August 6, 2013 Newsletter

Dear Friends,

Tangents:

Hiroshima Day: the world’s first nuclear weapon used in warfare occurred on this day in 1945.

There is a goddess of Memory, Mnemosyne, but none of Forgetting.  Yet there should be, as they are twin sisters, twin powers and walk on either side of us, disputing for sovereignty over us and who we are, all the way until death.

–Richard Holmes, A meander Through Memory and Forgetting.

Photos of the Day –August 6th, 2013

The Atomic Bomb Dome is silhouetted at sunset in Hiroshima, western Japan. Hiroshima marks the 68th anniversary of the world’s first atomic bombing. Shizuo Kambayashi/AP

Market Closes for August 6^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Aug. 6 (Bloomberg) — Canadian stocks fell for the first time in three days, led lower by precious metals producers and energy companies as commodities extended declines.

Barrick Gold Corp. and Yamana Gold Inc. retreated at least 6.2 percent as the precious metal headed for a sixth straight decline, the longest slump since May. Athabasca Oil Corp. and Suncor Energy Inc. slid at least 1.3 percent as oil prices fell for a third day. Paladin Energy Ltd. sank 6.9 percent to extend losses a second day after the uranium producer agreed to sell additional shares at a discount. BlackBerry Ltd. surged 5.7 percent for a fifth day of gains.

The Standard & Poor’s/TSX Composite Index fell 149.47 points, or 1.2 percent, to 12,453.78 at 2:12 p.m. in Toronto.

Today’s drop trimmed the gauge’s gain for the year to 0.2 percent. Trading volume was 7.1 percent lower than the 30-day average at this time of the day. Canadian markets were closed yesterday for a holiday.

“The commodities are weak and it affects us more than the U.S. market,” said John Kinsey, fund manager with Caldwell Securities Ltd. in Toronto. The firm manages about $1 billion.

“Gold looked like it was starting to form a bottom for a while there but now it’s breaking down. It’s been a big disappointment for an awful lot of people. The Fed really gave all the wrong signals and they’ve been trying to repair the damage ever since.”

Federal Reserve Chairman Ben S. Bernanke said last month that it’s too early to decide whether to begin paring asset purchases in September. The comments helped gold rise 7.3 percent in July, the biggest monthly gain since January 2012.

Speculation that the central bank would pull back on stimulus escalated yesterday after Fed Bank of Dallas President Richard Fisher, one of the most vocal critics of quantitative easing, said the Fed is closer to slowing the pace of bond buying. Fed Bank of Chicago President Charles Evans, who has been among the strongest proponents of record monetary accommodation, said today he “would clearly not rule” out a decision to begin dialing back the purchases in September.

Nine of 10 industries in the S&P/TSX retreated. Raw- materials producers lost the most, declining 3.4 percent to the lowest since June.

Barrick Gold, the world’s largest gold producer, tumbled 6.2 percent to C$16.29 and Yamana Gold plunged 6.4 percent to C$9.37, pacing declines in the S&P/TSX Gold Index. The gauge lost 5.4 percent, with 23 of its 24 members retreating. Gold futures for December delivery declined 1.5 percent in New York, on pace for the longest string of drops in 11 weeks.

Athabasca Oil slumped 3.4 percent to C$7.38 and Suncor Energy lost 1.3 percent to C$33.46. Crude for September delivery fell for a third day amid speculation the Fed will reduce stimulus, losing 1.4 percent in New York.

Francisco Blanch, head of commodities research with Bank of America, said in a Bloomberg Radio interview with Tom Keene West Texas Intermediate crude could slide $8 to $10 “unless there is a major geopolitical event” to drive prices higher.

Crude jumped 8.8 percent in July for the biggest monthly gain since August 2012, as U.S. inventories dropped and on concern political instability in Egypt would disrupt exports from the Middle East.

Paladin Energy sank 6.9 percent to 67 Canadian cents. The stock plunged 22 percent on Aug. 2 after the company said it failed to sell part of the Langer Heinrich mine in Namibia. That prompted the uranium miner to sell shares at a 30 percent discount to its previous closing price in Australia to raise about $78 million.

BlackBerry advanced 5.7 percent to C$9.80, giving information-technology stocks the only gain among 10 S&P/TSX groups. The smartphone maker’s shares have risen for five days, the longest streak since February.

U.S.-listed shares in the Waterloo, Ontario-based company jumped 7.4 percent yesterday after a report by GSM Arena included supposed leaked images of new BlackBerry smartphones that are in development.

US

By Nick Taborek and Whitney Kisling

Aug. 6 (Bloomberg) — U.S. stocks fell, giving the Standard & Poor’s 500 Index its biggest decline since June 24, as retailers’ results disappointed and trade data fueled concern the Federal Reserve may reduce its bond purchases this year.

American Eagle Outfitters Inc. and CVS Caremark Corp. slumped more than 2.8 percent. Newmont Mining Corp. lost 6.5 percent as gold tumbled. International Business Machines Corp. retreated 2.3 percent after requiring most U.S. employees in its hardware division to take a week off amid slowing demand.

Washington Post Co. rallied 4.3 percent as Amazon.com Inc. Chief Executive Officer Jeff Bezos agreed to buy its newspaper assets.

The S&P 500 fell 0.6 percent to 1,697.37 at 4 p.m. in New York, extending yesterday’s loss after a record high last week.

The Dow Jones Industrial Average decreased 93.39 points, or 0.6 percent, to 15,518.74. About 5.6 billion shares changed hands on U.S. exchanges, 12 percent below the three-month average.

“Certainly some of the move is due to increased concern about tapering due to the very strong trade number,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management which oversees $180 billion, said in an e- mail. “It’s puzzling to me why better GDP growth would be bad for the equity market, but there are some who view it this way. Longer term, we need to see revenue growth, and stronger GDP will deliver that.”

The U.S. trade deficit narrowed more than forecast in June to the lowest level since October 2009 as crude oil imports declined and American companies shipped more goods abroad, showing second-quarter growth was stronger than initially estimated.

Economists at Goldman Sachs Group Inc. and Barclays Plc raised their estimates for second-quarter U.S. gross domestic product, citing the trade report. A Commerce Department report last week showed the economy grew more than projected in the quarter, with GDP rising at a 1.7 percent annualized rate after a 1.1 percent gain the prior quarter.

The S&P 500 fell 0.1 percent yesterday after Fed Bank of Dallas President Richard Fisher, one of the most vocal critics of quantitative easing, said the central bank is closer to slowing its $85 billion in monthly bond buying.

Fed Bank of Chicago President Charles Evans, who has been among the strongest proponents of record monetary accommodation, said today he “would clearly not rule” out a decision to begin dialing back the purchases in September.

“We’ve seen good improvement in the labor market, there’s no question in my mind about that,” Evans said in a meeting with reporters in Chicago. “I’m still wanting to see greater evidence that it’s a sustainable improvement.”

Central bank policy makers have been debating the pace and timing of any cuts in the monetary stimulus that has helped propel the S&P 500 up more than 150 percent from its bear-market low in 2009. The Fed said last week that persistently low inflation could hamper the economy and pledged to keep buying bonds every month. Tapering of the pace of asset purchases may begin in September, according to a growing number of economists surveyed by Bloomberg from July 18 to July 22.

Stocks rallied 1.1 percent last week, sending the S&P 500 above 1,700 for the first time. The equity gauge has advanced 19 percent this year and is trading at 15.4 times estimated earnings, compared with an average of 13.9 over the last five years, data compiled by Bloomberg showed.

Better-than-expected corporate earnings have bolstered stocks in recent weeks. Some 31 companies in the S&P 500 report earnings today, including Marathon Oil Corp. and Walt Disney Co. Of the 419 members that have posted quarterly results so far, 73 percent have exceeded analysts’ estimates for profit, data compiled by Bloomberg show.

“The market is probably just sort of resting, digesting all its earnings numbers, which are good but not great,” Thomas Nyheim, a Wilmington, Delaware-based fund manager for Christiana Trust, which oversees about $16 billion, said by phone.

“Companies have basically hit their earnings numbers through cost cutting and not hiring as much as they should.”

Volumes on exchange-listed stocks reached 4.65 billion yesterday, the slowest full-day trading this year, data compiled by Bloomberg show. Intraday price swings have narrowed, with fluctuations in the S&P 500 averaging 0.65 percent during the past 20 days through yesterday, the smallest change over a comparable period since Feb. 1, the data show.

The Chicago Board Options Exchange Volatility Index, or VIX, jumped 7.4 percent today to 12.72. The equity volatility gauge reached its 2013 peak in June and has since fallen 38 percent.

All 10 main industry groups in the S&P 500 fell, with raw- materials, financial and industrial companies losing at least 0.8 percent to lead declines. Newmont Mining retreated 6.5 percent to $26.63 as gold prices declined 1.5 percent, capping the longest slump in 11 weeks. Caterpillar Inc. slid 1.2 percent to $82.53. Citigroup Inc. fell 2.6 percent to $51.48.

The Morgan Stanley Cyclical Index lost 1.4 percent and the Dow Jones Transportation Average erased 1.3 percent. An S&P index of homebuilders slipped 2.6 percent and the Bloomberg U.S.

Airlines Index dropped 2.7 percent. PulteGroup Inc. declined 4 percent to $16.19 and KB Home tumbled 3.5 percent to $16.79.

United Continental Holdings Inc. retreated 3.8 percent to $33.57 and Delta Air Lines Inc. fell 3.4 percent to $20.98.

Retailers slid. Urban Outfitters Inc. slipped 2.8 percent to $42.47 and Abercrombie & Fitch Co. erased 4.1 percent to $49.57 after a Janney Montgomery analyst downgraded the retail softline sector to underweight from neutral weight, citing headwinds including a high level of promotional activity.

American Eagle Outfitters fell 12 percent, the most since May 2010, to $17.57. The teen apparel chain said second-quarter profit was less than it forecast amid disappointing sales of women’s clothing and weak shopper traffic.

CVS Caremark dropped 2.8 percent to $59.89, the biggest decline since June 20. The largest provider of prescription drugs in the U.S. lowered the top end of its full-year adjusted earnings target to $3.96 a share from $4 a share.

J.C. Penney Co. declined 3.9 percent to $13.28, falling for a sixth straight session to the lowest level since January 2001.

The stock has tumbled 20 percent since July 29.

IBM lost 2.3 percent to $190.99 for the biggest drop in the Dow. The world’s largest computer-services company said U.S. employees in its hardware division will take a furlough week with one-third pay starting either Aug. 24 or Aug. 31.

The company is cutting costs after server demand slowed in the second quarter. Sales in the hardware business, which includes storage devices and microelectronics, slid 12 percent in the period from a year earlier to $3.76 billion.

Regeneron Pharmaceuticals Inc. fell 6.1 percent to $254.50.

The drug company declined after reporting second-quarter profit and sales that missed analysts’ estimates.

Washington Post Co. advanced 4.3 percent to $593. Bezos agreed to buy the Washington Post newspaper that is the core of the company’s weakest division. Washington Post Co., which isn’t selling its Kaplan education division and other businesses, plans to change its name.

Fossil Group Inc. gained 18 percent to $126.55. The fashion accessories designer reported results that beat analysts’ estimates. The company also raised its full-year earnings forecast. Fossil slid the most in the S&P 500 yesterday after a Barclays Plc analyst downgraded the shares to underweight from equalweight.

Have  a wonderful evening everyone.

Be magnificent!

Fear comes from the selfish idea

of cutting one’s self off from the universe.

Swami Vivekananda, 1863-1902

As ever,

Carolann

Success is not final, failure is not fatal: it is the courage

to continue that counts.

-Winston Churchill, 1874-1965

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