January 23rd, 2012 Newsletter

Dear Friends,

Tangents:

Went to see the movie The Iron Lady on the weekend.  Meryl Streep’s acting as Margaret Thatcher now, in her advance years wrestling with dementia, and when she was younger, as a politician, and eventually Prime Minister, is just amazing.  She should win another Oscar for this role.

In the Globe & Mail today, there was an article on exercising and the brain.   It is becoming increasingly clear that exercise can prevent Alzheimer’s especially if you’re predisposed to the disease.

It would appear that exercising can also help memory.  Dave McGinn writes,

“The effect of exercise on the brain has become a hot topic in research circles.  Many recent studies have revealed a link between active living and improved memory.

How can exercise improve memory?  Irish scientist may have come up with the answer in a study published last fall in the journal Physiology & Behavior.  Male college students took a memory test and then one half of the volunteers rode an exercise bike until they were exhausted, while the other half sat idle.  Both groups took the test again.  The bike riders did much better, while those who rested showed no improvement.  Those who exercised were found to have increased levels of a protein called brain-derived neurotrophic factor, which promotes the health of nerve cells.

In a 2010 study published in the Proceedings of the National Academy of Sciences, researchers from the University of Cambridge and the National Institute on Aging in Baltimore, Md., found that mice that had access to a running wheel performed nearly twice as well on memory tests than mice with no access.

Moreover, the running mice were found to have grown an average of 6,000 new brain cells per cubic millimeter in the hippocampus, which researchers hypothesized was due to the fact exercise increases blood flow to the brain.”

photos of the day

January 23, 2012

A performer dressed in traditional costume and wearing make-up prepares to take part in Chinese new year celebrations at the 700-year-old Dongyue Temple in Beijing. The temple is the largest of its kind in northern China for the Zhengyi school of Taoism, and was originally built by Taoist monks in the 14th century. The Lunar New Year, or Spring Festival, begins on Jan. 23 and marks the start of the Year of the Dragon, according to the Chinese zodiac.

David Gray/Reuters

Japan Aerospace Exploration Agency astronaut Soichi Noguchi dives in a space suit during a refresher training exercise at the Cosmonaut training center at Star City, outside Moscow.

Sergei Remezov/Reuters

Market Closes for January 23rd, 2012

Market Commentary:

Canada

By Matt Walcoff

Jan. 23 (Bloomberg) — Canadian stocks rose to a four-month high, led by energy producers and banks, as oil and gas futures gained and European finance ministers gathered in Brussels to discuss new budget rules and a Greek debt swap.

Encana Corp., the country’s largest gas producer, advanced 7.4 percent as the price of the fuel jumped after Chesapeake Energy Corp. announced immediate output cuts. Minefinders Corp., which produces gold and silver in Mexico, soared 22 percent after agreeing to be bought by Pan American Silver Corp. for C$1.5 billion ($1.49 billion). BlackBerry maker Research In Motion Ltd. declined 9.1 percent after new Chief Executive Officer Thorsten Heins said he doesn’t plan “drastic change.”

The S&P/TSX Composite Index increased 124.60 points, or 1 percent, to 12,521.70 at 4 p.m. Toronto time, the highest level since Sept. 8.

“Natural gas did a 360 today,” Irwin Michael, a money manager at ABC Funds in Toronto, said in a telephone interview.

The firm oversees about C$1 billion. “You got the first of production cuts. You start to get that people are a little more adventuresome.”

The index climbed each of the last five weeks, the longest streak since October 2010, as U.S. data indicated strengthening employment and manufacturing in the country that bought 75 percent of Canada’s exports in 2010.

Crude oil gained 1.3 percent on the New York Mercantile Exchange after settling at a one-month low Jan. 20. Natural gas rallied the most in two years after Chesapeake said it will “immediately curtail” output of 500 million cubic feet a day and will cut planned spending in gas fields by 70 percent from 2011 levels to $900 million.

Encana advanced 7.4 percent to C$19. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, increased 3.2 percent to C$40.21. PetroBakken Energy Ltd., an oil and gas producer with operations in Canada, climbed 3.4 percent to C$16.28 after saying it received a C$150 million increase to its credit facility.

Pan Orient Energy Corp., which produces oil and gas in Thailand, surged 27 percent to C$3.43 after reporting exploration results. Ithaca Energy Inc., which explores in the North Sea, rallied 14 percent to C$2.84 after saying it received a confidential, non-binding takeover offer.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, advanced 1.4 percent to C$45.93. Some nitrogen fertilizers produced by competitors require natural gas to manufacture. Corn and wheat futures climbed on the Chicago Board of Trade.

The S&P/TSX Financials Index rose for a sixth day, the longest streak in 11 months. Royal Bank of Canada, the country’s biggest lender by assets, gained 1.8 percent to C$54.82.

Toronto-Dominion Bank, its largest domestic rival, advanced 1.3 percent to C$80.17. Manulife Financial Corp., North America’s fourth-biggest insurer, increased 0.9 percent to C$12.76 to extend its monthly rally to 18 percent.

Minefinders surged 22 percent, the most since November 2008, to C$14.06 after Pan American Silver agreed to buy the Vancouver-based company for cash and shares. Pan American slumped 10 percent to C$22.40. Fortuna Silver Mines Inc., which operates in Peru, climbed 11 percent to C$6.28.

B2Gold Corp., which mines in Nicaragua, rose 6.4 percent to C$3.49 after saying production may increase as much as 11 percent this year.

Augusta Resource Corp., which is developing a copper project in Arizona, sank 11 percent, the most since Sept. 30, to C$2.89 after the U.S. Environmental Protection Agency called for a review of the project’s draft Clean Water Act permit.

RIM tumbled 9.1 percent to C$15.67 after Heins announced no significant strategy changes on a conference call. Heins replaced former co-CEOs Jim Balsillie and Mike Lazaridis today after shares of the Waterloo, Ontario-based company plunged 75 percent last year.

US

By Rita Nazareth

Jan. 23 (Bloomberg) — The Standard & Poor’s 500 Index rose for a fifth day, capping its longest rally since December, as energy and bank shares advanced and investors weighed developments in Europe’s efforts to tame its debt crisis.

Chesapeake Energy Corp. surged 6.3 percent, pacing gains in energy companies, as the second-largest U.S. natural-gas producer said it will cut production and reduce spending. Bank of America Corp. added 2.6 percent as Chief Executive Officer Brian T. Moynihan said the lender may reduce annual costs by as much as an additional $3 billion. Procter & Gamble Co. slumped

1.9 percent after Stifel Nicolaus & Co. cut its recommendation for the largest consumer-products company.

The S&P 500 added 0.1 percent to 1,316 at 4 p.m. New York time, gaining 2.1 percent in five days. The Dow Jones Industrial Average declined 11.66 points, or 0.1 percent, to 12,708.82, after earlier rising above the highest closing level since May.

“The bulls were able to flex their muscles a bit and the bears can’t really point to a whole lot of tangible news that’s really going to change matters much,” Hayes Miller, who helps oversee about $43 billion as the Boston-based head of asset allocation in North America at Baring Asset Management Inc., said in a telephone interview. “There’s a general relief about U.S. growth and Europe’s ability to solve its debt crisis. I don’t really buy into the overbought argument that much.”

The S&P 500 rose all four days U.S. exchanges were open last week as data bolstered confidence in the economy and companies from Goldman Sachs Group Inc. to Union Pacific Corp.

topped analysts’ income projections. Of the 52 companies in the S&P 500 that reported results since Jan. 9, 34 posted per-share earnings that beat projections, Bloomberg data show.

Equities turned lower early today after the S&P 500 reached 1,322.28, a level close to a downward trendline connecting the index’s all-time high in 2007 with its peak last year in April and its May and July highs, according to Ari Wald, a New York- based technical strategist at Brown Brothers Harriman & Co.

The index’s 14-day relative strength index, which measures the degree that gains and losses outpace each other, has stayed above 65 since Jan. 17, matching the longest streak since February, according to Bloomberg data. Some technical analysts consider RSI readings above 70 a sign that stocks have risen too far, too fast.

Germany and France said talks between Greece and bondholders on negotiations for a debt swap were making progress, while an official in Berlin said Germany may be open to combining Europe’s two bailout mechanisms and boosting their funding limit. Finance ministers meeting in Brussels today agreed on all aspects of the European Stability Mechanism in a deal to be signed on Jan. 30, Martti Salmi, an aide at Finland’s Finance Ministry in Helsinki, said by telephone.

A gauge of energy shares had the biggest gain in the S&P 500 among 10 groups, rising 0.7 percent. Chesapeake plans to cut output, idle drilling rigs and reduce spending in gas fields by 70 percent after prices for the fuel hit a 10-year low. Natural gas soared today, while Chesapeake surged 6.3 percent to $22.28.

Cabot Oil & Gas Corp. increased 6.5 percent to $65.08.

Range Resources Corp. added 9.2 percent to $59. Southwestern Energy Co. jumped 10 percent to $32.46. The oil and gas company was raised to “outperform” from “market perform” at BMO Capital Markets.

Financial stocks in the S&P 500 swung between gains and losses today before closing 0.3 percent higher.

Bank of America jumped 2.6 percent, the biggest gain in the Dow, to $7.25. The lender, which already targeted $5 billion in expense cuts from retail and back-office operations, may reach total savings of $6 billion to $8 billion a year, Moynihan said during a Jan. 19 employee meeting.

Procter & Gamble fell 1.9 percent, the second-most in the Dow, to $65. The company was lowered to “hold” from “buy” at Stifel Nicolaus.

Netflix Inc. sank 6.3 percent to $93.96. The owner of the streaming and DVD-by-mail service is likely to provide a first- quarter forecast that’s “well below” analysts’ estimates, according to Wedbush Securities.

Research In Motion Ltd. tumbled 8.5 percent to $15.56. The BlackBerry maker shook up its top management, replacing co-Chief Executive Officers Jim Balsillie and Mike Lazaridis, who guided the company for two decades and struggled to compete against Apple Inc. Thorsten Heins, a chief operating officer who joined RIM four years ago from Siemens AG, will replace the pair in the CEO post effective immediately.

Trading in U.S. stocks fell to the lowest level since at least 2008 amid mutual fund withdrawals and Wall Street job cuts.

An average of 6.69 billion shares changed hands on U.S. exchanges in the 50 days ended Jan. 18, the fewest on record in Bloomberg data starting three years ago that excludes over-the- counter venues. On the New York Stock Exchange, volume has tumbled to the lowest level since 1999, the data show.

The slowdown in trading shows that investors remain skittish after five years of withdrawals from mutual funds that buy U.S. equities and one of the most volatile years on record for the Standard & Poor’s 500 Index. While the benchmark index is having its best January rally since 1997, securities firms around the world cut more than 200,000 jobs last year.

“Investor confidence is shaky at the very least,” Mark Turner, head of U.S. sales trading at Instinet Inc. in New York, said in a telephone interview on Jan. 20. His firm handles about

4 percent of the total daily U.S. equity volume. “We need to see the U.S. economy improve. We need to see some sort of a plan in place to deal with Europe’s debt crisis before the market gains some confidence. At that point, we’ll start to see an increase in volume.”

Have a wonderful evening everyone.

Be magnificent!

In this world there are two orders of being,

the perishable and the imperishable.

The perishable is all that is visible.  The imperishable

is the invisible substance of all that is visible.

The Bhagavad Gita

As ever,

Carolann

It’s all trial and error, friends,

Trial and error…

-Sarah Burke, 1982-2012

A tweet on Jan. 6

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

Senior Vice-President &

Senior Investment Advisor