July 26, 2012 Newsletter

Dear Friends,

Tangents:

Last night I read the story on Winnipeg’s Clara Hughes in the most recent edition of Maclean’s where there’s an “Olympic preview” of a few Canadian athletes.  I went to see Clara Hughes in Vancouver last year where she captivated the audience as she spoke about her life and her intention to compete in the Olympics again this year.  She is one of two women to have won medals in Summer and Winter Games.

She is truly inspiring.  This is what she has to say on quitting:

The race began and I wanted to quit.  Less than 50 km into the race I wanted to quit.  I could have quit and everyone would have understood.  The team was fine without me and the race situation we set was more than ideal.  I could pull out and stop the bone-chilling rain from settling into my core and it would be okay.

But it would not be okay with me.  There’s something about quitting that just does not sit well.  I always think about what I would say to a kid at the finish area if they asked, “Why did you stop?”  There are no words to justify this other than broken bones or a catastrophic situation that has myriad forms in bike racing.  Cold rain does not qualify.  Fatigue does not qualify.My teeth still hurt from the chattering.  But I finished the race.

Blog entry, April 2012.

Unless I’m broken in half, I don’t quit.  I don’t want to have it in my brain that there’s a way out.  –Clara Hughes.

And on this day in…

1775 – US Postal Service established.

1894 – Aldous Huxley was born.

1943 – Mick Jagger was born.
1908 – FBI founded.
1931 – Grasshoppers bring ruin to Midwest.
1956 – Egypt nationalizes the Suez Canal.

The opposite of love is not hate, it’s indifference.

The opposite of art is not ugliness, it’s indifference.

The opposite of faith is not heresy, it’s indifference.
And the opposite of life is not death, it’s indifference.
–  Elie Wiesel

photos of the day July 26, 2012

A paperboy distributes copies of the London Evening Standard at a news stand at Stratford railway station, in London.

Patrick Semansky/AP

A sparrow drinks water from the beak of a pelican-shaped fountain at a park in Tokyo.

Shizuo Kambayashi/AP

Market Closes for July 26, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Dmitrieva and Eric Lam

July 26 (Bloomberg) — Canadian stocks advanced the most in three weeks as European Central Bank President Mario Draghi pledged to defend the euro and mining companies rallied on rising gold prices.

Suncor Energy Inc., the nation’s largest oil company, rose 3.2 percent as crude prices rose for a third day. Bank of Nova Scotia, the nation’s third-largest lender, rose 1.3 percent.

Energy and bank stocks contributed the most to the gains in the Standard & Poor’s/TSX Composite Index among 10 industries.

Barrick Gold Corp., the largest producer of the metal, slipped 4.2 percent after profit trailed estimates.

The S&P/TSX rallied 147.24 points, or 1.3 percent, to 11,639.75. The gauge gained the most since July 3 and pared its annual losses to 2.6 percent.

“Draghi is saying the Europeans will go to the mat to protect the euro, which got the futures excited even before the market opened,” David Baskin, president of Baskin Financial Services Inc. in Toronto, which manages about C$450 million ($445 million) in assets, said in a phone interview.

Draghi suggested policy makers may intervene in bond markets as surging yields in Spain and Italy threaten the existence of the 17-nation euro currency bloc. In the U.S., fewer people than forecast filed first-time claims for unemployment insurance payments last week. Orders for durable goods climbed more than projected.

Oil rose 0.5 percent to $89.39 a barrel on the New York Mercantile Exchange. Suncor Energy advanced 3.2 percent to C$31.86. Transcanada Corp. gained 1.4 percent to C$44.80.

Royal Bank of Canada rose 0.9 percent to C$50.85. Bank of Nova Scotia, the nation’s third-largest lender, rose 1.3 percent to C$51.28.

Mining companies reversed early losses as gold rallied, rising 0.4 percent to settle at $1,619.80 an ounce on the Comex.

Goldcorp Inc., the world’s second-largest producer of the metal, gained 4.8 percent to C$36.50.

Barrick fell 4.2 percent to C$33.04 after the company increased estimates for building a mine in South America.

Barrick said it could cost $8 billion to build the Pascua-Lama mine on the border between Chile and Argentina, 50 to 60 percent more than the top end of previous estimates. Second-quarter profit excluding certain items was 78 cents a share, missing the 93-cent average of 22 estimates compiled by Bloomberg.

NovaGold Resources Inc., which has a 50 percent stake in the Alaska-based Donlin Gold project with Barrick, plunged 25 percent to C$4.07 as Barrick said it would not fund the operation “at this time.” NovaGold Chief Executive Officer Greg Lang said the company will move forward with developing the project.

Potash Corp. of Saskatchewan Inc. added 0.6 percent to C$45.54, after plunging as much as 4.5 percent earlier in the day. The world’s largest fertilizer producer forecast lower- than-expected third-quarter profit as scheduled maintenance reduces output and raises costs.

US

By Rita Nazareth

July 26 (Bloomberg) — The Dow Jones Industrial Average capped its biggest advance in almost a month after European Central Bank President Mario Draghi pledged to defend the euro.

3M Co., the maker of Post-It Notes, and Visa Inc., the world’s largest payments network, rose at least 2 percent amid better-than-estimated earnings. PulteGroup Inc., the nation’s largest homebuilder by revenue, surged 18 percent on a jump in orders. Sprint Nextel Corp. and MetroPCS Communications Inc. rallied more than 20 percent after their results. Facebook Inc. fell 9.8 percent at 5:23 p.m. New York time after posting a narrower profit margin as sales and marketing costs surged.

Seven stocks rose for every three falling on U.S. exchanges at 4 p.m. New York time. The Standard & Poor’s 500 Index added 1.7 percent to 1,360.02. It fell 2.8 percent over the previous four days. The Dow gained 211.88 points, or 1.7 percent, to 12,887.93. Volume for exchange-listed stocks in the U.S. was 7.7 billion shares, or 15 percent above the three-month average.

“It is a big deal,” said Liz Ann Sonders, the New York- based chief investment strategist at Charles Schwab Corp., which has $1.8 trillion in client assets. “The markets have been looking for a more definitive acknowledgement by key people like Draghi that they are willing to do what they need to do. We feel that if they want to save the euro, it would involve true QE,” she said, referring to bond buying to stimulate the economy.

Global stocks rallied and the euro rose by the most in almost a month against the dollar after Draghi suggested policy makers may intervene in bond markets as surging yields in Spain and Italy threaten the existence of the 17-nation currency bloc.

The ECB mothballed its bond-buying program in March as it pushed governments to do more to control their deficits.

All 10 industries in the S&P 500 gained today as earnings at about 72 percent of the 271 companies in the measure which have reported second-quarter results exceeded analysts’ projections, according to data compiled by Bloomberg.

The bull market in American equities is intact and the S&P 500 will probably reach 1,380 within the next few months and rally from there, according to Laszlo Birinyi, president of research and money-management firm Birinyi Associates Inc. in Westport, Connecticut. He said concern about second-quarter earnings are overblown and too many investors are worried about a “worst-case” outcome for stocks.

“It will be, as it has been, a case of three steps forward, two backward and trends lasting one day or five hours,” wrote Birinyi in a note to clients. The former Salomon Brothers Inc. equity trader, who described his forecast as “1,380 later this summer, and then higher,” said in the note:

“Despite the frustrations of July with its volatility and curious price activity, we remain optimistic.”

Today’s rally trimmed this month’s drop in the S&P 500 to 0.2 percent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slumped 9.4 percent to 17.53.

Earlier this week, the VIX ended at the highest since June 15 amid concern about a global slowdown and Europe’s debt crisis.

3M rallied 2.1 percent to $90.59. Second-quarter profit beat estimates as gains in efficiency helped trump a drag from foreign-exchange rates. 3M had to overcome a stronger dollar that eroded the value of local-currency sales outside the U.S.

Visa rose 3.7 percent to $126.77. It has benefited from a consumer shift from cash to electronic payments that shows no signs of abating, while parrying threats to its business model.

A measure of homebuilders in S&P indexes climbed 6.4 percent. PulteGroup soared 18 percent, the most since 2008, to $11.86 after the company reported profit that beat analysts’ projections amid a 32 percent jump in orders.

Better-than-estimated earnings also drove a surge in telephone shares. The group rose the most among 10 industries in the S&P 500 today, adding 3 percent.

Sprint Nextel rallied 20 percent, the most since 2009, to $4.05. Sales at the wireless carrier were bolstered by customers spending more on data plans. Even so, its contract subscriber base has shrunk for five years, contributing to 19 straight quarterly losses.

MetroPCS Communications soared 37 percent, the most since it went public in 2007, to $8.59. The pay-as-you-go wireless carrier reported second-quarter earnings that beat estimates amid a decrease in promotional costs.

Akamai Technologies Inc., which helps businesses deliver data more quickly over the Internet, soared 24 percent to $35.04. The company reported profit and revenue that beat estimates, benefiting from the growth of cloud computing.

Western Digital Corp. jumped 21 percent, the most since 2002, to $39.27. The maker of disk drives and networking products reported fiscal fourth-quarter sales and profit that topped analysts’ estimates.

Whole Foods Market Inc. climbed 11 percent, the biggest gain since February 2011, to $94.10. The largest U.S. natural- goods grocer reported third-quarter profit that rose more than analysts estimated and boosted its annual earnings forecast as sales gained at established stores.

Moody’s Corp. rose 11 percent to $40.09 after the world’s second-largest provider of credit ratings reported second- quarter profit that beat analyst estimates.

The New York Times Co. gained 11 percent to $7.80. The newspaper publishing company reported a narrower loss in the second quarter amid a gain in digital subscriptions.

CBS Corp. jumped 4.9 percent to $32.63. The owner of the most-watched U.S. television network will raise its quarterly dividend 20 percent to 12 cents and expand a stock buyback program to as much as $4.7 billion.

Stocks rose even as data showed that a slump in June orders for equipment signals business investment may cool in the second half of the year. Jobless claims fell more than forecast last week, which may have resulted from difficulty adjusting data for seasonal shutdowns of auto factories.

Facebook fell 8.5 percent today ahead of its results as Zynga Inc. missed analysts’ second-quarter revenue and profit estimates. The biggest developer of games played on Facebook’s social network plunged 37 percent to $3.18 today.

After the close of regular trading, Facebook slumped 9.8 percent to $24.22. Marketing and sales expenses jumped more than fourfold. Chief Executive Officer Mark Zuckerberg is spending more to increase the user base, which swelled to 955 million last quarter, and seeks to attract advertisers.

“Ultimately, Facebook is just an advertising platform, and so advertisers go where people’s eyeballs are,” said Michael Pachter, an analyst at Wedbush Securities Inc. Based on the number of users Facebook has amassed, “they’ve built the third- largest country; it just happens to live on the Internet.”

Starbucks Corp., the world’s largest coffee-shop chain, also reported results after the market closed. Third-quarter profit rose less than analysts estimated amid weak demand in Europe. The shares lost 10 percent to $47.15 after the close of regular trading.

Raw material companies had the smallest advance in the S&P 500 among 10 industries today. Dow Chemical Co. slumped 3.6 percent to $29.18. The chemical company reported a bigger drop in earnings and sales than analysts estimated and said the outlook for global demand for the rest of the year is “bleak.”

Cliffs Natural Resources Inc. slid 6.3 percent to $38.57, the lowest since 2009. The largest U.S. iron-ore producer forecast higher costs and lower prices.

Airline stocks fell, giving a benchmark index its longest decline in two years, after United Continental Holdings Inc. posted a quarterly profit that missed analysts’ estimates.

United slid 5.9 percent to $19.20 to pace the Bloomberg U.S. Airlines Index toward an eighth straight daily drop, the longest streak since 2010. The index slumped 0.8 percent today.

The Bloomberg U.S. For-Profit Education Index fell 5.1 percent, to the lowest level since the data started being compiled in 2005, after ITT Educational Services Inc. and Strayer Education Inc. said student enrollment declined in the second quarter. ITT Educational sank 15 percent to $42.78, and Strayer plunged 12 percent to $79.44.

Boston Scientific Corp. slid 6.8 percent to $4.97. The second-biggest U.S. heart device-maker fell as sinking demand for stents and defibrillators led to a fourth consecutive quarterly sales drop.

Cash America International Inc. dropped 19 percent, the most since 2005, to $36.69. The world’s largest pawn shop operator posted results that missed estimates and said third- quarter earnings will be lower than last year.

Anyone buying Apple Inc.’s stock after last quarter’s sales shortfall at the iPhone maker has history on their side, according to Gene Munster, a Piper Jaffray Cos. analyst.

A study shows how Apple performed after four earlier cases of disappointing quarterly revenue, as tracked by Munster. They occurred in fiscal 2006, 2007, 2008 and 2011, with iPhone sales trailing estimates in the latter case. Six months later, the shares were 23 percent higher on average.

“It’s going to be an in-vogue stock again shortly,” Munster said yesterday in a Bloomberg Radio interview. He cited the pending introduction of the next iPhone model, known as the iPhone 5, which he expects in October. “We’re going to see a significant rebound in the December quarter, and that’s probably an understatement,” he said.

Have a wonderful evening everyone.

Be magnificent!

Hold the reins of your mind, as you would hold the reins of a restive horse.

Svetasvatara Upanishad

As ever,

Carolann

A people that values its privileges above

its principles soon loses both.

-Dwight D. Eisenhower, 1890-1969

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