July 11, 2012 Newsletter

Dear Friends,

Tangents:

I read this last night in the most recent edition of The Economist and thought it might be of interest to you too:

The Universe is Stitched Together by Invisible Threads

The Higgs boson is not the only curious form of matter whose nature has been probed this week.  A paper by Jörg Dietrich, of the University of Michigan, and his colleagues, just published by Nature, illuminates – if that is the appropriate word – a substance known as dark matter.

Dark matter, the theory goes, is composed of particles that cannot interact with electromagnetic force, and thus have no dealings with light.  But they do interact gravitationally.  In fact, it is the gravitational pull of dark matter that stops galaxies flying apart as they rotate.  Moreover, calculations suggest there is five times as much dark matter in the universe as there is ordinary matter.  But what is rarely observed is dark matter by itself.  Since both the dark and the visible forms of matter are affected by gravity, they tend to cluster together.

Models of the evolution of the universe suggest, though, that this clustering is secondary.  The young universe was first filled with a lattice of threads of dark matter, then the visible stuff gathered around these threads and formed the galaxies familiar today.

What Dr. Dietrich and his colleagues have done is to detect the part of a thread that runs between two groups of galaxies called Abell 222 and Abell 223.  They were able to do so by looking at the distorting effect the thread’s gravity has on light emitted by galaxies behind it.  Measuring these distortions allowed the researchers to work out both the thread’s shape and its mass (about 60 trillion times the mass of the sun).  Meanwhile, down on Earth, researchers at CERN, the particle physics laboratory near Geneva that has just found Higgs, will now turn their attention to making individual particles of dark matter.  Thus do the largest and the smallest scales of science complement each other.

And on this day in…

1656 – First Quaker colonists land at Boston
1896 – Wilfred Laurier sworn in as Canada’s 7th Prime Minister

1914 – Babe Ruth makes MLB debut
1944 – Hitler is paid a visit by his would-be assassin
1979 – Skylab crashes to Earth
1990 – Oka (Kanesetake) Quebec – Corporal Marcel Lemay, a 31 year old constable, killed during gun battle as 100 members of La Sûreté du Québec attack Mohawk barricades, put up in March to block expansion of a golf course on land they claim was never signed away.

I believe totally in a Capitalist System, I only wish that someone would try it. – Frank Lloyd Wright

photos of the day July 11, 2012

Women look at a metal structure filled with fire pots as World Heritage site Stonehenge is illuminated during an elemental Fire Garden display, which is part of the London 2012 Festival, in Salisbury, southern England, on Tuesday.

Kieran Doherty/Reuters

Visitors take photographs under bamboo wind chimes, which are part of an installation by New Zealand artist Tiffany Singh titled ‘Knock On The Sky Listen To The Sound, 2011,’ at the 18th Biennale of Sydney on Cockatoo Island in Sydney Harbour, Australia.

Tim Wimborne/Reuters

Market Closes for July 11, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Dmitrieva

July 11 (Bloomberg) — Canadian stocks rose, snapping a four-day slump, as rising crude overshadowed a decline in mining companies after Goldcorp Inc. cut its gold-production forecast.

Cenovus Energy Inc. and Suncor Energy Inc. rose more than 1.8 percent as energy stocks led gains in the Standard & Poor’s/TSX Composite Index. Mining stocks fell the most as Goldcorp, the world’s second-biggest producer of the metal, retreated 10 percent, the most in more than three years.

The S&P/TSX advanced 32.42 points, or 0.3 percent, to 11,544.64. On the index, 140 members advanced and 97 declined.

The gauge lost 3.4 percent over the previous four days and is down the same amount for 2012.

“The key driver is that oil is up,” Jeffrey Burchell at Toronto-based Aston Hill Financial Inc., which manages C$5.5 billion, said in a phone interview. “When you get a stock or commodity, and in this case oil, reacting the way you’d expect it to react to fundamental news, that means the market is working properly. It’s a good sign to see that.”

Gold futures dropped for a second day. Goldcorp slipped 10 percent to C$33.80 after reporting reduced output in Mexico and Canada. Production for the year will be 2.35 million to 2.45 million ounces, compared with a previous forecast of 2.6 million ounces, the Vancouver-based company said yesterday.

Barrick Gold Corp., the world’s largest gold miner, dropped 2 percent to C$35.66. Centerra Gold Inc. advanced 3.3 percent to C$7.46.

Crude prices rebounded from the lowest close in more than a week, rising as much as 3.1 percent as the U.S. Energy Department reported that supplies dropped and refinery use increased. Cenovus gained 3.4 percent to C$32.64. Suncor Energy, the nation’s largest oil company, climbed 1.9 percent to C$29.25. Canadian Natural Resources Ltd. advanced 2.4 percent to C$26.46.

Niko Resources Ltd., the Calgary-based oil and gas explorer, jumped 14 percent to C$14.05 after the company gave an update to an offshore exploration well in Indonesia.

The benchmark index briefly erased gains after investors weighed the release of minutes on the U.S. Federal Reserve’s latest policy meeting for evidence the central bank may be closer to additional stimulus actions. The minutes showed that a few policy makers said the central bank will probably need to take further action to boost the labor market and meet its inflation target. The U.S. is Canada’s largest trading partner.

“We’re a smaller market that follows global markets,” Wes Mills, who is part of a team that manages C$90 billion at Toronto-based Scotia Asset Management, said in a phone interview. “How the Federal Open Market Committee sees the economy going, it’ll have a big impact on sentiment in Toronto.”

US

By Lu Wang and Nikolaj Gammeltoft

July 11 (Bloomberg) — The Standard & Poor’s 500 Index erased losses in the final hour of trading as investors weighed the Federal Reserve’s latest policy minutes for evidence that the central bank may be closer to additional stimulus actions.

Bank of America Corp. and JPMorgan Chase & Co. added more than 1 percent as financial companies rallied. Exxon Mobil Corp. rose 1.5 percent as oil rebounded from the lowest close in more than a week. DuPont Co. and Google Inc. fell at least 1.1 percent after analysts said the companies may miss estimates.

Best Buy Co. sank 8.4 percent after electronics retailer Hhgregg Inc. cut its forecasts.

The S&P 500 fell less than 0.1 percent to 1,341.45 at 4 p.m. New York time, after sinking as much as 0.6 percent earlier. The benchmark gauge has retreated 2.4 percent over five days amid concern about corporate profits. The Dow Jones Industrial Average lost 48.59 points, or 0.4 percent, to 12,604.53. Volume for exchange-listed stocks in the U.S. was 6 billion shares, 9.5 percent below the three-month average.

“You didn’t see any kind of commitment one way or another from the Fed in the minutes from last time,” Robert Pavlik, who helps manage $1.4 billion as chief market strategist at Banyan Partners LLC in New York, said in a phone interview. “You have to be taking a cautious approach to this market here, especially heading into the earnings season. I’m optimistic, but I’m not fully committed to the possibility of a terrific earnings season.”

Stocks initially turned lower as minutes from the Fed’s June meeting showed two participants believed more bond purchases are appropriate, while two others said they would be warranted in the absence of “satisfactory progress” in cutting unemployment or if downside risks increase. Equities recovered as the S&P 500 briefly dipped below its average price over the past 50 days and analysts dissected the minutes, with Jefferies & Co. economist Ward McCarthy saying there’s a “reasonable probability” a third round of quantitative easing is announced in coming months.

“Between the Fed’s outlook and the technical support we should find at the moving average, there is generally going to be a lift and that’s exactly what you saw materializing,” said Peter Kenny, managing director in institutional sales at Knight Capital Group Inc. in Jersey City, New Jersey.

The Fed minutes come amid growing concern that the U.S. economy is faltering and corporate profits are shrinking.

Goldman Sachs Group Inc. cut its estimate for second-quarter gross-domestic product growth twice today, lowering it to 1.3 percent after data on wholesale inventories and the trade deficit dimmed prospects for the economy. The S&P 500 slumped yesterday amid lower sales estimates at Applied Materials Inc. and Cummins Inc.

Profits for S&P 500 companies fell 1.8 percent in the second quarter, according to analyst estimates compiled by Bloomberg. That would be the first decline since 2009, even as revenue is forecast to rise 2.5 percent. Analysts project profit growth of 3.9 percent and 15 percent, respectively, in the third and fourth quarters of 2012.

“You’re seeing a weakening demand picture, at least in the near term, starting to take root,” Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said in a phone interview. His firm oversees $363.6 billion. “The key calibration is whether the market reaches the conclusion that weakness is broad-based, but it’s shallow and short in duration, or it’s going to be deeper and longer in duration.

It’s too soon to make that call. I think that’s the question upon us over the next two weeks.”

Energy companies climbed the most among 10 S&P 500 industry groups today, rallying 1.4 percent, as oil rebounded from the lowest close in more than a week. Exxon rose 1.5 percent to $84.38, while Chevron Corp. gained 0.9 percent to $104.85.

Financial companies advanced. Bank of America rallied 2 percent to $7.63. JPMorgan climbed 1 percent to $34.59.

JPMorgan, the biggest U.S. bank by assets, kicks off the industry’s second-quarter earnings season on July 13 and may report a profit of 76 cents a share, excluding accounting adjustments, according to the average estimate of analysts in a Bloomberg survey.

Abercrombie & Fitch Co. had the biggest jump in the S&P 500, climbing 4.1 percent to $34.12. The teen-clothing retailer may substantially increase its buyback authorization from the current 12.9 million shares, the New York Post reported, citing a person it didn’t identify.

Wendy’s Co. added 2.4 percent to $4.69. The hamburger chain was raised to outperform from neutral at Nick Setyan, an analyst with Wedbush Securities Inc. The 12-month price target is $5.50.

Mead Johnson Nutrition Co. gained 4 percent to $78.28. The maker of the world’s best-selling Enfamil baby formula said China’s Hunan province apologized for “erroneous” reports claiming formula sold by the company contained a banned flavor additive.

DuPont dropped 1.1 percent to $47.14. Cooley May, an analyst with Macquarie Group Ltd., cut the stock’s rating to neutral from outperform, citing concern over profit growth in the company’s chemical and industrial businesses.

Google slid 1.8 percent to $571.19. The owner of the world’s most popular search engine may miss analysts’ second- quarter sales estimates because of a fluctuation in foreign exchange rates, according to Carlos Kirjner, an analyst with Sanford C. Bernstein & Co.

Best Buy, the largest U.S. consumer-electronics retailer, declined 8.4 percent to $19.37. Hhgregg plunged 36 percent, the most since its initial public offering in 2007, to $7.34. The Indianapolis-based appliance and electronics retailer cut its full-year forecast amid sinking television sales.

Goldcorp Inc. tumbled 9.7 percent to $33.17. The second- largest producer of the precious metal by market value cut its full-year 2012 gold production forecast by as much as 9.6 percent after delays at a Canadian mine and a water shortage at a Mexican project.

Waste Management Inc. fell 4.5 percent to $31.59. The trash hauler was cut to underweight, the equivalent of sell, from equalweight at Morgan Stanley.

Blackstone Group LP’s Byron Wien said the S&P 500 may climb past 1,400 this year. Wien, vice chairman of the advisory services unit of the world’s biggest private-equity firm, recommended buying Apple Inc. shares and said the iPad maker is the “most innovative” U.S. company. He said he’s also bullish on gold because the metal will retain its value should global growth slow.

“When everybody is so negative it’s usually a good time to take the other side,” he said today in a television interview on “Bloomberg Surveillance” with Tom Keene. “I think we can do better than 1,400.”

An advance to 1,400 would require a 4.4 percent increase in the U.S. equity benchmark from yesterday’s close. The S&P 500 has gained 6.7 percent this year. Apple shares have surged almost 50 percent this year.

Have a wonderful evening everyone.

Be magnificent!

In Sanskrit, one calls the bird twice born.

And this name is also given to the man who submits for at least twelve years

to the discipline of mastering his self and the noble thought, who emerges from it with simple needs,

with a pure heart, and ready to take upon himself all the responsibilities of life

in a broad and disinterested spirit.  One estimates that this man is born again from the blind envelopment

of the ego to the freedom of the life of the soul,

that he has entered into lively connection with his environment,

that he has become one with the Whole.

Rabindranath Tagore,1861-1901

As ever,

Carolann

Be honest, and remember that honesty counts for nothing unless back of it lie courage and efficiency.

-Theodore Roosevelt, 1858-1919

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7