January 31, 2012 Newsletter

Dear Friends,

Tangents:

The composer Philip Glass, credited with the invention of minimalist music, turns 75 today and is celebrating with a performance at Carnegie Hall tonight.

Another noteworthy anniversary today is that of the Tet Offensive which began on this day in 1968 in Saigon.  It was the turning point that hastened the departure of the US;  eventually North Vietnamese tanks rolled into the city.  We saw one when we were in Vietnam last month.  It still sits in front of the old US embassy.

In the Globe & Mail today:

The perfect martini

“James Bond insists on his being shaken, but scientists claim preparing the perfect vodka martini requires stirring it with a wooden spoon,” The Daily Telegraph reports.  “Rather than mixing the secret agent’s favourite tipple with a long metal cocktail spoon – or risk bruising the alcohol by shaking it over ice – experts claim a thin piece of wood is the best tool for the job.  The revelation comes in the science magazine New Scientist, which asked its academic readers for the optimum way to serve the drink.  The magazine concluded that metal spoons warm up a drink too much because metal is a good heat conductor. …It is believed that the original Ian Fleming books called for Bond’s martini to be shaken, not stirred because vodka was originally made from potatoes, which left an oily after-taste if not shaken vigorously.”

photos of the day

January 31, 2012

A vendor arranges pineapple-shaped lanterns for sale ahead of the Lantern Festival at the Confucius Temple in Nanjing, Jiangsu province. The festival marks the last day of the Chinese Lunar New Year celebrations and falls on February 6 this year.

Leo Lang/Reuters

A worker picks out roses in preparation for the upcoming Valentine’s Day, at a farm in Cajica. A troubled global economy and bad weather has some growers in Colombia worried about this year’s crop. Colombia exports 450 million flowers for Valentine’s Day, and flower farmers say that day alone accounts for 12 percent of their annual income.

John Vizcaino/Reuters

Market Closes for January 31^ST, 2012

Market Commentary:

Canada

By Matt Walcoff

Jan. 31 (Bloomberg) — Canadian stocks rose, completing a monthly gain, as raw-materials producers finished their biggest advance in a month since August 2010.

Metro Inc., Canada’s third-largest grocer, rose 3 percent after its first-quarter earnings beat all nine estimates in a Bloomberg survey. Oil-sands developer BlackPearl Resources Inc. plunged 9.6 percent after saying it missed its year-end production goal. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, dropped 1 percent after an analyst at Goldman Sachs Group Inc. cut her rating on the stock.

The S&P/TSX Composite Index increased 15.73 points, or 0.1 percent, to 12,452.15, extending the monthly climb to 4.2 percent.

“We’ve had some fairly good reaffirmation that the U.S. economy is on track,” Greg Taylor, a money manager at Aurion Capital Management in Toronto, said in a note to clients. The firm oversees about C$5.5 billion ($5.5 billion). “It also feels like the European headlines are more in the background. A bit of the risk-on trade is back.”

The index rose for the second month in the last 11. Mining companies gained on economic data showing a stronger U.S. economy and the U.S. Federal Reserve’s plan to keep interest rates at historical lows until at least late 2014. The S&P/TSX slumped 11 percent last year as the European debt crisis led to concern global growth would slow and demand for raw materials would decrease. Resources companies make up 48 percent of Canadian stocks by market value, according to Bloomberg data.

S&P/TSX consumer-staples companies advanced the most in two months after Metro reported first-quarter earnings that beat the average analyst estimate in a Bloomberg survey by 4.9 percent and boosted its dividend.

Metro gained 3 percent to C$54.74. Viterra Inc., Canada’s largest grain handler, advanced 3.9 percent to C$10.79 as Chicago Board of Trade wheat futures climbed to the highest since September on drought conditions in the central U.S.

Alimentation Couche Tard Inc., the owner of Mac’s and Circle K convenience stores, increased 2.9 percent to C$30.45 after Keith E. Howlett, an analyst at Desjardins Securities, began coverage of the company with a “buy” rating.’’

Imperial Oil Ltd., Canada’s second-largest oil company by revenue, rose 2 percent to C$47.78 after its fourth-quarter profit surpassed the average estimate of analysts in a Bloomberg survey by 11 percent, excluding certain items.

BlackPearl Resources tumbled 9.6 percent to C$4.80 after saying 2011 output averaged more than 9,500 barrels a day, compared with its goal of 11,000 barrels a day. Mark J. Friesen, an analyst at Royal Bank, cut his rating on the shares to “sector perform” from “outperform.”

Mart Resources Inc., which produces oil and gas in Nigeria, sank 19 percent, the most since December 2009, to 87 Canadian cents after saying capacity constraints at an export terminal limited production in December and January.

Potash Corp. lost 1 percent to C$46.98 after Lindsay Drucker Mann, an analyst at Goldman Sachs, reduced her rating on the shares to “neutral” from “buy.” A possible reduction in Indian fertilizer subsidies may reduce consumption, she wrote in a note to clients.

Uranium One Inc., a mining company controlled by Moscow- based ARMZ Uranium Holding, slumped 6.2 percent to C$2.57.

Uranium-oxide concentrate for immediate delivery fell 1 percent in the week ending yesterday, Roswell, Georgia-based Ux Consulting Co. said in a report.

Papermaker Fortress Paper Ltd. surged 16 percent, the most since March 2010, to C$39.42 after agreeing to buy and upgrade a mill in Quebec. The purchase is likely to provide a “long overdue catalyst” for the stock, Richard Kelertas, an analyst at Dundee Securities, said in a note to clients.

Westport Innovations Inc., which develops natural-gas engine technologies, jumped 9.3 percent to a 10-year high of C$41.64. The shares soared 23 percent in January as natural gas prices plunged 16 percent on the New York Mercantile Exchange and U.S. President Barack Obama promoted the fuel’s use.

US

By Rita Nazareth

Jan. 31 (Bloomberg) — U.S. stocks fell for a fourth day, the longest streak for the Dow Jones Industrial Average since August, as reports showed consumer confidence trailed economists’ projections and business activity cooled.

Stocks pared earlier losses as financial shares rallied.

Morgan Stanley and Goldman Sachs Group Inc. added at least 1.5 percent. Exxon Mobil Corp., the largest energy company by market value, dropped 2.1 percent on lower-than-forecast sales. Archer Daniels Midland Co. tumbled 3.6 percent as the world’s biggest grain processor reported an 89 percent plunge in earnings.

The Standard & Poor’s 500 Index declined 0.1 percent to 1,312.41 at 4 p.m. New York time. The benchmark gauge fell as much as 0.5 percent and rose 0.6 percent earlier today. The Dow retreated 20.81 points, or 0.2 percent, to 12,632.91.

“People are on the fence with respect to whether we accelerate in economic terms or slow down again,” John Carey, a Boston-based money manager at Pioneer Investments, said in a telephone interview. The firm oversees about $220 billion.

“We’d like to see better economic growth for sure.”

Stocks erased early gains as reports showed that consumer confidence unexpectedly dropped in January and a gauge of business activity fell, underscoring forecasts that the U.S. economy will cool after expanding at the fastest pace since the second quarter 2010. Earlier gains were triggered after most countries in Europe agreed to tighter budget controls and Greece made progress on debt talks.

Today’s decline trimmed the S&P 500’s monthly rally to 4.4 percent. The index still capped the best January gain in 15 years amid the Federal Reserve’s plans to keep interest rates low through at least late 2014 and better-than-estimated earnings. Of the 192 S&P 500 companies that reported results since Jan. 9, 129 posted per-share earnings that beat projections, Bloomberg data show.

“We’re moving closer to relief from the European problem becoming one of catastrophe,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. “The market is recognizing that European officials are working towards solutions. As more of that fades, what takes prominence is the fact that the corporate picture remains pretty decent.”

Exxon Mobil dropped 2.1 percent, the biggest decline in the Dow, to $83.74. Revenue rose 16 percent to $121.6 billion during the quarter, less than the $124.4 billion average of five analysts’ estimates compiled by Bloomberg.

ADM sank 3.6 percent to $28.63. The company, led by Chairman and Chief Executive Officer Patricia Woertz, has missed analysts’ estimates for three straight quarters. Operating profit at the agricultural-services unit, the company’s largest segment by revenue in fiscal 2011, fell 63 percent to $158 million after U.S. grain exports declined because of a smaller domestic crop and “adequate” global supplies, ADM said.

RadioShack Corp. tumbled 30 percent to $7.18 after the consumer-electronics retailer suspended share repurchases and reported preliminary fourth-quarter earnings that trailed analysts’ estimates.

The S&P 500 Diversified Financials Index rose 0.8 percent, the most among 24 groups. Morgan Stanley advanced 2.5 percent to $18.65. Goldman Sachs climbed 1.6 percent to $111.47.

U.S. financial stocks are hardly a bargain as they wrap up their best start to a year since the 1990s, according to Brian Belski, Oppenheimer & Co.’s chief investment strategist.

“Longer-term investors should not be fooled by what appear to be attractive valuations for financials,” Belski wrote in a Jan. 27 report. Anyone looking ahead three to five years ought to invest less money in these stocks than their S&P 500 weight would suggest, he added. They account for about 14 percent of the index’s value.

The financial index was valued at 12.4 times earnings yesterday. The ratio was about twice as high two years ago, according to data compiled by Bloomberg.

“Most of these companies operate in a ‘whole new world’ of increased scrutiny and regulation,” wrote Belski, based in New York. He added that more restrictive capital requirements, imposed as part of that shift, will hurt profitability.

This month’s gains in the shares resulted largely from buying to capitalize on a rising stock market, he wrote. S&P’s industry indicator swung by an average of 1.4 percent for every 1 percent move in the S&P 500 during the past 12 months, based on Bloomberg’s data. This reading, known as beta, was higher for financials than for any of the index’s nine other main industry groups.

U.S. Steel Corp. gained 5.1 percent to $30.19. The country’s largest producer of the metal by volume forecast improved prices and shipments at its biggest division.

Have a wonderful evening everyone.

Be magnificent!

Order is the very essence of the universe-

the order of birth and death and so on.  It is only man that seems to live in disorder, confusion.

He has lived that way since the world began.

-Krishnamurti, 1895-1986

As ever,

Carolann

I get it now; I didn’t get it then. That life is about losing

and about doing it as gracefully as possible… and

enjoying everything in between.

-Mia Farrow, 1945-

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

Senior Vice-President &

Senior Investment Advisor