July 22, 2013 Newsletter

Dear Friends,

Tangents:

There’s a Super Full  Moon tonight – don’t forget to look!

July 22nd is Pied Piper of Hamelin Day.  The story is that the town of Hamelin (Hameln), in Westphalia, was infested with rats in 1284, and that mysterious piper in  a parti-coloured suit appeared in the town and offered to rid it of vermin for a certain sum, an offer accepted by the townspeople.  The Pied Piper fulfilled his contract but payment was not forthcoming.  On the following St. John’s Day, he reappeared and again played his pipe.  This time all the children followed him and disappeared into a cave (or went to Transylvania to set up a new German colony, depending on the version).  The story became popular in Britain from Robert Browning’s poem of 1842 of the same name.

Indeed, there are man

The earliest mention of the story seems to have been on a stained glass window placed in the Church of Hamelin c. 1300. The window was described in several accounts between the 14th and 17th centuries.  It was destroyed in 1660. Based on the surviving descriptions, a modern reconstruction of the window has been created by historian Hans Dobbertin. It features the colorful figure of the Pied Piper and several figures of children dressed in white.

This window is generally considered to have been created in memory of a tragic historical event for the town. Also, Hamelin town records start with this event. The earliest written record is from the town chronicles in an entry from 1384 which states: “It is 100 years since our children left.” Although research has been conducted for centuries, no explanation for the historical event is agreed upon. In any case, the rats were first added to the story in a version from c. 1559 and are absent from earlier accounts.

Photos of the Day –July 22nd, 2013

Tony Appleton, a town crier, announces the birth of the royal baby, outside St. Mary’s Hospital exclusive Lindo Wing in London. Palace officials say Prince William’s wife Kate has given birth to a baby boy. The baby was born at 4:24 p.m. and weighs 8 pounds 6 ounces. The infant will become third in line for the British throne after Princes Charles and William. Lefteris Pitarakis/AP

A youth cools off in a fine mist of water as she enjoys the sun at ‘Paris Plage’ (Paris Beach), along the banks of the River Seine in Paris. The beach atmosphere in the heart of the French capital includes stretches of imported sand and various free sporting activities for the public. Christian Hartmann/Reuters

Market Closes for July 22^nd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katie Brennan

July 22 (Bloomberg) — Canadian stocks rose to the highest in four months, as raw-material producers climbed after gold surged the most in a year and industrial metals rallied.

Metals miners accounted for all 10 of the biggest gains in the Standard & Poor’s/TSX Composite Index. Eldorado Gold Corp. surged 9.6 percent as analysts at JPMorgan Chase & Co. recommended buying the shares. Barrick Gold Corp., the world’s largest producer of the precious metal, added 6.2 percent.

Financial stocks gained for a fourth day, with Royal Bank of Canada advancing 0.9 percent to stretch its winning streak to eight days.

The S&P/TSX rose 73.25 points, or 0.6 percent, to 12,758.38 at 4 p.m. in Toronto. The benchmark gauge has rallied 1.9 percent during a four-day winning streak to the highest since March 20. Trading volume was 9.3 percent below the 30-day average.

“These big jumps in financials and positive moves in the commodities may be enough to get people on the sidelines wanting to get back in,” Barry Schwartz, fund manager with Baskin Financial Services Inc. in Toronto, said in a phone interview.

He helps manage about C$500 million ($484 million).  “This may be the beginning of the bear in the Canadian market going back into his cave to hibernate.”

The S&P/TSX has advanced 7.8 percent since June 24, rebounding from a 7.2 percent rout that started May 22. The gauge is up 2.6 percent for the year.

Eight of the ten industries in the S&P/TSX advanced, led by a 3.8 percent surge among producers of raw materials. The S&P/TSX Materials Index is down 26 percent this year, even after a 13 percent surge in the past month, Gold advanced 3.3 percent today, the biggest gain since June 2012, to settle at $1,337.30 an ounce as speculation the Federal Reserve will maintain stimulus spurred demand for the metal. Silver rallied 5.4 percent, the most since April 25.

Copper rose for a third day. Aluminum, lead, nickel, tin and zinc also gained.

Eldorado Gold jumped 9.6 percent to C$8.11, the highest in seven weeks, after JPMorgan analyst John Bridges rated the stock “overweight” in new coverage. Barrick Gold climbed 6.2 percent to C$17.56.

Banks, brokerages and insurers in the S&P/TSX climbed 0.4 percent as a group, extending a gain of 2.7 percent gain from last week.

Royal Bank of Canada, the nation’s largest lender by assets, gained 0.9 percent to a record C$65.56. The stock has advanced 12 of the past 13 sessions for a 8.4 percent jump.

Telephone stocks declined the most in the index, falling 2.4 percent. Telus Corp. lost 3.1 percent to C$30.65 and Rogers Communications Inc. dropped 2.2 percent to C$41.15.

US

By Lu Wang and Katie Brennan

July 22 (Bloomberg) — U.S. stocks rose, as monthly flows into equity exchange-traded funds reached a five-year high, after housing data and earnings from companies including McDonald’s Corp. fueled speculation stimulus would continue.

Financial companies climbed the most among 10 industries in the Standard & Poor’s 500 Index as Bank of America Corp. added 1.2 percent. Newmont Mining Corp. jumped 5.8 percent, leading gains among gold producers, as the metal’s price surged the most in a year. McDonald’s slid 2.7 percent after revenue missed forecasts. Yahoo Inc. dropped 4.3 percent after saying activist investor Daniel Loeb is leaving the board. Homebuilders fell, with D.R. Horton Inc. losing 2.2 percent, as sales of previously owned houses unexpectedly dropped in June.

The S&P 500 rose 0.2 percent to 1,695.53 at 4 p.m. in New York, extending a record. The Dow Jones Industrial Average added 1.81 points, or less than 0.1 percent, to 15,545.55. About 5.2 billion shares traded hands on U.S. exchanges today, 19 percent below the three-month average.

“The earnings reflect a growing economy, but not a robust economy, not a runaway economy,” John Carey, a fund manager at Boston-based Pioneer Investment Management Inc., said by telephone. His firm oversees $211.5 billion. “There was concern that the economy may be doing a little better than the Fed was estimating and that might lead to an earlier tapering. Now with fairly modest economic growth and slow earnings growth, I don’t think people are going to be as worried about the tapering.”

The S&P 500 rallied 0.7 percent last week to a record, after better-than-forecast earnings and Federal Reserve Chairman Ben S. Bernanke said the central bank remains flexible about the duration of its asset-purchase program. Fed stimulus has helped fuel a surge in stocks worldwide, with the S&P 500 jumping 151 percent from its March 2009 low.

Investors have increasingly turned to stocks this month, as U.S. equity exchange-traded funds are getting money at the fastest rate since September 2008. After adding $10.2 billion to ETFs last week, the July total stands at $29.7 billion, according to data compiled by Bloomberg. Mutual funds that invest in U.S. equities had $4.55 billion of inflows during the week through July 10, ending seven consecutive weeks of withdrawals.

Individuals have 69 percent of their assets in mutual funds, almost a percentage point more than the average since 1992 and four points more than in 2012, Goldman Sachs Group Inc. said in a note to clients. Investors are demonstrating the “strongest risk appetite in five years,” according to the note dated July 19.

“What we’ve seen since June is market participants reengage pretty actively,” Arvin Soh, a New York-based portfolio manager with GAM, said by phone. His firm has more than $48 billion under management. “We’re off to a good start in the earnings season. Confidence is pretty high. Certainly, if you were say to say ‘do we know of many people that are bearish right now?’ Absolutely not.”

Data today showed purchases of previously owned houses fell 1.2 percent to a 5.08 million annualized rate last month, according to the National Association of Realtors. The median forecast of 79 economists surveyed by Bloomberg called for a 5.26 million pace. The pace of the demand was the second strongest since November 2009 following May’s downwardly revised 5.14 million rate.

In Asia, Japanese election results from the weekend strengthen Prime Minister Shinzo Abe’s ability to carry out his policy of monetary easing, fiscal stimulus and deregulation.

The broadest rally in U.S. stocks since at least 1990 has lifted shares of everything from the smallest companies to the biggest banks, signaling the bull market for America’s largest corporations will last at least until the end of the year, if history is a guide.

The S&P 500’s advance to a record last week coincided with highs in the Russell 2000 Index of smaller companies, the Dow Jones Transportation Index, the S&P 500 Financials Index and a gauge of economically sensitive equities overseen by Morgan Stanley. Since 1990, the S&P 500 has gained for six months on average after those measures peaked, according to data compiled by Bloomberg.

While bears say the breadth shows indiscriminate buying just as profit growth slows and the Fed prepares to curtail stimulus, gains across stock measures have proved an accurate forecaster of performance. In four market tops during the last 23 years, small-cap stocks and the cyclical gauge never peaked after the S&P 500.

About 84 percent of stocks in the index traded above their average prices from the past 50 days as of the end of last week, according to data compiled by Bloomberg. While that’s below a 19-month high of 93 percent reached in May, it’s up from its 2013 bottom of 12.8 percent in June. There were 84 stocks in the index that closed at a 52-week high yesterday and only one at a 52-week low.

More than 150 S&P 500 companies, including Apple Inc., Amazon.com Inc. and Facebook Inc., report their earnings this week. Of the 108 companies on the gauge to have already reported quarterly results, 71 percent have exceeded analysts’ profit estimates and 52 percent have beaten sales projections, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index, or VIX, lost 2 percent today to 12.29 for a fourth straight decline. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, hit a six-month high in June and has since fallen 40 percent.

Five of 10 S&P 500 main industries gained as financial and health-care shares rose more than 0.4 percent.

The KBW Bank Index advanced 1 percent to the highest level since October 2008. Bank of America increased 1.2 percent to $14.92. Financial companies have exceeded expectations so far in the earnings season more than any of other S&P 500 industry, with reported total profits 8.7 percent higher than forecast, data compiled by Bloomberg show.

Newmont, the biggest U.S. gold producer, climbed 5.8 percent to $30.35. Barrick Gold Corp., the world’s largest gold miner, jumped 6.2 percent to $17.56. Bullion futures rose above $1,300 an ounce in New York for the biggest gain in more than a year as speculation the Fed will maintain stimulus spurred demand for the metal.

Hasbro Inc. added 3.3 percent to $46.87 as higher sales in its games unit offset quarterly results that trailed estimates.

The world’s second-largest toymaker said sales of games such as “Monopoly” and “Magic: The Gathering” rose 19 percent to $255.4 million in the second quarter.

Federal-Mogul Corp. surged 31 percent, the most since October 2008, to $13.95. The auto-parts maker controlled by investor Carl Icahn returned to a profit in the second quarter.

McDonald’s fell 2.7 percent, the most in the Dow, to $97.58. The world’s largest restaurant chain posted second- quarter revenue that trailed analysts’ estimates and said economic weakness would hurt sales for the remainder of 2013.

Yahoo tumbled 4.3 percent to $27.86. The company will buy back $1.16 billion of shares held by Third Point LLC, leaving the fund with about 20 million shares, or less than a 2 percent stake. Loeb, who runs the fund, is leaving the board along with two other directors, Harry Wilson and Michael Wolf, added last year to end a proxy fight.

The S&P Supercomposite Homebuilding Index slumped 1.8 percent as all 11 members retreated. D.R. Horton declined 2.2 percent to $21.58. Lennar Corp. fell 2.1 percent to $34.80.

PulteGroup Inc. slid 1.1 percent to $19.14.

Gannett Co. dropped 1.9 percent to $25.87. The publisher of USA Today said second-quarter sales slipped less than 1 percent after print ads continued to slump even as licensing for its TV stations gained 62 percent from a year earlier.

DreamWorks Animation SKG Inc. fell 4.5 percent to $23.77.

The company may incur a writedown of as much as $50 million on the new movie “Turbo” because of a disappointing opening at the box office, James Marsh, a Piper Jaffray analyst in New York, wrote in a note to clients.

Have a wonderful evening everyone.

Be magnificent!

When a man has an idea of what he must be and how he must act,

and undermines this by not ceasing to act in the opposite way,

he must realize that his principles, his beliefs, his ideals,

will inevitably fall prey to hypocrisy and dishonesty.

It is the ideal that begets the opposite of itself.

Krishnamurti, 1895-1986

As ever,

Carolann

Science does not know its debt to imagination.

-Ralph Waldo Emerson, 1803-1882

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