July 19, 2012 Newsletter

Dear Friends,

Tangents:

SERVED COLD

Facebook friends the sub-Arctic with a gargantuan computer facility:

With 900 million members worldwide and growing, Facebook is building its first European  data storage facility – 60 miles south of the Arctic Circle in Lulea, Sweden.  The reason: natural air conditioning.  Some Internet “server farms” spend as much to cool the machines as power them.

Facebook’s Nordic operation – which will eventually expand to three 290,000-square-foot buildings, each housing tens of thousands of servers – will save millions of dollars on electricity.  Plus, the buildings are designed to capture some heat from the servers and use it to warm employee offices.  The estimated cost of building the facilities is more than $700 million.  Sweden hopes that construction subsidies and other incentives, including the promise of clean hydropower, will attract more digital companies to a region now being marketed as the “Node Pole.”

Tour  the sub-Arctic construction site at Smithsonian.com/fbserver.

-from the Smithsonian

And on this day in …

1799 – Rosetta Stone found, provides key to translation of Hieroglyphics into Greek.

1834 – Edgar Degas was born.

1848 – Women’s Rights Convention, Seneca Falls, NY.

1865 – Charles Mayo, surgeon, was born.

1879 – Doc Holliday kills for the first time.
1942 – German U-boats are withdrawn from positions of the U.S. Atlantic coast due to American Anti Sub Countermeasures.

1943 – America bombs Rome – More than 150 B-17 and 112 B-24 bombers are used in the attack.

The whole point of being alive is to evolve into the complete person you were intended to be.  -Oprah Winfrey

photos of the day July 19, 2012

An exercise rider rides a horse during morning workouts at Saratoga Race Course in Saratoga Springs, N.Y.

Mike Groll/AP

A butterfly collects nectar from a Jasmine flower in Karachi, Pakistan.

Shakil Adil/AP

Market Closes for July 19, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Dmitrieva

July 19 (Bloomberg) — Canadian stocks gained for a fifth day as oil rallied to the highest level since May and Canadian wholesale sales numbers were better than forecast.

Energy and raw materials stocks advanced the most among 10 industries in the Standard & Poor’s/TSX Composite Index. Suncor Energy Inc. and Imperial Oil Ltd., the nation’s two largest energy providers, rallied at least 1.3 percent. Goldcorp Inc.

added 2.3 percent as the metal gained for the first time this week. First Quantum Minerals Ltd. jumped 10 percent after Jefferies Group Inc. analysts named it a “top pick.”

The S&P/TSX rose 86.55 points, or 0.8 percent, to 11,665.70. The index has gained 2.1 percent over five days and has pared its 2012 loss to 2.4 percent.

“Oil and natural gas are the key drivers right now. There is this underlying bullishness in the market,” Jeff Parent, who manages more than C$100 million at Toronto-based Quadrexx Asset Management Inc., said in a phone interview. “The economic fiscal situation is resolving itself, and a lack of bad news means good markets.”

Canadian wholesale sales climbed 0.9 percent to C$49.8 billion, a government report said, higher than the median 0.2 percent prediction based on a Bloomberg survey. The growth was led by purchases of computers and communications equipment, Statistics Canada said from Ottawa.

Crude settled at $92.66 a barrel on the New York Mercantile Exchange, extending advances to a seventh day, on rising concerns that instability in the Middle East may disrupt supplies of about one-third of the world’s oil production.

Israeli Prime Minister Benjamin Netanyahu blamed Lebanon’s Iranian-backed Hezbollah organization for the deaths of Israeli tourists in Bulgaria, while Syrian government forces continued to battle rebels in Damascus.

Suncor, the largest energy provider in the country, rose 1.3 percent to C$30.59. Imperial Oil, the second-largest provider, added 1.7 percent to C$43.82. Canadian Natural Resources Ltd., the fifth-largest provider, advanced 3.2 percent to C$28.98. Trican Well Service Ltd., a pressure-pumping company that works with oil and natural-gas drillers, climbed 8.4 percent to C$11.49.

First Quantum Minerals jumped 10 percent to C$18.28, the most since November. HudBay Minerals Inc. added 6.6 percent to C$8.11. Fortune Minerals Ltd., a mineral producer with gold and coal deposits in Canada, gained 11 percent to 59 cents.

Gold advanced 0.6 percent on the Comex to settle at $1,580.40 an ounce, snapping three days of losses, as disappointing U.S. economic data increased speculation the Federal Reserve will add stimulus measures.

Goldcorp Inc. added 2.3 percent to C$33.60. Barrick Gold Corp. rose 1.2 percent to C$35.08. Kinross Gold Corp. advanced 1.1 percent to C$8.07.

US

By Rita Nazareth

July 19 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index to a two-month high, amid better- than-estimated earnings and bets that disappointing economic data will lead the Federal Reserve to add stimulus.

International Business Machines Corp., the biggest computer-services provider, and EBay Inc., the largest Internet marketplace, gained at least 3.7 percent as profits beat forecasts. Walgreen Co. soared 12 percent after renewing a contract with Express Scripts Inc. Morgan Stanley slid 5.3 percent after missing estimates as trading revenue plunged.

Google Inc., owner of the most popular search engine, rose 3.1 percent at 5:34 p.m. New York time as revenue surged 35 percent.

The S&P 500 advanced 0.3 percent to 1,376.51 at 4 p.m. New York time, the highest since May 3. The Dow Jones Industrial Average added 34.66 points, or 0.3 percent, to 12,943.36. The Nasdaq Composite Index gained 0.8 percent to 2,965.90. Volume for exchange-listed stocks in the U.S. was 7 billion shares today, up 4.8 percent from the three-month average.

“We’ve been watching very good earnings, but there were too many disappointing economic reports today,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “There’s some comfort based on the idea that if things get worse, the Fed will do something. We’ll have to wait and see.”

Today’s advance extended a three-day rally in the S&P 500 to 1.7 percent. Earnings have exceeded analyst estimates at about 71 percent of the 108 S&P 500 companies that have reported quarterly results so far, according to data compiled by Bloomberg. Analysts project a 2.1 percent decline in second- quarter profits, the data showed.

Investors also watched economic data. Sales of existing U.S. homes unexpectedly dropped and manufacturing in the Philadelphia region contracted for a third month. Other reports today showed consumer confidence weakened, claims for unemployment benefits rose and an index of leading economic indicators declined more than forecast.

Earlier this week, Federal Reserve Chairman Ben S. Bernanke said policy makers are studying options for further easing that could be deployed in case economic growth remains too feeble to produce a lasting decline in unemployment. The Federal Open Market Committee meets Aug. 1 to continue debating whether further action is needed.

Bets on more stimulus measures and better-than-estimated earnings helped send the Morgan Stanley Cyclical Index of companies most-tied to the economy up 2.7 percent in three days.

Technology companies, which make up about 20 percent of the S&P 500, added 1.4 percent today for the best gain among 10 groups.

IBM climbed 3.8 percent, the most since Jan. 20, to $195.34. IBM, which accounts for more than 11 percent of the Dow, added 54 points to the share price-weighted average.

The company’s decade-long shift to higher-margin software sales helped it overcome a slowdown in technology spending last quarter. IBM aims to get half of its earnings from software by 2015 — a move away from less-profitable hardware and services.

EBay soared 8.6 percent to $43.95, the highest price since 2006. Chief Executive Officer John Donahoe has increased spending on advertising and new technology to expand beyond EBay’s auction roots and let shoppers buy more items in instant sales, similar to those on Amazon.com Inc.’s site.

Google rallied 3.1 percent to $611.15 after the close of regular trading. Including the impact of Motorola Mobility Holdings acquisition, sales were $12.2 billion, compared with $9.03 billion a year earlier. Profit before some costs was $10.12 a share.

Microsoft Corp. also reported results after the close of regular trading. Fourth-quarter unearned revenue, a yardstick of future sales, topped analysts’ estimates. The largest software maker gained 2.4 percent to $31.41 at 5:34 p.m. New York time.

Qualcomm Inc. increased 4.3 percent to $58.44. The largest seller of mobile-phone semiconductors gained after quarterly results showed consumers in emerging markets are trading up to next-generation handsets, lifting profitability.

Textron Inc. rallied 12 percent to $26.50 as earnings beat estimates. The company is considering a bid for part or all of Hawker Beechcraft Inc., the bankrupt business-jet maker in exclusive talks with China’s Superior Aviation Beijing Co.

Capital One Financial Corp. climbed 2.7 percent to $56.37.

The lender that gets more than half of its revenue from credit cards reported results that exceeded some analysts’ estimates.

Walgreen soared 12 percent, the most since 2008, to $34.62.

The largest U.S. drugstore chain renewed a contract to provide Express Scripts customers with prescriptions, ending a dispute that contributed to an 11 percent drop in the retailer’s quarterly profit.

Express Scripts rallied 1.9 percent to $58.76. CVS Caremark Corp. lost 6.5 percent to $45.43.

J.C. Penney Co. jumped 4.8 percent to $20.66. Bill Ackman, the founder of Pershing Square Capital Management LP, reiterated his confidence in Chief Executive Officer Ron Johnson’s turnaround efforts.

Electronic Arts Inc. surged 6.7 percent to $12.27. The second-largest video-game publisher gained after Chief Executive Officer John Riccitiello suggested investors are overlooking the company’s growth potential.

Some of the largest financial institutions declined today.

Morgan Stanley slumped 5.3 percent to $13.25. The New York-based company reported a 50 percent drop in earnings and said it will cut more jobs as revenue from trading stocks and bonds declined the most among Wall Street banks.

Bank of America Corp. dropped 3.6 percent to $7.26.

Citigroup Inc. lost 1.9 percent to $26.59. JPMorgan Chase & Co. retreated 1.4 percent to $34.46.

Phone shares had the biggest decline among 10 groups in the S&P 500, falling 1.8 percent.

Verizon Communications Inc., the second-largest U.S. phone company, dropped 2.9 percent to $44.54. Second-quarter net income attributable to Verizon rose to $4.29 billion, or 64 cents a share, from $3.6 billion, or 57 cents, a year earlier.

That matched the average estimate of analysts, according to data compiled by Bloomberg.

Johnson Controls Inc. dropped 7.9 percent to $26.07. The largest U.S. auto supplier lowered its forecast for profit for the fourth quarter because of softness in global markets.

UnitedHealth Group Inc. slipped 2.4 percent to $54.99.

Chief Executive Officer Stephen Hemsley said profit margins are being squeezed in its Medicare and Medicaid plans.

Safeway Inc. slid 4.2 percent to $15.80. The second-largest U.S. grocer reported a 17 percent decline in quarterly profit from continuing operations.

Greenhill & Co. retreated 3.5 percent to $36.36. The advisory firm founded by Robert Greenhill reported a 90 percent drop in second-quarter net income.

Millionaires added U.S. stocks more than any other asset in the latest year as average investors fled to bonds, according to a survey by Fidelity Investments.

Twenty percent of the 1,020 households surveyed said they bought individual domestic equities in the 12 months ended in March, the Boston-based mutual fund firm said. Cash ranked second, with 13 percent saying they added to that asset class.

Eleven percent purchased exchange-traded funds, and 10 percent each added individual U.S. bonds or domestic stock funds.

The broader investing public has sought refuge in fixed income since the global credit crisis sent the S&P 500 down 38 percent in 2008, eight years after the meltdown in technology stocks. U.S. equity mutual funds suffered net withdrawals of $130 billion in the 12 months ended March 31, according to Chicago-based research firm Morningstar Inc. Bond funds attracted $191 billion. The S&P 500 gained 9.2 percent this year through yesterday.

“They’re probably ahead of the average investor in how they view opportunities,” Bob Oros, executive vice president in Fidelity’s institutional wealth services group, said of millionaires in an interview. “They’re becoming less and less risk-averse.”

Have a wonderful evening everyone.

Be magnificent!

If this individuality is wiped away, the creative joy that crystallized it disappears,

even if no material was lost, even if no atom was destroyed.

And if it is lost, it is also a loss for the entire world.  It is particularly precious because it is not universal.

Rabindranath Tagore,1861-1901

As ever,

Carolann

It’s easy to make a buck.  It’s a lot tougher to make a difference.

-Tom Brokaw, 1940-

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