May 17, 2012 Newsletter

Dear Friends,

Tangents:

My newsletter was sent to you last night not quite finished (sorry about that, so I included an extra picture today), but I had to leave here quickly to meet a friend for a date.  We went to see  Jamie Lee Curtis and listen to her wonderful talk for a couple of hours.  I knew her father was Tony Curtis, but I only learned last night that her mother was the actress Janet Leigh.  Anyway she was quite amazing.

I was reading recently about the life of another remarkable woman who passed away at the end of March – Jay Macpherson, a poet and professor at Victoria College.  Her obituary quoted the American literary critic Harold Bloom, who recognized her rarity from the moment the title poem of The Boatman caught his ear.   “She was a woman of the deepest literary sensibility and really very close to a kind of genius in poetry and in deep meditative thought upon the meaning and nature of poetry,” he said in an interview in which he redited several of her poems by heart.  When she told her friend George Johnston about a class trip (from McGill University) to visit the Toronto Public Library System, he insisted on writing a letter of introduction to his friend Northrop Frye at Victoria College.  After a brief encounter with Frye, Macpherson wrote that they parted “ with the offer ringing in my head that if I could get myself to Toronto he would ‘teach me Blake’ – by myself, as he wasn’t otherwise giving the course.”  She did get   herself to Toronto and Frye did teach her Blake.  He also supervised both he Masters (1955) and PhD (1964) degrees in Victorian literature.  The Boatman was dedicated to Frye and his wife, Helen, and contains a cycle about Noah and the ark.  The sequence ends with The Anagogic Man, a poem her muse was said to have given her as she watched Frye approach the entrance to Victoria College one day.  Knowingness and the affection are all there in its first two stanzas:

THE ANAGOGIC MAN

Noah walks with head bent down;

For between his nape and crown

He carries, balancing with care,

A golden bubble round and rare.

Its gently shimmering sides surround

All us and our worlds, and bound

Innocence and experience.

-Jay Macpherson, from The Boatman

And on this day in…

1792 – Merchants form the New York Stock Exchange at 70 Wall Street
1940 – Germany occupies Brussels and Belgium and begins the invasion of France
1954 – The U.S. Supreme Court unanimously rules for school integration in Brown v. Board of Education.
1939 – King George VI and Queen Elizabeth arrive in Québec City, to begin a month-long visit to Canada, the first by a reigning monarch.

photos of the day May 17, 2012

A man dressed as Charlie Chaplin walks on the beach in Cannes, France during the 65th Cannes Film Festival.

Eric Gaillard/Reuters

Three people walk along an avenue of trees at Lac Leman near Lausanne, Switzerland.

Jean-Christophe Bott/Keystone/AP

A H-2A rocket carrying four satellites including one from South Korea blasts off from the launching pad at Tanegashima Space Center on the Japanese southwestern island of Tanegashima, about 621 miles southwest of Tokyo.

Kyodo/Reuters

Market Closes for May 17, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

May 17 (Bloomberg) — Canadian stocks rose, breaking a four-day losing streak, as a rally in gold helped equities avoid declines seen in the U.S. and Europe.

Barrick Gold Corp., Goldcorp Inc. and Yamana Gold Inc. increased more than 4.5 percent. Canadian Natural Resources Ltd. climbed 1.5 percent. China Gold International Resources Corp. gained 7.1 percent after a Bloomberg News survey showed that China’s economic growth is likely to accelerate in the third quarter. Royal Bank of Canada and Toronto-Dominion Bank fell at least 1.6 percent.

The Standard & Poor’s/TSX Composite Index advanced 4.60 points, or less than 0.1 percent, to 11,330.68 Toronto time, trimming an earlier gain of as much as 0.9 percent. The index slumped 3.5 percent during the previous four days, and had declined in 10 out of the past 11 sessions.

“This is a weak bounce-back day,” Todd Johnson, a money manager at BCV Asset Management in Winnipeg, Manitoba, said in a telephone interview. The firm oversees C$340 million ($335 million). “Markets don’t do straight down forever. Maybe investors are getting a little exhausted from all the negative Spanish and European news.”

Equities fell in the U.S. and Europe as Spain’s borrowing costs rose at an auction, stoking concern that the region’s financial contagion is spreading from Greece. After the close of regular trading, Moody’s Investors Service downgraded the credit ratings of Spanish banks.

The S&P/TSX is heading for its third straight weekly decline as concerns mount that the Greek debt crisis, European elections and a slowing 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.

Materials stocks in the S&P/TSX rose for a second straight day as gold rallied for the first time in five sessions. The metal jumped the most since October as speculation that the Federal Reserve will announce more stimulus for the U.S. economy boosted demand for the precious metal.

Barrick Gold, the world’s largest producer of the metal, rose 6.9 percent to C$38.16. Goldcorp, the second-largest producer of the metal, gained 6.9 percent to C$35.48. Yamana Gold Inc., Canada’s third-largest company in the industry by market value, increased 4.6 percent to C$13.79.

China Gold, which explores and develops projects throughout Asia, gained 7.1 percent to C$3.30. China’s third-quarter economic growth will rebound to 8.3 percent from 7.9 percent this quarter, the first increase in seven periods, according to the median estimate of 21 economists surveyed by Bloomberg News.

Financial companies in the benchmark index tumbled after the Federal Reserve Bank of Philadelphia’s general economic index decreased to minus 5.8 in May, indicating an unexpected contraction in manufacturing. Economists forecast the gauge would rise to 10.

Royal Bank of Canada, the nation’s biggest lender, slipped 2 percent to C$51.96. Toronto-Dominion Bank, Canada’s second- largest lender, decreased 1.6 percent to C$77.65.

US

By Rita Nazareth

May 17 (Bloomberg) — The Standard & Poor’s 500 Index tumbled to a four-month low on disappointing economic data and concern that credit ratings for Spanish banks would be cut.

Nine out of 10 S&P 500 groups fell amid weaker-than- forecast data on manufacturing in the Philadelphia region and U.S. leading indicators. Caterpillar Inc. and JPMorgan Chase & Co. slid at least 4.3 percent to pace losses in the largest companies. Apple Inc. sank 2.9 percent, sending its market value below $500 billion. Facebook Inc. raised $16 billion in the biggest initial public offering by a technology company in history, pricing shares at the top end of an increased range.

The S&P 500 fell 1.5 percent to 1,304.86 at 4 p.m. New York time. The Dow Jones Industrial Average slid 156.06 points, or 1.2 percent, to 12,442.49. The Nasdaq-100 Index sank 2.1 percent to 2,509.05, falling for an eighth day in the longest slump since 2010. The Russell 2000 Index of small companies slipped 2.3 percent to 754.33. About 8.3 billion shares changed hands on U.S. exchanges, or 24 percent above the three-month average.

“Investors are de-risking,” said Tim Hoyle, the director of research at Radnor, Pennsylvania-based Haverford Trust Co., which manages about $6.5 billion. “They look at a global situation that appears to be degrading, not improving.”

Concern about a world economic slowdown drove the S&P 500 down 3.9 percent in five days. Banco Santander SA was among 16 Spanish banks whose credit ratings were cut by Moody’s Investors Service, which cited economic weakness and the government’s mounting budget strain. The announcement came after the market close, confirming investor speculation.

Both Russia’s Micex Index and Brazil’s Bovespa index fell more than 20 percent from their previous peaks, entering a bear market. The S&P 500 has fallen 8.1 percent from an almost four- year high on April 2. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against S&P 500 losses, soared 10 percent to 24.49, the highest since Dec. 19.

Consumer discretionary, financial and raw material shares had the biggest losses in the S&P 500 among 10 groups. The Morgan Stanley Cyclical Index of companies most-tied to the economy slumped 2.3 percent. The Dow Jones Transportation Average sank 3.2 percent. The KBW Bank Index fell 1.7 percent. A measure of homebuilders in S&P indexes tumbled 6 percent. The Bloomberg U.S. Airlines Index slipped 5.6 percent.

Caterpillar, the world’s largest maker of construction equipment, sank 4.4 percent to $87.80. JPMorgan retreated 4.3 percent to $33.93.

Apple lost 2.9 percent to $530.12, sending its market value to $495.7 billion. The company’s market capitalization had topped $500 billion for the first time in February, cementing its lead as the world’s most valuable business and reaching heights not seen by any company since the last recession.

SAC Capital Advisors LP and Viking Global Investors LP were among hedge funds that sold a net 6.1 million shares of Apple last quarter, taking advantage of the 48 percent jump in the iPhone maker’s stock. The stock has fallen 17 percent from its peak in April.

Hedge funds accounted for more than a third of the 15.2 million net Apple shares that were sold by endowments, banks, insurance companies and other investors during the first quarter, according to data compiled by Bloomberg, which was aggregated from regulatory filings. Even so, Apple remains hedge funds’ most valuable holding. As a group they controlled 37.8 million shares as of March 31.

“Apple has always been a hedge-fund favorite,” said Michael Binger, a senior portfolio manager at Gradient Investments LLC in Shoreview, Minnesota, which oversees about $225 million. “You’re seeing some locking in of profits.”

Facebook sold 421.2 million shares at $38 each, a statement today shows. That values the social network at $104.2 billion, making it the largest company to go public in the U.S. by market capitalization, according to data compiled by Bloomberg and Dealogic. Facebook, led by 28-year-old Mark Zuckerberg, this week expanded the IPO to meet demand, allowing investors Goldman Sachs Group Inc. and Accel Partners to reap more gains.

“My feeling is they could have gone higher, but they wanted to leave some room for upside tomorrow,” said Arvind Bhatia, an analyst with Sterne, Agee & Leach Inc. in Dallas.

“The demand was obviously quite strong so I think it’s the right move.”

American International Group Inc. retreated 6.5 percent, the biggest decline since Oct. 3, to $28.47. The Federal Reserve Bank of New York postponed the sale of assets acquired in the company’s rescue.

Limited Brands Inc. lost 4.4 percent to $45.86. The owner of the Victoria’s Secret lingerie chain forecast earnings for the second quarter and full year that trailed estimates.

Wal-Mart Stores Inc. rallied 4.2 percent, the most since 2009, to $61.68. The world’s largest retailer reported first- quarter profit that topped analysts’ estimates as its low prices increased customer traffic and boosted sales.

Sears Holdings Corp. gained 3.1 percent to $52.42. The retailer controlled by Edward Lampert reported first-quarter net income of $189 million after selling stores and said it would partially spin off its Canadian operations.

Gold producers rallied after the precious metal jumped the most since October as speculation that the Federal Reserve will announce more stimulus boosted demand. Newmont Mining Corp., the largest U.S. gold producer, added 4 percent to $45.26.

Hewlett-Packard Co. advanced 0.1 percent to $22.06, after falling as much as 1 percent. The company is considering cutting as many as 25,000 jobs, or 8 percent of its work force, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.

A long-term peak in the S&P 500 is developing as the gauge diverges from other equity measures, meaning stocks are likely to decline next year, according to RBC Capital Markets.

While the S&P 500 surpassed its 2011 peak last month, other stock measures including the Russell 2000 Index of small U.S. companies and the MSCI Emerging Markets Index failed to reach last year’s levels, sending a warning sign, according to a May 15 report from RBC’s Robert Sluymer.

“The MSCI and Russell didn’t confirm the S&P’s new cycle highs,” Sluymer, a technical analyst at RBC in New York, said during a phone interview yesterday. “These are the types of divergences you start to get as market tops develop.”

At the same time, the index may rebound in the next few weeks after reaching its “support band” of 1,300 to 1,330, Sluymer said in the May 15 report.

Cyclical companies are showing no signs of a reversal even though they appear “oversold,” Sluymer said. Caterpillar and Joy Global Inc. are two examples of economic-sensitive companies that have shown no evidence of bottoming, he said.

“We’re working through a much bigger top here,” he said in the interview. “We’re already seeing the market rotating away from cyclical leadership towards defensive themes.”

Have a wonderful evening everyone.

Be magnificent!

As long as there is division in any form

there must be conflict.

You are responsible, not only to your children,

but to the rest of humanity.

Unless you deeply understand this, not through words or ideas or the intellect,

but feel this in your blood, in your way of looking at life, in your actions,

you are supporting organized murder which is called war.

Krishnamurti, 1895-1986

As ever,

Carolann

Many live in the ivory tower called reality; they never

venture on the open sea of thought.

-Francois Gautier, 1959-

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