February 20, 2013 Newsletter

Dear Friends,

Tangents:

Numbers~

17,425, 170 – the number of digits in a new, rare prime number known as a Mersenne prime, discovered using a global network of computers.  It is reportedly the largest prime number found to date.

14000 – Level at which the Dow Jones Industrial Average closed on February 1, 2013, the first time it had closed that high since 2007.

101 – Age of Fauja Singh, the world’s oldest marathoner.  He says he will retire from competition after a charity 10K run at Hong Kong’s marathon on February 24^th.

Sources: Great Internet Mersenne Prime Search, Runner’s World.

Don’t forget if you haven’t sent your contributions into me yet!  March 1^st is the RSP deadline to get the deduction and  save taxes on your 2012 return!

Maximum contribution for 2012 is $22,970; for 2013 it is increasing to $23,820.

And your TFSA contribution room has increased this year to $5,500 from $5,000.

Photo of the Day – February 20^th, 2013

A Vietnamese man from the Pa Then minority group jumps into a fire during a ritual ceremony at the Vietnam Ethnic Minority Cultural Village, outside Hanoi. They believe that jumping into a fire without any protection will help them gain more special energy from God to challenge life’s difficulties and fight evils. Kham/Reuters

Market Closes for February 20th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Leslie Picker

Feb. 20 (Bloomberg) — Canadian stocks fell, giving the benchmark index its biggest loss since January, as home resale prices slid for a fifth month and commodities dropped amid speculation a hedge fund was selling positions.

OceanaGold Corp. and Premier Gold Mines Ltd. slumped at least 6.3 percent as gold futures fell for a fifth straight day.

Industrial Alliance Insurance & Financial Services Inc. lost 4.1 percent after Canaccord Genuity Corp. cut the insurer to hold from buy. Silver Wheaton Corp. retreated 6.3 percent after the company’s chief executive officer said it is seeking a second purchase this year after buying Vale SA’s gold.

The Standard & Poor’s/TSX Composite Index declined 96.16 points, or 0.8 percent, to 12,714.05, the biggest drop since Jan. 31. The S&P/TSX has risen 2.3 percent this year.

“It’s somewhat of a dour mood for commodities right now,” Paul Vaillancourt, managing director at Montreal-based Fiera Capital Corp., which oversees $66 billion, said in a telephone interview. “There’s a general slowdown. GDP numbers are not impressive. Earnings growth has cooled. Housing prices’ rate of growth is decelerating in Canada, which makes for a less euphoric backdrop.”

Canadian home resale prices fell for a fifth straight month in January, the longest string of declines since the country’s 2009 recession, according to the Teranet-National Bank Composite House Price Index. Government data in the U.S. showed builders broke ground on the most single-family homes in more than four years, while total housing starts trailed economists’ estimates.

Gold futures for April delivery slipped 1.6 percent to settle at $1,578 an ounce on the Comex in New York. The metal fell for a fifth straight day, the longest slump in more than a year. Silver futures led the losses among the S&P GSCI Spot Index of 24 raw materials, retreating as much as 4 percent.

Commodity producers had the biggest decline among 10 groups in the benchmark equities index. OceanaGold fell 16 Canadian cents to C$2.38. Premier Gold Mines lost 32 Canadian cents to C$2.78.

“Commodities will give investors the most challenges,” Patrick Blais, senior equity analyst at Toronto-based Manulife Asset Management Ltd., which oversees C$238 billion, said in a telephone interview. “Canada is very resource-driven. Just the demand for oil as well as base metals and gold — there’s definitely a slowdown in demand for those products.”

Silver Wheaton lost C$2.27 to C$32.77. The world’s largest buyer of precious-metal output rights from copper, zinc and lead mines is seeking a second purchase this year after paying $1.9 billion for gold from Vale, Chief Executive Officer Randy Smallwood said.

MEG Energy Corporation, the Canadian oil-sands developer, fell 3 percent to C$33.45. Legacy Oil + Gas Inc., an intermediate oil and natural gas company, dropped 4.3 percent to C$6.66.

Talisman Energy Inc. declined 0.8 percent to C$12.60. The Calgary-based company plans to fire 90 employees as it reduces spending on gas operations, it said in a statement today.

West Texas Intermediate oil for March delivery tumbled 2.3 percent to close at $94.46 a barrel on speculation that a commodity fund is selling positions. Gasoline futures slid for a second day from the highest level since September.

“There is a rumor that a fund is blowing up,” Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, told Bloomberg News. Schork has spent 17 years in physical commodity and derivatives trading including stints at Glencore Ltd. and Novarco Ltd., Marc Rich’s last venture in the global energy trading, and his clients include OPEC and major oil companies. “Metals are getting hit and it’s spreading over to oil.”

Health-care and financial stocks were the only industries to gain among the 10 groups in the S&P/TSX, adding at least 0.1 percent. Bank of Nova Scotia rose 1.5 percent to C$60.01 after Barclays Plc raised its recommendation to overweight from equalweight.

Industrial Alliance Insurance fell C$1.59 to C$37 after Mario Mendonca, an analyst at Canaccord, cut the company to hold from buy and lowered its price estimate to $C40.

Bombardier Inc. gained 4.4 percent to C$4.28. The planemaker said Russia’s Ilyushin Finance Co. converted a letter of intent into an order for CSeries jets that could be worth at least $2.56 billion.

Softchoice Corp. added 18 percent to C$15. The business-to- business direct marketer of software products reported fourth- quarter earnings that topped analysts’ estimates and boosted its quarterly dividend.

US

By Nikolaj Gammeltoft and Sarah Pringle

Feb. 20 (Bloomberg) — U.S. stocks fell from five-year highs, giving the Standard & Poor’s 500 Index its biggest decline since November, as minutes from the Federal Reserve’s last meeting showed a debate over further stimulus action.

Apple Inc. fell 2.4 percent after Foxconn Technology Group, the biggest assembler of Apple products, froze hiring across China. Toll Brothers Inc., the largest U.S. luxury-home builder, lost 9.1 percent as it reported earnings that missed estimates.

Caterpillar Inc. slid 2.5 percent after saying global retail machine sales dropped. OfficeMax Inc. dropped 7 percent after agreeing to be bought by Office Depot Inc. for $1.17 billion.

The Standard & Poor’s 500 Index slipped 1.2 percent to 1,511.95 at 4 p.m. in New York. The Dow Jones Industrial Average declined 108.13 points, or 0.8 percent, to 13,927.54. About 7.5 billion shares traded hands on U.S. exchanges today, or 22 percent above the three-month average. The VIX, the benchmark gauge of U.S. equity options, jumped the most in 15 months on growing demand for protection from losses.

“It doesn’t take a lot of imagination to think about where the next potential source of weakness or worry is going to be, and that’s going to be when the Fed steps back from their quantitative easing program,” Brian Barish, president of Denver, Colorado-based Cambiar Investors, which manages about $7 billion, said in a phone interview.

Minutes of the Federal Open Market Committee’s Jan. 29-30 meeting released today showed policy makers were divided about the strategy behind Chairman Ben S. Bernanke’s program of buying bonds until there is “substantial” improvement in a U.S. labor market burdened with 7.9 percent unemployment.

Some said an earlier end to purchases might be needed, and others warned against a premature withdrawal of stimulus.

Several policy makers said the central bank should be ready to vary the pace of their $85 billion in monthly bond purchases.

Equities retreated after yesterday’s 0.7 percent rally in the S&P 500 pushed the benchmark gauge’s price-to-earnings ratio to 15.1, the highest level since July 2011, data compiled by Bloomberg show.

The S&P 500 has gained 6 percent this year, touching the highest level since October 2007, as U.S. lawmakers agreed on a compromise budget and companies reported better-than-estimated earnings. The benchmark gauge is 3.4 percent below its 2007 all- time high of 1,565.15, while the Dow is 1.7 percent from its record high of 14,164.53.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 19 percent to 14.68 today, the most since November 2011. The VIX has retreated 19 percent this year.

About 71 percent of the 413 companies in the S&P 500 that have released quarterly results since Jan. 8 have exceeded profit estimates, and 66 percent beat sales estimates, data compiled by Bloomberg show. Devon Energy Corp. and Ameren Corp. were among companies reporting today.

Stocks extended losses and the S&P GSCI Spot Index tumbled 1.1 percent today on speculation that a commodity fund is liquidating. Raw-material shares had the biggest decline among 10 groups in the S&P 500, sliding 2.8 percent, the most since October.

Freeport-McMoRan Copper & Gold Inc. fell 6 percent to $32.22, while Cliffs Natural Resources Inc. slid 4.9 percent to $27.29.

CF Industries Holdings Inc. stumbled 5.2 percent to $207.07. The largest U.S. maker of nitrogen fertilizer reported fourth-quarter sales declined to $1.48 billion from $1.72 billion a year earlier, less than the $1.58 billion average of 13 estimates.

Apple declined $11.14 to $448.85. Foxconn halted recruitment until the end of March after more employees returned from the Chinese New Year break than a year earlier, Bruce Liu, a spokesman for the Taipei-based company, said today in a phone interview. The decision wasn’t related to iPhone 5 production, he said.

An S&P gauge of homebuilders lost 6.7 percent, the most since June, as all 11 stocks retreated. Work began on 613,000 one-family houses at an annual rate last month, the most since July 2008 and up 0.8 percent from December’s 608,000, Commerce Department figures showed today. Total housing starts dropped to a 890,000 rate, less than forecast and restrained by a slump in construction of multifamily units.

Toll Brothers dropped $3.34 to $33.56, the most since December 2008. The Horsham, Pennsylvania-based company reported fiscal first-quarter earnings that missed analyst estimates as the average selling price of its homes fell.

Caterpillar slid $2.38 to $93.22. The biggest maker of construction and mining said global retail machine sales dropped 4 percent in the three months through January. The company last month reported the first decline in retail machine sales in more than 2 1/2 years.

Joy Global Inc. rallied 2.7 percent to $65.25 as the world’s biggest producer of underground mining machines may seek acquisitions. While Joy is focused on integrating past deals, the company may seek purchases after accumulating more cash, Chief Executive Officer Michael Sutherlin said at a Barclays Plc investor conference today.

Office Depot dropped 17 percent to $4.18 and OfficeMax slipped 91 cents to $12.09, reversing earlier gains. Both stocks rallied yesterday in anticipation of the acquisition.

The deal will combine companies with revenue totaling about $18 billion compared with more than $24 billion in sales last year for Staples Inc. The company may accelerate the closing or selling of hundreds of stores after Starboard Value LP, an activist fund that became Office Depot’s largest shareholder in September, pushed for expense reductions.

Garmin Ltd. tumbled 9.4 percent to $35.54 for the biggest retreat in the S&P 500. The biggest maker of navigation devices declined the most in more than three years after forecasting 2013 sales and profit that missed estimates, as consumers switch to smartphones for maps and directions. The Schaffhausen, Switzerland-based company also posted fourth-quarter per share profit of 68 cents, missing the average analyst estimate of 73 cents.

NetSpend Holdings Inc. surged 29 percent to $15.81 after Total System Services Inc. agreed to buy the provider of prepaid debit cards for about $1.4 billion in cash.

Allscripts Healthcare Solutions Inc. advanced 14 percent to $12.72 after saying fourth-quarter bookings, which represent future sales, increased 12 percent to $181 million from the previous quarter.

Have a wonderful evening everyone.

Be magnificent!

The end to be sought is human happiness combined with full mental and moral growth.

This end can be achieved under decentralization.

Centralization as a system is inconsistent with a non-violent structure of society.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Business is a combination of war and sport.

-André  Maurois, 1885-1967

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