November 19, 2013 Newsletter

Dear Friends,

Tangents: On this day, November 19^th, 1863, Abraham Lincoln delivered what is now considered one of the greatest speeches in American history, The Gettysburg Address:

“Fourscore and seven years ago our fathers brought forth on this continent a new nation conceived in liberty and dedicated to the proposition that all men are created equal…”

For more, see www.loc.gov/exhibits/gadd.

Photo of the day

Comet ISON glows brightly in this five-minute exposure taken at NASA’s Marshall Space Flight Center (MSFC) on November 8 at 5:40 a.m. EST. At the time of this picture, Comet ISON was 97 million miles from Earth, heading toward a close encounter with the sun on November 28. ISON is now visible with a good pair of binoculars.

Aaron Kingery/NASA/MSFC/Handout via Reuters

Although not as intense as a burst last week, the increase is adding to speculation over whether the comet, formally known as C/2012 S1, will survive its Nov. 28 solar flyby.

The comet is projected to sweep past the sun a scant 1.2 million miles above its surface. If it does survive, its first pass through the solar system will be its last. The encounter with the sun will kick ISON out into interstellar space, researchers calculate.

Market Closes for November 19^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Aubrey Pringle

Nov. 19 (Bloomberg) — Canadian stocks fell, after reaching a two-year high last week, as a slump in technology and industrial shares offset a rise in gold producers while investors watched for signs the U.S. Federal Reserve will continue monetary stimulus.

TransCanada Corp. retreated 1.2 percent after the natural- gas transmission company pushed the start date for the Keystone XL pipeline project into 2016. Alacer Gold Corp. and Barrick Gold Corp. gained at least 1.3 percent, pacing advances among gold miners. Sears Canada Inc. climbed to a two-year high after the retailer reported a rise in same-store sales and said it will pay a special dividend to shareholders.

The Standard & Poor’s/TSX Composite Index fell 15.46 points, or 0.1 percent, to 13,442.6 at 4 p.m. in Toronto, after gaining as much as 0.3 percent earlier in the day. The gauge has climbed 8.1 percent this year.

“We’re at the end of the earnings cycle, so the focus goes away from individual stocks reporting earnings to more macro events like tapering,” Ian Nakamoto, director of research with MacDougall MacDougall & MacTier Inc., said in a phone interview from Toronto. The firm manages about C$4 billion. “The FOMC release their minutes tomorrow, so any other hints on what they’re thinking in terms of tapering might give us some clues.”

Equities have rallied this year as the U.S. Fed embarked on a monthly $85 billion bond-buying program to stimulate the economy. Fed policy makers will probably scale back the pace of asset purchases at their March 18-19 meeting, according to the median of 32 estimates in a Bloomberg survey of economists on Nov. 8. The central bank tomorrow releases the minutes from the October meeting of the Federal Open Market Committee.

The Organization for Economic Cooperation and Development cut its global growth forecasts for this year and next as emerging-market economies including India and Brazil cool. The world economy will probably expand 2.7 percent in 2013 and 3.6 percent in 2014, instead of the 3.1 percent and and 4 percent predicted in May, the Paris-based OECD said in a semi-annual report today.

The Bank of Canada will probably raise its benchmark lending rate at the end of next year to avoid a build-up of inflation, the OECD said. The first increase in the 1 percent rate since 2010 is projected to be in the fourth quarter of 2014, with the central bank raising it to 2.25 percent by the end of 2015, the OECD said.

Investors have been paring bets on higher borrowing costs after Governor Stephen Poloz unexpectedly dropped the central bank’s rate-increase bias at its last announcement Oct. 23, citing greater slack in the economy.

Six of 10 S&P/TSX industries fell on trading volume in line with the 30-day average. Technology companies declined 1.2 percent for the worst performance. BlackBerry Ltd. fell for a fourth straight session losing 1.7 percent to $6.31. Industrial shares slipped 0.7 percent today.

TransCanada retreated 1.2 percent to C$46.75, the lowest since Oct. 24. Facing delays from a U.S. review of its Keystone XL pipeline, the natural gas transmission company pushed the forecast startup date for the $5.4 billion project into 2016.

Calgary-based TransCanada hopes for U.S. approval in early 2014, Chief Executive Officer Russ Girling said today at an investor presentation in Toronto.

The S&P/TSX Gold Index gained 0.6 percent as miners advanced. Barrick Gold rose 1.3 percent to C$18.67 and Alacer Gold added 2.3 percent to C$2.25.

Gold and silver equities are “bottoming” and will go on to outperform the metals when a recovery finally begins, said Peter Grosskopf, the chief executive officer of Canadian money manager Sprott Inc. While both commodities have declined this year, they will eventually erase the losses and rise to records as more money is printed around the world, Grosskopf said in a Nov. 15. phone interview. Gold and silver producers will emerge stronger from the downturn as the weak are “weeded out,” he said.

Coastal Energy Co. surged 27 percent to C$18.84 after Cia.

Espanola de Petroleos SA, an oil refiner owned by Abu Dhabi, agreed to buy Coastal Energy as the Middle East sheikdom adds to crude and natural-gas assets in Southeast Asia. The venture will take on Coastal Energy’s C$51 million of net debt as part of the deal, due to close in the first quarter.

Sears Canada jumped 6.4 percent to C$17.87, the since June 2011, after the company said it will pay a special dividend of C$5 on Dec. 6. The retailer also posted its first quarterly same-store sales increase since 2008, boosted by stronger demand for apparel, accessories and home items.

Intertape Polymer Group Inc., a producer of plastic packaging for industrial use, jumped 6.8 percent to C$13.37 for the biggest increase in the benchmark index. The company was upgraded to a buy rating from market perform by Cormark Securities analyst Sarah Hughes.

USA

By Nick Taborek and Lu Wang

Nov. 19 (Bloomberg) — U.S. stocks fell after disappointing forecasts from Best Buy Co. and Campbell Soup Co. while investors awaited a speech from Federal Reserve Chairman Ben S. Bernanke to gauge the prospect of continued stimulus.

Best Buy slid 11 percent, the most in almost a year, after saying it will work to keep pace with competitors’ discounts in the holiday season, hurting fourth-quarter profitability.

Campbell Soup fell 6.2 percent after cutting its profit forecast. Home Depot Inc. gained 0.9 percent after boosting its earnings forecast as rising home prices spurred homeowners to splurge on renovations. Tyson Foods Inc. climbed 4.6 percent for a sixth day of gains as sales beat analysts’ expectations.

The Standard & Poor’s 500 Index fell 0.2 percent to 1,787.87 at 4 p.m. in New York. Yesterday, the gauge briefly surpassed 1,800 for the first time. The Dow Jones Industrial Average lost 8.99 points, or less than 0.1 percent, to 15,967.03. About 5.8 billion shares changed hands on U.S. exchanges, about 3 percent below the three-month average.

“The economy is not doing badly, and the Fed is remaining very aggressive and very friendly toward the market,” Bruce Bittles, chief investment strategist at RW Baird & Co., said by phone from Sarasota, Florida. His firm oversees $100 billion.

“We’ve had a big run. My suspicion is that the market might go sideways now for a little while before we encounter a year-end rally in December.”

The S&P 500 is up 25 percent this year, putting it on track for the biggest annual gain since 2003, as the Fed kept its monetary stimulus to spur economic growth and corporate earnings topped analysts’ estimates.

Bernanke is scheduled to speak in Washington today after Fed Bank of New York President William Dudley said yesterday that while he’s “more hopeful” the U.S. economy is strengthening, it’s not enough to warrant stimulus cuts yet.

Chicago Fed President Charles Evans, among the most vocal advocates for additional easing from the Fed, said today that while the central bank is going to deliver highly accommodative policy until it can get the economy where it wants, the biggest challenge is credibility.

The Organization for Economic Cooperation and Development cut global growth forecasts for this year and next as emerging- market economies including India and Brazil cool. The world economy may expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and 4 percent predicted in May, the Paris-based OECD said in a report today. Growth in the U.S. will be 1.7 percent and 2.9 percent this year and next, broadly similar to the outlook in May.

The Fed will release minutes of its October policy meeting tomorrow. The document will reveal more details behind the decision to press on with $85 billion in monthly asset purchases.

Policy makers will probably pare that pace to $70 billion at their March 18-19 meeting, according to the median estimate in a Bloomberg survey. Three rounds of monetary stimulus have helped propel the S&P 500 up 165 percent from a bear-market low in 2009.

Wall Street strategists have played catch-up in their U.S. stock-market forecasting for most of the year. Yesterday’s average prediction for the S&P 500 stood at 1,733, or almost 59 points below the index’s closing value. The gap dwindled to this year’s low of minus 70 points at the end of last week from a high of 84 points on Jan. 8.

John Stoltzfus, chief market strategist at Oppenheimer & Co. in New York, today boosted his 2013 projection for the S&P 500 by 4.7 percent to 1,812, citing the market’s strength. The index will end next year at 2,014, he forecast.

“Recent improvements in the tone of U.S. economic data suggest to us that prospects are good for investors to see a continuation of the economic recovery that could drive earnings higher in the year ahead,” Stoltzfus wrote in a note.

The S&P 500 trades at 16.9 times reported operating profit, a 20 percent increase from the beginning of 2013, according to data compiled by Bloomberg. Last week, the benchmark’s valuation reached the highest level since May 2010.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 2.2 percent today to 13.39. The measure is down 26 percent this year.

Six out of the 10 main S&P 500 industries declined as industrial and utility shares fell more than 0.6 percent for the worst performance.

Best Buy declined 11 percent to $38.78. Sales were little changed at $9.36 billion in the period ended Nov. 2, trailing the $9.37 billion analysts estimated on average.

Campbell Soup lost 6.2 percent to $39.20. The company said profit this year will be less than it previously estimated after a recall and changes in retailers’ buying patterns hurt first- quarter results.

Salesforce.com Inc. slipped 5 percent to $52.74. The biggest maker of customer-management software forecast fiscal fourth-quarter earnings of 6 cents a share at most. Analysts on average estimated 7 cents.

Home Depot gained 0.9 percent to $80.38. The one-and-a-half year gain in the U.S. housing market is giving consumers the confidence they need to remodel kitchens and bathrooms. The number of transactions in the quarter increased 4 percent to 344.3 million while the average purchase climbed 3.2 percent to $56.27, Home Depot said.

Tyson Foods added 4.6 percent to $30.78. The largest U.S. meat processor yesterday posted higher-than-expected quarterly revenue after a gain in prices and sales volumes for beef and chicken.

Boston Scientific Corp. climbed 3.4 percent to $11.96. The company’s Vercise deep brain stimulation system received CE Mark approval, as it met certain European product standards, for treatment of dystonia.

Tesla Motors Inc., the electric-car maker under an investigation by U.S. auto regulators, climbed 3.7 percent to $126.09, rebounding from a 10 percent decline yesterday. Craig Irwin, an analyst with Wedbush Securities Inc., said the probe was “entirely expected” and may be positive as it’s likely to lead to an independent confirmation of credibility of the company’s design.

The U.S. National Highway Traffic Safety Administration announced the probe today in a website posting following three fires in five weeks after roadway mishaps. The NHTSA said it would look into the fire risks from the cars’ undercarriages striking objects. The probe involves 13,108 Model S vehicles.

United Continental Holdings Inc. added 3.9 percent to $37.80. The world’s biggest airline said it will cut $2 billion in annual spending with half of the savings coming from lowering fuel expense.

Have a wonderful evening everyone.

Be magnificent!

It is you who must help the universe.

Swami Vivekananda, 1863-1902

As ever,

Carolann

Talent is God given.  Be humble.

Fame is man-given.  Be grateful.

Conceit is self-given.  Be careful.

-John Wooden, 1910-2010

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