October 16, 2012 Newsletter

Dear Friends,

Tangents:

Naples protests Italian pizza snub

Birthplace of pizza does not receive “Best in Italy” award.

-by Nick Squires

ROME – It prides itself as the birthplace of the pizza and the global benchmark for Italy’s most famous culinary export.  So when Naples heard this week that the latest edition of Italy’s most respected restaurant guide had nominated a pizzeria in faraway, foggy Verona as the best in the country, there was outrage. Worse than that, not one of

Naples’ estimated 2,000 pizzerias had made it into the 2013 edition of Gambero Rosso, Italy’s ‘bible’ for foodies.  Indignant “pizzaioli”, as pizza makers are known, staged noisy demonstrations in some of Naples’ most famous pizzerias to rail against what they saw as an injustice and a humiliation.  For the guide to judge the pizzeria near Verona, in the northeast of Italy, as the finest in the country was a snub not just to pizza makers in Naples, but to the entire city, they said.  Francesco Borrelli, a Neapolitan politician, went further – it was, he said, no less than an example of “culinary racism”.  “This is the umpteenth example of hostility towards our city and our traditions. The fact that Gambero Rosso did not find a single Neapolitan pizzeria to include is shameful,” he said.  Neapolitan newspapers tried to salvage some pride by poking fun at Verona for its culinary peculiarities – among them a horse meat stew known as “pastissada” and a bone marrow dish called “peara” – and said the city of Romeo and Juliet should stick to making

polenta, not pizza.  Naples was the undisputed birthplace of the pizza, said Sergio Miccu, president of the association of pizza makers, even if it had now become a dish known around the world.

Holding on to anger is like grasping a hot coal with the intent of throwing it at someone else; you are the one who gets burned. –Buddha

On this day in…

1793 – Marie Antoinette executed.

1853 – Crimean War.

1946 – Ten Nazi war criminals are hanged in Nuremberg, Germany.
1969 – The New York Mets win the World Series four games to one over the heavily-favored Baltimore Orioles.
1973 – Israeli General Ariel Sharon crosses the Suez Canal and begins to encircle two Egyptian armies.
1978 – The college of cardinals elects 58-year-old Karol Cardinal Wojtyla, a Pole, the first non-Italian Pope since 1523.
1984 – A baboon heart is transplanted into 15-day-old Baby Fae–the first transplant of the kind–at Loma Linda University Medical Center, California. Baby Fae lives until November 15.
1995 – The Million Man March for ‘A Day of Atonement’ takes place in Washington, D.C.

The hardest battle you’re ever going to fight is the battle to be just you. –Leo Buscaglia

photos of the day October 16, 2012

A Cambodian student holds lotus flowers while praying in front of the main gate of the Royal Palace in Phnom Penh, Cambodia, to mourn the death of former King Norodom Sihanouk.

Heng Sinith/AP

‘Verity’, a statue by British artist Damien Hirst is positioned on her plinth on the harbor wall at Ilfracombe in north Devon, South West England. The bronze artwork depicting a naked pregnant woman holding a sword, has been loaned to the Devon seaside town for twenty years by the artist who lives locally.

Toby Melville/Reuters

Market Closes for October 16th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam and Rita Nazareth

Oct. 16 (Bloomberg) — The Standard & Poor’s/TSX Composite Index capped its biggest gain since August as U.S. industrial production beat forecasts and two German lawmakers said the country is open to Spain seeking a precautionary credit line.

Thompson Creek Metals Co., a producer of molybdenum in Canada and the U.S, and Iamgold Corp., a producer of the precious metal, added at least 3.4 percent. Regal Lifestyle Communities Inc. slid 0.3 percent in its trading debut after a C$138.8 million ($140.8 million) initial public offering.

The S&P/TSX rose 177.74 points, or 1.5 percent, to 12,407.70 at 4 p.m. in Toronto. It has rallied 10 percent from this year’s low on May 18, and is up 3.8 percent in 2012.

“There’s an effort to have them working together to solve the European crisis,” Bill Harris, who manages C$279 million ($282.8 million) at Avenue Investment Management in Toronto, said in a telephone interview today. “Any good news that comes out at the moment will get stocks to bounce back.”

Equities rose as Michael Meister and Norbert Barthle, officials within Chancellor Angela Merkel’s Christian Democratic bloc, indicated a reversal to German resistance to a full bailout for Spain. A report showed U.S. industrial production increased a more-than-forecast 0.4 percent in September, partially reversing the prior month’s slump and indicating manufacturers are regaining their footing.

Canadian factory sales rose three times faster than economists forecast in August on gains in energy and automobiles. The Canadian dollar weakened the most in almost three months against its U.S. peer after Bank of Canada Governor Mark Carney suggested he may reduce his economic outlook and delay raising policy interest rates.

All 10 groups in the S&P/TSX rose as health-care and raw- material companies had the biggest gains. Thompson Creek Metals added 6.5 percent to C$2.78. Iamgold increased 3.5 percent to C$15.78.

Argonaut Gold Inc. added 2.2 percent to C$9.86 after being raised to outperform from neutral at Macquarie Group Ltd. by equity analyst Michael Siperco. The 12-month share-price estimate is C$12.

Loblaw Cos. gained 2.5 percent to C$34.72. Canada’s largest grocery chain by market capitalization will cut 700 jobs and take a C$60 million charge as it seeks to reduce costs after projecting annual profit would fall below last year.

Regal Lifestyle fell 0.3 to C$9.97. The company, which plans to buy 10 retirement communities in Canada, sold about 13.9 million shares on Oct. 4 in a sale led by Canadian Imperial Bank of Commerce and Bank of Montreal.

The banks have the option to sell an additional 15 percent of the company, which would increase proceeds to about C$159.6 million, the Toronto-based company said in an Oct. 5 statement.

Ivanplats Ltd., a mining company founded by billionaire Robert Friedland, raised C$300.8 million in its IPO in Toronto after selling shares at the lower end of the marketed range.

Ivanplats sold 63.3 million shares for C$4.75 apiece yesterday, within its offered range of C$4.50 to C$5.40 each, according to sales documents. The stock will trade in Toronto under the ticker IVP.

Ivanplats is the largest Canadian mining IPO since Tahoe Resources Inc. raised C$348 million in its 2010 share sale. The company plans to use proceeds from the sale for exploration and development projects in Africa and to complete the purchase of the Kipushi copper-and-zinc mine in the Democratic Republic of Congo from companies associated with Dan Gertler, an Israeli mining investor, according to a Sept. 28 prospectus.

Gildan Activewear Inc.’s drive to take market share from Berkshire Hathaway Inc.’s Fruit of the Loom and Hanesbrands Inc. has made it the best performing North American underwear stock this year.

Gildan, the biggest supplier of blank tops to makers of printed clothing such as T-shirts, soared almost 70 percent this year through yesterday, the most among 23 North American apparel, footwear and accessories makers with market values of more than $1 billion, according to data compiled by Bloomberg.

The shares are trading at 36 times earnings as investors back the company’s move into the retail market for socks, underwear and undershirts.

“Why this year will be a major breakthrough for us is we’ve taken our low-cost manufacturing and enhanced it with quality features at the same time as giving the retailers better margins than Fruit or Hanes,” Glenn Chamandy, chief executive officer, said last week by phone from Montreal, where the company is based. “That’s how you win shelf space.”

US

By Nikolaj Gammeltoft

Oct. 16 (Bloomberg) — U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest gain in a month, as industrial production rose more than forecast and corporate earnings topped estimates.

Citigroup Inc. added 1.6 percent after Chief Executive Officer Vikram Pandit stepped down. Johnson & Johnson climbed 1.4 percent after raising its 2012 forecast. Murphy Oil Corp. rallied 8 percent after saying it plans to spin off its U.S. refined fuels business. International Business Machines Corp. and Intel Corp. tumbled more than 2.4 percent after the market closed as the companies reported third-quarter results.

The S&P 500 climbed 1 percent to 1,454.92 at 4 p.m. in New York. The index advanced 1.8 percent over two days. The Dow Jones Industrial Average added 127.55 points, or 1 percent, to 13,551.78 today. About 6.2 billion shares traded hands on U.S. exchanges, 2.7 percent above the three-month average.

“Investors are cycling back into risk as earnings as well as economic numbers in the U.S. are somewhat better than expected,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $138 billion in client assets, said in a telephone interview.

“Economic growth will continue to be sluggish even with the flickers of hope that we’ve seen this morning.”

The S&P 500 has rallied 16 percent this year and is about 7 percent below its all-time high of 1,565.15 reached in October 2007. More than 80 companies in the S&P 500 have scheduled their results this week, according to data compiled by Bloomberg. Of the 50 companies in the benchmark index that have reported since Oct. 9, 37 posted earnings that exceeded analyst estimates, the data showed.

Output at factories, mines and utilities rose 0.4 percent in September after a 1.4 percent decline in August that was the biggest since March 2009, the Federal Reserve reported today in Washington. The median estimate in a Bloomberg survey of 85 economists called for production to rise 0.2 percent.

Manufacturing, which makes up 75 percent of the total, climbed 0.2 percent.

American equities followed European stocks higher as two German lawmakers said the country is open to Spain seeking a precautionary credit line. Michael Meister and Norbert Barthle, officials within Chancellor Angela Merkel’s Christian Democratic bloc, indicated a rolling back of German resistance to a full sovereign bailout for Spain.

“We have more good news than bad and no reason to take the market down in the short term,” James Gaul, a portfolio manager at Boston Advisors LLC which oversees about $2.3 billion in assets, said in a phone interview. “The comments by German lawmakers that Germany may be open to a precautionary credit line to Spain may take some risk off the table there.”

Nine out of 10 groups in the benchmark index rose, with commodity producers and technology shares rallying at least 1.5 percent. The Morgan Stanley Cyclical Index jumped 1.8 percent, the most since Sept. 6, as investors bought shares of companies most tied to economic growth. Financial shares added 0.7 percent as a group.

Citigroup advanced 1.6 percent to $37.25, with trading more than 187 percent above the five-day average. Directors ousted Pandit after concluding that he had mismanaged operations, leading to setbacks with regulators and a loss of credibility with investors, a person with knowledge of the discussions said.

Pandit said he decided yesterday to leave after turning the company around. He will be replaced as CEO by Michael Corbat.

President and Chief Operating Officer John P. Havens also resigned, the bank said in a statement.

The departures remove a leadership team that navigated Citigroup through 2008’s global credit crisis, when taxpayers rescued the bank from collapse with a $45 billion bailout.

Citigroup soared 5.5 percent yesterday, the most since March, after earnings topped estimates.

“We think this could be an intermediate term positive,” Matt Burnell, bank analyst at Wells Fargo & Co., wrote in a note today. He recommends investors buy Citigroup shares. “Corbat’s elevation strikes us as a positive for Citi, as it brings an experienced banker into the CEO’s role.”

State Street Corp. increased 4.7 percent to $43.53. The third-largest custody bank reported third-quarter operating profit that beat analysts’ estimates as it earned higher fees for managing client money.

Goldman Sachs Group Inc. slumped 1 percent to $123.22. The fifth-biggest U.S. bank by assets reported profit that beat analysts’ estimates on higher underwriting fees and a jump in the value of the firm’s own investments. Revenue from trading fixed-income, currency and commodities fell short of gains posted by JPMorgan Chase & Co. and Citigroup.

PNC Financial Services Group Inc. fell 4 percent, the most in the S&P 500, to $60.40. The seventh-largest U.S. bank by deposits reported quarterly profit that missed analyst estimates. Excluding the effects of securities transactions and integration costs, profit was $1.63 a share. The average estimate of 32 analysts surveyed by Bloomberg was $1.66.

Johnson & Johnson, the world’s biggest maker of health-care products, climbed 1.4 percent to $69.55. Third-quarter earnings beat analyst estimates on rising demand for medical tools acquired with the Synthes purchase and new prescription medicines. The drugmaker raised its 2012 earnings forecast to $5.05 to $5.10 a share excluding certain items, after trimming the forecast last quarter by 5 cents to $5 to $5.07 a share.

Apple Inc. jumped 2.4 percent to $649.79. The world’s most valuable company sent out invitations for what it’s calling a “special event” on Oct. 23 in San Jose, California. Apple plans to unveil a smaller version of its iPad tablet at the event, a person with knowledge of the matter said earlier this month.

IBM slid 3.3 percent to $203.99 at 5:18 p.m. New York time.

The biggest computer-services company reported third-quarter revenue after the close of regular trading that  fell short of estimates as currency fluctuations and slow hardware sales crimped results.

Intel soared 2.9 percent to $22.35 in regular trading.

After the market closed, the shares erased 2.4 percent as the world’s largest semiconductor maker said sales in the current period will be $13.1 billion to $14.1 billion. Analysts on average had projected sales of $13.7 billion, according to data compiled by Bloomberg.

The company’s forecast suggests year-end demand won’t match the most pessimistic expectations. Still, it doesn’t mean computer makers will soon return to the growth pace of the years preceding the advent of tablets and smartphones. A shift away from traditional computers has put the market on course for its first decline in more than a decade.

Mattel Inc. rose 5 percent, the most since July, to $37.20. The world’s largest toymaker reported third-quarter profit and revenue that topped analysts’ estimates.

Murphy Oil rallied 8 percent to $63.74. The El Dorado, Arkansas-based company plans to spin off its U.S. refined fuels business, including a network of gasoline stations at Wal-Mart Stores Inc. locations, after hedge fund Third Point LLC said the company should shed assets.

Kroger Co., a supermarket operator, increased 4.3 percent to $24.43. Jefferies Group Inc. upgraded the stock to buy from hold.

Fossil Inc. gained 7.3 percent to $91.31 for the third- biggest advance in the S&P 500. The maker of jewelry and leather goods was upgraded to buy at Citigroup, which cited the company’s inexpensive valuation as well as the earnings impact from new brands and products.

Coca-Cola Co. slumped 0.6 percent to $37.90. The world’s largest soft-drink maker said third-quarter revenue advanced less than 1 percent to $12.3 billion, trailing the $12.4 billion average of analysts’ estimates compiled by Bloomberg.

Clearwire Corp. tumbled 17 percent to $2.23. People with direct knowledge of the situation said Sprint Nextel Corp. has no immediate plans to take over Clearwire. Sprint, which agreed to sell a 70 percent stake to Softbank Corp. for $20.1 billion, was unchanged at $5.69.

Have a wonderful evening everyone.

Be magnificent!

Expansion is life; contraction is death.

Love is life, hatred is death.

We began to die the day we began to contract, to hate others

and nothing can prevent our death,

until we come back to life, to expansion

Swami Vivekananda, 1863-1902

As ever,

Carolann

Imagination is a poor substitute

for experience.

-Havelock Ellis, 1859-1939

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