January 2, 2013 Newsletter

Dear Friends,

Tangents:

Scared to fly? Does your heart race when there is turbulence? Maybe this recent study will help put your mind at ease.  The International Transportation Association (IATA) has released a global study stating that this has been the safest year (as well as the previous two years) to board a plane since records have been kept.  As of the end of November, the IATA calculated that for every million flights in 2012, there were 2.14 “hull losses” (what you and I would call crashes).  What this means is flying is 44 times safer than driving in Canada. This number is for all planes (jet and propeller) around the globe, whether the aircraft was built by Boeing or by some guy in his garage. Even when you take into account recent accidents in Nunavut, Kazakhstan and Moscow, the more relevant statistic for average North Americans flying on planes with Western-built jet engines is much lower – 11 times lower, in fact, clocking in at 0.19 crashes per million flights. So, if you were to take a flight every day from now on, odds are it would take you about 14,419 years for there to be an accident.  From reading this article, I would say flying beats the odds! Happy Travelling!

“The only source of knowledge is experience.” – Albert Einstein

On this day in…

1859 – Erastus Beadle published “The Dime Book of Practical Etiquette.”

1879 – Thomas Edison began construction on his first generator.

1893 – The first commemorative postage stamps were issued.

1910 – The first junior high school in the United States opened. McKinley School in Berkeley, CA, housed seventh and eighth grade students. In a separate building students were housed who attended grades 9-12.

1917 – Royal Bank of Canada took over the Quebec Bank.

1929 – The United States and Canada reached an agreement on joint action to preserve Niagara Falls.

1957 – The San Francisco and Los Angeles stock exchanges merged. .

1968 – Fidel Castro announced petroleum and sugar rationing in Cuba.

1971 – In the U.S., a federally imposed ban on television cigarette advertisements went into effect.

1983 – The musical “Annie” closed on Broadway at the Uris Theatre after 2,377 performances.

“The weak can never forgive. Forgiveness is the attribute of the strong.” – Mahatma Gandhi

Photos of the day January 2^nd, 2013

A Florida State Seminoles baton team member holds a flaming baton in her mouth as she twirls two others before her team plays against the Northern Illinois Huskies in the 2013 Discover Orange Bowl NCAA football game in Miami Tuesday. Photo: Andrew Innerarity/Reuters

A Bedouin girl swings from a tree as she plays with other children in the Jordan Valley, near West Bank city of Jenin.Photo: Ammar Awad/Reuters

A woman and her child walk on the banks of the Yenisey River in minus-22-degree-Fahrenheit weather outside the Siberian city of Krasnoyarsk, Russia. Photo: Ilya Naymushin/Reuters

“No one is in control of your happiness but you; therefore, you have the power to change anything about yourself or your life that you want to change.” – Barbara de Angelis

Market Closes for January 2nd, 2013:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Jan. 2 (Bloomberg) — Canadian stocks rose, sending the benchmark index to the highest level in nine months, as commodities surged after U.S. lawmakers passed a bill averting spending cuts and tax increases.

Iron-ore producers, such as Labrador Iron Mines Holdings Ltd., jumped after China Steel Corp. and South Korea’s Posco agreed to buy a 15 percent stake in ArcelorMittal Mines Canada Inc. Teck Resources Ltd., which produces steelmaking coal, rose 3.2 percent. Canadian Natural Resources Ltd. and Suncor Energy Inc. added at least 1.5 percent as crude climbed to its highest in three months. Barrick Gold Corp., the world’s largest producer of the metal, gained 1 percent as gold rallied to a two-week high.

The Standard & Poor’s/TSX Composite Index rose 96.44 points, or 0.8 percent, to 12,529.97 at 11:45 a.m. in Toronto. A close at that level would be the highest since March 26.

“Even though the markets were concerned, I don’t think anyone was seriously considering they would go over the fiscal cliff without doing something,” said Jamie Robertson, chief investment officer with McLean & Partners Wealth Management Ltd. in Calgary. The firm manages about C$1 billion ($1.02 billion).

“Now it’s another formality we’ve dealt with and the markets can focus on economic growth, earnings growth and valuations for a change. It’s very constructive.”

The U.S. House passed a bill undoing income tax increases for more than 99 percent of households. The 257-167 bipartisan vote breaks a yearlong impasse over how to head off $600 billion in tax increases and spending cuts that would have started taking effect yesterday.

Raw-materials and energy stocks contributed most to gains in the S&P/TSX as all 10 industries advanced. Trading volume was 2 percent higher than the 30-day average at this time of day.

Canadian Natural Resources increased 1.8 percent to C$29.15 and Suncor added 1.5 percent to C$33.21. Crude for February delivery climbed as much as 2.3 percent to $94.04 a barrel in New York, the highest since Sept. 19.

Barrick rose 1 percent to C$35.18 and Goldcorp Inc., the world’s second-largest producer of the metal, advanced 1.4 percent as gold for February delivery rose 0.7 percent to $1,688.10 an ounce in New York.

Iron-ore producers jumped as a group led by China Steel and Posco agreed to pay $1.1 billion for access to two of ArcelorMittal’s Canadian iron mines. The mines produce about 40 percent of Canada’s iron ore, which is a key raw material in steelmaking.

Labrador Iron Mines, an iron ore producer with operations in the Labrador trough, soared 13 percent to C$1.24. Teck, Canada’s largest diversified miner including six metallurgical coal mines in British Columbia and Alberta, gained 3.2 percent to C$37.31. Metallurgical coal is also required to make steel.

Agrium Inc. rose 2 percent to C$101.09 and Potash Corp. of Saskatchewan Inc. gained 1.1 percent to C$40.91. The two fertilizer producers, along with Mosaic Co., agreed on Dec. 31 to sell 1 million metric tons of potash to China’s Sinofert Holdings Ltd. at $400 a ton, $70 lower than a March agreement.

“The shipments under the contract are higher than expected,” P.J. Juvekar, an analyst at Citigroup Inc., said in a note to clients. The deal provides some “clarity” for the market in early 2013, he said.

US

By Michael Shanahan and Inyoung Hwang

Jan. 2 (Bloomberg) — U.S. stocks surged, sending the Standard & Poor’s 500 Index to its biggest rally in a year, and commodities jumped after Congress passed a bill averting most of the tax increases and spending cuts threatening the recovery in the world’s biggest economy. Treasury yields gained.

The S&P 500 rose 2.5 percent to 1,462.42 at 4 p.m. in New York and has increased 4.3 percent in the past two sessions. The Stoxx Europe 600 Index climbed 2 percent to the highest since February 2011 as equities added to last year’s 13 percent global rally. Industrial metals led commodities up and oil advanced to a three-month high. The Dollar Index reversed an early slide, while Treasury 10-year yields climbed eight basis points.

President Barack Obama said he will sign into law the bill undoing tax increases for more than 99 percent of households as Republicans vowed to fight him for spending cuts in exchange for raising the debt ceiling. An industry report today showed American manufacturing expanded in December at a pace that shows the industry is stabilizing after reaching a three-year low a month earlier.

“Short-term, a deal is good for the market,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., said by telephone. His firm oversees about $80 billion. “Long-term, more has to be done in the way of spending cuts before we can declare victory.”

Gauges of telephone, technology and financial companies climbed at least 2.9 percent to lead gains as all 10 of the S&P 500’s main industry groups jumped, sending the gauge to its highest level since Sept. 14. Hewlett-Packard Co., Caterpillar Inc. and AT&T Inc. advanced more than 3.8 percent to lead the Dow Jones Industrial Average up 308.57 points to 13,412.71 for its biggest gain since June.

The S&P 500 rose 1.7 percent on Dec. 31, the biggest end- of-year increase since 1974, in anticipation of a budget deal. The benchmark index rallied 13 percent in 2012, its best year since 2009 when markets began recovering from the bear market that followed the U.S. financial crisis.

The Institute for Supply Management’s manufacturing index climbed to 50.7 last month from November’s 49.5, which was the weakest since July 2009. Fifty is the dividing line between expansion and contraction. The median forecast of economists surveyed by Bloomberg called for a rise to 50.5.

“We’re catching up to where we would’ve been had we not had the fiscal cliff drama,” James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $325 billion, said in a telephone interview. “We’re revaluing the market based on what’s closer to the underlying economy and most of the economic reports have been pretty good.”

The House’s 257-167 bipartisan vote breaks a yearlong impasse over how to head off $600 billion in tax increases and spending cuts that would have started taking effect yesterday.

While avoiding most of the immediate pain, the measure is only one step toward curbing the federal deficit. The issue will return with a February fight over raising the $16.4 trillion debt limit.

Under the plan, households making less than $450,000 per year would be spared an income tax-rate increase. The wealthy would see a rise in their top rate, to 39.6 percent, from 35 percent. The top tax rates on capital gains and dividends would go up to 23.8 percent, from 15 percent last year.

For an individual with $10,000 invested in the S&P 500, dividends after taxes would fall to $167.64 a year from $187 at today’s payout rate. An investor who sells shares at a $5,000 profit would face capital gains obligations of about $1,190 compared with $750 in 2012.

All 19 industry groups in the Stoxx 600 advanced during the year’s first trading session. The European benchmark jumped 14 percent last year, the biggest increase since 2009. Rio Tinto Group led a rally in mining companies today, rising 5.1 percent.

Porsche SE and Volkswagen AG climbed more than 3 percent to pace gains in automakers.

Euro-area manufacturing output contracted more than initially estimated in December, adding to signs a recession in the currency bloc may extend as leaders struggle to tackle the sovereign-debt crisis. A gauge of manufacturing in the 17-nation euro area fell to 46.1 from 46.2 in November, London-based Markit Economics said. That’s below an initial estimate of 46.3 on Dec. 14. A reading below 50 indicates contraction.

The cost of insuring against default on European bank debt dropped, with the Markit iTraxx Financial index of credit- default swaps linked to 25 banks and insurers falling 15 basis points to 127.

The MSCI Asia Pacific excluding Japan Index gained 2.1 percent,  the highest since August 2011. Equity markets in Japan and mainland China were closed today and tomorrow for public holidays.

Developing-nation stocks rose the most since September, with the MSCI Emerging Markets Index adding 2.1 percent and the MSCI BRIC Index of the largest emerging markets surging 2.6 percent and extending its gain from a low in June to 22 percent.

Eighteen of 24 commodities tracked by the S&P GSCI Index advanced, sending the measure up 0.8 percent. Lead, aluminum, nickel and copper jumped at least 3.5 percent. Oil futures in New York climbed 1.4 percent to $93.12 a barrel.

A Chinese manufacturing gauge showed a third month of expansion yesterday. The Purchasing Managers’ Index was 50.6 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said. That compares with the 51.0 median estimate in a Bloomberg News survey of analysts and 50.6 in November. A reading above 50 indicates expansion.

China will “step up efforts to promote strong, sustainable and balanced growth in the world economy,” President Hu Jintao said in a New Year’s Eve address broadcast on state media. China achieved stable economic development in 2012 and will seek to do the same this year while making restructuring of its growth model a focus, he said.

The Dollar Index, a gauge of the currency against six major peers, increased 0.1 percent after losing as much as 0.6 percent. The currency strengthened 0.1 percent to $1.3185.

The dollar weakened against 12 of its 16 major peers. The yen also slid as investors sought higher-yielding assets and Japanese Prime Minister Shinzo Abe reiterated his intention to weaken the nation’s currency. Japan’s currency fell against 15 of 16 major peers, trading near a two-and-a-half-year low versus the dollar.

Treasury 10-year note yields climbed eight basis points to 1.84 percent, the highest since September on a closing basis.

The yield on similar-maturity German debt jumped 13 basis points to 1.44 percent while Britain’s 10-year rate climbed 16 basis points to 1.99 percent, the largest gains since September for both.

The world’s leading economies will have $220 billion less sovereign debt to refinance in 2013, cutting supply after every major government bond market rallied for the first time since the 2008 financial crisis.

The amount of bills, notes and bonds coming due for the Group of Seven nations plus Brazil, Russia, India and China will drop to $7.38 trillion from $7.60 trillion in 2012, according to data compiled by Bloomberg. Japan, the U.K., Germany, France, Italy and Brazil will see a decline, while the U.S., Canada, Russia, India and China will face an increase.

Have a great evening everyone!!!!!

Be Magnificent!

“Never make your home in a place. Make a home for yourself inside your own head. You’ll find what you need to furnish it – memory, friends you can trust, love of learning, and other such things. That way it will go with you wherever you journey.” – Tad Williams

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7

Tel: 778-430-5808

Fax: 778-430-5838