May 2, 2012 Newsletter

Dear Friends,

Tangents:

Received this news alert from The Wall Street Journal earlier today:

By Kelly Crow

Let the art market roar. Norwegian painter Edvard Munch became the most expensive artist at auction Wednesday when his 1895 pastel of a terrified man clutching his cheeks along an Oslo fjord, “The Scream,” sold for $119.9 million at Sotheby’s—the most ever paid for a work of art at auction.

The purchase surpasses the $106.5 million spent two years ago for Pablo Picasso’s 1932 portrait of his mistress, “Nude, Green Leaves and Bust,” as well as Alberto Giacometti’s earlier record of $104.3 million for his 1960 spindly bronze sculpture, “Walking Man I.”

Edvard Munch, ‘The Scream,’ 1895

In a dogged contest at the auction house’s New York saleroom, the bidding for Munch’s “Scream” began at $40 million and shot up quickly, with five bidders from the U.S. and China competing for the sunset-colored portrait. Charlie Moffett, a Sotheby’s specialist who represents American buyers, fielded the anonymous winning bid by phone.

The record-setting Munch was considered a plum as much for its rarity as for its pop-culture ubiquity. One of four versions of “The Scream” that Munch created, this version was the only one not in an Oslo museum and the first to ever come up at auction. The image has also been reproduced on everything from ice-cream containers to the villain’s mask in Wes Craven’s “Scream” horror films.

The work had been priced to sell for about $80 million. Sale prices, unlike estimates, include the auction house’s commission, which is 25% on the first $50,000, 20% up to $1 million and 12% above $1 million.

The sale reflects the trophy-hunting atmosphere buoying the global art market, as billionaires around the world vie for the few masterpieces that come up for sale in any given season. Bragging rights are at stake, but their collective bidding has also helped recalibrate price levels for dozens of top artists.

The Many Faces of Munch’s “The Scream”

The Simpsons TM and 2012 Twentieth Century Fox Film Corporation.

“The Scream” has inspired many pop-culture mash-ups. Here, Homer Simpson swirls with existential dread.

Outside the auction houses, artworks have already traded for even more: Five years ago, Chicago collector Stefan Edlis sold Andy Warho piecel “Turquoise Marilyn” to hedge-fund billionaire Steven Cohen for at least $80 million. Dealers say Greek shipping magnate George Embiricos sold his Paul Cezanne painting, “Card Players,” to an anonymous buyer last year for at least $250 million. Details of that $250 million sale remain cloudy in part because Mr. Embiricos died last fall, and no buyer for his record-setting painting has since stepped forward. Dealers say the likely buyers include Qatar’s royal family, which declined to comment, and billionaires from Greece and Russia.

“There’s a lot of money out there now, and it doesn’t take many billionaires to push up a price,” said Mr. Edlis, the Chicago collector, before the sale. “You can only buy so many yachts, and a painting is so much better to look at than a bankbook.” Mr. Edlis said he didn’t plan to enter the fray on the Munch.

Elsewhere in Sotheby’s sale, collectors also chased after a group of works coming from the estate of financier Theodore Forstmann, a pioneer in the leveraged-buyout business. Mr. Forstmann was the senior founding partner of the investment firm Forstmann Little & Co., and chairman and CEO of IMG Worldwide Holdings, Inc.

Ellen Gamerman/The Wall Street Journal:

Leading this group of colorful, modern paintings and bronze sculptures was Picasso’s $29.2 million “Woman Sitting in a Chair” from 1941, and Chaim Soutine’s $9.3 million “The Hunter of Maxim’s” from 1925.

“The Scream” carries its own mystique, having come from the collection of Petter Olsen, a Norwegian real-estate developer and shipping heir who grew up with the work in the living room of his childhood home. His father, Thomas Olsen, a neighbor of Munch’s in the small Norwegian town of Hvitsten, bought the work from the German coffee magnate who likely commissioned it. During World War II, Mr. Olsen said his family hid the work along with dozens of other Munch artworks in a hay barn to protect them from the Nazis, who were destroying artworks they deemed degenerate. Mr. Olsen has said he offered up “The Scream” now in order to fund a museum of Munch’s work in Hvitsten to open next year.

The work itself depicts a bald, skeletal figure in a blue shirt standing at a popular suicide spot on Oslo’s horseshoe-shaped bay where people could often hear screams from a nearby insane asylum, according to art historians. Munch’s sister, who had been diagnosed with schizophrenia, was housed in that asylum. (There’s still debate over whether Munch’s character is actually screaming or using his hands to muffle the sound of surrounding screams.)

The third in a series created between 1893 and 1910, Sotheby’s version was created with pastel on rough board and offered in its original frame, which is inscribed with an 1892 poem Munch wrote that inspired the work. In the poem, he says he was walking beside that fjord when he sensed “an infinite scream passing through nature.”

Historians hail Munch for breaking away from the Impressionists who still held sway over the art world in the late 19th century. Instead of playing with light and shadow to capture the world around him, Munch experimented with ways to visualize his own tormented emotions—a shift that helped pave the way for the Expressionists like Egon Schiele along with later Abstract Expressionists like Mark Rothko.

And, on this day in,

1670 – The Hudson’s Bay Company is founded
1946 – Prisoners revolt at California’s Alcatraz prison
1919 – The first U.S. air passenger service begins
1933 – Loch Ness Monster sighted

2011- Osama bin Laden killed during a raid on his compound in Abbottabad

You were born an original … Don’t die a copy. –John Mason

photos of the day

May 2, 2012

In this photo taken by Canadian Peter Mark in the end of April, 2012 and released today, a motorbike lies on a beach in Graham Island, western Canada. Japanese media say the motorcycle, lost in last year’s tsunami, washed up about 4,000 miles away in Canada. The owner, Yokoyama, was located through the license plate number, Fuji TV reported.

Peter Mark/Kyodo News

Mallard ducklings follow their mother into the grass on the south side of Nebraska Hwy. 2 near 13th Street in Lincoln, Neb.

Francis Gardler/The Journal-Star/AP

Market Closes for May 2, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

May 2 (Bloomberg) — Canadian stocks fell, snapping a five- day rally, after a U.S. industry report showed employers added fewer jobs than forecast last month and commodity prices dropped.

Canadian Natural Resources Ltd., the country’s third- largest energy company, declined 2.3 percent as oil dropped from a five-week high. Enbridge Inc., the nation’s largest pipeline company, dropped 0.9 percent. Barrick Gold Corp. decreased 2.7 percent as gold prices fell and the company reported results that matched analyst estimates. Copper producer First Quantum Minerals Ltd. lost 2.3 percent on declining prices for the metal.

The Standard & Poor’s/TSX Composite Index decreased 102.67 points, or 0.8 percent, to 12,230.12 in Toronto.

“The key thing today is that gold and oil are down,” Irwin Michael, a portfolio manager at ABC Funds in Toronto, said in a telephone interview. Michael’s firm oversees C$1 billion ($1 billion). “It’s a bit of a knee-jerk reaction to the last week or so of good, solid gains in the marketplace.”

The benchmark gauge had its second straight weekly gain in the period ending April 27, marking the first time since February that the index increased in consecutive weeks. Canadian stocks rose on better-than-forecast corporate earnings and U.S. housing data that exceeded expectations. Energy and raw material stocks account for 44 percent of Canadian stocks by value.

Energy companies fell as crude oil futures extended declines after the U.S. Energy Department said stockpiles rose to the highest level in 21 years. Supplies increased 2.84 million barrels to 375.9 million, the department said today.

Canadian Natural Resources declined 2.3 percent to C$33.91.

Enbridge dropped 0.9 percent to C$40.94. Oil-sands producer Cenovus Energy Inc. fell 4.3 percent to C$34.61.

Materials stocks in the S&P/TSX declined as metal prices fell. Gold dropped the most in a week after three voting members of the  U.S. Federal Open Market Committee said they don’t see a need for more economic stimulus and the Bombay Bullion Association said imports of the metal fell by as much as a two- thirds in April from a year earlier in India, the biggest importer.

Barrick Gold, the world’s largest producer of the metal, fell 2.7 percent to C$38.80 after reporting earnings excluding some items of C$1.09 a share, matching the average analyst estimate. Goldcorp Inc., the world’s second-biggest bullion producer, decreased 1.4 percent C$37.54.

Copper dropped for the first time in more than a week as Europe’s slowing industrial output and rising unemployment signaled a worsening economic slump that may crimp demand.

First Quantum Minerals, Canada’s second-largest publicly traded copper producer, decreased 2.3 percent to C$20.01. Teck Resources Ltd., the country’s biggest base metals producer, slipped 2.2 percent to C$36.39.

Financial shares declined as ADP Employer Services said companies added the fewest U.S. workers in seven months in April.

Royal Bank of Canada, the country’s biggest lender, dropped 0.9 percent to C$56.36. Toronto-Dominion Bank, Canada’s second- largest lender, fell 0.5 percent to C$82.59.

US

By Rita Nazareth

May 2 (Bloomberg) — U.S. stocks fell, dragging the Dow Jones Industrial Average down from the highest level since 2007, as data showed companies added fewer jobs than economists projected and euro-region unemployment rose to a 15-year high.

Energy and financial shares dropped the most among 10 groups in the Standard & Poor’s 500 Index. Chesapeake Energy Corp. tumbled 15 percent after reporting an unexpected loss and saying it may run out of money next year under the weight of the lowest natural-gas prices in a decade. Bank of America Corp.

retreated 1.8 percent. Stocks pared their slump as a gauge of homebuilders in S&P indexes advanced to the highest since 2008.

The S&P 500 slid 0.3 percent to 1,402.31 at 4 p.m. New York time, after falling 0.9 percent earlier today. The Dow dropped

10.75 points, or 0.1 percent, to 13,268.57. The Nasdaq Composite Index increased 0.3 percent to 3,059.85 as Apple Inc. shares rebounded. About 6.6 billion shares changed hands on U.S. exchanges, or 1.4 percent below the three-month average.

“The labor market is weak at best,” said Keith Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati. “While we thought that we were gaining some momentum, more recent data suggest that things are sluggish. If we start to see a cascade of negative news, the market is going to be vulnerable.”

Equities fell as American companies added 119,000 workers in April, the fewest in seven months, according to a private report. Concern about Europe’s economy also helped drive stocks lower today. The jobless rate in the euro area rose to 10.9 percent in March, manufacturing contracted last month and unemployment in Germany unexpectedly increased.

The decline in stocks came after the S&P 500 rose to the highest level in almost a month yesterday. Today’s payroll survey intensified concern that Labor Department data in two days may show the U.S. isn’t growing fast enough to reduce unemployment. An index of forecasting accuracy shows data have been worse than economists predicted. The Citigroup Economic Surprise Index is at minus 20.40, the lowest since October.

“I’ve got a feeling that we might see a downside surprise on the monthly jobs report,” Randy Frederick, managing director of active trading and derivatives at Charles Schwab Corp., said from Austin, Texas. His firm has $1.83 trillion in client assets. “Given how high the market is right now and this softening in economic data, it’s very likely to see a pullback in the range of 5 percent to 10 percent.”

Investors bought stocks this year on better-than-estimated earnings, sending the S&P 500 up 12 percent. About 73 percent of S&P 500 companies that reported results since April 10 have beaten projections, according to data compiled by Bloomberg.

Six out of 10 groups in the S&P 500 retreated as energy shares slumped 1.6 percent. Oil dropped from a five-week high after the U.S. Energy Department said stockpiles rose to the highest level in 21 years. Byron Wien, the 79 year-old chairman of Blackstone Group LP’s advisory services unit, is forecasting an annual drop in oil prices for the first time in his career as swelling production pushes global inventories higher.

Chesapeake tumbled 15 percent, the most since 2008, to $16.74. The company slashed its full-year 2012 and 2013 operating cash flow estimates by as much as 48 percent, and increased the amount of assets it plans to sell. This year’s cash flow estimate was lowered to $2.7 billion to $3 billion, from a February forecast of $4.5 billion to $5.2 billion.

The shares surged 6.3 percent yesterday amid plans to strip Chief Executive Officer Aubrey McClendon of the chairman’s job and end an executive perk that allowed him to buy personal stakes in every well the company drilled.

“I’m deeply sorry for all of the distractions of the past two weeks,” McClendon, co-founder of Oklahoma City-based Chesapeake, said on a conference call to discuss first-quarter results today. McClendon said the company may have to sell more assets than planned to cover a gap between cash flow and revenue if natural-gas prices remain depressed.

The KBW Bank Index dropped 0.9 percent as 18 of its 24 stocks retreated. Bank of America declined 1.8 percent to $8.16.

Citigroup Inc. slipped 2.7 percent to $32.70.

Bankrate Inc. plunged 15 percent, the most since it went public in June, to $20.19. The online publisher of personal finance information reported first-quarter earnings and revenue that fell short of estimates.

OpenTable Inc. sank 15 percent, the biggest decline since going public in 2009, to $37.13. The online restaurant- reservation service forecast revenue in 2012 of no more than $164 million, compared with the average analyst estimate of $168.5 million.

Stocks pared losses as a gauge of homebuilders in S&P indexes rose 2.5 percent. Lennar Corp. gained 2.7 percent to $29.02. D.R. Horton Inc. added 3.4 percent to $17.22.

An International Strategy & Investment survey released yesterday showed sales by homebuilders climbed to a six-year high. The Los Angeles Times reported that the Federal Housing Finance Agency is under pressure to allow Fannie Mae and Freddie Mac to reduce loan principal amounts for struggling borrowers.

A rebound in Apple, the world’s most valuable company, also helped trim some of the earlier slump in equities. Apple rose 0.7 percent to $585.98, after dropping for four straight days.

CVS Caremark Corp. rose 2.7 percent to $45.92. The largest provider of prescription drugs in the U.S. reported first- quarter profit that exceeded analysts’ estimates after grabbing customers from Walgreen Co.

Con-way Inc. advanced 13 percent to $37. The U.S. trucking company said it earned 45 cents a share excluding some items in the first quarter. Analysts, on average, estimated 34 cents, according to a Bloomberg survey.

Nike Inc., the world’s largest sporting-goods company, surged to an all-time high today. The shares added 2.7 percent to $114.28, extending this year’s rally to 19 percent.

TripAdvisor Inc. surged 17 percent to $42.63 for the biggest gain in the S&P 500. The online travel-recommendation service spun off from Expedia Inc. reported first-quarter profit and sales that topped some analysts’ estimates.

Financial shares are sending a signal that stock investors may be better off without a “sell in May” strategy this year, said Ari H. Wald, a Brown Brothers Harriman & Co. analyst.

The S&P 500’s financial stocks are beating the benchmark this year after lagging behind in 2011. The group’s weakness last year preceded five straight months of declines, from May through September, for the S&P 500.

Banks, insurers and other financial companies posted the year’s biggest gain among the S&P 500’s 10 main industry groups through yesterday. Their industry index rose 20 percent, just beating a 19 percent advance in a gauge of technology stocks.

Another favorable sign is that computer-related companies and other groups sensitive to economic swings are market leaders this year, Wald wrote yesterday in a report. Industries less affected by the economy’s performance were top performers through the first four months of last year.

There are indicators of weakness as well, he wrote. The number of 52-week highs in U.S. stocks after subtracting lows is shrinking, investor concern about a market slump has faded, yields on Treasury debt are low by historical standards, and commodity prices have fallen in the past two months.

The slump in these and other market barometers “has not progressed to the point that they support a bearish outlook as they did in May 2011,” Wald wrote. Instead, they point toward a “lack of full confirmation in either direction,” according to the New York-based analyst.

Have a wonderful evening everyone.

Be magnificent!

Do not believe a thing simply because it has been said.

Do not put your faith in traditions only because they have been honored by many generations.

Do not believe a thing because the general opinion believes it to be true or because it has been said repeatedly.

Do not believe  a thing because of the single witness of one of the sages of antiquity.

Do not believe a thing because the probabilities are in its favor,

or because you are in the habit of believing it to be true.

Do not believe in that which comes to your imagination,

thinking that it must be the revelation of a superior Being.

Believe nothing that binds you to the sole authority of your masters or priests.

That which you have tried yourself, which you have experienced, which you have recognized as true,

and which will be beneficial to you and to others;

believe that, and shape your conduct to it.

-Buddha

As ever,

Carolann

Follow your desire as long as you live.

-Ptah-hotep, 25^th-24^th centuries B.C.

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