December 17, 2014 Newsletter

Dear Friends,

Tangents:

On this day in history: Wilbur and Orville Wright completed the first man-powered, heavier-than-air aircraft flight in 1903 near Kitty Hawk, North Carolina. Orville piloted the flight, which lasted only 12 seconds and spanned 120 feet.

William Safire, writer, was born on this day in 1929.

The right to do something does not mean that doing it is right. – William Safire.

On another note, we are off to Hong Kong tomorrow for a couple of days on our way to the Maldives.  Back first week of January, so in addition to the wishes  from myself and my team in the Season’s Greetings cards we mailed to you, I’d just like to take this opportunity to once again wish you and yours the very best holiday season ever.  May 2015 pass a little more slowly than 2014 J!  

Was it ever a fast year – so many of you whom I’ve spoken to lately feel the same way.  And as always, please accept my very deepest gratitude for your very valued and loyal business.  Thank you.

It also looks like we’re in for a Santa Claus rally in the markets – to end the year on a positive note given the action – or lack thereof – by the FOMC today.  Thank you Janet Yellen.

PHOTOS OF THE DAY

A general view from top of the 6030 feet high Wendelstein mountain shows the Alps and surrounding mountains in Germany.Michael Dalder/Reuters

Michelle Cotterill gives a woman a hug in the street at a temporary memorial site close to the Lindt cafe in the central business district of Sydney, Australia. Cotterill said she had a steady stream of hug requests from the mourners who visited the site to pay their respect and leave flower tributes. Three people including a gunman were shot after police ended a siege in the city coffee shop. Rob Griffith/AP

Market Closes for December 17^th, 2014     

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Oliver Renick

     (Bloomberg) — Canadian stocks rallied for a second day, after tumbling to the lowest level since February last week, as energy companies surged with oil prices and raw-materials providers advanced.

     MEG Energy Corp. and Pacific Rubiales Energy Corp. paced gains among energy stocks, climbing at least 13 percent. Sherritt International Corp. surged 20 percent and Teck Resources Ltd. advanced 8.5 percent to lead gains in raw- materials providers.

     The Standard & Poor’s/TSX Composite Index jumped 259.18 points, or 1.9 percent, to 14,120.70 at 11:28 a.m. in Toronto, extending gains for a second day to 3.1 percent, the best rally in two months. The equity gauge dropped 5.1 percent last week, its worst decline since September 2011. The index is up 3.6 percent for the year.

     Eight of the 10 main groups in the S&P/TSX rose today. Energy shares added 5 percent, extending a two-day climb to 9.2 percent, the most since January 2009. Trading in S&P/TSX stocks was 59 percent above the 30-day average at this time of the day.

     Crude futures rebounded after sliding close to the lowest levels in five years. West Texas Intermediate jumped 1.3 percent.

     Canadian wholesale sales rose in October as higher prices for live animals pushed agricultural receipts to a record high.

     Sales rose 0.1 percent to C$54.2 billion ($46.5 billion), Statistics Canada said today in Ottawa, as farm products surged 13.5 percent to C$815 million. The increase comes as policy makers such as Bank of Canada Governor Stephen Poloz say that sustained momentum in exports and business investment is needed to complete an economic recovery over the next two years.

US

By Callie Bost

     (Bloomberg) — U.S. stocks surged the most since 2013, erasing almost half their December losses, as energy shares rebounded and the Federal Reserve said it will be patient on the timing of interest-rate increases.

     The Standard & Poor’s 500 Index rose 2 percent to 2,012.89 at 4 p.m. in New York, the most since October 2013, after plunging for three sessions. The Dow Jones Industrial Average gained 288 points, or 1.7 percent, to 17,356.87. The Russell 2000 Index of smaller companies surged 3.1 percent for its biggest increase in three years. The VIX tumbled the most since October 2013. About 9.4 billion shares changed hands on U.S. exchanges, the most since October.

     “The game has really changed in terms of inflation,” Jeff Kravetz, the Phoenix-based regional investment director at US Bank’s Private Client Reserve, said by phone. “There’s heightened uncertainty in international markets. The drop in oil prices has kept the lid on inflation. The Fed has to wait to see how these two factors play out. That’s why they retained dovish language.”

     In one day, the S&P 500 made up about 40 percent of the ground it lost in the seven days since touching a record 2,075.37 on Dec. 5. The index jumped back above 2,000 and its 50-day moving average of 2,002.89, levels that when breached on Dec. 15 led to amplified selling. Today’s gain lifted the gauge’s 2014 return to 8.9 percent, the 16th best among global markets this year.

     The S&P 500 fell 5 percent from a record on Dec. 5 through yesterday, as a slide in crude prices and signs of a worldwide economic slowdown rippled through financial markets.

     Investors have seen the wildest fluctuations in U.S. stocks since October. The Chicago Board Options Exchange Volatility Index plunged 18 percent, the most since October 2013, to 19.31 after rising to the highest since Oct. 16 through yesterday.

     The central bank said it will be patient on the timing of the first interest-rate increase since 2006, replacing a pledge to keep borrowing costs near zero for a “considerable time,” and raised its assessment of the labor market.

     The change in guidance is another step in the Fed’s plan to exit from the loosest monetary policy in its 100-year history. While a faster-than-expected drop in unemployment is pushing the central bank toward raising rates next year, plunging prices of oil and commodities are holding inflation below its target.

     Fed Chair Janet Yellen said a rate increase is possible at every meeting, though she doesn’t foresee the first increase in interest rates for “at least the next couple of meetings.”                         

     While today’s statement didn’t mention global market turmoil sparked by oil and the Russian currency crisis, Yellen said any spillover from the financial crisis in Russia is likely to be small.

     “They don’t see inflation pressure on the horizon,” Peter Jankovskis, who helps oversee $1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments LLC, said by phone. “With the statement, and if we can see some stabilization in oil prices, we’re well poised for a rally here perhaps through the year-end.”

     The consumer-price index dropped 0.3 percent in November, the most since December 2008, after being little changed the prior month, a Labor Department report showed today. Persistently low inflation allows Fed policy makers more flexibility in raising rates. Plunging fuel costs also will free up money that households can spend on other goods and services, bolstering the economic expansion.

     Crude oil has slumped almost 50 percent over six months as the Organization of Petroleum Exporting Countries seeks to defend market share while a U.S. shale oil boom exacerbates a global glut.

     All 10 major groups in the S&P 500 advanced, with energy shares jumping 4.2 percent, the most in three years, after climbing 0.7 percent yesterday. Raw-materials shares added 2.8 percent.

     Noble Energy Inc. rose 10 percent and Nabors Industries Ltd. surged 9.3 percent, while Newfield Exploration Co. and Transocean Ltd. added 8.5 percent. Exxon Mobil Corp. and Chevron Corp. added at least 3 percent.

     McDonald’s Corp. rose 3.3 percent, the most since March, after activist investor Bill Ackman said the world’s largest restaurant chain could be managed better.

     Ackman, whose Pershing Square Capital Management hedge fund owned shares in Burger King Worldwide Inc., said today in an interview on Bloomberg Television that McDonald’s could learn from its smaller rival. He declined to comment on whether he was taking a stake in McDonald’s.                      

     Royal Caribbean Cruises Ltd. gained 6.6 percent and Carnival Corp. jumped 3.5 percent. President Barack Obama said the U.S. will end more than a half century of isolation of Cuba, initiating talks to resume diplomatic relations, opening a U.S.

embassy in Havana and loosening trade and travel restrictions on the nation.

     Volcano Corp. jumped 55 percent after Royal Philips NV agreed to buy the diagnostic equipment maker for $1 billion.  Shareholders of Volcano will receive $18 a share in cash, Philips said in a statement.

     FedEx Corp. lost 3.7 percent after quarterly profit missed analysts’ estimates as the operator of the world’s largest cargo airline spent more on aircraft maintenance and collected less in fuel surcharges. United Parcel Service Inc. slid 1.32percent.

     Cliffs Natural Resources Inc. retreated 5.7 percent. The biggest U.S. iron-ore producer will need to be recapitalized within the next two years and near-term earnings aren’t sufficient to support its debt load, Credit Suisse Group AG analysts said. The broker cut its share-price target to $1 from $10.
 

Have a wonderful evening everyone.

Be magnificent!

All humanity shares the sunlight; that sunlight is neither yours nor mine.

It is the life-giving energy, which we all share.

The beauty of a sunset, if you are watching it sensitively, is shared by all human beings.

Krishnamurti

As ever,

Carolann

In the middle of every difficulty lies opportunity.

                          -Albert Einstein, 1879-1955

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7