August 20, 2015 Newsletter

Dear Friends,

Tangents:

On this day in in 1920, professional football was born when seven men, including legendary athlete Jim Thorpe, met in Canton, Ohio, to organize a professional league. Out of the meeting came the American Professional Football Conference (APFC), the precursor to the National Football League (NFL).

Changi Airport, Singapore: Butterfly Garden

(© Kevin R. Morris/Corbis )

Singapore’s Changi Airport routinely tops “Best Airports in the World” lists for its incredible amenities: a free 24-hour movie theater, a swimming pool, an enormous indoor children’s slide, massage chair lounges and more. But Changi’s outdoor spaces are perhaps the most innovative of its offerings. Most airports don’t allow travelers outside once they’ve cleared security, which can make long delays or layovers feel even longer. But Changi has several unique outdoor spaces within its terminals, including a rooftop cactus garden, a cheerful sunflower garden and various orchid displays (orchids are Singapore’s national flower). Our favorite is the butterfly garden. Visitors step into a fenced outdoor grotto, where some 1,000 butterflies flit from flower to flower, occasionally landing on a head or shoulder. If you’re lucky, you can even see one emerging from its chrysalis in a special “emergence enclosure.”  -Smithsonian Magazine, 8/20/2015

PHOTOS OF THE DAY

Artworks, sculptures, and performers are seen at ‘Dismaland,’ a theme park-styled art installation by British artist Banksy at Weston-Super-Mare in southwest England Thursday. Toby Melville/Reuters

Mechanics with the Ferrari Formula One team push the car of driver Sebastian Vettel of Germany in the pit lane ahead of this weekend’s Belgian F1 Grand Prix in Spa-Francorchamps, Belgium, Thursday. Yves Herman/Reuters

Market Closes for August 20^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks joined a global selloff in equities, falling to the lowest since December as the rout in emerging markets spread.

     The benchmark equity gauge slumped a fourth day, as equities around the world tumbled on intensifying concern that global growth is slowing. Canadian energy producers decreased 2.7 percent, extending a 2009 low. Barrick Gold Corp. jumped as gold rallied to the highest in more than a month as investors sought safety.

     The Standard & Poor’s/TSX Composite Index fell 299.63 points, or 2.1 percent, to 13,737 at 4 p.m. in Toronto, the lowest level since Dec. 15. The benchmark Canadian equity gauge has fallen 6.1 percent this year.

     The MSCI All-Country World Index of developing and developed markets declined a third session to a January low.

     Selling in emerging-market currencies intensified after Kazakhstan switched to a free float for the tenge, triggering a 23 percent slide. It’s the latest sign emerging nations will stop defending their currencies after China devalued the yuan, roiling markets and highlighting risks in emerging markets.

     Commodities producers are the worst-performing industries in the S&P/TSX this year with energy producers pacing declines with an 22 percent drop. Crude has slumped more than 30 percent from this year’s June peak and metals from copper to gold have declined amid concern global growth is slowing.

     Canadian Pacific Railway Ltd. tumbled 3.5 percent and Canadian National Railway Co. retreated 2.7 percent as industrials stocks slumped the most in the S&P/TSX. North American commodity carloads fell 5.8 percent in the week ended Aug. 15, according to a Bloomberg Intelligence report.

     Bank of Nova Scotia declined 2.2 percent and Royal Bank of Canada lost 1.2 percent. The nation’s largest lenders begin reporting third-quarter earnings next week.

     Valeant Pharmaceuticals International Inc. sank 6.7 percent after agreeing to buy female libido-drug developer Sprout Pharmaceuticals Inc. for $1 billion. Sprout received approval to sell the pill this week from U.S. regulators

US

By Callie Bost and Oliver Renick

     (Bloomberg) — The Standard & Poor’s 500 Index tumbled the most since February 2014, sending it below a trading range that has supported it for most of the year amid intensifying concern that global growth is slowing.

     The S&P 500 slipped out of the 70-point trading range it has been stuck in since March, falling below 2,040 to as low as 2,035.73. The gauge erased its gain for the year and is now 4.5 percent below its May record. The benchmark slid through its average price for the past 200 days for the fourth time this month, failing to rise back above it by the close for the first time since July 9.

     “Until today we’ve had nothing to break us out of the bottom or top end of the trading range,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said by phone. “The question is if this is the catalyst that will break us to the downside or if we’ll go back into the range.”

     Other major indexes also tumbled. The Dow Jones Industrial Average lost 358.04 points, or 2.1 percent, to 16,990.69, the lowest level since October. The Nasdaq 100 Index retreated 2.8 percent, with only four members advancing. The Chicago Board Options Exchange Volatility Index rose for a fourth day, heading for its biggest weekly gain of 2015.

     Netflix Inc. lost 7.8 percent as investors targeted the biggest winners of the year. Media stocks entered a correction as Walt Disney Co. tumbled 6 percent amid an analyst downgrade. The Nasdaq Biotechnology Index also entered a correction, falling more than 10 percent from a record set a month ago. The Philadelphia Semiconductor Index slid into a bear market, plunging more than 20 percent from a June peak.                   
     U.S. equities had held their ground throughout 2015, weathering turmoil from Greece and headwinds including a strong dollar that threatened multinationals’ earnings and a more than 60 percent drop in oil prices.

     The S&P 500 stuck within a range roughly tracking its 50-, 100- and 200-day moving averages, boosted by signs the economy is recovering and support from central banks. The S&P 500 hasn’t had a decline of more than 5 percent all year, and hasn’t dropped more than 10 percent since 2011.

     The index today plunged below the 200-day moving average as the rout in emerging markets intensified, with Kazakhstan becoming the latest country to stop defending its currency, as developing nations struggle to overcome plunging prices for commodity exports and China’s shock devaluation.

     Currency weakness and a slowdown in Chinese growth prompted Citigroup to cut its 2016 global growth forecast to 3.1 percent from 3.3 percent, its third consecutive downgrade, while holding its 2015 estimate at 2.7 percent.

     “Right now there are so many more concerns than hopes,” said Larry Peruzzi, director of international trading at Cabrera Capital Markets LLC in Boston. “There are global growth concerns, Fed minutes created some uncertainty about rates, and also playing a part is oil poised to dip below $40.”

     Slower growth may cause the Fed to delay its first interest rate increase since 2006. Minutes of the central bank’s latest meeting, released yesterday, showed officials are concerned about stubbornly low inflation even as the job market improves. Traders are now pricing in a 34 percent probability of a rate move at the September meeting, down from 50 percent before the release of the minutes.

     Led by a 7.8 percent plunge in Netflix, companies that have come to be known as the Fab Five saw $49 billion in market value erased Thursday, the most since Jan. 2013. Losses in Facebook Inc., Amazon.com Inc., Google Inc. and Apple Inc. pushed the Nasdaq 100 down the most since April 2014.

     “You’re finally starting to see the untouchable stocks — some of the biggest weighting of the market — get touched,”  said Jonathan Krinsky, chief market technician at MKM Holdings LLC. “Eventually the market needed to correct and for that to happen, the larger-cap stocks needed to get hit. We’re finally seeing that happen.”

     The VIX jumped 26 percent to 19.14. The volatility gauge has rallied 49 percent over four days, heading for its biggest weekly advance since December.

     All 10 major groups in the S&P 500 retreated. Financial companies dropped 2.1 percent, and technology and consumer- discretionary shares slid more than 2.4 percent.

     Disney fell 6 percent to the lowest since February after Sanford C. Bernstein & Co. downgraded the entertainment company to market perform from outperform.

     Eli Lilly & Co. rallied 4.3 percent. A diabetes drug sold by Lilly and Boehringer Ingelheim GmbH lowered the risk of heart attacks, stroke and death in a large trial of adults with type 2 diabetes, compared with the standard of care alone. The results could give the companies an advantage in a market crowded with diabetes treatments. Merck & Co. slid 4.5 percent.

     “We have been conditioned to buying on the dip,” said Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion. “What’s happening is that investors want that dip deeper. It’s no longer a knee-jerk reaction to buy on the dip because the Fed will underpin the market. Investors are being much more cautious and not as sure that the Fed will be there.”

Have  a wonderful evening everyone.

Be magnificent!

Your way is very good for you, but not for me.

My way is good for me, but not for you.

Swami Vivekananda

As ever,

Carolann

Insanity is often the logic of an accurate mind overtasked.

                       -Oliver Wendell Holmes, Sr., 1809-1894

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

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7