May 25, 2012 Newsletter

Dear Friends,

Tangents:

Today is African Freedom Day.

Also on this day in…

1935 – Jesse Owens sets six world records in less than an hour in Ann Arbor, Michigan
1953 – The first atomic cannon is fired in Nevada
1946 – Jordan gains independence from Britain
1961 – JFK Asks Congress to support the space program
1977 – Star Wars Opens
1926 – Miles Davis born

photos of the day May 25, 2012

Members of the Landilani Amanyawa Nyau dance group perform during Africa Day commemorations held in Harare.

-Tsvangirayi Mukwazhi/AP

A couple of monkeys quench their thirst as another takes a dip on a hot summer afternoon on the outskirts of Jammu, India.

-Channi Anand/AP

Market Closes for May 25, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

May 25 (Bloomberg) — Canadian stocks rose a fourth straight day as commodity shares gained amid rising metal prices, reversing losses driven by banks amid concern about Spain’s finances.

Barrick Gold Corp., Goldcorp Inc. and Yamana Gold Inc. gained more than 1.2 percent as the Standard & Poor’s/TSX Gold Index completed the longest winning streak in a year. Suncor Energy Inc. and Canadian Natural Resources Ltd. rose as much as 1.3 percent as oil futures increased. Royal Bank of Canada, Toronto-Dominion Bank and Bank of Nova Scotia dropped at least 0.9 percent.

The S&P/TSX Composite Index increased 10.40 points, or 0.1 percent, to 11,576.47. The benchmark gauge ranged between a loss of 0.4 percent and a gain of 0.2 percent today. It added 2.6 percent this week and posted the biggest four-day rally since Feb. 22. Trading volume for S&P/TSX companies was about 24 percent less than the 10-day average, before U.S. stock exchanges are shut for a holiday on May 28.

“The teeter totter has been playing out all week,” Danielle Park, a money manager at Venable Park Investment Counsel Inc. in Barrie, Ontario, said in a telephone interview. The firm manages at least C$1 million ($1 million) each for more than 200 clients. “The wild card will be what fantastical idea will be announced next in terms of monetary policy.”

The index completed its first weekly gain since the end of April as materials companies and banks increased after U.S. home sales rose and investors speculated China and Europe will stimulate economic growth. The 8.5 percent decline in the index since May 1 drove its price-earnings ratio to 13.2 on May 18, the cheapest valuation since June 2009, according to data compiled by Bloomberg.

Materials companies in the S&P/TSX rebounded after falling as much as 0.3 percent early in the day after gold and copper increased as improving U.S. consumer confidence revived demand prospects.

The S&P/TSX Gold Index has increased seven straight days, its longest winning streak since May 2011. As of last week, Canada’s commodity shares had fallen to their cheapest valuations since the recession, wiping out the stock market’s best start to the year since 2004 as global economic concerns overshadowed the best two-month job growth in more than 30 years.

Barrick Gold, the world’s largest producer of the metal, climbed 1.8 percent to C$41.24. Goldcorp, the second-largest producer of the metal, rose 1.2 percent to C$38.84. Yamana Gold, Canada’s third-largest company in the industry by market value, gained 3.2 percent to C$15.30.

Teck Resources Ltd., the country’s biggest base-metals producer, increased 0.2 percent to C$31.22. First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, climbed 0.3 percent to C$18.66.

Energy stocks rose with oil futures as U.S. consumer confidence gained and the United Nations’ atomic agency found evidence Iran boosted its output of enriched uranium that could be used for a nuclear weapon. Iran is the second-biggest crude producer in the Organization of Petroleum Exporting Countries after Saudi Arabia.

Suncor Energy, Canada’s largest oil and gas producer, gained 1.3 percent to C$28.87. Canadian Natural Resources, the country’s third-biggest energy company, increased 0.6 percent to C$31.70.

Banks in the S&P/TSX fell 1.2 percent amid concern about Spain. The Bankia group, the Valencia-based lender nationalized earlier this month, will seek 19 billion euros ($23.8 billion) in government money to restructure its business following loan losses.

Spain is analyzing requests from regional governments to help them regain access to capital markets, Deputy Prime Minister Soraya Saenz de Santamaria said today. Catalonia’s government said it is complying “strictly” with its budget program and will honor its commitments.

Royal Bank of Canada, the nation’s biggest lender, dropped 2 percent to C$50.35. Toronto-Dominion Bank, Canada’s second- largest lender, decreased 1 percent to C$78.22. Bank of Nova Scotia, the country’s third-largest lender, fell 0.9 percent to C$50.95.

US

By Allison Bennett and Rita Nazareth

May 25 (Bloomberg) — U.S. stocks retreated, trimming a weekly rally, while Treasuries rose and the euro traded at a 22- month low amid growing concern about Spain’s finances and plans to force some investors to take losses on debt holdings at failing European banks. Spanish and Italian bond yields rose.

The Standard & Poor’s 500 Index slipped 0.2 percent to 1,317.82 at 4 p.m. in New York, while emerging market equities capped a 10th weekly slide in their longest slump since 1994. Ten-year U.S. note yields lost four basis points to 1.74 percent. The euro slipped 0.1 percent to $1.2515 and dipped below $1.25 for the first time since July 2010. Spain’s 10-year yields added 15 basis points and Italy’s rose 10.

The Bankia group, the Spanish lender nationalized earlier this month, will seek 19 billion euros ($23.8 billion) in government money to restructure its business following loan losses. Spain is analyzing requests from regional governments to help them regain access to capital markets, Deputy Prime Minister Soraya Saenz de Santamaria said today. Catalonia’s government said it is complying “strictly” with its budget program and will honor its commitments.

“People are wondering if there are other skeletons in Spain’s regional government closets,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc. His firm oversees $3.68 trillion as the world’s largest asset manager. “Greece is critical, but still relatively small in the euro zone. The same cannot be said of Spain.”

Fewer than 5 billion shares changed hands on U.S. exchanges today, the slowest trading day of the year, according to data compiled by Bloomberg. U.S. markets are closed May 28 for the Memorial Day holiday.

The S&P 500 retreated after gaining for four straight days, leaving it up 1.7 percent in the week. This week’s rebound followed an 8.7 percent slump from a four-year high in April through May 18 that dragged the index’s price-to-earnings ratio to as low as 13.1, the cheapest valuation using reported earnings since November, according to data compiled by Bloomberg.

Gauges of industrial, commodity and financial shares fell at least 0.4 percent to lead losses among eight of the 10 main industry groups in the S&P 500. Boeing Co., Caterpillar Inc., JPMorgan Chase & Co. and Chevron Corp. slid at least 1.2 percent for the worst losses in the Dow Jones Industrial Average.

Facebook Inc. sank 3.4 percent, following a two-day gain.

U.S. stocks reversed losses late yesterday after Italian Prime Minister Mario Monti said most of the region’s leaders support sales of joint euro-area bonds to fight the debt crisis.

The majority of EU leaders at a Brussels meeting this week backed joint euro-area government bonds, Monti told Italy’s La7 television station yesterday. German Chancellor Angela Merkel left the door open to a compromise on debt sharing in the region.

“There’s an air of inevitability that we’ll get euro bonds,” Donald Williams, chief investment officer at Platypus Asset Management Ltd. in Sydney, which manages about $1 billion, said in an interview with Susan Li on Bloomberg Television’s “First Up.” “Germany is going to have to compromise more than it was willing to a few months ago. Ultimately there will be some resolution there and the markets will start to head higher again.”

The MSCI All-Country World Index fell 0.2 percent today, trimming this week’s gain to 0.7 percent. The index snapped a string of three weekly losses that drove it to 12.9 times reported earnings, the cheapest valuation this year. More than $4 trillion was erased from the value of global equities in the first three weeks of the month as concern deepened Greece will abandon the euro. European leaders failed to come up with a plan to resolve the debt crisis at a summit this week.

The Stoxx Europe 600 Index climbed 0.2 percent and increased 1.5 percent in the week, snapping a three-week drop.

Trading in Bankia SA, the publicly traded banking business of the nationalized Spanish lender, was suspended. The unraveling of Bankia has deepened concern about the health of Spain’s banks and increased the government’s financing costs as it struggles with the debt crisis.

Bankia, Banco Popular Espanol SA and Bankinter SA had their credit ratings cut to junk by S&P, which cited Spain’s weakening economy. S&P cut Bankia to BB+ from BBB- and its parent BFA, which was nationalized this month, was cut to B+ from BB-, the company said in statement today. Popular and Bankinter were reduced to BB+, and Banca Civica SA, set to merge with CaixaBank SA, was cut to BB.

Draft plans obtained by Bloomberg News showed the European Union will seek to give regulators the power to impose writedowns on senior unsecured creditors at failing banks as part of measures to get taxpayers off the hook for saving crisis-hit lenders.

The writedown powers would apply to senior unsecured debt and derivatives, while some other claims, including secured debt and deposits that are protected by government guarantee programs, will be protected from losses, according to the guidelines.

The euro weakened against 11 of 16 major peers, while the dollar strengthened against 13.

“I would be very wary of calling the bottom for the euro at this point,” said Samarjit Shankar, a managing director for the foreign-exchange group in Boston at Bank of New York Mellon Corp. “Going into the long weekend there has been an acceleration in U.S. Treasury inflows in a reaffirmation of the resolutely negative sentiment that is in place for all European assets.”

Brazil’s real rose against all of its most-traded counterparts, surging 2.1 percent to 50 U.S. cents, as the central bank said it will offer currency-swap contracts at auction.

The Dollar Index, which tracks the currency against six major peers, increased 0.1 percent to the highest level since September 2010.

The S&P GSCI Index of commodities increased 0.3 percent, rising for a second day as wheat, zinc and silver climbed more than 1 percent to lead gains in 17 of 24 materials.

The MSCI Emerging Markets Index was little changed and poised for a 10th weekly decline, the longest string of losses since 1994. The Shanghai Composite Index lost 0.7 percent today. China’s largest banks may fall short of loan targets for the first time in at least seven years as an economic slowdown crimps demand for credit, three bank officials with knowledge of the matter said. Indonesia’s Jakarta Composite Index sank 2.1 percent, the biggest loss since Nov. 1 and the most in Asia.

Have a wonderful weekend everyone.

Be magnificent!

In the song of the rushing torrent,

hold onto the joyful assurance:

I will become the sea.

And this is not a vain supposition;

it is absolute humility, because it is the truth.

-Rabindrantath Tagore, 1861-1901

As ever,

Carolann

I urge you to please notice when you are happy,

and exclaim or murmur or think at some point,

“If this isn’t nice, I don’t know what is.”

-Kurt Vonnegut, 1922-2007

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