February 23, 2012 Newsletter

Dear Friends,

Tangents:

Iwo Jima Day, February 23rs, 1945.

Raising the Flag on Iwo Jima, by Joe Rosenthal/ The associated Press.

Raising the Flag on Iwo Jima is a historic photograph  taken on February 23, 1945, by Joe Rosenthal.  It depicts five United States Marines and a U.S. Navy corpsman raising the flag of  the United States atop Mount Suribachi during the Battle of Iwo Jima in World War II.

The photograph was extremely popular, being reprinted in thousands of publications. Later, it became the only photograph to win the Pulitzer Prize for Photography in the same year as its publication, and came to be regarded in the United States as one of the most significant and recognizable images of the war, and possibly the most reproduced photograph of all time. Of the six men depicted in the picture, three (Franklin Sousley, Harlon Block, and Michael Strank) were killed during the battle; the three survivors (John Bradley, Rene Gagnon, and Ira Hayes) became celebrities upon their identification in the photo. The picture was later used by Felix de Weldon to sculpt the Marine Corps War Memorial, located adjacent to Arlington NationalCemetery just outside Washington, D.C.  –from Wikipedia, the free encyclopedia.

photos of the day

February 23, 2012

The ‘Golden Victoria’ sculpture from the top of Siegessaeule, the Victory column in Berlin is silhouetted against a cloudy sky.

Tobias Schwarz/Reuters

Children cross the Batllava Lake to go to school in Kosovo’s village of Orllan. Students at Orllan are starting their first few days of school after two weeks of disruption due to bad weather. They have to cross the frozen artificial lake of Batllava, which supplies water to the capital Pristina, to reach their school on the other side.

Hazir Reka/Reuters

Market Closes for February 23, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Andrew Theen and Katia Porzecanski

Feb. 23 (Bloomberg) — Canadian stocks rose, extending a five-month high, as bullion producers rallied after Yamana Gold Inc.’s earnings beat forecasts and the metal’s futures climbed.

Yamana, the country’s fourth-largest gold producer by market value, advanced 3.1 percent after the metal rose to a three-month high and executives from Barrick Gold Corp. and Goldcorp Inc. said mining shares are cheap relative to earnings.

Potash Corp. of Saskatchewan Inc., the world’s biggest fertilizer producer, slipped 1.5 percent as wheat declined in Chicago.

The Standard & Poor’s/TSX Composite Index rose 30.02 points, or 0.2 percent, to 12,731.28 in Toronto, the highest since Aug. 31.

“Good times are here again in terms of commodity prices,” Barry Schwartz, portfolio manager with Baskin Financial Services Inc. in Toronto, said in a phone interview. The firm oversees about C$450 million ($451 million). The gains in the stock market have been muted, he said, because investors are still wary after 2008, when they were “sliced and diced” by holding onto commodity stocks.

The index has rallied 2.2 percent this week after Greece won a second bailout, and has gained eight of the past nine weeks as improving U.S. employment, manufacturing and housing data overshadowed the European debt crisis. Materials, oil and gas make up 47 percent of the Canadian market.  Seventy-four percent of Canadian exports went to the U.S. last year, according to Statistics Canada.

Gold rose 0.8 percent to settle at $1,786.30 an ounce. Oil rose 1.5 percent to $107.83, the highest settlement since May.

Canadian commodity stocks don’t fully reflect the gains in the underlying commodities, Schwartz said.

“The stocks are reacting to this as if gold is still at $1,600 and oil is at $90 a barrel,” Schwartz said. “Someone sent the memo but Canadian investors didn’t get it.”

A gauge of materials companies advanced, with 50 of the 74 companies posting gains. Gold rose to a three-month high in New York after the dollar fell against a basket of currencies as a report showed German business confidence rose to the highest level in seven months in February.

Executives of the world’s two largest producers of the metal, Goldcorp and Barrick, said producers of metal are poised to outperform bullion after gold-mining shares fell to their cheapest in at least a decade. Barrick slipped 0.2 percent to C$49.40, while Goldcorp added 0.3 percent to C$49.35.

Great Basin Gold Ltd. gained 5.6 percent to 94 Canadian cents. Yamana Gold rose 3.1 percent to C$17.90. Yamana’s fourth- quarter profit beat the average analyst estimate by 5.9 percent.

An index of energy shares in the S&P/TSX rose for a third day.

Pacific Rubiales Energy Corp. rose 7.8 percent to C$29.44. The Toronto-based oil producer that operates fields in Colombia surged to a six-month high after its 2011 oil and natural-gas reserves gained 52 percent from the year before.

Loblaw Cos., the country’s biggest grocer, led losses among consumer staple companies and fell 5.7 percent to C$35.25 after it forecast profit this year will be down from 2011 due to higher costs for technology.

Potash Corp. fell 1.5 percent to C$46.65 as wheat declined on speculation that rising global inventories will cut demand for grain from the U.S. The stock was cut to underperform from sector perform by National Bank Financial Inc., meaning it is expected to perform worse than competitors.

US

By Rita Nazareth

Feb. 23 (Bloomberg) — U.S. stocks rose, sending the Dow Jones Industrial Average to the highest level since May 2008, amid better-than-estimated housing and jobs market reports.

International Business Machines Corp., which comprises 12 percent of the share-price weighted Dow, added 28 points to the index. Procter & Gamble Co. rose 3.1 percent as the largest consumer-products company said it will cut 5,700 jobs.

PulteGroup Inc. and KB Home advanced at least 4.3 percent to pace gains in homebuilders. Sears Holdings Corp. soared 19 percent as it plans to raise as much as $770 million by selling11 store sites and separating some smaller-format businesses.

The Standard & Poor’s 500 Index increased 0.4 percent to 1,363.46 at 4 p.m. in New York, erasing earlier losses. The benchmark gauge briefly rose above its April 2011 peak of 1,363.61, which was the highest level since June 2008. The Dow gained 46.02 points, or 0.4 percent, to 12,984.69. The Russell 2000 Index of small companies rallied 1.6 percent to 829.23.

“The recovery is starting to pick up speed,” Tom Wirth, who helps manage $1.5 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a phone interview. “There was so much fear about what was happening in Europe that people couldn’t see through all of that.”

Stocks gained as applications for jobless benefits were unchanged in the week ended Feb. 18 at 351,000, the fewest since March 2008. A report from the Federal Housing Finance Agency showed that a gauge of home prices jumped 0.7 percent in December, beating estimates. The euro rose to the strongest level in more than 10 weeks against the dollar as a report showed German business confidence climbed.

Today’s advance extended the S&P 500’s rally in February to 3.9 percent. The index was poised for a third straight month of gains, the longest streak in a year, on higher-than-estimated economic data. Still, it was the second time this week that the S&P 500 failed to hold above its highest close since 2008.

“Sometimes when you’re knocking on the door of a meaningful psychological level you have to knock hard a few times to gain admittance,” David Sowerby, a Bloomfield Hills, Michigan-based portfolio manager at Loomis Sayles & Co., which oversees more than $155 billion, said in a phone interview.

“Valuation is compelling. There’s been improvement in the economy. That provides potential for stocks to move higher.”

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, tumbled 7.6 percent to 16.80, the lowest since July. The Dow Jones Transportation Average added 0.7 percent, following a three-day slump. Nineteen out of 30 stocks in the Dow advanced. IBM jumped 1.9 percent, the second-biggest gain in the Dow, to $197.61.

Procter & Gamble rallied the most in the Dow, rising 3.1 percent to $66.42. The cuts include 1,600 announced in January and will be achieved through attrition and layoffs, Paul Fox, a spokesman, said in an e-mail. The reductions are part of a plan to achieve $10 billion in cost savings by 2016, as detailed today by Chief Executive Officer Bob McDonald and Chief Financial Officer Jon Moeller at a conference in Florida.

A gauge of homebuilders in S&P indexes climbed 2.3 percent.

KB Home added 4.4 percent to $11.75. PulteGroup advanced 4.8 percent to $8.73.

Sears surged 19 percent, the most in the S&P 500, to $61.80. The rights offering to separate the Hometown and Outlet shops and some hardware stores may raise $400 million to $500 million, Hoffman Estates, Illinois-based Sears said today in a statement. The 11 sites will be sold to General Growth Properties for about $270 million, the retailer said.

Vivus Inc. soared 78 percent to $18.73 after the company’s pill Qnexa won the backing of a regulatory panel, moving the drug a step closer to gaining U.S. approval as the first new obesity treatment in 13 years.

Target Corp. jumped 2.9 percent to $54.50. The second- largest U.S. discount retailer posted fourth-quarter earnings that exceeded some analysts’ estimates, helped by discount card initiatives and grocery sales.

MetroPCS Communications Inc. rallied 14 percent to $11.70.

The pay-as-you-go U.S. wireless carrier reported fourth-quarter profit that beat analysts’ estimates.

Apple Inc. rose 0.7 percent to a record $516.39. Chief Executive Officer Tim Cook, speaking today at an annual investor meeting, said Apple was continuing “active discussions” about what to do with its $97.6 billion in cash and investments, saying the cash hoard was “more than we need to run a company.”

Hewlett-Packard Co. dropped the most in the Dow, slumping 6.5 percent to $27.05. The U.S. computer manufacturer’s fiscal second-quarter profit forecast fell short of analysts’ estimates as consumers curtailed personal-computer purchases.

Solar shares fell after Germany, the world’s biggest market for solar power, plans record reductions in subsidies for the industry as part of a program to rein in a boom in installations. First Solar Inc. declined 8 percent to $37.20.

Trina Solar Ltd. tumbled 12 percent to $8.63.

Safeway Inc. declined 7.6 percent to $20.95. The grocer’s fourth-quarter sales excluding fuel at stores open at least one year increased 1.5 percent, trailing the average 2 percent gain expected by analysts.

The rally in U.S. stocks has pushed a trend measure of the S&P 500 to an “extreme” level not seen since 2004, a sign that the advance may be stalling, according to Sundial Capital Research Inc.

The benchmark gauge’s Average Directional Index, which measures the strength of a trend, climbed to 40.7 yesterday. The last time the indicator was higher following an advance, in November 2004, the S&P 500 was stuck in a 93-point range over the next eight months, according to data compiled by Bloomberg.

The trend is “extended,” Jason Goepfert, president of Sundial in Blaine, Minnesota, wrote in a note yesterday.

“Almost every time, by the time the trend becomes this strong, it’s about to become significantly less so.”

Have a wonderful evening everyone.

Be magnificent!

Freedom is a state of mind – not freedom from something.

-Krishnamurti, 1895-1986

As ever,

Carolann

Man is not made for defeat.

-Ernest Hemingway, 1899-1961

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