August 21, 2014 Newsletter

Dear Friends,

Tangents:

On this date in 1959, Hawaii became the 50th state in the U.S.

The Numbers today:

10,0000: Number of baby boomers who will turn age 65 every day between now and 2030. 

$896,000

The sum Berkshire Hathaway said it has agreed to pay to settle U.S. allegations that it violated antitrust laws by failing to report the acquisition of an equity stake in USG, a gypsum wallboard maker in Chicago.

Blanket

By Brian Johnstone

It flops down from the cupboard shelf by chance,
the grey  of something needing to be spread
again on earth, below taut canvas, half
remembered sky.  Still hinting at the smoke
of memories, it slumps like wood ash now
beneath my feet, green blanket-stitch the moss
on stones placed round a fire.
                              And glowing red?

A name tag tacking this to me, to years
in single figures, summer camps in fields
ploughed over when the tents were razed and gone;
the imprint of the past like patterns left
by grass stems in the flesh of knees,
                              that fade
as skin is stretched in standing, walking tall.

  -from Dry Stone Work, Arc Publications

Photos of the Day

People look at French artist Clement Briend’s photographic light installation ‘Divine Trees’, which features images of divine figures highly revered in Asian cultures projected on trees towering over bystanders, during a media preview of the Singapore Night Festival in Singapore. Edgar Su/Reuters

A home is alight from lanterns during the annual grand illumination night in Oak Bluffs on Martha’s Vineyard in Massachusetts. On this night, hundreds of lanterns hung on gingerbread cottage porches are lit. The tradition, dates from the turn of the 19th century. Kevin Lamarque/Reuters

Market Closes for August 21^st, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Elena Popina

     Aug. 21 (Bloomberg) — Canadian stocks ended little changed, with the benchmark index near an all-time high, as declines in gold mining companies were offset by gains in financial shares.

     Alamos Gold Inc. and Goldcorp Inc. fell more than 3.5 percent as the metal fell to a two-month low on the outlook for higher U.S. interest rates. Whitecap Resources Inc. rose 7.8 percent after Canaccord Genuity said the company has the potential to increase its dividend by 10 to 15 percent in the next 12 months.

     The Standard & Poor’s/TSX Composite Index declined 6.69 points, or less than 0.1 percent, to 15,555.26 at 4 p.m. in Toronto. The benchmark equity gauge has climbed 14 percent this year, the second-best performer among the world’s developed markets behind Denmark. It reached a record of 15,561.95 yesterday.

     Six of 10 industries in the S&P/TSX declined on trading volume 18 percent above the 30-day average. Raw-materials producers slid 1.9 percent for the biggest decline, as gold dropped 1.5 percent in New York. Oil dropped 0.5 percent.

     A Chinese Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics slid to 50.3 this month, missing the 51.5 projected in a Bloomberg survey. Euro-area manufacturing and services activity slowed in August, a preliminary report showed today.

     Financial stocks, which account for the biggest weighting in the broader index, added 0.5 percent. Royal Bank of Canada rose 0.1 percent to C$81.67. The lender is scheduled to report third-quarter earnings tomorrow.

     Cameco Corp. dropped 4.1 percent to C$21.62 after Cowen & Co. equity analyst Daniel Scott cut the stock to market perform, the equivalent of hold, from outperform.

USA

By Oliver Renick and Lu Wang

     Aug. 21 (Bloomberg) — Optimism that the Federal Reserve is committed to supporting a strengthening economy sent the Standard & Poor’s 500 Index to an all-time high and within eight points of the 2,000 milestone.

     The S&P 500 jumped 0.3 percent to a record 1,992.37 at 4 p.m. in New York, rising for a fourth day, the longest streak in two months. The Dow Jones Industrial Average gained 60.36 points, or 0.4 percent, to 17,039.49. The measure is 0.6 percent below its record after closing above 17,000 for the first time since July 24. Financial shares rallied as Bank of America Corp. added 4.1 percent. Hewlett-Packard Co. surged 5.4 percent to lead technology companies.

     “The market is really in a sweet spot for U.S. stocks, fundamentals continue to be very good,” Jeff Kravetz, the Phoenix-based regional investment director at US Bank’s Private Client Reserve, said via phone.

     The gains are coming after the S&P 500 started August with the worst weekly decline in more than two years. Almost $900 billion has been restored to American equity values since then, bolstered by easing tensions in Ukraine and speculation that central banks will keep interest rates low even as the economy shows signs of recovery. The S&P 500 has rebounded 4.3 percent from a two-month low on Aug. 7.

     About 4.8 billion shares changed hands on U.S. exchanges today, the second-slowest full session this year after May 23, the day before the Memorial Day holiday weekend. Volume has not topped 5 billion shares in each of the past three days.

     Minutes to the Fed’s July meeting released yesterday reinforced speculation that the central bank will remain supportive, even as some policy makers indicated a willingness to raise rates sooner than anticipated. While a report today showed fewer Americans than forecast applied for unemployment benefits last week, Fed Chair Janet Yellen has highlighted uneven progress in the labor market in making the case for further accommodation.                         

     Yellen will speak tomorrow at the Fed Bank of Kansas City’s economic symposium that starts today in Jackson Hole, Wyoming. European Central Bank President Mario Draghi will also speak.

     “The thesis for the second half is better growth,” Krishna Memani, the New York-based chief investment officer at OppenheimerFunds, said by phone. “The expectation for tomorrow is that Yellen is not going to say anything dramatic that’s going to be different from what she’s said before.”

     Among other data today, purchases of previously owned U.S. homes unexpectedly rose in July to a 10-month high as low borrowing costs and an increase in inventory drew buyers. The Conference Board’s index of U.S. leading indicators, a gauge of the outlook for the next three to six months, increased 0.9 percent in July, topping forecasts.

     The Markit Economics preliminary August index of U.S. manufacturing jumped to 58, the highest since April 2010, from 55.8 the month before as production, orders and employment picked up. Readings exceeding 50 in the purchasing managers’ gauge indicate expansion.

     “We’ve had a paradigm where good economic news is bad news, but it’s clear this week that good news is just good news,” Quincy Krosby, a market strategist at Newark, New Jersey-based Prudential Financial Inc., which manages more than $1 trillion, said via phone. “The package of data today was strong and the market is responding accordingly.”

     The S&P 500 has almost tripled since its March 2009 low, helped by three rounds of Fed stimulus, coupled with better- than-projected corporate earnings. 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 market’s latest rebound was the sixth in two years where equities needed less than two weeks to recover after a drop of 2 percent or more, according to data compiled by Sundial Capital Research Inc. The V-shaped pattern of losses followed by gains is recurring more often than any time in almost eight decades, Sundial data show.

     “It’s like trying to push a beach ball underwater and having it pop right back up,” John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said in a phone interview. “That’s what’s been happening to equity markets as the Federal Reserve has been accommodative.”

     Investors are betting that a soft touch on monetary policy will continue to suppress stock volatility, pouring a record stretch of cash into an exchange-traded note that rallies as calm returns to equities. The Chicago Board Options Exchange Volatility Index, the gauge known as the VIX, has lost 31 percent this month.

     Among 486 companies in the S&P that have reported second- quarter earnings, more than 75 percent beat analysts’ estimates. Gap Inc. and Salesforce.com Inc. are among eight S&P 500 companies reporting results today.                          

     Financial stocks advanced 1.1 percent, the most of 10 primary groups in the S&P 500. Bank of America gained 4.1 percent, its largest increase since May 2013, to $16.16. The company will pay $245 million to settle U.S. Securities and Exchange Commission allegations that it failed to disclose rising mortgage losses and the risks of bonds tied to home loans.

     EBay Inc. jumped 4.7 percent to $55.89, the most since January 2013, after The Information reported the company may spin off its PayPal payment unit as soon as next year.

     Hormel Foods Corp. gained 4.3 percent to a record $49.92 after reporting earnings and revenue that beat analysts’ estimates.

     Hewlett-Packard advanced the most in the S&P 500, rising 5.4 percent to $37, the highest since July 2011. The company posted its first sales growth in 12 quarters, fueled by improving personal-computer sales.                       

     Sears Holdings Corp., the retailer controlled by billionaire hedge-fund manager Edward Lampert, fell 7.2 percent to $33.38 after posting a wider second-quarter loss as sales decreased for the 30th straight quarter.

     Dollar Tree Inc. fell 1.3 percent to $54.28 as the discount chain cut the top end of its full-year earnings forecast amid costs related to its bid for Family Dollar Stores Inc. The deal came closer to fruition today after the takeover target rejected a $9 billion offer from Dollar General Corp., citing antitrust hurdles.

     Family Dollar lost 0.5 percent to $79.41 and Dollar General slipped 0.2 percent to $63.61.
 

Have a wonderful evening everyone.

Be magnificent!

Until a radical change takes place and we wipe out all nationalities,

all ideologies, all religious division, and establish a global relationship – psychologically and

inwardly first, then organized in the outside world – we shall go on with war.

Krishnamurti

As ever,

Carolann

The welfare of each is bound up in the welfare of all.

                                    -Helen Keller, 1880-1968

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