January 25th, 2012 Newsletter

Dear Friends,

Tangents:

On this day, January 25^th, in 1915, Alexander Graham Bell made the first transcontinental telephone call from New York to San Francisco.

The AT&T long-distance telegraph network begun in 1885 finally reached from New York to San Francisco, allowing Alexander Graham Bell in New York and Thomas J. Watson in San Francisco to participate in the first transcontinental telephone call.

“Four locations participated in the first call. Alexander Graham Bell, inventor of the telephone and co-founder of AT&T, led a group of dignitaries in New York. His one-time assistant Thomas Watson, led a group in San Francisco. AT&T President Theodore Vail spoke from Jekyll Island, Ga. And U.S. President Woodrow Wilson spoke from the White House.

At one point during the call, someone asked Professor Bell if he would repeat the first words he ever said over the telephone. He obliged, picking up the phone and repeating ‘Mr. Watson, come here, I want you.’ To which Watson, in San Francisco, replied, ‘It would take me a week now.’ ”

Today:

“E-mail has turned office workers into no more than lab rats desperately craving ‘pellets of social interaction,’ a leading expert has claimed.  Increasing levels of information overload from computer and smart phone screens cause a ‘bottleneck’ in the brain and prevent any deep thought, according to Nicholas Carr, former executive editor of the Harvard Business Review.…The natural impulses that helped early humans find food and avoid predators are causing us to regress to a state no more sophisticated than a rat in a laboratory, he said….For each bit of new information we find our brain releases a dose of dopamine, a pleasure-inducing chemical which has been linked to addictive behavior….’What makes digital messages all the more compelling is their uncertainty.  There’s always the possibility that something important is waiting for us in our inbox,’ Mr. Carr told Esquire magazine.” –fromThe Daily Telegraph

photos of the day

January 25, 2012

A woman walks in a park with a baby in a pram in the southern Russian city of Stavropol.

Eduard Korniyenko/Reuters

Kashmiri boats man paddles his Shikara or traditional gondola in the Dal Lake, on the outskirts of Srinagar, Indian.

Dar Yasin/AP

Market Closes for January 25th, 2012

Market Commentary:

Canada

By Matt Walcoff

Jan. 25 (Bloomberg) — Canadian stocks rose the most in three weeks, led by gold producers, after the U.S. Federal Reserve said it will keep its benchmark interest rate at “exceptionally low levels” until at least late 2014.

Barrick Gold Corp., the world’s largest producer of the metal, increased 5.8 percent as the metal advanced. Royal Bank of Canada, the country’s biggest lender by assets, fell 1 percent after the European Central Bank was said to oppose taking losses on its Greek debt holdings. Encana Corp., Canada’s largest natural gas producer, gained 10 percent as the fuel rose for a fourth day.

The S&P/TSX Composite Index climbed 143.97 points, or 1.2 percent, to a four-month high of 12,539.21.

“Gold is always an alternative to the paper currency, and when you’re going to debase and devalue your own currency by cheap, cheap money, all of a sudden people look for another store of value,” Tony Demarin, chief investment officer at BCV Asset Management in Winnipeg, Manitoba, said in a telephone interview. The firm oversees C$335 million ($333 million).

The S&P/TSX dropped 1 percent yesterday, its biggest decline this month, as talks to determine how much in losses holders of Greek debt will accept reached a stalemate. The index gained 4.7 percent this month through Jan. 23 as improving employment and manufacturing data in the U.S. overshadowed the European debt crisis.

The U.S. central bank extended its pledge to keep rates low from its previous end of the middle of 2013, citing “low rates of resource utilization and a subdued outlook for inflation.”

The U.S. Dollar Index fell and precious metals rallied after the Fed released its statement. The S&P/TSX Gold Index surged the most since Nov. 30.

Barrick gained 5.8 percent, the most since December 2009, to C$48.60. Goldcorp Inc., the world’s second-largest producer of the metal by market value, advanced 6.4 percent to C$47.71.

Tahoe Resources Inc., which explores for silver in Guatemala, soared 13 percent to C$21.49. Iamgold Corp., which mines in West Africa, South America and Quebec, jumped 9.6 percent, the most since May 2010, to C$17.04.

The eight lenders in the S&P/TSX each dropped after two people familiar with the stance of the ECB’s Governing Council said the central bank is opposed to joining private-sector investors in accepting losses on Greek debt. The people declined to be identified because the matter is confidential.

Royal Bank lost 1 percent to C$53.23. TD, its biggest domestic rival, dropped 0.7 percent to C$78.73. Canadian Imperial Bank of Commerce, the country’s fifth-largest lender by assets, slipped 1 percent to C$76.88.

Mutual-fund company AGF Management Ltd. slumped 4.4 percent to C$16.15 after reporting fourth-quarter earnings that trailed the average analyst in a Bloomberg survey by 23 percent.

Natural gas futures on the New York Mercantile Exchange extended their four-day gain to 18 percent. The fuel has rebounded from the lowest price since 2002 as Chesapeake Energy Corp., the second-largest U.S. producer, said it will cut production and reduce spending Jan. 23.

Encana Corp., the country’s largest natural gas producer, rallied 10 percent, the most since November 2008, to C$20.75.

Enbridge Inc., Canada’s biggest pipeline company, climbed 1.4 percent to C$37.21. Tourmaline Oil Corp., which produces oil and gas in Canada, advanced 6.8 percent to C$24.95 after increasing its production forecast for 2012.

BCE Inc., Canada’s largest phone company, decreased 1.5 percent to C$40.95 after Drew McReynolds, an analyst at Royal Bank, cut his rating on the stock to “sector perform” from “outperform.” Some other telecommunications and media companies in Canada cost less relative to earnings and will grow as fast or faster than BCE, McReynolds said in a note to clients.

BlackBerry maker Research In Motion Ltd. rebounded 8.1 percent to C$16.40 on speculation its 15 percent plunge in the previous three days was overdone. Chief Executive Officer Thorsten Heins, who replaced Jim Balsillie and Mike Lazaridis Jan. 22, said the following day he plans no “drastic change”

at the Waterloo, Ontario-based company.

US

By Rita Nazareth

Jan. 25 (Bloomberg) — U.S. stocks rose, sending the Dow Jones Industrial Average to the highest level since May, as the Federal Reserve signaled low rates through at least late 2014 and didn’t rule out bond purchases to bolster the economy.

A measure of commodity shares in the Standard & Poor’s 500 Index added 1.6 percent after gold rallied as record-low rates may boost its appeal as a hedge against inflation. Banks had the biggest drop in the S&P 500 among 24 groups as the industry may face pressure on margins from the Fed’s policy on rates. Apple Inc. climbed 6.2 percent to an all-time high as profit more than doubled. Textron Inc., the maker of Cessna planes, surged 15 percent after forecasting higher-than-estimated earnings.

The S&P 500 added 0.9 percent to 1,326.06 at 4 p.m. New York time, after dropping 0.5 percent earlier. The Dow gained

83.10 points, or 0.7 percent, to 12,758.85. The Nasdaq-100 Index rose 1.3 percent to 2,465.66, the highest since 2001.

“The Fed is saying that money will stay easy and the cost of money will stay low,” Madelynn Matlock, who helps oversee about $14.5 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “The ability for businesses to find the money they need to grow and for consumers to find the money they need to buy things is going to be easier. That makes the growth path a little simpler.”

Benchmark gauges reversed losses as the Fed extended its previous pledge to keep rates low at least until the middle of

2013 as more than two years of economic growth have failed to push unemployment below 8.5 percent. Fed Chairman Ben S.

Bernanke said central bankers are still debating additional asset purchases.

Investors also watched earnings reports. Of the 112 S&P 500 companies that reported results since Jan. 9, 74 posted per- share earnings that beat projections, according to data compiled by Bloomberg. Earnings probably grew 3.4 percent for S&P 500 companies in the fourth quarter, the data show. The projection has fallen from 6.2 percent at the end of last year.

The Morgan Stanley Cyclical Index of companies most- dependent on economic growth added 1 percent. The Dow Jones Transportation Average advanced 1.5 percent. All 10 groups in the S&P 500 gained.

Gold producers rallied as the metal climbed to a six-week high. Newmont Mining Corp., the largest U.S. gold producer, jumped 4.8 percent to $60.25. Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, climbed 4.8 percent to $46.08.

Apple rallied 6.2 percent, the most since May 2010, to $446.66. The company sold 37 million iPhones in the period ended Dec. 31, with customers snapping up the new 4S model that went on sale in October, a week after the death of co-founder Steve Jobs. Record revenue vaulted Apple ahead of Hewlett-Packard Co.

as the world’s biggest computer maker by sales and quelled concern that the company’s allure may dim as it embarks on a new era with Chief Executive Officer Tim Cook at the helm.

Textron surged 15 percent, the most in the S&P 500, to $24.76. Chief Executive Officer Scott Donnelly is working to leverage the company’s businesses with measures such as having Cessna and Bell share overseas service centers and sales forces.

Textron is winding down its finance unit, which struggled during the recession.

The Bloomberg U.S. Airlines Index of 11 companies jumped

4.5 percent. Delta Air Lines Inc. and US Airways Group Inc.

reported fourth-quarter profits that topped analysts’

projections. Delta Air climbed 6.2 percent to $9.96. US Airways rallied 17 percent to $7.52.

Illumina Inc. surged 46 percent to $55.15. Roche Holding AG offered $5.7 billion in a hostile bid for Illumina to bolster sales of gene-mapping equipment and services. Roche proposed paying $44.50 a share, 18 percent more than yesterday’s close.

Walter Energy Inc. gained 3.9 percent to $70.14. The company may finally lure buyers willing to bet on a recovery in coal prices with the industry’s cheapest stock. After losing almost half its value in the past year, the producer of steelmaking coal sold for 9.3 times earnings this week, according to data compiled by Bloomberg. That was less than any North American coal-mining company with $1 billion in market capitalization.

Walter Energy, which bought Western Coal Corp. for $5.3 billion in April, is an attractive target because it produces high-grade steelmaking coal, Brean Murray Carret & Co. said. A buyer could spend double Walter Energy’s closing price of $67.54 a share yesterday and still get the company for less relative to earnings than any coal takeover in the past year, data compiled by Bloomberg show.

Banks had the biggest decline in the S&P 500 among 24 industries, falling 0.3 percent. Bank of America Corp. and Citigroup Inc. are among lenders that may find it harder to boost profits and capital after the Fed’s pledge on low rates.

Bank of America rose 0.8 percent to $7.35. Citigroup added 0.2 percent to $29.96.

“This is a very dovish Fed,” David Kelly, who helps oversee $394 billion as chief market strategist for JPMorgan Funds in New York, said in a telephone interview. “It’s an attempt to push down long-term interest rates. They are pushing the rates down to a level where consumers should find them very attractive, but banks will find them very unattractive.”

Corning Inc. tumbled 11 percent, the biggest decline in the S&P 500, to $13.05. The largest maker of glass for flat-panel televisions said glass prices contributed to a 53 percent drop in fourth-quarter profit and are still sinking.

Xerox Corp. slumped 9.9 percent to $7.81. The provider of printers and business services gave earnings forecasts that trailed some analysts’ estimates as Europe weakens.

WellPoint Inc. decreased 4.8 percent to $66.10. The largest U.S. health insurer by enrollment forecast 2012 earnings and reported fourth-quarter profit that were less than analyst estimates on higher medical costs.

“It’s going to be a mediocre earnings season,” Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc., said in a phone interview. His firm oversees $3.5 trillion as the world’s largest asset manager. “We’re not going to see robust growth this year and this is being reflected in corporate outlooks.”

Have a wonderful evening everyone.

Be magnificent!

At our first meeting with beauty, we see it in its gaudy faded finery jarring us with its garish tones,

its frills and flounces, even its deformed shapes.  But when we get to know it better,

the apparent discord reveals itself to us as rhythmic modulation.

At first, we isolate beauty from all that is around it; we detach it from the rest;

but in the end, we understand its harmony with the whole.

-Rabindranath Tagore, 1861-1901

As ever,

Carolann

Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the

big choices in life.  Because almost everything, all external expectations, all pride, all fear of embarrassment

or failure – these things just fall away in the face of death, leaving only what is truly important.

Remembering that you are going to die is the best way I know to avoid the trap of thinking you have

something to lose.  You are already naked.  There is no reason not to follow your heart.

-Steve Jobs, 1955-2011, Stanford commencement speech, June 2005

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

Senior Vice-President &

Senior Investment Advisor