July 31, 2012 Newsletter

Dear Friends,

Tangents:

FIREFLIES

here come

the fireflies

with their staccato

lights

their tiny headlamps

blinking

in silence

through the tall grass

like constellations

cut loose

from the night

sky

(see how desire

transforms

the plainest

of us)

or flashes of insight

that flare

for a moment

then flicker out

-Linda Pastan

Life is without meaning. You bring the meaning to it. The meaning of life is whatever you ascribe it to be. Being alive is the meaning. –Joseph Campbell

And on this day in…

1790 – U.S. Patent Office opens.

1891 – British government declares territories in Southern Africa up to the Congo to be within their sphere of influence.

1965 – J.K. Rowling was born.

1971 – Apollo 15 astronauts take a drive on the moon in the land rover.

photos of the day

July 31, 2012

Shepherd Pascal Sapet walks with his flock of sheep near Les Diablerets, Switzerland. Great Pyrenees dogs are used to prevent attacks by wolves on their cattle by Swiss farmers.

Denis Balibouse/Reuters

Storm cells move over the 40 freeway near Needles, California area at sunset as monsoon moisture continues to invades the Mojave deserts area.

Gene Blevins/Reuters

Market Closes for July 31, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Dmitrieva

July 31 (Bloomberg) — Canadian stocks declined as oil fell for a second day and investors awaited the U.S. Federal Reserve’s monetary-policy decision tomorrow.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer company, dropped 1.3 percent. Suncor Energy Inc., the nation’s biggest oil company, declined 2.3 percent. Energy and raw materials stocks contributed the most to the decline on the Standard & Poor’s/TSX Composite Index. Rona Inc. jumped 14 percent after the company said it rejected an unsolicited takeover offer from U.S. home-improvement retailer Lowe’s Cos.

The S&P/TSX lost 93.17 points, or 0.8 percent, to 11,664.71. The benchmark index gained 0.6 percent for July, its second straight monthly advance.

“General sentiment is cautious. It just speaks to money in the mattress and folks just saying ’I’ll put smaller bets on,’ but the real money is on the sidelines,” David Sherlock of Calgary-based McLean & Partners, which manages C$1 billion, said in a phone interview. “Canada’s going to have a tough time moving forward without some meaningful resolution to the European crisis.”

Stocks fell as Germany’s Finance Ministry said the rules of the European Stability Mechanism don’t foresee a banking license to allow refinancing at the European Central Bank. In the U.S., a Bloomberg survey found the Fed will probably forgo announcing a third round of large-scale asset purchases this week.

Confidence among U.S. consumers unexpectedly rose for the first time in five months.

Canada’s gross domestic product grew less than economists predicted in May as a manufacturing decline curbed gains in energy and retailing. Output rose 0.1 percent, less than the 0.2 percent increased forecast by economists in a Bloomberg survey.

The Bank of Canada is relying on business investment and consumer spending for economic growth in what it calls the slowest export recovery since World War II.

Oil fell 1.9 percent to settle at $88.06 on the New York Mercantile Exchange, paring its monthly advance to 3.6 percent.

Enbridge Inc. lost 1.9 percent to C$41.03. Suncor declined 2.3 percent to C$30.66. Cenovus Energy Inc. slipped 1.6 percent to C$30.65.

Potash Corp. slipped 1.3 percent to C$44.40. Eldorado Gold Corp. fell 4.7 percent to C$10.85. Teck Resources Ltd. declined 3 percent to C$28.13.

Thomson Reuters Corp. slipped 1.7 percent to C$28.44 after the company reported that second-quarter revenue fell 4 percent to $3.31 billion. Profit for the financial news and information provider jumped 64 percent after the $1.25 billion sale of its health-care business.

Rona soared 14 percent to C$13.50 as it rejected Lowe’s C$14.50-a-share offer as not in the best interest of shareholders. The offer is 22 percent higher than Rona’s closing price yesterday and values the Quebec-based retailer at about C$1.76 billion.

Inmet Mining Corp., a base-metals producer, rose 4.8 percent to C$39.89, the most in a month. The company said its Spanish copper mine performed well in the second quarter and it expects to complete a deal to sell precious metals from a project in Panama.

US

By Rita Nazareth

July 31 (Bloomberg) — U.S. stocks fell, trimming a second monthly advance in the Standard & Poor’s 500 Index, as investors awaited the Federal Reserve’s monetary-policy decision tomorrow.

Coach Inc., the largest U.S. luxury handbag maker, tumbled 19 percent after reporting revenue that trailed analysts’

estimates. Humana Inc. slumped 13 percent as the provider of Medicare benefits cut its 2012 profit forecast. Apple Inc. rose 2.6 percent as Sanford C. Bernstein & Co. said it is considering a stock split that could prompt the world’s most valuable company to be added to the Dow Jones Industrial Average.

About five stocks fell for every three that rose on U.S. exchanges at 4 p.m. New York time. The S&P 500 slid 0.4 percent to 1,379.32. The benchmark measure rose 1.3 percent in July. The Dow average slid 64.33 points, or 0.5 percent, to 13,008.68 today. Volume for exchange-listed stocks in the U.S. was 6.7 billion shares, or about in line with the three-month average.

“People are taking some chips off the table as they don’t expect the Fed to come up with any positive surprise,” said Michael Holland, chairman of New York-based Holland & Co. His firm oversees more than $4 billion. “In addition, you have a mixed bag of earnings and news out of Europe is not helping.”

Equities fell on bets the Fed may forgo announcing a third round of large-scale asset purchases this week, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt. Policy makers meeting today and tomorrow may wait for more employment data before deciding whether action is needed to boost an economy that’s slowed for two straight quarters.

Consumer spending in the U.S. stagnated in June as labor- market weakness prompted Americans to use the biggest gain in incomes in three months to build savings. Yet Americans may be growing less pessimistic about job prospects later in the year, with another report today showing consumer confidence rose unexpectedly for the first time in five months.

U.S. equities followed a slump in European shares after companies including BP Plc and UBS AG posted earnings that missed forecasts. In the U.S., 60 percent of the companies which reported second-quarter results missed sales estimates, according to data compiled by Bloomberg. About 73 percent beat profit estimates, the data showed.

Companies which rely on consumer discretionary spending lost 1.2 percent for the biggest decline among 10 S&P 500 groups. Coach tumbled 19 percent, the most since 2001, to $49.33. Sales at North American stores open at least a year advanced 1.7 percent, compared with a gain of 10 percent a year earlier. Jennifer Davis, an analyst at Lazard Capital Markets, projected an increase of 5 percent.

Humana dropped 13 percent, the biggest decline since 2009, to $61.60. The company generated three-quarters of sales last year from Medicare, the U.S.-backed program for the elderly and disabled, and Chief Executive Officer Michael B. McCallister said that new members were proving more expensive.

Archer Daniels Midland Co. slumped 5.1 percent to $26.09.

The largest corn processor reported fiscal fourth-quarter profit that missed analysts’ estimates as its ethanol business swung to a loss and the U.S. drought increases corn costs.

Facebook Inc. dropped 6.2 percent to $21.71, the lowest price on record. The shares are trading 43 percent below the company’s initial public offering price of $38. Facebook, the largest social-networking service, last week reported second- quarter results that showed slowing growth.

U.S. shares of UBS slumped 4.2 percent to $10.60.

Switzerland’s biggest bank said second-quarter profit fell 58 percent, missing analysts’ estimates, as the investment bank posted a loss tied to Facebook’s initial public offering.

RealD Inc. retreated 23 percent to $9.70. The supplier of 3-D projection systems to theaters reported quarterly profit that missed analysts’ estimates because of costs to supply theaters with new eyeglasses.

Gains in technology companies, the biggest group in the S&P 500, limited the benchmark measure’s decline. Apple rallied 2.6 percent, the most since May 21, to $610.76. The company’s decision in March to pay its first dividend in 17 years makes it more likely the stock could be added to the index after a split, said Toni Sacconaghi, an analyst at Bernstein who rates the shares outperform, in a report today.

“We see the timing as ripe,” Sacconaghi said. “Apple’s initiation of a dividend brings the company in line with all other Dow components. We note that Apple is currently the only company above $215 billion in market cap that pays a dividend and is not included in the Dow.”

The Cupertino, California-based company is preparing to introduce the next version of the iPhone on Sept. 12 in what will be a design overhaul of its top-selling product, according to two people with knowledge of the company’s plans.

Pfizer Inc. climbed 1.4 percent, the most in the Dow, to $24.04. The world’s largest drugmaker said it will file in mid- August to sell as much as 20 percent of its animal-health unit in an initial public offering. The company also reported profit that beat analyst estimates as a result of cost cutting.

Goodyear Tire & Rubber Co. rose 10 percent to $11.45. The largest U.S. tiremaker reported a second-quarter profit that beat analysts’ estimates and lowered its full-year forecast for tire sales for the second time this year.

Cummins Inc. jumped 6 percent to $95.90. The maker of truck engines reported second-quarter earnings excluding some items of $2.45 a share, beating the average analyst estimate in a Bloomberg survey of $2.28 a share.

U.S. Steel Corp. rallied 9.1 percent to $20.65. The country’s largest producer of the metal reported earnings that beat estimates after demand rose for tubular products.

Valero Energy Corp. jumped 5.4 percent to $27.50. The largest U.S. refiner by processing capacity said second-quarter profit rose as access to cheaper crude produced in the U.S. led to a rally in the margin between oil costs and fuel prices.

Valero plans to separate its retail business to “unlock value” for its shareholders.

Dun & Bradstreet Corp. soared 13 percent, the most in the S&P 500, to $80.19. The operator of a database that provides credit and business data to firms is weighing a sale, said a person familiar with the matter.

AmerisourceBergen Corp. climbed 3 percent to $39.70. The third-biggest U.S. drug distributor won an $18.5 billion contract to supply Express Scripts Holding Co.

Investors should buy stocks before the Fed’s announcement tomorrow, if history is of any guide, according to Bespoke Investment Group LLC.

The S&P 500 has advanced in 20 out of the past 29 decision days since the Fed pledged to keep interest rates near zero in December 2008, a study from Harrison, New York-based Bespoke shows. While Fed days made up 3 percent of the trading days during the period, they accounted for about 38 percent of the equity gauge’s gain, the data show.

“‘Don’t fight the Fed’ is one of the most well-known market axioms around, and these performance numbers couldn’t do a better job of highlighting why,” Justin Walters, Bespoke’s co-founder, wrote in a note today.

The S&P 500 has rallied 9.7 percent this year amid speculation that worse-than-expected economic data will prompt the Fed to take more actions to spur growth.

The Fed has carried out two rounds of so-called quantitative easing since Lehman Brothers Holdings Inc. collapsed in 2008, buying $2.3 trillion in bonds to boost the economy. The S&P 500 jumped 59 percent during the 913 trading days from December 2008 through yesterday, with return on the Fed days totaling 22 percent, data from Bespoke and Bloomberg show. The average gain on the past 29 Fed days was 0.7 percent.

Have a wonderful evening everyone.

Be magnificent!

Being human,

I feel profoundly the necessity of putting an end to violence,

and I will make sure to put an end to it in myself.

Krishnamurti, 1895-1986

As ever,

Carolann

The soul is dyed the color of its thoughts.  Think only on those things that are

in line with your principles and can bear the light of day.  The content of your

character is your choice.  Day by day, what you do is who you become.

-Heraclitus, 535-475 BC

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