Divergence - Gold vs. Gold Stocks...There are better fishing ponds

Despite a significant rally in gold over the last week, stocks have underperformed. In fact, many such as Newmont (NEM) and Kinross (KGC) have broken down.

The gold sector has been exhibiting deteriorating breadth since the middle of January and we now are running into a seasonally weak period. Caution is warranted.

Bullish % for Precious Metals Sector

                                          

Barometer Readings

Despite recent geo-political activity overseas, our long-term sector models remain intact with developed market equities favoured over developing market equities and higher yielding corporate bonds and yield based equities favoured over sovereign fixed income. It is always strange how markets telegraph developments before reasons become obvious. Over the past few months, our sector work has pushed us toward virtually a max weight in energy (specifically oil), in both our equity and income mandates. While a quick contraction in risk appetite is having an impact in the last couple of days, it appears to be an effective allocation given what is happening in the gulf.




Across mandates, portfolios currently target multi-year secular growth themes where the supply/demand situation allows for pricing power vs. rising input costs. On top of our energy exposure, Canadian REIT's offer three attractive characteristics which include strong AFFO growth, a decreasing cost of capital and incremental demand for space from new tenants such as Target. Finally, we want to highlight our focus on technology which includes semi conductor and semi capital equipment, fibre optics, mobile data and IT services. Each of these areas are experiencing strong demand growth with good pricing power.



Cyclical Bull markets are characterized by steady advances, marked by short, sharp corrections so we could see further short term profit taking but liquidity and re-allocation should bring buyers into leading names on pullbacks.

Barometer Pool Holdings http://bit.ly/e2FRZ5

UNX to be acquired by HRT at $6.95 per share - a significant premium

Brazilian oil company HRT Participacoes (HRTP3.SA) said on Thursday that it is acquiring Canada's UNX Energy for 1.3 billion reais ($781 million), according to a filing with the securities regulator CVM. HRT said it would pay for the deal with depository receipts of the company abroad. (Reporting by Guillerme Parra-Bernal; Writing by Raymond Colitt Editing by Gary Hill) -

Held in Lakeview Canadian Equity, Barometer Long/Short and various seperately managed account mandates.

Arm Holdings based Qualcomm chip chosen by HP

SAN FRANCISCO, Feb 10 (Reuters) - Qualcomm Inc said on Thursday that its newest dual-core processor was designed to compete in the red-hot tablet market against Texas Instruments and smaller rival Nvidia, which has dominated design wins in early 2011.
Qualcomm's APQ8060 dual-core Snapdragon processor is being used in Hewlett-Packard Co's "TouchPad", which was unveiled on Wednesday.
Steve Mollenkopf, Qualcomm's Group president, said in an interview on Thursday that companies had agreed to use its processors in more 20 tablets.
He gave no further details but said, "If you look at our customer base it tends to be a blend of traditional phone manufacturers going after that market as well as traditional PC manufacturers going after that market and we have a good mix of both."
Qualcomm shares rose 1.41 percent to end at $57.
HP is betting heavily on the its TouchPad tablet, due to be released this summer, making the design win significant for Qualcomm.
Qualcomm's newest processor belongs to the Snapdragon line and it allows for high-definition and 3D video.
Nvidia , which specializes in graphics chips, has led tablet design wins so far this year with its Tegra 2. Its shares are up almost 50 percent since the end of December.
Earlier this week, Texas Instruments announced its newest mobile processor, the OMAP 5, which is also a two-core processor and will be available for tablet and phone makers to test in the second half of 2011.[ID:nN07128252]
All three chipmakers' mobile processors' are based on an energy efficient architecture licensed to them by Britain's ARM Holdings .
So far, manufacturers have mostly avoided Intel's mobile chip offerings, which are based on scaled down versions of PC chips and use more energy. Intel expects to launch improved versions early this year and has said it is committed to the mobile market.
On Monday, market research firm IHS iSuppli said Apple's new CDMA iPhone 4 for Verizon uses a baseband chip made by Qualcomm, a major design win.

Tech vs. Financials - A process of repair

When the tech sector rolled over in 2000 it went through the classic bursting of a bubble. After an initial rebound in 2003, the sector spent the next seven years underperforming on a relative basis as excess ownership was distributed into the market. ....so, after the collapse in financials through 2008/9 the sector rallied off the bottom and now unfortunately is displaying the same poor relative performance characteristics as tech did following 2004. It is likely that multiple compression will rule the day for the next several years as over-ownership is slowly washed out in favor of more timely opportunities.

(Chart courtesy of Mark Deriet - Cormark Securities)

Re-allocation from treasuries into equities

Pension Re-allocation to Equities