May 16, 2016 Newsletter

Dear Friends,

Tangents:

I read a book on the weekend that was amazing.  It is entitled When Breath Becomes air and was written by Paul Kalanithi.  He was a 36 year old neurosurgeon who was diagnosed with lung cancer in his last year of residency and died last year from the disease.  He began writing this book after his diagnosis.  In the foreword written by Abraham Verghese, the reader is advised to “Be ready.  Be seated.  See what courage sounds like.  See how brave it is to reveal yourself in this way.  But above all, see what it is to still live, to profoundly influence the lives of others after you are gone, by your words.  In a world of asynchronous communication, where we are so often buried in our screens, our gaze rooted to the rectangular objects buzzing in our hands, our attention consumed by ephemera, stop and experience this dialogue with my young departed colleague, now ageless and extant in memory.  Listen to Paul.  In the silences between his words, listen to what you have to say back.  Therein lies his message.  I got it.  I hope you experience it, too.  It is a gift.  Let me nott stand between you and Paul.”  Excellent advice.

The Poem:

What is our life?

by Sir Walter Raleigh

What is our life?  A play of passion.
Our mirth the music of division;
Our mothers’ wombs the tiring houses be,
Where we are dressed for this short comedy;
Heaven the judicious sharp spectator is
That sits and marks still who doth act amiss;
Our graves that hide us from the searching sun
Are like drawn curtains when the play is done.
Thus march we playing to our latest rest –
Only we die in earnest, that’s no jest.

From English Renaissance Poetry: A Collection of Shorter Poems, selected by John Williams with an introduction by Robert Pinsky, published by New York Review of Books.

PHOTOS OF THE DAY

Items recovered from a merchant ship in the ancient harbor of Caesarea National Park in Israel are on display Monday. Israel’s Antiquities Authority estimates the items to be about 1,600 years old. Baz Ratner/Reuters

A participant sets off on a penny-farthing bicycle at the start of the The Tweed Run in central London, Britain, Saturday. Hannah McKay/Reuters

Market Closes for May 16^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose to a two-week high, as crude prices jumped to the highest in six months and metals from gold to copper rallied.

     The benchmark S&P/TSX Composite Index rose 1.1 percent to 13,893.49 at 4 p.m. in Toronto, following a 0.3 percent gain last week. Volume today in the benchmark was about 12 percent lower than the 30-day average. The gauge now trades at 21.3 times earnings, about 11 percent higher than the 19.2 times valuation of the S&P 500, data compiled by Bloomberg show.

     Suncor Energy Corp. and Goldcorp Inc. jumped more than 2.6 percent as energy and raw-materials producers climbed at least 1.9 percent to lead gains across nine of 10 industries in the S&P/TSX.

     The commodities industries account for about 32 percent of the broader benchmark by market capitalization and have led gains this year, with the materials group surging 41 percent. That’s helped the S&P/TSX post one of the best performances this year among developed economies, behind only New Zealand out of 24 markets.

     Gains today came as crude futures rose 3.3 in New York to top $47 a barrel as Goldman Sachs Group Inc. said in a report that the market has shifted into a supply deficit earlier than expected following disruptions around the world.

     Gold extended Friday’s gains, pushing its advance this year to 20 percent as investors sought a haven from equity turmoil and the Federal Reserve dialed back expectations for interest rate increases, making the metal more attractive as a store of value. First Quantum Minerals Ltd. and Teck Resources Ltd. rose at least 3.8 percent as iron ore climbed in China as daily steel output jumped to a record in April.

     Valeant Pharmaceuticals International Inc. rose 3.8 percent to reverse earlier losses. Short-seller Andrew Left of Citron Research said he was “long for Valeant” and wouldn’t be surprised if the shares bounce up.

     The embattled drugmaker also announced expanded hospital rebates for two heart drugs at the center of congressional investigations of price hikes. Last week, the New York Times reported major hospital systems in the U.S. weren’t receiving discounts on the drugs Valeant had promised. The stock is down more than 90 percent from an August peak.

     Penn West Petroleum Ltd. plunged 22 percent, the biggest decline since 1992, after the oil producer said it was working with lenders to amend its borrowing limits by the end of the second quarter and is a “going concern” risk if it can’t reach an agreement. Penn West will continue asset sales and look for other sources of capital from investors. The company had C$1.86 billion in long-term debt at the end of the first quarter.

US

By Oliver Renick

     (Bloomberg) — A rally in crude prices boosted energy shares and Apple Inc. jumped after Berkshire Hathaway Inc. disclosed a stake in the iPhone maker, spurring broader gains in U.S. stocks as the S&P 500 rebounded from the longest streak of weekly losses since January.

     With today’s advance, equities continued to churn following a turbulent week that saw the biggest one-day rally in two months promptly wiped out by three straight losing sessions. Commodity shares jumped Monday as crude surged 3.3 percent, while Apple posted the steepest climb since March 1 after three weeks of declines. Anacor Pharmaceuticals soared 57 percent, the most ever, after Pfizer Inc. agreed to buy the drugmaker.

     The S&P 500 rose 1 percent to 2,066.66 at 4 p.m. in New York, after falling for a third straight week. The gauge topped its average price during the past 50 days after closing Friday below the level for the first time since February. The Dow Jones Industrial Average added 175.39 points, or 1 percent, to 17,710.71, its fourth move of at least 175 points in the last five days. The Nasdaq Composite Index increased 1.2 percent, boosted by Apple as well as gains in biotechnology shares.

     “It was a crazy week last week with retail stocks blowing up and then retail sales overall were strong, so there’s a little bit of a bounce back,” Craig Sterling, head of U.S. equity research at Pioneer Investments in Boston, said by phone. “Earnings are over more or less and the market is searching to see what the second half of the year will look like. The price of oil and other commodities seem to be catching a bid so there’s hope there will be improvement in the industrial side of the economy.”

     The CBOE Volatility Index fell 2.4 percent to 14.68, after the measure of market turmoil known as the VIX closed Friday at a one-week high. A Goldman Sachs Group Inc. basket of most shorted shares capped its biggest climb in three weeks. About 6.5 billion shares traded hands on U.S. exchanges, 12 percent below the three-month average.

     The main U.S. equity benchmark slid to a one-month low on Friday as disappointing results from large retailers offset data showing the consumer remains resilient. Amid the market gyrations in the past several sessions, the S&P 500 snapped an 18-day period without a swing of more than 1 percent, the longest stretch of relative calm since December 2014.

     After rallying 15 percent from a February low to a four- month high on April 20, the benchmark has struggled to regain momentum amid mixed earnings releases and lukewarm signs of an economic pickup. Meanwhile, one important support for equity prices during the bull market — corporate stock buybacks — has ebbed. Announced repurchases dropped 38 percent to $244 billion in the last four months, the biggest decline since 2009, data compiled by Birinyi Associates and Bloomberg show.

     Coming amid the worst profit slump since the financial crisis, the buyback slowdown may signal companies are preserving cash as economic and political uncertainty whips up from Europe to China and in the U.S.

     Meanwhile, a spate of deal activity today helped bolster fragile sentiment. In addition to Pfizer’s pact with Anacor, Terex Corp. added 10 percent after Konecranes Oyj agreed to buy one of its businesses. Yahoo! Inc. gained 2.7 percent as people familiar with the matter said Berkshire Chairman Warren Buffett is backing a group bidding for Yahoo’s Internet assets. Tribune Publishing Co. soared 23 percent as Gannett Co. raised the all- cash offer in its hostile takeover bid.

     Memorial Resource Development Corp. pared a 14 percent climb to 3.1 percent at the close amid Range Resources Corp.’s agreement to purchase the oil and natural gas company in an all- stock deal. Gains in Memorial Resource faded as Range Resources tumbled 10 percent to a three-week low.

     Retailers remain in focus after disappointing results from Macy’s Inc. to Nordstrom Inc. last week sent chain-store shares tumbling. Home Depot Inc., Target Corp., Staples Inc. and Wal- Mart Stores Inc. are due to report in the next few days. As the earnings season draws to a close, analysts estimate income at S&P 500 companies fell 7.4 percent in the first quarter, compared with forecast for flat growth earlier this year.

     Investors will also be assessing data this week for hints on the potential path for interest rates, including readings on housing starts, consumer prices, industrial production and home sales. Minutes from the Federal Reserve’s April meeting are due Wednesday. A report today showed manufacturing activity in the New York region unexpectedly contracted this month, while a separate gauge indicated homebuilder confidence held steady.                        

     In Monday’s trading, all of the S&P 500’s 10 main industries climbed, with energy and raw-material producers up more than 1.5 percent. Technology, industrial and health-care companies rose at least 1.1 percent. Oil rallied to a six-month high as Goldman Sachs said the market moved into a deficit earlier than expected following supply disruptions in Nigeria and an increase in demand.

     Williams Cos. added 6.4 percent to a four-month high, while Marathon Oil Corp. and Devon Energy Corp. advanced at least 3.9 percent. Chevron Corp. reversed a 1.4 percent drop Friday, rising 1.5 percent. Copper miner Freeport-McMoRan Inc. rallied 6.1 percent after dropping 10 percent during the prior two sessions. Cowen & Co. LLC raised its rating on the shares to the equivalent of buy from hold.

     Newmont Mining Corp. increased 4 percent, rising for the fourth time in five days to take its gain during that span to 11 percent. Gold advanced as holdings in exchange-traded funds backed by the metal climbed for a 14th straight day, reaching the highest in more than two years. Raw-material companies, the second-best performers in the index since the February low, alternated between gains and losses for a seventh session, typifying the market’s recent struggle for direction.

     Intel Corp. joined Apple to hoist the technology group, advancing 1.6 percent to its steepest increase since March 18. Nvidia Corp. added 3 percent on top of its post-earnings rally Friday, which was the biggest one-day jump in seven years. Semiconductor companies had their best session in a month, while Apple rebounded after its longest stretch of weekly losses since last June.

     Gains among consumer shares were muted relative to other industries as Macy’s and Michael Kors Holdings Ltd. retreated again after their worst weekly slides since at least November. Whirlpool Corp. slipped after data showed U.S. shipments of major home appliances fell 10.1 percent in April from a year earlier. Dollar Tree Inc. and Lowe’s Cos. added more than 2.6 percent to help overshadow those declines. Home Depot marked its strongest gain in two months before its earnings report tomorrow.

Have a wonderful evening everyone.

Be magnificent!

I cannot imagine anything nobler or more national than that for, say, one hour in a day,

we should all do the labor that the poor must do,

and thus identify ourselves with them and through them with all mankind.

Mahatma Gandhi

As ever,

Carolann

When the going gets tough, the tough get going.

                      -Joseph P. Kennedy, 1888-1969

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

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7