October 17, 2013 Newsletter

Dear Friends,

Tangents:

-from The Huffington Post as reported by Rachel Tepper

Ooh la la, the French may not have been the first to chow down on those greasy frogs’ legs they’re so famous for loving. A recent archaeological dig in Wiltshire, England has yielded evidence that the people living there were eating frogs’ legs 8,000 years before the French.

“This is significant for our understanding of the way people were living around 5,000 years before the building of Stonehenge,” said researcher David Jacques, according to the BBC. Jacques is part of a team of Mesolithic period experts working on the dig, which is being led by the University of Buckingham.

The revelation stems from an onsite discovery in April of charred small animal bones. Analysis by the U.K.’s Natural History Museum revealed that the bones belonged to a toad, which may have been cooked and eaten.

Jacques believes the site on which the bones were found, dated between 7596 B.C. and 6250 B.C., was the U.K.’s oldest continuous settlement. So far, the dig has unearthed evidence of other foods, too, including salmon, aurochs, wild boar, red deer and hazelnuts. Excavations will continue through Oct. 25.

We’ll hopefully be seeing more of the dig sometime soon — the whole thing is being filmed for a documentary by the BBC, Smithsonian, CBC and other groups.

OCTOBER

…O hushed October morning mild,

Begin the hours of this day slow.

Make the day seem to us less brief…

…Retard the sun with gentle mist;

Enchant the land with amethyst.

Slow, slow!…

-Robert Frost

Believe that life is worth living and your belief will help create the fact. –William James.

Photos of the day

A visitor views the spectacular autumn colors in the Acer Glade at Westonbirt Arboretum near Tetbury south west England. Originally planted in the heyday of Victorian plant hunting in the mid-nineteenth century, the arboretum boasts one of the world’s finest tree collections. Toby Melville/Reuters

People climb up a hill besides a chapel at Germany’s highest mountain, the Zugspitze, on a sunny day near Garmisch-Partenkirchen, southern Germany. Matthias Schrader/AP

Market Closes for October 17^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Oct. 17 (Bloomberg) — Canadian stocks rose, with the Standard & Poor’s/TSX Composite Index climbing above the 13,000 level for the first time since July 2011, as precious metals producers jumped in the wake of a debt-limit deal in Washington.

B2Gold Corp. and Eldorado Gold Corp. surged at least 8.9 percent as the 10 biggest gains in the benchmark equity gauge were miners. Africa Oil Corp. surged 14 percent after deciding to sell shares to fund exploration. Canadian Natural Resources Ltd. and Bankers Petroleum Ltd. each slipped 1.5 percent as the price of crude fell on rising U.S. inventories. CGI Group Inc. fell 3.4 percent, retreating from a record high.

The S&P/TSX rose 79.15 points, or 0.6 percent, to 13,036.36 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has climbed 1.1 percent this week.

“The gains today are primarily driven by materials and gold,” said Brian Huen, managing partner with Red Sky Capital Management Ltd. in Toronto. He helps manage C$220 million ($213.7 million). “The resolution of yesterday is what’s driving the buying today. Once that plan was unveiled, and it wasn’t the best plan in the world, as it’s a kick the can down the road kind of plan, people wanted some protection. You’re seeing a rally in gold as insurance.”

U.S. lawmakers avoided a debt default and ended a government shutdown, pushing through a bill that funds the government through Jan. 15, 2014, and suspends the debt limit through Feb. 7.

Raw-materials producers jumped 2.7 percent as a group, as six industries among 10 in the S&P/TSX advanced. Trading volume was 2.5 percent above the 30-day average at this time of the day.

Fortuna Silver Mines Inc. climbed 12 percent to C$3.71 and First Majestic Silver Corp. rose 8.4 percent to C$11.80 to pace gains in the S&P/TSX Materials Index. Silver added 2.7 percent in New York. Endeavour Silver Corp. increased 8.3 percent to C$4.31.

B2Gold rallied 8.9 percent to C$2.46 and Eldorado Gold jumped 9.3 percent to C$6.38 as 22 of 24 members of the S&P/TSX Gold Index advanced. The price of the metal jumped the most in a month, surging 3.2 percent to $1,323 an ounce in New York.

Barrick Gold Corp., the world’s largest producer of the metal, increased 4.6 percent to C$19.06 and Goldcorp Inc. advanced 3.4 percent to C$25.24.

Africa Oil, the oil and gas explorer with licenses in Kenya, Ethiopia and Somalia, soared 14 percent to C$9.60, the highest close in almost 11 months. The company will sell as many as 56.5 million shares at SEK 51.75 (C$8.25) a share for gross proceeds of $450 million, Africa Oil said in a statement.

The cash will be used to fund Africa Oil’s future exploration and development activities in East Africa, as well as for general capital purposes.

CGI Group tumbled 3.4 percent to C$37.09, snapping four days of gains. The stock rallied 5.6 percent from Oct. 9 to a record high of C$38.41 yesterday. Open Text Corp. lost 0.7 percent to C$78.20.

BlackBerry Ltd., the smartphone maker looking to sell itself, rose 0.2 percent to C$8.44, erasing earlier losses of as much as 1.3 percent.

Lenovo Group Ltd., the world’s largest personal-computer maker, has signed a non-disclosure agreement with BlackBerry and is considering a bid for the company, Dow Jones reported.

BlackBerry has tumbled 28 percent this year. The company said it has begun selling unlocked BlackBerry smartphones online directly to consumers in the U.S., including the Z10 and Q10 models.

Canadian Natural Resources slipped 1.5 percent to C$33.26 and Bankers Petroleum retreated 1.5 percent to C$4.04 as crude dropped to a three-month low. U.S. supplies increased by 5.94 million barrels last week, according to the American Petroleum Institute yesterday.

US

By Nick Taborek

Oct. 17 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record, as speculation grew that the Federal Reserve will maintain the pace of stimulus after Congress ended the budget standoff.

American Express Co. rallied the most in nearly two years after reporting third-quarter profit that beat analysts’ estimates. Newmont Mining Corp., the second-largest gold miner, jumped 4.6 percent as the price of the precious metal surged.

International Business Machines Corp. sank 6.4 percent after posting its sixth consecutive drop in quarterly sales. Goldman Sachs Group Inc. dropped 2.4 percent as the bank reported a 20 percent drop in revenue.

The S&P 500 rose 0.7 percent to 1,733.15 at 4 p.m. in New York, surpassing the previous record of 1,725.52 from Sept. 18.

The Dow Jones Industrial Average fell 2.18 points to 15,371.65, held down by IBM and Goldman Sachs. About 6.6 billion shares changed hands on U.S. exchanges, 12 percent above the three- month average.

“The taper seems a little bit further out, certainly than anybody expected eight weeks ago and maybe even just a couple of weeks ago,” Walter Todd, chief investment officer at Greenwood Capital Inc., said in a phone interview from Greenwood, South Carolina. He helps manage $950 million. “It keeps a lid on rates and provides more liquidity for risk assets like stocks. People are back to focusing on the individual company dynamics that occur during earnings season.”

The S&P 500 gained 2.4 percent during the 16-day government closure that ended yesterday after President Barack Obama signed a bill to fund the government through Jan. 15 and extend the borrowing authority through Feb. 7.

Investors will now weigh the shutdown’s effects on corporate earnings and economic growth as the impasse fueled bets that the Fed will delay reducing its $85 billion in monthly bond purchases.

Pacific Investment Management Co. said the central bank will postpone tapering. The Fed “may now have no choice but to stay longer in its intense policy experimental mode –- due both to the likelihood of weaker data and to a perceived need to take out insurance for the economy against future political dysfunction,” said Pimco Chief Executive Officer Mohamed El- Erian in a CNBC blog posting.

The “fiscal shenanigans” undermined the case for tapering, Dallas Fed President Richard Fisher, an opponent to increasing stimulus, said today. Kansas City Fed President Esther George, who has voted this year against expanding stimulus, said the Fed has enough data to assess the economy’s strength and should taper even amid fiscal “uncertainty.” The central bank next convenes Oct. 29-30.

The Fed stimulus has helped the equity gauge surge 156 percent from its March 2009 low. The index has jumped 22 percent this year and climbed to its previous intraday record of 1,729.86 on Sept. 19, a day after the Fed unexpectedly delayed tapering at its last policy meeting.

The rally in stocks this year has pushed valuations to a three-year high and is the broadest since at least 1990. The S&P 500 trades at 16.5 times reported operating profit, a 17 percent increase from the beginning of 2013, according to data compiled by Bloomberg. Some 445 stocks in the gauge have posted year-to- date gains through yesterday, data show. The second-broadest advance in the period was in 1995, when 434 stocks in the benchmark gained through Oct. 16.

Equities could come under pressure as companies from Knoll Inc. to NCI Inc. have said they expect the shutdown to affect revenue in the last three months of the year.

“We are going to see a lower equity market and a longer period of lower rates” if corporate earnings start to deteriorate in the fourth quarter, BlackRock Inc. Chief Executive Officer Laurence D. Fink, who as head of the world’s biggest money manager oversees $4.1 trillion in assets, said today on “Market Makers” with Erik Schatzker and Stephanie Ruhle.

Knoll, an officer furniture maker, estimates about $10 million of government business to be pushed into next year, CEO Andrew Cogan said. Stanley Black & Decker Inc.’s shares yesterday dropped 14 percent, the most since 1992, after the toolmaker reduced its full-year profit forecast in part because of the shutdown. Campbell Soup Co. has seen consumers pull back after a year that included higher payroll taxes, along with the impasse in Washington, CEO Denise Morrison said.

Profits for S&P 500 companies probably grew 8.8 percent in the fourth quarter, according to analysts’ estimates compiled by Bloomberg as of Oct. 11.

S&P Ratings Services yesterday said the shutdown has shaved at least 0.6 percent off of fourth-quarter 2013 gross domestic product growth, or taken $24 billion out of the economy. IHS Inc. of Lexington, Massachusetts, reduced its GDP growth estimate for the period to 1.6 percent, from 2.2 percent in September.

The U.S. economy will expand by 1.6 percent this year, according to economists surveyed by Bloomberg. That would be the slowest rate of annual growth since 2009.

Data today indicated that more Americans than forecast filed applications for unemployment benefits last week.

California continued to work through a backlog, indicating it will take time to gauge the impact of the federal shutdown.

The Labor Department will release on Oct. 22 its September employment report, delayed by the shutdown from the scheduled date of Oct. 4. Data on consumer prices for last month will be released Oct. 30.

A report today showed Americans in October were the most pessimistic about the nation’s economic prospects in almost two years as concern mounted that continued political gridlock will hurt the expansion. The monthly Bloomberg Consumer Comfort Index expectations gauge plunged to minus 31, the lowest level since November 2011.

“So far, we think earnings will be resilient, even to what happened in Washington,” Andres Garcia-Amaya, global market strategist at JPMorgan Chase & Co.’s mutual funds unit, said in a phone interview today. His firm oversees $400 billion. “Short term, you might still have the sour taste of what happened the last couple of weeks. Fundamentally, the economy still has plenty of pent-up demand. The balance sheets of the consumer are actually in decent shape.”

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, sank 8.4 percent, after falling yesterday by the most in more than two years. The index has retreated 25 percent this year.

Profits for companies in the S&P 500 probably increased 1.4 percent during the third quarter as sales rose 2 percent, according to analysts’ estimates compiled by Bloomberg. Some 24 companies in the index reported results today.

Google Inc. jumped 5.9 percent to $941.06 at 4:31 p.m. in New York after posting sales that topped estimates as advertisers boosted spending on mobile and video promotions. The stock fell 1 percent to $888.79 during the regular session.

Nine of 10 main groups in the S&P 500 advanced today.

Phone, utility and materials stocks rallied at least 1.3 percent to pace gains.

Verizon Communications Inc. increased 3.5 percent to $48.90, the highest since August. The second-largest U.S. phone company reported profit that exceeded projections as its mobile- phone business fueled gains in sales and profit, validating its decision last month to pay $130 billion for Vodafone Group Plc’s share of the joint venture.

Newmont Mining jumped 4.6 percent to $27.06. Gold rallied the most in four weeks on speculation the Fed will postpone slowing stimulus. The metal is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on earlier speculation the Fed would slow debt purchases this year.

Peabody Energy Corp. surged 3.9 percent to $18.58. The largest U.S. coal producer posted a surprise third-quarter profit after a recovery in domestic prices for coal used to generate electricity and a reduction in mining costs.

American Express Co. rallied 5.1 percent, the most since November 2011, to a record $80.23. The biggest credit-card issuer by customer purchases, said worldwide card spending, or billed business, rose 7.3 percent to $236.2 billion.

SanDisk Corp. climbed 8.8 percent to $68.50 for the biggest gain the S&P 500. The company posted third-quarter adjusted earnings of $1.59 a share, exceeding the $1.33 median forecast of analysts surveyed by Bloomberg. Sales came in at $1.63 billion, compared with the $1.56 billion projected by analysts.

IBM plunged 6.4 percent to $174.83 for the biggest drop in the Dow. Third-quarter revenue fell 4 percent to $23.7 billion, $1 billion less than analysts had forecast in a Bloomberg survey.

Goldman Sachs fell 2.4 percent to $158.32. The world’s most profitable securities firm before the financial crisis said earnings were little changed as the bank cut costs in response to a 20 percent drop in revenue. The firm increased its dividend 10 percent.

IBM and Goldman are the second and third-biggest weightings, respectively, in the price-weighted Dow. Goldman was added to the gauge last month. The difference between today’s move in the Dow and S&P 500 was the biggest since April, according to data compiled by Bloomberg.

EBay Inc. slipped 4 percent to $51.38, the lowest since Sept. 3, after saying fourth-quarter sales will be $4.5 billion to $4.6 billion amid “dramatically decelerating U.S. e-commerce growth.” Analysts on average were projecting revenue of $4.64 billion, according to data compiled by Bloomberg. The largest online marketplace also issued a profit forecast that missed analyst estimates.

Have a wonderful weekend everyone.

Be magnificent!

We must refuse to be lifted off our feet.

A drowning man cannot save others.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

We cannot direct the wind but we can

adjust the sails.

-Bertha Calloway, 1925-

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