June 6, 2012 Newsletter

Dear Friends,

Tangents:

The Queen’s Jubilee concert last night at Buckingham Palace was so fantastic! If you didn’t get a chance to see it, check it out on CBC.ca or youtube.  CBC did the full coverage and it really was incredible.  The most enchanting moment was when the song was performed that Andrew Lloyd Webber and Gary Barlow wrote especially for the Queen’s Jubilee by a stage full of singers from many different countries in the Commonwealth.   The lyrics in the song, SING, are so beautiful and a fitting tribute to this remarkable woman; the CD was released worldwide on May 28^th from Decca.

And on this day in…

1799 – Alexander Pushkin was born

1944 – D-Day – Operation Overlord lands 400,000 Allied American, British, and Canadian troops on the beaches of Normandy in German-occupied France
1985  – The body of Nazi war criminal Dr. Josef Mengele is located and exhumed near Sao Paolo, Brazil
1934 – President Franklin Roosevelt signs the Securities Exchange Act, establishing the SEC
1949 – George Orwell’s 1984 is published
You grow up the day you have your first real laugh at yourself. – Ethel Barrymore

photos of the day June 6, 2012

A bird comes into land atop one of the domes of the landmark Taj Mahal as Venus (top l.) begins to pass in front of the sun, as visible from Agra, India.

Kevin Frayer/AP

Two Silver-studded Blue butterflies sit on a blade of grass in Lofer, Austrian province of Salzburg, Austria.

Kerstin Joensson/AP

The Nave of York Minster cathedral in northern England is covered in 1,500 square meters of real grass as the church is prepared for the York Minster Rose Dinner to be held later this week.

John Giles/AP

Market Closes for June 6, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Steve Chambers

June 6 (Bloomberg) — Canadian stocks rallied, giving the benchmark index its biggest two-day gain since January, as commodities rose amid speculation global policy makers will take steps to spur economic growth.

Suncor Energy Inc. and Canadian Natural Resources Ltd. gained at least 1.1 percent, helping drive energy shares up 2.1 percent in the Standard & Poor’s/TSX Composite Index. Oil rose for a third straight day, copper snapped its longest losing streak since February and gold advanced. Barrick Gold Corp. dropped 5.1 percent after the world’s largest producer of the metal replaced Chief Executive Officer Aaron Regent after it was “disappointed” with its share price.

The S&P/TSX rose 125.69 points, or 1.1 percent, to 11,633.40 at 4 p.m. in Toronto. The benchmark index rose 2.6 percent over two days, paring its 2012 losses to 2.7 percent.

“Canada got very oversold,” said David Cockfield, a managing director at Northland Wealth Management in Toronto. The firm has C$200 million ($194 million) under management. “There was an ‘I want out of equities’ thing going on. People were treating equities as a commodity rather than as individual stocks, and earnings were coming through just fine.”

At the start of trading today, the benchmark index was at a price/earnings ratio of 13.19, its lowest level since May 2009.

The P/E ratio rose to 13.4 at the end of the day.

Stocks rallied as European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s growth outlook worsens. Federal Reserve Bank of Atlanta President Dennis Lockhart said extending Operation Twist, the U.S. central bank’s stimulus program that lengthens maturities of debt on its balance sheet, is an “option on the table.” The Fed said the U.S. economy maintained a moderate pace of growth as factory output rose and the real-estate market improved.

Suncor Energy, Canada’s largest energy provider, jumped 3.5 percent to C$29.30. Canadian Natural Resources, the nation’s third largest energy provider, added 1.1 percent to C$29.41.

Teck Resources Ltd., the country’s biggest base-metals producer, rose 2.9 percent to C$32.31. Potash Corp. of Saskatchewan Inc., the largest fertilizer company, advanced 1.4 percent to C$40.22.

Gabriel Resources Ltd., a gold-exploration company working in Europe, soared 11 percent to C$2.42. A government official in Romania said the country planned to make a decision by the end of the year on whether Gabriel’s gold-mine project could go forward. The Economy Ministry denied a June 1 report by news service Mediafax that quoted Economy Minister Daniel Chitoiu as saying he is convinced the mine project will start this year.

Barrick Gold, which fell 13 percent in 2011, dropped 5.1 percent to C$41.47. The company said Chief Financial Officer Jamie Sokalsky will replace Regent as CEO, effective immediately. Since Regent became chief executive on Jan. 16, 2009, the price of gold traded in London has soared 92 percent while Barrick shares have fallen 1.4 percent.

US

By Rita Nazareth

June 6 (Bloomberg) — U.S. stocks rallied, giving benchmark indexes their biggest gains in 2012, on speculation global policy makers will take steps to stimulate economic growth.

Bank of America Corp. surged 7.6 percent to pace gains among financial shares. Caterpillar Inc. and Exxon Mobil Corp. increased at least 3.3 percent. Home Depot Inc., the largest U.S. home-improvement retailer, climbed 3.4 percent after raising its stock repurchase plan by $500 million for fiscal 2012. Facebook Inc. added 3.6 percent, following a 32 percent decline since the biggest social-networking company went public.

The Standard & Poor’s 500 Index advanced 2.3 percent to 1,315.13 at 4 p.m. New York time. The Dow Jones Industrial Average increased 286.84 points, or 2.4 percent, to 12,414.79.

About 7.3 billion shares changed hands on U.S. exchanges today, or 8.3 percent above the three-month average.

“People are viewing central banks as very aware of the weakness of the global economy and looking for ways to deal with that,” said Michael Holland, chairman of New York-based Holland & Co. His firm oversees more than $4 billion. “In addition to that, we’ve had a major selloff, valuations are low and that certainly helps to lift the market on a day like today.”

The S&P 500 rose 2.9 percent in three days, wiping out the loss driven by a disappointing jobs report on June 1. Earlier this week, the index traded at 12.9 times its companies’ reported earnings, according to data compiled by Bloomberg. That was the cheapest valuation in six months, the data showed.

Concern about Europe’s debt crisis and a global slowdown took the S&P 500 down as much as 9.9 percent from this year’s peak.

Equities rallied today as European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s outlook worsens. Federal Reserve Bank of Atlanta President Dennis Lockhart said extending Operation Twist, the program to lengthen maturities of debt on the U.S. central bank’s balance sheet, is an “option on the table.”

The U.S. economy maintained a moderate pace of growth, according to the Fed’s Beige Book survey of business conditions.

The policy-setting Federal Open Market Committee meets June 19-20 to consider whether more stimulus is needed.

“I would be surprised if the Federal Reserve isn’t already having a contingency plan if everything unravels in Europe,” said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank. His firm manages $169 billion.

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said he expects the U.S. economy to avoid another recession as long as Europe can contain its debt crisis. There won’t be a recession “unless events in Europe develop in some way that spills over here big-time,” Buffett said yesterday at the Economic Club of Washington, D.C.

All 10 groups in the S&P 500 rose today as energy, financial and industrial shares had the biggest gains. The Dow Jones Transportation Average climbed 3 percent. Bank of America increased 7.6 percent, the most in the Dow, to $7.64.

Caterpillar, the largest maker of construction equipment, added 3.6 percent to $86.66. Exxon Mobil jumped 3.3 percent to $80.18.

Home Depot rose 3.4 percent to $50.60. The timing of its share repurchases will not have a material impact on the diluted earnings per share in that period, the retailer said.

Monsanto Co. added 3 percent to $79.20. The largest seed company will repurchase as much as $1 billion of shares as rising profit boosts the company’s cash hoard to a record.

Facebook rallied 3.6 percent to $26.81. No large U.S. company is attracting more attention from short sellers than Facebook amid bets it will keep falling after losing $29 billion since its initial public offering.

Short interest on the Menlo Park, California-based company reached 5.9 percent of shares outstanding, according to data compiled by Bloomberg and Data Explorers Ltd., a New York-based research firm. None of the S&P 500 companies with at least $50 billion in market capitalization has short interest higher than 3 percent, the data show. Facebook, which has a market value of about $61.6 billion, isn’t in the S&P 500.

“Facebook is one of those companies whose future potential is unknown and unknowable,” said Robert Stimpson, a money manager at Akron, Ohio-based Oak Associates Ltd., which oversees about $900 million and doesn’t own Facebook. “The stock is expensive. The short interest might also reflect a bet that there is more bad news to come and Facebook will be punished.”

Nasdaq OMX Group Inc.’s board approved a plan to pay brokers whose orders were mishandled in Facebook Inc.’s initial public offering, earmarking about $40 million to cover losses.

Chesapeake Energy Corp. jumped 7.1 percent, the most since Aug. 11, to $18.21. The company is in advanced talks to sell pipelines to Global Infrastructure Partners for more than $4 billion, said two people with knowledge of the matter.

A measure of homebuilders in S&P indexes gained 3.7 percent. Hovnanian Enterprises Inc. surged 18 percent, the most since Aug. 15, to $2.01. The largest homebuilder in New Jersey reported an unexpected profit for its fiscal second quarter as orders jumped 52 percent amid rising U.S. demand for new houses.

Iron Mountain Inc. surged 14 percent, the biggest gain in the S&P 500, to $32.32. The document-storage company approved a plan to convert to a real-estate investment trust and increased its quarterly dividend by 8 percent.

Lee Enterprises Inc. soared 16 percent, the biggest gain since Jan. 24, to $1.33. Buffett’s Berkshire Hathaway disclosed owning a stake in the owner of newspapers in the U.S. Midwest and West Coast.

Ancestry.com Inc. gained 11 percent to $25.06. The family- history research website is weighing a sale and working with Frank Quattrone’s Qatalyst Partners LLC to find buyers, according to a person with knowledge of the situation.

Halliburton Co. slumped 3.5 percent to $28.10. The world’s largest provider of hydraulic-fracturing services said North American margins will be 500 to 550 basis points lower this quarter than last because of higher material costs.

Tempur-Pedic International Inc. plunged 49 percent, the most ever, to $22.39. The luxury mattress maker cut its full- year profit and revenue forecasts amid lower-than-expected second-quarter sales in North America.

The selloff that erased $1.78 trillion from U.S. equity values has pushed the cost of options to the highest levels of 2012, prompting hedge funds to add to short sales at the fastest rate since October. The Chicago Board Options Exchange Volatility Index surpassed 26 last week, a level not seen since December.

The gain left the gauge near its price just before the S&P 500 slumped 12 percent in August and September 2011, data compiled by Bloomberg show. As the VIX has risen, an International Strategy & Investment Group measure of hedge fund bullishness has retreated by 7.4 percent.

While the cost of hedges and the amount of short selling are increasing, they may have further to go before bearishness is exhausted amid Europe’s credit crisis, according to Wayne Lin of Legg Mason Inc. The VIX would have to gain 45 percent to reach its average price in August and September. The ISI gauge bottomed at 42 last year compared with its level of 45.3 now.

“The concerns about Europe combined with questions about the robustness of global growth are filtering into markets,”

Lin, who helps oversee $639 billion as a money manager at Baltimore-based Legg Mason, said yesterday in a phone interview.

“These risks make people back out of equities, cause the hedge funds to go short and push the VIX up.”

Have a wonderful evening everyone.

Be magnificent!

Truth resides in the heart of every man.

And it is there that he must seek it, in order to be guided by it so that,

at the least, it will appear to him.

But we do not have the right to force others to see the Truth in our way.

-Mahatma Gandhi, 1869-1948

As ever,

Carolann

But words once spoke

can never be recalled.

-Wentworth Dillon, 1630-1685

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