September 19, 2013 Newsletter

Dear Friends,

Tangents:

On this day in 1960, Chubby Checker’s record The Twist hit #1 on the music charts and launched a worldwide dance craze.

If you hear a voice within you say  ‘you cannot paint’ then by all means paint,  and that voice will be silenced. –Vincent Van Gogh.

And the day came when the risk it took to remain tight inside the bud was more painful than the risk it took to blossom. –Anaïs Nin.

Photos of the day

Artists with their painted bodies and wearing tiger masks perform during the annual ‘Pulikali’ or Tiger Dance in Thrissur, in the southern Indian state of Kerala. Pulikali is a colorful recreational folk art revolving around the theme of tiger hunting, performed to entertain people during Onam, an annual harvest festival. Arun Sankar K./AP

Tourists look at a traditional yacht sailing on the Mediterranean Sea during the Regatta of Nice in southeastern France. The regatta, which has been held annually since 2008, aims to highlight the strong historical ties to yachting, which was introduced at the end of the 19th century, in the region./Lionel Cironneau/AP

Market Closes for September 19^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Aubrey Pringle

Sept. 19 (Bloomberg) — Canadian stocks fell from a two- year high, as gold producers and financial stocks slid following the U.S. Federal Reserve’s decision yesterday to unexpectedly maintain the pace of its bond buying program.

Barrick Gold Corp. dropped 2.7 percent even as precious metals prices rallied. Manulife Financial Corp. and Sun Life Financial Inc. lost more than 1.2 percent as the threat of depressed yields weighed on the insurers’ investment portfolios.

Catamaran Corp. advanced 2.9 percent after Cantor Fitzgerald LP said the stock’s 9 percent slide yesterday represents a buying opportunity.

The Standard & Poor’s/TSX Index fell 4.62 points, or less than 0.1 percent, to 12,926.78 at 4 p.m. in Toronto, trimming an earlier decline of as much as 0.3 percent. The drop halted a four-day rally that left the gauge at its highest level since July 2011. Trading volume was 7 percent above the 30-day average.

“People had their fun yesterday, but at some point that tapering is going to start,” Gareth Watson, vice president of investment management and research at Richardson GMP Ltd., said in a phone interview from Toronto. His firm oversees C$15 billion ($14.6 billion). “Tapering was just postponed, it wasn’t canceled.”

The benchmark Canadian equity gauge soared yesterday after the U.S. Federal Reserve said it will “await more evidence” for sustained economic recovery before reducing its $85 billion in monthly bond buying. The central bank stimulus has helped fuel a global rally in equities.

Yields on government bonds in the U.S. and Canada plunged yesterday after the Fed suggested short-term borrowing rates could remain near zero even if U.S. unemployment falls below 6.5 percent. The threat of cuts to the bond purchases had pushed the yield on 10-year U.S. Treasury notes to a two-year high.

Financial firms dropped 0.2 percent for a second day of declines, led lower by insurers. Manulife fell 2.4 percent to C$17.16 and Sun Life Financial lost 1.2 percent to C$32.88.

Insurers invest in bonds to back future obligations to policyholders and low yields can pressure profits.

Materials producers sank 1.6 percent, following the biggest rally in six weeks yesterday after gold surged the most in two years. While the metal continued its advance today, an index of gold producers slumped 2.7 percent.

Investors are “likely hesitant because they don’t have a lot of conviction in the longer-term sustainability of higher gold prices,” Watson said.

Nineteen of 24 members in the S&P/TSX Gold Index retreated after each advanced at least 1.3 percent yesterday. Barrick Gold, the world’s largest producer, dropped 2.7 percent to C$19.94. Novagold Resources Inc. plunged 7 percent to C$2.67.

Catamaran, a provider of pharmacy benefits management, gained 2.9 percent to C$53.44. Cantor Fitzgerald LP analyst Justin Kew called the worst slide since May “overly punitive.”

Walgreen Co., one of the company’s main customers, said late Sept. 17 it would switch employees into a private insurance exchange in 2014.

Health-care companies rallied 3.4 percent as a group for the biggest gain in the S&P/TSX. Valeant Pharmaceuticals International Inc. jumped 3.7 percent to a record C$108.92.

Niko Resources Ltd. jumped 8.7 percent to C$4.12, snapping a three-day slide as energy companies climbed. The Calgary-based oil and gas explorer lost 9.1 percent during the losing streak.

“The material sector moved very strongly yesterday, and I think energy is catching up to that,” Youssef Zohny, portfolio manager at Richardson GMP in Vancouver, said in a phone interview.

US

By Nick Taborek and Aubrey Pringle

Sept. 19 (Bloomberg) — U.S. stocks fell after the Standard & Poor’s 500 Index rallied to a record yesterday on the Federal Reserve’s decision to refrain from cutting stimulus as investors weighed the latest batch of economic reports.

ConAgra Foods Inc. lost 4 percent after first-quarter sales missed estimates. Walt Disney Co. dropped 2.1 percent as Morgan Stanley downgraded the shares. Apple Inc. gained 1.6 percent as the iPhone maker rose for the third straight day. Priceline.com Inc., the largest U.S. online travel agency by market value, closed above $1,000 for the first time. Rite Aid Corp. surged 23 percent as the drugstore chain raised its profit forecast.

The S&P 500 fell 0.2 percent to 1,722.34 at 4 p.m. in New York. The Dow Jones Industrial Average lost 40.39 points, or 0.3 percent, to 15,636.55. About 6.8 billion shares changed hands on U.S. exchanges, 13 percent above the three-month average.

“It’s been essentially a bleeding off of some of the party atmosphere from yesterday,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $150 billion, said by phone. “At some point the market’s got to take a breather and I think today’s that day. There’s no real catalyst today in the data.”

The benchmark index climbed 1.2 percent to a record yesterday as the Fed unexpectedly refrained from reducing bond buying. Treasury yields have jumped since May, when Fed Chairman Ben S. Bernanke first outlined a possible timetable for a reduction in asset purchases.

The Federal Open Market Committee said it wants more evidence of an economic recovery before paring its $85 billion- a-month bond-buying program, surprising economists who predicted a reduction in the plan. The Fed has held the main interest rate near zero since December 2008 and pushed its balance sheet to a record $3.66 trillion through three rounds of stimulus, helping send the S&P 500 155 percent higher since March 2009.

“To be fair to Bernanke, he set the conditions necessary for tapering and the conditions are not there,” Ross Yarrow, who sells U.S. equities to European investors for Robert W.

Baird & Co. in London, said in a phone interview today. That’s “not because of any particular deterioration but because, by talking about tapering, he already achieved an adjustment in yields,” Yarrow said.

Ten-year U.S. Treasury yields climbed as high as 3.01 percent on Sept. 6 from 1.61 percent on May 1. They plunged 16 basis points yesterday to 2.69 percent.

Equity gauges whose performance some chart analysts consider predictive of stock market gains closed at records yesterday, including the Dow Jones Transportation Average, the Russell 2000 Index and the Morgan Stanley Cyclical Index.

About 83 percent of the stocks in the S&P 500 rose above their average price over the past 50 days yesterday, and a quarter of them reached their highest levels in 52 weeks or more, data compiled by Bloomberg show. Both measures hit their highest since Aug. 1, a day before the benchmark index peaked and started a 4.6 percent retreat.

Some 136 S&P 500 stocks had their 14-day relative-strength index above 70 yesterday, the most since May 20, 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 higher than 70 as indicating the stock has gained too far too fast.

Economic data today showed sales of previously owned U.S. homes unexpectedly rose in August to the highest level in more than six years as buyers rushed to lock in interest rates before they rise further. Manufacturing in the Philadelphia region expanded in September at the fastest pace since March 2011, a sign factories are picking up momentum.

Among other reports, the Conference Board’s index of leading economic indicators increased 0.7 percent in August.

Jobless claims in the U.S. rose less than forecast last week as two states began working through a backlog of applications that were caused by computer-system changeovers.

The U.S. economy will expand 1.6 percent this year, at the slowest pace since the recession ended in 2009, and grow by 3 percent in 2015, according to economists surveyed by Bloomberg.

The Bloomberg Economic Surprise Index, which measures the degree to which economic data exceeded or missed projections, is at minus 0.01. It has fluctuated above and below zero since April, after reaching an 11-month high in February.

“People had their fun yesterday, but at some point that tapering is going to start,” Gareth Watson, vice president of investment management and research at Richardson GMP Ltd., said in a phone interview from Toronto. His firm oversees C$15 billion ($14.6 billion). “Tapering was just postponed, it wasn’t canceled.”

Investors are also watching the political wrangling over the approaching limit on federal spending. Government funding expires Oct. 1 and the Treasury is expected to exhaust its ability to borrow funds in mid-October, when it will hit the statutory debt limit.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, dropped 3.2 percent to 13.16, the lowest level since Aug. 14. The equity volatility gauge has tumbled 23 percent in September after rallying 26 percent in August, the biggest monthly gain since May 2012.

Financial and consumer-staples shares had the biggest drops among 10 main groups in the S&P 500, losing more than 0.4 percent.

ConAgra fell 4 percent to $30.80. Revenue in the first quarter missed analysts’ predictions as consumer foods volume was lower than planned. General Mills Inc. slipped 2.6 percent to $48.83 after Wells Fargo Securities downgraded the shares to market perform from outperform.

Walt Disney dropped 2.1 percent to $65.72. Morgan Stanley cut Disney to equalweight from overweight, its first downgrade of the shares in more than four years, saying the company’s growth now depends more on its creative success. Disney delayed the Pixar film “The Good Dinosaur” by 18 months, leaving the animation studio that produced “Toy Story” without an annual release for the first time since 2005.

Banks had the largest decline among 24 groups in the S&P 500, falling 1 percent. Zions Bancorporation fell 2.8 percent to $27.96 and KeyCorp retreated 3.9 percent to $11.60. Regional lenders had been rooting for the Fed to let interest rates rise, which would help bring relief to bankers who’ve seen lending margins squeezed and expenses pushed up by new technology and regulations.

Life insurer Lincoln National Corp. tumbled 3.7 percent to $42.21 and MetLife Inc. lost 3.2 percent to $47.08. Insurers invest in bonds to back future obligations to policyholders and low yields can pressure profits.

Mining companies declined even as gold continued to rally.

Newmont Mining Corp. retreated 3.5 percent to $29.78, after an 8.2 percent surge yesterday. Barrick Gold Corp. slid 3.3 percent to $19.44. Gold for immediate delivery rose 0.2 percent.

Yesterday’s 4.1 percent jump in the metal’s price was the biggest since June 2012.

Pier 1 Imports Inc. plunged 14 percent to $20.33. The home furnishings retailer cut its earnings forecast for the year after second-quarter profit fell short of analysts’ predictions.

Same-store sales increased 3.5 percent in the quarter, compared with the average analyst estimate of 6.5 percent.

Technology and industrial shares had the best performance among S&P 500 industries. Apple jumped 1.6 percent to $472.30.

The stock has rallied 4.9 percent over three days, after an 11 percent slide since the Sept. 10 introduction of the newest iPhones.

Priceline, the largest U.S. online travel agency by market value, added 0.6 percent to $1,000.62. It climbed to as much $1,001 in intraday trading yesterday, the first time a stock in the S&P 500 changed hands at a four-digit price, according to S&P Dow Jones Indices, which compiles the indicator.

Agilent Technologies Inc. increased 3.4 percent to $50.98 after announcing it will split into two public companies. One company will focus on life sciences, diagnostics and applied markets, retaining the Agilent name. The other will be comprised of Agilent’s current portfolio of electronic measurement products, according to a statement.

Rite Aid surged 23 percent to $4.58. The drugstore chain raised its annual profit and revenue forecasts after second- quarter results exceeded analyst estimates, helped by an increase in same-store pharmacy sales.

Take-Two Interactive Software Inc. advanced 1.3 percent to $17.43. The video game maker said first-day sales of “Grand Theft Auto V” topped $800 million worldwide, surpassing the record set by “Call of Duty: Black Ops II” last November.

Groupon Inc. gained 9 percent to $12.59. The daily deals provider was raised to buy from hold at Stifel Nicolaus & Co.

Tesla Motors Inc. climbed 7 percent to $177.92. Deutsche Bank analyst Rod Lache said in a note the electric car maker is on track to “modestly” outperform margin expectations for the third quarter and raised his price target to $200 from $160.

Have a wonderful evening everyone.

Be magnificent!

Life is like a garden,  Quite naturally, leaves wither and flowers fade.

Only if we clear the decay of the past

then and there can we really enjoy the beauty of the new leaves and flowers.

Likewise, we must clear the murkiness of past bad experiences from our minds.

Life is remembrance in forgetfulness.

Forgive what ought to be forgiven; forget what ought to be forgotten.

Let us embrace life with renewed vigor…

We should be able to face every moment of life with renewed expectation, like a freshly blossomed flower.

Mata Amritanandamayi, 1953-

As ever,

Carolann

Answer me in one word.

-Shakespeare, 1564-1616

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