July 21, 2014 Newsletter

Dear Friends,

Tangents:

Yesterday was the anniversary when the first men, Neil Armstrong and Buzz Aldrin walked on the moon, on July 20^th, 1969.

Annette Dutenhoffer wrote this in a column this morning:

Another little boy watched that TV broadcast too, 9-year-old Chris Hadfield. Years later that Ontario farm boy fulfilled his dream and grew up to be commander of the International Space Station. During his five-month stay there, he became an online celebrity, posting videos that shared insights into his life and work in space. His most popular video, though no longer posted, had more than 22 million views on YouTube. It was a performance of David Bowie’s song, “Space Oddity,” showing Mr. Hadfield singing and floating with his guitar in space, while awe-inspiring views of the earth go by in the background.

Many things point to humanity’s yearning to know more of the infinite than our finite earth-bound perspective can give us: the 22 million views of Hadfield’s video; the surge of interest in private space travel, asteroid mining, and Mars in general; the jaw-dropping beauty of two decades of images from the Hubble Space Telescope; and, of course, the never-ending theories about the origin and makeup of Earth and the universe. I suspect the weightlessness we see the astronauts experiencing entices us to think that maybe even a glimpse of infinity might cut us loose from the burdens that weigh us down. ..

Although not all of us want to be space travelers, who hasn’t gazed up to the heavens on a dark, starry night and wondered about the magnificence of it all? We look to the broad expanse of the heavens for profound answers.

The splendor of the cosmos, the planets in their orbits, the grandeur of the celestial bodies, point to the beauty and harmony of spiritual reality. In the 1920s, astronomer Edwin Hubble discovered that the universe continues to expand….Just think, your vibrant potential is expanding and is boundless.

Before Hadfield departed for his mission on the space station in December 2012, he said, “To be able to command the space station, yes, it’s professional, and yes, I’ll take it seriously, and yes, it’s important for Canada, but for me, as just a Canadian kid, it makes me want to shout and laugh and do cartwheels.” I share his exuberance and desire to shout and laugh and do cartwheels when I think of the unlimited, eternal, and spiritual splendor of man and the universe.

Photos of the Day

A whirling dervish performs a traditional Sufi dance during the Muslim fasting month of Ramadan in the Ottoman-era Tekkiye Suleimaniye mosque complex in Damascus. Omar Sanadiki/Reuters

A young rider is sad at the end of a ride on the Seaside Heights NJ carousel. The historic 82-year-old carousel is being sold this fall after surviving superstorm Sandy and a devastating boardwalk fire intact. Its owners say it is too expensive to maintain and insure. It is one of only about 150 carousels left in the US. Wayne Parry/AP

Market Closes for July 21^st, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Jacob Barach

July 21 (Bloomberg) — Canadian stocks fell from a record, led by losses in energy companies, amid a retreat in global equities as international pressure on President Vladimir Putin intensified.

Canyon Services Group Inc. dropped 3.2 percent after FirstEnergy Capital Corp. lowered its rating on the stock to market perform from outperform. Valeant Pharmaceuticals International Inc. climbed 2.9 percent after the company said it has contacted regulators concerning Allergan Inc.’s past statements about its Bausch & Lomb unit.

The S&P/TSX lost 16.58 points, or 0.1 percent, to 15,249.99 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has gained 12 percent this year, the third-best performance among the world’s developed markets.

The S&P/TSX Energy Index dropped 0.2 percent. Eight of 10 industries in the benchmark equity gauge fell. Trading in S&P/TSX stocks was 17 percent below the 30-day average at the close.

Canyon Services lost 3.2 percent to C$16.94. FirstEnergy Capital also lowered its ratings on Precision Drilling Corp. and Western Energy Services Corp. Both stocks fell at least 1 percent.

Valeant advanced 2.9 percent to C$134.67. The company told the Autorite des marches financiers, Quebec’s regulators, and the U.S. Securities and Exchange Commission that Allergan has falsely asserted that Bausch & Lomb’s pharmaceutical sales were stagnating or declining, an “apparent attempt to mislead investors and manipulate the market.”

Separately, Allergan said it will cut 1,500 jobs and eliminate another 250 vacant positions as it tries to fend off a hostile takeover from Valeant.

European Union foreign ministers meeting in Brussels tomorrow will consider tougher sanctions on Russian individuals and companies as world leaders pressure Putin to do more to end the violence in eastern Ukraine.

Russian President Putin said the Malaysian airline disaster shouldn’t be used for political purposes. He again blamed the downing of the plane on the Ukraine conflict and said that international investigators, whose probe of the crash site has been hampered by armed, pro-Russian separatists, should have full access to the wreckage.

US
By Oliver Renick

July 21 (Bloomberg) — U.S. stocks fell, after the best Standard & Poor’s 500 Index rally since April, as concern tension in Ukraine could lead to deeper sanctions against Russia kept investors on the sidelines before major earnings reports.

Herbalife Inc. sank 11 percent as hedge-fund manager Bill Ackman vowed to reveal fraud at the company. Yum! Brands Inc. dropped 4.3 percent and McDonald’s Corp. lost 1.5 percent after the two halted buying meat products from a Shanghai supplier under investigation. Hasbro Inc. fell 2.7 percent after reporting revenue that missed analysts’ estimates. BB&T Corp. slid 4 percent as adjusted profit fell short of targets.

The S&P 500 lost 0.2 percent to 1,973.63 at 4 p.m. in New York, paring a loss of as much as 0.6 percent. The Dow Jones Industrial Average dropped 48.45 points, or 0.3 percent, to 17,051.73 after losing almost 126 points this morning. Trading in S&P 500 stocks was 6 percent below the 30-day average.

“The geopolitical situation is an overarching damper on the market and underneath that this week we’re right in the heart of second quarter earnings,” Matthew Kaufler, manager of Federated Investor Inc.’s Clover Value Fund, said in an interview. “While the market is net focused on earnings, we’re still trying to keep a pulse on what’s going on around the world.”

A total of 10 S&P 500 companies are reporting earnings today, including Chipotle Mexican Grill Inc., Netflix Inc. and Botox-maker Allergan Inc. Some 145 companies in the gauge report this week. Apple Inc., McDonald’s Corp. and Coca-Cola Co. are schedule to report results tomorrow.

The S&P 500 rallied 1 percent on July 18, rebounding from its biggest loss since April 10 that came after the downing of a Malaysian Airlines passenger jet in Ukraine and the Israeli ground invasion of the Gaza Strip.

The index pared losses today after President Barack Obama said he prefers a diplomatic solution to the hostilities in Ukraine and Malaysia’s prime minister said rebels in eastern Ukraine agreed to hand over bodies of crash victims and grant access to the crash site.

Obama added that Russian President Vladimir Putin has “direct responsibility” to compel separatists in Ukraine to let international investigators recover remains and collect evidence from the crash site.

“The burden is now on Russia,” Obama said. “Russia will only further isolate itself from the international community” and costs will “only increase” if it doesn’t get separatists to cooperate.

The administration is pushing European governments to expand sanctions against Russia, even at some peril to their own economies, in an effort to break Putin’s support for the pro- Russian rebels. Putin has defied rising international anger over the downing of the airliner, suggesting leaders in the U.S. and Europe were using the incident for “selfish political gains.”

“If Obama had said something concerning further sanctions then there would’ve been some fundamental bite, but there was nothing to it,” Matt Maley, equity strategist at Boston-based Miller Tabak & Co LLC, said in a phone interview. “The market is looking for something to have real impact, something concrete like a cut-off in oil supply or more sanctions.”

In the Middle East, diplomatic efforts to end two weeks of Gaza Strip fighting intensified after battles killed dozens of Palestinians and 13 Israeli soldiers in the conflict’s bloodiest single day.

The S&P 500 ended last week up 0.5 percent, rallying on the final day after better-than-estimated sales at Google Inc., the world’s third-largest company, spurred a rebound in shares.

The equities benchmark has advanced almost 7 percent this year amid better-than-estimated corporate earnings and central bank stimulus as the U.S. economy shows signs of recovering from a 2.9 percent contraction in the first quarter.

The gauge closed at a record 1,985.44 on July 3 and trades at 18.3 times reported earnings, near the highest level in four years. The index has not had a drop of more than 10 percent since 2011.

“People are naturally cautious against these geopolitical events and the market having had such a strong rally,” said Patrick Spencer, the London-based head of equity sales at Robert W. Baird & Co., which oversees more than $100 billion. “Markets are nervous given we haven’t had a correction yet so people are thinking we’re overdue. People are just looking for reasons for the market to sell off.”

The Chicago Board Options Exchange Volatility Index jumped 6.2 percent to 12.81. The gauge known as the VIX was little changed last week despite a 32 percent jump on July 17, the biggest one-day rally in 15 months.

About 76 percent of S&P 500 companies that have posted results this season have beaten analysts’ estimates for profit, while 69 percent exceeded sales projections, according to data compiled by Bloomberg.

Earnings at the index’s members probably rose 6.2 percent in the second quarter, while sales gained 3.3 percent, according to analyst estimates compiled by Bloomberg.

Nine of the 10 main groups in the gauge retreated today, with indexes of health-care and consumer stocks dropping at least 0.4 percent to pace declines. General Electric Co. sank 1.8 percent for the steepest slide in the Dow.

Herbalife shares fell the most in three months, losing 11 percent to $54.02, after billionaire Bill Ackman vowed to show Enron Corp.-like fraud at the seller of supplements and weight- loss shakes. Ackman, head of Pershing Square Capital Management LP, said his firm has devoted $50 million of investors’ money to prove that Herbalife is a pyramid scheme. The results of the investigation will be released in New York tomorrow, Ackman said in an interview on Bloomberg Television.

Herbalife responded to the statements today on Twitter, saying it was confident in the integrity of the company and that “the truth will prevail.”

“Ackman’s theatrics are increasingly desperate,” the company said through its HerbalifeTruth account. Herbalife “is proud of role that nutrition clubs play in helping people lose weight and stay healthy.”

Hasbro lost 2.7 percent to $51.78. The toys and game maker reported second-quarter revenue that fell short of estimates. Rival Mattel Inc. last week said earnings and sales fell short of forecasts.

BB&T Corp. sank 4 percent to $37.33. North Carolina’s second-largest bank reported profit that missed estimates and disclosed that the U.S. Department of Housing and Urban Development is auditing its originations of  government-backed loans.

Yum Brands fell 4.3 percent and McDonald’s dropped 1.5 percent. Shanghai Husi Food Co. is being investigated on allegations it sold chicken and beef past its expiration date.  Yum said that would result in shortages of some menu items.

Allergan Inc. jumped 2.2 percent to $171.14. The maker of the Botox wrinkle remover said it will cut 1,500 jobs as it tries to fend off a hostile takeover from Valeant Pharmaceuticals International Inc. The company also reported adjusted profit that topped analysts’ estimates.

EMC Corp. climbed 5 percent to $28.33. Elliott Management Corp. has amassed an active stake of more than $1 billion in EMC and is pushing the world’s biggest maker of storage computers to spin off its VMware Inc. unit, a person familiar with the matter said.

Have a wonderful evening everyone.

Be magnificent!

To make a decision is an illusion.

Behind the decision is the hidden belief

that everyone is the same.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Courage is grace under pressure.

-Ernest Hemingway, 1899-1961

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM, FCSI

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7