January 22, 2014 Newsletter

Dear Friends,

Tangents:

Thought I’d share with you this interesting article  that I read this morning:

Why do birds fly in a V?

ENERGY SAVINGS, AERODYNAMIC BENEFITS ARE FACTORS, STUDY SHOWS

-by SUDESHNA CHOWDHURY

The reason why some birds fly in a big V is more than just aesthetics, say scientists.  A team led by University of London biologists Steven Portugal and James Usherwood equipped a flock of 14 bald ibises with various measurement devices and monitored the endangered birds as they migrated from Austria to Italy.  The precision of these measurements allowed the scientists to track the relative positioning of the birds in a V, according to the university’s Royal Veterinary College. As the birds flew, the scientists observed them for just over 43 minutes, recording each bird’s position, speed, and direction, according to a press release from the science journal Nature.

Their findings, published in the Jan. 16 issue of Nature, revealed that birds changed their position of flight or flapped their wings in a manner that gave them “the best aerodynamic advantage.”  The ones flying in V formation flapped their wings in phase so that the trailing bird could get an extra lift from the one that was ahead of it, stated the study. Those flying directly behind another bird flapped their wings out of phase to reduce the effects of “detrimental downwash” from the bird ahead of it. It is basically a balancing act, says Dr. Usherwood, who was involved in the study.  “The intricate mechanisms involved in Vformation flight indicate remarkable awareness and ability of birds to respond to the wing path of nearby flock-mates,” said Dr. Portugal.  “Birds in V formation seem to have developed complex phasing strategies to cope with the dynamic wakes produced by flapping wings.”  This behavior also helps conserve energy while flying, says Usherwood, Not all birds fly in V patterns. Only certain species of birds, such as cranes, pelicans, and geese, do. “Birds which fly in V-formation are fairly big,” Usherwood says. “They fly at the same speed and fly large distances. They usually have long wings.”  This study opens the door to further research about how birds can sense the flow of air, says Usherwood. “This can also help us look into how aircraft fly together,” he says.  These findings also show that birds can sense and predict the patterns of air turbulence caused by the other birds in the flock.

Birthday today: poet Lord Byron was born on this day in 1788.

She walks in beauty, like the night

Of cloudless, climes and starry skies;

And all that’s best of dark and bright

Meet in her aspect and her eyes.

–Lord Byron, from She Walks in Beauty, 1815.

Photos of the day

The sun illuminates windblown snow as a man walks under elevated train tracks in Philadelphia. A winter storm stretched from Kentucky to New England and hit hardest along the heavily populated Interstate 95 corridor between Philadelphia and Boston. Matt Rourke/AP

Members of movement Oxford Committee for Famine Relief (Oxfam) put white roses on symbolic gravestones, on the opening day of the Geneva II peace talks on Syria, in Montreux, Switzerland. Representatives of Syrian President Bashar Assad, a divided opposition, world powers and regional bodies started the peace conference. Salvatore Di Nolfi/Keystone/AP

Market Closes for January 22^nd, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Jan. 22 (Bloomberg) — Canadian stocks rose for the sixth time in seven days after Bank of Canada governor Stephen Poloz maintained the benchmark interest rate and said the direction of the next move will depend on the economy.

BlackBerry Ltd. climbed 9.9 percent on plans to sell most of its Canadian real estate for cash. Gran Tierra Energy Inc. rallied 10 percent after FirstEnergy raised its rating on the stock. Torex Gold Resources Inc. plunged 5 for a second day of losses after announcing it is seeking to raise C$125 million in a share offering.

The Standard & Poor’s/TSX Composite Index increased 36.43 points, or 0.3 percent, to 13,988.20 at 4 p.m. in Toronto after losing 0.1 percent earlier. The gauge has advanced 2.7 percent this year.

“The market’s just awaiting the earnings picture that begins next week,” John Kinsey, fund manager with Caldwell Securities Ltd. in Toronto, said by phone. The firm manages about C$1 billion ($916.6 million). “The market will probably go quiet until we see some of these numbers. It’s had a good run the last little while and we’re hopeful that with the large commodity content that it has, the world economies are going to do a little better in 2014 than in 2013, and that will be beneficial for our markets.”

Policy makers kept the benchmark rate on overnight loans between commercial banks at 1 percent, where it’s been since September 2010, as expected by all 21 economists in a Bloomberg News survey. The bank’s updated forecast lifted the outlook for 2014 economic growth to 2.5 percent from 2.3 percent and said inflation will be further below target throughout 2014.

The Canadian dollar, or the loonie, lost 1 percent to a four-year low of C$1.1087 per U.S. dollar. The loonie has fallen against all of its 16 major peers this year after Poloz said he’s concerned that inflation is too low.

BlackBerry rallied 9.9 percent to C$11.96. The struggling smartphone maker is working with CBRE Group Inc. to sell vacant properties as well as occupied space it would then lease back from buyers, according to a statement today. The assets cover more than 3 million square feet (280,000 square meters), the amount of office space in the 104-story One World Trade Center skyscraper in lower Manhattan.

Gran Tierra rallied 10 percent to C$8.58. The stock was raised to top pick from market perform by FirstEnergy analyst Darren Engels after the company reported “significant” reserves at its Bretana field in Peru.

Torex Gold plunged 5 percent to C$1.14, extending yesterday’s 9.8 percent decline, after the mining company said it will sell shares at C$1.20 each to finance the development of its El Limon and Guajes projects and for general corporate purposes.

Bombardier Inc. slipped 1 percent to C$3.91. Chief Executive Officer Pierre Beaudoin said the company will not have to raise additional funds this year after delaying delivery of its CSeries narrow-body plane for a fourth time.

The manufacturer delayed its CSeries jetliner again on Jan. 16, saying the aircraft won’t enter commercial service until late next year instead of 2014 because it needs more time for tests.

Penn West Petroleum Ltd. dropped 9 percent to C$8.22. The company may have a higher risk of missing expected production rates, AltaCorp Capital Inc. analyst Jeremy McCrea wrote in note. RBC analyst Greg Pardy said the oil and gas explorer should divest assets with “modest” output to improve its balance sheet.

USA

By Lu Wang

Jan. 22 (Bloomberg) — Most U.S. stocks rose as investors assessed earnings from companies including Norfolk Southern Corp., Coach Inc., International Business Machines Corp.

Norfolk Southern, the second-largest U.S. eastern railroad, climbed 4.8 percent after posting a fourth-quarter profit that exceeded analysts’ estimates. BlackBerry Ltd. rose 8.6 percent as the smartphone maker said it plans to sell most of its Canadian real estate to raise cash for its turnaround plan.

Coach, the largest U.S. luxury handbag maker, slumped 6 percent after sales missed analysts’ estimates. IBM slid 3.3 percent as revenue declined for a seventh consecutive quarter amid weaker demand for servers.

Three stocks rose for every two that declined in the Standard & Poor’s 500 Index. The U.S. equity benchmark added less than 0.1 percent to 1,844.86 at 4 p.m. in New York. The Dow Jones Industrial Average lost 41.10 points, or 0.3 percent, to 16,373.34 for a second day of declines. About 6.3 billion shares changed hands on U.S. exchanges, 3 percent above the three-month average, according to data compiled by Bloomberg.

“Earnings are all that matters,” Dan Morris, who helps oversee about $564 billion as global investment strategist at TIAA-CREF Asset Management in New York, said in a phone interview. “To see the justification for meaningful higher prices, we just need to wait for earnings to catch up and accelerate a bit and that may take a quarter or two.”

Twenty-five companies in the S&P 500 including Northern Trust Corp., Netflix Inc. and EBay Inc. report earnings today.

Of the 86 index members that have posted results so far this season, 70 percent have beaten estimates for profit and 65 percent have exceeded sales projections, according to data compiled by Bloomberg.

Per-share profit for companies in the benchmark probably climbed 6 percent in the fourth quarter, while sales increased 2.2 percent, according to analysts surveyed by Bloomberg.

A five-year rally that lifted the S&P 500 up more than 170 percent from a bear-market low has boosted equity valuations to near the highest level since 2009. The index trades at 15.6 times the estimated earnings of its members, more than the five- year average multiple of 14.1, data compiled by Bloomberg show.

The Dow is diverging from the S&P 500 by the most in more than two years amid weaker results from companies such as Johnson & Johnson and IBM. The average difference between their performance in the past three days has been 0.5 percentage point, the most since October 2011.

“Earnings have been mixed,” David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages about $120 billion. “If we as a country, we as a world, stay in the muted economic growth we’ve experienced in the past two years, the market probably can’t support the valuations here. We need better economic numbers and we need earnings to follow that.”

Traders are buying record amounts of options that pay off if the calm that is blanketing markets proves temporary.

Outstanding call options on the Chicago Board Options Exchange Volatility Index has reached a record 8.4 million, exceeding the previous high of 7.7 million in March, according to data compiled by Bloomberg.

The contracts, which expire today, are used by investors as insurance against losses because the VIX usually climbs when equities fall. Investors are positioning for stock swings with more than 180 companies in the S&P 500 getting ready to release quarterly results by the end of next week. The VIX slid 0.2 percent today to 12.84, bringing its decline for 2014 to 6.4 percent.

Energy, consumer-discretionary and industrial stocks rose the most among 10 main industries in the S&P 500, climbing more than 0.2 percent. Telephone and raw-materials companies dropped at least 0.7 percent for the worst performance.

Norfolk Southern jumped 4.8 percent to $92.94. The company’s profit exceeded analysts’ forecast amid higher shipments of chemicals, automotive and agricultural products.

BlackBerry rose 8.6 percent to $10.78. The company said in a statement that it will work with CBRE Group Inc. to sell vacant properties as well as occupied space it will then lease back from the new owners.

Textron Inc. advanced 5.3 percent to $38. The manufacturer of Cessna aircraft said it earned 60 cents a share in the fourth quarter. That beat the average analyst estimate by 1 cent.

Brinker International Inc., which owns Chili’s Grill & Bar restaurants, climbed 6.5 percent to $49.72. The restaurant chain reported second-quarter profit and sales above analysts’ estimates.

Nuance Communications Inc. jumped 7.8 percent to $16.05.

The provider of voice applications to corporate customers said first-quarter preliminary adjusted earnings per share probably amounted to 23 cents to 24 cents, more than the 20-cent average estimate of analysts. The company predicted profit of 18 cents to 21 cents a share in November.

Coach slid 6 percent to $49.38. Revenue for the quarter through Dec. 28 amounted to $1.42 billion, missing the average analyst estimate of $1.48 billion. The maker of luxury accessories posted earnings per share of $1.06, falling short of the $1.11 that analysts had projected.

IBM dropped 3.3 percent to $182.25 for the biggest retreat in the Dow. The world’s biggest computer-services provider said revenue declined to $27.7 billion in the three months through December. Profit dropped at the company’s hardware unit partly because of its x86 server business, according to Chief Financial Officer Martin Schroeter.

Advanced Micro Devices Inc. slumped 12 percent to $3.67 for the biggest drop since October. The maker of processors for personal computers predicted that revenue will be from $1.29 billion to $1.38 billion in the first quarter. The average analyst projection had called for sales of $1.37 billion, according to a Bloomberg survey.

Motorola Solutions Inc. fell 3.9 percent to $64.51. The mobile communications company forecast first-quarter profit below analyst estimates and said it expects sales to decline between 4 percent and 6 percent. Analysts were predicting a 2 percent revenue gain.

Have a wonderful evening everyone.

Be magnificent!

In Sanskrit, one calls the bird twice born.

And this name is also given to the man who submits for at least twelve years

to the discipline of mastering his self and the noble thought, who emerges from it with simple needs,

with a pure heart, and ready to take upon himself all the responsibilities of life

in a broad and disinterested spirit.  One estimates that this man is born again from the blind envelopment

of the ego to the freedom of the life of the soul,

that he has entered into lively connection with his environment,

that he has become one with the Whole.

Rabindranath Tagore, 1861-1901

As ever,

Carolann

Now hatred is by far the longest pleasure.  Men love in haste,

but they detest at leisure.

–Lord Byron, 1788-1824.

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