February 4, 2013 Newsletter

Dear Friends,

Tangents:

Neil Subin is the associate dean of biological sciences at the University of Chicago and the author of “The Universe Within: Discovering the Common History of Rocks, Planets, and People.”  I read an interesting column he wrote last week in The New York Times.  In it, he discusses why winter causes seasonal affective disorder for so many people.  He writes, “Our genetic clocks are set to the sun by our brains and our eyes.  Light entering our eyes triggers a signal that ends in a tiny patch of cells in the brain.  This brain region then emits hormones that coordinate the clocks in the different cells of the body.  Mess with this system and things go awry really fast….Our clocks tie us not only to other creatures, but also to the formation of the solar system itself.  The spinning of the earth and rotation of the moon form a backbeat that thumps inside the chemistry of our cells.  The Apollo missions returned more than 840 pounds of moon rock and soil samples.  Analysis of minerals inside reveals that they have a chemical signature similar to those of Earth’s crust and are in this respect unique among other bodies of the solar system.

The current theory that accounts for all the evidence is that a Mars-size asteroid hit the Earth over four billion years ago.  The mélange of Earth’s crust and asteroid debris ejected into space, ultimately congealing as the moon and tilting the primordial Earth.

With that great cataclysm came our seasons, months and the duration of days.  Our internal timepieces, and some of the maladies we suffer, lie as artifacts of this moment in our planet’s history.

Carl Sagan famously reveled in the fact that ‘we are stardust,’ because the elements that compose us are derived from the birth of stars and the explosion of supernovae.  These events are only the beginning of our deep connections to the universe.  Written inside of us is the birth of the solar system and workings of the planet itself.”

Photos of the day February 4th^t, 2013

NASA illustration shows aesthetic close-up of cosmic clouds and stellar winds featuring LL Orionis, interacting with the Orion Nebula flow in this image released on February 4, 2013. Adrift in Orion’s stellar nursery and still in its formative years, variable star LL Orionis produces a wind more energetic than the wind from our own middle-aged Sun. ESA and the Hubble Heritage Team//NASA/Reuters

The remains found underneath a car park last September at the Grey Friars excavation in Leicester have been declared ‘beyond reasonable doubt’ to be the long lost remains of England’s King Richard III, missing for 500 years. Richard was immortalized in a play by Shakespeare as a hunchbacked usurper who left a trail of bodies — including those of his two young nephews, murdered in the Tower of London — on his way to the throne. University of Leicester/AP

Market Closes for February 4th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Sarah Pringle

Feb. 4 (Bloomberg) — Canadian stocks retreated as financial and commodity shares slumped on renewed concern about Europe’s debt crisis.

Petrobank Energy & Resources Ltd. and Cenovus Energy Inc. lost more than 1.5 percent as oil prices declined. Royal Bank of Canada and Toronto-Dominion Bank slid at least 0.7 percent.

Canadian Pacific Railway Ltd. dropped 2.1 percent after hiring Keith Creel away from rival Canadian National Railway Co.

BlackBerry, formerly known as Research In Motion Ltd., rose 15 percent after Sanford C. Bernstein & Co. raised its rating.

The Standard & Poor’s/TSX Composite Index lost 51.21 points, or 0.4 percent, to 12,717.62 at 4 p.m. in Toronto. The benchmark gouge has gained 2.3 percent this year. Nine of 10 industries retreated today. About 695 million shares traded hands on Canadian exchanges today, or 8.4 percent below the three-month average.

“You can’t go straight up, you need a time for pause and reflection and to catch your bearings,” Barry Schwartz, who helps manage C$480 million ($476 million) as a fund manager at Toronto-based Baskin Financial Services, said in a phone interview. “Commodities continue to be beaten and thrown to the curb and misused and abused, and I think that’s going to be the trend that will continue.”

Spanish 10-year government yields jumped 23 basis points to 5.44 percent and Italy’s rates jumped as well. Spanish Premier Mariano Rajoy is facing opposition calls to resign amid contested reports about illegal payments, while Deutsche Bank AG said this year’s rally in Italian and Spanish bonds may falter as Italy’s Silvio Berlusconi narrowed the front-runner’s lead before elections this month.

An index of financial shares in the S&P/TSX lost 0.5 percent. Royal Bank of Canada dropped 0.5 percent to C$62.21 and Toronto-Dominion Bank slid 0.7 percent to C$82.96.

Petrobank Energy, an oil and gas explorer, fell 2.2 percent to 88 Canadian cents. Cenovus Energy, a Canadian oil producer, dropped 1.5 percent to C$33.20. Crude oil for March delivery slid 1.6 percent to $96.17 a barrel on the New York Mercantile Exchange, the most in two months, as the prospect of renewed talks between Western countries and Iran reduced Middle East tension.

Teck Resources Ltd., which mines gold and other natural resources, retreated 1.3 percent to C$36.51. New Gold Inc., the Vancouver-based gold explorer, dropped 2.3 percent to C$9.89.

Gold futures for April delivery gained 0.3 percent to $1,676.40 an ounce on the Comex in New York.

Turquoise Hill Resources Ltd., which owns 66 percent of the Oyu Tolgoi gold and copper mine in Southern Mongolia, fell 1.3 percent to C$7.57. Mongolia’s President Tsakhia Elbegdorj said the nation should have more control of Rio Tinto Group’s Oyu Tolgoi project after the government claimed costs had increased.

Canadian Pacific Railway slid C$2.40 to C$113.38. The company hired Creel away from Canadian National Railway and named him president and chief operating officer to assist Chief Executive Officer Hunter Harrison in his turnaround plan. The companies reached a settlement to end their outstanding litigation linked to Harrison’s move to Canadian Pacific last year, Canadian National said in a separate release.

Canadian National slipped 0.6 percent to C$95.14.

Kirkland Lake Gold Inc. rose 5.7 percent to C$6.47. The gold mining company said it remains on track to meet its production guidance for the current fiscal year.

BlackBerry rallied C$1.98 to C$14.99, for the biggest gain since November, as technology companies had the only advance among 10 groups in the S&P/TSX. Sanford C. Bernstein analyst Pierre Ferragu upgraded the company to outperform from market perform, citing a strong start in the first days of sales for the BlackBerry 10. BlackBerry shares tumbled 26 percent last week amid the introduction of the new smartphones.

Harry Winston Diamond Corp. was unchanged at C$14.70, erasing earlier gains of up to 2 percent. The luxury jewelry retailer said C. Fipke Holdings Ltd. ended court action brought against it, BHP Billiton Ltd. and other companies. The minority stakeholder of the Ekati diamond mine sued to block Harry Winston’s proposed acquisition of BHP’s 80 percent share of the Canadian operation.

US

By Inyoung Hwang and Leslie Picker

Feb. 4 (Bloomberg) — U.S. stocks fell, driving the Standard & Poor’s 500 Index to its biggest decline since November, on concern that the European debt crisis may intensify.

All 10 groups in the S&P 500 fell at least 0.5 percent.

Wal-Mart Stores Inc. dropped 1.2 percent as JPMorgan Chase & Co. cut its rating on the stock. Gannett Co. erased 6.7 percent on concern that TV revenue growth won’t be enough to compensate for weak print advertising. Herbalife Ltd. rose 1.3 percent, rebounding from a decline of as much as 12 percent, after the Federal Trade Commission corrected an erroneous statement that said the company was the subject of a law-enforcement probe.

The S&P 500 slipped 1.2 percent, the most since Nov. 14, to 1,495.71 in New York, after reaching a five-year high last week.

The Dow Jones Industrial Average lost 129.71 points, or 0.9 percent, to 13,880.08. More than 6.3 billion shares traded handed on U.S. exchanges today, in line with the three-month average.

“There’s some profit-taking happening,” Matthew Swaim, a fund manager at Chicago-based Advisory Research Inc., which oversees $9 billion in assets, said by telephone. “People are drawing a corollary to the last couple years where in the spring Europe started taking the limelight again and that caused a drop in our markets.”

The S&P 500 rallied 5 percent last month as lawmakers reached a budget compromise and companies reported better-than- estimated earnings. The Dow climbed above the 14,000-level last week for the first time since 2007, and is 2 percent away from its all-time high.

Yum! Brands Inc. and Sysco Corp. are among 13 companies in the S&P 500 that report earnings today. About 73 percent of the 264 companies from the gauge that have released results this earnings season have exceeded profit projections, and 66 percent have beaten sales estimates, according to data compiled by Bloomberg.

The Stoxx Europe 600 Index slid 1.5 percent today. Spanish Premier Mariano Rajoy is facing opposition calls to resign amid contested reports about illegal payments, while Deutsche Bank AG said this year’s rally in Italian, as well as Spanish, bonds may falter as Italy’s Silvio Berlusconi narrowed the front-runner’s lead before elections this month.

Spanish 10-year government yields jumped 23 basis points to 5.44 percent. Yields on similar-maturity Italian debt rose 14 basis points to 4.47 percent.

Orders placed with U.S. factories increased less than forecast in December, reflecting a drop in non-durable goods that overshadowed gains in construction equipment and computers.

Bookings climbed 1.8 percent after a revised 0.3 percent drop in November that was initially reported as unchanged, Commerce Department figures showed. The Bloomberg survey median called for a 2.3 percent gain.

The recent rally in U.S. stocks has made the benchmark S&P 500 look overvalued given the slow pace of the country’s economic recovery, Patrick Legland, Societe Generale SA’s head of research, wrote in a note. The “risk-on mode” may end soon with a lack of positive economic data, Legland wrote.

The Chicago Board Options Exchange Volatility Index, known as the VIX, jumped 14 percent to 14.67 today for the biggest gain of the year, trimming its 2013 decline to 19 percent. The Morgan Stanley Cyclical Index of 30 U.S. companies most tied to economic growth slid 1.4 percent, the most since November.

Technology, financial and consumer discretionary companies fell the most out of 10 S&P 500 groups, losing at least 1.2 percent. The KBW Bank Index of 24 U.S. lenders slumped 1.2 percent.

Wal-Mart fell 86 cents to $69.63 as JPMorgan downgraded its rating on the stock to neutral from overweight, a rating similar to buy. The brokerage also reduced its price target for the stock to $75 from a previous estimate of $84.

Gannett lost $1.33 to $18.51. The owner of 82 U.S. daily newspapers and 23 television stations said TV sales for the first quarter of this year should have percentage growth in the “high single-digits” from a year earlier. That’s a slowdown from 46 percent growth to $280.2 million in the fourth quarter.

McGraw-Hill Cos. sank 14 percent to $50.30. The U.S. Justice Department intends to file a civil lawsuit against S&P based on ratings in 2007 of certain collateralized debt obligations, the company said today. The Justice Department and state prosecutors may file civil charges this week against S&P, owned by McGraw-Hill, alleging wrongdoing in its ratings of mortgage bonds in the lead up to the 2008 financial crisis, according to two people familiar with the matter.

“A DOJ lawsuit would be entirely without factual or legal merit,” the company said in a statement.

Chevron Corp. lost 1.1 percent to $115.20. UBS cut its recommendation on the second-largest U.S. energy company to neutral from buy, citing the stock’s recent rally. The shares have gained 6.5 percent this year.

Oracle Corp. slipped 3 percent to $35.13. The largest maker of database software agreed to buy Acme Packet Inc. for $1.7 billion, or $29.25 a share. Acme surged 24 percent to $29.59.

Acme’s tools to transmit voice and video via the Web may help Oracle challenge Cisco Systems Inc. in networking — a market that’s benefiting from the boom in mobile devices.

Merck & Co. lost 2.3 percent to $40.85. The second-largest U.S. drugmaker was cut to underweight from equalweight by Morgan Stanley, which cited concern the company’s Improve-It study of cholesterol drug Vytorin may fail when interim data is reviewed in March, hurting chances for experimental drug anacetrapib.

Sysco slumped 2.7 percent to $31.23. The distributor of food to restaurants, hospitals and schools reported second- quarter adjusted earnings that missed analysts’ projections by 1 cent.

Herbalife, the marketer of nutritional supplements that hedge-fund manager Bill Ackman has called a pyramid scheme, rose 47 cents to $35.54. Shares of the company rebounded after the FTC corrected a statement that erroneously said the company was the subject of a law-enforcement probe. The New York Post reported earlier, citing the FTC’s response to a freedom of information request, the company is the subject of a probe as it received as many as 192 complaints over the past seven years.

Humana Inc. jumped 4.7 percent to $78.86. The health-care company reported fourth-quarter earnings of $1.19 a share, exceeding the $1.07 a share estimated by analysts on average.

U.S. options trading posted its second-best start to a year on record after the stock market rally to near-record highs drove investors to seek protection from losses.

An average of 17.2 million options traded daily in the U.S. in January, the highest level for the start of a year except for a record in 2011, according to the Options Clearing Corp. The volume represents an 8.2 percent increase from the full-year 2012 average.

Investors are taking advantage of the cheapest options in 5 1/2 years to protect against losses as the U.S. economy unexpectedly shrank in the fourth quarter and the S&P 500 reached its highest valuation in 18 months. Options trading has also increased as investors try to boost returns by selling contracts in order to collect a premium, according to Marko Kolanovic, global head of derivatives and quantitative strategy at JPMorgan Chase & Co.

Have a wonderful evening everyone.

Be magnificent!

When restraint and courtesy are added to strength, the latter becomes irresistible.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Formal  education will make you a living.  Self-education

will make you a fortune.

–Jim Rohn, 1930-2009

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