November 30, 2012 Newsletter

Dear Friends,

Tangents:

On this day in 1900, Oscar Wilde dies in a Paris hotel room after saying of the room’s wallpaper: “My wallpaper and I are fighting a duel to the death. One or the other of us has to go.”

And also on this day in…

1667 – Jonathan Swift was born.

1835 – Mark Twain was born.

1874 – Winston Churchill was born.

1936 – Abbie Hoffman was born.

1948 – The Soviet Union complete the division of Berlin, installing the government in the Soviet sector.

1950 – President Truman declares that the United States will use the A-bomb to get peace in Korea.

1961 – The Soviet Union vetoes a UN seat for Kuwait, pleasing Iraq.

1974 – India and Pakistan decide to end a 10-year trade ban.

1974 – Pioneer II sends photos back to NASA as it nears Jupiter.

1979 – Pope John Paul II becomes the first pope in 1,000 years to attend an Orthodox mass.

1979 – Pink Floyd released the album “The Wall.”

 
Always do right.  This will gratify some people and astonish the rest.  –Mark Twain.

photos of the day

November 30, 2012

A block of encrusted silver coins from the shipwreck of a 1804 galleon, on its first display to the media at a ministry building, in Madrid. Spanish cultural officials have allowed the first peep at 16 tons (14.5 metric tons) of the shipwreck, ‘Nuestra Senora de las Mercedes’ a treasure worth an estimated $500 million that a US salvage company gave up after a five-year international ownership dispute.

Daniel Ochoa de Olza/AP

A Sotheby’s employee carefully handles one volume of a medieval manuscript , Philip The Good’s copy of ‘Mystere de la Vengeance’ unseen on the market for 200 years, during a press viewing in London. The manuscript which comprises of two volumes estimated at 4-6 million pounds (6.5-9.6 million US Dollars) will go on sale in the evening sale of Old Master Paintings and Drawings on Dec. 5 in London.

Kirsty Wigglesworth/AP

Market Closes for November 30th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Nov. 30 (Bloomberg) — Canadian stocks erased losses in the final minutes of trading, paring the first monthly drop for the Standard & Poor’s/TSX Composite Index since May, before MSCI Inc. rebalanced its global indexes after a semi-annual review.

Dollarama Inc., the only Canadian stock added to the MSCI Canada Index, rallied 1.5 percent. Nexen Inc., which is awaiting approval of its sale to China’s Cnooc Ltd., rallied 4.9 percent to snap nine days of losses after Canadian Prime Minister Stephen Harper said the government will soon make decisions on foreign-investment guidelines.

The S&P/TSX rose 0.3 percent to 12,239.36 in Toronto, erasing an earlier decline of as much as 0.3 percent. The benchmark Canadian equity gauge retreated 1.5 percent for the month. Trading volume was 20 percent higher than the 30-day average.

“The activity both on the volume and movement side of the market today was as a result of the MSCI rebalance,” said Brian Huen, managing partner with Red Sky Capital Management Ltd. in Toronto. His firm manages about C$220 million. “The reason these stocks go up is because there are so many funds that track it.”

Amendments to indexes can alter share prices as passively managed funds buy and sell stocks to mirror the benchmark indexes. Some $321.9 billion was invested in exchange-traded funds linked to MSCI indexes at the end of October, according to MSCI. About $3 trillion of funds are benchmarked against its indexes globally.

Dollarama, which added 1.5 percent to C$63.45, was added to the MSCI Canada Index, according to a statement from the index company. Fairfax Financial Holdings Ltd. lost 2.8 percent to C$343.94 and Precision Drilling Corp. added 2.2 percent to C$7.44 as the two stocks were removed.

Canada’s economic growth slowed to a 0.6 percent annualized pace in the third quarter as consumer spending gains were blunted by the fastest export decline since the end of the last recession and falling business investment. The gain in gross domestic product for July to September was the slowest in more than a year and short of analysts’ estimates, according to a survey by Bloomberg.

Financial stocks contributed the most to gains in the S&P/TSX as nine of 10 industries advanced. Talisman Energy dropped 3.2 percent to C$11.18 after Randy Ollenberger, an analyst with BMO Capital Markets, cut his rating on the oil and natural gas producer to market perform from outperform.

Richmont Mines Inc. slumped 26 percent to C$2.82. The gold producer said it closed a mine and suspended exploration at another near Rouyn-Noranda, Quebec. The company cut its output forecast for next year.

Nexen added 4.9 percent to C$24.39. Canadian regulators are reviewing the sale of Calgary-based Nexen and an appeal of Petroliam Nasional Bhd.’s rejected C$5.2 billion ($5.24 billion) bid for Progress Energy Resources Corp.

Trilogy Energy Corp. rose 3.2 percent to C$28.64 and Bonterra Energy Corp. added 2.5 percent to C$44.02. Crude for January delivery rose 1 percent to settle at $88.91 for its first monthly gain since August.

US

By Inyoung Hwang

Nov. 30 (Bloomberg) — U.S. stocks erased losses in the final 15 minutes, sending the Standard & Poor’s 500 Index to a second weekly gain, as investors bought shares before changes to MSCI Inc. indexes amid federal budget talks.

MetroPCS Communications Inc. rallied 5 percent as Guggenheim Securities LLC said the wireless carrier could get a bid from Sprint Nextel Corp. VeriSign Inc. plunged 13 percent, the most in the S&P 500, after a new contract letting the company manage Web sites ending in .com limited price increases.

Yum! Brands Inc. lost 9.9 percent after saying same-store sales in China will decline. Zynga Inc. dropped 6.1 percent after loosening terms of its longstanding alliance with Facebook Inc.

The S&P 500 rose less than 0.1 percent to 1,416.18 at 4 p.m. in New York. The Dow Jones Industrial Average added 3.76 points, or less than 0.1 percent, to 13,025.58. More than 7.1 billion shares traded hands on U.S. exchanges today, or 15 percent above the three-month average, according to data compiled by Bloomberg.

“A lot of the volatility near today’s close is due to the MSCI rebalance,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said by e-mail. His firm oversees $250 billion. “Outside of that, we’ve been trading solely on political rhetoric in Washington.”

Changes to MSCI’s global indexes were implemented at the close of trading today, causing the S&P 500 to jump as much as 0.2 percent to its highest intraday level of 1,418.86 within the final two minutes of trading before paring most of its gain by the close. The eight U.S. companies that were added included homebuilder Lennar Corp. and Under Armour Inc., a sportswear maker. For-profit educator Apollo Group Inc. and coal miner Walter Energy Inc. were among the seven stocks removed.

MSCI, the developer of gauges such as the MSCI World Index of 24 developed countries, made the changes after a semi-annual review. Amendments to indexes can alter share prices as passively managed funds buy and sell stocks to mirror the benchmark indexes. About $3 trillion of funds are benchmarked against its indexes globally, according to MSCI. Some $321.9 billion was invested in exchange-traded funds linked to MSCI indexes at the end of October.

“Rebalances can sometimes create price dislocation,” Mike Shea, a managing partner at New York-based brokerage firm Direct Access Partners LLC, wrote in an e-mail. “Let’s also not forget the competitive nature of Wall Street. Not every investor simply places their order into the end of day closing match. Some try and outperform that closing price. So it is not uncommon to see more aggressive trading around the close.”

President Barack Obama earlier today warned of “prolonged negotiations” ahead as congressional Republicans dug in on their opposition to his plan to avert the fiscal cliff. House Speaker John Boehner, an Ohio Republican, told reporters in Washington “right now we’re almost nowhere” on talks.

The S&P 500 advanced 0.5 percent this week and rose 0.3 percent for the month. U.S. stocks have swung between gains and losses amid lawmakers’ comments on whether an agreement can be reached to avert more than $600 billion in spending cuts and tax increases scheduled to begin on Jan. 1. The benchmark gauge of U.S. stocks has lost 0.9 percent since the president won re- election on Nov. 6.

Savita Subramanian, head of U.S. equity strategy at Bank of America Corp. wrote in a note that she expects the market to be in a “better place” by mid-2013, as the equity risk premium gradually declines. She cited a bottoming in China growth, reduced tail risk from Europe and a multi-stage solution to the fiscal cliff. New York-based Subramanian forecasts the S&P 500 will reach 1,600 at the end of next year on earnings of $110 a share.

U.S. equity funds tracked by EPFR Global attracted more than $10 billion in net inflows during the fourth week of November, their best showing in more than a year, according to the Cambridge, Massachusetts-based research firm.

Spending by U.S. consumers unexpectedly declined and incomes stagnated in October as superstorm Sandy kept those in the Northeast from getting to work or from shopping at malls and car dealerships.

Purchases decreased 0.2 percent, the weakest reading since May, after a 0.8 percent gain in the prior month, Commerce Department figures showed today in Washington. The median estimate of 79 economists surveyed by Bloomberg called for no change in so-called nominal sales. Incomes were unchanged, held down by a drop in wages caused by Sandy.

“I’m concerned that the fundamentals are starting to roll over,” Douglas Cote, chief market strategist at New York-based ING U.S. Investment Management, said in a telephone interview.

His firm oversees about $165 billion. “I did not like the consumer numbers out today. Personal income and personal spending were below consensus. People say it’s because of Sandy but the consensus knew about Sandy and it’s below the Sandy- factored-in consensus. That’s a concern.”

Utility companies advanced 1 percent for the biggest gain among 10 industries in the S&P 500. The sector has increased for five straight days, the longest winning streak since July 2. It is still the only S&P 500 group to be down this year, having fallen 2.7 percent.

MetroPCS rallied 5 percent to $10.65. Guggenheim analyst Shing Yin said the pay-as-you-go wireless carrier could get a bid in the next one to four weeks from Sprint for as much as $13 a share. MetroPCS agreed last month to merge with Deutsche Telekom AG’s T-Mobile USA division. Under the deal, the German parent company will hold 74 percent of the combined entity and pay MetroPCS shareholders $1.5 billion in cash.

St. Jude Medical Inc. added 1.8 percent to $34.28. The second-largest manufacturer of heart rhythm devices authorized a share buyback program for as much as $1 billion amid a U.S. regulatory review for the manufacturing of one of its key products. The St. Paul, Minnesota-based company was raised to buy from neutral at Mizuho Securities USA.

Advanced Micro Devices Inc. rallied for a fourth straight day, rising 7.8 percent to $2.20. The second-largest maker of personal-computer processors has surged 18 percent since Nov. 27 amid a report it will sell its Austin, Texas campus to raise cash. Shares of the Sunnyvale, California-based company are still down 59 percent this year.

VeriSign tumbled 13 percent to $34.15. The U.S. Department of Commerce approved a contract extension through Nov. 30, 2018, that lets the main manager of the Internet-address database continue current pricing of $7.85 per domain name registration.

VeriSign no longer has the right to four price increases of as much as 7 percent over the term of the contract, an option that was included in the previous accord.

Yum fell 9.9 percent to $67.08. The company, owner of the Taco Bell and KFC dining chains, said fourth-quarter same-store sales in China will decline 4 percent from a year earlier.

Other consumer-discretionary shares slumped. Coach Inc., the largest U.S. luxury handbag maker, dropped 2.6 percent to $57.84. Tiffany & Co. slumped 1.4 percent to $58.98, while homebuilder PulteGroup Inc. sank 1.9 percent to $16.81.

Zynga Inc. erased 6.1 percent to $2.46, while Facebook rose 2.5 percent to $28 after earlier falling as much as 2.1 percent.

The companies loosened terms of their longstanding alliance, making it easier for competing game developers to vie for users on the world’s largest social-networking service. The new terms eased log-in, payment and advertising requirements for Zynga, which makes most of its money by selling virtual goods in games played on Facebook.

Groupon Inc. lost 8.7 percent to $4.15. The largest provider of online coupon has no immediate plans to replace Chief Executive Officer Andrew Mason after its board met to deliberate whether to make changes to senior management.

Directors of the Chicago-based company met yesterday and some members were planning to voice frustration with Mason’s leadership, a person with knowledge of the matter said.

Have a wonderful weekend everyone.

Be magnificent!

It is not others who must change, but you.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

I am not an adventurer by choice

but by fate.

-Vincent Van Gogh, 1853-1890

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