October 25, 2013 Newsletter

Dear Friends,

Tangents:

Apparently changing climate is threatening to the coffee industry, which fills 1.6 billion cups a day.  It may not be long before that after-dinner espresso costs more than the wine.  More importantly, there are some 26 million farmers who depend on coffee to feed their families.  Coffee is the most valuable tropical export crop and the world’s favorite drink.  It is now the second most traded commodity after oil, with exports worth $15 billion US per year.  The plant is peculiarly vulnerable to climate change according to the New Scientist.

On this day in 1964, the Rolling Stones made their US television debut, appearing on The Ed Sullivan Show.

Pablo Picasso was born on October 25^th, 1881.

128 years ago, on October 25^th, 1885, Johannes Brahm’s 4^th Symphony in E  premiered.

Our greatest weakness lies in giving up.  The most certain way to succeed is always to try just one more time. –Thomas A. Edison

Photo of the day

A man takes a photograph of a sculpture by artist Lucy Humphrey titled ‘horizon’ on a rocky cliff which is part of the ‘Sculpture by the Sea’ exhibition at Sydney’s Tamarama Beach in Australia. The free and temporary outdoor exhibition, now in its 17th year, stretches for 1.24 miles along the coastline. David Gray/Reuters

Market Closes for October 25^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Aubrey Pringle

Oct. 25 (Bloomberg) — Canadian stocks rose for the eighth time in nine days, capping the benchmark index’s third straight weekly gain, as energy producers and miners rallied amid higher commodity prices.

Trilogy Energy Corp. surged 8.3 percent to lead gas companies higher after a report said China Petrochemical Corp. plans to sell half its stake in two shale gas blocks in Canada.

Centerra Gold Inc. jumped 4.2 percent to pace gains among gold miners. CGI Group Inc., the designer of the website for the new U.S. health-care exchanges, fell 0.8 percent amid blame for software snags on the portal.

The Standard & Poor’s/TSX Composite Index rose 74.66 points, or 0.6 percent, to 13,399.42 at 4 p.m. in Toronto. The gauge rallied 2 percent in the past five days, the biggest weekly gain since July. It’s risen 4.8 percent in October, poised for its best month in two years.

“There’s been a nice uptick in some of the material names,” said Matt Skipp, chief investment officer with Sw8 Asset Management Inc. in Toronto. The firm manages about C$54 million ($52 million). “People are looking for places to put money, and Canada is hanging on the positive side at the moment.”

While the benchmark Canadian index traded at a two-year high after rallying 7.8 percent so far in 2013, U.S. stocks have surged 23 percent this year, with the S&P 500 closing at a record today.

Eight of 10 groups in the S&P/TSX advanced today. Utility stocks gained 1.3 percent to pace gains. Canadian Utilities Ltd. rose 2.3 percent to C$38.08 and ATCO Ltd. gained 2.5 percent to C$48.47.

Energy stocks rallied 1 percent as a group to the highest since March 2012, with gas producers pacing gains. Trilogy Energy jumped 8.3 percent to C$31.58, a three-month high.

Precision Drilling Corp. added 4.4 percent to C$11.05 and Enerplus Corp. climbed 2.8 percent to C$18.12.

China Petrochemical plans to sell the stakes in its two biggest shale blocks in Canada to spread costs and speed up their development, Reuters reported, citing Feng Zhiqiang, chairman of North America operations of Sinopec International Petroleum Exploration and Production Corp.

Materials stocks increased 0.6 percent, erasing an earlier drop of as much as 1 percent as gold prices reversed. Gold for December delivery added 0.2 percent in New York to the highest in a month.

Centerra Gold surged 4.2 percent to C$4.19, while Alacer Gold Corp. jumped 1.3 percent to C$3.22 and Semafo Inc. rose 2.4 percent to $2.98.

CGI Group dropped 0.8 percent to C$35.59, pushing its loss for the week to 4 percent. Canada’s biggest technology company continues to bear responsibility for glitches on the new www.healthcare.gov exchange website. Canada’s biggest technology company posted its second straight weekly loss.

Cameco Corp., a uranium company, erased earlier gains and slipped 0.4 percent to C$19.27 after an earthquake struck northeast of Tokyo and a tsunami warning was issued for the Fukushima region.

USA

By Lu Wang

Oct. 25 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record, as Amazon.com Inc. and Microsoft Corp. sales beat estimates while a drop in consumer confidence added to speculation the Federal Reserve will delay scaling back monetary stimulus.

Amazon.com surged 9.4 percent as consumers flocked to the largest online retailer ahead of the holiday shopping season, helping to curtail losses. Microsoft jumped 6 percent as the company relied on corporate software demand to make up for weak consumer personal-computer purchases. Eastman Chemical Co. slumped 5.2 percent after cutting its full-year forecast.

The S&P 500 rose 0.4 percent to 1,759.77 at 4 p.m. in New York. The Nasdaq 100 Index climbed 0.6 percent to 3,383.83. The Dow Jones Industrial Average added 61.07 points, or 0.4 percent, to 15,570.28. About 6 billion shares changed hands on U.S. exchanges, in line with the three-month average.

“Earnings have been good enough and the liquidity spigot is open so that people see very little risk in the system,” Charlie Smith, chief investment officer of Pittsburgh-based Fort Pitt Capital Group Inc., said in a phone interview. His firm oversees $1.5 billion. “It’s like a giant game of musical chairs. The attitude on the part of most investors is that they have to play while the Fed got the music going.”

The S&P 500 has jumped 4.7 percent this month as lawmakers agreed to raise the government’s borrowing limit, avoiding a sovereign default. Equities rallied for a third week, with the benchmark index up 0.9 percent, as signs of slower economic recovery fueled bets the Fed will wait until March before scaling back bond purchases.

Exchange-traded funds that invest in U.S. equities took in more than $2.3 billion the last four days, bringing this month’s flows to about $15.8 billion, data compiled by Bloomberg show.

October is on track for the biggest intake since July.

Stocks briefly pared gains today as a person in Kentucky Republican Rand Paul’s office said the Senator is considering placing a hold on the nomination of Janet Yellen to lead the Fed. Equities rallied earlier this month when President Barack Obama chose Yellen to succeed Ben S. Bernanke as Fed chairman.

As a top deputy to Bernanke, Yellen supported the central bank’s bond-buying programs that have helped propel the S&P 500 up 160 percent from a 12-year low in 2009.

Better-than-expected earnings and continued monetary stimulus have driven the S&P 500 up 23 percent this year. While the rally lifted equity valuations to a four-year high, with the index trading at 15.9 times estimated operating earnings, that’s still below the multiples at the market’s two previous peaks, when the ratio reached 16.5 in October 2007 and 25.7 in March 2000, data compiled by Bloomberg show.

“Valuation is still reasonable and the economy appears to getting better,” Alan Gayle, senior investment strategist and director of asset allocation at RidgeWorth Capital Management, said by phone from Atlanta. His firm oversees about $48 billion.

“The market does look a bit extended so it wouldn’t surprise me if we saw some near-term pullback.”

Data today showed consumer confidence in the U.S. dropped in October to a 10-month low, showing the reopening of the federal government failed to reassure households. The Thomson Reuters/University of Michigan final consumer sentiment index for October decreased to 73.2 from 77.5 the prior month. The median estimate in a Bloomberg survey called for a decline to 75 compared with a preliminary reading of 75.2.

Orders for U.S. durable goods rose in September by the most in three months as stronger demand for commercial and military aircraft outweighed a drop in business equipment.

Sixteen S&P 500 reported earnings today. Of the 244 members of the gauge that have released results so far, 76 percent exceeded analysts’ predictions for profit, while 54 percent beat sales estimates, data compiled by Bloomberg showed.

Earnings for the broad equity gauge probably increased 3.7 percent in the third quarter as sales climbed 2.4 percent, according to analysts’ estimates compiled by Bloomberg.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, slipped 0.8 percent to 13.09, trimming its gain for the week to 0.4 percent.

All 10 S&P 500 groups gained today as phone and utility shares climbed more than 1 percent to lead the advance.

Technology shares increased 0.4 percent.

Amazon jumped 9.4 percent to an all-time high of $363.39.

Chief Executive Officer Jeff Bezos has poured money into the company’s delivery network, cloud-computing services and line of Kindle e-readers and tablets, sacrificing near-term profits to fuel growth. That could put Amazon on track to outpace the e- commerce market, where sales are seen climbing 15.5 percent to $83.2 billion, according to EMarketer Inc.

Microsoft rallied 6 percent to $35.73. The world’s largest software maker is undergoing unprecedented changes, conducting its first-ever CEO search to replace Steve Ballmer and starting an organizational overhaul aimed at bolstering sales by focusing on devices and services.

United Parcel Service Inc. added 1.2 percent to a record $95.61. The world’s largest-package delivery company beat analysts’ estimates for third-quarter earnings. The company said revenue from each domestic parcel rose 1 percent and daily package volume was up 2.3 percent.

Alexion Pharmaceuticals Inc. climbed 7.3 percent to a record $125.17. The maker of a drug for rare blood diseases boosted its full-year earnings forecast to as much as $3.04 a share. That compared with the average analyst estimate of $3.03.

National Oilwell Varco Inc. rose 4.5 percent to $82.72. The biggest U.S. maker of oil-field equipment reported third-quarter earnings that topped analysts’ estimates and said it expects orders for the current quarter to be good, “maybe great.”

Zynga Inc. advanced 5.5 percent to $3.73. The maker of social-networking games reported its first quarter under Chief Executive Officer Don Mattrick, recording a smaller-than- forecast loss as purchases of items used in games exceeded the company’s forecast.

Eastman Chemical slumped 5.2 percent to $77.94. The producer of chemicals said it expects full-year earnings to be as low as $6.30 a share, trailing the average analyst estimate of $6.47 in a Bloomberg survey.

Express Scripts Holding Co. declined 4.5 percent to $60.88, the lowest since May. The largest U.S. processor of prescription drug claims reduced its 2013 cash flow forecast, citing delays in some non-client integration activities.

Yahoo! Inc. lost 2.5 percent to $32.25 after Yahoo Japan Corp. forecast full-year sales and profits that missed analysts’ estimates.

Have a wonderful weekend everyone.

Be magnificent!

Truth has no path, and that is the beauty of truth, it is living.

Krishnamurti, 1895-1986

As ever,

Carolann

The reward of a thing well done, is to have done it.

-Ralph Waldo Emerson, 1803-1882

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