May 5th, 2011 Newsletter

Dear Friends,  I spent the last two days at UBC’s Sauder School of Business and I am happy to say it was the last course necessary to complete my Certificate in Business Family Advising.  However, the final step before graduating later this year, is to work on an actual case study and present the analysis to the Faculty.  When I returned to Victoria last night,  I went to a reception which was given by The Victoria Conservatory of Music  as an expression of appreciation for its supporters.  Several of the students from the Conservatory performed and it was just incredible to witness the remarkable talent of these young musicians.  There were two violinists, a classical guitarist, a pianist, an incredible vocalist – just amazing.   While I was there, I ran into one of my clients and as we were chatting before the performance began, he mentioned that he was going to New York next week for a cultural break.  I told him I had just read an article in The New Yorker about a painting and an exhibit at the Frick that he should try to see and that I would scan and e-mail the article to him this morning, which I did.  I thought I’d share it with you too in case you have the opportunity soon to go to New York in the near future. Here it is:

CRITIC’S NOTEBOOK

MASTER STROKES

Is the Frick’s Rembrandt “Self-Portrait” of 1658 the best painting in New York?

Its return from a revelatory cleaning coincides with a fine show, “Rembrandt and His School: Masterworks from the Frick and Lugt Collections.”  Bankrupt by the age of fifty-two, the artist casts himself as a sick and tired potentate of the studio, enthroned in an archaic golden-yellow jerkin and a floppy black hat.  An almost subliminal drama smolders.  Rugged brushwork – prodigious, even for Rembrandt – details aging flesh as much by touch as by sight.  A shadow falls across the eyes.  (A tiny dot of white on one eye ignites the painting.)  The high belting of the jerkin lends the figure a busty, maternal air.  The barely indicated knees bemuse; given a chair jammed up to the picture plane, they should protrude  into the room.  (Are we sitting in Rembrandt’s lap?)  The artist doesn’t doubt his powers.  How could he?  But, in disgrace, he seems to wonder what they’re worth.  He isn’t much good to himself any longer.  He’s ours, if we want him – in a fire sale of the soul.

                                     -Peter Schjeldahl

Army musicians stand in front of a World War II monument in Russia’s southern city of Volgograd, once known as Stalingrad. Russia prepares to mark the 66th anniversary of the 1945 victory over Nazi Germany on May 9. Stalingrad saw perhaps the greatest number of casualties in the history of warfare during its long 1942 seige.

Sergey Karpov/Reuter

A cat looks at demonstrators shouting slogans during a march by animal rights activists in Bucharest, Romania. A parliamentary committee has passed a draft law that says stray dogs can be killed. Protesters called for stray dogs to be sterilized, saying it is cheaper and more humane. Romania has long had a problem with stray dogs, with an estimated 30,000 of them in the capital alone.

Vadim Ghirda/AP

Market Commentary 

Canada

By Matt Walcoff

     May 5 (Bloomberg) — Canadian stocks fell for a fourth day, briefly erasing the 2011 gain for the nation’s benchmark index, as the worst global commodities slump in two years bled into equities.

     Suncor Energy Inc., the country’s largest oil and gas producer, lost 5.3 percent as crude oil declined the most since 2009. Kinross Gold Corp., the country’s third-largest gold producer, retreated 3.7 percent as the U.S. Dollar Index rose the most in six months. First Quantum Minerals Ltd., Canada’s second-biggest publicly traded copper producer, decreased 4.7 percent as the metal sank to the lowest price this year.

     The Standard & Poor’s/TSX Composite Index slumped 155.94 points, or 1.2 percent, to 13,455.38. The retreat reduced the index’s advance for the year to 0.1 percent. It fell as low as 13,415.95, below its Dec. 31 level of 13,443.22.

     “I view this as a wake-up call to investors who believe the commodity trade only goes one way,” said Barry Schwartz, a money manager at Baskin Financial Services Inc. in Toronto, which oversees C$400 million ($415 million).

     The S&P/TSX index has fallen 3.5 percent this week as the Thomson Reuters/Jefferies CRB Commodity Price Index had the biggest weekly drop in 26 months. Energy and raw-materials companies make up 49 percent of Canadian stocks by market value.

     Energy and metals declined after the U.S. reported more initial jobless claims than most economists had forecast. Crude oil reached a seven-week low a day after the U.S. reported a decrease in gasoline consumption, while natural gas fell the most in a year after the U.S. said inventories rose more last week than most economists in a Bloomberg survey had forecast.

     The S&P/TSX Energy Index fell from a three-month low.

     Suncor retreated 5.3 percent to C$39.60 to complete the stock’s biggest three-day decline since July 2009. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, dropped 2.6 percent to C$41.25. Cenovus Energy Inc., the fifth-biggest energy company by revenue, lost 2.9 percent to C$33.73. Contract driller Major Drilling Group International Inc. slumped 7.2 percent to C$14.74.

     Sterling Resources Ltd., which explores for oil and gas in Europe, tumbled 22 percent, the most since November 2008, to C$3 after reporting drilling results.

     Gold futures dropped for a third day after European Central Bank President Jean-Claude Trichet signaled the ECB will wait until after June to raise interest rates, boosting the U.S. dollar against the euro. The U.S. dollar-euro exchange rate accounts for 58 percent of the U.S. Dollar Index.

     Kinross decreased 3.7 percent to C$14.33. Goldcorp Inc., the world’s second-largest gold producer by market value, slipped 3.2 percent to C$47.21. Novagold Resources Inc., which is developing gold and base-metal properties in Alaska and British Columbia, slid 7.7 percent, the most in 10 months, to C$10.50.

     Silvercorp Metals Inc., which mines in China, tumbled 8.6 percent to C$10.43 as silver completed its biggest four-day plunge since 1983. CME Group Ltd., the owner of the Comex exchange, has enacted five increases in two weeks to the minimum amount of cash that must be deposited when borrowing from brokers to trade silver futures.

     Minefinders Corp., which produces precious metals in Mexico, sank 8.7 percent to C$13.50 after Trevor Turnbull, an analyst at Bank of Nova Scotia, cut his 12-month price estimate on the company’s U.S.-traded shares to $17 from $18. Turnbull cited Minefinder’s report of lower-quality ore grades at its Dolores mine for the change. The shares’ decline was the biggest since June 2009.

     Base-metals and coal producers retreated as all major industrial metals traded on the London Metal Exchange fell.

First Quantum dropped 4.7 percent to C$121.20. Northern Dynasty Minerals Ltd., Anglo American Plc’s partner in the Pebble project in Alaska, declined 5.7 percent to a 2011 low of C$11.35.

     Pharmacy-benefits manager SXC Health Solutions Corp.

rallied 5.9 percent to a record C$56.15 after raising its 2011 profit forecast. At least four analysts raised their 12-month price estimate on the shares.

     Telus Corp., Canada’s third-largest wireless carrier, gained 3.6 percent to a three-year high of C$51.77 after boosting its quarterly dividend.

US

By Rita Nazareth

     May 5 (Bloomberg) — U.S. stocks tumbled, sending the Standard & Poor’s 500 Index down for a fourth straight day, as shares of energy and raw-material companies slumped following the biggest plunge in commodities in almost two years.

     Freeport-McMoRan Copper & Gold Inc. and Exxon Mobil Corp.

slid at least 2.5 percent as metal prices sank and oil fell below $100 a barrel for the first time since March 17. General Motors Co. slumped 3.1 percent after saying that Chinese sales declined. The NYSE Arca Airline Index jumped 3.2 percent as crude extended its loss since April 29 to 12 percent. FedEx Corp., operator of the biggest cargo airline, added 2.9 percent.

     The S&P 500 retreated 0.9 percent to 1,335.10 at 4 p.m. in New York. The benchmark gauge for American equities has declined

2.1 percent this week. The Dow Jones Industrial Average decreased 139.41 points, or 1.1 percent, to 12,584.17 today.

     “It’s driven by fear,” said James Gaul, a money manager at Boston Advisors LLC in Boston, which oversees about $1.8 billion. “Fear of losing of money on positions for the short- term traders to long-term concerns that the economy is weakening and risky assets aren’t performing as well as they have done, which you can extrapolate into oil prices. Big price moves like these are most often sentiment-driven.”

     Gauges of energy and metal producers fell at least 4.4 percent since April 29, leading the declines in the S&P 500. The index pared this year’s gain to 6.2 percent. Before that, the S&P 500 had risen to the highest level since June 2008 amid government stimulus measures and higher-than-forecast profits.

     The MSCI All-Country World Index of shares in 45 nations fell 1.1 percent. The MSCI EM Index dropped 0.8 percent.

     European Central Bank President Jean-Claude Trichet said the bank will monitor upside inflation risks “very closely,”

suggesting it may wait until after June to raise interest rates again. The Bank of England kept its benchmark rate at a record low of 0.5 percent today. In the U.S., the Federal Reserve last week retained its pledge to keep rates “exceptionally low” for an “extended period” to bolster the world’s largest economy.

     Monetary policy elsewhere is becoming tighter. Central banks in the Philippines and Malaysia today raised interest rates, and India this week increased its borrowing costs for the ninth time since March 2010. Rates in China, Asia’s biggest economy, may rise further after its central bank said yesterday that taming inflation is its top priority.

     “The big risk building in global asset markets was this massive crowding into commodity and emerging markets,” said Michael Shaoul, chairman of Marketfield Asset Management, which oversees $1 billion in New York. “Sooner or later monetary tightening would bring this down. They might be in the process of losing leadership from this point on. Losing their leadership probably means losing a decent amount of value in the process.”

     Stock-futures fell after a report showed that more Americans unexpectedly filed first-time claims for unemployment insurance payments last week, pushed up by three factors that normal seasonal variations failed to take into account, the Labor Department said.

     Applications for jobless benefits jumped by 43,000 to 474,000 in the week ended April 30, the most since August, Labor Department figures showed today. A spring break holiday in New York, a new emergency benefits program in Oregon and auto shutdowns caused by the disaster in Japan were the main reasons for the surge, a Labor Department spokesman said as the data was released to the press.

     “The jobs market is going to lag in this recovery,” said said David Sowerby, a Bloomfield Hills, Michigan-based money manager at Loomis Sayles & Co., which oversees $150 billion.

“There’s concern about inflation and what that can do with global interest-rates. I wouldn’t be surprised to see a modest selloff in stocks in the near-term.”

     U.S. consumer confidence dropped to a five-week low as the highest gasoline prices in almost three years soured Americans’

views of the buying climate. The Bloomberg Consumer Comfort Index decreased to minus 46.2 in the week ended May 1, the lowest level since the end of March, from minus 45.1 the prior period. The buying climate gauge slumped to its second-lowest level in 15 months.

     Indexes of energy and raw-material producers in the S&P 500 fell at least 1.2 percent. Freeport-McMoRan, the largest publicly traded copper producer, declined 2.5 percent to $49.85.

Exxon slumped 2.6 percent to $82.62.

     Murphy Oil Corp. slumped 6.4 percent to $68.57 for the second-biggest loss in the S&P 500. The operator of gasoline- filling stations said second-quarter earnings will be as low as $1.50 a share, trailing the average estimate of $1.75 among analysts in a Bloomberg survey.                           

     “Commodities had a big run and nobody expected prices to remain at those levels,” said James Dunigan, chief investment officer in Philadelphia for PNC Wealth Management, which oversees $110 billion. “It’s not a bad thing that oil and other commodities are down. That will put less pressure on prices, which is good for consumption. The economy is on firmer footing.”

     General Motors slumped 3.1 percent to $32.02. The biggest overseas automaker in China reported sales fell in April, the first decline since December, as the removal of government incentives dented demand.

     GM sold 203,367 vehicles in China last month, the Detroit- based company said in a statement today. That compares with sales of 213,112 units last April. The decline follows delivery growth of 1.2 percent in March and a 6 percent increase in February.             

     The NYSE Arca Airline Index climbed 3.2 percent as 13 of its 15 stocks advanced.

     The Dow Jones Transportation Average rallied 1.1 percent.

FedEx added 2.9 percent to $95.29.

     Con-way Inc. advanced 5.2 percent to $39.54, the highest price since May 2010. The biggest U.S. trucking company by sales reported first-quarter profit that topped analysts’ estimates as revenue at its freight division increased.

     Electronic Arts Inc. added 8.8 percent to $21.68, the highest price since August 2009. The second-largest U.S. video- game producer posted a fivefold gain in fourth-quarter profit, after the shooting title “Dead Space 2” helped sales surpass analysts’ estimates.

     Earnings-per-share beat estimates at 73 percent of the 398 companies in the S&P 500 that reported results since April 11, according to data compiled by Bloomberg. 

Have a wonderful evening everyone. 

Be magnificent 

Find the Unique and possess the Whole.

This truly is our highest, most sublime privilege.

It is in the law of this unity that is, as long as we understand it,

our immutable force.  Its living principle is the force that resides in truth –

Truth is one.

-Swami Prajnanpad, 1891-1974

As ever,

Carolann

To Suffering there is a limit;

to fearing, none.

  -Sir Francis Bacon, 1561-1626

Carolann Steinhoff, B.Sc., CFP, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor