October 22, 2013 Newsletter

Dear Friends,

Tangents:

Attended a very informative investment seminar in NYC yesterday – lots of interesting investment ideas and perspectives from money managers from around the world.  Took the red-eye home last night after the meeting, so I’ll be brief tonight and get into more details with you later  🙂 .

Tattoo

-by John Whale

According to Aetius, a physician

of some second-century repute,

the ancients had their own recipe for it:

as if preparing for their funerals

they would take some corroded bronze

previously attacked by vinegar

and grind it solemnly with vitriol

and just a touch of predictable gall

before they applied it with needles

to the relative permanence of the dermis.

And now, at both ends of the M62

there are reports of the stricken natives

taking this rite of the hot scratch

some way closer to their raw grief

by asking their artists to grind

the coarse ashes of their beloved

with a suitably back ink

and to bury this finer dust

through repeated puncture wounds

in the form of words which go down

deep into their sore and grieving flesh:

Just like me/ They long to be / Close to you.

Photos of the day

Autumnal trees are reflected in the water as a fisherman rows his boat during a sunny day at the Sylvenstein barrier lake in Germany. Michael Dalder/Reuters

A torch bearer carries the Olympic torch past Kizhi Pogost, world famous 18th-century wooden churches, in Kizhi Island, northern Russia. The torch relay for the Sochi Winter Games will pass through many cities that showcase the historical, cultural and ethnic richness of Russia. olympictorch2014.com/AP

Aspiring witches line up to register before the start of an audition session to work as the resident witch at the Wookey Hole Caves tourist attraction in Wookey Hole, Somerset, England. About 50 applicants auditioned for the position, each given one minute to perform in front of a panel of judges. The requirements for the job include: must be able to cackle and must not be allergic to cats. Matt Dunham/AP

Market Closes for October 22^nd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Oct. 22 (Bloomberg) — Canadian stocks rose for a sixth day, the longest streak since April, as banks extended a record high and gold and silver prices surged after U.S. jobs data fueled speculation the Federal Reserve will extend stimulus.

Detour Gold Corp. and B2Gold Corp. rallied at least 7.2 percent as gold climbed to the highest in almost a month.

Turquoise Hill Resources Ltd. surged 10 percent to pace gains among materials producers. Canadian Imperial Bank of Commerce added 1.2 percent as the largest lenders rose a ninth day.

Pretium Resources Inc. plunged 28 percent after a consultant that withdrew from the company’s Valley of the Kings project said there are “no valid gold mineral resources” at the site.

The Standard & Poor’s/TSX Composite Index rose 61.53 points, or 0.5 percent, to 13,248.06 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has rallied 2.8 percent in the past six days, extending a two-year high.

“The weak U.S. data perpetuates this easy money environment and pushes expectations for tapering of bond-buying in the U.S. out, which is good for stock prices,” said Bob Decker, fund manager with Aurion Capital Management in Toronto.

The firm manages about C$6 billion ($5.84 billion). “Gold notionally is a beneficiary, it’s been purged from a lot of portfolios this summer, so it’s forming a base here.”

The U.S. added 148,000 workers in September, following a revised 193,000 rise in August that was larger than initially estimated. The median forecast of 93 economists surveyed by Bloomberg called for a 180,000 advance. The unemployment rate fell to 7.2 percent, the lowest since November 2008.

Turquoise Hill Resources surged 10 percent to C$5.11 and Endeavour Silver Corp. added 8.3 percent to C$4.98 as  raw- materials producers surged 2.7 percent as a group, the most in the S&P/TSX. Six of 10 industries in the benchmark Canadian equity gauge advanced. Trading volume was 19 percent above the 30-day average at this time of the day.

Detour Gold jumped 8.8 percent to C$8.79 and B2Gold added 7.2 percent to C$2.67. Semafo Inc. gained 9.5 percent to C$2.78 as 23 of 24 members of the S&P/TSX Gold Index rose. Gold for December delivery soared 2 percent to $1,342.60, reaching the highest since Sept. 30.

Bombardier Inc. increased 0.6 percent to C$5.33, a two-year high. The aircraft maker has soared 7.7 percent in the past five days, the longest rally since December 2012.

Pierre Beaudoin, chief executive officer with Bombardier, said in an interview yesterday its agreement to sell as many as 30 CSeries aircraft to a Chinese leasing company may prompt more deals in the nation.

RMP Energy Inc. jumped 9.2 percent to C$6.29, the highest close since August 2006, after analyst Anthony Petrucci with Canaccord Genuity raised his rating for the stock to buy from hold.

Bank of Montreal added 0.7 percent to C$72.63, a six-year high. Canadian Imperial gained 1.2 percent to C$86.41. The S&P/TSX Banks Index has advanced 4.6 percent in the past nine days, the longest streak since 2005. The gauge is up 13 percent this year to a record high.

Pretium Resources sank 28 percent to C$3.45, the lowest since shares began trading in December 2010.

Pretium today reported preliminary results from the processing of bulk samples from Valley of the Kings in British Columbia. The report comes two weeks after the company said Strathcona Mineral Services Ltd., which had been hired to evaluate ore samples, resigned from the project.

In withdrawing from the evaluation program, Strathcona said ore samples showed “there are no valid gold mineral resources for the VOK Zone, and without mineral resources there can be no basis for a feasibility study,” Pretium said today in a statement.

USA

By Lu Wang and Nikolaj Gammeltoft

Oct. 22 (Bloomberg) — Speculation slower growth in hiring will extend Federal Reserve stimulus lifted U.S. stocks and pushed the annual advance in the Standard & Poor’s 500 Index within a percentage point of the best yearly gain in a decade.

The S&P 500 rose 0.6 percent to 1,754.67 at 4 p.m. in New York after closing at a record yesterday, bringing its increase since December to 23.0 percent. The gauge would have to reach 1,761 to surpass the 23.5 percent surge in 2009 and be poised for the largest annual rise since 2003, when it climbed 26.4 percent. American stocks have rallied amid $85 billion in monthly bond purchases by the Fed aimed at jumpstarting the economy and record earnings.

Unlike in 2003, when gains in the S&P 500 followed a 49 percent plunge after the bursting of the technology bubble, this year’s advance is building on strength. The benchmark gauge for American equities had already doubled from its 12-year low in March 2009 through the end of 2012. Almost $13 trillion has been restored to U.S. equity values during the 4 1/2-year bull market, data compiled by Bloomberg show.

The Dow Jones Industrial Average advanced 75.46 points, or 0.5 percent, to 15,467.66 today, the highest in a month. About 6.9 billion shares changed hands on U.S. exchanges, 17 percent higher than the three-month average.

Whirlpool Corp. climbed 12 percent after the world’s largest appliance maker lifted its forecast. Freeport-McMoRan Copper & Gold Inc. jumped 3.8 percent amid better-than-estimated earnings. Apple Inc. lost 0.3 percent, reversing an earlier gain of 1.4 percent and halting a nine-day rally. Netflix Inc. slipped 9.2 percent after Chief Executive Officer Reed Hastings attributed the stock’s rally to investor “euphoria.”

The S&P 500 rallied as much as 0.8 percent today, boosted by speculation the Fed will delay curtailing its monetary stimulus after payrolls in the U.S. climbed by less than forecast in September, indicating the economy had little momentum leading up to the 16-day shutdown of the federal government. The jobless rate fell to an almost five-year low.

“This report indicates the Fed is joining us for the holiday season at the current level of quantitative easing,” Darrell Cronk, the New York-based regional chief investment officer at Wells Fargo Private Bank, which oversees $170 billion, said by phone. “And it will probably be ringing in the New Year with us as well as it continues QE through the end of 2013. Right now the data is not suggesting any kind of tapering.”

Progress in the labor market depends on how quickly the world’s largest economy can bounce back from the loss of business caused by the government closure. The budget dispute weighed on fourth-quarter growth and will prompt Fed policy makers to wait until March before starting to scale back the $85 billion of monthly bond purchases, a Bloomberg survey showed last week.

A separate report showed construction spending in the U.S. rose in August for a fifth consecutive month, propelled by the strongest outlays on homebuilding in five years. Federal spending dropped to the lowest level in five years, showing government budget cuts will hold the industry back.

Investors are also watching corporate earnings to gauge the health of the economy. Analysts have raised their forecasts for profits in the third quarter, predicting an average increase of 2.5 percent for all companies in the gauge, according to estimates compiled by Bloomberg. That compares with a 1.7 percent projection at the beginning of the month.

Earnings at the 138 companies that have reported so far grew 5.5 percent, while sales gained 2.3 percent, according to data compiled by Bloomberg. Some 72 percent of the companies have topped analysts’ profit estimates, while 54 percent have beaten on sales.

“You’re getting a significant number of beats again and you’re seeing it widespread again,” Sandy Lincoln, the Chicago- based chief market strategist in the U.S. with BMO Global Asset Management, which oversees about $120 billion, said in a telephone interview. “I think those surprise factors continue to cause the market go higher.”

The S&P 500 will rise past 1,800 as earnings and the U.S. economy improve, Michael Shaoul, the chairman and chief executive officer of New York-based Marketfield Asset Management LLC, told Bloomberg TV.

“We feel pretty good about equities,” said Shaoul in an interview from New York. “Corporate earnings point to a re- accelerating domestic economy. 1,800 is attainable.” He did not specify a time frame.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 1.3 percent to 13.33. The measure has fallen 20 percent this month.

Nine of 10 S&P 500 industry groups gained, with materials, consumer-staples and utility stocks increasing more than 1.3 percent to lead the advance. The Morgan Stanley Cyclical Index rallied 1.7 percent to a record.

Walt Disney Co., the world’s largest entertainment company, rose 2.1 percent, the most in the Dow, to a record $69. Alcoa Inc., the biggest U.S. aluminum producer, jumped 8.8 percent to $9.36 for the largest advance in two years.

An S&P index of homebuilders climbed 2.8 percent amid the rise in construction spending and a decline in Treasury 10-year note yields. All 11 members in the Supercomposite Homebuilding Index gained. Lennar Corp. advanced 4.2 percent to $36.17 while D.R. Horton Inc. rose 3 percent to $19.23.

Whirlpool climbed 12 percent to $146.19. The world’s largest appliance maker lifted its forecast for earnings this year to as much as $10.10 a share from an earlier estimate of no more than $10. That compared with the analyst estimate of $9.97.

Freeport-McMoRan jumped 3.8 percent to $36.36. The largest U.S. miner reported third-quarter profit that beat analysts’ estimates as copper costs were better than expected.

The Bloomberg U.S. Airlines Index advanced 2.2 percent to its highest level since October 2007. Delta Air Lines Inc. added 3.2 percent to a record $25.49. The carrier’s quarterly profit beat analysts’ estimates as more people flew at higher fares and fuel prices declined.

Transocean Ltd. jumped 6 percent to $49.35. The offshore drilling contractor will replace Dell Inc. in the S&P 500, the index provider said in a statement late yesterday. Revisions in the benchmark’s composition prompt some money managers to shift holdings to match the equity index.

VMware Inc. climbed 2.8 percent to $85. The biggest maker of software that lets computers run different operating systems reported quarterly profit that beat analysts’ forecasts.

Lockheed Martin Corp. added 3.8 percent to $130.05. The biggest U.S. government contractor raised its 2013 forecast as third-quarter profit jumped, defying Pentagon budget cuts.

The reduction in government spending weighed on United Technologies Corp., as the company trimmed its full-year sales projection. The stock dropped 1.4 percent to $106.13 for the biggest retreat in the Dow.

Apple lost 0.3 percent to $519.87, declining as much as 2.6 percent during the day after erasing an earlier gain. Chief Executive Officer Tim Cook, facing two straight quarters of declining profit and a stock that’s down by more than a quarter from a September 2012 record, updated the company’s lineup of iPads at an event today.

Netflix slid 9.2 percent to $322.52. Shares of the world’s largest online subscription-streaming service have more than tripled this year for the best performance in the S&P 500 as of yesterday. Netflix’s valuation is “difficult to justify,” Bank of America Corp. said in a note. The stock jumped as much as 9.6 percent earlier today, after profit beat analyst estimates.

Coach Inc. slid 7.5 percent to $50.10, the lowest since April. The largest U.S. luxury handbag maker said fiscal first- quarter profit fell 1.6 percent as stiffer competition curtailed handbag sales in North America.

EMC Corp. slipped 4.8 percent to $24.04. The world’s biggest maker of storage computers cut its full-year sales and profit forecasts after earnings fell short of estimates after U.S. federal government spending declined.

Groupon Inc., a deal-of-the-day coupon company, tumbled 6.9 percent to $9.87. The slowdown in Groupon’s domestic business worsened last month from August, Steve Weinstein, an analyst with ITG Investment Research, wrote in a note to clients.

RadioShack Corp. tumbled 18 percent, the most since July 2012, to $2.89 as the consumer-electronics retailer posted a seventh straight quarterly loss. The company also said it received commitments for $835 million in new five-year financing to boost liquidity amid a turnaround effort.

Have a wonderful weekend everyone.

Be magnificent!

Adaptability is not imitation.

It means power of resistance and assimilation.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Nearly all men can stand adversity, but if you want

to test a man’s character, give him power.

-Abraham Lincoln, 1809-1865

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