Newsletter February 27, 2012

Dear Friends,

Tangents:

Birthday: Henry W. Longfellow, born February 27^th, 1807.  He finished his last poem, The Bells of San Blas, on March 15^th, 1882.  “Out of the shadows of night

The world rolls into light; it is daybreak everywhere.”

I read this poem on the weekend in a recent edition of The New Yorker:

MONEY TIME

Supposedly, time is money:

money will buy you time

assuming you have money

to spend, as well as time

to wait while your money

grows. However, time

spent waiting can be like money

misspent – it’s often time

wasted, even if money

is made, a kind of time

not worth spending, so money

isn’t necessarily time.

Maybe time is money

if you make with your time

something else that makes money,

though most of the time

it’s not your money

you’ve made with your time.

And money isn’t even money,

necessarily, in a time

like this, when money

loses value and time

is misspent losing money.

And time isn’t even time,

necessarily, if it’s lost money

on which you’re wasting time,

nor is money really money

if it’s wasted on wasted time.

Still, sometimes, time is money,

but only if you have money and time.

-Craig Morgan Teicher

photos of the day

February 27, 2012

A timed exposure shows stars in the sky over the Norwegian village Haglebu as a car passes by.

Leonhard Foeger/Reuters

Meryl Streep, who won Best Actress for ‘The Iron Lady,’ and Jean Dujardin, who won Best Actor for ‘The Artist,’ pose with their Oscars during the 84th Academy Awards in Los Angeles.

Joel Ryan/AP

Market Closes for February 27, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Matt Walcoff

Feb. 27 (Bloomberg) — Canadian stocks fell for a second day as energy companies dropped after the International Monetary Fund said the world economy remains at risk for a slowdown.

Suncor Energy Inc., Canada’s biggest oil and gas producer, decreased 2.2 percent as crude futures retreated for the first time in eight days. Petrominerales Ltd., which produces energy in Colombia, plunged 20 percent after reporting drilling results that Tudor Pickering Holt & Co. called “disappointing.”

Valeant Pharmaceuticals International Inc., Canada’s biggest drugmaker, rose 5.6 percent after reporting profit that surpassed the average analyst estimate in a Bloomberg survey.

The S&P/TSX Composite Index fell 25.39 points, or 0.2 percent, to 12,700.38 after IMF Managing Director Christine Lagarde said the economy is “not out of the danger zone.”

“There is a bit of deja vu,” Ian Nakamoto, director of research at money manager MacDougall MacDougall & MacTier Inc., said in a telephone interview from Toronto. The firm oversees about $4 billion. “We had a very strong market at the beginning of the year last year, and we also had a rise in oil prices. The equity markets fell back. The general sense is that there is going to be a pause. That’s why people are taking money off the table.”

The index rallied 2.2 percent last week as Greek and European officials agreed on a second bailout of the country and oil futures climbed to the highest price since May. Canada’s benchmark stock gauge has advanced 6.2 percent this year after sinking 11 percent in 2011.

Lagarde cited “still fragile financial systems, high public and private debt, and higher world oil prices” as risks to the economy in a statement yesterday.

Oil futures dropped 1.1 percent on the New York Mercantile Exchange after jumping 11 percent in the previous two weeks.

Suncor declined 2.2 percent to C$36.16. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, lost 0.8 percent to C$37.71. Nexen Inc., an oil and gas producer with operations on five continents, slumped 2.9 percent to C$20.56 after John Herrlin, an analyst at Societe Generale SA, said the company is no longer a short-term buy.

Petrominerales tumbled a record 20 percent to C$19.05 after Matthew Portillo, an analyst at Tudor Pickering, cut his rating on the shares to accumulate from buy. Portillo said flow rates at the company’s Tatama-1 well were at most one-third of what he had forecast. An accumulate rating means the shares should be purchased “consistently” at current prices rather than “aggressively” as with a buy rating.

Pan Orient Energy Corp., which operates in Thailand, Indonesia and western Canada, soared 25 percent to C$4.24 after reporting drilling results. The shares have more than doubled this year.

The S&P/TSX Materials Index fell for a second day as the U.S. Dollar Index rebounded after closing at the lowest level since Dec. 1 on Feb. 24.

Iamgold Corp., which mines in West Africa, South America and Quebec, dropped 2.5 percent to C$15.50 after Tony Lesiak, an analyst at Macquarie Group Ltd., cut his rating on the shares to neutral from outperform. A neutral rating means the shares will return within 5 percentage points of their benchmark over the next 12 months. Teck Resources Ltd., Canada’s biggest base- metals and coal producer, declined 0.8 percent to C$40.34.

Guyana Goldfields Inc., which explores for gold in South America, sank 13 percent to C$5.87, the lowest since November 2009, after analysts at Royal Bank, Bank of Montreal and Cormark Securities Inc. cut their ratings on the company. The shares plunged 20 percent Feb. 24 after the feasibility study for its Aurora project was “not as robust as previous guidance had suggested,” Brad Humphrey, an analyst at Raymond James Financial Inc., said in a note to clients.

Trelawney Mining & Exploration Inc., a gold explorer with operations in Ontario, slumped 16 percent, the most since September 2009, to C$2.49. The company released a new resource estimate for its Cote Lake deposit that had a lower average grade than its previous report. Jeff Killeen, an analyst at Canadian Imperial Bank of Commerce, reduced his 12- to 18-month share-price forecast to C$4.25 from C$6.50.

Batero Gold Corp., which explores in Colombia, plunged 49 percent, the most since it began trading three years ago, to C$1.30. The initial resource estimate for the Batero-Quinchia project was lower than Jeff Wright, an analyst at Global Hunter Securities LLC, had forecast, Wright said in a telephone interview.

Valeant gained 5.6 percent to C$50.71 after its fourth- quarter earnings beat the average analyst estimate in a Bloomberg survey by 7.8 percent, excluding certain items. The shares have surged 10 percent in the last four days.

Money manager Fiera Sceptre Inc. soared 18 percent, the most since June 2010, to C$8.50 after agreeing to buy National Bank of Canada’s asset-management unit for C$309.5 million ($308.4 million).

US

By Rita Nazareth

Feb. 27 (Bloomberg) — The Standard & Poor’s 500 Index rose to an almost four-year high, rebounding from earlier losses, on better-than-estimated housing data as financial shares rallied.

A measure of banks advanced the most in the S&P 500 among 24 industries, rallying 1.9 percent. JPMorgan Chase & Co. climbed 2 percent after CLSA Ltd. analyst Mike Mayo said it should consider breaking up and selling businesses. Lennar Corp. and D.R. Horton Inc. rallied more than 1.8 percent to pace gains in homebuilders. Micron Technology Inc., the largest U.S. maker of computer-memory chips, surged 7.7 percent after Japan-based rival Elpida Memory Inc. filed for bankruptcy.

The S&P 500 gained 0.1 percent to 1,367.59 at 4 p.m. New York time, erasing a drop of 0.8 percent. The Dow Jones Industrial Average lost 1.44 points, or less than 0.1 percent, to 12,981.51. The gauge turned lower at the close of trading after failing to hold above 13,000 for the third session in the past week. The Dow last closed above that level in May 2008.

“The market has been very discomforting for the bears,” Michael Holland, chairman and founder of New York-based Holland & Co., said in a telephone interview. His firm oversees more than $4 billion. “The economy is healing. That’s causing the market to have some resilience.”

The S&P 500 is on pace for a third month of gains, the longest streak in a year, amid better-than-estimated economic and corporate reports. It has risen 4.2 percent this month. The index trades at about 14.1 times reported earnings, compared with the average since 1954 of 16.4 times, according to data compiled by Bloomberg.

Stocks rose today as more Americans than forecast signed contracts to buy previously owned homes in January, indicating the industry that sparked the last recession is improving.

Benchmark gauges rebounded from earlier losses, which were triggered by concern about Europe’s debt crisis after the Group of 20 nations rebuffed euro area call for help.

“We’re nowhere near the bottom of the European debt crisis,” Keith Wirtz, who oversees $14.6 billion as chief investment officer for Fifth Third Asset Management in Cincinnati, said in a telephone interview. “I keep hoping that the European influence will ebb. The problem is still there. We’ll need to get used to volatility.”

Six out of 10 groups in the S&P 500 rose today as financial, consumer discretionary and technology companies had the biggest gains. The Morgan Stanley Cyclical Index of companies most-dependent on the economy added 0.6 percent.

The KBW Bank Index rallied 1.3 percent as 22 of its 24 stocks advanced.

JPMorgan Chase jumped 2 percent, the most in the Dow, to $39.06. Its parts are worth one-third more than its market value, according to CLSA’s Mayo. While JPMorgan’s stock has outperformed its peers, the New York-based company has trailed the leading firms in its individual businesses, Mayo wrote in a note e-mailed today.

“At what point does the conglomerate discount become so great that it encourages the company to take action?” Mayo wrote. “The stock seems undervalued, but the question is how and when this value gets realized?”

Bank of America Corp. climbed 2 percent to $8.04. The lender and a group of investors that reached an $8.5 billion mortgage-bond settlement with the bank won their bid to remove the case from a federal judge and return it to state court. The U.S. Court of Appeals in Manhattan overturned a lower court ruling and granted a request by Bank of America and the investor group to remand the case to New York state court, where it was first filed, according to a decision today.

A measure of homebuilders in S&P indexes rallied 1.5 percent. Lennar added 2.5 percent to $22.94. D.R. Horton gained 1.9 percent to $14.24.

Lowe’s Cos. rose 0.7 percent to $27.34. The second-largest U.S. home-improvement retailer reported fourth-quarter profit that exceeded analysts’ estimates after warmer weather encouraged outdoor projects.

Whirlpool Corp. advanced 6.7 percent to $76.10. The world’s largest appliance maker will beat analysts’ estimates for 2012 earnings as profit recovers, Cleveland Research said in a note after meeting with the management.

Micron surged 7.7 percent to $8.56. Elpida, the last Japanese maker of dynamic random access memory, or DRAM, chips filed for bankruptcy after semiconductor prices plunged and it failed to win a second government bailout. While there’s too much capacity in the DRAM market, Micron could acquire some of Elpida’s facilities and convert them to produce Nand flash, the chips used in mobile phones and tablets, Kevin Cassidy, a Stifel Nicolaus & Co. analyst, said.

Walt Disney Co. added 0.8 percent to $41.64. The largest U.S. entertainment company by market value was raised to “conviction buy” from “neutral” at Goldman Sachs Group Inc., which expects accelerating ad growth at ESPN.

Dendreon Corp. tumbled 21 percent, the most since Nov. 3, to $11.81. The maker of the prostate-cancer drug Provenge reported earnings that missed analyst estimates.

A gauge of U.S. equity volatility is likely to be “contained” below its historical average for the next four months, according to MKM Partners LLC, reducing the potential yields that structured product issuers can offer.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, will generally hold between 15 to 20 until mid- June, said Jim Strugger, a derivatives strategist for MKM in Stamford, Connecticut. The VIX measures the cost of using options as protection from losses in the S&P 500.

“We believe the volatility cycle is close to shifting into its sweet spot that will last a couple of months and be characterized by a steady move higher for U.S. equities,” Strugger said in a note today to clients. He based his estimate of the “sweet spot,” which represents a cyclical low in the level of volatility, on historical data from periods that had comparable price swings.

Have a wonderful evening everyone.

Be magnificent!

You must learn how to be lucid in all your actions;

that is, you must not only be aware of the time, the place, and the circumstances,

in which the action takes place, but also of yourself, the player, of your body

and what is happening at any moment.

It is not only a question of seeing things as they are, but of seeing yourself at the same time,

and the reactions that take place within you.

In other words, you absorb the whole thing within you and you become complete.

-Swami Prajnanpad, 1891-1974

As ever,

Carolann

The best time to make friends is

before you need them.

-Ethel Barrymore, 1879-1959

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