November 4, 2013 Newsletter

Dear Friends,

Tangents:

Lines to a Superior Young Lady on the Occasion

of Her First Manifesting a Will of Her Own

-by Rudyard Kipling

Imperious, long-coated Sage

Though your months as men reckon are two

You are wiser than ten times your age

And these rhymes are for you.

Oh Pagan Philosopher small,

You can’t read them now, it is true,

For dinner and sleep are your all,

And your knowledge is – you.

But you scream when there’s anything wrong,

And you scream till it’s righted, you do;

And Creation attends to your song

And the Earth waits on You.

What more could the best of us do,

Though his years might be three-score and odd?

And therefore with Deference due,

These Verses are written for You

Oh wee little, wise little God!

On this day in…

1922, the entrance to King Tut’s tomb was discovered in Egypt’s Valley of the Kings.

1946, UNESCO was founded.

1948, T.S. Eliot won the Nobel Prize in literature.

2008, Barack Obama was elected President.

If you refuse to be made straight when you are green, you will not be made straight when you are dry.  –African Proverb.

Photos of the day

Visitors on the floor of the New York Stock Exchange use their smartphones and tablet devices to photograph the opening bell ceremonies. Twitter’s confidence appears to be increasing ahead of its initial public offering set for later this week at the NYSE, as the 7-year-old short messaging service on Monday boosted the price range for the IPO. Richard Drew/AP

Waves crash against the sea front in Wimereux as strong winds battered northern France. Pascal Rossignol/Reuters

Market Closes for November 4^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Aubrey Pringle

Nov. 4 (Bloomberg) — Canadian stocks rose, after a two-day drop, as raw-materials producers rallied and investors awaited data for clues on when the U.S. central bank will reduce its bond-buying program.

Aurico Gold Inc. and China Gold International Resources Corp. added at least 6 percent as gold miners led gains among materials producers. Pacific Rubiales Energy Corp. climbed 3.6 percent after the crude producer received licenses from Colombia’s environmental agency for a new oil field. BlackBerry Ltd. sank 16 percent after Fairfax Financial Holdings Ltd. walked away from a $4.7 billion plan to buy the smartphone maker.

The Standard & Poor’s/TSX Composite Index gained 24.32 points, or 0.2 percent, to 13,361.78 at 4 p.m. in Toronto after falling as much as 0.2 percent earlier in the day. The benchmark Canadian equity gauge fell 0.9 percent in the prior two sessions. It has added 7.5 percent this year. Trading volume was 10 percent below the 30-day average today.

Investors are waiting for “further confidence or clarification in terms of what the Fed’s going to do,” Ian Nakamoto, director of research with MacDougall MacDougall & MacTier Inc., in a phone interview from Toronto. The firm manages about C$4 billion. “There’s not a lot of action either way here. October was a great month. We can’t keep having great months.”

Stimulus from the Federal Reserve and other central banks has helped fuel a global rally in equities. The S&P/TSX surged 4.5 percent in October, for a fourth straight monthly gain and the biggest in two years.

The Fed last week maintained the pace of its monthly bond buying even as policy makers noted underlying strength in the economy, which fueled speculation the central bank could cut stimulus sooner than anticipated.

Data this week on U.S. gross domestic product and employment will provide clues to whether the economy is strong enough to continue growing with less stimulus.

In Canada, a report today showed consumer confidence rose for the first time in five weeks as opinions about job security and house prices improved. The Bloomberg Nanos Canadian Confidence Index, a weekly measure of the economic mood of Canadians, advanced to 58.5 in the seven days through Nov. 1 from 57.7 the previous week.

Four of 10 main groups in the S&P/TSX rose today, led by a 2.3 percent rally among raw-materials companies. Nine of the 10 biggest advances in the broad index were gold miners. China Gold added 6 percent to C$2.85 and Aurico climbed 6.4 percent to C$4.48.

The S&P/TSX Gold Index jumped 3 percent, with all 24 members advancing to snap a two-day losing streak. The metal gained 0.1 percent from a two-week low in New York. A decline in the U.S. dollar boosted demand for gold as an alternative investment.

Pacific Rubiales climbed 3.6 percent to C$22.22, halting a five-day losing streak. Colombia’s largest independent oil producer plans to start production at the well next year after the licensing process experienced repeated delays.

Energy producers retreated less than 0.1 percent as a group, as oil fluctuated near the lowest level in four months.

The industry has fallen four straight days, the longest streak since August.

Advantage Oil & Gas Ltd. slid 3.6 percent to C$4.06 and Bonavista Energy Corp. dropped 2.4 percent to C$11.90 to pace the declines.

BlackBerry plummeted 16 percent to C$6.75, the lowest since September 2012. Fairfax Financial, the company’s largest shareholder, ended its bid to buy the smartphone maker, opting instead for a $1 billion bond deal and a management shakeup.

Chief Executive Officer Thorsten Heins will step down and former Sybase Inc. CEO John Chen will become executive chairman, putting him in charge of the company’s strategy.

Fairfax Financial dropped 2.5 percent to C$423.98, extending its losing streak to five days.

USA

By Lu Wang and Nick Taborek

Nov. 4 (Bloomberg) — U.S. stocks rose, after the Standard & Poor’s 500 Index climbed for four straight weeks, as Exxon Mobil Corp. and U.S. Steel Corp. led a commodity rally while investors awaited data on employment and economic growth.

Exxon Mobil, the world’s largest energy company, increased 2.5 percent. U.S. Steel and AK Steel Holding Corp. gained more than 4.4 percent on an industry upgrade by Goldman Sachs Group Inc. Kellogg Co. climbed 0.7 percent after announcing it will reduce its global workforce by seven percent as part of a four- year cost-saving plan. BlackBerry Ltd. tumbled 16 percent as Fairfax Financial Holdings Ltd. walked away from a $4.7 billion takeover plan.

The S&P 500 gained 0.4 percent to 1,767.93 at 4 p.m. in New York. The Dow Jones Industrial Average added 23.57 points, or 0.2 percent, to 15,639.12. About 5.7 billion shares changed hands, the slowest trading in two weeks.

“The path of least resistance continues to be up,” James Dunigan, who helps oversee $118 billion as chief investment officer in Philadelphia at PNC Wealth Management, said by phone.

“In general, the earnings picture is good. Valuations with the market at these levels are probably in the fair range. As you get into year-end portfolio adjustments, playing on that momentum we’ll likely see the market continue to do well here as opposed to selling off. I think if there are any sort of corrections they’ll be short lived in this environment.”

The equity gauge jumped 4.5 percent in October, reaching a record on Oct. 29, as the Federal Reserve decided to continue $85 billion in monthly bond purchases, and companies beat earnings forecasts. Investors are watching data to gauge the health of the U.S. economy after the Fed last week said it needs to see more evidence of sustained improvement before reducing the pace of its monthly bond purchases.

Seventy-six percent of the 374 S&P 500 companies that have reported earnings so far have beaten analysts’ estimates, according to data compiled by Bloomberg. Income for the broad index probably increased 4.1 percent in the third quarter, according to analyst estimates compiled by Bloomberg.

The S&P 500 has surged more than 160 percent from a bear market low in 2009 as the central bank introduced unprecedented monetary stimulus to spur growth. The benchmark gauge is up 24 percent this year, poised for the best annual gain since 2003.

The rally pushed the index’s price-to-earnings ratio up 18 percent this year to 16.8, near the highest level in more than three years, data compiled by Bloomberg show. The 15-year average multiple is 19.3.

The economy probably slowed in the third quarter and employers hired fewer workers in October, economists project reports to show this week.

Gross domestic product grew at a 2 percent annualized rate after a 2.5 percent pace from April through June, according to the median forecast of 69 economists surveyed by Bloomberg before Commerce Department figures due Thursday. Growth in consumer spending, the biggest part of the economy, was probably the weakest since 2011. Payrolls rose by 125,000 workers last month after a 148,000 gain in September, Labor Department figures may show Friday.

Data today showed U.S. factory orders increased 1.7 percent in September after falling 0.1 percent the prior month.

Economists estimated a gain of 1.8 percent for September.

“We’ve been in this slow growth environment for some time and we don’t see it breaking out of the trend,” Rex Macey, who helps oversee $20 billion as chief investment officer at Wilmington Trust Investment Advisors in Atlanta, said in a phone interview. “That’s the thing markets kind of like, where it could be a little warmer, but at least it’s not too hot.”

The rally in U.S. equities may accelerate in the final two months of the year and lift the S&P 500 to its biggest annual increase in 16 years, a look at historical data suggests. Since 1928, shares have climbed in November and December 82 percent of the time when the benchmark gauge advanced at least 10 percent through October, data compiled by S&P and Bloomberg show. The mean increase of 6 percent in this period signals that the index could jump to 1,862.79.

In another sign that investor appetite for equities is growing, Twitter Inc. raised the price of shares in its initial public offering, putting it on track to raise $1.75 billion amid brisk demand. Twitter is likely to raise its offering price again as the IPO is already several times oversubscribed at $25 a share, the high end of the range, two people with knowledge of the matter said.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, lost 2.6 percent today to 12.93. The measure is down 28 percent this year.

All 10 S&P 500 main industries advanced as energy companies climbed 1.3 percent for the best performance. Exxon Mobil increased 2.5 percent to $92.10 for the biggest gain in the Dow.

U.S. Steel climbed 4.4 percent to $26.91 and AK Steel Holding Corp. rallied 8.7 percent to $5. Both stocks were raised to buy from sell at Goldman Sachs.

U.S. steel demand is “heading to a solid sustainable recovery” over coming years, Sal Tharani, an analyst with Goldman Sachs, wrote in a note, boosting the rating on the U.S. steel industry to neutral from cautious.

Coal stocks advanced amid an improved outlook for the steel industry. Alpha Natural Resources Inc., a producer of metallurgical coal that’s used to make steel, jumped 9.4 percent to $8.13. Consol Energy Inc. advanced 3.1 percent to $37.76.

Vulcan Materials Co. rallied 7.7 percent, the most in the S&P 500, to $57.78. The producer of construction aggregates reported third-quarter sales of $813.6 million, beating the average analyst estimate by the biggest margin in more than a year, data compiled by Bloomberg show.

Alcoa Inc. jumped 7 percent to $9.92 for the second-biggest increase in the S&P 500.

Kellogg, the world’s largest cereal maker, increased 0.7 percent to $62.72. The company’s cost-saving program, known as “Project K,” will result in total, pretax charges of between $1.2 billion and $1.4 billion, the company said.

Abercrombie & Fitch Co. climbed 3.6 percent to $38.21. The teenager apparel retailer was boosted to buy from neutral at SunTrust Robinson Humphrey Inc.

Sysco Corp. gained 4.3 percent to $33.96. The distributor of food to restaurants, hospitals and schools reported profit of 49 cents a share for the fiscal first quarter, beating the average analyst estimate of 47 cents in a Bloomberg survey.

Groupon Inc. gained 6.4 percent to $10.57. The online-deals provider may “modestly exceed” analyst expectations for quarterly earnings, driven by growth in North America and a rebound in business from Europe, Middle East and Africa, Heath Terry, an analyst with Goldman Sachs, said in a note. Groupon is scheduled to announce results on Nov. 7.

BlackBerry tumbled 16 percent to $6.50 as the company attempts to recover with a management shakeup and $1 billion bond deal. Rather than acquiring the company, Fairfax will invest $250 million in the convertible bonds, according to a statement.

As part of the new agreement, Chief Executive Officer Thorsten Heins will step down. Former Sybase AG CEO John Chen will become executive chairman, putting him in charge of the company’s strategy.

Have  a wonderful evening everyone.

Be magnificent!

When you look at that unchanging Existence

from the outside, you call it God;

and when you look at it from the inside,

you call it yourself.  It is but one.

Swami Vivekananda, 1863-1902

As ever,

Carolann

The truth will set you free.  But not until it is finished

with you.

-David Foster Wallace, 1962-2008.

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