March 4, 2013 Newsletter

Dear Friends,

Tangents:

Birthday: Antonio Vivaldi was born on this day in 1675.

Poem:

The Art of Fugue

-by Fiona Sampson

A curtain brims;

its white lip appears,

dashing and slovenly

like the girl on the Tube

with her bedroom hair.

I miss that girl

crossing the Green

in heels and feather trim

whom I so nearly

and never was.

Oh, waking

is a rising to light,

something humming

deep and dirty

moves through a suspended life,

in the dawning bedroom

the jacket on a chair-back

is a gesture

suddenly stilled:

and the girl crossing the Green

turns her head on a pillow

barred with light.

From Coleshill (Chatto & Windus)

It is one of the most beautiful compensations of life, that no man can sincerely try to help another without helping himself.  –Ralph Waldo Emerson.

Photos of the Day –March 4th, 2013

Masaai women line up at dawn to vote in a general election in Kumpa, Kenya. Five years after more than 1,000 people were killed in election-related violence, Kenyans went to the polls on Monday to begin casting votes in a nationwide election seen as the country’s most important – and complicated – in its 50-year history. Riccardo Gangale/AP

A Hindu sadhu (holy man) applies paint to his forehead at his ashram on the premises of Pashupatinath Temple in Kathmandu, Nepal. Hindu holy men from Nepal and India come to this temple to take part in the Shivaratri festival, which this year falls on March 10. Celebrated by Hindu devotees all over the world, Shivaratri is dedicated to Lord Shiva. Navesh Chitrakar/Reuters

Market Closes for March 4th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

March 4 (Bloomberg) — Canadian stocks fell for a second day, led by raw-materials and energy producers, on concern changes in China’s government policy may stunt growth in the world’s second-biggest economy.

Cenovus Energy Inc. and Canadian Natural Resources Ltd. slipped at least 2.5 percent as the price of crude briefly fell below $90 for the first time in 2013. Agrium Inc. dropped 1.7 percent after its chairman urged shareholders to vote against a board slate backed by an activist investor. Aurizon Mines Ltd. gained 2.8 percent after agreeing to sell itself to Hecla Mining Co. in a deal valued at C$796 million ($774 million).

The Standard & Poor’s/TSX Composite Index fell 65.71 points, or 0.5 percent, to 12,707.41 at 4 p.m. in Toronto.

Materials companies erased 2.6 percent, the most among the index’s 10 groups, and energy producers slid 0.6 percent.

Trading volume was 1.8 percent above the 30-day average. The S&P/TSX has risen 2.2 percent this year.

“The market had been getting close to new highs and people are getting uncomfortable,” said Paul Harris, a fund manager with Avenue Investment Management in Toronto, which oversees about C$300 million. “India and China, those stock exchanges have come off a fair bit in the last little while. People have seen the market run up a lot in the last two to three months and were expecting a pullback.”

The Shanghai Stock Exchange Composite Index fell 3.7 percent today, the most since August 2011, after China’s cabinet last week ordered tighter mortgage rules to cool the property market. The Chinese government is seeking higher downpayments on second-home loans and stricter enforcement of sales-tax policy.

Separately, data yesterday showed China’s service industries grew last month at the weakest pace since September, adding to speculation that demand growth is slowing in the world’s second-biggest oil-consuming country.

Canadian Natural Resources slumped 2.5 percent to C$31.26 and Cenovus lost 2.8 percent to C$31.82. Crude for April delivery fell 0.6 percent to settle at $90.12 a barrel in New York. It slid as much as 1.5 percent to $89.33 earlier in the day.

Fifty-two of the 61 members in the S&P/TSX Materials Index declined, even as gold snapped a three-day losing streak on speculation that central banks will continue stimulus measures to spur economic growth. Gold futures for April delivery rose 10 cents to settle at $1,572.40 an ounce at 1:50 p.m. on the Comex in New York.

Yamana Gold Inc. decreased 6.3 percent to C$14.22, Iamgold Corp. slid 6 percent to C$6.32 and Silver Wheaton Corp. lost 4.7 percent to C$31.09.

Agrium lost C$1.87 to C$105.43 after Victor Zaleschuk, chairman of the Calgary-based company, sent a letter to shareholders asking them to re-elect the existing board at the seed and fertilizer supplier’s annual general meeting April 9.

He called an opposing slate from New York-based hedge fund Jana Partners LLC “a Trojan horse tactic” designed to break up Agrium. Jana has pressed the company to spin off its farm-supply retail network.

Atlantic Power Corp. plunged 17 percent to C$6.06, its lowest level since November 2008. The loss extended a 29 percent decline on Mar. 1 after the electric power company cut its annual dividend 65 percent to 40 Canadian cents a share.

“Even after a 29 percent share price decline, we believe it is too early for value investors to step in,” said Nelson Ng, analyst with RBC Capital Markets.

Aurizon added 12 Canadian cents to C$4.47. The cash-and- stock offer from U.S.-based Hecla Mining, which operates silver mines in Alaska and Idaho, comes after Aurizon rejected on Jan. 23 a C$780 million unsolicited bid from its largest shareholder, Alamos Gold Inc. Alamos climbed 0.9 percent to C$14.24.

US

By Inyoung Hwang and Sarah Pringle

March 4 (Bloomberg) — U.S. stocks rose, sending the Dow Jones Industrial Average to its highest level since 2007, as speculation the Federal Reserve will continue stimulus measures overshadowed concern over spending cuts and China’s economy.

Airlines rallied while industrial and energy stocks fell as oil dropped to its lowest level since December. Yahoo! Inc. jumped 3.5 percent after an analyst at Barclays Plc raised his rating on the company. Homebuilders advanced as D.R. Horton Inc. and Ryland Group Inc. rose at least 3.2 percent. Google Inc. jumped 1.9 percent to a record, while Apple Inc. retreated 2.4 percent to its lowest level in more than a year.

The Standard & Poor’s 500 Index rose 0.5 percent to 1,525.20 at 4 p.m. in New York, after falling as much as 0.4 percent earlier. The Dow Jones Industrial Average gained 38.16 points, or 0.3 percent, to 14,127.82, its highest level since October 2007. About 6 billion shares exchanged hands on U.S. exchanges today, 4.4 percent below the three-month average.

“Excluding this quarter, which will be impacted by the sequester, the economy probably strengthens as the year goes on,” Michael Mullaney, chief investment officer at Boston-based Fiduciary Trust Co., which manages $9.5 billion, said by telephone. “The Fed is going to be our friend for an extended period of time, and as the old adage goes, don’t fight the Fed.”

The bull market in U.S. equities is entering its fifth year this month after the S&P 500 surged 124 percent from a 12-year low in 2009 amid better-than-estimated corporate earnings and three rounds of bond purchases by the Fed to keep interest rates low and stimulate the economy. The S&P 500 has climbed 6.9 percent this year and is trading at 2.6 percent below its record of 1,565.15 reached in October 2007. The Dow is less than 0.3 percent from its high of 14,164.53.

Stocks rose as Federal Reserve Vice Chairman Janet Yellen said the U.S. central bank should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the unprecedented program.

“Turning to the potential costs of the Federal Reserve’s asset purchases, there are some that definitely need to be monitored over time,” Yellen said today in a speech in Washington. “At this stage, I do not see any that would cause me to advocate a curtailment of our purchase program.”

Equities fell early in the trading day as China’s services industries expanded last month at the slowest pace since September. The non-manufacturing Purchasing Managers’ Index fell to 54.5 in February from 56.2 in January, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said. A reading above 50 indicates expansion.

Automatic cuts in U.S. federal spending, half of which are in defense programs, went into effect March 1 following a congressional impasse. The government will reduce spending by $1.2 trillion over the next nine years, including $85 billion in this fiscal year. The budget cuts, known as sequestration, will cause a 0.6 percentage-point reduction in economic growth this year, the Congressional Budget Office has estimated.

Even as President Barack Obama phoned Democratic and Republican legislators over the weekend, Obama’s aides and congressional leaders signaled the budget reductions would continue for weeks, possibly months.

Both sides indicated that revisiting the reductions would begin after they resolve a confrontation over legislation that’s needed to keep federal agencies running beyond March 27, placing a premium on avoiding a government shutdown.

A Bloomberg gauge of U.S. airlines rallied 4.1 percent to 44.93, its highest level in more than two years. Industrial and energy companies in the S&P 500 declined. Crude prices briefly fell below $90 a barrel for the first time in 2013 on growing speculation that demand growth is slowing in China.

Delta Air Lines Inc. surged 5.6 percent to $15.65, its highest level since February 2008. The Atlanta-based carrier increased the lower end of its guidance for unit revenue to 4.5 percent from 4 percent.

United Continental Holdings Inc. climbed 5.3 percent to $28.82 and Alaska Air Group Inc. added 4.1 percent to a record $54.53.

Caterpillar Inc., the biggest maker of construction and mining equipment, retreating 1.8 percent to $89.75 for the largest decline in the Dow. Cliffs Natural Resources Inc. erased 5.8 percent, the most in the S&P 500, to $23.78. Joy Global Inc., the maker of underground mining equipment, slid 3 percent to $60.18.

Consumer discretionary companies in the S&P 500 rose 1 percent to a record. Best Buy Co. surged 3.6 percent to $17.77 and Target Corp. jumped 3.6 percent to $66.44, its highest level in more than five years.

An S&P group of homebuilders rallied 2.3 percent as all 11 members advanced. D.R. Horton climbed 3.2 percent to $23.24, while Ryland Group added 3.5 percent to $36.95.

The KBW Bank Index rose 1.2 percent to 54.79, as 22 of its 24 members gained. Capital One Financial Corp. rallied 2.4 percent to $53.12 and Citigroup Inc. added 2 percent to $42.94.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slumped 8.8 percent to 14.01. The gauge has tumbled 22 percent in 2013.

Yahoo jumped 76 cents to $22.70, its highest level since July 2008. Anthony J. DiClemente, equity analyst at Barclays, raised his rating on the company to overweight from equalweight, noting that Yahoo’s minority stakes in Alibaba Group Holdings Ltd. and Yahoo Japan Corp. are not fully reflected in its shares.

Google, the operator of the world’s largest search engine, advanced $15.31 to a record $821.50. The stock has rallied 16 percent this year. Chief Financial Officer Patrick Pichette said last week the company wants to keep money on hand in order to be able to invest quickly when needed.

Apple fell for a fourth day to its lowest level since January 2012, sliding $10.42 to $420.05. The shares have tumbled 40 percent since setting a record in September, amid concern that the company’s growth is being hurt by higher production costs and stiffer competition from rivals such as Samsung Electronics Co. Investors are looking to Chief Executive Officer Tim Cook to demonstrate that Apple has more blockbuster products in the pipeline to reignite sales.

Hess Corp. rallied 3.5 percent to $68.84. The oil company targeted by Paul Singer’s Elliott Management Corp. will exit energy trading, marketing and retail businesses to focus on exploration and production, according to a statement today. The company also plans to buy back as much as $4 billion in shares.

AutoNation Inc. increased 1.8 percent to $44.24. The largest U.S. retailer of new cars and trucks said that total retail vehicle sales climbed 6 percent in February.

Warren Buffett, who built Berkshire Hathaway Inc. into a $250 billion company with funds from insurance units, said in his annual letter to shareholders on March 1 that low interest rates create “dim prospects” for the industry that fueled his firm’s growth.

The billionaire also said other CEOs who held back investment last year because of doubts about the economy missed an opportunity. The future of the U.S. has been uncertain since the country’s Declaration of Independence in 1776, he wrote.

“American business will do fine over time. And stocks will do well just as certainly,” Buffett said. “Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of ‘experts,’ or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it,” he said, referring to Vice Chairman Charles Munger.

Have a wonderful evening everyone.

Be magnificent!

How can you regard yourself as subject and other beings as objects,

when you know that all are one?

Brihadaranyaka Upanishad

As ever,

Carolann

The idea of waiting for something makes it

more exciting.

-Andy Warhol, 1928-1987

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