May 31, 2012 Newsletter

Dear Friends,

Tangents:

Poet Walt Whitman’s birthday, born May 31^st, 1819,

…Passing the visions, passing the night,

Passing, unloosing the hold of my comrades’ hands,

Passing the song of the hermit bird and the tallying song of my soul,

Victorious cong, death’s outlet song, yet varying ever-altering song,

As low and wailing, yet clear the notes, rising and falling, flooding the night,

Sadly sinking and fainting, as warning and warning, and yet again bursting with joy,

Covering the earth and filling the spread of the heaven,

As the at powerful psalm in the night I heard from recesses,

Passing, I leave thee lilac with heart-shaped leaves,

I leave thee there in the dooryard, blooming, returning with spring…

-Walt Whitman, from When Lilacs Last in the Dooryard Bloom’d

And on this day in…

1859 – Big Ben goes into operation in London

1819 – Walt Whitman, American poet, is born
1988 – Ronald Reagan in Moscow, the first American president to do so in 14 years
1962 – Adolf Eichmann, former SS commander, is hanged near Tel Aviv, Israel
1578 – Martin Frobisher c1539-1594 sails with fleet of 15 ships to build a settlement at Frobisher Bay and mine the ‘gold’ ore found a year earlier; will discover Hudson Strait; the 2,000 tons of ‘gold’ ore he mines will prove to be worthless pyrites, and used to pave the streets of London.

photos of the day May 31, 2012

Lightning strikes behind the campanile on the University of Kansas campus in Lawrence, Kan.

Orlin Wagner/AP

Children stand in a multimedia installation about global warming’s effect on glaciers at the Green Nation Fest environmental show in Rio de Janeiro. In June, Rio will host the United Nations Conference on Sustainable Development.

Victor R. Caivano/AP

Market Closes for May 31, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

May 31 (Bloomberg) — Canadian stocks rose, trimming losses from the biggest monthly decline since September, as banks beating profit estimates and optimism Greece will stay in the euro offset disappointment with U.S. economic reports.

Royal Bank of Canada and Toronto-Dominion Bank increased more than 1.4 percent. Canadian Imperial Bank of Commerce and National Bank of Canada rose at least 0.7 percent after beating analyst earnings estimates. CGI Group Inc. surged 14 percent after agreeing to buy Logica Plc, doubling sales and expanding in Europe. Copper producers Teck Resources Ltd. and Ivanhoe Mines Ltd. declined at least 1.1 percent.

The S&P/TSX Composite Index increased 79.99 points, or 0.7 percent, to 11,513.21 after falling as much as 0.6 percent earlier. The measure slumped 6.3 percent in May, posting a third straight monthly loss as investors grew increasingly concerned that Greece will leave the euro and the debt crisis will overwhelm Spain.

“We had some strength today amongst the Canadian banks, mainly because of earnings out of CIBC and National,” Gareth Watson, vice president of investment management and research at Richardson GMP Ltd. in Toronto, said in a telephone interview.

The firm oversees about C$16 billion ($15.5 billion). “They were respectable and showed some stability.”

Banks in the S&P/TSX rose today as a Greek opinion poll before June 17 elections showed New Democracy, the largest pro- bailout party, leading Syriza, which calls for the cancellation of the country’s bailout terms.

The Wall Street Journal reported on its website that the European department of the International Monetary Fund has started discussing contingency plans for a rescue loan to Spain in the event that the country can’t find enough money to bail out the Bankia group. The IMF is not preparing financial aid for Spain, nor has the country asked for a loan, a spokesman for the fund said.

Royal Bank of Canada, the nation’s biggest lender, gained 1.8 percent to C$51.55. Toronto-Dominion Bank, Canada’s second- largest lender, climbed 1.4 percent to C$79.07.

CIBC, Canada’s fifth-biggest bank, gained 2.5 percent to C$72.07 after saying second-quarter profit rose 5.7 percent on consumer lending gains, topping analysts’ estimates.

National Bank of Canada, the country’s sixth-biggest bank, increased 0.7 percent to C$73.66 after boosting profit for a seventh straight period because of an increase in consumer banking and a gain from a sale.

CGI Group surged 14 percent, the most since July 2002, to C$23.95 after saying it will buy Logica for 1.7 billion pounds ($2.6 billion) in cash. The deal will double “significantly strengthen its presence in Europe,” said Paul Treiber, an analyst at RBC Capital Markets.

Materials stocks in the S&P/TSX decreased as copper futures fell to a five-month low as signs of slowing in the U.S. economy added to concerns that Europe’s debt crisis will damp raw- material demand. The number of Americans applying for unemployment benefits rose to a one-month high and companies hired fewer workers than forecast, according to a Labor Department report today.

Teck Resources, Canada’s biggest base metals producer, declined 1.1 percent to C$30.94. Ivanhoe Mines, Rio Tinto Group’s partner in the Oyu Tolgoi Mongolian gold and copper mine, sank 3.1 percent to C$9.75.

US

By Rita Nazareth

May 31 (Bloomberg) — U.S. stocks fell, capping the biggest monthly decline for the Standard & Poor’s 500 Index since September, as disappointment with American economic reports overshadowed optimism that Greece will stay in the euro.

Energy shares dropped the most among 10 groups in the S&P 500, while the Bloomberg U.S. Airlines Index jumped 3.1 percent as oil had the biggest monthly decline in more than three years.

Joy Global Inc. sank 5.4 percent as the maker of mining equipment cut forecasts. Bank of America Corp. rallied 2.1 percent to pace gains in financial shares. Facebook Inc. climbed 5 percent, rebounding from an earlier slump of 4.8 percent.

The S&P 500 decreased 0.2 percent to 1,310.33 at 4 p.m. New York time, after falling below 1,300 earlier today. The benchmark gauge has dropped 6.3 percent in May. The Dow Jones Industrial Average retreated 26.41 points, or 0.2 percent, to 12,393.45. About 8 billion shares changed hands on U.S. exchanges today, or 21 percent above the three-month average.

“There’s less of a growth backstop to the global economy,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “The U.S. has held the position of stabilizing factor amid all the concern about Europe’s crisis. To the extent that the latest numbers suggest that momentum in the U.S. is slowing, that will make investors more nervous.”

Equities fell as data showed the U.S. economy grew more slowly in the first quarter than previously estimated and business activity expanded in May at the slowest pace in more than two years. The number of Americans applying for unemployment benefits rose. A Labor Department report due tomorrow is projected to show unemployment held at 8.1 percent.

Benchmark gauges briefly rose today as two polls showed that the anti-austerity Greek Syriza party is likely to win second place. An inconclusive election on May 6 has stoked concern that Greece will be unable to form a government willing to implement austerity measures reached with the European Union as part of an international bailout. MSCI Inc. and Standard & Poor’s announced contingency plans for calculating their equity indexes should Greece leave the euro currency union.

“This is a chokepoint for Greece,” said Peter Sorrentino, who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati. “The question gets pushed to a resolution. It would be expensive for the rest of Europe to have Greece exit.”

Stocks also rebounded after the Wall Street Journal reported that the International Monetary Fund’s European department started contingency plans for a rescue loan to Spain should the country fail to find funds to bail out Bankia group.

The IMF said it is not preparing financial aid for Spain and the country denied any talks about a bailout.

Concern about Europe’s debt crisis sent the S&P 500 lower for a second month, following the best first-quarter gain since 1998. Commodity, financial and technology companies fell at least 7.8 percent in May.

Energy shares in the S&P 500 dropped 0.9 percent today, the most among 10 groups, as oil sank after the U.S. Energy Department said stockpiles increased to a 22-year high.

Options traders are paying the most ever to protect against losses in Exxon Mobil Corp., spurred by concern expanding U.S.

stockpiles and slowing economic growth will drive down the largest energy producer by market value. Exxon retreated 1.5 percent to $78.63, the lowest level since November.

Joy Global tumbled 5.4 percent to $55.86, driving industrial shares lower. The maker of P&H and Joy mining equipment cut forecasts for full-year earnings and revenue as mining companies ease capital expenditure amid concern over the slowdown in China. Caterpillar Inc., the largest maker of construction and mining equipment, slid 2.8 percent to $87.62.

TiVo Inc. retreated 4.7 percent to $8.54. The company reported a first-quarter loss, citing hardware costs, and said legal expenses in the current period would lead to a wider loss than analysts expected.

Kohl’s Corp. dropped 6.2 percent to $45.82 after the retailer said May same-store sales decreased 4.2 percent. That compares with the average estimate for a 1.1 percent decline.

Banks had the biggest gain in the S&P 500 among 24 groups, adding 1 percent. The KBW Bank Index added 1.1 percent, reversing a loss of 1 percent. Bank of America gained 2.1 percent, the most in the Dow, to $7.35.

Facebook, which this week fell below $30 for the first time, rallied 5 percent to $29.60. The shares dropped earlier today amid concern that the world’s largest social-networking service will struggle to wring profit from its 901 million users.

Ciena Corp. climbed 14 percent, the most since September, to $13.55. The maker of networking equipment rose after second- quarter sales and earnings topped analysts’ estimates. Ciena is capitalizing on demand for speedy fiber-optic networks, which transmit data in the form of light over fiber strands.

Talbots Inc. soared 89 percent, the most ever, to $2.44.

The women’s clothing retailer trying to reverse falling sales agreed to be bought by private-equity firm Sycamore Partners for a reduced price of $369 million, including debt.

TJX Cos. rose 2.7 percent to $42.46. The owner of the T.J. Maxx and Marshalls retail chains posted an 8 percent increase in May same-store sales, topping analysts’ estimates of 5.1 percent as warm weather and lower gasoline prices boosted consumer spending. Target Corp., which also beat estimates, added 0.2 percent to $57.91.

“Traffic trends have picked up as hot summer weather spread over the majority of the nation,” Adrienne Tennant, an analyst at Janney Montgomery Scott LLC in Washington, wrote.

The S&P 500 may rebound almost 3 percent in June based on the average size of moves following past May declines of 4 percent or more, Bespoke Investment Group said.

The benchmark gauge has fallen 4 percent or more in May on 15 occasions since 1928, followed by an average June increase of 2.8 percent, according to data compiled by Bespoke. The index rose in June 60 percent of the time following such moves.

The last time the S&P 500 slid more than 4 percent during May of a U.S. presidential election year was in 1984, when it tumbled 5.9 percent before rebounding 1.8 percent in June. This year’s slide may also mark a bottom for the market followed by a June rally, Justin Walters, Bespoke’s co-founder, said in a phone interview yesterday.

“The data certainly leans positive,” Walters said.

“Along with the election analysis and the big down Mays, the risk-reward favors the market going positive here.”

The S&P 500 has averaged a gain of 0.51 percent in June following an increase in May, the Bespoke report showed, and the index has risen 0.96 percent in June after May declines. Its performance next month ultimately will be determined by Europe’s handling of the government-debt crisis, according to Walters.

Have a wonderful weekend everyone.

Be magnificent!

Never under any circumstances ask ‘how.”

When you use the word “how” you really want someone to tell you what to do,

some guide, some system, someone to lead you by the hand so that you lose your freedom,

your capacity to observe, your own activities, your own thoughts, your own way of life.

-Krishnamurti, 1895-1986

As ever,

Carolann

You cannot be mad at somebody
who makes you laugh – it’s as

simple as that.

-Jay Leno, 1950-

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