January 17th, 2012 Newsletter

Dear Friends,

Tangents:

Birthday: Benjamin Franklin, January 17, 1706; some of his words of wisdom:

There is no little enemy.

Don’t throw stones at Your neighbors if your own windows are glass.

Be slow in choosing a friend, slower in changing.

Necessity never made a good bargain.

The definition of insanity is doing the same thing over and over and expecting different results.

I received an e-mail from a client on the weekend with this cogent message:

“We spend January 1 walking through our lives, room by room, drawing up a list of work to be done, cracks to be patched. Maybe this year, to balance the list, we ought to walk through the rooms of our lives… not looking for flaws, but for potential.” ~ Ellen Goodman

photos of the day

January 17, 2012

A jogger runs along a street during a snowfall in Vienna.

Heinz-Peter Bader/Reuters

A woman walks past portraits on a street in Lisbon, Portugal. The photos are part of French photographer Joanne Gatefield’s large-scale art project called ‘Inside Out Lx,’ which aims to spread joy by showing laughing people.

Hugo Correia/Reuters

Market Closes for January 16th, 2012

Market Commentary:

Canada

By Matt Walcoff and Ksenia Galouchko

Jan. 17 (Bloomberg) — Canadian stocks fell as Kinross Gold Corp. plunged after saying it expects to record a goodwill writedown on its Tasiast mine in Africa and banks slipped as Citigroup Inc. reported a decline in profit.

Kinross, Canada’s third-largest gold producer by market value, dropped 21 percent. Cenovus Energy Inc., the country’s fifth-biggest energy company by revenue, rose 4.4 percent after an analyst at Canaccord Financial Inc. raised his share-price estimate on the company. Research In Motion Ltd. gained 5.3 percent after a report that Samsung Electronics Co. may be interested in buying the company.

The Standard & Poor’s/TSX Composite Index slipped 25.77 points, or 0.2 percent, to 12,232.83 today.

“There was concern from day one as to this purchase of Tasiast,” Greg Eckel, a fund manager with Morgan Meighen & Associates Ltd. in Toronto, said in a telephone interview. The firm oversees about C$1 billion ($975 million). The acquisition “seemed a little excessive and now you’re seeing that they’re having to pull back and digest what they’ve done.”

The index gained 4.5 percent from Dec. 28 to yesterday as gold stocks rebounded from the lowest level since July 2010.

Gold companies make up 11 percent of Canadian stocks by market value, and eight of the world’s 21 largest companies in the industry are Canadian, according to data compiled by Bloomberg.

Kinross plunged 21 percent, the most since its initial public offering in 1993, to C$10.40 after saying it will review development plans for three projects, including Tasiast. Kinross acquired the mine in Mauritania when it bought Red Back Mining Inc. for C$8 billion ($7.9 billion) in September 2010.

Barrick decreased 2.1 percent to C$48.75 after Steven Butler, an analyst at Canaccord Financial Inc., cut his rating on the shares to “hold” from “buy” in a note to clients dated yesterday. Butler cited Barrick’s higher share price relative to net assets than its peers and a “relatively flat production profile over the next few years” in the note.

Agnico-Eagle Mines Ltd. fell 5.4 percent to C$36.11 after at least three analysts, including Anita Soni of Credit Suisse Group AG, cut the stock’s price estimates.

S&P/TSX banks retreated for a third day after Citigroup, the third-largest U.S. bank by assets, missed analysts’ average earnings forecast in a Bloomberg survey by 26 percent. Royal Bank of Canada, the country’s biggest lender by assets, dropped 0.5 percent to C$51.82. Toronto-Dominion Bank, its biggest rival, slipped 0.1 percent to C$77.71, ending a six-day streak of gains. Scotiabank fell 0.1 percent to C$51.81.

Cenovus rallied 4.4 percent to C$35.06 after Phil Skolnick, an analyst at Canaccord, boosted his 12-month price estimate on the shares to C$45 from C$42. Skolnick cited a higher forecast for oil prices.

Natural gas futures closed at the lowest price in almost 10 years as above-normal temperatures and rising production contributed to a growing surplus of the furnace and power-plant fuel.

Peyto Exploration & Development Corp., which produces oil and gas in Canada, fell 4.9 percent to C$19.97. Tourmaline Oil Corp., a western Canadian natural gas and oil producer, tumbled 4.9 percent to C$22.44. Progress Energy Resources Corp., which produces natural gas and oil in Canada, slumped 1.3 percent to C$11.01, the lowest price since October 2010.

Petrominerales Ltd., an energy producer with operations in Colombia, climbed 6.4 percent to C$19.35, the biggest gain in the S&P/TSX.

Whiterock Real Estate Investment Trust, which owns commercial properties in Canada and the U.S., soared 12 percent to a record C$16.08 after agreeing to be bought by Dundee Real Estate Investment Trust. Dundee REIT slipped 3.3 percent to C$33.93.

Uranium producer Denison Mines Corp. slumped 10 percent to C$1.72 after Craig Miller, an analyst at TD, cut his rating on the shares to “reduce” from “hold.”

“The company continues to incur significant development expenditures, which we believe are not sustainable from operating cash flows alone,” Miller wrote in a note to clients.

The shares jumped 19 percent yesterday after Uranium One Inc. reported a 45 percent production increase.

Chinese gross domestic product increased 8.9 percent in the fourth quarter from a year earlier, down from 9.1 percent in the previous three months, the National Bureau of Statistics said today in Beijing.

All major base metals traded on the London Metal Exchange gained, and copper futures advanced on the Comex in New York.

First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, rallied 4.8 percent to C$23.91.

North American Palladium Ltd. tumbled 13 percent to C$2.69 after forecasting “modest growth” for 2012 production and saying it is discontinuing production at its Sleeping Giant mine due to insufficient operating margin.

RIM rose 5.3 percent to C$17.76, the highest level since Dec. 1. Samsung may be interested in buying the maker of the Blackberry smartphone, and no deal has been made because Waterloo, Ontario-based RIM is asking too much, the blog BGR reported today, without identifying its sources.

Celestica Inc., the maker of electronic parts for companies including RIM, gained 3.5 percent to C$8.07.

Primero Mining Corp., which owns a gold and silver mine in Mexico, tumbled 15 percent to C$3.18 after releasing a 2012 production forecast that trailed the estimates of David Haughton, an analyst at Bank of Montreal.

US

By Rita Nazareth

Jan. 17 (Bloomberg) — U.S. stocks advanced, sending the Dow Jones Industrial Average to the highest level since July, after reports bolstered optimism in the American and German economies and Spain’s borrowing costs decreased at an auction.

Equities pared gains as financial shares slumped, with Citigroup Inc. losing 8.2 percent amid an unexpected drop in earnings. Wells Fargo & Co., the largest U.S. bank by market value, gained 0.7 percent amid record profit. Sears Holdings Corp. surged 9.5 percent, the most in the Standard & Poor’s 500 Index, on speculation that the company may seek to go private.

Carnival Corp. tumbled 14 percent after the Costa Concordia cruise ship ran aground off the coast of Italy on Jan. 13.

The S&P 500 increased 0.4 percent to 1,293.67 at 4 p.m. New York time, paring an earlier gain of as much as 1.1 percent. The Dow rose 60.01 points, or 0.5 percent, to 12,482.07.

“The economic data broadly exceeded expectations,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion, said in a telephone interview. “That’s why we had an immediate lift to the market,” he said. “What the auction in Spain tells me is that the market is ahead of the rating companies.”

Stocks gained as manufacturing in the New York region expanded in January at the fastest pace in nine months. German investor confidence rose the most on record in January. Spanish borrowing costs fell at an auction as investors ignored S&P downgrades last week. China’s economy expanded at the slowest pace in 10 quarters, sustaining pressure on Premier Wen Jiabao to ease monetary policy.

The S&P 500 is up 2.9 percent in 2012 for its best start to a year since 2003, according to data compiled by Bloomberg. At least 48 companies in the benchmark index are scheduled to report quarterly results this week. S&P 500 companies, which beat profit estimates in the previous 11 quarters, probably will report a 4.6 percent increase in per-share earnings during the September-December period, analysts’ estimates compiled by Bloomberg show.

Nine out of 10 groups in the S&P 500 gained. Among the biggest companies, Apple Inc. added 1.2 percent to $424.70.

Exxon Mobil Corp. advanced 1 percent to $85.69.

Wells Fargo added 0.7 percent to $29.83. Profit beat analysts’ estimates as mortgage financing improved. New mortgages rose 35 percent to $120 billion from the three months ended September at Wells Fargo, the biggest U.S. home lender, while dropping 6 percent from a year earlier.

Sears surged 9.5 percent to $36.75. Sears, working to turn around four years of declining sales, has lost ground as shoppers have flocked to such rivals as Macy’s Inc. Edward Lampert, who owns about 60 percent of Sears and serves as chairman, may seek new capital and to reorganize operations, said Paul Swinand, an analyst with Morningstar Inc. in Chicago.

“Restructuring is often easier taken under private hands,” Swinand said today in a telephone interview. “Anything that gives you more flexibility is an advantage.”

Kraft Foods Inc. added 1 percent to $38.13. The food company said it will realign its U.S. sales organization and cut 1,600 jobs in North America throughout 2012 as part of its move to divide its snacks and grocery businesses.

Dish Network Corp. rallied 1.2 percent to $29.10. AT&T Inc. is under so much pressure to add wireless spectrum after its failed $39 billion bid for T-Mobile USA that it may be compelled to pay the highest premium in more than a decade to secure Dish.

With the industry facing network constraints and a scarcity of new spectrum that’s making Dish a target, President and Chief Executive Officer Joe Clayton says the company is open to future acquisitions.

At $50 a share, cited as a reasonable price by Alpine Mutual Funds, AT&T would have to pay a 77 percent premium for Dish, the highest in an acquisition greater than $5 billion by a telecommunications company since 2000, according to data compiled by Bloomberg.

The S&P 500 Diversified Financials Index retreated 2.2 percent for the biggest decline among 24 groups. Citigroup lost

8.2 percent to $28.22. Trading declines mirrored results at JPMorgan, which said last week that revenue in every investment- banking business fell from a year earlier.

Carnival tumbled 14 percent, the most since 2001, to $29.60. The Costa Concordia was carrying more than 4,200 people when it ran aground hours after leaving a port near Rome to continue a Mediterranean cruise. The accident has left at least 11 people dead.

Royal Caribbean Cruises Ltd., the second-biggest cruise line, fell 6.2 percent to $26.97.

Investors began to put cash back to work in January, buying U.S. stocks, as expectations for global growth climbed to a six- month high, a Bank of America Corp. survey showed.

A net 27 percent of the 214 respondents, who together manage $655 billion in assets, said they were overweight cash.

That’s down from a net 35 percent in December. Asset allocators became the most bullish on American equities since April 2010, with the U.S. replacing emerging markets as their most favored region for equities.

“We have started the new year with investors much less pessimistic on global growth,” said Gary Baker, BofA’s head of European equity strategy at a press briefing in London. “This has translated into greater risk appetite. The U.S. has shown fairly consistent improvement, largely exceeding expectations.”

Have a wonderful evening everyone.

Be magnificent!

As ever,

Carolann

Never let the fear of striking out get in your way.

-Babe Ruth, 1895-1948

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

Senior Vice-President &

Senior Investment Advisor