September 6, 2012 Newsletter

Dear Friends,

Tangents:

I attended a conference in Vancouver today on the current aspects and future trends of Canada-Asia business.  It hosted some of Canada’s most influential policy makers and executives, including chief executives from the energy, mining, baking and technology industries; it also hosted Asian executives and policy makers who provided their perspectives.  The conference was opened by Stephen Harper who offered his insights on Canada’s economic relationship with Asia and his government’s priorities ahead of the APEC summit of leaders in Russia.  Business leaders in attendance included Jacynthe Côté, CEO of Rio Tinto Alcan, Mike McAllister, President Encana, Ian Telfer, Chairman of Goldcorp, Sean Yang, President of Huawei Technologies, Wenran Jiang, Director, Canada-China Energy & Environment, Howard Eng, President & CEO, Greater Toronto Airports authority (GTAA), and several other titans of industry.  Bottom line from most: we have to decrease our dependence on our largest customer, the USA, and expand trade with many other countries or we will be left behind economically speaking.  We need to be a more competitive and innovative and productive country.  Our exports have halved in recent years while Australia’s have doubled.   If you are interested in more information I took away from this conference, please let me know and I’ll be happy to share.  All in all, an interesting day, but now I have to go see what’s up at the Democratic National Convention in Charlotte….And thank you Mr. Draghi for today’s markets!

And on this day in…

1915 – First tank produced.

1920 – First radio broadcast of a prizefight.

1928 – Robert Pirsig was born.
1936 – Aviator Beryl Markham flies the first east-to-west solo flight across the Atlantic Ocean.
1937 – The Soviet Union accuses Italy of torpedoing two Russian ships in the Mediterranean.
1941 – Germany announces that all Jews living in the country will have to begin wearing a Star of David.

1947 – Jane Curtin was born.
1953 – The last American and Korean prisoners are exchanged in Operation Big Switch, the last official act of the Korean War.
1976 – A Soviet pilot lands his MIG-25 in Tokyo and asks for political asylum in the United States.
1988 – Lee Roy Young becomes the first African-American Texas Ranger in the force’s 165-year history.
photos of the day September 6, 2012

President of European Central Bank Mario Draghi listens to questions as the Euro logo is reflected in his glasses during a news conference in Frankfurt.

Michael Probst/AP

Related

A child walks in front of the pumpkin sculpture ‘King Thrushbeard’ during the preparations of the autumn exhibition ‘Fantastical fairy-tale world’ at the horticultural exhibition ‘EGA’ (Erfurt Garden Construction Exhibition) in Erfurt, central Germany.

Jens Meyer/AP

Market Closes for September 6, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam and Rita Nazareth

Sept. 6 (Bloomberg) — Canadian stocks rose, pushing the Standard & Poor’s/TSX Composite Index to its highest level since May, after the European Central Bank agreed to an unlimited bond-purchase program and American jobless claims declined.

ShawCor Ltd., which provides coatings and other services to the pipeline industry, surged 20 percent as the company is considering selling itself. Inmet Mining Corp., the Canadian developer of a $6.2 billion copper and gold mine in Panama, rose 3.5 percent after offering to buy Petaquilla Minerals Ltd. for about C$112 million ($113 million). Trican Well Service Ltd., which provides drilling services for the energy industry, added 4.1 percent after being raised at Raymond James Financial Inc.

The S&P/TSX gained 149.59 points, or 1.3 percent, to 12,139.73 in Toronto, its highest level since May 2. The benchmark index has risen 7.6 percent from its low for the year on May 18, and is up 1.5 percent for 2012.

“It’s a very good day,” John Kinsey, a portfolio manager with Caldwell Securities in Toronto, said in a phone interview.

His firm manages about C$1 billion. “The ECB is taking a step forward. They’ve been kind of wishy-washy. The market really needs to have something positive that you can say: ’Well, OK, now they are maybe getting serious.’”

Canadian stocks joined a global rally amid expectations that the ECB plan will help tame Europe’s debt crisis and reduce chances of a euro breakup. The program “will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro,” ECB President Mario Draghi said in Frankfurt after the central bank held its benchmark rate at a record low of 0.75 percent.

Data showing that fewer Americans than forecast filed applications for unemployment benefits last week also helped fuel a rally in stocks as the Standard & Poor’s 500 Index climbed above the highest closing level since 2008. U.S. payrolls probably grew at a slower pace in August and unemployment exceeded 8 percent for a 43rd month, highlighting why Federal Reserve Chairman Ben S. Bernanke said the lack of jobs is a “grave concern” for policy makers, economists said before a report tomorrow.

Nine out of 10 industries on the S&P/TSX rose today as energy, mining and bank stocks contributed the most to the gains. Suncor Energy Inc., Canada’s largest energy company by market value, climbed 1.6 percent to C$31.85.

ShawCor surged 20 percent to C$42.20, highest since the shares began trading in November 1988. Chairman Virginia Shaw told the board she is prepared to sell her shares as part of a sale of the company, the Toronto-based company said in a statement yesterday. Shaw is the controlling shareholder through a holding company, Shawcor said.

Inmet Mining gained 3.5 percent to C$45.77. Each Petaquilla shareholder will get C$0.48 or 0.0109 of an Inmet share, Toronto-based Inmet said yesterday in a statement. That’s 37 percent more than Petaquilla’s closing price in Toronto yesterday. Petaquilla soared 66 percent to 58 cents.

Trican Well Service increased 4.1 percent to C$12.29 after the shares were raised to market perform from underperform at Raymond James by equity analyst Andrew Bradford. The 12-month share-price estimate is C$14.

Major Drilling Group International Inc. rallied 12 percent to C$10.20, its biggest gain in three years after reporting record revenue for the first quarter and raising its dividend.

Major Drilling shares have plunged 34 percent this year.

US

By Lu Wang

Sept. 6 (Bloomberg) — The Standard & Poor’s 500 Index climbed to its highest level since 2008 as the European Central Bank announced specifics of its bond-buying plan and data boosted optimism in the American economy.

JPMorgan Chase & Co., Bank of America Corp. and Cisco Systems Inc. jumped at least 4.2 percent, leading gains in the Dow Jones Industrial Average. All 10 S&P 500 groups increased as Alcoa Inc. and Owens-Illinois Inc. climbed more than 2.8 percent to pace advances among raw-material shares. Chipmaker SanDisk Corp. rallied 8.4 percent after OCZ Technology Group Inc. blamed a shortage of certain flash-memory components for lower-than- estimated sales.

The S&P 500 climbed 2 percent, the most since June, to 1,432.12 at 4 p.m. in New York. The Dow added 244.52 points, or 1.9 percent, to 13,292, its highest level since December 2007.

The Nasdaq-100 Index climbed 2.3 percent to almost a 12-year peak. More than five shares rose for each that declined on U.S. exchanges, with volume at 7.1 billion shares, or 18 percent above the three-month average.

“We are in a period where we are peeling away the onion little by little, all the uncertainties, what’s going to happen in Europe and what’s going to happen here,” Dan Veru, chief investment officer at Palisade Capital Management LLC in Fort Lee, New Jersey, said in a phone interview. His firm oversees $3.5 billion. “I think Draghi is serious about putting Europe on the positive path.”

Draghi said policy makers agreed to an unlimited bond- purchase program as they try to regain control of interest rates in the euro area. He said the ECB will have a “fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability.” The bond plan is the most ambitious yet in the central bank’s fight to save the euro after nearly three years of turmoil.

Service industries in the U.S. expanded in August at a faster pace than forecast, according to the Institute for Supply Management’s non-manufacturing index. Claims for unemployment benefits fell to the lowest level in a month and American companies added more workers than forecast, separate reports showed today before the Labor Department payrolls data tomorrow.

The government’s employment report may show overall hiring climbed by 130,000 jobs in August while the jobless rate remained at 8.3 percent for a second month, according to the median forecasts by economists in a Bloomberg survey. The unemployment rate has stayed above 8 percent since February 2009.

“The market was looking for signs that the ECB and some part of the European Union would basically stimulate in Europe and guarantee the sovereign debt,” David Pearl, who oversees $24 billion as co-chief investment officer at New York-based Epoch Investment Partners, said in a phone interview. “Draghi pretty much gave what the market was looking for. The U.S. data is at least moving positively and we’re in a recovery.”

Today’s rally helped the S&P 500 break out of a 19-point trading range for the index’s close since Aug. 7. The gauge spent the past four weeks hovering around 1,400 as investors awaited policy clues from central banks. Federal Reserve Chairman Ben S. Bernanke said in Jackson Hole, Wyoming, last week that he wouldn’t rule out more stimulus.

“There’s a lot of buying, it’s really across the board,” Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, said in a phone interview. “When you have this much breadth, it’s a very positive sign,” he said. Birinyi, who advised clients to buy stocks before the S&P 500 hit a 12-year low in March 2009, said an advance in the index this year to “1,500 is a very achievable target.”

The index has rallied 12 percent from a June low amid optimism central banks worldwide will act to spur growth and as corporate earnings beat analysts’ estimates.

Raw-materials, financial and technology shares rose the most among the 10 S&P 500 groups today, climbing at least 2.4 percent. The Morgan Stanley Cyclical Index jumped 3.2 percent. JPMorgan rose 4.3 percent to $38.69. Cisco Systems increased 4.4 percent to $19.73. Alcoa added 2.8 percent to $8.76.

Bank of America advanced 5 percent to $8.35. The second- biggest U.S. lender by assets agreed to sell Strategic Partners Inc. to private-equity investors Partners Group Holding AG and Avista Capital Partners. Bank of America has sold more than $50 billion in assets and businesses since Brian T. Moynihan took over as CEO in 2010, as it seeks to increase capital before stricter international rules come into force.

Owens-Illinois rose 8.9 percent, the most in the S&P 500, to $18.78. The world’s biggest maker of glass bottles reaffirmed that it will generate free cash flow of at least $250 million this year.

SanDisk rallied 8.4 percent to $44.01. OCZ, a maker of solid-state disk drives, said it experienced “a significant shortage” of certain so-called Nand flash memory components in August and its stock plunged 19 percent to $4.35. Micron Technology Inc., another manufacturer of computer-memory chips, climbed 7.8 percent to $6.68.

Amazon.com Inc. added 2.1 percent to a record $251.38. The company is updating its line of Kindle e-readers and tablets in a bid to stoke consumer demand as Google Inc. and Microsoft Corp. join the crowded market of machines challenging Apple Inc.’s iPad.

Navistar International Corp. climbed 17 percent to $23.97.

The maker of International brand trucks reported third-quarter results that topped analysts’ estimates. Lewis Campbell, who became interim chief executive officer after Dan Ustian was ousted amid an inquiry from regulators, said he expects “significant improvements” in the next 12 to 18 months.

First Solar Corp. jumped 7.4 percent to $20.03. The largest maker of thin-film photovoltaic panels won a contract to supply 25 megawatts for a project that Green Infra Ltd. is developing in India.

Walgreen Co. fell 1.9 percent to $35.20. Sales in the three months ended Aug. 31 slid about 4.9 percent to $17.1 billion, the company said. That trailed the $17.2 billion average of analysts’ estimates compiled by Bloomberg. Walgreen has lost customers this year to CVS Caremark Corp. and Wal-Mart Stores Inc. after its agreement to provide prescriptions for Express Scripts Inc. customers expired.

Seagate Technology Plc dropped 2.6 percent, the most in the S&P 500, to $31.70. The world’s largest maker of computer disk drives was cut to hold from strong buy at Needham & Co.

VeriFone Systems Inc. slumped 14 percent to $30.55 after the maker of credit-card terminals said that third-quarter revenue rose to $489.1 million, missing the average analyst estimate of $498.7 million in a Bloomberg survey.

The Chicago Board Options Exchange Volatility Index, known as the VIX, tumbled 12 percent to 15.60 as stocks rallied. U.S. options trading is poised for the biggest annual drop since 1988 as easing monetary policies worldwide reduced demand for protection against stock losses. Demand for options, often used by investors to hedge against declines in equity holdings, is retreating after the S&P 500 surged 14 percent this year.

The number of option contracts changing hands fell 13 percent to 2.70 billion during the first eight months of 2012, including a 43 percent slump in August, according to data compiled by Chicago-based Options Clearing Corp. Should the pace continue, that would end nine consecutive years of rising volume and mark the second-biggest drop since OCC data began in 1973.

Charles Schwab Corp. estimates that trading will slip 9 percent for the whole year.

“There are few participants who believe downside protection in any great magnitude is needed right now,” Randy Frederick, managing director for active trading and derivatives at Charles Schwab in Austin, said in a phone interview yesterday. His firm has $1.83 trillion in client assets. “There is a good possibility that we could have a relatively calm market throughout the remainder of the year.”

Have a wonderful evening everyone.

Be magnificent!

I see these things with an intense joy,

and while I observe, there is no observer, only a beauty almost like love.

For an instant, I am absent, myself and my problems, my anxieties, my troubles: nothing but this wonder exists.

-Krishnamurti, 1895-1986

As ever,

Carolann

You can’t wait for inspiration.  You

have to go after it with a club.

-Jack London, 1876-1916

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