August 20, 2014 Newsletter

Dear Friends,

Tangents:

Rankings of the best places in the world to live published today….Impressive that Vancouver made it to third place, behind only Melbourne and Vienna.   Two other Canadian cities made it on the list – Toronto and Calgary.

In three words I can sum up everything I’ve learned about life.  It Goes On.  –Robert Frost.

Circumstance

Two children in two neighbor villages
Playing mad pranks along the healthy leas;
Two strangers meeting at a festival;
Two lovers whispering by an orchard wall;
Two lives bound fast in one with golden ease;
Two graves grass-green beside a gray church-tower,
Washed with still rains and daisy blossomed;
Two children in one hamlet born and bred;
So runs the round of life from hour to hour.

                           –Alfred, Lord Tennyson

August 20^th 1940: Winston Churchill stood in Parliament and said of the RAF bombers and fighter pilots:  “Never in the field of human conflict has so much been owed by so many to so few.”  The speech, his third major address to Parliament in the Battle of Britain in the summer of 1940, may not have been his finest oratorical hour.…But the phrase “The Few” stuck, and gave the British a rallying cry that lasted through the war and beyond. –Simon Houpt, G & M, 8/20/2014.

Photos of the Day
 A horse grazes on a pasture near Sehnde, northern Germany. Julian Stratenschulte/AP

A giant inflatable rubber duck floats past the USS Iowa battleship at the Port of Los Angeles. The world-famous sculpture sailed into the port for the first time to kick off the Tall Ships Festival LA and will remain in the harbor. The duck was designed by Dutch artist Florentijn Hofman and at 61 feet high, 110 feet long 85 feet wide is the largest rubber duck in the world. Hofman debuted the sculpture in 2007 and has since created several of them to sail around the world to places including China, Hong Kong and New Zealand. Nick Ut/AP

Market Closes for August 20^th, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     Aug. 20 (Bloomberg) — Canadian stocks rose to a record as crude and base metals prices advanced and the minutes from the Federal Reserve’s latest meeting indicated stimulus will continue amid uneven labor gains.

     First Quantum Minerals Ltd. and Lundin Mining Corp. gained at least 1.5 percent as copper advanced. Athabasca Oil Corp. rose 4 percent to pace gains among energy producers. AltaGas Ltd. lost 1.7 percent after declaring a plan to sell shares to fund capital growth. Bellatrix Exploration Ltd. retreated 2.4 percent after its biggest gain in more than a year yesterday.

     The Standard & Poor’s/TSX Composite Index rose 84.78 points, or 0.6 percent, to a record 15,561.95 at 4 p.m. in Toronto.

     Athabasca rose 4 percent to C$7.21 and Crew Energy Inc. added 3.9 percent to C$10.33. Nine of 10 industries in the benchmark Canadian equity gauge advanced.

     West Texas Intermediate crude rose for the first time in three days after U.S. stockpiles decreased more than expected last week.

     First Quantum gained 3.2 percent to C$25.02 and Lundin Mining rose 1.5 percent to C$6.11 as copper futures climbed.

     Gold fell to a two-week low after the Fed minutes were released. In the minutes, Fed policy makers raised the possibility that an end to aggressive stimulus might occur sooner than anticipated while acknowledging continued slack in the labor market. Fed Chair Janet Yellen will speak on labor markets on Aug. 22 in Jackson Hole, Wyoming.

     AltaGas dropped 1.7 percent to C$52. The company plans to sell 7.85 million common shares at C$51 to raise about C$400 million, with the proceeds to be used for capital growth, lowering debt and general corporate purposes.       AltaGas also agreed yesterday to a 15-year alliance with Painted Pony Petroleum Ltd. for the development of processing infrastructure and marketing services for natural gas in British Columbia. Painted Pony climbed 6.9 percent to C$14.36 today.       Bellatrix lost 2.4 percent to C$8.52. The oil and gas explorer jumped yesterday after activist investor Orange Capital LLC acquired a 5.3 percent stake in Bellatrix with as it seeks board changes and a possible sale.

     Canadian wholesale sales climbed 0.6 percent to C$53 billion ($48.4 billion), Statistics Canada said in Ottawa, faster than all 11 responses in a Bloomberg survey. The data adds to reports suggesting the world’s 11th economy rebounded in the second quarter after a tough winter disrupted production.

US

By Oliver Renick

     Aug. 20 (Bloomberg) — U.S. stocks gained for a third day, sending the Standard & Poor’s 500 Index to within two points of a record, as minutes indicated the Federal Reserve will continue to support the economy amid uneven gains in the labor market.

     The S&P 500 added 0.3 percent to 1,986.51 at 4 p.m. in New York. The gauge touched 1,988.57, briefly surpassing a closing high of 1,987.98 reached July 24, before pulling back. The Dow Jones Industrial Average rose 59.54 points, or 0.4 percent, to 16,979.13. The Russell 2000 Index of smaller companies slipped 0.4 percent. About 4.9 billion shares changed hands on U.S. exchanges, 14 percent below the three-month average.

     “The Fed said if data points move toward their objectives faster than expected they’ll raise rates sooner than expected,”  Todd Salamone, senior vice president of research at Cincinnati- based Schaeffer’s Investment Research, said via phone. “That’s still a big ‘if.’”

     In minutes to the central banks’ July meeting, released today, Fed officials raised the possibility that an end to aggressive stimulus might occur sooner than anticipated while acknowledging continued slack in the labor market. The Fed is on pace to wind down its monthly bond purchases in October, and intends to keep the benchmark interest rate low for a “considerable time” after that.

     The Fed minutes said that “many participants” noted that if jobs data moved toward the committee’s objectives more quickly than expected, “it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated.”

     Chair Janet Yellen has committed monetary policy to stronger labor markets, which she measures with an array of indicators, so long as inflation remains in check. In their statement after the July 29-30 meeting, Fed officials downplayed recent declines in the unemployment rate, highlighting “significant underutilization of labor resources.”

     Low inflation has given the Fed room to hold rates near zero even as economic growth shows signs of accelerating. Data yesterday showed inflation remains below the Fed’s target, while a report on Aug. 1 indicated employers added more than 200,000 jobs for a sixth straight month in July, the longest such period since 1997.

     Yellen will speak on labor markets Aug. 22 at the annual Fed Bank of Kansas City’s economic symposium that begins tomorrow in Jackson Hole, Wyoming. Policy makers including European Central Bank President Mario Draghi will also speak.

     Three rounds of Fed stimulus and better-than-estimated corporate earnings have sent the S&P 500 higher by 194 percent from its bear-market low on March 2009.

     The index has rebounded 4 percent from a three-month low on Aug. 7 as investors speculated central banks won’t raise rates sooner than anticipated. The S&P 500 has not had a decline of 10 percent in almost three years. It trades at 17.8 times the reported earnings of its companies, near the highest level since 2010.

     The Chicago Board Options Exchange Volatility Index, the gauge of S&P options prices known as the VIX, declined 3.5 percent to 11.78, the lowest level since July 23. The gauge has lost 14 percent this year.

     Eight of 10 primary groups in the S&P advanced, with industrial stocks pacing gains with a 1 percent advance. Jacobs Engineering Group Inc. jumped 3.1 percent to $53.90. ADT Corp. increased 2.7 percent to $37.22 and Southwest Airlines Co.advanced 2.7 percent to $31.57.

     International Rectifier Corp. soared 47 percent to $39.10. Infineon Technologies AG, Germany’s largest chipmaker, agreed to buy the company for about $3 billion in cash, adding to its power-management technology business.

     Hewlett-Packard Co. and Target Corp. are among the six S&P 500 companies reporting earnings today. Stocks rallied yesterday as retailers including Home Depot Inc. and TJX Cos. led gains on better-than-projected results.

     Staples Inc. declined 2.6 percent to $11.32 for the biggest loss in the S&P 500. The world’s largest office-supply chain will shut about 140 locations this year, part of a store-closing plan announced earlier, as the retailer responds to online competition.

     J.M. Smucker Co. fell 1 percent to $102.42 after the maker of peanut butter and fruit spreads reported earnings that missed analysts’ estimates, citing slow sales of consumer foods and coffee.                          

   “With multiples getting pushed up to full value, the market is starting to demand earnings-driven returns and top- line growth and they’re going to be a little more critical of earnings as a result,” Leo Kelly, the Hunt Valley, Maryland- based partner and chief executive officer of HighTower’s Kelly Wealth Management, said in a phone interview.

     Hertz Global Holdings Inc. slumped 3.9 percent to $30.33 after saying its full-year results will miss the low end of its forecast. The company said its performance is being hurt by a record number of auto recalls, higher-than-expected operating expenses in the U.S. rental-car market and sluggish demand for its equipment business.

     Investor Fir Tree Partners, which holds more than 3 percent of the stock, is urging Hertz’s board to replace Chief Executive Officer Mark Frissora, while billionaire Carl Icahn disclosed a stake and said he may seek representation on the board.

     Software companies declined the most of 24 groups in the S&P. Adobe Systems Inc. lost 1.4 percent to $71.02 and Yahoo! Inc. slid 0.9 percent to $37.50.

Have a wonderful evening everyone.

Be magnificent!

Better never love,

if that makes us hate others.

Swami Vivekananda

As ever,

Carolann

It takes a genius to whine appealingly.

         -F. Scott Fitzgerald, 1896-1940

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7