September 24, 2012 Newsletter

Dear Friends,

Tangents:

Today marks the 45^th anniversary of the passing of three-time Pulitzer Prize-winning poet Carl Sandburg.  In his honor, tonight PBS is featuring a documentary, The Day Carl Sandburg Died, which includes rarely seen film clips and photographs as the backdrop for candid interviews with scholars, friends, and family in an expansive view of this controversial populist known as a poet of the people.

FOG

-Carl Sandburg

The fog comes

on little cat feet.

It sits looking

over harbor and city

on silent haunches

and then moves on.

And also on this day in…

1789 – The First Supreme Court is formed by an act of Congress, signed by George Washington.
1890 – The Mormon Church officially denounces polygamy.

1896 – F. Scott Fitzgerald was born.

1960 – The first nuclear powered aircraft carrier, the USS Enterprise is launched.

1962 – Nia Vardalos was born.

1964 – The Warren Commission report on the assassination of President Kennedy, is delivered to President Johnson.
1970 – The Soviet Luna 16 lands, completing the first unmanned mission to the Moon.

At 18 our convictions are hills from which we look.  At 45 they are caves in which we hide. –F. Scott Fitzgerald

photos of the day September 24, 2012

Larry, the Downing Street cat, waits to be allowed back into Number 10 during a rainy day in London.

Stefan Wermuth/Reuters

A woman walks past a house beloging to an artist on Abbey Street during heavy rainfall in Dublin, Ireland.

Cathal McNaughton/Reuters

Market Closes for September 24th, 2012:

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Sept. 24 (Bloomberg) — Canadian stocks fell the most in three weeks as commodities slumped after data showed business confidence slipping in Germany and China.

B2Gold Corp. and Novagold Resources Inc. retreated at least 7.1 percent. Fortuna Silver Mines Inc. plunged 9 percent.

Advantage Oil & Gas Ltd. fell 3.9 percent as crude dropped for the fifth time in six days.

The Standard & Poor’s/TSX Composite Index tumbled 70.06 points, or 0.6 percent, to 12,313.54 in Toronto, its biggest percentage loss since Aug. 30.

“Europe is a major trading partner with China so the slowdown in Europe has definite knock-on effects in China as well,” said Robert McWhirter, portfolio manager with Selective Asset Management Inc. in Toronto. His firm manages about C$60 million ($61.2 million). “People are going back and forth.

Things are patched up in the short-term, but long-term the problems in Europe are still there.”

China, a major consumer of commodities including base metals such as copper, has shifted its focus toward health care and social issues and away from infrastructure building, McWhirter said.

The benchmark Canadian gauge joined a slump in global markets with mining and energy stocks leading declines on the S&P/TSX.

German business confidence unexpectedly fell to the lowest in more than two and a half years in September as the sovereign debt crisis clouded the economic outlook. China’s manufacturers and retailers are less optimistic about sales than they were three months ago and more companies are cutting jobs, according to the China Beige Book, a survey modeled on the U.S. Federal Reserve’s Beige Book.

The Standard & Poor’s GSCI Spot Index, which tracks a basket of commodities including oil, metals and grains, declined 1 percent to 657.68. The index fell 4.4 percent last week, its first weekly drop in eight weeks.

Advantage Oil & Gas dropped 3.9 percent to C$3.70. Crescent Point Energy Corp. tumbled 2.1 percent to C$44.76 and Canadian Natural Resources Ltd. retreated 2.4 percent to C$31.48 as crude for November delivery declined 1 percent to settle at $91.93 a barrel in New York.

B2Gold sank 8.8 percent to C$3.86 and Novagold Resources slipped 7.1 percent to C$5.66. Goldcorp Inc. retreated 3.7 percent to C$44.08 and Franco-Nevada Corp. sank 5.9 percent to C$55.76.

Gold tumbled the most in more than seven weeks, with futures for December delivery dropping 0.8 percent to settle at $1,764.60 an ounce in New York.

Fortuna Silver Mines plunged 9 percent to C$5.18 and Tahoe Resources Inc. fell 4.4 percent to C$20.34 after Dale Mah, analyst with Dundee Securities Corp., cut his ratings on both silver miners to neutral from buy.

“A short-term correction is a reality,” he said in a research note.

Canaccord Financial Inc. slipped 5.6 percent to C$5.76 after the investment firm said it will shutter 16 branches of its wealth management unit, half the total. Last month, the Toronto-based firm said it would cut 60 jobs after posting a larger-than-estimated first-quarter loss.

US

By Rita Nazareth

Sept. 24 (Bloomberg) — The Standard & Poor’s 500 Index fell a third day, its longest decline in seven weeks, as European leaders clashed on ways to stem the debt crisis and data from China and Germany signaled the slowdown is deepening.

Apple Inc. retreated 1.3 percent after reporting debut weekend sales for the iPhone 5 that fell short of some analysts’ projections on supply constraints. Facebook Inc., the world’s largest social-networking service, decreased 9.1 percent amid concern the company’s stock is overpriced. U.S. Steel Corp., Peabody Energy Corp. and Micron Technology Inc. declined at least 1.6 percent after analysts downgraded the shares.

The S&P 500 dropped 0.2 percent to 1,456.89 at 4 p.m. New York time. The Dow Jones Industrial Average lost 20.55 points, or 0.2 percent, to 13,558.92 for its second straight decline.

Volume for exchange-listed stocks in the U.S. was 5.5 billion shares today, or 7.5 percent below the three-month average.

“There’s no magic bullet to this European crisis,” said Hayes Miller, who helps oversee about $48 billion as the Boston- based head of asset allocation in North America at Baring Asset Management Inc. “The politicians have been trying to put on a face of unity. Yet there are no easy solutions. You’re going to have an economic growth rate that’s going to be quite poor over the next year. It’s going to be a challenging environment.”

Global stocks slumped after Chancellor Angela Merkel and President Francois Hollande disagreed on a timetable for starting joint oversight of Europe’s banking sector. German business confidence unexpectedly fell in September. China’s manufacturers and retailers are less optimistic about sales than they were three months ago and are cutting jobs, according to a survey by New York-based researcher CBB International LLC.

The S&P 500 last week had the first drop since August after European Union finance ministers failed to calm concern about the region’s debt crisis. The index was still up 16 percent this year amid better-than-estimated earnings, rising consumer confidence and home sales, and Federal Reserve stimulus. The S&P 500 briefly rose today amid gains in financial shares.

“I just think the market has an underlying bid between now and the start of the next quarter as the quarterly allocation process should strongly favor equities,” said Michael Shaoul, chairman of New York-based Marketfield Asset Management, which oversees $3 billion. “It will take something quite significant to derail the rally between now and then.”

Six out of 10 groups in the S&P 500 fell as technology and commodity shares had the biggest losses.     Apple fell 1.3 percent to $690.79. More than 5 million units of the iPhone 5 were sold in the first three days, surpassing a record set last year by the previous model, the iPhone 4S. Demand for the new handset exceeded the initial supply, Apple said. A successful debut for the iPhone, responsible for about two-thirds of profit, is crucial to fueling the growth that transformed Apple from a niche computer maker into the world’s most valuable company.

“The number is lower than what people had expected,” said Brian White, an analyst at Topeka Capital Markets, in an interview. He had estimated debut weekend sales of 6 million to 6.5 million units. “This seems to be driven more by availability than demand.”

Facebook lost 9.1 percent to $20.79, after surging 27 percent since the end of August. Barron’s said the company is overvalued and may drop to $15 a share or lower as it falls behind in capitalizing on the growing number of mobile-device users. Richard Greenfield, an analyst at BTIG Research, said the mobile strategy makes him concerned, according to the newspaper.

Measures of semiconductor and computer companies led the losses in the S&P 500 among 24 groups. Evercore Partners Inc. cut its estimates for the personal computer industry. Hewlett- Packard Co. retreated 2.2 percent, the most in the Dow, to $17.21. Intel Corp. lost 1.4 percent to $22.80, the lowest price since November.

Two of the nation’s largest steelmakers were downgraded by Citigroup Inc., which cited declining steel prices and the companies’ fixed costs. U.S. Steel was lowered to a neutral rating, and AK Steel Holding Corp. was rated a sell, Brian Yu and Jonathan Sullivan, analysts at Citigroup, wrote in a note issued today. Citigroup reduced its forecast for hot-rolled coil to $625 a ton in 2013 and $630 a ton in 2014.

U.S. Steel, based in Pittsburgh, fell 1.8 percent to $19.59. AK Steel, based in West Chester, Ohio, dropped 4.6 percent to $5.01.

Peabody Energy, the largest U.S. coal producer by volume, dropped 4.5 percent to $22.94. Bank of America downgraded the stock to underperform from buy, citing a more cautious outlook on the industry.

Micron Technology lost 1.7 percent to $6.26 after being cut to sector perform at Pacific Crest Securities LLC. The company is due to announce its results on Sept. 27. Micron reported its fourth-straight quarterly loss in June as chip manufacturers struggled to match production capacity with fluctuations in demand for personal computers, mobile phones and tablets.

Questcor Pharmaceuticals Inc. tumbled 37 percent to $19.08 after disclosing the company’s marketing practices are being investigated by the U.S. government.

Peregrine Pharmaceuticals Inc. plunged 78 percent, the most ever, to $1.16. The biotechnology company said the survival rates from its lung cancer study reported earlier this month were unreliable.

Google Inc. rose 2.1 percent to a record $749.38. The world’s largest search engine is benefiting from rising demand for its advertising products, including search, display and mobile. The company is expected to become the leader in the U.S. for display advertising this year, including banner ads, replacing Facebook, according to eMarketer Inc.

MetLife Inc. advanced 1.6 percent to $35.42. The insurer seeking to exit banking to limit U.S. oversight amended a deal to sell about $7 billion in deposits to General Electric Co. so that Federal Deposit Insurance Corp. approval is no longer required. The deal will now be subject to approval from the Office of the Comptroller of the Currency, the New York-based insurer said in a Sept. 21 regulatory filing.

Chief Executive Officer Steven Kandarian is seeking to reduce supervision from the Federal Reserve after the regulator twice blocked his company’s plans to return capital to shareholders. MetLife may increase its dividend and repurchase shares after exiting bank status, according to Barclays Plc.

TiVo Inc. rallied 4 percent to $9.94. The pioneer of digital-video-recording technology gained after Verizon Communications Inc. agreed to pay it at least $250.4 million under a patent-litigation settlement.

Pandora Media Inc. climbed 3.7 percent to $10.89. The biggest U.S. online radio service rose after Albert Fried & Co. estimated a bill introduced to Congress would cut the company’s content costs by as much as half.

CIT Group Inc. jumped 5.9 percent to $41.25. The commercial lender led by John Thain gained after analysts wrote it could be a target for Wells Fargo & Co., and Fox Business Network said the firm is seeking a buyer. Curt Ritter, a spokesman for New York-based CIT, said the company doesn’t comment on market rumors or speculation. Mary Eshet, a spokeswoman for San Francisco-based Wells Fargo, declined to comment.

Joy Global Inc. added 1.3 percent to $60.17. The mining- equipment manufacturer looks “increasingly likely” to be a General Electric acquisition target, Larry De Maria, a New York- based analyst at William Blair & Co., said in a note to clients today. GE is preparing to buy more mining-equipment and services companies as it creates a new unit using the blueprint for doubling oil and gas revenue in four years.

The unbroken streak of S&P 500 profit growth that spurred a three-year bull market would last another quarter if not for energy companies, whose profits are poised to slump the most since 2009.

Income at oil and gas producers will fall 24 percent in the three months ending in September, the largest decline in three years, according to more than 1,200 analyst estimates compiled by Bloomberg. Excluding the retreat, earnings in the benchmark gauge for U.S. stocks would climb 2.5 percent, the 12th straight increase, amid gains for banks and computer makers, data show.

Lower earnings from Apache Corp. to Occidental Petroleum Corp. reflect the dip in oil and gas prices in May and don’t signal lasting weakness in U.S. profits after they doubled since 2009, according to BB&T Wealth Management’s Walter “Bucky”

Hellwig. Bears say investors should heed the decline because energy suppliers are the fourth-biggest industry in the S&P 500 and their income reflects economic momentum.

“Over the past three years, companies have done well in growing earnings in a very challenging revenue environment,”

Hellwig, who helps manage $17 billion at BB&T in Birmingham, Alabama, said in a Sept. 18 telephone interview. “For stocks as a whole, the earnings growth rate slowdown’s already been discounted. Companies will continue to generate favorable earnings and favorable earnings growth.”

Have a wonderful evening everyone.

Be magnificent!

Though there is repulsion enough in Nature, she lives by attraction.

Mutual love enables Nature to persist.

Mahatma Gandhi,1869-1948

As ever,

Carolann

All I know I learned after I was thirty.

-Georges Clemenceau, 1841-1929

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