November 19, 2012 Newsletter

Dear Friends,

Tangents:

November 19, 1863: Lincoln’s Gettysburg Address characterized by some as one of the greatest speeches in American history:

Fourscore and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty and dedicated to the proposition that all men are created equal….The world will little note nor long remember what we say here, but it can never forget what they did here.  It is rather for us the living, to be here dedicated to the great task remaining before us – that from these honored dead we take increased devotion to that cause for which they here gave the last full measure of devotion – that we here highly resolve that these dead shall not have died in vain, that this nation shall have a new birth of freedom, and that government  of the people, by the people, for the people shall not perish from the earth. –Abraham Lincoln.

www.loc.gov/exhibits/gadd/

And also on this day in…

1493 – Puerto Rico Discovery Day.

1620 – The Pilgrims sight Cape Cod.

1897 – The Great “City Fire” in London.

1911 – New York receives first Marconi wireless transmission from Italy.

1917 – Indira Gandhi was born.

1938 – Ted Turner was born.

1961 – Meg Ryan was born.

1969 – Apollo 12 touches down on the moon.

1973 – New York stock market takes sharpest drop in 19 years.

1981 – U.S. Steel agrees to pay $6.3 million for Marathon Oil.

You cannot shake hands with a clenched fist.  –Indira Gandhi

photos of the day

November 19, 2012

Indian camel traders arrive with their livestock for the annual Pushkar fair in Pushkar, Rajasthan state, India. The weeklong cattle fair attracts a large number of tourists from different parts of the world.

Deepak Sharma/AP

A Hindu devotee stands in the waters of Sun Lake to offer prayers to the Sun god during the Hindu religious festival in the northern Indian city of Chandigarh.

Ajay Verma/Reuters

Market Closes for November 19th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Inyoung Hwang and Eric Lam

Nov. 19 (Bloomberg) — Canadian stocks rallied the most in a month as commodity producers gained amid concern over Middle East unrest and optimism a deal can be reached to avoid automatic U.S. spending cuts and tax increases.

Agnico-Eagle Mines Ltd. advanced 5.8 percent as analysts at RBC Capital Markets raised the stock’s rating after a recent drop in the share price. Suncor Energy Inc. climbed 3.3 percent as oil rallied on concern Israel’s continued attack on Gaza may disrupt supply. Goldcorp Inc. rose 2.2 percent as a weaker dollar pushed investors to seek the metal as an alternative investment.

The Standard & Poor’s/TSX Composite Index added 162.68 points, or 1.4 percent, to 12,040.40 in Toronto, the biggest gain since Oct. 16. The Canadian equity benchmark gauge is up 0.7 percent this year after erasing its 2012 gain last week.

Trading volume was 8.4 percent higher than the 30-day average.

“Markets were vastly oversold last week,” Keith Richards, a fund manager with ValueTrend Wealth Management, said in a phone interview from Barrie, Ontario. His firm manages about C$100 million ($100 million). “Now, we’re seeing commodities moving and the fiscal cliff talks going on, it’s plain as daylight that the markets were going to rally. They were ripe for it.”

The S&P/TSX has fallen 3.1 percent this month amid concern that U.S. President Barack Obama and lawmakers may not reach a budget agreement in time to prevent spending cuts and tax increases from kicking in next year. Obama expressed confidence yesterday that he will reach a deal to avoid a $607 billion deficit-cutting package known as the fiscal cliff.

Gold and oil rallied as Israel’s Defense Minister Ehud Barak said the army was prepared to invade the Gaza Strip for the first time in almost four years. Energy and gold mining companies contributed most to the advance on the S&P/TSX as all 10 industries gained.

Agnico-Eagle rose 5.8 percent to C$55.20 after Stephen Walker, an analyst with RBC Capital Markets, raised his rating on the gold miner to outperform from sector perform while maintaining a $69 price target.

“After the recent pullback, we believe Agnico’s shares are attractively valued,” he said in a note to clients. Since touching a high this year on Nov. 8, the shares fell 8.5 percent over the following week.

Barrick Gold Corp., the world’s largest producer of the metal, rose 1.2 percent to C$34.19 and Goldcorp, the world’s second-largest producer, added 2.2 percent to C$40.61. Gold for December delivery gained 1.1 percent to settle at $1,734.40 an ounce in New York.

Suncor, Canada’s largest oil producer, gained 3.3 percent to C$32.59 and Cenovus Energy Inc. added 1.9 percent to C$32.99 as crude rose to the highest level in four weeks. Crude for January delivery increased 2.7 percent to $89.28 a barrel in New York, the biggest gain since Oct. 19. Futures are up 3.5 percent this month.

Agrium Inc. increased 3.3 percent to C$101.01, its biggest gain since June, after hedge fund Jana Partners LLC, the fertilizer company’s largest shareholder, raised its stake to more than 6 percent and chose five nominees in preparation for a fight to dislodge the current board.

Jana is pressing Agrium to spin off its farm-supply retail network from its wholesale fertilizer arm.

Astral Media Inc. climbed 3.1 percent to C$45.78. The Montreal-based media company has agreed to an amended takeover plan from BCE Inc., Canada’s largest telecommunications company, after their initial proposal was blocked by regulators. The C$3.38 billion proposal addresses regulatory concerns, the companies said in a statement today.

Augusta Resource Corp. fell 6.5 percent to C$2.44 after the company said permitting for its proposed Rosemont copper project near Tuscon, Arizona, is not expected until the first quarter of next year. Joseph Gallucci, an equity analyst with Dundee Securities Corp., lowered his rating on the stock to sell from neutral.

US

By Rita Nazareth and Tom Stoukas

Nov. 19 (Bloomberg) —  U.S. stocks rose, giving the Standard & Poor’s 500 Index its biggest advance in two months, amid better-than-forecast housing data and as President Barack Obama expressed confidence on a budget agreement with Congress.

Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. rallied more than 1.4 percent to pace gains in commodity producers amid Middle East tension. Cisco Systems Inc. increased 1.7 percent as it agreed to buy closely held Meraki Inc. for $1.2 billion. Lowe’s Cos. surged 6.2 percent after the home- improvement retailer posted profit that beat estimates. Apple Inc. and Amazon.com Inc. added at least 1.9 percent.

The S&P 500 rose 2 percent to 1,386.89 at 4 p.m. in New York. The benchmark gauge for U.S. equities gained 2.5 percent in two days, the most since July. The Dow Jones Industrial Average added 207.65 points, or 1.7 percent, to 12,795.96.

Volume for exchange-listed stocks in the U.S. was 6.2 billion shares, about in line with the three-month daily average.

“This change and transition in taxation is much more important for equity allocations going forward than what people realize,” said Michael Shaoul, chairman of New York-based Marketfield Asset Management, which oversees $3.5 billion. He spoke in a phone interview. “The U.S. economy looks pretty good. Earnings are OK. As long as Congress doesn’t absolutely wreck it, it will be fine.”

Obama met with senior Democrats and Republicans on Nov. 16 for talks to avoid $607 billion of automatic tax increases and spending cuts that, if allowed to come into force, might push the country into a recession next year. The S&P 500 rose 0.5 percent on Nov. 16 as House Speaker John Boehner, a Republican, described the budget discussions as constructive and said he would accept increased government revenue coupled with spending cuts. Congress is now in recess for Thanksgiving until Nov. 26.

“I am confident we can get our fiscal situation dealt with,” Obama said yesterday at a news conference in Bangkok, where he began a three-nation Asian trip.

Sales of previously owned U.S. homes climbed in October, indicating gains in the real estate market are being sustained by cheap borrowing costs. Confidence among U.S. homebuilders unexpectedly climbed in November to a six-year high, propelled by the biggest jump in sales in a decade, adding to signs the real-estate market is improving.

The S&P 500 has gained an average 0.6 percent during the week of Thanksgiving, according to data since World War II compiled by Bloomberg. That compares with 0.15 percent in all calendar weeks in the same timeframe.

Gold and oil rallied as a weaker dollar and concern about unrest in the Middle East increased demand for the commodities as alternative investments. Israel’s Defense Minister Ehud Barak said the army was prepared to invade the Gaza Strip for the first time in almost four years.

Freeport-McMoRan, the biggest publicly traded copper producer, added 4.1 percent to $38.28. Newmont Mining, the largest U.S. gold producer, added 1.5 percent to $46.79.

Occidental Petroleum Corp. rose 2.2 percent to $75.46.

Cisco rose 1.7 percent to $18.30. The world’s largest maker of computer-networking equipment agreed to pay $1.2 billion for Meraki, adding technology that helps businesses manage Wi-Fi networks remotely and expanding its lineup of products for mid- sized customers.

Lowe’s gained 6.2 percent to $33.96. The company, headed by Chief Executive Officer Robert Niblock, boosted sales of generators, chainsaws and cleaning supplies in the northeastern U.S. before Sandy struck on Oct. 29, destroying homes and leaving millions without power. Consumers also spent more as the U.S. housing market improved.

Home Depot Inc., the biggest U.S. home-improvement retailer, gained 2 percent to $63.33.

Apple, the world’s most valuable company, gained 7.2 percent to $565.73, for the biggest advance since April. An analyst at Topeka Capital Markets said the shares are undervalued after retreating from a record high in September.

Amazon, the largest online retailer, gained 2 percent to $229.71.

Tyson Foods Inc. added 11 percent to $18.72. The largest U.S. meat processor declared a special dividend and posted fiscal fourth-quarter earnings and sales that exceeded analysts’ estimates after prices increased.

The post-election rout in U.S. stocks has driven the S&P 500 down so far that it would have to advance 26 percent to reach the valuation of bull markets since John F. Kennedy was in the White House.

Investors have seen $806 billion erased from the value of American equities since Obama was re-elected Nov. 6 in the biggest decline since May. The combination of falling stocks and rising profits as the economy recovers has left the S&P 500’s price-earnings ratio below the ending level of eight of the nine bull markets since 1962 and beneath the average of any since Ronald Reagan was in power.

Bears say the 4.8 percent drop in the S&P 500 and valuations show investors are losing confidence that Congress and Obama will reach a budget compromise that would keep the recovery from stalling. Bulls, including the top strategists at six Wall Street firms, say that the declines are another reason to buy and that stock prices from Apple to Dollar Tree Inc. are bound to improve as earnings increase.

“The stock market looks cheap because people are way too pessimistic about what growth looks like for the next 10 years,” said Brian Jacobsen, who helps oversee $208 billion as chief strategist at Wells Fargo Advantage Funds and predicts the S&P 500 will rise 47 percent to 2,000 in 2014. “You can get big and rapid moves in the market when expectations are so low.”

Have a wonderful evening everyone.

Be magnificent!

An individual is a separate entity without connection.

A person is an individual connected.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Things do not change,

we do.

-Henry David Thoreau, 1817-1862

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