February 7, 2013 Newsletter

Dear Friends,

Tangents:

Anat Cohen has been ranked the world’s greatest clarinetist for six years in a row.  Last night we listened to an interview she gave on Fresh Air with Terry Gross.  Her latest CD is Claroscuro – it is amazing!  You  can find her at anatcohen.com  and watch the Claroscuo EPK.  You can also listen to her interview with Terry Gross at npr.org/programs/fresh-air/.  It will give you an insight to the inspiration for her music derived from American jazz greats like Louis Armstrong to the klezmer music of her native Israel, the Cantors’ singing in synagogues to South American rhythms…Worth it – I promise you won’t be disappointed.

Photos of the day February 7th^t, 2013

Horticulturist Elisa Biondi works on a display of vanda orchids at Kew Royal Botanic Gardens in London. Over 4,500 orchids are being displayed for an orchid festival as well as 550 bromeliads and 350 assorted foliage plants. Kirsty Wigglesworth/AP

A boy practising karate on the beach is silhouetted against the setting sun in Colombo, Sri Lanka. Dinuka Liyanawatte/Reuters

Happiness is a butterfly which, when pursued, is always beyond our grasp, but which, if you sit down quietly, may alight upon you. –Nathaniel Hawthorne

Market Closes for February 7th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Sarah Pringle

Feb. 7 (Bloomberg) — Canadian stocks fell, after a two-day gain in the benchmark index, as a slump in energy producers and disappointing earnings offset a report showing building permits rose to a record last year.

Energy shares dropped as crude oil slid 0.8 percent. Teck Resources Ltd. tumbled 6 percent after forecasting weakness in coal markets. Gildan Activewear Inc. fell 4.2 percent after its second-quarter forecast fell short of estimates. Manulife Financial Corp., Canada’s largest insurer, climbed 0.9 percent after beating earnings estimates. BlackBerry jumped 6 percent after adding former executives from Verizon Communications Inc. and Sony Ericsson Mobile Communications AB to its board.

The Standard & Poor’s/TSX Composite Index slipped 5.67 points, or less than 0.1 percent, to 12,755.92 at 4 p.m. in Toronto. About 844 million shares traded hands on Canadian exchanges today, or 11 percent above the three-month average.

Four of 10 industry groups in the index declined. The gauge has gained 2.6 percent this year.

“People will be watching near-term earnings more,” Bob McWhirter, fund manager with Selective Asset Management Inc., said in a phone interview. The Toronto-based firm manages about C$3 million ($3 million). One of the focuses will be revenue “because the argument has been that a lot of the rise in earnings has been because of cost cutting, not so much as sales.”

Data today showed Canadian building permits climbed to a record C$80.5 billion in 2012 even as the year ended with sharp back-to-back declines. New home prices rose 2.3 percent in December from a year ago, Statistics Canada said in a separate report.

Energy producers contributed most to declines in the S&P/TSX. Cenovus Energy Inc., the Calgary-based oil producer, slid 1.4 percent to C$32.90, while Encana Corp., Canada’s largest natural gas producer, fell 2.1 percent to C$19.28.

West Texas Intermediate oil for March delivery dropped 79 cents to $95.83 a barrel on the New York Mercantile Exchange, the lowest level in two weeks. European Central Bank President Mario Draghi said the euro’s strength could hamper an economic recovery, curbing fuel demand.

Teck tumbled the most in the S&P/TSX, dropping C$2.19 to C$34.45. Canada’s largest diversified miner forecast weakness in coal markets until at least the middle of the year. The company’s Chief Executive Officer Don Lindsay said it may consider acquisitions in copper mining to help offset an expected decline in the company’s output of the metal.

Gildan Activewear, one of the world’s biggest suppliers of t-shirts to makers of printed clothing, sank C$1.52 to C$35. The company, which was the top-performer in the benchmark index in 2012, forecast second-quarter earnings below analysts’ estimates. Gildan said it will be affected by lower net selling prices for its printwear business, short-term manufacturing inefficiencies, the timing of the Easter holiday shutdown, and some cost inflation.

Iamgold Corp., a producer with mines in Canada, West Africa and South America, advanced 1 percent to C$8.74. The company is considering a share buyback or extra dividend to boost shareholder returns after its stock slumped and it curbed spending on expansion. Iamgold shares have tumbled 48 percent in the past year.

BlackBerry, formerly known as Research In Motion Ltd., rallied 96 Canadian cents to C$16.94. A week after unveiling a new smartphone lineup, the Waterloo, Ontario-based company bolstered its board by adding Dick Lynch, a retired executive video president of Verizon, and Bert Nordberg, the former chief executive officer at Sony Ericsson. The stock has climbed 30 percent this week so far.

T-Mobile USA, the fourth-largest U.S. mobile-service provider, said its tests of the new BlackBerry Z10 are going well and it’s aiming to be the first American carrier “out of the gate” with the phone next month.

Manulife added 13 Canadian cents to C$14.54. The company posted fourth-quarter net income of C$1.06 billion as wealth- management revenue in Asia reached a record. Chief Executive Officer Donald Guloien has said Asian markets including China, Malaysia and Singapore will become the fastest-growing segment of the company’s earnings, due to demand for wealth-management and pension products.

Cineplex Inc., Canada’s largest movie theater operator, jumped 1.6 percent to an all-time high of C$32.97. The Toronto- based company posted record sales and attendance in 2012 with superhero blockbusters such as “Marvel’s The Avengers” and “The Dark Knight Rises.”

US

By Nikolaj Gammeltoft, Leslie Picker and Sarah Pringle

Feb. 7 (Bloomberg) — U.S. stocks fell, after a two-day advance in the Standard & Poor’s 500 Index, as corporate earnings reports disappointed and European policy makers warned the euro’s advance could hamper the region’s recovery.

Sprint Nextel Corp. fell 0.5 percent as the third-largest U.S. wireless carrier reported a drop in monthly contract subscribers. Akamai Technologies Inc. tumbled 15 percent after its forecast missed estimates. Apple Inc. rallied 3 percent as the iPhone maker said its management team and board of directors have been in “active” talks to return more cash to holders after David Einhorn urged the company to do so.

The S&P 500 slid 0.2 percent to 1,509.39 at 4 p.m. in New York. It earlier fell as much as 0.9 percent and is poised for its first weekly drop of the year. The Dow Jones Industrial Average lost 42.47 points, or 0.3 percent, to 13,944.05. About 6.6 billion shares traded hands on U.S. exchanges today, 5.6 percent higher than the three-month average.

“We’ve moved so far so fast that the market’s just looking for any kind of sign to take something off the table,” Mark Freeman, who oversees about $14.1 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said in a phone interview. “The market really needs a positive catalyst to take it higher.”

The S&P 500 has rallied 5.8 percent in 2013 as U.S. lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The benchmark equity gauge is about 3.6 percent below its record high reached in October 2007.

It has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond-buying to lower interest rates and boost economic growth.

Stocks worldwide fell after European Central Bank President Mario Draghi signaled policy makers are concerned that the euro’s advance could damp inflation and hamper an economic recovery.

“The exchange rate is not a policy target, but it is important for growth and price stability,” Draghi said at a press conference in Frankfurt today after the ECB kept its benchmark rate at a record low of 0.75 percent. “We want to see if the appreciation is sustained, and if it alters our assessment of the risks to price stability.”

The euro fell 0.9 percent to $1.34 today. It reached a 14- month high against the dollar this month and a three-year high against the yen. It has climbed 11 percent on a trade-weighted basis since Draghi pledged on July 26 to do whatever is needed to preserve Europe’s monetary union, a comment that helped end the turmoil raging through the region’s bond markets.

“There’s concern that Europe will implode,” Jeff Sica, president and chief investment officer at Morristown, NJ-based SICA Wealth Management, which oversees more than $1 billion in assets, said in a phone interview. “Investors are worried about what the contagion effect is going to be on the U.S. economy.”

Applications for jobless benefits dropped to 366,000 in the week ended Feb. 2, Labor Department figures showed today.

Economists forecast 360,000 claims, according to the median in a Bloomberg survey. A separate report showed productivity, the measure of employee output per hour, decreased at a 2 percent annual rate, the worst performance in almost two years, after a 3.2 percent gain in the prior three months.

“It’s frustrating not to see the employment number improving more than it is, but at least it’s heading in the right direction,” Jeffrey Davis, chief investment officer at Boston-based Lee Munder Capital Group, said in a telephone interview. His firm oversees $5 billion. “There’s pretty good momentum in the market. I don’t think it will be disrupted by these numbers.”

The CBOE Volatility Index for the S&P 500, known as the VIX, jumped 0.7 percent to 13.50. The gauge is up 4.7 percent so far this week, poised for the biggest weekly rally of the year.

Eight out of 10 groups in the S&P 500 declined today.

Material, energy and financial stocks fell the most, losing at least 0.4 percent as investors sold shares of companies most tied to economic growth. The Morgan Stanley Cyclical Index of 30 U.S. companies erased 0.6 percent. All 11 stocks in the S&P Supercomposite Homebuilding Index retreated, as the gauge slumped 1.2 percent.

Sprint dropped 3 cents to $5.74 after the number of monthly contract subscribers fell by 243,000 in the fourth quarter.

Analysts expected a subscriber loss of almost 206,000, according to an average of eight estimates compiled by Bloomberg.

Akamai, a company that helps customers speed the delivery of online content, tumbled $6.32 to $35.26 after forecasting first-quarter revenue of $352 million to $362 million, short of the $369.8 million estimate.

Teradata Corp. tumbled 7.1 percent to $61.82. The data- storage software company forecast profit this year will be between $3.05 and $3.20 a share, compared with analysts’ average estimate of $3.15.

News Corp. slipped 2.3 percent to $27.56 after cutting its profit outlook because of declining ratings for shows such as “American Idol” and “X Factor.” The media company said operating income will grow by a “mid-to high-single-digit” percentage for the fiscal year ending in June, down from an earlier forecast of growth that could exceed 10 percent.

Prudential Financial Inc., the No. 2 U.S. life insurer, dropped 2.8 percent to $56.90 after posting a fourth-quarter loss on costs tied to fluctuation of currencies including the yen, which tumbled versus the dollar in the fourth quarter.

Yelp Inc. lost 4.6 percent to $21.35. The website that lets consumers review local businesses reported a wider fourth- quarter loss than analysts estimated as it boosted spending on expansion into new markets.

U.S. retailers fell even after reporting monthly same-store sales gains. Gap Inc. lost 3 percent to $32.23. The largest U.S. apparel chain boosted sales 8 percent last month, double the average estimate of 4 percent. Limited Brands Inc. erased 3.3 percent to $45.68 even after posting a 9 percent gain in same- store sales, or almost three times the average projection.

Apple climbed $13.52 to $468.22. The Cupertino, California- based company said in a statement today that it’s in “active discussions” about returning cash to shareholders.

Einhorn’s Greenlight Capital Inc., an Apple investor, urged the world’s most valuable company to return more of its $137.1 billion in cash. Greenlight asked fellow holders to vote against a proposal — outlined in the company’s annual proxy statement – – that would eliminate preferred stock. Greenlight sued to block the measure, asking a federal court in Manhattan to bar Apple from certifying votes cast in its favor.

American Express Co. jumped 2.6 percent to $62.14, for the biggest gain in the Dow. Chief Executive Officer Ken Chenault and Group President Steve Squeri on investor day focused on the flexibility of the company’s model to generate “attractive earnings growth even in a less robust top-line environment,” Citigroup Inc. analyst Donald Fandetti wrote in a note dated today. Fandetti recommends investors buy shares of the biggest U.S. credit-card issuer by purchases.

O’Reilly Automotive Inc. rallied 8.1 percent to $100.04 for the third-biggest gain in the S&P 500. The auto-parts chain forecast earnings in 2013 of at least $5.57 a share, exceeding the $5.44 average profit estimate by analysts.

Yahoo! Inc., the biggest U.S. Web portal, rose 2.4 percent to $20.32 after Pivotal Research Group LLC analyst Brian Wieser raised his recommendation on the shares to buy from hold.

Have a wonderful evening everyone.

Be magnificent!

Unity is an intellectual concept.

On an emotional level unity is serenity, equality, and equilibrium.

Swami Prajnanpad,1891-1974

As ever,

Carolann

All life is an experiment.  The more experiments

you make the better.

-Ralph Waldo Emerson, 1803-1882

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