August 26, 2013 Newsletter

Dear Friends,

Tangents:

On this day in 1498, Michelangelo was commissioned to carve the Pietá; it is the only piece he ever signed.

Also on this day in 1946, Norma Jeane Baker signed a contract with 20^th Century FOX and officially changed her name to Marilyn Monroe.

On August 26^th, 1920,  Women’s Equality Day was established.  “Feminism is the radical concept that women are people.” –Cheris Kramarae & Paula Treichler.

Are all of us the same, I wonder, navigating our lives by interpreting the silences between words spoken, analyzing the returning echoes of our memory in order to chart the terrain, in order to make sense of the world around us?

-Tan Twan Eng, The Garden of Evening Mists

Photos of the Day –August 26th, 2013

Vadim Veligurov kisses Abi, a wild sparrow, during a walk near his grandmother’s house in the town of Minusinsk, Russia, August 22, 2013. In June Veligurov, found and brought the lost female baby bird to his grandmother’s house. The rescued sparrow, which was named Abi, didn’t fly away and since then has spent most her time with Veligurov. /Ilya Naymushin/Reuters

Pigeons sit on the arm of a retired man as he enjoys a walk in Enghien-les-Bains, north of Paris. France’s government, which has been meeting with labor union heads about retirement issues, neared a deal with trade unions to overhaul the pension system via a slight lengthening of working lives. Christian Hartmann/Reuters

Market Closes for August 26^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Alex Barinka

Aug. 26 (Bloomberg) — Canadian stocks erased gains, sending the benchmark index lower after a two-day advance, as concern over Syria overshadowed a rally in commodity shares and speculation the U.S. Federal Reserve won’t reduce stimulus soon.

Paramount Resources Ltd. lost 2.8 percent as energy shares slid. Alacer Gold Corp. and Endeavour Silver Corp. climbed more than 4.1 percent to pace gains among commodity producers. Agrium Inc. and Potash Corp. of Saskatchewan Inc. jumped at least 2.4 percent as OAO Uralkali’s chief executive officer was detained in Belarus after the largest potash producer pulled out of a joint venture that controlled more than 40 percent of exports.

The Standard & Poor’s/TSX Composite Index fell 2 points, or less than 0.1 percent, to 12,760.30 at 4:00 p.m. in Toronto, erasing an earlier advance of 0.4 percent. The index has gained 2.2 percent in August. Trading volume was 20 percent lower than the 30-day average at this time of the day.

“Lots of people are in wait-and-see mode,” Brian Huen, managing partner with Red Sky Capital Management Ltd. in Toronto, said in a telephone interview. His firm manages C$220 million ($214 million). “They are going to be monitoring the data out of the U.S. very closely to see what the Fed is going to be doing. The materials index is up nicely.”

Stocks fell after U.S. Secretary of State John Kerry said the president will hold Syria’s government accountable for using chemical weapons. President Barack Obama is consulting with allies and members of Congress and “believes there must be accountability for those who have used the world’s most dangerous weapons,” Kerry said.

“By any standard it is inexcusable,” Kerry told reporters in Washington today, saying evidence makes it “undeniable” that Syrian President Bashar al-Assad’s regime was responsible for last week’s attack that the opposition blames for more than 1,300 deaths.

The S&P/TSX had gained as much as 0.4 percent earlier, led by rising commodity shares, as a report showing a drop in U.S. durable-goods orders spurred speculation the Fed won’t reduce stimulus soon. U.S. Commerce Department data showed bookings for goods meant to last at least three years decreased 7.3 percent, the most since August 2012.

Federal Reserve officials are weighing when to begin curbing bond purchases that they pledged to maintain until the job market improves. Minutes released on Aug. 21 showed policy makers were comfortable with Chairman Ben S. Bernanke’s plan to taper this year if the economy strengthens.

Nine of 10 industries fell as a decline in energy shares offset a 1.7 percent rally in raw-materials producers.

Energy companies dropped 0.4 percent, erasing an earlier advance of as much as 0.3 percent. West Texas Intermediate crude fell for the first time in three days, declining 0.5 percent.

Paramount Resources slid 2.8 percent to C$33.20. AltaGas Ltd. fell 0.2 percent to C$35.52.

Alacer rose 7 percent to C$3.50, the highest level since April. Iamgold Corp. climbed 1.6 percent to C$7.17. Endeavour Silver gained 4.1 percent to C$5.83. Silver futures jumped 1.2 percent, while gold was down 0.2 percent at $1,393.10 an ounce.

Potash producers rallied after Uralkali CEO Vladislav Baumgertner was charged with abusing his office as chairman of Belarusian Potash Co., the trading venture that Russia’s Uralkali and Belaruskali set up in 2005.

Agrium rose 3.3 percent to C$94.07. Potash Corp. gained 2.4 percent to C$32.10.

The S&P/TSX Commercial Banks Index increased 0.2 percent to a record high. Five of eight companies in the group rose today.

Canadian banks are scheduled to post earnings this week, with Bank of Montreal and Bank of Nova Scotia reporting tomorrow.

Canada Imperial Bank of Commerce climbed 1 percent to C$80.69. Bank of Montreal rose 0.9 percent to C$65.78. Toronto- Dominion rose 0.2 percent to a record C$88.96.

US

By Nick Taborek

Aug. 26 (Bloomberg) — U.S. stocks fell, with the Standard & Poor’s 500 Index’s halting two days of gains, after Secretary of State John Kerry said the president will hold Syria’s government accountable for using chemical weapons.

Tyson Foods Inc., the largest U.S. meat processor, slid 7.3 percent after Bank of America Corp. analysts cut their rating on the stock. Archer-Daniels-Midland Co., the largest corn processor, dropped 4.9 percent as hot, dry weather in the Midwest threatened to reduce crop harvests. Amgen Inc. jumped 7.7 percent after agreeing to buy cancer-treatment developer Onyx Pharmaceuticals Inc. in a $10.4 billion transaction.

The S&P 500 declined 0.4 percent to 1,656.78 at 4 p.m. in New York, erasing an earlier gain of as much as 0.4 percent. The Dow Jones Industrial Average lost 64.05 points, or 0.4 percent, to 15,946.46.

“If there’s going to be turmoil and then if there’s going to be some retaliation and affect U.S. assets, people get a little scared,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a phone interview. “It’s a bit of a pullback so people are probably taking some risk off the table.”

President Barack Obama is consulting with allies and members of Congress and “believes there must be accountability for those who have used the world’s most dangerous weapons,” Kerry said.

“By any standard it is inexcusable,” Kerry told reporters in Washington today, saying evidence makes it “undeniable” that Syrian President Bashar al-Assad’s regime was responsible for last week’s attack that the opposition blames for more than 1,300 deaths.

The S&P 500 spiked lower following the statements after earlier extending its first weekly gain since Aug. 2., as investors speculated whether a report showing durable-goods orders fell in July would delay stimulus cuts.

A Commerce Department report showed bookings for goods meant to last at least three years decreased 7.3 percent, the most since August 2012, after a 3.9 percent gain in June. Orders waned for aircraft and capital goods such as computers and electrical equipment.

“It’s another data point that indicates a slow recovery,” Eric Teal, who helps oversee $5 billion as the chief investment officer at First Citizens BancShares Inc. in Raleigh, North Carolina, said by phone. “Given that the Fed’s position is data dependent, then I think that the odds are increasing that there’ll be less tightening than more.”

Stocks rebounded last week after a data showing a plunge in sales of new homes eased concern that the Federal Reserve would curb stimulus efforts next month. Officials have been weighing whether the economy is strong enough to prompt a reduction in stimulus, which has helped propel the S&P 500 up as much as 153 percent from its March 2009 low.

Speculation about the stimulus has whipsawed stocks since May, when Chairman Ben S. Bernanke first indicated cuts could start this year. Sixty-five percent of economists in a Bloomberg Aug. 9-13 survey said the first reduction would come at the Sept. 17-18 meeting.

The Chicago Board Options Exchange Volatility Index, or VIX, rose 7.2 percent to 14.99 today, surging after Kerry’s comments to reverse an earlier drop of 0.6 percent. The equity volatility gauge has jumped 27 percent since Aug. 5.

Trading in U.S. exchanges is heading for the second-slowest month in at least five years, according to data compiled by Bloomberg. An average of about 5.5 billion shares have changed hands each day this month. That’s about 60 million shares more than last August. About 4.7 billion shares traded today, 24 percent below the three-month average.

Nine of 10 major groups in the S&P 500 fell. Shares in phone companies and consumer staples producers lost at least 1.1 percent to pace declines. Procter & Gamble Co. slid 1.8 percent to $78.54 for the steepest drop in the Dow. AT&T Inc. and Verizon Communications Inc. retreated 1.4 percent.

Tyson Foods dropped 7.3 percent to $29.17 for the steepest decline in the S&P 500. Ryan Oksenhendler and Bryan Spillane at Bank of America’s Merrill Lynch unit cut the shares to neutral, similar to a hold rating, from buy, after a 62 percent rally this year.

“Industry data indicate a steep increase in production,” the analysts wrote in a report today. “In our view, this is likely to cause industry margins to peak sooner than we expected.” They also cut Tyson’s 2014 profit estimates, citing lower chicken prices.

Archer-Daniels-Midland fell 4.9 percent to $34.50, while Kraft Foods Group Inc. declined 1.4 percent to $52.08, the lowest since May. Temperatures will average as much as 14 degrees Fahrenheit above normal during the next seven days, with little rain expected in the Midwest, T-Storm Weather LLC said in a note to clients today. Rainfall in July and August will be the least since 1936 in Iowa, Illinois and Indiana.

An S&P index of homebuilders added 0.5 percent, rebounding from a 3.1 percent drop on Aug. 23 following the new home-sales report. The gauge has lost 26 percent since climbing to near a six-year high on May 14, as rising interest rates have raised concern that the housing recovery could slow. Treasury 10-year yields retreated today.

KB Home rose 1.2 percent to $16.63 today and Toll Brothers Inc. advanced 0.8 percent to $31.43. Home Depot Inc., the largest U.S. home-improvement retailer, climbed 2.1 percent to $75.43 for the biggest increase in the Dow.

“The home industry is on firm footing,” Jim Russell, senior equity strategist for U.S. Bank Wealth Management, said in an interview from Cincinnati. His firm oversees $110 billion.

“We do think the homebuilders are going to be pretty much tied at the hip to the daily interest rate moves, and absolutely tied to what’s decided on the taper.”

Amgen gained 7.7 percent to a record $113.75 for the biggest gain in the S&P 500. The pharmaceuticals maker agreed to pay $125 a share for Onyx’s outstanding stock, the companies said in a statement yesterday. Onyx’s Kyprolis, approved last year for a rare blood cancer, may spur more than $3 billion in revenue by 2021, according to analyst estimates compiled by Bloomberg. Onyx jumped 5.6 percent to $123.49.

Anadarko Petroleum Corp. climbed 1.4 percent to $91.02. The oil explorer said in a statement yesterday it agreed to sell a 10 percent stake in a Mozambique gas field to ONGC Videsh Ltd., a unit of India’s biggest energy explorer, for $2.64 billion.

Facebook Inc. advanced 2 percent to $41.34. The market value of the world’s largest social network topped $100 billion at the close for the first time since its initial public offering in May 2012. The stock has more than doubled since falling to a record low of $17.73 in September.

TMS International Corp. jumped 12 percent to $17.48.

Chicago’s Pritzker family, owner of a controlling stake in Hyatt Hotels Corp., agreed to acquire the steel mill servicer for $690 million in cash. TMS is the largest producer of outsourced industrial services to steel mills in North America as measured by revenue.

Price gains of stocks in the S&P 500 are outpacing profits by the fastest rate in 14 years as the bull market extends beyond the average length of rallies since Harry S. Truman was president.

The benchmark gauge for U.S. equities has risen 14 percent relative to income over the past 12 months to 16 times earnings, according to data compiled by Bloomberg. Valuations last climbed this fast in the final year of the 1990s technology bubble, just before the index began a 49 percent tumble. The rally that started in March 2009 has now outlasted the average gain since 1946, the data show.

“Markets have been running away,” Robert Royle, who helps oversee $21 billion as manager of the North American Trust at Smith & Williamson Investment Management LLP in London, said by telephone on Aug. 20. “Everyone is hoping for a second-half recovery in fundamentals,” he said. “I am just not sure what will drive the recovery.”

Have a wonderful evening everyone.

Be magnificent!

Man has accepted conflict as an innate part of daily existence

because he has accepted competition, jealousy, greed, acquisitiveness and aggression

as a natural way of life.

Krishnamurti, 1895-1986

As ever,

Carolann

Go to heaven for the climate, Hell for the company.

-Mark Twain, 1835-1910

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