February 22, 2012 Newsletter

Dear Friends,

Tangents:

Someone suggested I listen to guitarist Tommy Emmanuel on youtube…it was a revelation.  I had never heard of him before – an excellent guitarist; check it out for yourself.

Speaking of guitarists, I read recently that if you ever wished you could have a guitar lesson with James Taylor, all you have to do is visit jamestaylor.com and you can discover how to do so.  He breaks down his unique guitar technique in slow motion, so that even if you aren’t a player, it’s neat to see.  Also on the site are vintage and modern videos of performances and rehearsals throughout his illustrious career.

Also worth noting in the world of music, to mark composer Philip Glass’s 75^th birthday, Sony Classical is releasing a three-disc set – The Essential Philip Glass – which includes highlights from his classical career (“Einstein on the Beach,” “Satyagraha,” and “Akhnaten”), dance scores for Twyla Tharp (“In the Upper Room”) and Jerome Robbins (“Songs From Liquid Days”), theater works (“The Photographer”), plus music for solo piano and collaborations with artists such as Suzanne Vega, Linda Ronstadt, the Kronos Quartet, and Yo-Yo Ma.

photos of the day

February 22, 2012

A copy painting of the ‘Mona Lisa’ is seen through the viewfinder of a video camera on display in Spain’s Prado Museum in Madrid on Tuesday, Feb. 21. The ‘Mona Lisa’ copy was painted by one of Leonardo da Vinci’s apprentices alongside the master himself as he did the original, museum officials said.

Paul White/AP

Ethnic Tibetan women pray around the Labrang Monastery ahead of the Tibetan New Year which starts on Wednesday in Xiahe county, Gansu Province. A teenage Tibetan Buddhist monk has set himself on fire and died in southwestern China, a rights group said, in the latest reported self-immolation by a monk denouncing Chinese policies in Tibet and demanding the return of the Dalai Lama. Tibetan new year begins on February 22, 2012.

Market Closes for February 22, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Porzecanski and Andrew Theen

Feb. 22 (Bloomberg) — Canadian stocks rose, extending a five-month high, as energy shares gained with oil prices on concern Iran will curb supply and gold producers rallied with the metal.

Suncor Energy Inc., the country’s largest oil and gas producer, increased 1.9 percent. Barrick Gold Corp., the world’s largest producer of the precious metal, gained 1.6 percent. Teck Resources Ltd., Canada’s largest copper and coal producer, advanced 2.9 percent. Manulife Financial Corp. the country’s biggest insurer, declined 1.7 percent.

The S&P/TSX Composite Index rose 61.68 points, or 0.5 percent, to 12,685.04 at 1:57 p.m. Toronto time.

“On balance, things are slowly but surely improving,”

Irwin Michael, a money manager at ABC Funds in Toronto, said in a telephone interview. His firm oversees C$1 billion. “There are a lot of investors who are chomping at the bit wanting to get invested. They’ll buy on weakness; they’ll stick their toe in the water and the market will saw-tooth its way upwards.”

The index rallied 1.3 percent yesterday after European finance ministers approved 130 billion ($172 billion) in aid for Greece. Canadian stocks have gained eight of the past nine weeks as improving U.S. employment, manufacturing and housing data overshadowed the European debt crisis. Energy and raw material producers account for 48 percent of Canadian stocks by market value, according to Bloomberg data.

The S&P/TSX Energy Index gained 0.6 percent as oil extended a nine-month high after United Nations inspectors in Iran said they were denied access to a suspected nuclear-related military base.

Suncor Energy increased 1.9 percent to C$35.40, while oilfield-services company Calfrac Well Services Ltd. rose 3.4 percent to C$28.13. Nexen Inc., an oil and gas producer with operations on five continents, gained 0.8 percent to C$20.67.

Materials companies rallied as gold and copper prices erased earlier declines.

The S&P/TSX Gold Index rose for a second day. Barrick jumped 1.6 percent to C$49.02. Nevsun Resources Ltd., which mines gold in the African country of Eritrea, advanced 7.5 percent to C$4.29.

Lake Shore Gold Corp., which mines in Ontario, surged 12 percent to C$1.69 after the company said new resources at its Gold River Trend are almost triple a previous estimate.

Teck Resources, Canada’s largest base-metals and coal producer, advanced 2.9 percent to C$40.59. First Quantum Minerals Ltd., the country’s second-biggest publicly traded copper producer, gained 0.5 percent to C$23.17.

Money may flow from commodities into individual oil securities or gold securities “because a lot of the actual common shares have been lagging the bullion price and the oil price,”  Michael said.

Rogers Communications Inc. gained 1.2 percent to C$38.24 after reporting fourth-quarter earnings rose 8.3 percent, helped by increasing wireless revenue as customers spent more time on their smartphones.

Aircraft maker Bombardier Inc. advanced 0.9 percent to C$4.71. The company’s business-jet deliveries climbed 21 percent last year, outperforming a global industry in which total shipments declined, a U.S. trade group said.

Financial shares fell after U.S. purchases of previously owned homes climbed less than forecast and reports signaled declines in European and Chinese manufacturing.

Manulife fell 1.7 percent to C$12.50. Brookfield Asset Management Inc., the country’s largest real-estate company, fell

2.1 percent to C$31.11. Sun Life Financial Inc., Canada’s third largest insurer, declined 1.8 percent to C$21.09.

US

By Rita Nazareth

Feb. 22 (Bloomberg) — U.S. stocks fell, a day after the Standard & Poor’s 500 Index failed to hold at an almost four- year high, as sales of previously owned houses missed estimates and data from Europe and China spurred economic concern.

The S&P 500 slid 0.3 percent to 1,357.61 at 4 p.m. New York time, according to preliminary closing data.

“You can ride this, but you’ve got to be very careful and sit near the exit,” David Darst, the New York-based chief investment strategist at Morgan Stanley Smith Barney, said in a phone interview. His firm has $1.6 trillion in client assets.

“Most of the economies are slowing. Earnings will be slowing.

The market is overbought.”

Stocks fell today as purchases of previously owned homes rose to a 4.57 million annual rate, less than forecast, data from National Association of Realtors showed. China’s manufacturing may shrink for a fourth month, according to data from HSBC Holdings Plc and Markit. European services and manufacturing output unexpectedly shrank. Fitch Ratings lowered Greece’s credit rating and said a default is highly likely.

Today’s loss trimmed the S&P 500’s gain in February to 3.4 percent. Still, the index was poised for a third straight month of gains, the longest streak in a year, on higher-than-estimated economic data and expectations Europe would tame its crisis. The S&P 500 yesterday failed to hold above its April 2011 peak of 1,363.61, which was the highest level since June 2008.

“We have a trifecta of worrisome news,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion, said in a telephone interview. “The softness in economic data suggests that global momentum remains muted. We have slower earnings growth and the market is facing some technical resistance.”

Earnings at S&P 500 companies will grow 7.4 percent this year, according to the average analyst estimate in a Bloomberg survey, following a 15 percent increase in 2011.

A two-week retreat in the Dow Jones Transportation Average may signal a warning for the rally that has added $1.35 trillion to American equity values this year, according to analysts who use charts to predict markets.

The gauge has fallen 3.8 percent since Feb. 3, a period in which the Dow Jones Industrial Average climbed 0.8 percent and reached the highest level since May 2008. The transportation average is viewed by some analysts as a leading indicator because truckers, airlines and couriers may be the first to experience the effects of an economic slowdown.

“This market does seem to be overdue for a pullback,”

Chuck Carlson, chief executive officer at Horizon Investment Services LLC in Hammond, Indiana, said in a phone interview.

Horizon oversees $150 million and uses the relationship between the industrial and transportation gauges to determine how much cash to hold. A divergence “doesn’t always necessarily signal a change in the major trend, but it can foreshadow a bit of a correction,” he said.

Futures traders are pricing in the biggest increase in U.S.

equity hedging costs since 2010 after the S&P 500 rose within 2 points of erasing last year’s slump.

April futures on the Chicago Board Options Exchange Volatility Index closed at 25.15 yesterday, or 6.96 points higher than the level of the gauge, according to data compiled by Bloomberg. The gap widened to 7.02 points on Feb. 17. The last time two-month futures were that high in relation to the index known as the VIX was July 2010.

The S&P 500 has surged 24 percent since Oct. 3 on optimism Europe will resolve the debt crisis. Now, traders are increasing hedges to protect against losses, according to Dominic Salvino, a specialist on the CBOE floor for Group One Trading.

“The consensus bet is that we’re going to have turmoil or some levels of higher volatility in the future,” Liam Dalton, who oversees about $1.8 billion as chief executive officer of Axiom Capital Management Inc. in New York, said in a telephone interview yesterday. “If you were to talk about a breakdown in cooperation in Europe, it would affect everything. If the sentiment goes negative, then you can get these periods of increased volatility.”

Have a wonderful evening everyone.

Be magnificent!

When a man has an idea of what he must be and how he must act,

and undermines this by not ceasing to act in the opposite way,

he must realize that his principles, his beliefs, his ideals,

will inevitably fall prey to hypocrisy and dishonesty.

It is the ideal that begets the opposite of itself.

-Krishnamurti, 1895-1986

As ever,

Carolann

Mediocrity doesn’t mean average intelligence;

it means an average intelligence that resents

and envies its betters.

-Ayn Rand, 1905-1982

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