Motion’s co-chief executive officer until January 2012, cut his last formal ties to a company he helped build for two decades when he reported yesterday that he no longer holds a stake.

Balsillie had been the third-largest shareholder.

Phone companies had the largest gain among groups in the S&P/TSX, as all five companies  advanced.

Rogers Communications rallied C$1.85 to C$47.32. Canada’s largest wireless carrier reported fourth-quarter profit that beat analysts’ estimates, helped by consumer spending on data- hungry devices such as Apple Inc.’s new iPhone 5. Chief Executive Officer Nadir Mohamed announced plans to step down next January, a surprise move that sent Rogers in search of a new leader for the second time in four years.

Telus Inc., Canada’s No. 3 carrier, jumped 1.5 percent to C$67.81. The Vancouver-based phone company posted fourth-quarter revenue of C$2.85 billion, better than the average analysts’ estimate of C$2.82 billion.

US

By Lu Wang and Leslie Picker

Feb. 15 (Bloomberg) — The Standard & Poor’s 500 Index fell, snapping three days of gains, as Wal-Mart Stores Inc. tumbled and investors weighed economic data.

Wal-Mart slipped 2.2 percent amid the worst sales start of a month in seven years. Agilent Technologies Inc. fell 5.2 percent after cutting its full-year forecast. CBS Corp. climbed 4 percent after forecasting growth in licensing fees and an increase in its share buybacks. MeadWestvaco Corp. rallied 13 percent after Nelson Peltz’s Trian Fund Management LP took a stake in the packaging company.

The S&P 500 fell 0.1 percent to 1,519.79 at 4 p.m. in New York. The Dow Jones Industrial Average gained 8.37 points, or 0.1 percent, to 13,981.76. About 6.7 billion shares traded hands on U.S. exchanges, 9.7 percent above the three-month average, as options on stocks, equity indexes and exchange-traded products were set to expire. The market is closed Feb. 18 for Presidents Day.

Wal-Mart’s sales slowdown “is a sign that the consumer is not as ready to come back as maybe Wall Street was hoping,” Terry L. Morris, who helps oversee about $2.6 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said by phone. “Maybe the market is a little ahead of itself at assuming better growth than what’s actually there.”

Among economic reports, U.S. consumer confidence rose in February to a three-month high and manufacturing in the New York region unexpectedly expanded. Industrial production nationwide posted a surprise contraction in January as factories took a breather after the biggest back-to-back gain in three decades.

Group of 20 finance ministers and central bankers began talks in the Russian capital today to find some common ground on currencies, with investors seeking clarity on how comfortable they are with a sliding yen. Russia, who holds the G-20’s rotating presidency this year, wants to head off a global currency war by pushing policy makers to make stronger commitments against exchange-rate manipulation.

In the U.S., lawmakers face a deadline to agree on a deal avoiding scheduled budget cuts, a process known as sequestration. Senate Democrats unveiled a $110 billion plan yesterday to delay federal spending cuts, including tax increases Republicans already say they won’t accept. The plan would postpone the March 1 start of more than $1 trillion in cuts until 2014, replacing them with defense-spending reductions, a halt in direct payments to farmers and a tax increase imposing a minimum 30 percent rate on top earners.

“At this point, it just looks like the market may be interested in pausing and pondering,” John Stoltzfus, chief market strategist at New York-based Oppenheimer & Co., said in a telephone interview. “Perhaps even a modest downside bias while we look to the March 1 deadline in Washington.”

The S&P 500 rose 0.1 percent this week, completing a seventh straight week of gains, the longest streak since January 2011. It has climbed 6.6 percent in 2013 as U.S. lawmakers reached a budget compromise. The benchmark gauge 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 trading at 15 times reported earnings, according to data compiled by Bloomberg. While the multiple reached the highest level since July 2011, it’s below the six- decade average of 16.4, the data show.

Four out of the 10 groups in the S&P 500 fell today as energy and financial companies dropped the most, sinking 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, dropped 1.6 percent to 12.46.

Wal-Mart, the world’s largest retailer, dropped $1.52 to $69.30. Sales slumped this month as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News. The numbers “are a total disaster,” Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives.

Agilent slipped $2.33 to $42.25. The scientific-testing equipment company lowered its full-year sales forecast, citing a potential slowdown in government spending and demand in the cell-phone market.

Transocean Ltd. fell 5.1 percent to $56.26. Deutsche Bank AG cut the rating for the world’s largest offshore driller to sell from hold, citing an increase in out-of-service time at its fleet.

CBS advanced $1.70 to $44.64. The owner of the most-watched U.S. television network will get $500 million in cable and broadcast licensing fees this year, halfway toward its goal of $1 billion by 2017, Chief Financial Officer Joseph Ianniello said. The broadcaster added $1 billion to its budget for Class B stock repurchases this year, almost double what it had previously planned.

MeadWestvaco climbed $3.97 to $35.65 after Trian disclosed it bought 1,595,125 shares in the fourth quarter. Peltz, 70, is known for taking stakes in companies and then engaging management in efforts to increase shareholder value.

Gap Inc. climbed 4.9 percent to $32.88. The biggest U.S. specialty-apparel retailer may have hired a financial adviser after receiving interest from Japan’s Fast Retailing Co., CNBC reported, citing StreetAccount. Edie Kissko, a spokeswoman for Gap, declined to comment.

Office Depot Inc. advanced 2 percent to $4.59. The second- largest U.S. office-supply chain is in talks to sell the remaining 50 percent of its Mexican unit to Grupo Gigante SAB, said people familiar with the situation.

Burger King Worldwide Inc. rose 4.7 percent to $17.36 after posting fourth-quarter earnings and revenue that beat analysts’ estimates. The fast-food chain boosted its dividend 25 percent to 5 cents a share.

Herbalife Ltd. climbed 1.2 percent to $38.74. Carl Icahn reported a 13 percent stake in Herbalife yesterday and said he would seek talks with the nutritional supplements company.

Strategic alternatives for Herbalife may include taking it private, he said in a filing with the U.S. Securities and Exchange Commission.

Have a wonderful evening everyone.

Be magnificent!

That economics is untrue which ignores or disregards moral values.

The extension of the law of nonviolence in the domain of economics means nothing less

than the introduction of moral values as a factor to be considered with regulating international commerce.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Home is not where you live but where

they understand you.

-Christian Morgenstern, 1871-1914

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