March 21, 2012 Newsletter

Dear Friends,

Tangents:

I finished reading a wonderful book last night, a memoir by Gully Wells entitled The House in France.  Gully’s mother is Dee Wells, and was caught up in the counter culture of the 1960s, immersing  herself within an intellectual  inner circle that included Isaiah Berlin, Iris Murdoch, Bertrand Russell, Martin Amis, Christopher Hitchens, Robert Kennedy among many others.  The story unfolds in London, Provence and New York.  She  married A.J. Ayer, the celebrated Oxford philosopher when Gully was only a toddler.  Gully writes of lovingly of her step-father Freddie, as A.J. is known:  “His old friend e.e. cummings once wrote him a birthday poem, which captured this charming duality in his nature rather nicely:

Considering the gravity of your language

And the levity of your nature

(or, at times, the levity of your language

and the gravity of your nature)

it is clear that keeping your balance

comes easier than it does to teetering us.

You walk on the tightropes as if they lay on the ground,

And always, bird eyed, notice more than we notice you notice; and the

observation follows always with the clarity

of a wire slicing cheese.

photos of the day

March 21, 2012

Performers dance during Navruz celebrations in the Tajik capital of Dushanbe. Navruz is a traditional Central Asian holiday marking the first day of spring and the beginning of a new year.

Nozim Kalandarov/Reuters

People watch a water fountain on the Swiss Federal square in front of the Swiss Federal Palace (Bundeshaus) in Bern.

Michael Buholzer/Reuters

Market Closures for March 21, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

March 21 (Bloomberg) — Canadian stocks rose for the first time in three days, led by industrial shares, after Bombardier Inc. signed an agreement with China-based Commercial Aircraft Corp. that will help cut costs and boost sales.

Bombardier, a maker of trains and airplanes, increased 3.2 percent. Canadian National Railway Co., the country’s largest railroad, rose 1.8 percent on plans to build a line in Quebec.

Calfrac Well Services Ltd., which provides hydraulic fracturing in Canada and the U.S., fell 5.9 percent after Baker Hughes Inc. said a shift away from gas rigs may hurt its earnings.

The Standard & Poor’s/TSX Composite Index rose 5.79 points, or 0.1 percent, to 12,436.49 in Toronto.

March 21 (Bloomberg) — Canadian stocks were little changed as financial shares slipped after a decline in sales of previously owned U.S. homes and gold producers rose with futures for the metal.

Bank of Nova Scotia, Canada’s third-biggest lender by assets, fell 1 percent. Yamana Gold Inc., Canada’s third-largest producer by market value, gained 0.8 percent as  futures advanced on speculation that demand will rebound in India.

Calfrac Well Services Ltd., which provides hydraulic fracturing in Canada and the U.S., fell 5.4 percent after Baker Hughes Inc. said a shift away from gas rigs may hurt its earnings.

The Standard & Poor’s/TSX Composite Index rose 0.77 point, or less than 0.1 percent, to 12,431.47 at 12:43 p.m. in Toronto.

“For the past couple of weeks this market has been predominantly driven off the commodity space, but you’re not seeing a lot of movement on it today,” Gareth Watson, vice president of investment management and research at Richardson GMP Ltd. in Toronto, said in a telephone interview. The firm oversees about C$16 billion ($16 billion). “It’s a reflection of the fact that there really hasn’t been a great deal of news or development overnight from an economic standpoint.”

Canadian financial companies, which make up 30 percent of the country’s stocks by market value, fell after the National Association of Realtors said in a report that purchases of previously owned U.S. homes dropped 0.9 percent to a 4.59 million annual rate from a revised 4.63 million pace in January that was faster than previously estimated.

Bank of Nova Scotia decreased 1 percent to C$55.20. The U.S. accounted for 19 percent of the company’s deposits last year, according to data compiled by Bloomberg. Industrial Alliance Insurance & Financial Services Inc. dropped 2 percent to C$29.95.

Gold stocks in the index rose on speculation that demand will increase after jewelry shops end a five-day shutdown tomorrow in India. Futures for April delivery gained 0.3 percent to $1,651.90 an ounce at 12:06 p.m. in New York.

Yamana rose 0.8 percent to C$15.60. Centerra Gold Inc., which mines in Kyrgyzstan and Mongolia, increased 5.4 percent to C$16.34.

Calfrac declined 5.4 percent to C$29.33 after Baker Hughes, the world’s third-largest oilfield services provider, said it expects operating profit before tax for the first quarter to fall as producers shift drilling from natural gas to crude.

Agrium Inc. gained 1 percent to C$88.43 after Goldman Sachs Group Inc. said it remains bullish on the sector given the positive outlook for corn prices. The company has partnered with Glencore International Plc in the largest publicly traded commodity supplier’s attempt to buy Viterra Inc.

US

By Rita Nazareth

March 21 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index down a second day, on concern the best first-quarter since 1998 has outpaced economic prospects and as Baker Hughes Inc. drove a selloff in energy shares.

Baker Hughes, the world’s third-largest oilfield-services provider, tumbled 5.8 percent after saying that a shift away from gas rigs will hurt earnings. Morgan Stanley and Fifth Third Bancorp dropped at least 1.7 percent to pace losses in financial companies. Hewlett-Packard Co. slumped 2.2 percent for the biggest decline in the Dow Jones Industrial Average.

The S&P 500 slipped 0.2 percent to 1,402.89 at 4 p.m. New York time. The Dow retreated 45.57 points, or 0.4 percent, to 13,124.62. About 6.1 billion shares changed hands on U.S. exchanges, or 7.9 percent below the three-month average.

“People won’t play real hard at these levels,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, which oversees more than $300 billion. “I don’t think you should get bearish. Yet the market’s energy seems to be used up after the strong rally.”

The S&P 500 has rallied 12 percent this year amid better- than-estimated economic and corporate data. More than $3.6 trillion was restored to U.S. equity values since last year’s low for the benchmark gauge in October. The rally drove the index to about 14.6 times reported earnings this week, the highest valuation level since July.

Data today showed purchases of previously owned U.S. houses dropped 0.9 percent to a 4.59 million annual rate from a revised 4.63 million pace in January that was faster than previously estimated. The median forecast in a Bloomberg News survey called for a rise to 4.61 million.

“The housing situation is not a quick turnaround,” Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm manages about $6.5 billion. “In addition, the stock market had an almost one-way ride. It’s due for a pause.”

Energy shares in the S&P 500 slumped 1 percent for the biggest decline among 10 groups.

Baker Hughes tumbled 5.8 percent to $45.04. North American first-quarter profit margin will drop to as low as 13.2 percent from 18.7 percent because of lower prices, higher costs and supply shortages as U.S. operators shift rig locations, the company said. Companies are drilling for oil because it’s worth about eight times more on an energy-equivalent basis than gas on U.S. markets, according to data compiled by Bloomberg.

A measure of financial shares in the S&P 500 lost 0.4 percent for the second-biggest decline among 10 industries.

Morgan Stanley fell 1.7 percent to $20.06. Fifth Third retreated 1.8 percent to $14.24.

Hewlett-Packard slid 2.2 percent to $23.46. The company will combine its personal-computer unit with the division that sells printers into a group led by Todd Bradley, who ran the PC business, to help cut expenses amid declining sales and profit.

“Deeper issues will likely take more than management changes,” Maynard Um, an analyst with UBS AG in New York, said in a note to investors.

Hartford Financial Services Group Inc. rose 1.4 percent to $22.02. Chief Executive Officer Liam McGee responded to billionaire John Paulson’s call for a breakup with plans to shut or sell parts of the 201-year-old insurer. Hartford will stop selling individual annuities and seek buyers for its individual life, Woodbury Financial Services and retirement-plan operations.

LinkedIn Corp. surged 6.5 percent to $97.78. The biggest professional-networking website was raised to buy from neutral at Goldman Sachs Group Inc.

Netflix Inc. gained 4.4 percent to $120.10. The online and mail-order video-rental service said the mystery series “Hemlock Grove” will be available exclusively to its members for instant viewing early in 2013.

Stocks will probably begin a “steady upward trajectory” over the next few years because any declines in economic growth are already reflected in share prices, Goldman Sachs Group Inc. said. The MSCI World Index is trading at 13.2 times estimated earnings after falling 7.6 percent last year, data compiled by Bloomberg show.

“Given current valuations, we think it’s time to say a ‘long goodbye’ to bonds, and embrace the ‘long good buy’ for equities as we expect them to embark on an upward trend over the next few years,” Peter Oppenheimer, chief global equity strategist at Goldman Sachs in London, wrote in a report today.

The prospects for returns in equities versus bonds “are as good as they have been in a generation,” he wrote.

Have a wonderful evening everyone.

Be magnificent!

I am myself.

The other is simply something else.

I am what I am.

If I am a demon, very well then I am a demon.

That is all.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

I don’t like that man.  I must

get to know him.

-Abraham Lincoln, 1809-1865

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