February 21, 2013 Newsletter

Dear Friends,

Tangents:

February 21^st, 1758, Thomas Gray wrote to Thomas Wharton: “Would you know, what I am doing?  I doubt, you have been told already, and hold my employment cheap enough: but everyone must judge of his own capabilities, and cut his amusements according to his disposition.  The drift of my present studies is to know, wherever I am, what lies within reach, that may be worth seeing.  Whether it be building, ruin, park, garden, prospect, picture, or monument; to whom it does, or has belonged, and what has been the characteristic, and taste of different ages.  You will say, this is the object of all antiquaries, but pray, what antiquary ever saw these objects in the same light, or desired to know them for a like reason?  In short say what you please, I am persuaded, whenever my list is finished, you will approve it, and think of no small use.  My spirits are very near the freezing pint, and for some hours of the day this exercise by its warmth and gentle motion serves to raise them a few degrees higher.

From today’s Globe & Mail: how to host the “best ever” dinner party…Nigella’s secret – globeandmail.com/video.

Photo of the Day – February 21^st, 2013

Horses are seen at an equestrian centre in Jucu village near Cluj-Napoca, 426 km (265 miles) northwest of Bucharest. Bogdan Cristel/Reuters

Market Closes for February 21^st, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

by Eric Lam

Feb. 21 (Bloomberg) — Canadian stocks fell to the lowest level in more than a month as energy shares slid amid a drop in crude and weaker-than-estimated earnings from Bombardier Inc. and Tim Hortons Inc.

Bombardier plunged 9.1 percent after pushing back initial deliveries of one of its business jets to 2014 and reporting earnings that missed analysts’ estimates. Tim Hortons dropped 3 percent after announcing 2013 guidance and fourth-quarter earnings below forecasts. Suncor Energy Inc., Canada’s largest energy company, and Canadian Natural Resources Ltd. lost at least 1.6 percent as crude fell the most in three months.

The Standard & Poor’s/TSX Composite Index fell 74.08 points, or 0.6 percent, to 12,639.97, the lowest level since Jan. 16. The S&P/TSX has risen 1.7 percent this year.

“After the drubbing we’ve taken in the resource sectors, we’ve had a bit of shellshock,” said Bob Decker, a fund manager with Aurion Capital Management, who helps manage about C$6 billion ($5.89 billion), from Toronto. “Tim Hortons, with their soft guidance and share buyback, is giving the message of slow growth to the market.”

Energy and bank shares contributed the most to losses in the S&P/TSX as six of 10 industries retreated. Trading volume was 29 percent above the 30-day average.

Royal Bank of Canada, the nation’s largest lender, lost 0.8 percent to C$63.96, retreating from an all-time high yesterday.

Suncor dropped 1.6 percent to C$31.49, the lowest in five months, while Canadian Natural Resources sank 1.9 percent to C$29.99. Crude for April delivery tumbled 2.5 percent to $92.84 a barrel in New York, the lowest settlement this year. A U.S. government report showed crude stockpiles climbed 4.14 million barrels last week to 376.4 million, the highest since July.

Bombardier, based in Montreal, fell 39 Canadian cents to C$3.89 after pushing back initial deliveries of its Learjet 85 business aircraft and saying its train unit wouldn’t meet a 2013 profit target.

The company reported adjusted fourth-quarter earnings of 10 cents a share, short of the 12-cent average analyst estimate.

Bombardier said its total backlog at the end of 2013 rose to a record $66.6 billion from $55.8 billion a year earlier.

Tim Hortons, the biggest coffee and doughnuts chain in Canada, sank C$1.50 to C$49.30. The Oakville, Ontario-based company reported fourth-quarter adjusted earnings of 70 Canadian cents, compared with estimates of 71 cents.

The company forecast 2013 earnings of C$2.87 to C$2.97, below analysts’ expectations of C$3. It anticipates weaker comparable sales in the first quarter due to economic concerns, a competitive environment and unfavorable weather.

Yamana Gold Inc. climbed 5 percent to C$15.43 after the gold producer reported fourth-quarter adjusted earnings of 26 cents, exceeding analysts’ forecasts of 25 cents.

Chief Executive Officer Peter Marrone said in an interview with Bloomberg that he doesn’t have the appetite for an acquisition and will focus on putting three mines into commercial production this year.

US

By Sarah Pringle and Nikolaj Gammeltoft

Feb. 21 (Bloomberg) — U.S. stocks fell, following the biggest drop since November for the Standard & Poor’s 500 Index, as concern grew that the U.S. Federal Reserve may slow the pace of stimulus and investors weighed corporate earnings.

VeriFone Systems Inc. lost 43 percent after the maker of credit-card terminals forecast second-quarter profit that missed analysts’ estimates because of weak economic conditions in Europe. Wal-Mart Stores Inc. rose 1.5 percent as the world’s biggest retailer reported earnings that topped forecasts.

Hewlett-Packard Co. rallied 6.7 percent after regular trading as its outlook exceeded estimates.

The S&P 500 fell 0.6 percent, or 9.53 points, to 1,502.42 at 4 p.m. in New York. The benchmark index lost 1.2 percent yesterday amid concern that the Fed will scale back economic stimulus. The Dow Jones Industrial Average dropped 46.92 points, or 0.3 percent, to 13,880.62 today. About 7.7 billion shares exchanged hands on U.S. exchanges today, 25 percent above the three-month average.

“The timeliness of the Fed’s comments coming out took a little bit of the excess out of the stock market,” Tim Hartzell, who helps manage about $400 million as chief investment officer at Sequent Asset Management in Houston, said in a phone interview. “Equities really had gotten ahead of itself with just the belief that there’s always going to be $85 billion come into the market from the Fed.”

Several participants at the Federal Open Market Committee’s Jan. 29-30 meeting said the central bank should be ready to vary the pace of its $85 billion in monthly bond purchases, minutes from the meeting showed yesterday, spurring concern stimulus will be curtailed.

The S&P 500 has gained 5.4 percent this year as U.S. lawmakers agreed on a compromise budget and companies reported better-than-estimated earnings. The benchmark gauge is 4 percent below its 2007 all-time high of 1,565.15, while the Dow is 2 percent from its record high of 14,164.53.

About 72 percent of the 433 companies in the S&P 500 that have released quarterly results since Jan. 8 have exceeded profit estimates, and 65 percent beat sales estimates, data compiled by Bloomberg show.

“People are taking some profits and watching to see what the next catalyst is,” Neil Massa, senior equity trader at Boston-based John Hancock Asset Management, said in a telephone interview. His firm oversees $233 billion. “It’s a healthy sell off. We’ve gone up so much, it’s a good opportunity to take a breather. I don’t think it’s a sign of a continuing trend.”

The Chicago Board Options Exchange Volatility Index, or VIX, climbed 3.7 percent to 15.22. That followed a jump of 19 percent yesterday, the biggest advance since November 2011.

Volatility will likely increase with the March 1 deadline for automatic federal budget cuts approaching, said New York- based Russ Koesterich, the chief investment strategist at BlackRock. Republicans and President Barack Obama are seeking to assign blame for who would be at fault if the cuts, known as sequestration, take effect.

Investors holding more U.S. equities than the benchmark they track should reduce exposure, Koesterich said at a briefing in Sydney. “Part of what we’d suggest again is lowering the allocation a bit to the U.S. and second of all, being cautious of the parts of the market that are dependent upon U.S. consumption.”

Stocks extended losses today as the Federal Reserve Bank of Philadelphia’s general economic index dropped to minus 12.5, the lowest reading since June, from minus 5.8 in January. Readings lower than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of 58 economists surveyed by Bloomberg projected an increase to 1.

Jobless claims increased by 20,000 to 362,000 in the week ended Feb. 16, the Labor Department reported today in Washington. Among other economic data, the index of U.S. leading indicators rose for a second month in January, climbing 0.2 percent. Purchases of existing houses, tabulated when a contract closes, increased 0.4 percent to a 4.92 million annual rate.

Investors sold shares of companies most tied to economic growth, sending the Morgan Stanley Cyclical Index down 0.9 percent. Raw-material shares retreated 0.9 percent for the biggest drop among 10 groups in the S&P 500, while the Dow Jones Transportation Average slipped 0.8 percent. The KBW Bank Index lost 1.2 percent as 22 of its 24 companies slid.

Bank of America Corp. tumbled 3.2 percent to $11.42 for the biggest drop in the Dow. Caterpillar Inc. sank 1.8 percent to $91.53. Home Depot Inc. lost 3.1 percent to $64.38.

Semiconductors performed the worst among 24 groups in the S&P 500, slipping 2 percent. Advanced Micro Devices Inc. dropped 3.7 percent to $2.60. Micron Technology Inc. slid 2.5 percent to $7.68, and Intel Corp. fell 2.3 percent to $20.25.

Hewlett-Packard rose 6.7 percent to $18.25 as of 4:45 p.m. in New York. The shares surged 2.4 percent during regular trading ahead of the release of the company’s earnings, with most of the gain coming in the final hour. The largest personal- computer maker forecast fiscal second-quarter profit that exceeded analysts’ estimates, helped by cost-cutting measures and recovering demand for enterprise services.

VeriFone tumbled $13.65 to $18.24. Earnings excluding some items will be 45 cents to 50 cents a share in the quarter ending in April, San Jose, California-based VeriFone said. Analysts on average had predicted profit of 80 cents a share, according to data compiled by Bloomberg.

Tesla Motors Inc. dropped 8.8 percent to $35.16. The maker of electric cars headed by billionaire Elon Musk reported a fourth-quarter loss that was larger than analysts expected, blaming a jump in operating costs during the start of production.

PG&E Corp., the owner of California’s largest utility, dropped 4 percent to $41.41. The company fell the most since August 2011 after forecasting 2013 earnings below the average analyst estimate.

Carlyle Group LP, the second-largest U.S. private-equity company, tumbled 7.8 percent to $33.80, the most since going public in May. Washington-based Carlyle, the most active U.S. private-equity buyer in 2012, reported fourth-quarter profit that fell short of analysts’ estimates as the firm’s fund holdings appreciated at a slower pace.

Wal-Mart rose $1.05 to $70.26. The retailer rose as fourth- quarter profit topped analysts’ estimates and the company raised its dividend, overcoming concerns that tax increases would hurt earnings this year.

Safeway Inc. soared $2.84 to $22.97 for the biggest advance in the S&P 500. The second-largest U.S. grocery chain reported fourth-quarter profit that exceeded analysts’ estimates on higher store sales.

Boeing Co. rallied 1.6 percent to $76.01. The Chicago-based company will present a battery redesign for the 787 Dreamliner tomorrow in a bid to satisfy regulators’ safety concerns and get the jet back into the air within weeks, people with knowledge of the proposal said.

Imax Corp. increased 4.3 percent to $26.27, its highest level in 11 months. The designer of digital imaging and sound technologies reported fourth-quarter adjusted earnings per share of 23 cents, beating analyst estimates for 16 cents. The company said that growing international demand for movies shown in its large-screen format helped double fourth-quarter profit.

Have a wonderful evening everyone!

Be magnificent!

The spirit of democracy

is not a mechanical thing

to be adjusted by abolition of forms.

It requires a change of heart.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

It’s easy to make a buck.  It’s a lot tougher

to make a difference.

-Tom Brokaw, 1940-

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