February 6, 2012 Newsletter

Dear Friends,

Tangents:

Queen’s Jubilee today.

Babe Ruth’s birthday:

I have only one superstition.  I touch all the bases when I hit a home run.

-Babe Ruth, 1895-1948

We went to hang out with some friends in Vancouver on the weekend and yesterday before we left for home, I suggested to  Gary that we should check out the Armory District which I had read about in Western Living magazine.   It is a wonderful area.   It is right around  the Seaforth Armoury on Burrard Street at First Avenue, hence the name.   It encompasses a small area east of Burrard to the Granville Street Bridge,  beginning at First Avenue up to and including Third Avenue. There are some neat shops and galleries.  We found a wonderful shop, Les Amis du Fromage, which sells an amazing variety of cheese and baguettes and other things.  We scored some great French olive oil there which our local supplier has been out of for some time.  Also found the most fantastic cook book store named Barbara-Jo’s Books to Cooks, www.bookstocooks.com, where I picked up Adam Gopnik’s latest, The Table Comes First: Family, France, and the Meaning of Food (2011). I started reading it on the way home and it begins with a letter from an imprisoned resistance fighter in Nazi occupied France, to his parents, telling them about the meal he began that day with, an attempt to alleviate their anguish as well as underscore for the reader, the importance of the meal to in France.

There are also a few edgy furniture and carpet stores, and fabulous art galleries that we had to peak through windows to see the art because they were closed on Sunday.  One that seemed to have especially intriguing art is Gallery Jones on 3^rd Avenue.  A welcome discovery.

photos of the day

February 6, 2012

Britain’s Queen Elizabeth smiles after visiting Dersingham Infant and Nursery School in Dersingham, Norfolk, eastern England. Today marks the 60th anniversary of Queen Elizabeth’s accession to the throne.

Andrew Winning/Reuters

A dragon dance is performed amid fireworks during a Lantern Festival celebration in Chongqing municipality, China. The Lantern Festival occurs on the 15th day of the Chinese Lunar New Year and marks the end of the Spring Festival.

Reuters

Market Closes for February 6, 2012:

North American Markets

Market Commentary:

Canada

By Matt Walcoff and Katia Porzecanski

Feb. 6 (Bloomberg) — Canadian stocks declined for the first time in five days as oil fell after German Chancellor Angela Merkel said “time is running out” for Greece to accept the conditions for a bailout.

Canadian Natural Resources Ltd., the country’s second- largest energy company by market value, dropped 1.4 percent as crude futures declined for the sixth time in the last seven days. Canadian Pacific Railway Ltd. rallied 1.2 percent after William Ackman, the largest investor, renewed his call to replace Chief Executive Officer Fred Green. Rogers Communications Inc., Canada’s biggest wireless provider, lost

1.5 percent after an analyst at Macquarie Group Ltd. cut his rating on the shares.

The S&P/TSX Composite Index dropped 17.43 points, or 0.1 percent, to 12,559.85 in Toronto after closing at a four-month high Feb. 3.

“Greece has been an almost-deal for a long time,” Todd Johnson, a money manager at BCV Asset Management in Winnipeg, Manitoba, said in a telephone interview. The firm oversees about

C$335 million ($336 million). “The longer it goes on, the more one has to realize that there might eventually be what’s been called the ‘hard default.’ It’s going to be a huge political chaos if that happens. Likely, everyone’s going to hit the sell button at the same time.”

The S&P/TSX gained each of the previous seven weeks, the longest streak since April 2009, and has advanced 5.1 percent this year. Canadian stocks have climbed as improvements in U.S.

employment and manufacturing data have overshadowed the European debt crisis.

European leaders stepped up pressure on Greek politicians to meet the conditions of a 130 billion-euro ($171 billion) bailout. A gathering of Greek political leaders was delayed by a day until tomorrow as they struggled for a unified response.

Antonis Samaras, the head of the second-largest party, indicated he would oppose some measures put forward by international creditors.

“I can’t quite understand why we need a few more days — time is running out,” Merkel said today in a joint briefing with French President Nicolas Sarkozy in Paris.

The S&P/TSX Energy Index fell for the first time in five days as crude futures declined on the New York Mercantile Exchange. Canadian Natural lost 1.4 percent to C$40.28.

Antrim Energy Inc., which explores for oil and gas in the North Sea and Argentina, plunged 22 percent, the most since August 2006, to C$1.07 after abandoning a North Sea well.

Cenovus Energy Inc., the country’s fifth-biggest energy company, fell 1.8 percent to C$38.11.

C&C Energia Ltd., an oil and gas producer with operations in Colombia, sank 13 percent to C$7.80 after reporting a well in the Putumayo Basin is a dry hole and will be abandoned.

Most gold producers fell as the metal retreated to the lowest price in more than a week as a rally in the dollar curbed demand for the metal as an alternative investment.

Alamos Gold Inc., which mines in Mexico, fell 4 percent to C$18.75. Romarco Minerals Inc., which is developing a gold project in South Carolina, sank 7.9 percent to C$1.16.

Great Basin Gold Ltd., which mines in Nevada and South Africa, dropped 8.7 percent to C$1.05 after saying its 2011 production trailed its forecast.

Base-metals and coal producers fell as copper dropped on the Comex in New York. First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, declined 3.4 percent to C$22.64.

Teck Resources Ltd., Canada’s largest base-metals and coal producer, decreased 2.1 percent to C$42.50 after Greg Barnes, an analyst at Toronto-Dominion Bank, reduced his rating on the stock to “buy” from “action list buy.” Barnes cited a lower coal-price forecast and higher copper-mining-cost estimates in a note to clients.

Rogers retreated 1.5 percent to C$38.07 after Greg MacDonald, an analyst at Macquarie, cut his rating on the stock to “neutral” from “outperform.” The company may report lower margins in the fourth quarter due to subsidies related to strong sales of Apple Inc.’s iPhone, MacDonald wrote in a note to clients.

Canadian Pacific Railway Ltd. advanced 1.2 percent to C$74.34. Ackman, the founder of New York-based Pershing Square Capital Management LP, told shareholders at a meeting in Toronto the board “has chosen the wrong CEO.”

Ackman, 45, buys stakes in companies he deems undervalued and pushes changes to improve returns. He arranged the meeting in Toronto to win support for his slate of five directors, a group that he said would help persuade the board to replace the current CEO, Fred Green, with Hunter Harrison, the former head of Canadian National Railway Co.

SXC Health Solutions Corp., a pharmacy-benefits manager, fell 3.8 percent to C$61.02 after Reuters reported that “key people” at the Federal Trade Commission are seeking to stop the acquisition of Medco Health Solutions Inc. by rival pharmacy benefits company Express Scripts Inc.

US

By Rita Nazareth

Feb. 6 (Bloomberg) — U.S. stocks declined, following a five-week advance for the Standard & Poor’s 500 Index, amid concern about Europe’s debt crisis as Greek leaders wrestled with spending cuts to get aid and avert a default.

Banks in the S&P 500 dropped 1.1 percent, following a retreat in European lenders. Boeing Co. decreased 1.2 percent as it ordered inspections of 787 Dreamliners after finding signs of fuselage delamination. Toll Brothers Inc. and Lennar Corp.

slumped at least 2.3 percent after Raymond James Financial Inc.

cut its recommendation for the homebuilders. Medco Health Solutions Inc. tumbled 8.1 percent amid concern that its proposed acquisition by Express Scripts Inc. may be blocked.

The S&P 500 decreased less than 0.1 percent to 1,344.33 as of 4 p.m. New York time, paring a decline of as much as 0.6 percent as energy companies advanced. The Dow Jones Industrial Average retreated 17.10 points, or 0.1 percent, to 12,845.13.

“It’s an ongoing Greek tragedy,” Stephen Wood, the New York-based chief market strategist for Russell Investments, said in a phone interview. His firm oversees $137.6 billion. “We’re in the hands of the best efforts of European politicians. That’s a source of risk that’s difficult to forecast.”

Stocks fell as European leaders stepped up pressure on Greek politicians to meet the conditions of a 130 billion-euro

($171 billion) bailout, saying time was running out. French President Nicolas Sarkozy met German Chancellor Angela Merkel as Greece’s interim prime minister, Lucas Papademos, planned to confer with the so-called troika of international lenders. A gathering of Greek political leaders was delayed by a day until tomorrow as they struggled for a unified response.

Today’s decline in equities came after the S&P 500 capped the best start to a year since 1987 as a report showed that employment growth topped estimates and the jobless rate unexpectedly fell to 8.3 percent. Financial and commodity shares had the biggest losses among 10 industries.

“Markets are not a very patient beast,” Michael A. Gayed, chief investment strategist in New York at Pension Partners LLC, said in a telephone interview. “When you have these talks that the Greece situation is going to be resolved, then, it gets postponed, markets get impatient.”

Boeing fell 1.2 percent to $75.46. The new checks add to challenges in boosting output of the twin-engine 787, which entered service in 2011 after more than three years of delays.

Boeing said 2012 deliveries for the jet should stay on schedule after an initial slowdown for inspections. Delamination is a term for the separation that can occur in a composite material when its layers crack and lose strength.

A gauge of homebuilders in S&P indexes slumped 1.7 percent.

Toll Brothers, the largest U.S. luxury-home builder, slid 2.4 percent to $23.28. Lennar slid 2.8 percent to $22.69. KB Home tumbled 3.5 percent to $10.43. The companies are among those downgraded at Raymond James, which cited valuation concern.

Medco Health Solutions tumbled 8.1 percent to $58.47.

Reuters reported that “key people” at the Federal Trade Commission are seeking to stop the company’s proposed $29.1 billion acquisition by rival pharmacy benefits company Express Scripts. Medco and Express Scripts said they still expect to complete the transaction in the first half of this year. Express Scripts slumped 4.6 percent to $49.67.

Walgreen Co., the largest U.S. drugstore chain, gained 1.9 percent to $34.28.

Humana Inc. slid 5.4 percent to $85.25. The second-largest Medicare provider raised its 2012 earnings forecast less than analysts estimated as more Americans were expected to seek medical care in a recovering economy.

Micron Technology Inc. retreated 2.8 percent to $7.73. The company named Mark Durcan as its chief executive officer, replacing Steve Appleton, who died on Feb. 3 after crashing an experimental plane. The shares fell 3.1 percent to $7.70 in late trading Feb. 3, after having been halted at $7.95.

With today’s drop in stocks, the S&P 500 traded for about

14 times its companies’ earnings and has been stuck below its five-decade average multiple of 16.4 since May 2010, the longest stretch since a 13-year period beginning in 1973.

Earnings beat projections at 66 percent of the 268 companies in the S&P 500 that reported quarterly results since Jan. 9, according to data compiled by Bloomberg. Profits probably grew 4.9 percent in the fourth quarter, according to a Bloomberg survey of analysts. The projection has fallen from 6.2 percent at the end of last year.

Energy shares had the biggest gain in the S&P 500 among 10 industries, rising 1.1 percent as a group. Alpha Natural Resources Inc., a coal miner, rallied 3.3 percent to $23.54.

Baker Hughes Inc. added 2.1 percent to $52.09.

Walt Disney Co. gained 1.2 percent to $40.46. The world’s biggest theme-park operator was raised to “buy” from “neutral” at Davenport & Co. by equity analyst Michael Morris.

The 12-month share-price estimate is $46.

Sprint Nextel Corp. climbed 6 percent to $2.46. The third- largest U.S. wireless, scheduled to release its fourth-quarter results on Feb. 8, offers a buying opportunity for investors because earnings during the period most likely marked the trough, Macquarie Group Ltd. said.

Kroger Co. rose 0.6 percent to $24.06. The largest U.S.

grocery-store chain traded last week at an 86 percent discount to its projected sales this fiscal year, leaving it cheaper than

99 percent of companies in the S&P 500, according to data compiled by Bloomberg.

The company, which has increased sales in every year since at least 1987 even as Target Corp. and Wal-Mart Stores Inc.

grabbed market share from other supermarkets, may now become a target for retailers outside the U.S. or private equity firms, according to Northcoast Research Holdings LLC.

Valued at $13.7 billion last week, Kroger could still attract a takeover offer 30 percent above its current price, Point View Wealth Management Inc. said, making it the largest grocery acquisition on record.

“Of the traditional pure-play grocery stores, Kroger is the crown jewel,” David Dietze, president and chief investment strategist at Summit, New Jersey-based Point View, which owns shares of Kroger, said in a telephone interview. “They have a long consistent record of positive same-store sales performance.

It’s timely to acquire Kroger because it’s cheap.”

Have a wonderful evening everyone.

Be magnificent!

Like a silkworm you have built a cocoon around yourself.  Who will save you?

Burst your own cocoon and come out as the beautiful butterfly, as the free soul.

-Swami Vivekananda, 1863-1902

As ever,

Carolann

Make voyages. Attempt them.

There’s nothing else.

-Tennessee Williams, 1911-1983

Carolann Steinhoff, B.Sc., CFP, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor