October 18, 2012 Newsletter

Dear Friends,

Tangents:

Driving back to the office tonight after a brief dinner interlude, we were listening to the fabulous Terry Gross on NPR’s nightly program Fresh Air.  Tonight, Terry was interviewing Sherry Turkle.  Turkle is an MIT Professor and an expert on mobile technology, social networking and sociable robotics and her research puts her at the forefront of understanding the growing impact of technology on human relations.   We saw her at the World Business Forum in New York earlier this month.

Turkle is a founding Director of the MIT Initiative on Technology and Self; her presentation in NYC focused on our relationship with digital technology and how it is affecting the way we behave and interact with one another.  Her latest book, Alone Together, has just been published in paperback.  Worth the read.

Today in History:

1918 – Czechs seize Prague and renounce Hapsburg’s rule. Marian column in Old Town Square, Prague, the Czech Republic, destroyed by a crowd in 1918 as a symbol of Habsburg Monarchy.

On this day in 1977, Reggie Jackson earned the nickname Mr. October for hitting three home runs in Game 6 of the World Series, leading the NY Yankees to the championship over the Los Angeles Dodgers. –Wall Street Journal, 10/18/12.

And also on this day in…

1904 – A.J. Liebling, journalist, was born.

1918 – Czechs seize Prague and renounce Hapsburg’s rule.
1919 – Madrid opens a subway system.
1921 – Russian Soviets grant Crimean independence.

1926 – Chuck Berry was born.
1939 – President Franklin D. Roosevelt bans war submarines from U.S. ports and waters.
1944 – Lt. General Joseph Stilwell is recalled from China by president Franklin Roosevelt.
1950 – The First Turkish Brigade arrives in Korea to assist the U.N. forces fighting there.
1967 – A Russian unmanned spacecraft makes the first landing on the surface of Venus.

Freedom of the Press belongs to those who own one.  –A.J. Liebling

photos of the day October 18, 2012

A child lies inside a work by Australian artist Sue Roberts titled ‘the listrumpet’ which is part of the ‘Sculpture by the Sea’ exhibition at Sydney’s Tamarama Beach. The free and temporary outdoor exhibition, now in its 16th year, stretches for 1.24 miles along the coastline popular with walkers, joggers and tourists.

Tim Wimborne/Reuters

A woman jumps on ‘Sacrilege, 2012’ art works by artist Jeremy Deller at the Esplande des Invalides in Paris. ‘Sacrilege’ is an inflatable piece representing Stonehenge, a megalithic monument in Britain.

Jacky Naegelen/Reuters

Market Closes for October 18th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Oct. 18 (Bloomberg) — Canadian stocks rose for a fourth day as investors weighed U.S. economic data and awaited news from a two-day meeting of European Union leaders in Brussels.

Encana Corp. rose 3.8 percent after an analyst with Hedgeye Risk Management said the company is next on the list of takeover targets for Exxon Mobil Corp. Lake Shore Gold Corp. and Premier Gold Mines Ltd. slipped at least 4.2 percent as the price of the metal declined for the first time in three days.

The Standard & Poor’s/TSX Composite Index added 4.87 points, or less than 0.1 percent, to 12,466.12 in Toronto. The benchmark equity gauge is up 2.2 percent this week, on pace for its biggest weekly gain in more than a month.

“The past few months markets have been moving higher, but at low volumes so there hasn’t been much conviction,” said Rob Edel, chief investment officer with Nicola Wealth Management, in a phone interview from Vancouver. His firm manages about C$1.8 billion ($1.8 billion). “They’ve removed some of the tail risk on Europe, but what they are doing will take years. It’s like herding cats, so it can be hard to be super optimistic.”

More Americans than forecast filed applications for unemployment benefits last week, reflecting an unwinding of adjustments for seasonal swings at the start of a quarter. An index of U.S. leading economic indicators rose in September by the most in seven months, while manufacturing in the Philadelphia region expanded in October for the first time in six months.

As leaders gather in Brussels for a two-day summit, French President Francois Hollande said efforts to stem the turmoil that began in 2009 could unravel if the EU fails to deliver on its promises. Divisions have flared over the scope of the European Central Bank’s supervisory powers and how losses would be shared.

Financial stocks contributed most to gains on the S&P/TSX as five of 10 industries rose on trading volumes 2.3 percent above the 30-day average. Gold stocks paced declines on the index.

Fiera Capital Corp., the best-performing wealth manager among its North American peers this year, jumped 6.6 percent to C$8.10, its biggest gain since February.

The firm is looking for acquisitions of companies with assets of up to C$2 billion, President Sylvain Brosseau said in an interview with Bloomberg earlier this week.

Encana surged 3.8 percent to C$23.64, its highest close in more than a year. Kevin Kaiser with Hedgeye said in an interview with Bloomberg the chances of Exxon Mobil buying the company are “now very real” after the U.S. energy firm, the largest in the world, agreed to buy Celtic Exploration Ltd. in a $2.92 billion deal yesterday.

The potential deal for Encana is likely well in the $30-a- share range, with even a $34 a share offer a “steal” for Exxon, Kaiser said.

Lake Shore Gold slumped 5.9 percent to 80 Canadian cents and Premier Gold Mines retreated 4.2 percent to C$5.44 as gold for December delivery slid 0.5 percent to settle at $1,744.70 an ounce in New York. Barrick Gold Corp., the world’s largest gold producer, slipped 1.9 percent to C$38.37 and Goldcorp Inc. fell 2.6 percent to C$42.20.

Silvercorp Metals Inc. retreated 2 percent to C$5.87 and Silver Wheaton Corp. declined 1.1 percent to C$38.63. Silver for December delivery fell 1.1 percent to $32.868 an ounce.

Husky Energy Inc. tumbled 2.9 percent to C$27.37 after analysts at Goldman Sachs Group Inc. cut their rating on the stock to sell from neutral.

Cenovus Energy Inc. lost 0.1 percent to C$34.53, paring earlier losses of as much as 1.3 percent. Oil for November delivery fell 2 cents to settle at $92.10 a barrel in New York, erasing an earlier loss of as much as 1.6 percent.

Astral Media Inc., the Canadian broadcaster that BCE Inc. agreed to buy for C$3 billion ($3.1 billion), slumped 3.7 percent to C$46.65. The Canadian Radio-Television Telecommunications Commission, the country’s telecommunications regulator, officially rejected BCE’s offer after the close of trading.

US

By Nikolaj Gammeltoft

Oct. 18 (Bloomberg) — U.S. stocks fell, snapping a three- day advance in the Standard & Poor’s 500 Index, as Google Inc. pulled down technology shares after reporting third-quarter profit and sales that missed estimates.

Google dropped 8 percent after the earnings report was filed inadvertently during regular trading hours. Technology shares had the biggest decline among 10 groups in the S&P 500.

Philip Morris International Inc. dropped 4.2 percent as earnings trailed analysts’ estimates. Travelers Cos. gained 3.6 percent as earnings more than doubled on lower claims costs tied to natural disasters.

The S&P 500 fell 0.2 percent to 1,457.34 at 4 p.m. in New York. The index gained as much as 0.2 percent earlier as a rise in jobless claims was offset by better-than-estimated data on leading indicators and Philadelphia manufacturing. The Dow Jones Industrial Average slid 8.06 points, or 0.1 percent, to 13,548.94 today. The Nasdaq-100 Index tumbled 1.1 percent to 2,744.17. About 6.9 billion shares traded hands on U.S. exchanges, 14 percent above the three-month average.

“Google failed to meet expectations and then also mistakenly released in the middle of the day,” Giri Cherukuri, a portfolio manager for Oakbrook Investments LLC, which manages $3 billion, said in a telephone interview. “Google is a big company and on top of the fact that they missed estimates, they talked about advertising in the online world not doing as well as previously thought.”

Trading in Google’s stock was halted at about 12:50 p.m. New York time, and resumed at 3:20 p.m. after the company released a final version of its earnings document. The company said R.R. Donnelley & Sons Co. released a draft of the quarterly results without permission. Google tumbled the most since January, losing 8 percent to $695.

Google’s profit and sales missed analysts’ estimates, a sign that its tools are becoming less valuable to advertisers while costs associated with expansion into new businesses are chipping away at profitability. The average amount advertisers paid each time a user clicks on a promotion declined about 15 percent from a year earlier, and was 3 percent less than the prior period.

“The downward move in the market is more a result of the fundamentals,” Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital in Greenwood, said in a phone interview. “The fact that it was released early, it exacerbates the dynamic but I don’t think we would have fallen any less if the numbers had come out after the market.”

Technology shares erased 1.5 percent as a group in the S&P 500. Apple Inc. slid 1.9 percent to $632.64 and International Business Machines Corp. dropped 2.8 percent to $194.96. AOL Inc. declined 1.9 percent to $36.36. Online-coupon provider Groupon Inc. slipped 3.4 percent to $4.91. Facebook Inc., the world’s most popular social-networking service, lost 4.6 percent to $18.98.

Microsoft Corp. fell 2.4 percent to $28.79 at 5:11 p.m. as it released results after the close of regular trading. The largest software maker reported fiscal first-quarter profit and sales that fell short of analysts’ estimates as declining personal computer sales crimped demand for Windows, its core operating system.

U.S. stocks slumped early in the trading day as Labor Department figures showed more Americans than forecast filed applications for unemployment benefits last week, reflecting an unwinding of adjustments for seasonal swings at the start of a quarter.

Equities pared declines as the index of U.S. leading economic indicators rose in September by the most in seven months, boosted in part by a jump in permits for home construction that’s helping underpin the expansion.

Manufacturing in the Philadelphia region expanded in October for the first time in six months, a sign the industry may be starting to stabilize. The Federal Reserve Bank of Philadelphia’s general economic index rose to 5.7 in October from minus 1.9 in September. A reading of zero is the dividing line between expansion and contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

“The market is digesting some strong gains earlier in the week and the disappointing jobless claims number,” Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $113 billion, said in a phone interview. “The data cadence is two steps forward, one step back right now with a positive bias. It does appear as if things are firming up at the margin for the U.S. economy and the Philly Fed report confirms that.”

Economic issues including jobs are central to the race for the American presidency. Gallup’s daily tracking of registered voters conducted Oct. 10 through Oct. 16 showed President Barack Obama with 46 percent and Republican challenger Mitt Romney with 48 percent support. The margin of error is two percentage points.

“Everything seems paused until we get clarity on the election since there are a lot of economic policy issues that need to be resolved before the end of the year,” Thomas Nyheim, a Wilmington, Delaware-based fund manager for Christiana Trust, which oversees about $13 billion, said in a telephone interview.

The S&P 500 has rallied 16 percent so far this year as economic data topped estimates, companies posted better-than- expected earnings and the Fed announced a third round of bond purchases.

As many as 28 companies listed on the S&P 500 release results today, according to data compiled by Bloomberg. Of the 104 companies in the benchmark index that have reported since Oct. 9, 75 posted earnings that exceeded analyst estimates, while 26 missed them, the data showed.

Philip Morris International, the world’s largest publicly traded tobacco company, dropped 4.2 percent to $88. The maker of Marlboro cigarettes posted third-quarter profit that trailed analysts’ estimates. European Union nations facing a debt crisis and high unemployment saw smokers cut back or switch to contraband cigarettes or roll-your-own varieties. Sales in the region slipped 15 percent in the third quarter.

Morgan Stanley slipped 3.8 percent, the most since July, to $17.79 even after the sixth-largest U.S. bank reported results that beat analysts’ estimates, as revenue from fixed-income trading almost doubled from the second quarter. Morgan Stanley had a loss of $1.01 billion, or 55 cents a share.

Boston Scientific Corp. fell 3.9 percent to $5.40. The heart-device maker lowered its forecast for full-year revenue to no more $7.24 billion from a previous range of $7.2 billion to $7.4 billion. Analysts on average estimated $7.26 billion in sales for the year.

Travelers climbed 3.6 percent to $73.94 for the biggest gain in the Dow. Chief Executive Officer Jay Fishman, 59, has bought back shares, raised rates for coverage and changed policy terms to improve shareholder returns as near record-low interest rates pressure income from the investment portfolio.

Property-casualty insurers have benefited from fewer natural disasters this year after record losses in 2011.

Allstate Corp., the largest publicly traded U.S. home and auto insurer, advanced 1.8 percent to $42.62 today. Chubb Corp., which competes with Travelers selling commercial coverage, jumped 2.9 percent to $81.19. Ace Ltd. gained 3 percent to $81.70.

EBay Inc. rallied 5.5 percent to $50.83, the highest level since 2005. The world’s largest online marketplace rose the most in three months after third-quarter results fueled optimism that the company’s turnaround is gathering steam. Chief Executive Officer John Donahoe has been spending money on mobile technology, marketing campaigns and a website redesign, seeking to vault the company beyond its roots in Internet auctions.

MGM Resorts International jumped 2.3 percent to $11.17. MGM China Holdings Ltd., a venture between Pansy Ho and MGM Resorts, won a land grant to develop a second casino resort in Macau. The approval allows MGM China to build on the city’s increasingly popular Cotai strip, where the operator doesn’t have a presence.

Lam Research Corp. rose 7.2 percent to $36.01 for the biggest gain in the S&P 500. The chip-equipment manufacturer reported first-quarter earnings that beat analyst estimates.

Have a wonderful evening everyone.

Be magnificent!

When you see that everything is different, that everything is unique,

you become one with the whole.

This is because you no longer judge, compare, or attribute particular characteristics.

Remove the characteristics,

and you no longer have an entity.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Don’t fight forces; use them.

-Buckminster Fuller, 1895-1983

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