February 11, 2014 Newsletter

Dear Friends,

Tangents:

Unfortunately we were experiencing problems with our email  the past few days, so I apologize for being unable to send you market updates for the past three days.  Hopefully, the problems have been resolved.

On this day in 1990, Nelson Mandela was released from prison after serving a 27 year sentence for his anti-apartheid activities.  I was listening to the news of Shirley Temple Black’s death on NPR this morning, and I was saddened to learn of the criticism leveled at her because of her dancing duet with Mr. Bo Jangles – a black man!  It was nice to hear that Shirley Temple ignored the criticism and  always praised him in every interview she conducted as being the best the best teacher she ever had (don’t look at your feet!) and that she made him a close lifelong friend until he passed away.

We must use time wisely and forever realize that the time is always ripe to do right. –Nelson Mandela, 1918-2013.

Photos of the day

Ellie a horticulturist at Kew stands on a step ladder as she makes final adjustments during a media preview of an Orchid festival at Kew Botanical Gardens in London. The exhibition of orchids is open to the public from February 8 to March 9, 2014, and it includes a new Phalaenopsis hybrid ‘Diamond Sky’ that has not been seen before. Alastair Grant/AP

An Afghan man walks along a cemetery during a snowy day in Kabul. Mohammad Ismail/Reuters

Market Closes for February 11^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam

Feb. 11 (Bloomberg) — Canadian stocks rose a sixth day, the longest streak of the year, as gold advanced amid growing demand in the U.S. and China while Federal Reserve Chairman Janet Yellen pledged to reduce stimulus in “measured steps.”

Detour Gold Corp. and Argonaut Gold Inc. rose at least 8.7 percent. CGI Group Inc. gained 4.4 percent after being selected by APG, a Dutch pension provider, to provide application services. Horizon North Logistics Inc. jumped 8.6 percent after winning contracts to provide camp facility services for two oil- sands and natural-gas projects in Alberta and British Columbia.

The Standard & Poor’s/TSX Composite Index rose 86.81 points, or 0.6 percent, to 13,880.99 at 4 p.m. in Toronto. The benchmark equity gauge has jumped 2.9 percent in the past six days, the longest rally since Dec. 27.

“The market is stabilizing a little bit here, there’s a rally in precious metals,” said Brian Huen, fund manager at Red Sky Capital Management Ltd. in Toronto. The firm manages about C$230 million ($208.3 million). “People are focused on the Yellen testimony with Congress today and the direction of the Fed. Whatever the Fed does will be driven by economic data, and the Fed will continue on the course of tapering and providing guidance as things change. It will be gradual, I don’t think in her first take things will change that much.”

Yellen said she will maintain her predecessor’s policies by scaling back stimulus in “measured steps” amid a continuing recovery in the labor market. The Fed reduced its monthly bond purchases to $65 billion from $85 billion during its last two meetings.

Canadian Federal Finance Minister Jim Flaherty released a budget today that includes higher taxes on cigarettes, benefit cuts for retired government workers and aid for carmakers. The plan projects a deficit of C$2.9 billion for the fiscal year starting April 1, before swinging to a surplus of C$6.4 billion in 2015.

The price of gold climbed 1.2 percent in New York to settle at $1,289.80 an ounce in New York for a fifth day of gains, the longest winning streak since August 2012. The gold price had dipped earlier amid Yellen’s testimony to lawmakers. Volume for Shanghai’s benchmark bullion spot contract surged to a nine- month high yesterday and sales of American Eagle gold coins by the U.S. Mint jumped 63 percent in January.

Raw-materials stocks added 1.8 percent as a group, the biggest gain in the S&P/TSX. Nine of 10 industries in the gauge advanced on trading volume 29 percent higher compared with the 30-day average.

Detour Gold soared 12 percent to C$9.20, for the highest close since September, and Argonaut Gold climbed 8.7 percent to C$5.86 as precious metals producers accounted for nine of the top 10 movers in the S&P/TSX.

Fortuna Silver Mines Inc. increased 5.3 percent to C$4.93 and Silvercorp Metals Inc. rallied 5.3 percent to C$3.18 as the price of silver rose 0.2 percent in New York for a seventh day of gains, the longest streak since August.

CGI Group rose 4.4 percent to C$34.32, the most since September. The Montreal-based information technology company said it has secured a three-year contract with APG with an annual minimum value of 10 million euros ($13.7 million).

Horizon North Logistics soared 8.6 percent to C$7.56, the biggest gain since October 2010, after disclosing the contracts late yesterday. The company will build a 400-person camp facility in the Fort McMurray, Alberta, oil-sands region and another for 350 people in northeastern British Columbia.

“We remain positive on both mobile accommodation and Horizon North Logistics specifically,” said Greg Colman, analyst with National Bank Financial, in a note to clients today. “These contract awards reinforce those views.”

Colman maintained his outperform rating for the stock, the equivalent of a buy, with a C$9.50 12-month price target. The stock has nine buys and one hold, according to data compiled by Bloomberg.

Cineplex Inc., Canada’s largest cinema operator, lost 1.5 percent to C$40.88 after posting adjusted earnings of 32 Canadian cents a share in the fourth quarter, short of analysts’ projections of 48 cents.

Net income slumped 38 percent to C$20.2 million from C$32.7 million as same-store attendance and box-office revenues declined due to a weaker slate of films in the quarter.

USA
By Callie Bost and Jeff Sutherland

Feb. 11 (Bloomberg) — U.S. stocks rose, giving benchmark indexes the biggest four-day rally in more than a year, as comments by Federal Reserve Chairman Janet Yellen fueled bets the economy is strong enough to weather further stimulus cuts.

Cliffs Natural Resources Inc. and Mosaic Co. increased more than 2.4 percent to pace a rally among commodity shares. Boeing Co. and Goldman Sachs Group Inc. jumped at least 2.1 percent, leading gains in the Dow Jones Industrial Average. Sprint Corp. rose 2.7 percent after fourth-quarter revenue topped estimates. CVS Caremark Corp. climbed 2.7 percent as pharmacy sales rose on new medicines and new customers.

The Standard & Poor’s 500 Index gained 1.1 percent to 1,819.75 at 4 p.m. in New York. The gauge advanced 3.9 percent over four days, and climbed above its average level over the past 50 sessions for the first time in more than two weeks. The Dow rose 192.98 points, or 1.2 percent, to 15,994.77. The Nasdaq Composite Index added 1 percent, erasing a loss for the year. About 7 billion shares changed hands on U.S. exchanges, 11 percent higher than the 30-day average.

“The market likes consistency and what we’ve heard this morning has been consistent with what we’ve heard for months,” Steven Rees, head of U.S. equities at JPMorgan Private Bank, which oversees $977 billion in assets, said in a phone interview. “Tapering continues, but it continues to be the result of an economic situation that’s slowly improving. The economy is still on track to have a good year.”

Yellen, 67, delivered her first public remarks as Fed policy makers pursue plans to gradually scale back the unprecedented bond-purchase program she helped put in place.  Economic growth has strengthened and there is “broad improvement” in the labor market,’’ the chairman said. She repeated the Fed’s outlook for further reductions in “measured steps” and that asset purchases, known as quantitative easing, are not on a “pre-set course.”

While growth has picked up, “the recovery in the labor market is far from complete,” Yellen said in remarks to the House Financial Services Committee. “I am committed to achieving both parts of our dual mandate: helping the economy return to full employment and returning inflation to 2 percent while ensuring that it does not run persistently above or below that level.”

Federal Open Market Committee officials have twice reduced the size of the monthly asset-purchase program, lowering bond buying to $65 billion in February from $85 billion last year. Three rounds of stimulus under previous Chairman Ben S. Bernanke have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009.

“Yellen will be very careful to create a degree of stability,” Stephen Wood, New York-based chief market strategist at Russell Investments, said by phone. His firm oversees over $256 billion. “No genius ideas out of left field, just very methodical. The market is not only going to like the message but they’re going to like the messenger. The Fed will be accommodative and the Fed will maintain credibility the bond market and equity market will appreciate.”

Yellen said financial-market turmoil doesn’t pose a major risk to the outlook for the U.S. economy. Asset prices aren’t at “worrisome levels” even after the S&P 500 soared 30 percent last year, Yellen said, although the Fed is on the lookout for any threat of a bubble.

The S&P 500 has rallied 4.5 percent over the past six sessions, trimming its decline for the year to 1.6 percent. The benchmark gauge closed at a record on Jan. 15 and then dropped 5.8 percent through Feb. 3 on signs of slowing growth in China and a rout in emerging-market currencies.

Equities extended gains amid speculation Congress was nearing an agreement on debt talks in Washington. The House of Representatives will vote tonight on suspending the U.S. debt limit, with a snowstorm forecast for the U.S. East Coast tomorrow, a Republican leadership aide said.

House Speaker John Boehner, an Ohio Republican, said Democrats will need to back the measure suspending the debt ceiling until March 15, 2015, which he said will get minimal Republican support. A suspension of the U.S. debt limit enacted by Congress in October expired Feb. 7. Treasury Secretary Jacob J. Lew said last week that borrowing authority may not last past Feb. 27.

Sixteen companies in the S&P 500 were scheduled to release earnings results today. Of the index members to have reported this season, 76 percent beat analysts’ profit estimates, while 66 percent exceeded sales forecasts, data compiled by Bloomberg show.

Profit for the benchmark’s stocks rose by 8.3 percent in the fourth quarter of 2013 and revenue by 2.7 percent, according to analyst estimates compiled by Bloomberg.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, dropped 4.9 percent to 14.51 today, for its fourth straight decline.

All 10 main industries in the S&P 500 advanced, with energy companies increasing 1.4 percent and raw-materials shares rising 1.2 percent. The Morgan Stanley Cyclical Index gained 1.4 percent, while the Dow Jones Transportation Average increased 1.2 percent. Boeing added 2.4 percent to $130.16 and Goldman Sachs jumped 2.1 percent to $164.39. Newmont Mining Corp. climbed 3.2 percent as gold prices surged 1.2 percent.

Phone shares rose 1.3 percent as a group. Sprint jumped 2.7 percent to $7.90 after saying fourth-quarter sales rose to $9.14 billion, beating the average analyst estimate calling for $8.99 billion in a Bloomberg survey.

Mosaic jumped 2.4 percent to $47.96. The largest U.S.-based potash producer expects record global shipments of the crop nutrient this year as customers become more confident that prices are unlikely to extend declines.

Cliffs Natural Resources climbed 4.5 percent to $21.50.  Cliffs has gained 11 percent this month after shareholder Casablanca Capital LP urged the biggest U.S. iron-ore producer to spin off its international assets, double its dividend and cut expenses. Cliffs was the second-worst performer in the S&P 500 last year, plunging 32 percent.

CVS Caremark added 2.7 percent to $68.77. The largest provider of prescription drugs in the U.S. posted fourth-quarter profit that topped analysts’ estimates. The new drugs and an expanded roster of clients for specialty pharmaceuticals, along with higher prices, boosted revenue from pharmacy services to $19.6 billion, the company said.

General Motors Co. gained 1 percent to $35.25 as sales in China rose 12 percent to a record 348,061 units last month.  Buick monthly deliveries gained 16 percent to surpass 100,000 units for the first time.

InvenSense Inc. climbed 11 percent to $21.69 after saying it has settled pending patent litigation proceedings with STMicroelectronics NV. The two companies entered into a patent cross-license agreement, resolving lawsuits over infringement.

ConAgra Foods Inc. dropped 6.3 percent to $29.08, the lowest level since November 2012. ConAgra cut its year-end profit forecast, reflecting a longer time frame to restore its private brands segment to planned levels of operating profit, as well as weaker-than-anticipated volumes in consumer foods.

Urban Outfitters Inc. slipped 2.8 percent to $35.61. The clothing retailer reported fourth-quarter preliminary sales of $906 million, less than analysts’ estimates of $925.97 million.  Urban Outfitters will release its fourth-quarter earnings on March 10.

Have a  wonderful evening everyone.

Be magnificent!

Hold the reins of your mind, as you would hold the reins of a restive horse.

Svetasvatara Upanishad

As ever,

Carolann

The difference between ordinary and extraordinary

is that little extra.

-Jimmy Johnson, 1975-

Carolann Steinhoff, B.Sc., CFP®, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7