October 14, 2015 Newsletter

Dear Friends,

Tangents:

On this day in 1962, the Cuban Missile Crisis started, taking the U.S. and the Soviet Union to the brink of nuclear conflict.

October 14, 1964: Martin Luther King Jr. was awarded the Nobel Peace Prize.

Gary and I spent the weekend at the sail boat show in Annapolis; lucked out with beautiful weather and gentle breezes on Chesapeake Bay where we were able to sail a new Jeanneau 45 and a new  Hylas 54.  We also attended a seminar conducted by renowned sailor and author Ralph Naranjo who riveted us with tales from the six years he and his wife and their two small children sailed around the world in the world on their Ericson 41.  His book is entitled The Art of Seamanship which was published last year and which I intend to read at my earliest opportunity.  Annapolis is a charming town – full of history.  We stopped for a day in Baltimore before heading home and it is truly a beautiful city – also very charming and steeped in history. 

PHOTOS OF THE DAY

People rest in hammocks as they experience The Chronarium Sleep Lab, a public sleep laboratory presented by British group Loop.pH during the Festival of Tech in Singapore, Monday. Edgar Su/Reuters

A self-driving vehicle picks up people during a demonstration at Gardens by the Bay in Singapore. Singapore unveiled its public transport future on Monday, including passengers commuting in driverless buses and platoons of autonomous trucks following a single driver. Edgar Su/Reuters

Market Closes for October 14^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canada’s gold producers have been the biggest beneficiaries of the recent volatility in global markets amid speculation the Federal Reserve will hold off this year on raising interest rates.

     Raw-materials producers are the best-performing group in the benchmark Canadian equity gauge in October, led by a rally among mining companies. Gold jumped to a three-month high, rebounding from a five-year low in July. Gold is a more attractive investment in times of low rates as the metal doesn’t pay interest.

     The Standard & Poor’s/TSX Composite Index rose 30.60 points, or 0.2 percent, to 13,875.33 at 4 p.m. in Toronto, halting a two-day retreat. The benchmark Canadian equity gauge is down 5.2 percent for the year, the poorest showing among 24 countries except for Singapore and Greece.

     Gold has climbed after global stocks capped the worst quarterly performance since 2011 amid rising concern that a slowdown in China is accelerating. Canadian stocks climbed 4.7 percent last week, the most since December, as commodities and emerging markets rebounded amid a drop in the dollar. Raw- materials producers have jumped 15 percent in October, the biggest monthly advance since January.

     Gold futures advanced 1.2 percent to $1,179.80 an ounce in New York, and is up more than 5 percent this month, on track for the biggest rise since January. Chinese data from imports to factory gate deflation has indicated the weakness in the economy is persisting. In the U.S., reports today showed retail sales rose less than forecast and wholesale prices dropped, posing a problem for the Fed as it looks for signs inflation is moving toward its target.

     The Fed declined to raise interest rates in September, and the chance it will wait until at least 2016 has risen to 64.3 percent, according to data compiled by Bloomberg based on futures.

     Barrick Gold Corp. added 8.9 percent and Goldcorp Inc. increased 8.8 percent to lead gold producers higher. Suncor Energy Inc. rose 1.1 percent and Encana Corp. climbed 2.8 percent as energy stocks advanced.

     Despite the recent rally, energy and raw-materials producers remain the worst-performing industries in the S&P/TSX this year, giving Canadian equities the third-worst performance among developed markets.

     Prices for Canadian stocks remain expensive relative to global peers. The MSCI All-Country World Index, a measure of developed and developing markets, currently trades at about 17.1 times earnings. The index’s valuation dropped to as low as about 16 at the end of September, the lowest since October 2014. By contrast, the price-to-earnings ratio of the S&P/TSX sits at 20.1, after falling to as low as 18.9 in September.

     Valeant Pharmaceuticals International Inc., the third- largest stock in the S&P/TSX by market capitalization, jumped 5.6 percent for the fifth advance in six sessions. The drugmaker tumbled 22 percent in September, the most since 2007, as U.S. lawmakers scrutinized drug pricing policies.

US

By Neil Denslow and Joseph Ciolli

     (Bloomberg) — U.S. stocks were dragged lower as a bleaker outlook from Wal-Mart Stores Inc. added to global growth concerns. The dollar fell to the lowest in three months and bonds rose as investors became more certain the Federal Reserve will hold off on raising interest rates.

     Wal-Mart had its biggest plunge in more than 27 years after predicting a decline in profit during the next fiscal year. Treasuries rose and the greenback weakened against all major peers as the odds that a U.S. rate increase will be delayed until at least 2016 climbed to the highest this year. Gold advanced to a three-month high.

     “The probability of a global recession is rising as news out of China gets worse,” said Hugh Grieves, who runs the U.S. Opportunities Fund at Miton Group in London. “As each data point comes out, positive or negative, sentiment lurches from one extreme to the other very quickly.”

     The global economy is already showing signs of stress, with weak data from China piling up and ripple effects being felt as far away as Brazil’s deteriorating labor market. The growing evidence of a slowdown is validating the Fed’s decision last month to hold off on raising interest rates. For investors looking for more clarity on the outlook for corporate earnings, today’s results provided little comfort.

     The drumbeat of weaker-than-expected economic data continued today as Chinese producer prices matched their biggest slump since the global financial crisis. In the U.S., retail sales rose less than forecast and wholesale prices dropped, posing a problem for the Fed as it looks for signs inflation is moving toward its target. Meanwhile, analysts project profits for S&P 500 members dropped 7.2 percent in the third quarter.

     “The market is very fragile when it comes to the growth story right now,” Mark Kepner, an equity trader at Themis Trading LLC in Chatham, New Jersey, said by phone.

     The Standard & Poor’s 500 Index dropped 0.5 percent, after slipping for the first time in five days on Tuesday. The Dow Jones Industrial Average lost 0.9 percent as Wal-Mart accounted for 45 points of the gauge’s 157-point drop.

     Wal-Mart plunged 10 percent, its biggest loss since 1988. The retail chain said earnings will decrease 6 percent to 12 percent in fiscal 2017, which ends in January of that year. Analysts had estimated a gain of 4 percent on average according to data compiled by Bloomberg.

     “Wal-Mart’s sizable reset of expectations has shaken the overall market,” said Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey, which oversees about $170 billion. “Investors are reconsidering their future forecasted growth rates for S&P earnings.”

     Reaction to earnings from the largest U.S. banks was mixed, with JPMorgan Chase & Co. falling 2.5 percent after cautioning that trading this quarter is off to a tepid start, while Bank of America Corp. added 0.8 percent after its quarterly profit rebounded as expenses fell.

     TripAdvisor Inc. surged 26 percentafter announcing a deal with Priceline Group Inc. to bring the online travel company’s catalog of hotels into TripAdvisor’s booking system. SanDisk Corp. jumped 11 percent as people with knowledge of the matter said the chipmaker hired a bank to explore a potential sale.

     The yield on U.S. 10-year Treasuries dropped 6 basis points to 1.98 percent. German bunds rallied, with the yield on 10-year bonds falling 5 basis points to 0.54 percent. Yields on similar- maturity securities from the U.K. tumbled 7 basis points to 1.76 percent.

     Fed officials last month left interest rates unchanged, opting to monitor the risk that China’s slowdown could spill over to the U.S. Traders’ bets that the Fed will lift its benchmark by year-end have dropped to less than a 30 percent chance, and aren’t much higher for January. For March, the probability has tumbled to about 50 percent, from 66 percent at the start of the month.

     Fed Governor Daniel Tarullo told CNBC yesterday that he doesn’t currently favor raising interest rates in 2015. That lines him up with fellow Governor Lael Brainard, who made the case on Monday for patience, and diverges from the majority of Federal Open Market Committee members including Fed Chair Janet Yellen.

     China sold 10-year bonds with the lowest coupon since 2008. The $4.4 billion of 10-year notes had a coupon of 2.99 percent, which was lower than the 3.1 percent median estimate in a Bloomberg survey.

     The Bloomberg Dollar Spot Index, a gauge of the U.S. currency against 10 major peers, slid 0.9 percent, touching its lowest since June 30. The dollar dropped to its weakest in seven weeks versus the euro and down for a third day against the yen. Canada’s dollar advanced 0.9 percent.

     The pound rose as a report showed the U.K.’s unemployment rate unexpected fell to the lowest level since mid-2008. Sterling climbed 1.5 percent to $1.5483, its biggest gain since May.

     New Zealand’s dollar added 2.4 percent, after central bank Governor Graeme Wheeler said further easing will depend on economic data. Singapore’s dollar snapped a two-day drop, rising

1.3 percent as the city state’s monetary authority, the only advanced economy regulator to use the exchange rate as a key policy tool, said it would “slightly” reduce the pace of the currency’s appreciation versus trading partners.

     The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong dropped 1 percent in its first back-to-back decline in more than two weeks. The Shanghai Composite Index slid 0.9 percent.

     China’s consumer-price index increased 1.6 percent in September from a year earlier, while producer prices fell for a 43rd month.

     The MSCI Emerging Markets Index fell for a second day, losing 0.1 percent.South Africa’s rand and Turkey’s lira gained, helping an index of 20 currencies rebound from the biggest decline since March.

     Gold futures added 1.2 percent to $1,179.80, the highest since June, as further signs of tame global inflation weakened the case for the Fed to raise U.S. interest rates. The metal had a fourth straight gain, and is up more than 5 percent this month, on track for the biggest rise since January.

     Copper rose 1.2 percent, rebounding from an earlier decline.

     West Texas Intermediate fell for a third day, dropping 2 cents to $46.64 on the New York Mercantile Exchange, after paring an earlier loss of 1.5 percent.

Have a wonderful evening everyone.

Be magnificent!

By education I mean an all-round drawing out of the best in a child and man – body, mind, and spirit.

Mahatma Gandhi

As ever,

Carolann

The most wasted of all days is one without laughter.

                              -e.e. cummings, 1894-1962

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