May 23, 2012 Newsletter

Dear Friends,

Tangents:

I learned something interesting this morning.  One of my clients dropped by the office on his way to work and we chatted for awhile.  I asked him how he passed this past long weekend.  He took his family to Tofino and they went to find the World War II plane wreckage, which I never knew existed.

The eldest of his three children, his teenage son, had researched it on the internet.  He showed me the photos on his smart phone.  It is amazing.  Turns out there was a plane carrying four anti-submarine bombs that crashed in the rainforest in Tofino shortly after take-off during World War II.  What is surprising is how intact the wreckage still is – I would have thought it would be rusted away by now.  Also, the bombs were removed afterward from the plane and detonated, creating a large crater, which is now filled with water – a pond.

I saw lots of these craters in Vietnam when we visited in December, only they were covered with grass, not water.

And also on this day in…

1430 – Burgundians capture Joan of Arc and sell her to the English
1533 – Henry VIII’s marriage to Catherine of Aragon is declared null and void; relations with the Catholic Church come to blows
1949 – The Federal Republic of West Germany is proclaimed
1934 – Gangsters Bonnie Parker and Clyde Barrow are killed by Texas Rangers

Most of the things worth doing in the world have been declared impossible before they were done. –Louis D. Brandeis

photos of the day

May 23, 2012

Clara Lahti runs to catch up with her family during a walk along a pond in the warm spring weather in Clarence, N.Y.

David Duprey/AP

Sailors line the mast of the tall ship ARC Gloria, training ship and official flagship of the Colombian Navy, as it passes the Statue of Liberty in New York Harbor while arriving for the 25th annual Fleet Week celebration.

Brendan McDermid/Reuters

Market Closes for May 23, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

May 23 (Bloomberg) — Canadian stocks rose a second straight day, wiping out a 1.7 percent retreat in the Standard & Poor’s/TSX Composite Index, as raw-material companies and banks reversed losses amid optimism about the Europe crisis.

Barrick Gold Corp., Goldcorp Inc. and Yamana Gold Inc. increased at least 4.8 percent as the S&P/TSX Gold Index rallied 4.9 percent to the highest level since May 2. Premier Gold Mines Ltd. surged 20 percent after finding “gold-bearing structures” at a site. Royal Bank of Canada and Toronto-Dominion Bank gained at least 1.2 percent. Romarco Minerals Inc. lost 25 percent after saying a U.S. Army Corps of Engineers environmental assessment for a gold project will take longer than expected.

The S&P/TSX Composite Index rose 113.02 points, or 1 percent, to 11,564.80. Its 2.5 percent increase this week is the biggest jump over two days since Jan. 3. The benchmark gauge surged 1.5 percent yesterday, the most in more than a month, and hadn’t posted back-to-back gains since the beginning of May.

“You have people thinking the Greek story is overplayed going into the weekend,” Andrew Pyle, an associate money manager on a Bank of Nova Scotia team that oversees about C$200 million ($200 million), said in a phone interview. “A lot of people are taking a step back and saying that the probability of an exit by Greece from the euro over the weekend is still pretty low. You’re also seeing some late-day cherry picking in terms of value players coming back into the market.”

The benchmark gauge on May 18 completed a third straight weekly decline as concerns mounted that the Greek debt crisis, European elections and a slowing Chinese economy may curb demand for commodities.

Materials companies in the S&P/TSX recovered from a 2.2 percent decline earlier in the day, posting a second straight rally, as gold and copper producers rose.

Barrick Gold, the world’s largest producer of the metal, climbed 6.7 percent to C$40.55. Goldcorp, the second-largest producer of the metal, rose 7 percent to C$38.40. Yamana Gold, Canada’s third-largest company in the industry by market value, gained 4.8 percent to C$14.85.

Teck Resources Ltd., the country’s biggest base-metals producer, rose 4.9 percent to C$31.46. First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, gained 5.8 percent to C$18.82.

Premier Gold Mines surged 20 percent to C$4.35 after finding “gold-bearing structures” during a construction project linking the Red Lake Gold Mines and Cochenour sites.

Romarco Minerals, which is developing a gold project in South Carolina, plunged 25 percent to 61 Canadian cents after saying it will not receive a decision on a Federal 404 Wetlands permit for its Haile gold project until August 2013. The timetable is “longer than we have been targeting,” President and Chief Executive Officer Diane Garrett said in a statement.

Financial stocks in the S&P/TSX rose for a second consecutive session after decreasing as much as 1.4 percent earlier in the day. The group fell for five straight sessions last week.

Royal Bank of Canada, the nation’s biggest lender, rose 1.4 percent to C$52.90. Toronto-Dominion Bank, Canada’s second- largest lender, increased 1.2 percent to C$78.73.

US

By Rita Nazareth

May 23 (Bloomberg) — U.S. stocks erased early losses amid optimism that European leaders will do more to halt contagion from the region’s debt crisis, helping the market reverse a plunge triggered by growing concern Greece will leave the euro.

Bank of America Corp., Alcoa Inc. and FedEx Corp. advanced at least 1.4 percent to pace gains among the biggest companies.

Facebook Inc. increased 3.2 percent after losing 19 percent in the previous two days. Dell Inc. tumbled 17 percent, the most since 2000, amid a disappointing revenue forecast. Hewlett- Packard Co. rallied 10 percent at 5:02 p.m. New York time after reporting quarterly results and saying it will cut 27,000 jobs.

The S&P 500 rose 0.2 percent to 1,318.86 at 4 p.m. New York time, reversing a decline of as much as 1.5 percent. Earlier today, it approached the average price from the last 200 days of about 1,280. The Dow Jones Industrial Average decreased 6.66 points, or 0.1 percent, to 12,496.15, trimming this year’s gain to 2.3 percent. About 7.6 billion shares changed hands on U.S. exchanges today, or 12 percent above the three-month average.

“Huge turnaround,” said Tim Ghriskey, who oversees about $2 billion as chief investment officer of Solaris Group in Bedford Hills, New York. “There’s speculation that European leaders will take action to stabilize the situation with Greece.

In addition, there’s a lot of cash on the sidelines looking to get into the equity market. Certainly, the decline we’ve had recently might provide an opportunity.”

Equities fell earlier, joining a global slump, as European leaders meet to discuss the region’s crisis. The prospect of Greece leaving the shared currency weighed on the market as parties opposed to bailout terms won most of the votes in May 6 elections.

Concern about Europe’s crisis erased about $4 trillion from global equity values this month as Brazil and Russia entered into bear markets. The S&P 500 has fallen 5.7 percent in May as financial and commodity shares tumbled at least 7.8 percent.

“European concerns are fueling global deleveraging that is particularly severe for sectors vulnerable to economic slowdowns and financial dislocations,” said Mohamed El-Erian, the chief executive officer of Pacific Investment Management Co., the largest manager of bond funds. “To contain the likely economic and financial disruptions, a ‘Grexit’ would need to be part of a broader effort to strengthen the euro zone’s underpinnings.”

Companies that are most-tied to economic growth rallied after posting the biggest losses in the S&P 500 earlier today.

The Dow Jones Transportation Average, a proxy for the economy, gained 1.2 percent. Bank of America added 2.7 percent, the most in the Dow, to $7.17. Alcoa, the largest U.S. aluminum producer, advanced 1.4 percent to $8.61. FedEx, the operator of the world’s biggest cargo airline, climbed 2.2 percent to $88.74.

Facebook added 3.2 percent to $32. It fell below its $38 IPO price on May 21 on concern its initial public offering was priced too high. The offering valued Facebook at 107 times trailing 12-month earnings, more than every S&P 500 member except Amazon.com Inc. and Equity Residential.

The cost to short sell Facebook is at the most-expensive level in a 10-point scale developed by Data Explorers Ltd., which said bets against the social-media company amount to 4.3 percent of shares sold in the company’s initial public offering.

A measure of homebuilders in S&P indexes gained 2.2 percent. Demand for new U.S. homes rose more than forecast in April, indicating residential real estate may contribute to economic growth for the first time in seven years.

Expedia Inc. advanced 6.8 percent to $45.61, a record.

Piper Jaffray Cos. said ComScore Inc. data suggest a “strong acceleration” in Europe for online-travel companies and raised its share-price estimate by 20 percent.

Car companies had the biggest gain in the S&P 500 among 24 industries, adding 1.4 percent. Ford Motor Co. jumped 2.2 percent to $10.41. The automaker was raised to investment grade by Moody’s Investors Service yesterday, enabling Executive Chairman Bill Ford, great-grandson of the founder, to reclaim the blue oval logo he put up as collateral for a loan.

Dell tumbled 17 percent, the biggest decline in the S&P 500, to $12.49. The forecast, paired with a first-quarter sales and earnings miss, pointed to problems endemic to Dell, Steve Felice, Dell’s president, said in a conference call. The sales team focused on individual products instead of packages of hardware and software, he said.

Rival Hewlett-Packard rallied 10 percent to $23.27 after the close of regular trading. The world’s largest PC maker will eliminate the jobs by October 2014 through firings and early retirement offers, for an annual savings of as much as $3.5 billion. The company also forecast fiscal third-quarter profit that missed analysts’ estimates on slumping demand for printers, data-center equipment and services.

Earlier losses drove the S&P 500 near its 200-day moving average. A drop below that level is seen by some technical analysts as a harbinger of further losses and could take the S&P 500 to 1,205, according to Ryan Detrick at Schaeffer’s Investment Research.

“If we continue to get negative news out of Europe, there would be a decent probability of that happening,” said Detrick, senior technical strategist at Schaeffer’s in Cincinnati. “We need some type of major positive catalysts to get us moving higher. Right now, we just don’t have one.”

Have a wonderful evening everyone.

Be magnificent!

The universal power that manifests itself in the universal law

is at one with our true power.

-Rabindranath Tagore,1861-1901

As ever,

Carolann

Fate chooses your relations,

you choose your friends.

-Jacques Delille, 1738-1813

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