January 20th, 2012 Newsletter

Dear Friends,

Tangents:

The weather has been the hot topic this week.  A friend who lives in West Vancouver told me this morning she was taking the afternoon off to go tobogganing on Grouse Mountain.   Sounds like a great way to spend a Friday afternoon to me.

The artist Andrew Millner wrote in Speak for the Trees:

What is “NATURE”?  What is “NATURAL”?  These questions are increasingly more difficult to answer as the borders between the natural and the artificial blur.   In my work I have notated the simple outlines of leaves, branches, and limbs, by hand-drawing their outlines with an electronic pen and tablet.  The drawing is a collection of moments…thousands of casual, quick outlines that transform a botanical world into a mathematical language of line.

The final drawing is culled from looking at the tree in different seasons, at different scales, and from multiple points of view.  These digital tools facilitate greater intimacy and prolonged time for investigation.  Paradoxically, they suggest evidence of our estrangement from the natural.

The realm of the born – all that is nature – and the realm of the

made – all that is humanly constructed – are becoming one.

Machines are becoming biological and the biological is becoming

engineered.

-Kevin Kelly

photos of the day

January 20, 2012

A thick coat of ice is seen on tree branches in Tacoma, Wash. Thick ice brought down trees and power lines in the region overnight, following two days of snow and ice storms. A powerful Pacific Northwest storm knocked out power to about 250,000 electric customers around Seattle, Tacoma, and Olympia after it coated much of Washington in ice and swelled Oregon rivers.

Ted S. Warren/AP

A butterfly rests on a flower petal at a park in Hyderabad, India.

Mahesh Kumar A./AP

Market Closes for January 20th, 2012

Market Commentary:

Canada

By Matt Walcoff

Jan. 20 (Bloomberg) — Canadian stocks rose, completing a fifth-straight weekly gain, as financial companies advanced after the country reported slower inflation.

Royal Bank of Canada, the country’s largest lender by assets, climbed 1.4 percent after the country reported prices climbed less in 2011 than all 23 economists in a Bloomberg survey had forecast. First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, decreased 5.7 percent after a private report indicated manufacturing contracted in China.

The S&P/TSX Composite Index increased 16.41 points, or 0.1 percent, to 12,397.10, extending the weekly gain to 1.4 percent.

“All of the news in terms of inflation under control, the general economy getting better, that erases the pressure of lower margins for the banks,” Marcus Xu, director of equity investments at Genus Capital Management in Vancouver, said in a telephone interview. The firm oversees about C$1.7 billion ($1.7 billion).

The S&P/TSX has posted the longest streak of weekly gains since October 2010 as data have shown stronger employment and manufacturing in the U.S. Seventy-five percent of Canada’s exports went to the U.S. in 2010, according to Statistics Canada.

The S&P/TSX Financials Index rose for a fifth day, the longest streak since July, after Statistics Canada said the country’s year-over-year inflation rate slowed to 2.3 percent in December from 2.9 percent in November. The Canadian dollar fell for the first time this week against the U.S. currency.

Royal Bank increased 1.4 percent to C$53.85. Toronto- Dominion Bank, the country’s second-largest lender by assets, advanced 1.2 percent to C$79.15. Manulife Financial Corp., North America’s fourth-biggest insurer, climbed 2.6 percent to C$12.65 capping its fifth-straight weekly gain.

A purchasing managers’ index released by HSBC Holdings Plc and Markit Economics indicated manufacturing contracted for a third month in China, the world’s largest user of industrial metals. Copper futures fell for the first time this week on the Comex in New York.

Base-metals and coal producers in the S&P/TSX retreated the most this month. First Quantum slumped 5.7 percent to C$22.55.

Lundin Mining Corp., which produces base metals in Europe, declined 4 percent to C$5.09.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, decreased 1.8 percent to C$45.28 after Lindsay Drucker Mann, an analyst at Goldman Sachs Group Inc., said a proposed reduction in Indian subsidies may hurt the company. The country’s government plans to reduce payments for potash and phosphorus fertilizers because prices of the nutrients may decline, Hindu Business Line reported Jan. 18 without citing anyone.

B2Gold Corp., which mines in Nicaragua, surged 6.5 percent to C$3.28 after reporting drilling results from its Primavera project.

Niko Resources Ltd., which produces oil and gas in South Asia, rose 5.3 percent to C$53.37 extend its three-day rally to 13 percent. The company said Jan. 17 it signed a $250 million credit facility with Royal Bank and Bank of Nova Scotia.

New Zealand Energy Corp., which explores for oil and gas in that country, soared 18 percent to C$1.71 after Bill Newman, an analyst at Mackie Research Capital Corp., began coverage of the Vancouver-based company with a “speculative buy” rating. The closing price was the highest since the company’s initial public offering in August.

US

By Rita Nazareth

Jan. 20 (Bloomberg) — Most U.S. stocks rose, erasing a loss for the Standard & Poor’s 500 Index in the final minutes of trading, as banks gained and results from International Business Machines Corp. to Intel Corp. boosted technology shares.

JPMorgan Chase & Co. and Bank of America Corp. added at least 1.1 percent. IBM, Intel and Microsoft Corp. rose more than 2.9 percent as results beat projections. General Electric Co.

closed unchanged, rebounding from a 2.5 percent slump, as profit topped estimates while sales were curbed by Europe. Google Inc. tumbled 8.4 percent as earnings missed projections. American Express Co. slid 1.8 percent on lower-than-forecast sales.

Seven stocks gained for every five falling on U.S. exchanges at 4 p.m. New York time. The S&P 500 rose 0.1 percent to 1,315.38, extending its gain since Jan. 13 to 2 percent. The index rose for a third week, capping the longest streak since October. The Dow Jones Industrial Average climbed 96.50 points, or 0.8 percent, to 12,720.48. IBM, which comprises 11 percent of the share-price weighted Dow, added 60.55 points to the index.

“It’s a mixed bag of earnings,” Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which oversees $85 billion, said in a telephone interview.

“Earnings growth is going to decline, but that’s already built into the market to a certain extent. If earnings don’t collapse, it won’t be a problem.”

S&P 500 companies, which beat profit estimates in the previous 11 quarters, will report a 3.4 percent increase in per- share earnings during the September-December period, analysts’ forecasts compiled by Bloomberg show. Of the 51 companies in the S&P 500 that reported results since Jan. 9, 33 posted per-share earnings that beat projections, Bloomberg data show.

Sales of previously owned U.S. homes rose for a third month in December to the highest level since January 2011, a sign the housing market ended last year with momentum. Greek officials and private creditors entered a third day of negotiations on a debt swap deal that’s crucial to lowering the country’s borrowings and freeing up a second round of international aid.

Financial shares had the biggest gain among 10 S&P 500 groups, adding 0.7 percent. JPMorgan rose 1.2 percent to $37.36.

Bank of America advanced 1.6 percent to $7.07.

“The upturn is around the corner,” Chris Hyzy, the New York-based chief investment officer at U.S. Trust Co., which oversees about $325 billion, said in a telephone interview. The rebound in banks “is a good sign. The financials have become a more stable sector. That’s the first sign that within six to nine months you could start to see the turnabout in the financial sector.”

IBM gained 4.4 percent to $188.52 after forecasting 2012 earnings that beat analysts’ estimates as fourth-quarter profit rose 4.4 percent because of rising software demand.

Intel increased 2.9 percent to $26.38. The chipmaker predicted first-quarter revenue that may top analysts’ estimates, signaling that the shortage of disk drives that throttled personal computer production may be ending.

Microsoft added 5.7 percent to $29.71. The company’s Xbox business got a boost from Christmas shoppers, who snapped up its video-game consoles and Kinect sensor controllers, and signed up for the Xbox Live online service.

GE closed unchanged at $19.15. Profit topped estimates after the company’s industrial order backlog rose to a record $200 billion even as weaker demand in Europe hindered sales in health care.

Google tumbled 8.4 percent to $585.99. Chief Executive Officer Larry Page is moving into new markets to ignite growth outside Google’s traditional search-based business. That effort contributed to an 8 percent drop in the average price Google gets when users click an ad, because it charges less for ads on mobile devices and in emerging markets, said Herman Leung, an analyst at Susquehanna Financial Group.

American Express lost 1.8 percent to $50.04. The company reported fourth-quarter revenue of $7.74 billion, missing the average analyst projection of $7.9 billion, data compiled by Bloomberg show. Profit excluding some items beat analysts’ estimates as card spending reached a record.

Capital One Financial Corp. slumped 5.6 percent to $46.03.

The credit-card issuer seeking approval to purchase ING Groep NV’s U.S. online bank said fourth-quarter profit fell 42 percent as expenses rose.

Fifth Third Bancorp sank 2.9 percent to $13.17. Ohio’s largest lender reported fourth-quarter sales of $1.46 billion, missing the average analyst estimate of $1.52 billion, data compiled by Bloomberg show.

U.S. stocks are caught in “a vicious circle” of slower trading and bigger swings in prices, according to Pierre Lapointe, Brockhouse & Cooper Inc.’s global macro strategist.

Trading for the 50 days ended yesterday was the slowest since at least 2008, when Bloomberg started compiling the data, at 6.67 billion shares a day.

Similar averages for companies in the S&P 500 and the Dow declined this week to the lowest levels since 1999 and 2000, respectively, according to Bloomberg’s figures. They reflect trading totals for each stock on the New York Stock Exchange or Nasdaq Stock Market, depending on where it’s listed.

“Getting in or out of a stock causes more price variation” because fewer shares are trading, Lapointe and Alex Bellefleur, a financial economist, wrote yesterday in a report from their Montreal-based firm. “This increases volatility.”

The Chicago Board Options Exchange Volatility Index, or the VIX, closed above 20 for almost six months before dropping below the threshold yesterday. The time period was the longest for the benchmark gauge of U.S. stock options since 2009.

Have a wonderful weekend everyone.

Be magnificent!

The lamp is empty; the oil is used up.

The tambourine is dead, the dancer lies down,

The fire is out, and no smoke rises from it.

The soul is absorbed into the Unique, and there is no longer a duality.

~ Kabir,1440-1518

As ever,

Carolann

Beware the fury of the

patient man.

-John Dryden, 1631-1700

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

Senior Vice-President &

Senior Investment Advisor