January 30, 2014 Newsletter

Dear Friends,

Tangents:

On this day in 1948, Mahatma Gandhi was assassinated by a Hindu extremist in New Delhi.

1969, the Beatles played an unannounced concert on a London rooftop in what would be their last concert together as a band.

1971, Carole King released her album Tapestry, which would eventually sell 25 million copies.

1972, Northern Ireland’s Bloody Sunday.

January

“Some people are far more sensitive to light than others and are at their happiest when there is plenty of sunlight and they can throw open the windows and walk outside.  None of us is immune to seasonal changes, though we may think we are, but we are certainly less so than plants and animals.  Fading and increasing light tells them to hibernate or drop their leaves, mate or be active.  I welcome winter as a time when I can slightly change my way of life, stay indoors more, read, and give way to a lethargy I do not have in summer.  I am aware that the light as it meets our eyes produces a set of nerve impulses that travel to the gland between the hemispheres of our brain, and that the hormones in this gland have a powerful effect on our sleep as well as our mood, so perhaps my lethargy is quite natural.  ‘ A sad tale’s best for winter’, wrote Shakespeare.  I believe he meant this to fit the winter mood of the reader.  I have just talked to a friend who is moving back to London after two winters and a summer in the country.  She says she feels depressed in the country and wants the companionship and activity of town life.  I am wondering if it is really the lack of sunlight through the naturally short days that she is missing rather than the glitter of town lights.  Soon spring will be with us than days much longer, so our spirits should be lightened too…”  -Rosemary Verey, from A Countrywoman’s Notes, 1989, Frances Lincoln Ltd, Publishers.

Photos of the day

The moon moves between NASA’s Solar Dynamics Observatory (SDO) and the sun, giving the observatory a view of a partial solar eclipse from space beginning at 8:31 am ET. Such a lunar transit happens two to three times each year. This one lasted two and one half hours, which is the longest ever recorded. NASA/SDO/Reuters

Ice crystals glisten in the sunlight on a bridge over Falls Lake in Wake Forest, NC. Temperatures reached the single digits. A storm that dropped just inches of snow Tuesday wreaked havoc across much of the South. AP

Market Closes for January 30^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Jan. 30 (Bloomberg) — Canadian stocks rose, erasing a loss for the week, as an increase in U.S. consumer spending offset a decline in gold shares amid a report showing manufacturing in China contracted.

NuVista Energy Ltd. soared 9.2 percent after CIBC World Markets analysts upgraded the stock. Methanex Corp. surged 7.8 percent after reporting fourth-quarter earnings that exceeded estimates. Gold producers in the index retreated 2.2 percent as China Gold International Resources Corp. and Osisko Mining Corp. paced losses. Potash Corp. of Saskatchewan Inc. tumbled 1.9 percent after forecasting 2014 earnings that trailed estimates.

The Standard & Poor’s/TSX Composite Index increased 92.06 points, or 0.7 percent, to 13,735.28 4 p.m. in Toronto. The gauge has gained 0.1 percent this week. Trading in S&P/TSX stocks was 5.3 percent below the 30-day average.

“Today is a risk-on market,” Bob Decker, a fund manager with Aurion Capital Management Inc. who helps manage about C$6 billion ($5.37 billion), said by phone from Toronto. “Investors seem to think that emerging markets turmoil will calm down and fairly good earnings in U.S. market could drive gains. People who bought gold yesterday are now selling.”

Americans’ spending climbed the most in three years as the U.S. economy expanded at a 3.2 percent pace in the fourth quarter, data today showed. The annualized gain in gross domestic product matched the median forecast in a Bloomberg survey.

A Chinese manufacturing gauge signaled the first contraction since July. The Purchasing Managers’ Index fell to 49.5 this month from 50.5 in December, HSBC Holdings Plc and Markit Economics said in a statement. The reading compared with the median 49.6 estimate in a Bloomberg News survey of 14 economists. A number below 50 indicates contraction.

Today’s reports come after U.S. Federal Reserve policy makers said yesterday the central bank will cut monthly bond purchases by $10 billion to $65 billion, sticking to a plan for a gradual withdrawal from its unprecedented monetary easing.

Gold for April delivery fell the most in six weeks. The metal had rallied 5 percent this month through yesterday, with a rout in emerging-market currencies this week spurring demand.

Nine of 10 main industries in the S&P/TSX advanced at least 0.6 percent. Industrial shares gained 1.9 percent, as Canadian Pacific Railway Ltd. jumped 3.6 percent to a record, and Canadian National Railway Co. climbed 2.1 percent.

NuVista Energy soared 9.2 percent to C$8.28, the highest level since June. CIBC analyst Adam Gill raised the stock to sector outperform from sector perform with a 12-month target price of C$10.50 a share.

Methanex surged 7.8 percent to C$68.88, an all-time high, after the methanol producer said it earned C$1.72 per share in the fourth quarter.

BlackPearl Resources Inc. increased 2.9 percent to C$2.47.

Macquarie analysts wrote that BlackPearl and other energy producers may attract foreign buyers amid a depreciation in the Canadian dollar.

Air Canada jumped 6.4 percent to C$7.63, stopping a five- day slide of 26 percent. The stock was the best performer on the S&P/TSX in 2013, soaring 323 percent.

An index of raw-materials producers dropped 1.2 percent for the only decline in the benchmark gauge today, as as gold and silver prices tumbled.

The S&P/TSX Gold Index dropped 2.2 percent after two days of gains. China Gold slumped 6.2 percent to C$3.32, halting a two-day rally that added 15 percent to the stock. Osisko Mining slid 4.2 percent to C$6.60, and Iamgold Corp. dropped 3.3 percent to C$4.06.

Potash Corp. tumbled 1.9 percent to C$34.89. The world’s largest fertilizer producer by market value said today that profit for the year will be $1.40 to $1.80 a share, below analysts’ estimates of $2 a share.

Potash Corp. also cut its estimate for 2014 global shipments. Buyers of potash deferred purchases in the second half of 2013 after OAO Uralkali, the world’s largest producer, quit a sales accord in July with its Belarusian competitor and announced plans to boost output.

US

By Stephen Kirkland and Nick Taborek

Jan. 30 (Bloomberg) — U.S. stocks rose, pushing benchmark indexes up from two-month lows, while Treasuries and gold fell as consumer spending climbed and corporate earnings beat estimates. The iShares MSCI emerging-markets exchange-traded fund rose and the dollar gained a fifth day versus the euro.

The Standard & Poor’s 500 Index jumped 1.1 percent to 1,794.19 by 4:32 p.m. in New York, the biggest gain in a month.

The emerging-markets ETF climbed 0.9 percent and European stocks rallied. Ten-year Treasury yields rose two basis points to 2.69 percent. The dollar strengthened 0.8 percent against the euro, while Hungary’s forint retreated. Gold and natural gas slumped more than 1.4 percent while aluminum dropped to a four-year low and West Texas Intermediate oil advanced.

The rally in American equities erased losses for the week after data showed the U.S. economy expanded 3.2 percent in the fourth quarter and spending climbed the most in three years.

Investors are pulling money from exchange-traded funds that track developing-nation assets at the fastest rate on record, as concerns over a slowdown in China and reductions in central-bank stimulus sink currencies from Turkey to Malaysia.

“The fact we can print a quarter in which GDP growth was more than 3 percent even though government spending contracted as much as it did, is unquestionably a positive,” Dan Greenhaus, chief global strategist at BTIG LLC in New York, said by phone. “The concerns over emerging markets are the dominant topic. To the extent this remains contained, the selloff is likely to be limited.”

More than $7 billion flowed from ETFs investing in developing-nation assets in January, the most since the securities were created, data compiled by Bloomberg show.

Emerging economies have benefited from cheap money as three rounds of Fed bond buying pushed capital into their borders in search of higher returns. The central bank began paring the purchases by $10 billion to $75 billion this month and announced yesterday plans to reduce the amount by another $10 billion.

Facebook Inc. jumped 14 percent after the world’s largest social network reported that more than 50 percent of its advertising revenue came from mobile devices in the last quarter of 2013. Blackstone Group LP and Under Armour Inc. also rallied after reporting better-than-estimated earnings.

The Dow Jones Industrial Average gained 0.7 percent, rising from yesterday’s lowest close since Nov. 7.

Companies in the S&P 500 probably increased their earnings per share by 6.6 percent in the fourth quarter of 2013 and their revenue by 2.6 percent, analysts’ estimates compiled by Bloomberg show.

The annualized gain in U.S. gross domestic product matched the median forecast in a survey of economists and followed a 4.1 percent advance in the prior three months, Commerce Department figures showed today. Growth in the second half of the year was the strongest since the six months ended in March 2012. Consumer spending, which accounts for almost 70 percent of the economy, climbed 3.3 percent, less than estimated.

Separate data showed contracts to purchase previously owned homes in the U.S. plunged in December by the most since May 2010 as higher borrowing costs and bad weather held back sales.

Asian stocks and industrial metals tumbled after a private report showed that China’s manufacturing industry contracted this month. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 0.8 percent, taking this year’s decline to 9.2 percent. Aluminum dropped as much as 1.1 percent to $1,723 a metric ton, the lowest level since July 2009, and zinc fell for a seventh day.

A Chinese Purchasing Managers’ Index fell to 49.5 from 50.5 in December, HSBC Holdings Plc and Markit Economics said in a statement. The reading compared with the median 49.6 estimate in a Bloomberg News survey of 14 economists. A number below 50 indicates contraction.

European stocks advanced, with the Stoxx Europe 600 Index climbing 0.3 percent to pare its monthly decline to 1.5 percent.

Givaudan SA, the world’s largest maker of flavors and fragrances, jumped 6.3 percent after posting full-year net income that beat analyst estimates. Diageo Plc, the biggest distiller, lost 4.7 percent after reporting sales growth that missed forecasts.

Hungary’s forint dropped versus the greenback as emerging- market currencies extended a week-long rout. The forint depreciated 0.8 percent to 228.15 per dollar after earlier dropping as much as 1.6 percent. The currency has declined “too fast, too big” and the central bank is monitoring its move and the market environment, Gyula Pleschinger, a member of the central bank’s Monetary Council, said yesterday.

The dollar’s strength against the euro was driven partly by speculation that emerging-market central banks may take steps to prevent their exchange rates from falling further, according to Geoffrey Yu, senior currency strategist at UBS AG in London.

“If these central banks are getting ready for intervention, they would need to over-fund in dollars,” said Yu. “That may involve selling euro reserves into the U.S. currency.”

The yen has advanced 4.5 percent this year, the biggest gain in Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies.

Gold futures tumbled 1.6 percent, the most since Dec. 19, as U.S. economic growth boosted speculation that the Fed will continue to scale back monetary stimulus.

Treasuries declined, with 10-year yields climbing from a two-month low as the U.S. sold $64 billion of notes, the first time it conducted two fixed-coupon debt auctions in a single day since October 2008.

U.S. debt losses were limited as the week-long slide in emerging-market assets boosted demand for the safest fixed- income securities. Today’s five- and seven-year auctions completed four note sales this week totaling $111 billion.

WTI oil rose 0.9 percent to $98.23 a barrel, the highest level in four weeks. Natural gas dropped 8.3 percent as a government report showed a U.S. stockpile decline that matched analyst estimates. Prices are up about 19 percent this month, heading for the biggest gain since September 2009.

Have a wonderful evening everyone.

Be magnificent!

If this individuality is wiped away, the creative joy that crystallized it disappears,

even if no material was lost, even if no atom was destroyed.

And if it is lost, it is also a loss for the entire world.  It is particularly precious because it is not universal.

Rabindranath Tagore, 1861-1901

As ever,

Carolann

Fall seven times, stand up eight.

-Japanese Proverb

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