February 13, 2014 Newsletter

Dear Friends,

Tangents:

On this day in 1997, the Dow Jones Industrial Average pierced 7000 for the first time ever. The blue-chip average finished that day at 7022.44. –WSJ.

Just in time for Valentine’s Day:

Facebook ranked 50 major U.S. cities to see where people might have the best odds for turning their status from “single” to “in a relationship.” If you’re serious about looking for a relationship, don’t move to San Francisco, Washington, D.C., or New York. They were on the top of the list for the least likely cities to find love. The most romantic city, with its snow-capped Rocky Mountain backdrop, growing downtown bar scene and college-town setting, is Colorado Springs. –Gerald
Baker, Editor in Chief, WSJ.

I am off to a dinner meeting with celebrated American economist Nouriel Roubini tonight.  I’ll have some news on his perspective of the current state of affairs for you tomorrow.

Photos of the day

In this image made with a multiple exposure, Joss Christensen of the United States competes in the men’s ski slopestyle qualifying at the Rosa Khutor Extreme Park, Thursday, Feb. 13. Christensen went on to win the gold medal in the event. Gero Breloer/AP

A drone camera captures Australia’s Russell Henshaw jumping during the men’s ski slopestyle final at the Rosa Khutor Extreme Park, Thursday, Feb. 13. Sergei Grits/AP

Market Closes for February 13^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam

Feb. 13 (Bloomberg) — Canadian stocks rallied, with the benchmark index closing above 14,000 for the first time in almost three years, as financial shares rose on improving earnings and mining companies gained as gold topped $1,300 an ounce.

Barrick Gold Corp. and Goldcorp Inc. added at least 3.6 percent after reporting fourth-quarter earnings. Canadian Tire Corp. climbed 3.1 percent as earnings topped estimates and same- store sales increased. Teck Resources Ltd. sank 6.7 percent as results were hampered by declining coal and copper prices.

Bombardier slumped 8.9 percent after cutting its profit targets.

Nautilus Minerals Inc. dropped 10 percent as the undersea metals explorer terminated its pact with Papua New Guinea.

The Standard & Poor’s/TSX Composite Index rose 101.16 points, or 0.7 percent, to 14,001.65 at 4 p.m. in Toronto to close above the 14,000 level for the first time since April 2011. The benchmark index has jumped 3.8 percent in eight straight days of gains, the longest rally since September 2010.

“It has to do with expectations, for instance with Barrick the numbers were negative but expectations weren’t that high so as a result the stock moves higher,” said Bruce Campbell, fund manager with StoneCastle Investment Management Inc. in Kelowna, British Columbia. He manages about C$100 million ($90.9 million) with the firm. “In some cases stocks are starting off weaker and then moving up after some panic dumping. The market probably eases up barring something more macro that scares everyone.”

Canadian shares fell earlier as U.S. data showed retail sales declined the most since June 2012 in January, sliding 0.4 percent as poor weather kept customers away from auto showrooms and stores. Jobless claims unexpectedly increased to 339,000 last week, from 331,000 in the prior period.

Barrick Gold, the world’s largest gold producer by sales, added 6.1 percent to C$22.08 and Goldcorp rose 3.6 percent to C$29.64.

Barrick reported a net loss of $2.83 billion, ahead of a loss of $3.01 billion a year earlier. Goldcorp’s average cost to produce and sell gold, adjusted for the sale of silver and other metals, was $467 an ounce, compared with the $484 average of five estimates compiled by Bloomberg.

B2Gold Corp. increased 6.1 percent to C$2.96 and Iamgold Corp. climbed 4.2 percent to C$4.43 as the S&P/TSX Gold Index rallied 4 percent. The price of gold increased 0.4 percent to $1,300.10 an ounce in New York for a seventh straight session, the longest rally since 2011.

Telus Corp. rose 0.7 percent to C$37.33 after adding more than expected wireless customers in the fourth quarter. The Vancouver-based wireless carrier reported a 3.4 percent increase in sales.

Home Capital Group Inc., a mortgage and credit card services company, soared 8.6 percent to C$83.13, the most since 2009. The company said 2014 earnings will rise 13 percent to 18 percent and boosted its quarterly dividend to 32 Canadian cents a share from 28 cents.

Canadian Tire jumped 3.1 percent to C$97.69, the most since August, as consumer discretionary stocks advanced 0.5 percent as a group. Nine of 10 industries in the gauge rose on trading volume 62 percent higher than the 30-day average.

Canadian Tire, the home hardware and sports equipment retailer, reported fourth-quarter earnings of C$2.35 a share, ahead of analysts’ estimates of C$2.26. Same-store sales, a measure of performance among locations open for at least a year, rose 4 percent in Canadian Tire stores in the quarter.

Teck Resources slumped 6.7 percent to C$26, the most since June. Sales declined to C$2.38 billion from C$2.73 billion a year ago as copper prices declined 10 percent in the fourth quarter compared with a year earlier.

Nautilus Minerals plunged 10 percent to 22.5 Canadian cents after terminating its agreement with Papua New Guinea as the country has not completed purchase of its 30 percent stake in the offshore Solwara 1 project. The company will seek damages.

Bombardier slumped 8.9 percent to C$3.68, the lowest since December 2012, after it lowered its projection for earnings before interest and taxes in its planemaking business to 5 percent of revenue from 6 percent. Earnings in its rail division will also fall short of targets.

US

By Callie Bost and Nikolaj Gammeltoft

Feb. 13 (Bloomberg) — U.S. stocks rose, after benchmark indexes ended a four-day rally yesterday, as better-than- forecast earnings and a $45.2 billion takeover of Time Warner Cable Inc. overshadowed a drop in retail sales.

Time Warner Cable jumped 7 percent as Comcast Corp. agreed to acquire the cable company. CBS Corp. and Goodyear Tire & Rubber Co. gained at least 4.5 percent on optimism about earnings. Applied Materials Inc., the largest supplier of semiconductor-manufacturing equipment, climbed 5.4 percent after predicting rising sales amid customer upgrades. Cisco Systems Inc. dropped 2.5 percent after forecasting quarterly revenue below some estimates.

The Standard & Poor’s 500 Index rose 0.6 percent to1,829.83 at 4 p.m. in New York, after falling as much as 0.6 percent earlier. The index reversed losses after dropping below its average price over the past 50 days. The Dow Jones Industrial Average added 63.65 points, or 0.4 percent, to 16,027.59. The Nasdaq-100 Index rallied 0.9 percent to the highest level since 2000. About 6.6 billion shares changed hands on U.S. exchanges, 4 percent higher than the three-month average at the close.

“People want to buy the dips now because the market made a bottom after Feb. 3,” Donald Selkin, who helps manage about $3 billion as chief market strategist at National Securities Corp.in New York, said in a phone interview. “We got very oversold and now it’s believed that the trend is turning back up. People feel like we’ve seen a near-term bottom in the market.”

The S&P 500 closed at a record on Jan. 15 and then dropped5.8 percent through Feb. 3 on signs of slowing growth in China and a rout in emerging-market currencies. The S&P 500 has rallied 5.1 percent since then, restoring $800 billion to share values in a week, on speculation economic growth is strong enough to withstand further cuts to Federal Reserve monetary stimulus. The index is at the highest level in three weeks, 1 percent away from reaching its record.

The benchmark gauge reversed today after slipping below 1,810 in the first minutes of trading, a level representing its average price in the last 50 days that is considered significant by analysts who analyze charts.

Data today showed retail sales in the U.S. fell 0.4 percent in January, the most since June 2012, after a revised 0.1 percent drop the prior month, as inclement weather kept consumers away from auto showrooms and stores. Jobless claims increased by 8,000 to 339,000 in the week ended Feb. 8 from 331,000 in the prior period, a Labor Department report showed.

“The market has well discounted weather as the reason for recent economic weakness, and continues to be comfortable with Fed tapering so long as their economic outlook hasn’t changed,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $290 billion. “Easing stress in emerging markets has also helps. Combined, those factors are helping to overcome the cautious sentiment we’ve seen as of late.”

The S&P 500 rallied earlier this week on comments by the Fed’s Janet Yellen. Yellen, delivering her first public remarks as Fed chair, said economic growth has strengthened and there is “broad improvement” in the labor market.

She repeated the Fed’s outlook for further stimulus reductions in “measured steps,” adding that only a “notable change in the outlook” for the economy would prompt policy makers to slow the pace.

“The market is wondering, ‘will any of this change the Fed’s mind?’” Krishna Memani, the New York-based chief investment officer of OppenheimerFunds Inc., which oversees $232 billion, said in a phone interview. “The threshold is much, much higher than one or two soft retail prints. We’re convinced any of that isn’t going to happen ahead of March. Any softness will be taken down with the weather-related justification and only when we are in warmer times will the Fed look at this data.”

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.

A total of 17 companies in the S&P 500 were scheduled to post earnings today, including Cliffs Natural Resources Inc. and American International Group Inc. Almost 76 percent of those that have reported results this season have exceeded analysts’ profit estimates, data compiled by Bloomberg show.

Earnings at S&P 500 companies rose by 8.3 percent in the fourth quarter of 2013 and sales 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, fell 1.1 percent to 14.14 today. The gauge has fallen for six straight days, the longest stretch since July.

All 10 main industries in the S&P 500 rose. Utilities, raw- materials providers and phone companies had the biggest gains, rising at least 1 percent.

Time Warner Cable jumped 7 percent to a record $144.81. Its acquisition by Comcast combines the two largest U.S. cable companies and creates a bulwark against competition from phone and satellite providers.

In sealing the deal, Comcast Chief Executive Officer Brian Roberts trumped a bid from Charter Communications Inc. and its billionaire backer John Malone, who had courted Time Warner Cable for months. The merger also will help the companies cope with an industrywide decline in cable-TV viewers following years of inroads by phone and satellite companies, as well as newer Internet services such as Hulu LLC and Aereo Inc.

Comcast fell 4.1 percent to $52.97, while Charter slipped 6.3 percent to $128.91.

“In general, an environment that would foster more mergers and acquisitions suggests corporations are willing to be more free with their cash,” John Canally, an economic strategist at LPL Financial Corp. said in a phone interview from Boston. His firm oversees about $438.4 billion. “This could be a signal of a wave of new M&A, which could be good for the small and mid-cap companies. Corporations have a ton of cash on hand and they’re getting no return on it and so they have to put it to work.”

Goodyear Tire soared 11 percent to $26.94, the highest level since May 2008. The Akron, Ohio-based tire manufacturer reported adjusted fourth-quarter earnings higher than analysts’ estimates and reaffirmed its financial targets for 2014 through 2016.

CBS, owner of the most-watched television network, increased 4.5 percent to $64.61, an all-time high. The company reported better-than-estimated quarterly profit, helped by programming deals, and expanded its stock buybacks by $1.5 billion.

Applied Materials climbed 5.4 percent to $18.87, the highest level since August 2008. The company forecast fiscal second-quarter sales growth of as much as 10 percent as memory chipmakers boost spending on factory upgrades.

Demand is increasing from companies that make semiconductors used to store data in mobile phones and from made-to-order chipmakers, or foundries, Chief Executive Officer Gary Dickerson said. A growing list of companies will spend more to keep up on new techniques required to stay competitive in producing chips used in mobile devices, according to Dickerson.

Nvidia Corp. added 3.2 percent to $17.36, the highest level since June 2011. The maker of graphics processors forecast fiscal first-quarter sales that may exceed some analysts’ predictions as demand for cards used in high-end gaming computers helps make up for a decline in laptops.

Facebook Inc. climbed 4.5 percent to a record $67.33. The social-networking site owner has soared 26 percent since Jan.30, when it announced a 63 percent surge in fourth-quarter revenue, with more than half of its advertising revenue coming from mobile devices in the period.

Cisco declined 2.5 percent to $22.27. The world’s biggest maker of network routers and switches said weakness in emerging markets and a slump in demand from telecommunications companies will lead to a revenue decline of 6 percent to 8 percent in the quarter through April. That indicates sales of $11.2 billion to $11.5 billion, while analysts projected $11.3 billion on average, according to data compiled by Bloomberg.

Whole Foods Market Inc. fell 7.2 percent to $51.46. The largest U.S. natural-goods grocer posted profit that trailed estimates and lowered its full-year forecast amid increased competition.

Have a wonderful evening everyone.

Be magnificent!

We have at the present moment everybody claiming the right of conscience

without going through any discipline whatsoever

that there is so much untruth being delivered to a bewildered world.

Truth is not to be found by anybody who has not got a sense of humility.

If you would swim on the bosom of this ocean of Truth

you reduce yourself to a zero.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Let me tell you the secret that has led me to my goal.  My strength

lies solely in my tenacity.

-Louis Pasteur, founder of microbiology, 1822-1895

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7