January 10, 2013 Newsletter

Dear Friends,

Tangents:

On this day in 1863, the London Underground opened.  John Allemang writes in the Globe & Mail today:

“Lord Palmerston, the 79-year old prime minister, skipped the VIP preview the day before – at his age, he said, he preferred to stay above ground as long as he could.  The private-sector backers of the seven-stop Metropolitan Railway had reason to fear they would have trouble luring travelers into London’s murky depths, described by the skeptical Times newspaper as ‘foul subsoil’ that was ‘beyond the reach of light or life.’  But 30,000 people rode the world’s first urban subway line on opening day, reassured by the gas-lamps on the wooden carriages that made subterranean travel a rational, everyday experience.  However, pollution from coal-fired steam locomotives was hellish in the unventilated tunnels – electrification was decades away.  But in a Victorian boomtown choked with horse-drawn traffic, underground travel turned out to be an irresistible idea, progress at its most basic.”

Look at the first picture below…

I personally loved riding the subway, the Metro as it is called in Montreal, into school every day when I was a girl; you could read a book or chat with the person next to you or just daydream away.

And also on this day in…

1878 – Women’s Suffrage Amendment was introduced.

1920 – the League of Nations was founded.

1946 – The United States Army Signal Corps successfully conducts Project Diana, bouncing radio waves off the moon and receiving the reflected signals.

1954 – BOAC Flight 781, a de Havilland DH.106 Comet 1, explodes and falls into the Tyrrhenian Sea killing 35 people.

1962 – Apollo program: NASA announces plans to build the C-5 rocket launch vehicle. It became better known as the Saturn V Moon rocket, which launched every Apollo Moon mission.

1972 – Sheikh Mujibur Rahman returns to the newly independent Bangladesh as president after spending over nine months in prison in Pakistan.

1981 – Salvadoran Civil War: The FMLN launches its first major offensive, gaining control of most of Morazán and Chalatenango departments.

1984 – The United States and Vatican City establish full diplomatic relations after 117 years.

1985 – Sandinista Daniel Ortega becomes president of Nicaragua and vows to continue the transformation to socialism and alliance with the Soviet Union and Cuba; American policy continues to support the Contras in their revolt against the Nicaraguan government.

1990 – Time Warner is formed by the merger of Time Inc. and Warner Communications.

1999 – Sanjeev Nanda kills three policemen in New Delhi, India with his car, an act for which he was later acquitted, resulting in a sharp drop in public confidence in the Indian legal system.

Patience and passage of time do more than strength and fury. –Jean de la Fontaine, 1621-95.

photos of the day

January 10th, 2013

Passengers arrive at Canary Wharf underground station in London. Britain’s capital began year-long celebrations for the 150th anniversary of the world’s oldest underground passenger railway with reams of newsprint and plans for exhibitions, books, poetry, and a commemorative steam train ride.

Photo: Olivia Harris/Reuters

Volunteers and employees of Selfridges department store on Oxford Street in London, pose for the media in ‘The Silence Room,’ a space they unveiled for shoppers to quietly relax in. The Silence Room, where shoes are to be left outside and mobile phones not to be used, is part of a campaign by the store to integrate shopping with meditation to encourage people to be more considered and mindful in their everyday life.

Photo: Matt Dunham/AP

Market Closes for January 10th, 2013:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Jan. 10 (Bloomberg) — Canadian stocks rose for a third day as resource companies advanced after China’s exports jumped more than forecast last month.

Canadian Natural Resources Ltd. and Suncor Energy Inc. added at least 0.9 percent as crude rose to a three-month high.

Yamana Gold Inc. gained 5.8 percent as gold rose the most in two months. First Quantum Minerals Ltd. added 2.2 percent after Leucadia National Corp., the top shareholder of Inmet Mining Corp., said it plans to tender its shares to First Quantum’s hostile C$5.1 billion ($5.2 billion) bid for the copper mining company.

The Standard & Poor’s/TSX Composite Index rose 77.5 points, or 0.6 percent, to 12,599.74 in Toronto. The benchmark gauge has gained 1.3 percent this year.

“The market today is moving primarily on the Chinese data, so gold is up and crude is up which is very good for the Canadian market,” said John Kinsey, fund manager with Caldwell Securities Ltd. in Toronto. His firm manages about C$1 billion.

“Those are the two areas that have been dragging.” Materials and energy stocks fell the most among 10 industries in the benchmark Canadian equity gauge in 2012, slumping 6.9 percent and 3.7 percent respectively.

Overseas shipments increased 14.1 percent in November from a year earlier, the most since May, China customs administration data showed today, compared with the 5 percent median forecast in a Bloomberg News survey of 40 economists.

Raw-materials and energy stocks contributed the most to gains in the S&P/TSX today as nine of 10 industries advanced.

Trading volume was 15 percent higher than the 30-day average at this time of the day.

The S&P/TSX Gold subindex rallied 2.5 percent, the most in more than a week, as 25 of 31 members advanced.

Yamana climbed 5.8 percent to C$17.26 and Eldorado Gold Corp. advanced 3.8 percent to C$12.67 as gold futures for February delivery gained 1.4 percent to settle at $1,678 an ounce in New York, the biggest jump for a most-active contract since Nov. 6.

Colossus Minerals Inc. increased 4.1 percent to C$4.87. The company reported drill results that included high-grade gold values near the surface in the Elefante area in Brazil.

First Quantum added 2.2 percent to C$21.05. Leucadia, which owns about 16 percent of Inmet, said it will tender its shares into First Quantum’s C$72-a-share hostile offer unless a better deal emerges.

Suncor gained 0.9 percent to C$33.58 and Canadian Natural Resources Ltd. added 1.8 percent to C$29.69. Crude for February delivery increased 0.8 percent to $93.82 a barrel in New York, the highest settlement since Sept. 18.

Karnalyte Resources Inc., a potash mining company based in Okotoks, Alberta, jumped 6.1 percent to C$8.49 after announcing Gujarat State Fertilizers & Chemicals Ltd. will buy a 20 percent stake in the company for C$45 million.

The publicly-traded Indian agribusiness company has also agreed to a 20-year deal for potash from Karnalyte’s Wynyard project in Saskatchewan.

US

By Rita Nazareth and Sarah Pringle

Jan. 10 (Bloomberg) — U.S. stocks advanced, sending the Standard & Poor’s 500 Index to the highest level in five years, amid better-than-estimated data on Chinese exports.

Financial shares had the biggest gain in the S&P 500 among 10 industry groups as Bank of America Corp. and Morgan Stanley rallied at least 3 percent. Ford Motor Co. climbed 2.7 percent after boosting its dividend. Supervalu Inc. rose 14 percent as a Cerberus Capital Management LP-led investor group agreed to buy five of its chains in a deal valued at about $3.3 billion.

Tiffany & Co. slumped 4.5 percent as the jewelry retailer said full-year earnings will be at the low end of its forecast.

The S&P 500 advanced 0.8 percent to 1,472.12 at 4 p.m. New York time, the highest level since December 2007. The Dow Jones Industrial Average added 80.71 points, or 0.6 percent, to 13,471.22. About 6.8 billion shares changed hands on U.S. exchanges, or 9.9 percent above the three-month average.

“The market is encouraged by evidence of healing on the international front,” said Alan Gayle, senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “In the U.S., the earnings season is just getting started and there’s a lot of things that we don’t know. Investors will still be on that wait-and-see mode.”

Equities followed global shares higher as China’s overseas sales rose 14.1 percent in December from a year earlier, almost triple the 5 percent gain predicted. European Central Bank President Mario Draghi said the euro-area economy will slowly return to health in 2013 as the region’s bond markets stabilize after three years of turmoil. More Americans than forecast filed applications for unemployment benefits last week.

Investors also watched corporate results. Fourth-quarter profits at S&P 500 companies grew 2.9 percent, according to analysts’ estimates compiled by Bloomberg. That would be the second-slowest quarterly growth since 2009, the data show.

All 10 groups in the S&P 500 rose today as financial and energy shares had the biggest gains. The KBW Bank Index of 24 stocks added 1.3 percent. Bank of America rallied 3.1 percent to $11.78, after tumbling 5.6 percent over the previous three days.

Morgan Stanley rose 3.7 percent to $20.34.

Wall Street banks such as Morgan Stanley will benefit more from shareholders demanding reforms than regulators imposing new rules, CLSA Ltd.’s Mike Mayo said.

Activist investors including Nelson Peltz’s Trian Fund Management LP and Dan Loeb’s Third Point LLC will have more success in changing the biggest U.S. banks by holding managements’ “feet to the fire,” Mayo said today in a Bloomberg Television interview with Betty Liu.

“We need more Dan Loebs than we need regulators,” Mayo said. “We need more shareholders to step up to the plate.”

Ford jumped 2.7 percent to $13.83. The second-largest U.S. automaker doubled its dividend to 10 cents per share after record profit margins boosted its cash. Ford, which resumed paying a dividend last year after a five-year hiatus, cited its strengthening business as the reason for boosting the payout.

Supervalu climbed 14 percent to $3.47. A Cerberus-led investor group agreed to acquire Supervalu’s Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market grocery stores. Cerberus also will lead a group to conduct a tender offer to buy as much as 30 percent of Supervalu’s common stock for $4 a share in cash, the companies said today in a statement.

DirecTV jumped 1.1 percent to $52.44. The company is planning to raise $750 million with bonds that may fund share repurchases at the largest U.S. satellite-TV operator, whose stock trades cheaper relative to earnings than its average U.S. competitor.

News Corp. gained 2.2 percent to $26.97. The media company run by billionaire Rupert Murdoch was raised to outperform from market perform at Sanford C Bernstein & Co.

Altria Group Inc. rose 2.5 percent to $32.70. The largest seller of tobacco in the U.S. was raised to buy from hold at Stifel Nicolaus Corp. by equity analyst Christopher Growe. The 12-month share-price estimate is $36.

Legg Mason Inc. rallied 3.2 percent to $26.84. The money manager searching for a new chief executive officer rose after Reuters said today that two large private-equity investors showed interest in financing a buyout led by the Baltimore-based firm’s largest affiliates. Legg Mason’s board has refused to engage in discussions about a sale, said Reuters, citing unidentified people with knowledge of the matter.

Tiffany slumped 4.5 percent to $60.40. High-income consumers’ confidence waned in the U.S. as the prospect of higher taxes approached, David Schick, an analyst at Stifel Financial Corp., who recommends holding the shares, wrote in a Jan. 7 note.

Orbitz Worldwide Inc. dropped 10 percent to $2.98.  The resignation of Chief Financial Officer Mitch Marcus amplified investor concerns about the company’s ability to expand hotel bookings.

Herbalife Ltd. slipped 1.8 percent to $39.24, reversing an earlier rally of 7.6 percent. Chief Executive Officer Michael Johnson accused hedge fund manager Bill Ackman of “gross mischaracterizations” about the nutrition company’s direct- selling model as Herbalife executives mounted a point-by-point defense for investors.

Ackman said today in a statement that Herbalife “distorted, mischaracterized, and outright ignored” major portions of a Dec. 20 presentation accusing Herbalife of using inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme.

Molycorp Inc. tumbled 23 percent to $8.34. The owner of the largest rare-earth deposit outside China missed its 2012 output target and said revenue will be lower than forecast this year after the new chief executive officer changed its ramp-up schedule.

Microsoft Corp. lost 0.9 percent to $26.46. The world’s largest software maker was downgraded to equalweight from overweight at Morgan Stanley.

The two-month rally in U.S. stocks will end as the advance in the S&P 500 toward 1,500 depletes buyers, according to Tom DeMark, the creator of indicators to show turning points in securities.

The benchmark index for U.S. equities will climb to an intraday high of 1,492.73 and form a sell signal on a daily Combo indicator, which is designed to identify market tops and bottoms, said DeMark, who has spent more than 40 years developing market-timing indicators. The S&P 500 will then fall at least 5.5 percent, he said.

“This high could occur as early as tomorrow,” DeMark wrote in an e-mail. “1,492.73 is just shy of psychological 1,500 as most traders are predisposed to look at markets in terms of round numbers and will expect 1,500 to be hit. And just to confound them, expect market to trade not quite to 1,500.”

Have a wonderful evening everyone.

Be magnificent!

Nonviolence is not a cloistered virtue to be practiced

by the individual for peace and final salvation,

but it is a rule of conduct for society,

if it is to live consistently with human dignity

and make progress towards the attainment of peace

for which it has been yearning for ages past.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

We can pay our debt to the past by putting

the future in debt to ourselves.

-John Buchan, 1875-1940

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