August 2, 2013 Newsletter

Dear Friends,

Tangents:

What carries us through

We lie on the driveway, side by side,

old sheet pulled up

to our shoulders to fend off the mosquitoes,

and look

for shooting stars against the August sky.

(I see one – there!  Did you see it?)

Too hot to touch, I feel your hand,

hold a single finger,

love you,

bigger than the sky,

for taking me outside

to see.

-Jennifer Freed

Make a note: The Perseid meteor shower will peak the night of August 12^th.

Photos of the Day –August 2nd, 2013

Star trails form over yurts, traditional nomad felt tents, in a long exposure picture on the mountainous Assy plateau, 56 miles east of Almaty, Kazakhstan. Modern farmers follow centuries old nomadic tradition of relocating from settlements to the plateau to tend their livestock for a summer season. Shamil Zhumatov/Reuters

A general view of Hong Kong’s business district. The Hong Kong Observatory has issued a strong wind signal number three as Tropical Storm Jebi edges closer to Hong Kong. Vincent Yu/AP

Market Closes for August 2^nd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Aug. 2 (Bloomberg) — Canadian stocks rose a second day as banks helped lead gains, offsetting a drop in industrials after data showed the U.S. added fewer jobs than forecast in July.

Turquoise Hill Resources Ltd., a unit of Rio Tinto Group, jumped 8.7 percent for a third day of gains after agreeing to new terms for the sale of a stake in a mine. Royal Bank of Canada, the nation’s largest lender, climbed 0.8 percent.  SNC- Lavalin Group Inc., Canada’s largest engineering company, sank 6.1 percent after reporting an unexpected second-quarter loss.

Paladin Energy Ltd. plunged 22 percent after saying it will sell additional shares.

The Standard & Poor’s/TSX Composite Index rose 9.29 points, or 0.1 percent, to 12,603.25 at 4 p.m. in Toronto. The gauge pared a weekly loss to 0.4 percent. Trading volume was about 24 percent lower than the 30-day average.

“It’s time for a bit of a pause,” said Keith Richards, a fund manager with ValueTrend Wealth Management in Barrie, Ontario. The firm manages about C$110 million ($106 million). “We’ve had this great run in the U.S. markets.”

U.S. payrolls rose by 162,000 last month, less than an estimated 185,000 and the smallest advance in four months. The unemployment rate dropped to 7.4 percent from 7.6 percent. The U.S. Federal Reserve has indicated its $85 billion monthly bond buying may be trimmed should the economy meet its forecasts, though Chairman Ben S. Bernanke has said there’s no fixed schedule for reducing stimulus.

Turquoise Hill surged 8.7 percent to C$5 after agreeing to sell its 50 percent stake in Altynalmas Gold Ltd. to Sumeru Gold BV for $235 million, down from $300 million agreed to in February. In exchange, Turquoise Hill will receive advance payment by Aug. 9, ahead of the closing of the transaction.

Silvercorp Metals Inc. gained 2.6 percent to C$3.12 as silver rallied 1.5 percent to $19.912 an ounce in New York, snapping three days of losses.

Royal Bank rose 0.8 percent to C$64.43 and Toronto-Dominion Bank advanced 0.7 percent to C$87.37 as the S&P/TSX Financials Index rose the most in two weeks.

Paladin Energy Ltd. slumped 22 percent to 72 Canadian cents, the biggest loss since in went public in 2005. The Australian company producing uranium in Africa announced it will sell shares to institutions after ending talks to sell a stake in its mine in Namibia, citing low prices for the nuclear fuel.

Athabasca Oil Corp. lost 3.9 percent to C$7.64 and Pengrowth Energy Corp. slipped 1.7 percent to C$5.94. Oil dropped 0.9 percent to $106.94 a barrel, paring a weekly advance.

SNC-Lavalin, based in Montreal, tumbled 6.1 percent to C$40.38 after cutting its annual profit forecast. The company cited losses in the second quarter in its oil and gas division and its infrastructure and environment unit. Chief Executive Officer Robert Card said in the statement that 2013 is “proving to be a very challenging year.”

Bombardier Inc. lost 1.6 percent to C$4.87. The world’s third-biggest aircraft maker said it is working toward a debut takeoff for the CSeries jetliner within the next few weeks, after three delays since November.

US

By Lu Wang and Katie Brennan

Aug. 2 (Bloomberg) — U.S. stocks rose, with the Standard & Poor’s 500 Index erasing an earlier decline, as data showing employers added fewer workers than anticipated in July signaled the Federal Reserve will continue its stimulus efforts.

American International Group Inc. rallied 2.7 percent after saying it will pay its first dividend since 2008 and authorizing a share buyback of as much as $1 billion. LinkedIn Corp. surged 11 percent after increasing its full-year sales forecast. Dell Inc. advanced 5.6 percent as Michael Dell agreed to sweeten his proposal to buy the computer maker with a special dividend.

Chevron Corp. slipped 1.2 percent after posting its biggest second-quarter profit decline in four years.

The S&P 500 rose 0.2 percent to 1,709.67 at 4 p.m. in New York, advancing to a record in the final hour of trading and capping the weekly gain at 1.1 percent. The Dow Jones Industrial Average climbed 30.34 points, or 0.2 percent, to a record 15,658.36 today. About 5.7 billion shares changed hands, 11 percent lower than the three-month average.

“This number isn’t an earth-shaker,” John Manley, who helps oversee $222.7 billion as chief equity strategist for Wells Fargo Funds Management in New York, said in a phone interview. “It is debatable if it was good or bad. It was OK. The number still indicates the Fed is going to be there for a while, that is not bad.”

The 162,000 increase in payrolls last month was the smallest in four months and followed a revised 188,000 rise in June that was less than initially estimated, Labor Department figures showed today in Washington. The median forecast of 93 economists surveyed by Bloomberg called for a 185,000 gain.

Workers spent fewer hours on the job and hourly earnings fell for the first time since October. The unemployment rate dropped to 7.4 percent from 7.6 percent.

Consumer spending rose in line with forecasts in June as Americans’ incomes grew, while orders placed with factories increased, pointing to further stabilization in manufacturing that may help lift second-half growth, separate reports showed.

Equities pared earlier losses as Federal Reserve Bank of St. Louis President James Bullard, who backed this week’s Fed decision to continue bond buying, said the central bank should wait for evidence the labor market and economy are strengthening before tapering purchases.

The S&P 500 climbed above the 1,700 level yesterday for the first time as central banks vowed to maintain stimulus efforts and data on global manufacturing beat forecasts. The benchmark gauge is trading at 15.5 times projected earnings, compared with an average of 13.9 over the last five years, according to data compiled by Bloomberg.

About 83 percent of stocks in the index traded above their average prices from the past 50 days as of yesterday, 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.

Some 115 S&P 500 stocks had their 14-day relative-strength index exceeding 70 yesterday, the most since May 21, Bloomberg data show. RSI measures the degree to which gains and losses outpace each other and some analysts who watch charts to predict market moves consider a reading over 70 as indicating the stock has risen too far too fast.

Three rounds of bond purchases by the Fed, coupled with improving earnings and economic growth, has helped propel the S&P 500 up more than 150 percent from its bear-market low in 2009. Speculation about the Fed’s monthly bond purchases has whipsawed stocks since May, when Chairman Ben S. Bernanke first indicated policy makers could begin reducing the stimulus this year if the job market continues to improve.

Fed officials said this week the labor market has shown “improvement,” while a report showed the U.S. economy grew more than projected in the second quarter. The central bank may begin tapering the pace of its asset purchases in September, according to a growing number of economists surveyed by Bloomberg from July 18 to July 22.

“The market will read today’s jobs report as part of the mixed data that’s shaping the Fed’s policy,” Stephen Wood, the New York-based chief market strategist who helps oversee about $237 billion at Russell Investments. “The pattern of economic growth looks more lumpy coming into this quarter. The market is going to turn its focus back to the earnings season and look at the revenue guidance with a microscope.”

Chevron and Berkshire Hathaway Inc. are among nine S&P 500 companies reporting results today. Of the 390 companies in the gauge to have already reported quarterly earnings, 74 percent have exceeded analysts’ profit estimates and 56 percent have beaten sales projections, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index, or VIX, dropped 7.4 percent today to 11.98, the lowest closing level since March 15. The equity volatility gauge reached its 2013 peak in June and has since fallen 42 percent.

Seven of the 10 main industries in the S&P 500 advanced, with consumer-discretionary, raw-materials and technology companies rising at least 0.5 percent to lead gains.

AIG jumped 2.7 percent to $48.33. The insurer that repaid a government bailout last year announced a quarterly dividend of 10 cents a share. It also posted net income that climbed 17 percent to $2.73 billion in the second quarter.

LinkedIn surged 11 percent to $235.58. The operator of the biggest online professional-networking service said revenue jumped 59 percent to $363.7 million in the second quarter. That exceeded the average analyst estimate of $354.3 million.

Facebook Inc. rose 1.5 percent to $38.05, a closing price not seen since the social-networking company’s May 18, 2012, initial public offering. The stock had tumbled to a low of $17.55 in September, less than half the $38 IPO price.

Dell increased 5.6 percent to $13.68. Michael Dell and Silver Lake Management LLC agreed to increase their offer for the computer maker to $13.75 a share with a special dividend of 13 cents. Dell and Silver Lake had offered $13.65.

Sealed Air Corp. rallied 8.9 percent to $30.36 for the largest advance in the S&P 500. The packing-material maker reported second-quarter adjusted profit of 35 cents a share, beating the average analyst estimate of 25 cents.

Viacom Inc. jumped 6.5 percent to $79.17. The owner of cable networks MTV and Nickelodeon doubled its stock-buyback program to $20 billion and posted higher-than-estimated sales.

Charter Communications Inc. climbed 4.7 percent to $134.

The fourth-largest U.S. cable company by subscribers has held talks about combining with rival Cox Communications Inc., according to two people with knowledge of the matter.

Charter and its shareholder Liberty Media Corp. are still pursuing an acquisition of Time Warner Cable Inc., the people said. Time Warner Cable, which has been resistant to a combination with Charter, slipped 0.5 percent to $117.10.

Cablevision Systems Corp. climbed 5.2 percent to $19.61 even after the fifth-largest U.S. cable provider reported second-quarter sales that missed analysts’ estimates. The stock climbed 25 percent this year through yesterday, driven by speculation it may be an acquisition target.

Chief Executive Officer James Dolan said on the earnings call that “you never say never” to potential mergers and acquisitions.

Energy companies fell 0.6 percent as a group, the most in the S&P 500. Chevron slipped 1.2 percent to $124.95. The world’s second-largest energy company by market value missed analysts’ estimates as crude oil prices and production fell.

Eaton Corp. slid 5.5 percent to $66.06. The equipment maker cut the high end of its 2013 forecast, saying it expects to earn no more than $4.25 a share. Analysts estimated $4.33 on average.

CareFusion Corp. tumbled 6 percent, the most in the S&P 500, to $36.61. Smiths Group said talks with a “potential counterparty” to sell its medical equipment division had collapsed. The U.S. maker of medical pumps, ventilators and medicine dispensers was a potential buyer for the U.K. technology company’s unit, the Financial Times said in May.

Have a wonderful weekend everyone.

Be magnificent!

When a man begins to have a vision larger than his own truth,

when he realizes that it is much larger than it at first seemed, he begins to become conscious of his moral nature.

His perspective on life necessarily changes , and his will takes the place of his desires,

So comes about the conflict between our inferior self and our superior self,

between our desires and our will, between our greed for objects that appeal to our senses

and the purpose that comes from the bottom of our heart.

Rabindranath Tagore,1861-1901

As ever,

Carolann

Wear a smile and have friends; wear a scowl

and have wrinkles.

-George Eliot, 1819-1880

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