May 21, 2014 Newsletter

Dear Friends,

Tangents:

Want to be happier?  Go to the trees.  New research ties proximity to parks and other green spaces to better mental health, writes Ben Schiller at Fast Company.  People living in places with more trees are likely to be happier, with the association between the two “significant and sizable,”  according to one recent study.  The findings could be used to argue for more investment in green spaces.  “ ‘Our work indicated that “greening” could be considered a potentially low-cost, high-return investment among urban and regional planners to positively influence population mental health,’ “ Mr. Schiller quotes the study’s authors as saying.

I read with dismay last week that so many beautiful old trees in Vancouver have already disappeared and continue to be destroyed as neighborhoods are transformed by developers.  It should be outlawed in my opinion.  The trees should be saved and it should be mandated that when new owners buy a property to tear down and rebuild, the trees on the property are given priority.

Photos of the day

A crow carries twigs in its beaks at a park in Tokyo. Shizuo Kambayashi/AP

A light show featuring a ballet dancer and swans from Swan Lake is projected onto spraying water by the Vivid Aquatique Water Theatre during a preview of the Vivid Sydney light and music festival. For 18 days beginning on May 23 the Vivid Sydney festival, one of the world’s largest creative industry forums, will combine outdoor lighting sculptures and installations. Jason Reed/Reuters

Market Closes for May 21^st, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

May 21 (Bloomberg) — Canadian stocks rose a second day as energy producers rallied with oil following an industry report showing a drop in U.S. inventories.

Lightstream Resources Ltd. and Pacific Rubiales Energy Corp. added at least 3.9 percent as crude in New York climbed to a one-month high. Royal Bank of Canada increased 1 percent to pace gains among bank stocks. Rio Alto Mining Ltd. sank 7.5 percent after agreeing to buy Sulliden Gold Corp. in an all- stock deal worth about C$300 million ($274.32 million). Sulliden soared 33 percent.

The Standard & Poor’s/TSX Composite Index rose 96.43 points, or 0.7 percent, to 14,621.62 at 2:08 p.m. in Toronto.  The S&P/TSX is little changed in May. The gauge has rallied for 10 months, the longest winning streak in three decades.

“Crude is really helping the market,” said Stephen Gauthier, chief investment officer at Fin-XO Securities Inc. in Montreal. His firm manages about C$650 million. “Oil stocks have done very well since the beginning of the year so that certainly helps.”

The Canadian equity benchmark trade at a price-earnings ratio of 19.6, near the highest level since 2011, data compiled by Bloomberg show.

Crude advanced 1.7 percent to $104.11 a barrel. U.S. crude stockpiles decreased 7.23 million barrels to 391.3 million in the seven days ended May 16, according to the Energy Information Administration. Analysts surveyed by Bloomberg projected no change in inventories. Crude imports fell to the lowest level since 1997 while U.S. output climbed to a 28-year high.

Pacific Rubiales gained 6.1 percent to C$19.51 and Lightstream Resources added 3.9 percent to C$7.41 as energy companies rallied 1 percent as a group. Nine of 10 industries in the S&P/TSX advanced on trading volume 16 percent lower than the 30-day average at this time of the day.

Royal Bank of Canada increased 1 percent to C$74.15 and Toronto-Dominion Bank added 0.5 percent to C$51.79. The two lenders, the largest in the nation, are scheduled to report second-quarter earnings tomorrow.

CI Financial Corp. rose 2.4 percent to C$33.87 after Geoffrey Kwan, analyst at RBC Capital, raised his rating for the stock to outperform, the equivalent of a buy. Onex Corp. rallied 1.9 percent to C$62.93 as the S&P/TSX Financials Index advanced 0.7 percent, the most in three weeks.

Encana Corp. added 1.7 percent to C$25.25 for a second day of gains after increasing the size of its initial public offering for PrairieSky Royalty Ltd. to as much as C$1.46 billion, in what would be Canada’s largest initial sale in 14 years.

Rio Alto Mining slumped 7.5 percent to C$1.97, the lowest since January, after agreeing to buy Sulliden Gold to expand its production of the precious metal. Rio Alto will pay 0.525 of its shares for each Sulliden share, along with 0.1 share of a newly incorporated company that will hold Sulliden’s stake in the East Sullivan property in Quebec.

Sulliden soared 33 perent to C$1.04, the biggest increase since January 2009.

Bombardier Inc. dropped 2.9 percent to C$3.82. Republic Airways Holdings Inc., Bombardier’s biggest customer for the CSeries jet, said its order for 40 of the aircraft is no longer a priority. Chief Executive Officer Bryan Bedford said the Indianapolis-based company hasn’t made any decisions about the order.

US
By Callie Bost

May 21 (Bloomberg) — The Standard & Poor’s 500 Index advanced, erasing yesterday’s declines, as Tiffany & Co. rallied and Federal Reserve policy makers said continued stimulus doesn’t risk sparking a jump in the inflation rate.

Tiffany gained 9.2 percent to lead an advance among retailers as quarterly profit beat estimates. Netflix Inc. rose 5.1 percent after saying it will expand its online-video service in Europe. Exxon Mobil Corp. and Chevron Corp. climbed more than 1.4 percent as the price of oil surged.

The S&P 500 added 0.8 percent to 1,888.03 at 4 p.m. in New York. The equity benchmark is 0.5 percent away from a record reached on May 13. The Dow Jones Industrial Average climbed 158.75 points, or 1 percent, to 16,533.06. The Russell 2000 Index of smaller companies was up 0.5 percent, while the Nasdaq 100 Index rose to the highest level since April 3. About 5.3 billion shares changed hands on U.S. exchanges, 20 percent below the three-month average.

“There were no big surprises in the Fed minutes,” Darrell Cronk, deputy chief investment officer at Wells Fargo Private Bank, which manages $170 billion, said by phone. “There was more of the same and that means more dovish statements. We continue to think the domestic equity markets will climb higher.  The fundamentals are good.”

Minutes of the central bank’s April 29-30 meeting released today in Washington showed Fed officials also discussed the need to improve their guidance on the likely path of interest rates. Participants agreed that “early communication” of their exit strategy “would enhance the clarity and credibility of monetary policy.”

Policy makers said last month the economy is showing signs of picking up and the job market is improving. The central bank pared its monthly asset buying to $45 billion in April, its fourth straight $10 billion cut, and said further reductions in measured steps are likely.

The Fed reiterated at the time that it will keep the key rate target near zero for a “considerable time” once it concludes the bond-purchase program.

Fed Chair Janet Yellen testified to lawmakers May 7 that the Fed will probably end bond buying in the fall if the labor market continues to improve. Still, she said “a high degree of monetary accommodation remains warranted” with inflation and employment far from the central bank’s goals.

Three rounds of bond purchases by the Fed have helped send the S&P 500 up as much as 180 percent from a 12-year low in 2009. It is trading at 16 times the projected earnings of its members, greater than a five-year average of 14.3 times, according to data compiled by Bloomberg.

About 75 percent of S&P 500 companies that have posted results this season have beaten analysts’ estimates for profit, while 53 percent have exceeded sales projections, data compiled by Bloomberg show.

The S&P 500 fell 0.7 percent yesterday after retailers reported lower-than-estimated earnings and small-cap shares slumped. The benchmark index closed at an all-time high of 1,897.45 on May 13 before a selloff in small-cap stocks spread to the broader market. The Russell 2000 tumbled 1.5 percent yesterday, and is down 8.7 percent from a record set in March.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility known as the VIX, fell 8.1 percent to 11.91 today, the lowest level since August. The measure has lost 13 percent this year.

All 10 main industries in the S&P 500 rose today, with consumer-discretionary and energy companies gaining at least 1 percent for the biggest advances.

Retailers rose 1.2 percent as a group in the S&P 500, after slumping 1 percent yesterday amid worse-than-estimated results from companies from Staples Inc. to Urban Outfitters Inc.

Tiffany increased 9.2 percent to a record $96.30 today. The world’s second-largest jewelry retailer reported first-quarter profit that exceeded analysts’ estimates and raised its forecast for the year as price increases helped boost sales.

Netflix jumped 5.1 percent to $390.60, the highest level in two months. The shares have rebounded 24 percent from a six- month low on April 28. The world’s largest Internet subscription service will enter Germany, France, Austria, Belgium, Luxembourg and Switzerland, according to a statement. The company already operates in the U.K., Ireland, the Netherlands, Denmark, Norway, Sweden and Finland.

TJX Cos. rallied 4.9 percent to $56.60. The owner of the T.J. Maxx discount chain tumbled 7.6 percent yesterday, the most in more than five years, after posting first-quarter profit and sales that trailed analysts’ estimates.

The Dow Jones Internet Composite Index increased 1.2 percent, as Facebook Inc. added 3.3 percent. TripAdvisor Inc. and LinkedIn Corp. rose more than 1.9 percent.

Exxon Mobil advanced 1.4 percent to $102.03 and Chevron increased 1.4 percent to $124.16 to pace gains among energy companies. Occidental Petroleum Corp. surged 2.2 percent to $97.59. West Texas Intermediate crude rose to a one-month high after a government report showed U.S. supplies tumbled last week as imports dropped to a 17-year low.

PetSmart Inc. tumbled 8.3 percent to $57.02. The pet services retailer cut its profit forecast this year to below analysts’ forecasts as first-quarter revenue missed estimates.

Have a wonderful evening everyone.

Be magnificent!

When the poor come to you in great need, begging for food,

do not harden your hearts against them.

Remember that the poor may once have been rich,

and you may one day be poor.

When you see people who are think for lack of food,

beg them to accept your help;

remember that you may need their friendship in times to come.

Rig Veda

As ever,

Carolann

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