September 8, 2014 Newsletter

Dear Friends,

Tangents:

We went to see the movie Boyhood last week – the movie that has been getting good reviews from the critics.  It took twelve years to make and it felt like half that long to watch it.  It is a long movie – about three hours.  I thought it was good; Gary thought it was terrific, so maybe gender has something to do with appreciation with this one.  It is a pretty clever movie, I have to admit.

On this date in 1966, the hit science-fiction series “Star Trek” made its debut on NBC.

Photos of the Day

A jogger runs through the snow at Nose Hill Park during an early year snow fall in Calgary, Alberta. The snow and unseasonably cold weather are supposed to last for two days according to local media reports. Todd Korol/Reuters

A Yes sign is displayed in a field with Llamas grazing in Jedburgh, Scotland. The British government plans to offer Scotland more financial autonomy in the coming days as polls predict a very close vote in the September 18 referendum on Scottish independence. Scott Heppell/AP

Market Closes for September 8^th, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     Sept. 8 (Bloomberg) — Canadian stocks fell a third day, with the benchmark index at the lowest level in nearly three weeks, as commodity producers dropped after Brent crude sank to a 16-month low amid weaker Chinese trade data.

     Bankers Petroleum Ltd. and Athabasca Oil Corp. retreated more than 2.9 percent to pace declines among oil producers. B2Gold Corp. lost 2.8 percent with gold touched the lowest since June. Bombardier Inc. rose the most in a month after resuming test flights for its CSeries passenger jet.

     The Standard & Poor’s/TSX Composite Index fell 60.53 points, or 0.4 percent, to 15,509.39 at 4 p.m. in Toronto, the lowest since Aug. 19. It closed Sept. 3 at a record 15,657.63.

     The S&P/TSX has advanced 14 percent this year, the second- best performer among the world’s developed markets behind Denmark. Trading volume in the S&P/TSX was 3 percent below the 30-day average.

     Bankers Petroleum sank 5.2 percent to C$5.98, the lowest since May, and Athabasca Oil lost 2.9 percent to C$7.15 as the S&P/TSX Energy Index declined 1.2 percent.

     Brent crude fell 62 cents to $100.20 a barrel as Chinese imports slipped, bolstering concern there’s a global oil surplus. West Texas Intermediate retreated 0.7 percent to $92.66 a barrel in New York, the lowest close since Jan. 14.                       

     China’s trade surplus climbed to a record in August, as imports fell for a second month. China is the world’s largest consumer of commodities and Canada’s second-largest trading partner after the U.S.

     B2Gold lost 2.8 percent to C$2.46 and Yamana Gold Inc. fell 3.9 percent to C$8.07. Gold for December delivery decreased 1 percent in New York to settle at $1,254.30 an ounce.

     Bombardier advanced 0.6 percent to C$3.65, the biggest gain since Aug. 8. The aircraft manufacturer yesterday conducted the first test flight of its CSeries jet since an engine failure in May delayed efforts to introduce the airliner next year.

     Bombardier has taken steps to fix the problem, including modifying the engine’s oil-lubrication system, the company said. The Montreal-based company is targeting a CSeries debut in the second half of 2015 after missing a release date last year.

US

By Elena Popina

     Sept. 8 (Bloomberg) — The Standard & Poor’s 500 Index fell, after a five-week rally sent the gauge to a record, as declines in energy companies along with oil prices overshadowed a rally by Yahoo! Inc.

     Exxon Mobil Corp. and Chevron Corp. dropped at least 0.9 percent to pace declines in the Dow Jones Industrial Average as oil prices tumbled. Ford Motor Co. slipped 2 percent after Morgan Stanley downgraded the shares of the automaker. Yahoo climbed 5.6 percent to the highest level since 2006 after Alibaba Group Holding Ltd. said it plans to raise as much as $21.1 billion in an initial public offering.

     The S&P 500 retreated 0.3 percent to 2,001.54 at 4 p.m. in New York. The Dow lost 25.94 points, or 0.2 percent, to 17,111.42. The Nasdaq 100 Index added 0.1 percent, led by Yahoo. About 5.2 billion shares changed hands today, 6 percent below the three-month average.

     “You have five weeks of S&P growth, we may be in the overbought territory,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $110 billion, said in a phone interview. “You generally don’t continue to grow forever.”

     The S&P 500 climbed 0.2 percent last week, completing its longest streak of weekly gains this year, as investors speculated weaker jobs growth will keep the Federal Reserve from raising interest rates. Bets on continued Fed support got a boost on Sept. 5 as data showed the economy added fewer jobs than estimated in August and the unemployment rate fell to 6.1 percent.                         

     The Fed is gauging the strength of the labor market as it winds down a bond-buying program and considers the timing of raising interest rates. Policy officials next meet Sept. 16-17.

     Low volatility across financial markets may signal investors are underestimating how quickly the Fed will raise interest rates, according to researchers at the San Francisco Fed.

     “Surveys, market expectations, and model estimates show that the public seems to expect a more accommodative policy than Federal Open Market Committee participants,” Jens Christensen, a senior economist, and Simon Kwan, a vice president of financial research, said in a report today. Data also suggest that the public is “less uncertain about their projections.”

     Morgan Stanley chief U.S. equity strategist Adam Parker announced today an increase in the firm’s 12-month S&P 500 forecast to 2,125, while Goldman Sachs Group Inc. raised its three-month rating on stocks to the equivalent of buy, after the European Central Bank reduced its main interest rates and implement an asset-buying plan. The move reversed a July 26 call, when the firm cut its three-month rating on stocks to neutral amid expectations government bond yields would increase.                       

     The S&P 500 trades at 18 times the reported earnings of its members, near the highest level in four years. The gauge hasn’t posted a four-day streak of losses in all of 2014 and the last time it fell more than 10 percent was three years ago.

     While markets are calm for now, the trajectory of the U.S. stock market is about to get bumpier, according to one measure in the options market.

     Investors are bidding up contracts that protect against losses in the S&P 500 in the next three months, driving the price to near the highest level in 19 months compared with contracts expiring in a month. The difference in implied volatility shows traders are hedging for risks that may be months away while expressing less concern over the present.

     U.S. equities climbed last week after Ukraine agreed on a cease-fire with pro-Russian separatists to stem months of bloodshed. The S&P 500 extended declines in afternoon trading today after an NBC affiliate in Florida reported a possible Ebola case at an area hospital, citing the U.S. Centers for Disease Control and Prevention. Shares recouped some of the losses after the patient tested negative, according to a report from the Washington Post.

     The Chicago Board Options Exchange Volatility Index, a gauge of investor concern derived from options prices, climbed 4.7 percent to 12.66 today. The index plummeted 29 percent in August, the biggest monthly drop since October 2011.

     Eight of 10 main industries in the S&P 500 fell today, with energy shares dropping 1.6 percent to lead declines. Brent crude briefly fell below $100 for the first time since June 2013 as Chinese imports slipped in August, bolstering concern there’s a global oil surplus.

     Energy companies also had the worst performance last week, with a loss of 1.5 percent. Brent has tumbled 13 percent since June 19 as economies from Europe to Asia show signs of slowing while oil output climbs. Oil markets in the U.S. and Europe face a glut amid constrained consumption and the recovery of supplies from Libya, the International Energy Agency, the Paris-based adviser to 29 nations, said last month.

     Marathon Oil Corp. dropped 1.7 percent to $40.21 and Newfield Exploration Co. lost 4.7 percent, the most in the S&P 500, to $40. Exxon Mobil retreated 1.5 percent to $97.77, while Chevron dropped 0.9 percent to $126.21.

     Ford declined 2 percent to $16.80 after Morgan Stanley downgraded the shares to underweight, similar to sell, from overweight, similar to buy. The brokerage cited a high exposure to the U.S. market, where it said sales in the last five years were driven by pent-up demand.

     Campbell Soup Co. slid 2.6 percent to $43.39 as its 2015 profit forecast was less than analysts had estimated. The company has struggled to rekindle Americans’ appetite for soup, with sales of ready-to-serve varieties decreasing 8 percent in the quarter ended Aug. 3.

     Apple Inc. slipped 0.6 percent to $98.36. The company will unveil the latest iPhones and a wearable gadget at an event tomorrow near its headquarters. The iPhones will include software that lets the handset act as a mobile wallet, while the watch-like wearable device is expected to include features for tracking health and fitness activity, people familiar with the plans have said.

     Technology shares had the best performance among the S&P 500 groups, climbing 0.2 percent.

     Yahoo, which owns more than 22 percent of e-commerce company Alibaba, rallied 5.6 percent to $41.81 for the biggest advance in the S&P. Alibaba plans to list on the New York Stock Exchange this month, according to a regulatory filing on Sept. 5. Yahoo will sell 121.7 million of its Alibaba shares, potentially reaping as much as $8.03 billion.

     Facebook Inc. added 0.8 percent to $77.89 as its market value exceeded $200 billion, making it the 22nd-largest company in the world, as investors bet on the company to capitalize on the future of mobile advertising.

     Rackspace Hosting Inc. rallied 6.9 percent to $39.79 after people familiar with the situation said CenturyLink Inc. has discussed the idea of acquisition with the San Antonio, Texas- based company. The cloud-computing provider said last month it is conducting an internal review of its strategic options. A spokeswoman for Rackspace and a representative for CenturyLink at Joele Frank Wilkinson Brimmer Katcher declined to comment.

     Multimedia Games Holding Co. jumped 30 percent to $36.15 in its biggest advance since February 2012 as Global Cash Access Holdings Inc., a provider of cash solutions to the gaming industry, said it will buy the company for about $1.2 billion to expand its access to casino floors.

     Boeing Co. rose 2.6 percent to $127.98 after Ryanair Holdings Plc agreed to buy as many as 200 high-density Boeing 737 jets in a deal worth a potential $22 billion at list prices.

Have a wonderful evening everyone.

Be magnificent!

Non-possession is allied to non-stealing.

Mahatma Gandhi

As ever,
 

Without discipline, there is no life at all.

          -Katharine Hepburn, 1907-2003

Carolann

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