January 28, 2014 Newsletter

Dear Friends,

Tangents:

Amanda commented in the Newsletter last night about flight delays lately because of the fog at Victoria airport.  We experienced it firsthand trying to get home Sunday night; arrived at the Seattle airport only to learn the Victoria airport was shut down….everything was tied up so we had to go back to the city, try for Monday morning; no luck, finally in the afternoon.  Gary’s office had to cancel all his patients booked yesterday – we both felt out of sorts – the feeling you get when you’re supposed to be somewhere else.  The opera was superb, but it’s the most expensive Rigoletto we’ve ever seen, with the back and forth and extra night.

We also had to abandon the float plane on Saturday morning because of fog, so we got to see Spinnaker’s new digs at the Victoria airport. Looks great, feels great – we had very good cappuccinos J.   You have to go through security first and you’ll see it on the other side.  The airport is sure expanding.

Seattle is at a fever pitch right now in anticipation of  the Super Bowl next Sunday.  People are dressed in their number 12 Seahawk jerseys; everywhere you go, people are talking about their team and the game.  Signs posted everywhere.  The route to the airport was lined on both sides with fans cheering the bus that carried the team to the airport for their flight to New York on Sunday.   Sunday’s game  should be exciting – the best offence in the league pitted against the best defense in the league.  Not to mention the B’s star quarterback.

Photos of the day

A visitor checks little lemon trees from Portugal at one of the world’s leading horticultural trade fairs, IPM in Essen, Germany. Martin Meissner/AP

A bird sits on a frozen branch in Waterford, Mich. Temperatures dropped to dangerous lows in Michigan, leading to the closure of hundreds of schools. The morning low of 9 degrees below zero at Detroit Metropolitan Airport in Romulus broke the previous record low. With the winds, it felt like 25 to 30 degrees below zero. Eric Seals/Detroit Free Press/AP

Market Closes for January 28^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Jan. 28 (Bloomberg) — Canadian stocks rose the most in two weeks, following the biggest three-day slide since June, as commodities producers rallied and global equities rebounded.

Thompson Creek Metals Co. and China Gold International Resources Corp. added at least 4.9 percent to pace gains among miners.  BlackBerry Ltd. jumped 3.1 percent after releasing an updated version the operating system for its handsets. First Quantum Minerals Ltd. climbed 2.6 percent after boosting the production target for its Cobre Panama copper mine. Air Canada plunged 12 percent after Bank of America Corp. lowered its rating on the stock.

The Standard & Poor’s/TSX Composite Index increased 105.37 points, or 0.8 percent, to 13,687.66 at 4 p.m. in Toronto. The gauge closed at a three-week low yesterday after falling 2.9 percent since Jan. 22. Trading in S&P/TSX stocks was in line with than the 30-day average at the close.

“This is a little bit of a relief rally on the back of what has been a pretty ugly three days for North America,”  Brian Huen, a fund manager with Red Sky Capital Management Ltd., which oversees C$225 million ($202 million), said by phone from Toronto. “I think all eyes will be on the Fed tomorrow to make sure that nothing strange is going to happen.”

U.S. stocks advanced on corporate earnings from Ford Motor Co. to Pfizer Inc. and data showing consumer confidence rose more than forecast this month. European equities climbed after three days of losses and the MSCI Emerging Markets Index advanced 0.3 percent, after closing yesterday at the lowest level since August.

The U.S. Federal Reserve began a two-day policy meeting to discuss further cuts to its monthly bond buying that has helped propel global equities higher.

All 10 main industries in the S&P/TSX advanced at least 0.1 percent today, with raw-materials producers adding 1.9 percent.  Thompson Creek jumped 6.3 percent to C$3.03 and China Gold rose 4.9 percent to C$3.22.

Energy stocks added 0.7 percent as crude advanced for the first time in three days. Canadian Natural Resources Ltd. jumped 2.6 percent to C$36.30, the highest level since March 2012.

BlackBerry climbed 3.1 percent to C$11.18, halting a three- day slide that had reduced the share price by 9.4 percent. The smartphone maker announced a new software update for its BlackBerry 10 devices.

First Quantum rose 2.6 percent to C$20.36. The mining company raised its estimate of the cost of building the copper mine to $6.43 billion while boosting the production target.

The company forecast annual production of 320,000 metric tons of copper at the mine starting in the first quarter of 2018. The mine’s previous owner had planned to spend about $6.2 billion to produce 266,000 tons annually from 2016.

Air Canada slumped 12 percent, the most since April, to C$7.63. The stock has plunged 21 percent during a four-day losing streak. It was the best performer on the S&P/TSX in 2013, soaring 323 percent.

Bank of America analyst Glenn Engel lowered his rating to underperform, citing a “sharp” depreciation in the Canadian dollar. The loonie fell against the dollar to its lowest level since July 2009.

Engel also cut his recommendation on WestJet Airlines Ltd. The regional carrier’s stock sank 4.1 percent to C$24.83, the lowest level since October.

USA

By Lu Wang and Whitney Kisling

Jan. 28 (Bloomberg) — U.S. stocks rose, with the Standard & Poor’s 500 Index rebounding from its worst slump since June, as earnings at companies from Pfizer Inc. to D.R. Horton Inc. topped estimates and consumer confidence increased ahead of a Federal Reserve policy meeting.

Pfizer, the world’s biggest drugmaker, advanced 2.6 percent after earnings beat estimates as it cut costs and saw its tax rate fall. An index of homebuilders surged 5.3 percent as D.R. Horton jumped 9.8 percent and a report showed home prices climbed. American International Group Inc. rose 2.5 percent after Bank of America Corp. said it expects the insurer to buy back $10 billion of stock during the next two years. Apple Inc. tumbled 8 percent as iPhone sales trailed estimates.

The S&P 500 rose 0.6 percent to 1,792.50 at 4 p.m. in New York. The Dow Jones Industrial Average climbed 90.68 points, or 0.6 percent, to 15,928.56. About 6.6 billion shares changed hands on U.S. exchanges, 6.8 percent more than the three-month average.

“Earnings looked pretty good,” Dan Veru, the chief investment officer who helps oversee $4.5 billion at Palisade Capital Management LLC, said by phone from Fort Lee, New Jersey.

“The economy is in the process of being self-reinforcing and it can handle the modest amount of tapering we’re planning to do.”

U.S. equities joined a global rebound as European shares recovered from their biggest three-day decline in seven months while the MSCI Emerging Markets Index rose from its lowest level since August.

The S&P 500 lost 3.4 percent in the past three days, the most since June, with emerging-market currencies sinking amid signs China’s economy is slowing. The benchmark gauge rallied 30 percent last year and is up 165 percent from a bear-market low in 2009.

Some 83 S&P 500 stocks had their 14-day relative-strength index below 30 yesterday, the most since November 2012, data compiled by Bloomberg show. RSI measures the degree to which gains and losses outpace each other, and some analysts who watch charts to predict market moves consider a reading lower than 30 as indicating the stock has fallen too far too fast.

“The ride probably will not be as smooth as we have seen in the last couple years,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, which oversees $63 billion, said in phone interview from Philadelphia. “We’ve had a pretty decent pullback here in equity prices.”

The Federal Open Market Committee started its last meeting under Chairman Ben S. Bernanke today. Policy makers said in December that the central bank would begin to pare the pace of its monthly bond buying by $10 billion to $75 billion this month. The Fed will cut purchases by $10 billion at each of the next six FOMC meetings, with the program ending no later than December, according to economists in a Bloomberg News survey conducted Jan. 10.

The Conference Board’s index of consumer confidence rose to 80.7 in January from a revised 77.5 in the prior month, the New York-based private research group said today. The median forecast in a Bloomberg survey of economists called for a reading of 78.

Stock futures briefly erased early gains as a report showed orders for durable goods unexpectedly slumped in December by the most in five months, reflecting a broad-based retreat that raises the risk business investment will cool in early 2014.

AT&T Inc. and Yahoo! Inc. are among S&P 500 companies reporting quarterly results today. Almost 74 percent of the 152 companies that have posted earnings this season beat analysts’ projections. Profit at S&P 500 companies probably rose 6.6 percent in the fourth quarter of 2013, and sales increased 2.3 percent, analysts’ estimates compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index retreated for a second day, sliding 9.3 percent to 15.80. The gauge of S&P 500 options known as the VIX surged 46 percent last week, its biggest gain since May 2010.

Nine out of 10 main industries in the S&P 500 advanced, with financial and health-care stocks rising more than 1.2 percent for the biggest gains.

Pfizer advanced 2.6 percent to $30.42 after posting quarterly profit of 56 cents a share excluding some items. The average analyst estimate was for 52 cents.

An S&P index of homebuilders rallied 5.3 percent, the most since September. Home prices in 20 U.S. cities rose 13.7 percent in November from a year ago, the S&P/Case-Shiller index showed, the biggest 12-month gain since February 2006.

D.R. Horton climbed 9.8 percent, the most in the S&P 500, to $23. The largest U.S. homebuilder by revenue posted earnings that beat analyst estimates as the Fort Worth, Texas-based company raised prices and delivered more homes.

AIG and T. Rowe Price Group Inc. led gains among financial shares. AIG rose 2.5 percent to $48.46 after Bank of America named the stock the top pick among property and casualty insurers for 2014. T. Rowe Price climbed 5.5 percent to $80.70 after the money manager reported fourth-quarter profit that exceeded analysts’ estimates.

Comcast Corp. increased 1.6 percent to $53.35 after people familiar with the matter said the cable company is near a deal to buy assets from Charter Communications Inc. Comcast also reported a 26 percent increase in fourth-quarter profit after adding TV subscribers for the first time in more than six years.

Cliffs Natural Resources Inc., the biggest U.S. iron ore producer, advanced 2.1 percent to $19.81. Casablanca Capital LP, which owns 5.2 percent of Cliffs, said the company’s valuation would rise to $53 if Cliffs spun off foreign assets, doubled its dividend and converted U.S. assets to a master limited partnership to “significantly cut costs.”

Oshkosh Corp., which designs and manufactures specialty trucks and other vehicles, rallied 8 percent to $55.50. The company said replacement demand and earlier orders may indicate a stronger recovery. The company boosted its 2014 earnings forecast to at least $3.40 a share, higher than the average analyst estimate of $3.35, according to data compiled by Bloomberg.

Technology shares sank 0.7 percent for the only loss among 10 S&P 500 groups. Apple slid 8 percent to $506.50, the lowest since October, after reporting that it sold 51 million iPhones in the quarter ended Dec. 28, missing analysts’ estimates for 54.7 million handsets. Apple also projected revenue in the current period may shrink from a year earlier, in what would be the first quarterly sales decline since 2003.

Stagnating growth is adding pressure for the company to release new hit products, be it a television, wearable computer or a way to pay for things with an iPhone. Billionaire activist investor Carl Icahn is betting Apple will deliver, disclosing on Twitter today that he bought another $500 million of Apple shares on top of the $3.6 billion he had as of last week.

Yahoo! Inc. dropped 2.9 percent to $37.10 as of 4:39 p.m. in New York. The company forecast after the close of regular trading first-quarter sales that fell short of some analysts’ estimates as Chief Executive Officer Marissa Mayer struggles to turn user growth at the Web portal into advertising dollars.

Seagate Technology Plc dropped 11 percent to $51.52 in regular trading. It reported second-quarter earnings of $1.32 a share excluding some items, missing the average analyst estimate of $1.39. The maker of disk drives posted sales of $3.53 billion, falling short of the projected $3.56 billion.

Corning Inc. tumbled 6.2  percent to $17.10 after projecting price declines for LCD, the display technology used in televisions and computer monitors.

Have a wonderful evening everyone.

Be magnificent!

Man lives in confusion and fear until he discovers the uniformity of the law in nature;

until then the world is a stranger to him.

And yet, the law discovered is only the perception of the harmony between reason,

which is the soul of man, and the play of nature.

It is the bond that unites man to the world he lives in.

When he discovers it, man feels an intense joy, because he realizes himself in his environment.

To understand this is to find something to which we belong,

and it is the discovery of ourselves outside ourselves that gives us joy.

Rabindranath Tagore, 1861-1901

Carolann

Be yourself.  The world worships the original.

–Ingrid Bergman, 1915-1982

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