September 17, 2012 Newsletter

Dear Friends,

Tangents: Rosh Hashana today: L’SHANA TOVAH 5773 – wishing all my Jewish friends a very good year.

And on this day …

1862 – Battle of Antietam, 25,000 killed.

1883 –William Carlos Williams, poet, was born.

1920 – Nationa Football league formed.

1932 – Gandhi begins fast in protest of caste separation.

1925 – Ken Kesey, writer, was born.
1939 – With the German army already attacking western Poland, the Soviet Union launches an invasion of eastern Poland.
1942 – British Prime Minister Winston Churchill meets with Soviet Premier Josef Stalin in Moscow as the German Army rams into Stalingrad.
1944 – British airborne troops parachute into Holland to capture the Arnhem bridge as part of Operation Market-Garden. The plan called for the airborne troops to be relieved by British troops, but they were left stranded and eventually surrendered to the Germans.
1959 – The X-15 rocket plane makes its first flight.
1976 – The Space Shuttle is unveiled to the public.

Leaders don’t force people to follow — they invite them on a journey. –Charles S. Lauer

photos of the day September 17, 2012

Ducati MotoGP rider Valentino Rossi of Italy kneels next to his bike during the third practice session of the San Marino motorcycling Grand Prix at the Misano circuit Saturday.

Max Rossi/Reuters

A decorated cow stands on a grassland before walking down from Mutterer Alm, some 10km south of the western Austrian city of Innsbruck on Saturday.

Dominic Ebenbichler /Reuters

Market Closes for September 17^th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Sept. 17 (Bloomberg) — Canadian stocks fell as crude prices plunged the most in eight weeks and euro area finance ministers quarreled over the future of the banking system and the parameters of future bailouts.

Pacific Rubiales Energy Corp. and BlackPearl Resources Inc. fell at least 4.9 percent as energy stocks contributed the most to declines in the benchmark index. Rona Inc. plunged 12 percent after U.S.-based Lowe’s Cos. withdrew its unsolicited C$14.50 ($14.91) a share offer for the Quebec-based home improvement retailer. Teck Resources Ltd. declined 3.8 percent after analysts at Canaccord Genuity cut the stock to a hold.

The Standard & Poor’s/TSX Composite Index fell 52.61 points, or 0.4 percent, to 12,446.86 in Toronto. The equity gauge has advanced 4.1 percent this year, rallying in September as commodities rebounded on stimulus moves from the U.S. Federal Reserve and signs of progress in the euro zone.

Eight of 10 industries on the S&P/TSX retreated, with volume for the day 19 percent above the 30-day average.

“It’s been a tremendously comforting rally that we haven’t seen in a long time, so you were bound to have a bit of a correction,” said Michael Smedley, executive vice president with Morgan Meighen & Associates Ltd. in Toronto. His firm manages about C$1 billion ($1.03 billion).

Oil declined more than $3 in less than a minute in late trading as October options were about to expire, ending the day with the largest drop in eight weeks.

Futures tumbled to $94.83 at 1:54 p.m. from $97.88 in the same minute on a surge in volume. Oil for October delivery settled 2.4 percent lower at $96.62 a barrel in New York.

Global stocks fell earlier after squabbling among European governments over the next steps needed to overcome the sovereign debt crisis. A Sept. 14 European Union finance ministers meeting in Cyprus deadlocked over the timetable for a more unified EU banking sector, with a German-led coalition pushing back against a more ambitious plan sought by France, Spain and Italy. The ministers also bickered over the terms of bailout requests and the role of the European Central Bank.

Teck Resources, Canada’s largest diversified miner, slumped 3.8 percent to C$31.78 after Orest Wowkodaw, an analyst with Canaccord Genuity, cut his rating to hold from buy and lowered his one-year price target to C$37 from C$39.

Paul Forward, analyst with Stifel Nicolaus & Co. Inc., said Australian metallurgical coal producers settled their fourth- quarter contract pricing at $170 a ton, compared with a benchmark level of $225 a ton in the third quarter. In 2011, coal accounted for 49 percent of Teck’s revenues.

Pacific Rubiales, which operates in Colombia, fell 5.4 percent to C$24.41 after a government authority said the country will decide on environmental licenses requested by the company by the end of the year. BlackPearl Resources declined 4.9 percent to C$3.71.

San Gold Corp., the third-worst performing stock on the S&P/TSX Materials Index this year, decreased 3.7 percent to C$1.04. Kirkland Lake Gold Inc. dropped 4.1 percent to C$11.38 and Franco-Nevada Corp., a gold royalties company, fell 2.2 percent to C$56.08. Gold for December delivery fell 0.1 percent to $1,770.60 an ounce in New York.

First Quantum Minerals slipped 4.7 percent to C$22.03. Copper futures for December delivery declined 1.1 percent to settle at $3.792 a pound in New York amid speculation the Chinese government will not ease monetary policy as quickly as anticipated.

Rona fell 12 percent to C$11.29, its biggest loss ever. Lowe’s withdrew its offer after the Rona board rebuffed its request for permission to conduct due diligence and proceed with a friendly transaction, the Mooresville, North Carolina-based retailer said today in a statement.

Jean Coutu Group Inc., a Longueuil, Quebec-based pharmacy retailer, dropped 0.7 percent to C$14.17. Alimentation Couche- Tard Inc., based in Laval, Quebec, slipped 1.3 percent to C$45.61.

US

By Nikolaj Gammeltoft and Amanda Gould

Sept. 17 (Bloomberg) — U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from the highest level since 2007, as European finance chiefs deadlocked at debt-crisis talks and New York-area manufacturing slumped.

Bank of America Corp. and Morgan Stanley slid more than 2.4 percent after two weeks of gains. Alcoa Inc. tumbled 2.6 percent as commodity shares plunged. Cliffs Natural Resources Inc. lost 7 percent after its rating was cut by JPMorgan Chase & Co. Apple Inc. gained 1.2 percent as pre-orders of its iPhone 5 topped 2 million units in one day. Office Depot Inc. rose 5.3 percent after Starboard Value LP took a stake in the company.

The S&P 500 slid 0.3 percent to 1,461.19 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 40.27 points, or 0.3 percent, to 13,553.1. About 5.7 billion shares traded hands on U.S. exchanges today, 5.4 percent below the three-month average.

“It looks like we need to take a small breather after the sizable rally that we’ve had,” Randy Frederick, managing director of active trading and derivatives at Charles Schwab Corp., said in an interview from Austin, Texas. His firm has $1.83 trillion in client assets. “There’s the potential for a small pull-back, but I think we will move back into the bull territory later in the week unless there’s an unexpected negative news event.”

The S&P 500 rallied last week to the highest level since December 2007 as the Federal Reserve’s plan to buy mortgage securities fueled demand for riskier assets. Commodity, financial and industrial shares had the biggest gains among 10 groups in the benchmark gauge, helping to extend its two-week advance to 4.2 percent. The index is about 7 percent away from its all-time high set in October 2007.

Stocks fell today as European Union finance ministers failed to agree on a timetable for a more unified banking sector and clashed over terms of bailout requests and the role of the European Central Bank at a meeting Sept. 14 in Cyprus. Citigroup Inc. became the latest bank to cut its growth forecast for China. At least 13 banks and brokerages have reduced their 2012 economic growth forecasts for the world’s second-largest economy this month.

U.S. equities also declined as the Federal Reserve Bank of New York’s general economic index dropped to minus 10.41, the lowest since April 2009, from minus 5.85 in August. The median forecast of 53 economists in a Bloomberg survey called for minus 2. Readings less than zero signal contraction in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.

“To me the only question is if the stock market is going to correct its current overbought condition by going sideways, or if it is going to correct back to the 1,400-1,422 support,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, wrote in an e-mail today. His firm oversees $350 billion.

Financial and commodity shares had the biggest declines among 10 groups in the S&P 500. The Morgan Stanley Cyclical Index tumbled 1.2 percent after rallying for four straight days.

The Dow Jones Transportation Average slipped about 1.5 percent and the S&P Supercomposite Homebuilding Index lost 1.9 percent after rallying 8.5 percent last week.

The KBW Bank Index declined 1.7 percent as 23 of its 24 companies slipped. Bank of America, which climbed 20 percent in the past two weeks, tumbled 2.6 percent to $9.30 for the second- biggest drop in the Dow. Morgan Stanley declined 2.4 percent to $17.80. Wells Fargo & Co. fell 2.2 percent to $35.33 after Stifel Nicolaus & Co. cut the fourth-largest U.S. bank by assets to hold from buy.

Alcoa, the largest U.S. aluminum producer, fell the most in the Dow, sliding 2.6 percent to $9.58, as the S&P GSCI Spot Index of 24 commodities fell 2.2 percent, the most since July.

Cliffs Natural Resources slipped 7 percent to $42.36 for the biggest decline in the S&P 500. JPMorgan downgraded the stock to neutral from overweight.

Netflix Inc. fell 5.8 percent to $57.02. The world’s largest video-subscription service was rated underperform in new coverage at Macquarie Capital USA Inc.

Boeing Co. lost 1.9 percent to $69.92. Oppenheimer & Co. analyst Yair Reiner said shares of the world’s largest maker of cargo aircraft may fall, citing GEnx engine issues after one cracked on a Boeing 787 Dreamliner during testing in Charleston, South Carolina, on July 28, spewing hot metal parts.

Apple gained 1.2 percent to a record $699.78 and exceeded $700 in extended trading for the first time ever. Pre-orders of its iPhone 5 topped 2 million units in one day, more than double the sales record set by the previous model of the device.

Because demand for the iPhone 5 exceeds the initial supply, some pre-orders will be delivered to customers in October, rather than September as previously planned, Apple said today in a statement.

Office Depot rose 5.3 percent to $2.60. Starboard Value, a New York-based investment firm, took a 13.3 percent stake in the company, becoming its largest shareholder, and said the retailer must improve its financial results.

Gilead Sciences Inc. rose 6.1 percent, the most in the S&P 500, to $65.80 after JPMorgan analyst Geoff Meacham said the company’s AIDS drug, called Stribild, may emerge as a market leader based on a survey of 52 HIV specialists.

As politicians debate whether Americans are better off than they were four years ago, the stock market is saying yes. With 50 days before the national election, the S&P 500 has rallied 82 percent and touched a four-year high since President Barack Obama took office.

The advance puts the gauge closer to the all-time high than any of the world’s biggest stock markets, data compiled by Bloomberg show. The benchmark index of American equity is trading at 14.9 times reported earnings, the biggest discount to MSCI’s global measure since March 2010.

“We are in a healthier state right now,” Chris Hyzy, who helps oversee about $325 billion as chief investment officer of U.S. Trust in New York, said in a Sept. 12 phone interview.

“Next year, we think the growth clip in the United States and the globe is going to be better than expected. Over the next three years, we are bullish.”

Have a wonderful evening everyone.

Be magnificent!

No matter how insignificant the thing you have to do,

do it as well as you can,

give it as much of your care and attention as you would give to the thing

you regard as most important.

Mahatma Gandhi,  1869-1948

As ever,

Carolann

Let no man pull you low enough to hate him.

-Martin Luther King Jr., 1929-1968

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