July 6, 2012 Newsletter

Dear Friends,

Tangents:

British Pathé, a media company that produced newsreels between 1910 and 1970, recently posted to the Web an old newsreel that detailed the day-to-day jobs of window washers in 1938.  Try not to get vertigo as the camera pans down to the city streets hundreds of stories below and follows the window washers as they squeegee at dizzying heights.  How did the cameraman do it?  Check out the video at http://bit.ly/windowwashers.

And on this day in…

1907 – Painter Frida Kahlo is born.

1935 – Dalai Lama, leader of Tibet is born.
1957 – John Lennon and Paul McCartney meet for the first time.
1942 – Anne Frank and her family take refuge in Amsterdam.
1976 – Women inducted into US Naval Academy.
1536 – Jacques Cartier returns to France after discovering the St. Lawrence River in Canada.
1854 – The Repulican Party (US) is officially founded in Jackson, Mich.

photos of the day July 6, 2012

Tourists enjoy the beach of the Promenade des Anglais as summer holidays started with temperatures close to 30 degrees Celsius (86 Fahrenheit) in Nice, France.

Eric Gaillard/Reuters

Market Closes for July 6, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Dmitrieva

July 6 (Bloomberg) — Canadian stocks fell for a second day after U.S. employers added fewer jobs than economists had estimated and commodity prices declined the most in two weeks.

Suncor Energy Inc., the nation’s largest oil company, retreated 3.4 percent. Pengrowth Energy Corp. lost 3.2 percent after cutting its dividend. Raw-materials producers and energy stocks contributed most to the decline in the Standard & Poor’s/TSX Composite Index as nine of 10 industries slumped.

The S&P/TSX slid 157.07 points, or 1.3 percent, to 11,659.96. The index fell 2.1 percent over the last two sessions and yesterday snapped six days of gains. The Canadian equity benchmark is up 0.6 percent this week and has fallen 2.5 percent in 2012.

U.S. payrolls rose 80,000 last month, less than the 100,000 median gain economists had projected in a Bloomberg News survey.

The unemployment rate held at 8.2 percent. The news overshadowed Canadian employment data that showed employers added jobs for a fourth consecutive month in June, led by education and health care. The nation’s jobless rate dropped to 7.2 percent from 7.3 percent in May.

“The American job numbers negate any of the slight positive that was in the Canadian numbers,” Michael Sprung, president of Toronto-based Sprung Investment Management Inc., said in a phone interview. “The U.S. is struggling, and investors are beginning to worry about that far more and its longer-term implications for Canada.”

Barrick Gold Corp. lost 2.7 percent to C$37.55 and Goldcorp Inc. fell 2 percent to C$38.52 as the metal declined in New York. Centerra Gold Inc. retreated 5.2 percent to C$7.69.

The S&P GSCI Spot Index of 24 raw materials fell 2.4 percent, the most since June 21. Crude oil and gold dropped the most in a week, and industrial metals including lead, aluminum and copper slumped.

Suncor fell 3.4 percent to C$29.36. Pengrowth lost 3.2 percent to C$6.40. The oil and gas company reduced its dividend citing continuing weakness in the commodity markets. Arcan Resources Ltd., a Calgary-based explorer and producer of natural gas, plunged 12 percent to C$1.76. Canadian Natural Resources Ltd., the nation’s third-largest energy company, declined for a third day, losing 3.5 percent to C$26.58.

US

By Lu Wang and Julia Leite

July 6 (Bloomberg) — U.S. stocks declined, erasing a weekly gain for the Standard & Poor’s 500 Index, as slower-than- forecast growth in payrolls fueled concern that the economic recovery is slowing.

All 10 industry groups in the S&P 500 retreated. Alcoa Inc., Freeport-McMoRan Copper & Gold Inc. and Schlumberger Ltd.

slid at least 1.3 percent as commodity shares declined. JPMorgan Chase & Co. and Bank of America Corp. dropped at least 1.4 percent to pace losses among financial companies. Computer and software shares slumped after Informatica Corp. and Seagate Technology Plc  said earnings missed their forecasts.

The S&P 500 slipped 0.9 percent to 1,354.68 at 4 p.m. in New York, reversing its gain for the week to a loss of 0.6 percent. The Dow Jones Industrial Average dropped 124.20 points, or 1 percent, to 12,772.47. Volume for exchange-listed stocks in the U.S. was 5.1 billion shares, 25 percent below the three- month average and the second-slowest full trading day of 2012.

“It confirms the view that the U.S. economy is slowing,” said Jack Ablin, chief investment officer of BMO Harris Private Bank in Chicago, which oversees about $60 billion of assets.

“We are creating jobs at about less than half the pace in the second quarter than we did in the first quarter, either because of influences from abroad or seasonal adjustments.”

Equities fell as Labor Department figures showed payrolls rose 80,000 last month after a 77,000 increase in May.

Economists projected a 100,000 gain, according to the median estimate in a Bloomberg News survey. The unemployment rate held at 8.2 percent. Private employment, which excludes government agencies, increased 84,000 in June, the weakest in 10 months.

“On balance it’s a mildly disappointing report,” Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion, said in a phone interview. “It’s hard for investors to get overly enthused about it unless in this bizarre world you believe this number gives the Fed more impetus to step up with QE3,” he said, referring to another round of stimulus action by the Federal Reserve.

The Fed has already purchased $2.3 trillion of securities in two so-called quantitative-easing programs. Chairman Ben S.

Bernanke, speaking at a June 20 Washington press conference, said the Fed is focusing “primarily” on the outlook for jobs in deciding whether to ease further, and more action would be needed without “sustained improvement in the labor market.”

U.S. stocks declined yesterday, halting a three-day advance for the S&P 500, amid disappointment over Europe’s efforts to tame the region’s debt crisis. The European Central Bank reduced its benchmark rate to a record low of 0.75 percent and the People’s Bank of China cut borrowing costs for a second time in a month.

Commodity shares in the S&P 500 slumped 1.2 percent as a group today. The S&P GSCI Index of commodities lost 2.4 percent as oil and gold prices declined. Alcoa, the largest U.S. aluminum producer, tumbled 2.2 percent to $8.73. Freeport- McMoRan, a copper and gold company, fell 1.3 percent to $35.01 while oilfield services company Schlumberger slid 1.4 percent to $65.17.

The Morgan Stanley Cyclical Index of companies most-tied to economic growth erased 1.3 percent. The Dow Jones Transportation Average slumped 1 percent. JPMorgan slipped 1.4 percent to $33.90 while Bank of America lost 2.1 percent to $7.66.

Technology shares dropped the most among S&P 500 groups, erasing 1.8 percent. Informatica plunged 28 percent to $31.39, the biggest loss since 2001. The provider of corporate data- integration software reported second-quarter earnings and revenue that unexpectedly dropped, missing analysts’ estimates.

Informatica said it didn’t adapt as rapidly as it should have to a downturn in demand, especially in Europe.

Other software companies tumbled. Teradata Corp. fell the most in the S&P 500, sinking 10 percent to $65.01, while Citrix Systems Inc. had the second-biggest drop, tumbling 7.6 percent to $77.45.

Seagate declined 0.5 percent to $24.96. The world’s largest maker of computer disk drives said fiscal fourth-quarter sales and profit margin would miss the company’s previous forecast, citing reduced hard-drive shipments and a “supplier quality issue” that affected some products.

Acme Packet Inc. slumped 14 percent to $15.74. The maker of devices that help transmit voice and data over Internet networks said second-quarter earnings missed its expectation because of continued weakness in the North American service provider market. F5 Networks Inc., a developer of software for Internet traffic management, dropped 6.9 percent to $94.49.

Navistar International Corp. fell 15 percent to $24.42. The maker of International brand trucks said it expects additional costs to introduce an engine that will meet U.S. emission standards after its earlier technology failed to comply.

Airlines advanced as a drop in oil spurred expectations that fuel costs will fall. Southwest Airlines Co. gained 1.3 percent to $9.27 while Delta Air Lines Inc. rose 3.5 percent to $11.

The government’s previous employment report on June 1 showed the weakest jobs growth in a year, and sent the S&P 500 down 2.5 percent for its biggest drop of 2012. Ten-year Treasury yields reached a record low of 1.4387 percent that day. The S&P 500 has rallied 6 percent since then.

The rebound in equities came after a 9.9 percent tumble from a four-year high in April dragged the S&P 500 to 12.9 times reported earnings, the cheapest level since November. Alcoa is scheduled to unofficially start the second-quarter earnings season when it releases results on July 9.

Analyst estimates compiled by Bloomberg project a 1.8 percent decline in profits for S&P 500 companies in the April- June period, which would mark the first year-over-year decrease since 2009, even as revenue increased 2.5 percent. Analysts still predict profit growth of 7.2 percent for the full year.

Slower-than-forecast growth in employment means labor costs won’t be a threat to corporate profits, according to Neel Kashkari, head of global equities at Pacific Investment Management Co.

“Corporate taxes are not going to go up, cost of labor is going to stay low,” he said in an interview on Bloomberg Television’s “Market Makers” program today. “Corporate profits can continue to stay strong in the short term.”

Pimco is being very selective when it comes to which stocks to buy and is focusing on companies that should be more resilient in the face of a global economic slowdown, Kashkari said. He cited companies such as Wal-Mart Stores Inc., the world’s largest retailer, low-fare carrier Spirit Airlines Inc. and drugmaker Merck & Co.

“There are individual names that should do well in this environment,” he said. The Newport Beach, California-based firm’s Pimco Total Return Fund is the world’s largest mutual fund.

The risk of economic shocks from Europe’s debt crisis and slowing growth in China create a flight to high-quality global companies, Kashkari said. Investors should stop holding cash and come back to the market before inflation accelerates as a result of central bank policies meant to stimulate growth, he said.

“Investors are waiting on volatility, but earnings will decay as prices around the economy rise,” he said. “Sitting in cash is not a good option.”

Have a wonderful weekend everyone.

Be magnificent!

My work will be finished if I succeed in carrying conviction to the human family,

that every man or woman, however weak in body,

is the guardian of his or her self-respect and liberty, and that this defence prevails,

though the world be against the individual resister.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Morale is a state of mind.  It is steadfastness and courage and hope.  It is confidence and zeal and loyalty.  It is elan, ésprit de corps and determination.

-George Marshall, 1880-1959

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