November 20, 2012 Newsletter

Dear Friends,

Tangents:

On this day in 1985, Microsoft debuted its first installment of the Windows operating system, Windows 1.0.

This year, Microsoft released Windows 8. –Steven Russolillo, WSJ, 11/20/2012.

And also on this day in…

1889 – Edwin Hubble, American astronomer, was born.

1910 – Mexico Revolution Day.

1925 – Robert F. Kennedy, senator, was born.

1945 – The Nazi war crime trials begin at Nuremberg.

1947 – Princess Elizabeth (future Queen Elizabeth II) marries Philip, Duke of Edinburgh, in Westminster Abbey.

1974 – The United States files an antitrust suit to break up ATT.

1978 – In Jonestown, Guyana, American Rev. Jim Jones leads his followers in a mass suicide.

There is no mistake so great as the mistake of not going on.  –William Blake, 1757-1827.

photos of the day

November 20, 2012

A leaf falls from a tree on an autumnal day in central London.

Andrew Winning/Reuters

Ice, a 5-month-old North American Puma female cub, plays in the snow at the Royev Ruchey zoo in a surburb of Russia’s Siberian city of Krasnoyarsk.

Ilya Naymushin/Reuters

Market Closes for November 20th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Nov. 20 (Bloomberg) — Canadian stocks rose, as a rally in financial shares pulled the market higher after an earlier decline amid a drop in wholesale sales.

Royal Bank of Canada, the nation’s largest lender, rose 1.5 percent. Banro Corp., which operates and develops mines in the Democratic Republic of Congo, plunged 13 percent after rebels in the country seized control of an eastern city. Canadian Oil Sands Ltd. lost 1.1 percent as crude fell from the highest level in a month as Israel and Hamas negotiated a cease-fire, easing concern that Middle East unrest will disrupt supply.

The Standard & Poor’s/TSX Composite Index rose 5.88 points, or 0.1 percent, to 12,046.28 in Toronto, erasing earlier losses of as much as 0.5 percent. The gauge jumped 1.4 percent yesterday, and is up 0.8 percent this year.

“This is following from the big run of yesterday, digesting that and finding new levels,” said Robert “Hap” Sneddon, president of Castlemoore Inc. in Oakville, Ontario.

“We had come off a little bit, but I still think we’re in a short-term run here. How long it lasts, that’s dependent on what happens with the fiscal cliff.”

The U.S. fiscal cliff refers to more than $600 billion in automatic tax increases and spending cuts scheduled for the beginning of 2013 that would likely plunge the world’s largest economy into recession.

Canadian wholesale sales fell 1.4 percent in September to C$48.8 billion ($49 billion), with automobiles and personal goods leading declines across every major category. Statistics Canada pared its estimates for the prior two months. The September drop exceeded all 13 forecasts in a Bloomberg economist survey, with a median estimate for a 0.5 percent increase.

Royal Bank added 1.5 percent to C$57.40 and Toronto- Dominion Bank gained 0.7 percent to C$80.16 as financials paced gains on the benchmark Canadian equity gauge, rising 0.7 percent.

Banro, which operates the Twangiza gold mine and is developing three other projects in the DRC, fell 13 percent to C$3.07 after rebel forces took Goma, a city about 260 kilometers (162 miles) north of the mine.

Alacer Gold Corp. lost 4.4 percent to C$4.74 and Lake Shore Gold Corp. dropped 4.9 percent to 78 Canadian cents. Gold for December delivery fell 0.6 percent to settle at $1,723.60 an ounce in New York, snapping a two-day gain.

Canadian Oil Sands retreated 1.1 percent to C$20.76 and Cenovus Energy Inc. slid 1.1 percent to C$32.62.

Oil for January delivery fell 2.8 percent to settle at $86.75 a barrel in New York.

Talks to end fighting between Israel and Palestinian groups extended today as the army renewed its bombardment of Gaza and militants fired more rockets at the Jewish state. The latest clashes came amid peace talks in which leaders including U.S. Secretary of State Hillary Clinton, who arrived in Israel today, and Egyptian President Mohamed Mursi are involved.

Canadian Satellite Radio Holdings Inc., which provides the Sirius XM satellite radio service in Canada, soared 18 percent to C$5.80 after declaring a special dividend and initiating quarterly dividend payments yesterday after the market close.

The company will pay 8.25 Canadian cents per Class A share and 2.75 cents per Class B share. Both the special and regular dividend will be payable Jan. 2.

Research In Motion Ltd., the maker of the BlackBerry line of smartphones, rose 1.6 percent to C$9.70. Peter Misek, an equity analyst with Jefferies & Co., raised his rating on the stock to hold from underperform. He also doubled his price target to $10 from $5, citing better-than-expected interest from mobile handset carriers for the company’s upcoming BB10 series of smartphones, which will be released in January.

“We have been surprised by the strongly positive initial feedback on BB10 from carriers,” he said in a note to clients.

US

By Rita Nazareth and Adria Cimino

Nov. 20 (Bloomberg) — The Standard & Poor’s 500 Index advanced, erasing earlier losses, as an increase in housing starts tempered a tumble in Hewlett-Packard Co. shares.

Bank of America Corp. and American Express Co. added at least 1.1 percent to pace gains in the biggest companies. HP fell 12 percent as it announced a charge of $8.8 billion linked to its Autonomy Corp. business, saying there were “accounting improprieties” before its takeover of the company. Best Buy Co. sank 13 percent as the largest consumer-electronics retailer reported a $10 million loss on weaker-than-expected sales.

The S&P 500 rose 0.1 percent to 1,387.82 at 4 p.m. New York time, after falling 0.7 percent earlier. It had rallied 2.5 percent over the previous two days. The Dow Jones Industrial Average slid 7.45 points, or 0.1 percent, to 12,788.51. Volume for exchange-listed stocks in the U.S. was 5.6 billion shares, or 7.8 percent below the three-month daily average.

“There will be this back and forth,” Wayne Lin, a money manager at Baltimore-based Legg Mason Inc., said in a phone interview. His firm oversees $646 billion. “People are coming to the realization that earnings growth is not going to be as robust as analysts had expected. That’s starting to creep in. On the other hand, housing is strengthening. As for Europe, ultimately, they will do what it takes to support Greece.”

New-home construction unexpectedly climbed to a four-year high in October, more evidence of a revival in the industry that’s helping propel the U.S. economy. The euro traded at almost a two-week high against its U.S. counterpart as the region’s finance ministers met in Brussels to discuss ways to plug a 15-billion euro ($19 billion) hole in Greece’s finances.

Stocks briefly extended losses as Federal Reserve Chairman Ben S. Bernanke said the central bank doesn’t have the tools to offset the potential harm to the economy from the so-called fiscal cliff. The S&P 500 jumped 2 percent yesterday amid better-than-forecast housing data and as President Barack Obama expressed confidence on a budget agreement with Congress.

“Bernanke’s comment was a polite way of telling Congress that they should not kick the can down the road,” said John Manley, who helps oversee about $207.5 billion as chief equity strategist for Wells Fargo Advantage Funds in New York. He spoke in a telephone interview.

HP tumbled 12 percent to $11.71. The company accused Autonomy, the software maker it bought last year, of a broad range of financial falsehoods resulting in an $8.8 billion writedown, adding to the challenges facing Chief Executive Officer Meg Whitman in the midst of a multiyear turnaround.

Hewlett-Packard began investigating Autonomy’s finances after a senior executive at Autonomy came forward after founder Mike Lynch, 47, departed in May, Hewlett-Packard said. Lynch, in an interview  with the Wall Street Journal, said Hewlett-Packard has mismanaged the Autonomy deal and that the company is “trying to cover it up with this big writeoff.”

Best Buy sank 13 percent to $11.96. Chief Executive Officer Hubert Joly, who took over in September, is increasing employee training to improve customer service and plans to work with vendors on exclusive products as Best Buy customers defect to Amazon.com Inc. and Wal-Mart Stores Inc. Same-store sales fell 4.3 percent in the third quarter, more than the 3.3 percent drop estimated by analysts in a Retail Metrics survey. Sales by that measure have slid in nine of the past 10 quarters.

Intel Corp. dropped 3.6 percent to $19.51 after UBS AG cut its rating for the largest chipmaker. The shares were downgraded to neutral from buy at the firm, which cited uncertainty around CEO transitions. Paul Otellini will retire in May, in a surprise move three years before mandatory retirement, after failing to equip the company for a shift toward mobile devices and away from the personal computers it long dominated.

Cliffs Natural Resources Inc. retreated 12 percent to $30.48. The largest U.S. iron-ore producer was downgraded to sell at Goldman Sachs Group Inc., which cited the company’s high production costs in weak iron ore markets.

Campbell Soup Co. slid 2 percent to $36.21. The world’s largest soup maker said earnings this quarter could be “negatively impacted” amid high soup inventories and an increase in marketing spending.

Research In Motion Ltd. climbed 1.2 percent to $9.71 after Jefferies & Co. raised the stock’s rating to hold, saying the struggling maker of the BlackBerry may avoid a “worst-case scenario.” The shares pared gains after news that the BlackBerry is being dropped by the U.S. government agency that investigates plane accidents because of the device’s reliability issues.

Archer-Daniels-Midland Co. added 3.1 percent to $26.34. The world’s biggest corn processor was raised to outperform from market perform at BMO Capital Markets by equity analyst Kenneth Zaslow. The 12-month share-price estimate is $32.

Groupon Inc. jumped 8.5 percent to $3.37 after Tiger Global Management LLC, the $8 billion hedge fund run by Chase Coleman and Feroz Dewan, said it acquired a 9.9 percent stake in the daily deal site.

Lower earnings estimates are dragging down stocks from this year’s highs and their full effect has yet to be felt, according to Hasan S. Tevfik, a global equity strategist at Citigroup Inc.

He compares the performance of an earnings-revision index, or ERI, compiled weekly by Citigroup with MSCI Inc.’s All-Country World Index since the beginning of last year.

Since the first week of May, the revision index has been less than zero, which means there were more estimate cuts than increases among analysts. The MSCI gauge of stocks in developed and emerging markets rose to its peak for the year in September and then lost as much as 6.7 percent.

“ERI remains an anchor for global equity markets,” Tevfik wrote. A similar disparity between estimate changes and share prices in 2011 was resolved when stocks declined in July and August of that year, the London-based strategist added.

Earnings projections for next year are poised to decline further, he wrote, citing the gap between analysts’ estimates for companies and strategists’ projections for stock indexes.

Citigroup strategists are collectively calling for profit growth of 7 percent, trailing a 12 percent increase implied by company- specific estimates, Tevfik wrote. The lower figure may be too high, he added, as economic growth slows worldwide.

Have a wonderful evening everyone.

Be magnificent!

Why is the lamp extinguished?

I surrounded it with my robe to shelter it from the wind; this is why the lamp is extinguished.

Why has the flower wilted?

I pressed it to my heart with anxiety and love; this is why the flower has wilted.

Why is the river dry?

I built a dike across it so that it would serve me and me alone; this is why the river is dry.

Why is the harp string broken?

I tried to play a note too high for it; this is why the harp string is broken.

Rabindranath Tagore, 1861-1901

As ever,

Carolann

Act as if it were impossible to fail.

-Dorothea Brande, 1893-1948

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