January 14, 2014 Newsletter

Dear Friends,

Tangents:

It’s serendipitous that I came across these words by Albert Schweitzer a few moments ago…

“You must give some time to your fellow men.  Even if it’s a little thing, do something for others – something for which you get no pay but the privilege of doing it.”

–Albert Schweitzer.

Today is the philosopher, Albert Schweitzer’s birthday.  He was born on January 14^th, in 1869.

I was thinking of my husband Gary, who is spending the evening tonight giving a talk to a couple of hundred folks and then doing a Q & A on the subject of sexual dysfunction after prostate cancer and what can be done about it.  Just because he can, for no compensation, after a very long day of seeing patients at the office and then at the cysto clinic.  I marvel at his incredible giving nature and caring disposition.

It made me think of something I read in the Wall Street Journal this past weekend by economist Donald Boudreaux:

“Suppose that Jones chooses a career as a poet. Jones treasures the time he spends walking in the woods and strolling city streets in leisurely reflection; his reflections lead him to write poetry critical of capitalist materialism. Working as a poet, Jones earns $20,000 annually.

Smith chooses a career as an emergency-room physician. She works an average of 60 hours weekly and seldom takes a vacation. Her annual salary is $400,000. Is this “distribution” of income unfair? Is Smith responsible for Jones’ relatively low salary? Does Smith owe Jones money? If so, how much? And what is the formula you use to determine Smith’s debt to Jones?

While Dr. Smith earns more money than does poet Jones, poet Jones earns more leisure than does Dr. Smith. Do you believe leisure has value to those who possess it? If so, are you disturbed by the inequality of leisure that separates leisure-rich Jones from leisure-poor Smith? Do you advocate policies to “redistribute” leisure from Jones to Smith—say, by forcing Jones to wash Smith’s dinner dishes or to chauffeur Smith to and from work? If not, why not?”

Photo of the day

A dog looks at a couple kissing on the beach in Nice, France. Temperatures on the French Riviera reached 54 degrees Fahrenheit. Lionel Cironneau/AP

Market Closes for January 14^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Jan. 14 (Bloomberg) — Canadian stocks rose, rebounding from the worst drop in a month yesterday, as Corus Entertainment Inc. posted higher-than-estimated profit and Bank of America Corp. advised buying Thompson Creek Metals Co. shares.

Corus Entertainment, which operates television stations, climbed 3.3 percent. Thompson Creek surged 19 percent after Bank of America raised its rating on the stock to buy from underperform. Canexus Corp., a chemical maker, sank 12 percent after saying costs for a train expansion will be about 40 percent higher than previous forecasts. Pinecrest Energy Inc. plunged 41 percent after production in December fell short of previous guidance.

The Standard & Poor’s/TSX Composite Index rose 10.90 points, or 0.1 percent, to 13,692.38 at 4 p.m. in Toronto. The benchmark equity gauge has advanced 0.5 percent this year.

“We’re getting a little bit of a bounce back from yesterday’s pretty weak day and also retail sales in the U.S. were higher than estimated,” said Anish Chopra, fund manager at TD Asset Management Inc. in Toronto. He helps manage C$218.3 billion ($199.6 billion) with the firm. “Earnings that exceed expectations are a fantastic backdrop for stronger market performance.”

U.S. retail sales increased 0.2 percent in December, exceeding the median forecast for a 0.1 percent gain, according to a Bloomberg survey of analysts.

“Canadian equities have more elbow room, with current valuations not as stretched as those stateside,” said Avery Shenfeld, chief economist with CIBC World Markets, in a note to clients. “The TSX has outperformed the S&P in each of the last six years in which global growth has topped 4 percent, and 2014 should add to that streak.”

Raw-materials stocks rose 0.6 percent as a group. Six of 10 industries in the S&P/TSX advanced on trading volume 31 percent higher compared with the 30-day average.

Thompson Creek surged 19 percent to C$2.82. The company reported yesterday that molybdenum production climbed 34 percent to 30 million pounds in 2013. The stock has four buys, eight holds and four sell ratings from analysts, according to data compiled by Bloomberg. The stock’s 12-month share-price target is C$3.27, implying a 16 percent rally from current levels.

Allied Nevada Gold Corp. soared 7 percent to C$5.02 after China Gold Stone Mining Development Ltd. retracted a $779.6 million offer for the company that it said was published in error.

Allied Nevada said it received a letter from closely held China Gold Stone yesterday, which included the proposed offer.

The stock jumped as much as 52 percent to $6.55 in pre-market trading in New York before Allied Nevada halted trading. The company said it questioned the credibility of the bid.

Telephone stocks rallied after Wind Mobile yesterday withdrew from a spectrum auction. The company’s principal backer, VimpelCom Ltd., decided not to fund its bid, Wind Chief Executive Officer Anthony Lacavera said in an e-mail.

The mobile-phone company’s exit ruins the government’s plans to open the market to more competitors, said David Heger, a St. Louis-based analyst with Edward Jones & Co.

Rogers Communications Inc. increased 1.7 percent to C$47.86, Telus Corp. added 0.7 percent to C$37.03 and BCE Inc. rose 0.7 percent to C$46.72. Telephone stocks rallied 0.8 percent as a group in the S&P/TSX.

Corus Entertainment added 3.3 percent to C$25.40 after reporting first-quarter earnings of 65 Canadian cents a share, higher than the average estimate of 62 cents. The media company also raised its dividend 6.9 percent for Class A and Class B shares, to an annual payout of C$1.085 and C$1.09 respectively.

Canexus plunged 12 percent to C$6.57, the biggest decline since November 2008. The firm said its pipeline connected train expansion will now cost about C$315 million, more than the earlier estimate of C$225 million. The company plans to pay for the rising costs using its credit facilities and the project remains on track for completion in mid 2014.

Pinecrest Energy sank 41 percent to 22 Canadian cents, the lowest close in its history. The Calgary-based company said it averaged production of 2,308 barrels of oil equivalent per day in December, below previous guidance. Pinecrest cited bigger- than-expected declines at three of its drilled wells.

USA

By Lu Wang and Callie Bost

Jan. 14 (Bloomberg) — U.S. stocks rose, giving the Standard & Poor’s 500 Index its biggest gain of the year, as better-than-forecast retail sales and corporate merger activity signaled confidence in the economy.

Intel Corp. and Jabil Circuit Inc. paced gains among technology companies, rising at least 4 percent amid analyst upgrades. Google Inc. added 2.4 percent after agreeing to buy digital-thermostat maker Nest Labs Inc. for $3.2 billion in cash. Time Warner Cable Inc. climbed 2.7 percent after rejecting an acquisition offer from Charter Communications Inc. JPMorgan Chase & Co. and Wells Fargo & Co. were little changed after reporting fourth-quarter results.

The S&P 500 added 1.1 percent to 1,838.88 at 4 p.m. in New York, posting the biggest jump since Dec. 18 and erasing most of yesterday’s loss. The Dow Jones Industrial Average gained 115.92 points, or 0.7 percent, to 16,373.86. About 6.5 billion shares changed hands on U.S. exchanges, 7.7 percent above the 30-day average.

“We’re probably at the stage in the stock market cycle where good news will continue to be seen as good news,” Martin Leclerc, founder of Barrack Yard Advisors LLC, which oversees $270 million, said in a telephone interview. “I would say that after this massive move we’ve had, it does feel like the animal spirits are still resurrected.”

The S&P 500 fell 1.3 percent yesterday, the most since November, as investors weighed valuations after a 30 percent rally last year that sent the gauge to a record. The benchmark index dropped 1.6 percent in January through yesterday for the worst start to a year since 2009.

The index trades at 15.6 times the estimated earnings of its members, more than the average multiple of 14.1 over the last five years, data compiled by Bloomberg show. The S&P 500 ended 2013 at its highest valuation since the end of 2009.

Wells Fargo and JPMorgan are among companies reporting financial results today. Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc. report later this week. Earnings for companies in the index probably climbed 4.9 percent on average in the fourth quarter, while sales increased 1.8 percent, according to analyst estimates compiled by Bloomberg.

“Earnings are going to dominate for the next two or three weeks,” Patrick Kaser, a managing director and portfolio manager at Brandywine Global Investment Management in Philadelphia, said by phone. His firm oversees about $50 billion. “People are concerned about the rate of growth in the economy. How we finished the quarter going into January, that’s going to matter the most for where we are right now.”

U.S. retail sales increased 0.2 percent after a 0.4 percent advance in November that was smaller than previously reported, Commerce Department figures showed today in Washington. The median forecast of 86 economists surveyed by Bloomberg called for a 0.1 percent gain. Excluding cars, demand jumped by the most in almost a year.

Investors are watching economic data for signals on the pace of Federal Reserve stimulus cuts. Three rounds of monetary stimulus from the central bank have helped push the S&P 500 higher by 172 percent from a 12-year low in 2009. The Fed, which next meets Jan. 28-29, last month announced a reduction in its monthly bond-buying program, citing a recovery in the labor market.

A government report on Jan. 10 showed employment rose in December at the slowest pace in almost three years. The data ended months of improving job growth that had signaled the world’s largest economy was picking up.

Stocks extended losses yesterday after Fed Bank of Atlanta President Dennis Lockhart said weak payroll growth last month shouldn’t discourage policy makers from reducing monthly bond purchases as long as the economy continues to gain strength.

Philadelphia Fed President Charles Plosser said today that the central bank’s stimulus program should end later this year because the economy is on a “firmer footing” than it has been in the past several years.

Richard Fisher, Fed president in Dallas, likened quantitative easing to “beer goggles” that makes everything look good. There are signs that “we have made for an intoxicating brew as we have continued pouring liquidity down the economy’s throat,” he said in a speech today.

The Chicago Board Options Exchange Volatility Index, which measures expected swings on the S&P 500 using options prices, dropped 7.5 percent today to 12.28. The gauge is down 11 percent this year.

All 10 main industries in the S&P 500 advanced. The Morgan Stanley Cyclical Index climbed 1.4 percent, reversing a 1.4 percent drop yesterday. The Dow Jones Transportation Average added 1.3 percent, the most since Oct. 16. Microsoft Corp., Visa Inc., 3M Co. and Walt Disney Co. increased at least 1.6 percent to pace gains among the largest companies.

The Nasdaq-100 Index jumped 1.9 percent, the most since Oct. 10, as technology companies in the S&P 500 rallied 1.9 percent as a group.

Intel rose 4 percent to $26.51 for the biggest increase in the Dow. The maker of computer chips was raised to overweight from neutral by Christopher Danely, an analyst with JPMorgan Chase, on expectation the personal-computer market will remain stable this year and new Chief Executive Officer Brian Krzanich will focus on areas where Intel has an advantage.

Jabil Circuit advanced 7.8 percent to $17.89. The maker of electronics for Apple Inc. was boosted to buy from neutral by Goldman Sachs.

Google Inc. added 2.4 percent to $1,149.40, an all-time high, after saying it will buy Nest Labs. The deal is contributing to greater confidence among venture-capital firms, which often bet on companies before they have revenue or even a product.

Proposed deals by companies including Charter and Google brought the value of takeover offers worldwide this year to $130 billion, data compiled by Bloomberg show.

Time Warner Cable rose 2.7 percent to $136. The broadband- service provider’s chief executive officer, Rob Marcus, called Charter’s $132.50-a-share bid a “low-ball offer.” The proposal included about $83 cash per share and about $49.50 in stock.

Excluding debt, the deal would have been worth $37.3 billion.

Intuitive Surgical Inc. rallied 6.8 percent to $419.88. The maker of robot surgery systems said fourth-quarter revenue was $576 million, beating the average analyst estimate of $549.1 million in a Bloomberg survey.

Regeneron Pharmaceuticals Inc. jumped 12 percent to $300.32 for the biggest increase in the S&P 500. Sales of the eye drug Eylea, the company’s top-selling product, were about $400 million last quarter, Chief Executive Officer Len Schleifer said. That exceeded the $377.5 million average of eight analysts’ estimates compiled by Bloomberg.

Tesla Motors Inc. surged 16 percent to $161.27, the highest level in two months. The maker of high-end electric cars delivered 6,900 Model S sedans in the fourth quarter, lifting full year sales of the vehicle beyond the company’s target.

JPMorgan added less than 0.1 percent to $57.75. Quarterly profit fell 7.3 percent on $2.6 billion of settlements tied to Bernard Madoff’s Ponzi scheme as rising legal costs ended the firm’s three-year streak of record annual earnings.

Wells Fargo rose less than 0.1 percent to $45.59. The largest U.S. home lender posted record fourth-quarter and full- year profit as expense cuts and one-time gains bolstered results.

While Wells Fargo’s profit was enough to beat the consensus of Wall Street analysts, mortgage applications plunged and Oppenheimer & Co.’s Chris Kotowski said in a note to clients that results were helped by reserve releases and gains on securities.

GameStop Corp. plunged 20 percent, the most in the S&P 500, to $36.31. The largest specialty retailer of video games cut its full-year profit forecast amid lower-than-anticipated software sales and reduced gross margin from Sony Corp.’s PlayStation 4 and Microsoft Corp.’s Xbox One consoles during the holiday shopping period.

Have a wonderful evening everyone.

Be magnificent!

You have to stand against the whole world although you may have to stand alone.

You have to stare the world in the face although the world may look at you with a bloodshot eye.

Do not fear.

Trust that little thing in you which resides in the heart and says:

forsake friends, wife, all, but testify to that for which you have lived and for which you have to die.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

It is not fair to ask of others what you are

unwilling to do yourself.

-Eleanor Roosevelt, 1884-1962.

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