June 21, 2012 Newsletter

Dear Friends,

Tangents:

The secret of health for both mind and body is not to mourn for the past, not to worry about the future, not to anticipate the future, but to live the present moment wisely and earnestly. – Buddha

June 21, 2012

-Will  Winter

For people like me who love the sun,

Who get gloomy when it is grey,

this is the very best day.

The track of yellow goes highest

over my house today.

Only a fool would sleep and miss a minute of this life…

And on this day…

1939 – Baseball legend Lou Gehrig is forced to quit baseball because of amyotrophic lateral sclerosis–a disease which wastes muscles.
1942 – German General Erwin Rommel captures the port city of Tobruk in North Africa.
1945 – Japanese forces on Okinawa surrender to American troops.
1948 – Dr. Peter Goldmark demonstrates his “long-playing” record.
1963 – France announces it will withdraw from the NATO fleet in the North Atlantic.
1964 – Three civil rights workers disappear in Meridian, Mississippi.
1982 – John Hinkley Jr. is found not guilty by reason of insanity for attempting to assassinate President Ronald Reagan.

If you torture the data long enough, it will confess to anything.

-Darrell Huff, How to Lie With Statistics, 1954.

photos of the day June 21, 2012

Racegoer Laura Nelson poses for photographs on Ladies Day, the third day of racing at the Royal Ascot, southwest of London.

Stefan Wermuth/Reuters

A bee collects pollen on a sunflower in a field in Biedermannsdorf, Austria, on the first day of summer.

Heinz-Peter Bader/Reuters 

Aymara indigenous musicians play flutes and drums at dawn during a new years’ ritual at the ruins of the ancient civilization of Tiwanaku, Bolivia. The Aymara Indians celebrate the year 5,520 as well as the southern hemisphere’s winter solstice, marking the start of a new agricultural cycle.

Juan Karita/AP

Market Closes for June 21, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katia Dmitrieva

June 21 (Bloomberg) — Canadian stocks fell the most since October as reports showing a slowdown in global manufacturing pushed commodities down and dragged oil below $80 a barrel for the first time in eight months.

Energy and raw-materials stocks were the biggest drag on the Standard & Poor’s/TSX Composite Index among 10 industries, tumbling more than 4.1 percent each. Encana Corp. slid 7.9 percent after the company said it will increase spending, and Barrick Gold Corp. lost 3.8 percent. Niko Resources Ltd. tumbled 39 percent after the natural-gas producer’s reserves fell more than estimated.

The S&P/TSX tumbled 351.02 points, or 3 percent, to 11,408.32, erasing a weekly gain. Canadian equities were down the most among 24 developed nations tracked by Bloomberg and has lost 4.6 percent this year. Today’s slump followed reports showing manufacturing unexpectedly shrank in the Philadelphia area and that factory output was heading for an eighth straight monthly decline in China.

“China helps determine world prices,” Arthur Salzer of Toronto-based Northland Wealth Management, who manages $C200 million ($195 million), said in a phone interview. “They can push a trend into one direction.”

Global equities fell as a preliminary reading by HSBC Holdings Plc and Markit Economics showed China’s manufacturing slump may match the longest streak since the global financial crisis.

The Federal Reserve Bank of Philadelphia’s economic index showed the worst contraction in manufacturing in almost a year, while other reports showed existing U.S. home sales decreased more than forecast and jobless claims topped estimates.

Yesterday, the U.S. central bank lowered its outlook for the American economy. Euro-area manufacturing shrank at the fastest pace in three years.

All 10 groups in the S&P/TSX fell today, as the S&P GSCI gauge of 24 commodities slid to the lowest level since October 2010 and extended its drop since February to 22 percent. Energy stocks slumped 4.3 percent, while material companies dropped 4.2 percent.

The price of oil sank 4 percent to $78.20 a barrel in New York. Suncor Energy Inc., Canada’s largest energy provider, declined 6.6 percent to C$27.70. Canadian Natural Resources Ltd., the third-largest provider, fell 6 percent to C$26.60.

Encana retreated 7.9 percent to C$20.39. Canada’s biggest natural-gas producer said it will increase spending this year.

The Calgary-based company will invest an additional $600 million this year to boost production. The spending probably will be more than the company’s cash flow next year, Phil Skolnick, an analyst at Canaccord Genuity Inc. in Toronto, said in a note to investors today.

Niko Resources tumbled 39 percent to C$13.21, its biggest decline since 1993. The company said its total reserves on March 31 were 377 billion cubic feet. That’s about a 69 percent decline from a year earlier before adjusting for production, Alan Knowles, a Calgary-based analyst at Haywood Securities Inc., said in a note today.

Barrick Gold, the world’s largest producer of the metal, fell 3.8 percent to C$39.49. The price of the metal dropped for the fourth straight day.

US

By Rita Nazareth

June 21 (Bloomberg) — U.S. stocks tumbled, while commodities entered a bear market, after signals of a global slowdown in manufacturing added to disappointing housing and labor market data at the world’s largest economy.

Alcoa Inc. and Chevron Corp. slumped at least 3.4 percent to pace losses in commodity shares. Bed Bath & Beyond Inc. plunged 17 percent as its earnings forecast trailed estimates.

ConAgra Foods Inc. rose 2.7 percent as the maker of Hebrew National hot dogs forecast profit that beat estimates. Standard & Poor’s 500 Index futures expiring in September rose 0.2 percent at 5:43 p.m. New York time as bank credit downgrades announced by Moody’s Investors Service matched expectations.

The S&P 500 fell 2.2 percent to 1,325.51 at 4 p.m. in New York, its second-biggest loss in 2012. The Dow Jones Industrial Average slid 250.82 points, or 2 percent, to 12,573.57. Volume for exchange-listed stocks in the U.S. was about 7.2 billion shares, or 6.9 percent above the three-month average.

“It’s risk off,” said James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, whose firm manages $717 billion. “The economy is losing momentum. The question will be how much the U.S. and China slow. On top of that, the Fed’s response yesterday was fairly tepid. While they indicated willingness to do more, they haven’t done it.”

Stocks from Hong Kong to London and Sao Paulo slumped on concern about a global slowdown. Data showed euro-area manufacturing shrank at the fastest pace in three years and a Chinese output gauge indicated contraction. More Americans than forecast filed claims for jobless benefits, manufacturing in the Philadelphia region shrank and sales of existing homes fell.

The reports came out a day after the Federal Reserve lowered its growth and employment estimates while signaling it may add to its record stimulus. The central bank yesterday extended its so-called Operation Twist program to replace short- term bonds with longer-term debt, disappointing some investors who expected more asset purchases. Former Fed Chairman Alan Greenspan today said the U.S. economy “looks very sluggish.”

The Citigroup Economic Surprise Index for the U.S., which measures how much data is missing or beating the median estimates in Bloomberg surveys, fell to minus 64.8, the lowest since August. It turned negative this year in April after remaining above zero since October. The Fed announced Operation Twist in September, four months after the index turned negative.

A challenging economic environment has made Goldman Sachs Group Inc. analyst Noah Weisberger recommend shorting the S&P 500, or bet on further declines. He has a target of 1,285, or 5.2 percent below yesterday’s close.

“With incremental U.S. monetary policy on hold, the market will need to confront a deteriorating growth picture near term,” Weisberger wrote.

Expectations for further policy action gave stocks their first back-to-back weekly gain since April on June 15. The S&P 500 earlier this month was on the brink of a so-called correction, or a 10 percent drop from a recent peak, on concern about a global slowdown and a worsening of Europe’s crisis.

All 10 S&P 500 groups fell today as commodity shares had the biggest losses. The Morgan Stanley Cyclical Index of companies most-tied to the economy lost 2.9 percent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, rose 16 percent, the most since November, to 20.08.

Measures of commodity producers in the S&P 500 lost at least 3.2 percent for the biggest declines since November. The S&P GSCI Spot Index of 24 raw materials fell 2.8 percent to settle at 559. It has dropped 22 percent from this year’s highest close of 715.52 on Feb. 24, entering a bear market.

Alcoa, the largest U.S. aluminum producer, dropped 4.2 percent to $8.55. Chevron decreased 3.5 percent to $100.02.

The KBW Bank Index tumbled 2.3 percent as all of its 24 stocks retreated. Bank of America Corp. dropped 3.9 percent to $7.82. JPMorgan Chase & Co. slid 2.6 percent to $35.51.

In after-hours trading, Morgan Stanley jumped 3.4 percent after the world’s largest brokerage was downgraded two levels by Moody’s Investors Service rather than the three-grade cut that the ratings firm said was possible. The bank dropped 1.7 percent to $13.96 during regular trading.

Donald Jones, a Sterne Agee & Leach Inc. analyst, said in a June 19 note that the most likely outcome expected by bond investors was a three-grade rating cut.

Bed Bath & Beyond declined 17 percent, the most ever, to $61.17. It said comparable-store sales in the first quarter rose 3 percent compared with 7 percent a year earlier. Analysts projected a gain of 3.8 percent, the average of five estimates compiled by Bloomberg.

Red Hat Inc., the largest seller of the open-source Linux operating system, fell 6.2 percent to $53. Billings, a predictor of revenue, were $310 million in the quarter ended May 31, falling short of the $319 million average analyst estimate, said Abhey Lamba, an analyst at Mizuho Securities USA Inc.

Celgene Corp. fell 11 percent to $59.45. It withdrew its application in Europe to expand regulatory approval of Revlimid as a first option and maintenance therapy for patients with a deadly blood cancer.

Micron Technology Inc. retreated 7.8 percent to $5.65. The largest U.S. maker of computer memory reported a fourth consecutive quarterly loss after prices fell for chips used to store data in phones and tablets, crimping sales.

ConAgra jumped 2.7 percent to $25.26. The company forecast fiscal year 2013 earnings of at least $1.95 a share. On average, the analysts surveyed by Bloomberg estimated profit of $1.92.

Gannett Co. added 3.2 percent, the most in the S&P 500, to $13.47. The publisher of USA Today reaffirmed its long-term annual revenue growth targets. The owner of 82 daily newspapers and 23 television stations also said at an analysts’ conference that it sees improved ad trends across all of its groups.

Onyx Pharmaceuticals Inc. surged 43 percent to $63.78, the highest level on record, as it won support from a U.S. advisory panel for a drug to treat a deadly blood cancer that affects 50,000 Americans.

Facebook Inc.’s 22 percent rally in two weeks through yesterday has helped the company avoid posting the biggest slump among the largest U.S. initial public offerings since the start of 2011. The shares rose 0.8 percent to $31.84 today.

The social-network operator, which set a record for technology companies by raising $16 billion last month, has unveiled new products and services after the shares tumbled to a low of $25.87 on June 5.

PetroLogistics LP dropped 20.4 percent in its first month of trading, or 3.1 percentage points more than Facebook, giving the propylene maker the worst return among the 30 largest IPOs since the beginning of last year, data compiled by Bloomberg show.

Concern Facebook was overvalued and that the company will struggle to increase revenue fast enough pushed the stock down as much as 32 percent from its IPO price of $38 on May 17.

Since the shares bottomed earlier this month, Facebook introduced a real-time bidding platform to better target ads to consumers and ComScore Inc. released research that showed marketing on the social network is effective.

“Investors are starting to come around to see the significant opportunity of the Facebook platform,” Victor Anthony, a New York-based analyst at Topeka Capital Markets Inc., said in a telephone interview. He has a buy rating on the stock. “It was a botched IPO process but ultimately, the underwriters did their job. If the stock increasingly marches up, all the concerns will be tapered down.”

Have  a wonderful evening everyone.

Be magnificent!

The human soul travels from the law to love,

from discipline to freedom,

from the moral plane to the spiritual plane.

-Rabindranath Tagore, 1861-1901

As ever,

Carolann

We are the hero of our own story.

-Mary McCarthy, 1912-1989

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