February 5, 2014 Newsletter

Dear Friends,

Tangents:

February: The month of purification among the ancient Romans – the  Latin februum meaning purgation.  It is said that if the weather is fine and frosty at the close of January and the beginning of February, there is more winter ahead than behind.  Well, that appears to ring true in Victoria where the weather has been very fine, but we are supposedly going to experience snow on Sunday!  I just had a visit from a client who lives in Grande Prairie, Alberta and she was describing what it’s like there right now – six foot high snow banks, no green….I grew up in Montreal, so I remember winters just  like it.  She is an anaesthesiologist and said many of the people she works with have their pilot’s licenses and small planes in order to escape.   The draw is that they’re paid twice as much in Alberta as B.C. and kudos to the Redford government because their provincial health care plan is running a surplus this year.  So, they’ve opened the ORs on weekends for elective surgeries, and paying nurses overtime to work on weekends to keep them running.  Quite the contrast to the onerous wait times for surgeries in this province; one of the ORs here was even closed, extending wait times even more.

The Northwest Flower and Garden Show is taking place in Seattle this weekend with featured gardens for those seeking a contrast.  It is usually very good.  Tower of Power is playing at Jazz Alley  too for an added draw.

Photos of the day

Wildlife caretakers release a Grey Headed Flying Fox, also known as fruitbat, in Centennial Park in Sydney, Australia. Each year thousands of native wildlife are rescued by volunteers caught in anti bird netting. The Grey Headed Flying Fox is considered vulnerable to extinction. Rob Griffith/AP

A military helicopter flies over a Spanish cargo ship that slammed into a jetty in choppy Atlantic Ocean waters off Anglet, southwestern France. The ship had been heading to a nearby port to load up with cargo when its engine failed and the rough waves carried it into the jetty. Bob Edme/AP

Market Closes for February 5^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Feb. 5 (Bloomberg) — Canadian stocks rose for a second day, after the benchmark index sank to the lowest level of the year this week, as a rally in energy and financial shares offset data showing U.S. companies added fewer jobs than forecast.

Royal Bank of Canada and Toronto-Dominion Bank rose at least 0.5 percent. Silver Standard Resources Inc. and Lundin Mining Corp. added more than 4.2 percent as precious metals prices advanced. Goldcorp Inc. lost 1.2 percent after agreeing to effectively freeze its hostile offer for Osisko Mining Corp.

Advantage Oil & Gas Ltd. dropped 8.9 percent after ending its strategic review process.

The Standard & Poor’s/TSX Composite Index increased 55.21 points, or 0.4 percent, to 13,559.69 at 4 p.m. in Toronto. The gauge has lost 1 percent this week. It has fallen 0.5 percent this year as the U.S. Federal Reserve pared stimulus and emerging-market currencies slumped amid signs China’s economy is slowing. Trading in S&P/TSX stocks was 16.3 percent higher than the 30-day average at the close.

“We’re still going through this consolidation correction where people are trying to figure out if tapering is going to accelerate or if growth expectations are too high,” Jeff Young, chief investment officer at NexGen Financial Corp., said in a phone interview. The Toronto-based firm manages about C$900 million ($811 million). “Friday’s jobs data is the next big point on the economic scene.”

Colder-than-normal weather limited progress in the U.S. job market as payrolls increased by 175,000, according to the ADP Research Institute in Roseland, New Jersey. The median projection of 40 economists surveyed by Bloomberg called for an advance of 185,000. Canada and the U.S. will both report employment data on Friday.

Another report showed Canadian building permits fell for a second month in December as multiple-unit housing projects dropped to the lowest level in nine months. The value of domestic municipal permits fell 4.1 percent to C$6.48 billion ($5.86 billion), following a 6.6 percent decline in November, Statistics Canada said today in Ottawa. Economists forecast a 1.5 percent gain according to the median of eight responses to a Bloomberg survey.

Six of 10 main industries in the S&P/TSX rose. Financial shares gained 0.9 percent. Royal Bank of Canada climbed 1.5 percent to C$69.08 and Toronto-Dominion increased 0.5 percent to C$47.86.

Energy shares gained 0.8 percent. TransGlobe Energy Corp. climbed 4.3 percent to C$7.82 and Penn West Petroleum Ltd. jumped 4 percent to C$8.52. Peyto Exploration & Development Corp. rose 3.8 percent to C$33.34.

Silver Standard jumped 6.4 percent to C$8.93 and Lundin increased 4.2 percent to C$4.96. Alacer Gold Corp. increased 3 percent to C$2.38.

Gold futures rose 0.5 percent after the U.S. payrolls report boosted demand for the metal as a store of value. The price of silver jumped 2 percent.

Goldcorp decreased 1.2 percent to C$27.48, reversing an earlier rally of as much as 2.3 percent. The Vancouver-based gold producer won’t take up and pay for any Osisko shares tendered to its bid before a judgment on a lawsuit filed by Osisko to block the takeover, Goldcorp said in a statement.

Goldcorp extended the deadline of the offer to March 10 from Feb. 19.

A trial will be held from March 3 to March 5 at the Quebec Superior Court, Montreal-based Osisko said yesterday in a statement. Osisko said Goldcorp misused confidential data in making its cash-and-stock bid. Goldcorp, the world’s second- largest gold producer by market value, denies the allegations.   Osisko fell 0.9 percent to C$6.53.

Advantage Oil & Gas slumped 8.9 percent, the biggest drop since September 2011, to C$4. The Calgary-based company didn’t get an acceptable offer after receiving expressions of interest on potential transactions, according to a statement.

Advantage also sold its shares in Longview Oil Corp.Longview fell 1.8 percent to C$4.37, an all-time low.

Atlantic Power Corp. slumped 3.8 percent to C$2.52, extending a four-day losing streak to 28 percent. Moody’s Investors Service downgraded the energy producer’s corporate family rating to B2 from B1 this week, citing high leverage.

US

By Lu Wang and Nick Taborek

Feb. 5 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index to its third loss in four days, as a private report showing companies added fewer jobs than forecast overshadowed acceleration in service industries.

Cognizant Technology Solutions Corp. fell 4.3 percent on a disappointing forecast. Estee Lauder Cos. dropped 5.5 percent as its quarterly earnings prediction missed estimates. 3D Systems Corp. slumped 15 percent after its projection trailed expectations amid sluggish consumer demand. Genworth Financial Inc. and Radian Group Inc. rallied at least 2.8 percent after posting profits from insuring U.S. mortgages.

The S&P 500 fell 0.2 percent to 1,751.64 at 4 p.m. in New York. The Dow Jones Industrial Average lost 5.01 points, or less than 0.1 percent, to 15,440.23. About 7.4 billion shares changed hands on U.S. exchanges, 18 percent above the three-month average.

“There’s uncertainty around the economic outlook,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said in a phone interview. “People had a lot of confidence coming into this year that the economy was accelerating, and the recent set of economic statistics have thrown that into question.”

The S&P 500 added 0.8 percent yesterday, rebounding from its biggest slide since June, as companies from Yum! Brands Inc. to Michael Kors Holdings Ltd. reported profit that exceeded projections. The index is down 5.2 percent this year, and lost as much as 5.8 percent since reaching a record 1,848.38 on Jan. 15, the first decline of more than 5 percent since June 2013.

Should it follow the pattern from the 18 times that’s happened since 2009, the S&P 500 would fall to about 1,697 in the next week, then rebound to a new high by mid-April, according to data compiled by Bloomberg and Bespoke Investment Group.

The stock market’s decline this year is healthy and the S&P 500 probably will end 2014 higher, Leon Cooperman, chairman of hedge fund Omega Advisors Inc., said on Bloomberg Television.

BlackRock Inc. Chief Executive Officer Laurence D. Fink said in a separate interview that the recent market decline is a temporary setback as opposed to a departure from current economic growth.

“I look at this as a good old-fashioned correction,” Fink said today during an interview with Erik Schatzker and Stephanie Ruhle on Bloomberg TV’s “Market Makers.” Fink said BlackRock isn’t seeing long-term investors change their behavior.

The market may “unravel quickly” if the major indexes trade lower this week, Tom DeMark, the chief executive officer of DeMark Analytics LLC, said today in an interview on CNBC. If stocks fall today and open lower and trade lower tomorrow, he said, stocks are likely to continue falling regardless of Friday’s jobs data.

The Labor Department may report in two days that businesses added 188,000 employees in January after an 87,000 increase in December, according to the median forecast of economists surveyed by Bloomberg.

Companies added 175,000 payrolls last month as colder-than- normal weather limited progress in the U.S. job market, a report from ADP Research Institute in Roseland, New Jersey showed today. The median projection of 40 economists surveyed by Bloomberg called for an advance of 185,000.

“The market wants to see a happy report” on Friday and today’s ADP data “might mute them slightly,” Michelle Clayman, chief investment officer at New Amsterdam Partners in New York, which manages $1.6 billion. “The ADP number is not a bad number, but it’s certainly down from the rate of last time’s report and slightly below expectations so that’s making people a bit more cautious.”

A separate report today showed a gauge of service industries advanced more than forecast. The Institute for Supply Management’s non-manufacturing index increased to 54 in January from 53 the prior month. Readings greater than 50 signal expansion. The median forecast of 78 respondents in a Bloomberg survey called for a reading of 53.7.

The S&P 500 fell 3.6 percent in January, its first monthly decline since August as the Fed pared stimulus and emerging- market currencies slumped amid signs China’s economy is slowing.

Federal Reserve Bank of Philadelphia President Charles Plosser, who votes on policy this year, said today that he expects the economy to expand 3 percent in 2014 as the jobless rate falls to 6.2 percent by year-end, warranting a quicker tapering to bond purchases by the central bank.

Some 26 companies on the S&P 500 report quarterly results today. Profit for the benchmark’s stocks probably increased by 8.3 percent in the fourth quarter of 2013 and revenue by 2.5 percent, analysts’ estimates compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index added 4.4 percent today to 19.95. The gauge of S&P 500 options known as the VIX has surged 45 percent this year.

Six of 10 S&P 500 industry groups fell as energy, health- care and telephone shares sank at least 0.6 percent for the worst performance. Chevron Corp. lost 1.2 percent to $109.52, among the biggest drops in the Dow.

Cognizant fell 4.3 percent to $92.85. The provider of outsourcing services forecast adjusted earnings of at least $5.02 a share for 2014. That compared with the average analyst estimate for $5.08.

Estee Lauder retreated 5.5 percent to $65.36. The maker of cosmetics and skin care products said it expects to earn no more than 55 cents a share in the fiscal third quarter. That missed the average analyst estimate of 64 cents in a Bloomberg survey.

3D Systems tumbled 15 percent to $64.10. The maker of three-dimensional printers said it expects to earn 85 cents a share this year. Analysts, on average, estimated $1.29.

Gilead Sciences Inc. slipped 4.7 percent to $78.15 even as fourth-quarter earnings beat analysts’ estimates, helped by rising sales from a new medicine for hepatitis C. Shares of the world’s largest maker of HIV drugs more than doubled in the 12 months through yesterday.

Genworth climbed 2.8 percent to $14.93 while Radian jumped 6 percent to $15.19. Genworth, which also offers life insurance and long-term care coverage, had a $6 million operating profit at its U.S. mortgage insurer, compared with a loss a year earlier. Radian reported net income of $36.4 million, after a $177.3 million loss in the last three months of 2012.

Myriad Genetics Inc. surged 15 percent to $31.29. The breast-cancer test provider forecast earnings in 2014 will be $2.09 to $2.12 a share. that’s higher from a November prediction that profit would be no more than $1.97 a share.

Sprint Corp. rallied 8.4 percent to $8.50. The company is getting close to securing $45 billion financing to make an offer for T-Mobile US Inc., DealReporter said, citing people familiar with the situation.

Have a wonderful evening everyone.

Be magnificent!

If a man does not of his own free will put himself last among his creature,

there is not salvation for him.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Fast is fine but accuracy is everything.

–Xenophon, 431 BC- 365 BC

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