May 16, 2012 Newsletter

Dear Friends,

Tangents:

And on this day in,

1919 – Liberace, pianist, was born

1929 – The first Academy Awards are held in Hollywood

1920 – Joan of Arc is canonized in Rome
1868 – President Andrew Johnson is acquitted of high crimes and misdemeanors impeachment, by one vote
1770 – King Louis XVI marries Marie Antoinette

True wisdom comes to each of us when we realize how little we understand about life, ourselves, & the world around us. -Socrates

Market Closes for May 16, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Canada

By Joseph Ciolli

May 16 (Bloomberg) — Canadian stocks fell a fourth straight day as concern the Greek financial crisis is intensifying drove energy and financial shares lower, overshadowing optimism the U.S. Federal Reserve may be more inclined to boost stimulus measures.

Manulife Financial Corp. and Crescent Point Energy Corp. slumped more than 2.4 percent, helping lead declines in the S&P/TSX. Alacer Gold Corp. retreated 11 percent after sinking 9.1 percent in Australia. Oil-sands producer Cenovus Energy Inc. fell 1 percent. Canadian Pacific Railway Ltd. and First Quantum Minerals Ltd. advanced at least 3.2 percent.

The S&P/TSX Composite fell 34.35 points, or 0.3 percent, to 11,308.70 at 2:19 p.m. Toronto time. The index had risen as much as 1.2 percent earlier. It briefly erased losses after minutes from their last meeting showed several Fed policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action.

European Central Bank President Mario Draghi acknowledged that Greece could leave the euro area and signaled policy makers won’t compromise on their key principles to prevent an exit. Greeks will vote again on June 17 after talks on forming a government failed, Democratic Left leader Fotis Kouvelis said.

The S&P/TSX is heading for its third straight weekly decline as concerns mount that the Greek debt crisis, European elections and a weakening Chinese economy may curb demand for commodities. Energy and raw-material companies account for 44 percent of Canadian stocks by market value, according to data compiled by Bloomberg.

US

By Rita Nazareth

May 16 (Bloomberg) — The Standard & Poor’s 500 Index dropped a fourth day, the longest decline in a month, as concern Greece’s debt crisis is worsening offset better-than-estimated reports on U.S. housing starts and industrial production.

Financial stocks fell the most in the S&P 500 among 10 groups as Bank of America Corp. and JPMorgan Chase & Co. sank at least 2.1 percent. Alcoa Inc. slid 2.5 percent as commodities retreated after the Dollar Index rose for a record 13th straight day. J.C. Penney Co. tumbled 20 percent, the biggest drop ever, on disappointing results. General Motors Co. rose 2.3 percent as Berkshire Hathaway Inc. disclosed a stake in the automaker.

The S&P 500 retreated 0.4 percent to 1,324.80 at 4 p.m. New York time, reversing an earlier advance of as much as 0.8 percent. The Dow Jones Industrial Average decreased 33.45 points, or 0.3 percent, to 12,598.55, the lowest level since Jan. 18. About 7.6 billion shares changed hands on U.S. exchanges today, or 15 percent above the three-month average.

“The situation in Europe is extremely precarious,” said Barry Knapp, the New York-based head of U.S. equity strategy at Barclays Plc. “More needs to be done. You can’t have a lot of confidence that assets will stabilize.”

Concern about Europe’s crisis drove the S&P 500 down 2.4 percent in four days and trimmed this year’s gain in the gauge to 5.3 percent. The European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as President Mario Draghi signaled the ECB won’t compromise on key principles to keep Greece in the euro area.

Equities rose earlier today as economic data bolstered optimism the U.S. could withstand fallout from Europe. Several Federal Reserve policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery going, minutes of their last meeting showed.

“Several Fed members are now saying more action may be needed, but they are not taking action,” said Peter Jankovskis, who helps manage about $2.9 billion at Oakbrook Investments in Lisle, Illinois. “Certainly the situation in Greece is troublesome. It’s getting to a point where it gets harder and harder to envision Greece staying within the euro.”

Eight out of 10 groups in the S&P 500 retreated today as financial and raw material indexes lost at least 1.1 percent. The Morgan Stanley Cyclical Index of companies most-tied to the economy fell 1 percent. Alcoa, the largest U.S. aluminum producer, sank 2.5 percent to $8.49. Bank of America decreased 2.6 percent to $7.11. JPMorgan slid 2.2 percent to $35.46.

JPMorgan’s shareholders sued the bank and Chief Executive Officer Jamie Dimon in two separate cases over the company’s $2 billion trading loss. The bank continues to employ Bruno Iksil, the trader known as the London Whale whose positions may have distorted prices in some derivatives markets. Brian Marchiony, a spokesman for the New York-based firm, confirmed Iksil’s status. The New York Times reported earlier that Iksil is leaving JPMorgan by the end of this year.

J.C. Penney slumped 20 percent, the most in the S&P 500, to $26.75. The department-store chain led by Apple Inc.’s former retailing chief reported a first-quarter loss and sales that fell more than analysts projected.

Abercrombie & Fitch Co. dropped 13 percent to $39.50, the lowest level since October 2010. The operator of namesake and Hollister stores reported first-quarter revenue that missed analysts’ estimates and said same-store sales will decline this fiscal year amid weakness in Europe.

Staples Inc. decreased 5.7 percent to $13.91. The largest office-supply retailer reported first-quarter sales of $6.1 billion, missing the average analyst estimate of $6.19 billion.

Some car companies and auto-parts suppliers gained as Warren Buffett’s firm said it had 10 million shares of GM on March 31 and Goldman Sachs Group Inc. said the industry has “significant” potential to gain from volume and margin growth. GM rose 2.3 percent to $21.91. Goodyear Tire & Rubber Co., the biggest U.S. tiremaker, added 4.9 percent to $10.69.

General Electric Co. climbed 3.3 percent to $19. Its finance unit will resume payouts to the parent company that were suspended in 2009 during a freeze in credit markets. Restarting the dividend is a milestone in GE Capital’s recovery from the financial crisis, when the unit suffered $32 billion of credit losses and received capital infusions from the parent.

Legg Mason Inc. jumped 7.5 percent, the biggest gain in the S&P 500, to $24.05. The money manager with 18 straight quarters of net redemptions plans to issue debt to help repurchase $1.25 billion of bonds from private-equity firm KKR & Co.

Facebook Inc. investors such as Accel Partners and Goldman Sachs Group Inc. increased the number of shares they’re selling in the social network’s initial public offering, boosting the sale to as much as $16 billion.

Existing holders will offer 241.2 million shares, bringing the total on offer to 421.2 million, a regulatory filing today shows. Accel, the biggest seller in the IPO, raised the amount it’s selling by 28 percent, while Goldman Sachs more than doubled its shares on offer.

Facebook, girding for the largest-ever IPO of a technology company, yesterday boosted the offering’s price range to as much as $38 a share, indicating a market value as high as $104 billion. While the expanded IPO may mean the appetite for shares is strong, insiders’ decision to pare holdings further may heighten some investors’ concern over Facebook’s earnings growth, said Greenwood Capital’s Walter Todd.

“If the demand wasn’t there, they wouldn’t have upsized the deal,” said Todd, who oversees about $940 million as chief investment officer at the Greenwood, South Carolina-based firm. “On the other hand, when you see insiders unloading their stakes, you start to wonder why. I could see it turning some institutional investors off.”

Investors will be able to avoid losses in the broader equity market this year by buying stocks with larger-than- average dividends, said David Kostin, chief U.S. equity strategist at Goldman Sachs Group Inc.

“The scarcest commodity in the world is yield,” the New York-based strategist said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “You have negligible returns” in most asset classes. “Where are you getting any income? You are going to get it in the form of dividends.”

Kostin has a year-end projection for the equities gauge of 1,250, according to a weekly survey by Bloomberg News. The S&P 500 has a dividend yield of 2.13 percent, according to Bloomberg data. Ten-year Treasuries yield 1.76 percent.

Have a wonderful evening everyone.

Be magnificent!

When you believe that the truth is living, moving, that it does not have one home or rest in any temple,

mosque, or church, in any religion, master or philosopher – in short, that nothing can lead you to it-

you will see also that you are this living thing in every respect;

it is your anger, your brutality, your violence, your despair,

It is the agony and the pain that you live through.  The truth is in the comprehension of all of this;

you cannot comprehend it unless you are determined to see it in your life.

Krishnamurti, 1895-1986

As ever,

Carolann

Acquire inner peace and a multitude will find

their salvation near you.

-Catherine de Hueck Doherty, 1896-1985

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