March 10, 2014 Newsletter

Dear Friends,

Tangents:

We went to the Joan Miró exhibit at the Seattle Art Museum this past weekend and found it worthwhile.  It is on until May 26^th, so there is still lots of time to take it in.  All the pieces are from the Museo Nacional Centro de Arte Reina Sofia, in Madrid.  They are mostly works – painting and sculpture – from the last two decades of his life when he lived in Palma de Mallorca.  We also found a new restaurant by celebrated chef Thierry Rautureau (Best chef in the Pacific Northwest from The James Beard Foundation, 1998; Chevalier de l’Ordre Du Mérite Agricole from the French Government, 2004) named Loulay Kitchen and Bar.  We liked it so much, we dined there Saturday and Sunday.  The interior is wonderful – high ceilings, floor to ceiling windows, whimsical light fixtures – and the food is terrific.  We knew Rautureau’s cooking from his old restaurant Rover’s, which is closed now.  The food at Rover’s was a little more pretentious; Loulay is more casual a’ la French bistro style.  And it is right downtown, so its location is a lot more convenient than where  Rover’s was.   We didn’t care for Seattle opera’s production of The Consul; but I don’t think it was the performance as much as the opera itself – sung in English and depressing subject matter – human oppression.  Ah well – it happens.

Photos of the day

A horse and rider are silhouetted against the morning sun as they ride out on the gallops at the Cheltenham racecourse in western England. The four-day Cheltenham Festival 2014, culminating with the Gold Cup, will begin on Tuesday. Eddie Keogh/Reuters

The hands of Claudia Breidbach (r.) demonstrating her bionic hand that is steerable by a mobile phone or iPod via Bluetooth to German Chancellor Angela Merkel (l.) and British Prime Minister David Cameron during the opening day of the computer fair CeBIT in Hannover, Germany. Frank Augstein/AP

Market Closes for March 10^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

March 10 (Bloomberg) — Canadian stocks were little changed, closing near a five-year high, as commodity companies tumbled on weaker-than-estimated export data from China while health-care and bank shares advanced.

Teck Resources Ltd. and First Quantum Minerals Ltd. dropped at least 2.5 percent as copper prices posted the biggest two- session decline in 28 months. Legacy Oil & Gas Inc. and BlackPearl Resources Inc. retreated more than 2.1 percent as crude fell for the first time in three days. Canadian Imperial Bank of Commerce climbed to a six-year high as housing starts in Canada rose for the first time in four months.

The Standard & Poor’s/TSX Composite Index rose 2.98 points, or less than 0.1 percent, to 14,302.06 at 4 p.m. in Toronto. The index has gained 5 percent this year and closed at a five-year high on March 5.

“Most people are looking at China, which is a bit of a knee-jerk reaction given how unreliable the data is this time of the year due to the Chinese New Year,” said Bob Decker, fund manager at Aurion Capital Management in Toronto. The firm manages about C$6.6 billion ($5.9 billion). “We’re looking for a choppy market this year.”

China’s exports declined by 18.1 percent in February from a year earlier, the biggest drop since August 2009, according to a March 8 report from the General Administration of Customs.  Economists surveyed by Bloomberg had forecast a median 7.5 percent increase.  he S&P GSCI Index, which tracks prices for 24 commodities, retreated 1 percent for the first decline in three days, closing at a three-week low.

Canadian Imperial rose 0.7 percent to C$94.56, the highest level since November 2007, and Toronto-Dominion Bank added 1 percent to C$51, a record high.

Financial stocks rose 0.2 percent as a group with seven of 10 industries in the S&P/TSX advancing on trading volume 23 percent lower compared with the 30-day average.

Canadian housing starts climbed 6.4 percent to a seasonally adjusted annual pace of 192,100 units in February, Canada Mortgage & Housing Corp. said today. Economists forecast 190,000 starts. Multiple-unit starts rose 13 percent.

Catamaran Corp. jumped 2.8 percent to C$50.54 to pace gains among health-care stocks.

Bombardier Inc. rallied 4.6 percent to C$3.77 for a third day of gains.

Teck Resources, Canada’s largest diversified miner, slumped 2.5 percent to C$23.80, the lowest since July. First Quantum Minerals dropped 2.6 percent to C$19.58, a one-month low. Copper prices sank below $3 a pound for the first time since June today and the metal slumped 5.8 percent in the past two days, the most since October 2011.

Turquoise Hill Resources Ltd., which is developing the Oyu Tolgoi gold and copper mine in Mongolia, tumbled 3.1 percent to C$4.38 and Thompson Creek Metals Co. slumped 6.1 percent to C$2.75. Raw-materials stocks declined 0.8 percent as a group.

BlackPearl Resources decreased 4.3 percent to C$2.45 and Legacy Oil & Gas fell 2.1 percent to C$6.63 as crude retreated 1.4 percent to a three-week low.

USA

By Callie Bost and Jeremy Herron

March 10 (Bloomberg) — The Standard & Poor’s 500 index fell from a record, following declines in emerging-market equities and commodities, as a slowdown in China’s exports fueled concern the world’s second-largest economy is moderating.

The S&P 500 retreated 0.1 percent at 4 p.m. in New York, trimming an earlier decline of 0.6 percent. The MSCI Emerging Markets Index dropped 1.3 percent, the most in a week. China’s CSI 300 Index fell 3.3 percent to the lowest since February 2009. Copper had its biggest two-day drop in 28 months, while lead and zinc also retreated. Corn prices slid the most in three months and soybeans had the biggest decline in six weeks on an outlook for ample global supplies. U.S. Treasuries were little changed after four straight advances.

China’s exports dropped the most since 2009 in February, highlighting challenges facing Premier Li Keqiang in achieving this year’s economic-growth target of 7.5 percent as lawmakers meet to set economic policy. The country’s first onshore bond default last week underscored growing credit risks. Japan’s economy expanded less than estimated in the fourth quarter and the current-account deficit widened to a record in January. In Crimea, Ukraine began military drills as Russian forces tightened their hold on the peninsula and the Foreign Ministry in Moscow warned of “lawlessness” in the eastern provinces.

“We’re just waiting to see what goes on overseas with geopolitical situations and developments,” Stephen Carl, principal and head equity trader at New York-based Williams Capital Group LP, said by phone. “We need to keep an eye on overseas because we’re still waiting on a concise agreement in the Ukraine, but markets, as we saw last week, continue to grind higher despite that.”

The S&P 500 has surged more than 177 percent since reaching its bear-market low, which was five years ago yesterday. The measure rose 1 percent last week, buoyed by improving hiring and manufacturing data, and its ’s valuation rose to almost 16 times its companies’ projected earnings, the highest level of the year.

Industrial stocks paced declines today among U.S. equities. Boeing Co. dropped 1.3 percent after a 777-200 plane disappeared with 239 passengers and crew during a Malaysia Airlines flight to Beijing on March 8. Cliffs Natural Resources Inc. slid 3.8 percent and Freeport-McMoRan Copper & Gold Inc. lost 2.5 percent for among the biggest declines in the S&P 500.

Chiquita Brands International Inc. soared 11 percent after the owner of the namesake banana label agreed to buy Dublin- based Fyffes Plc in an all-stock transaction that values Fyffes at about $526 million.

China’s overseas shipments plunged 18.1 percent in February, customs data showed March 8. That compared with a median estimate of a 7.5 percent increase in a Bloomberg survey of economists. Premier Li announced the goal for 2014 gross domestic product growth last week at the opening of the annual meeting of the National People’s Congress in Beijing, a pace unchanged from last year.

“China is moderating but only very modestly,” Donna Kwok, a Hong Kong-based senior China economist at UBS AG, said in a Bloomberg TV interview. “Ultimately you need to wait for March data to really get a true sense of the underlying outlook. The PBOC is very consciously guiding the recent volatility. We see the default as a risk, as a shift in investors’ mindset.”

The Shanghai Composite Index fell 2.9 percent, the most since June and the lowest since Jan. 20, to pace losses in emerging-market indexes. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 1.8 percent to a one-month low.

Malaysian Airline System Bhd. fell 4 percent in Kuala Lumpur trading after the disappearance of its jet.

Brazil’s Ibovespa fell 1.5 percent to the lowest since July as commodity exporters including iron-ore producer Vale SA tumbled. China is Brazil’s largest trading partner.

The S&P GSCI Index of commodities slid 1 percent. Copper dropped 1.7 percent in New York and touched the lowest level since June. The metal fell 5.8 percent in the past two sessions, the most since October 2011. Lead retreated 0.6 percent and zinc fell 0.8 percent. China is the biggest consumer of industrial metals.

Gold for April delivery rose 0.2 percent to settle at $1,341.50 an ounce in New York, trading near a four-month high.  Crude oil fell 1.4 percent to settle at $101.12 a barrel.

Corn futures for May delivery fell 2.2 percent to close at $4.7825 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest drop for a most-active contract since Nov. 18.

The U.S. Department of Agriculture raised its outlook for world corn inventories before the 2014 Northern Hemisphere harvests by 0.7 percent to 158.47 million metric tons, topping analyst estimates.

Soybean futures for May delivery fell 2.7 percent to $14.1875 a bushel, the biggest decline since Jan. 21. The price has climbed 9.8 percent this year.

The MSCI All-Country World Index lost 0.4 percent after completing a fifth weekly gain, the longest streak since August.

Investors are also watching developments in Ukraine. The country’s armed forces are testing the combat-readiness of troops, the Defense Ministry said today on its website, reiterating the government’s desire for a peaceful end to the standoff in Crimea.

Russia has vowed to defend the ethnic Russians that dominate the region. Crimea’s local government may use a March 16 referendum to leave Ukraine and join the country’s Soviet-era master.

The Stoxx 600 fell 0.5 percent after posting its first weekly decline since January. Rio Tinto Group, the world’s second-largest mining company, fell 1.9 percent and BHP Billiton Plc lost 1.4 percent. A gauge of mining stocks in the Stoxx 600 fell 2.2 percent for the biggest decline among 19 industry groups.

Iliad SA surged 11 percent after Bouygues SA said it is in talks to sell some of its mobile-phone assets to the operator of the Free brand. Bouygues jumped 8.7 percent.

The Australian dollar depreciated 0.5 percent to 90.19 U.S. cents after advancing to 91.33 cents on March 7, the strongest level since Dec. 11.

The People’s Bank of China weakened the yuan’s reference rate by 0.18 percent. The currency declined 0.2 percent to 6.1385 per dollar, according to China Foreign Exchange Trade System prices.

Spanish 10-year bonds advanced, pushing the yield six basis points lower to 3.30 percent, the least since January 2006. The yield on similar-maturity Portuguese securities tumbled for a fifth day to 4.45 percent.

The U.S. treasury 10-year note yield fell one basis point to 2.78 percent. Economists projected U.S. payrolls would rise by 149,000 last month, with the bigger-than-expected 175,000- worker increase indicating the economy is starting to bounce back from frigid winter weather.

Federal Reserve Bank of Philadelphia President Charles Plosser, who votes on policy this year, said recent encouraging economic data isn’t enough to change the pace of the central bank’s monthly bond purchases.

“The hurdle rate for change is pretty high in either direction,” Plosser said in a Bloomberg Television interview with Manus Cranny in Paris, referring to the Fed’s tapering of its stimulus program.

Fed Bank of Chicago President Charles Evans said in a speech today that he expects the U.S. economy to expand at a rate of 2.5 percent to 3 percent in 2014. Fed Chair Janet Yellen said last month the economy is robust enough to withstand measured cuts to monetary stimulus.

The U.S. equity rally that just turned five years old is starting to match the 1990s Internet bubble when it comes to its speed. That’s where most of the resemblances end.

Unlike then, when technology stocks drew 85 percent of the cash and surged four times as much as anything else, investors today are spreading their money around, sending $2 billion or more to exchange-traded funds tracking everything from drugmakers to oil drillers, data compiled by Bloomberg and Morningstar Inc. show. While gains are extending to almost every industry, they’ve only been enough to push valuations to close to half the level when the bubble popped in 2000.

While the S&P 500’s multiple of 17 times reported earnings is close to the average since 1937, it’s about 40 percent below where it was in 2000, data compiled by Bloomberg and S&P show.

Have a wonderful evening everyone.

Be magnificent!

Meditation is movement without any motive, without words, and the activity of thought.

It must be something that is not deliberately set about.

Only then is it a movement within the infinite, measureless to man, without a goal, without an end,

without a beginning.  And that has a strange action in daily life, because all life is one,

and then becomes sacred.

Krishnamurti,1895-1986

As ever,

Carolann

You only live once, but if you do it right,

once is enough.

-Mae West, 1893-1980

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