October 29, 2015 Newsletter

Dear Friends,

Tangents:

From a recent Wall Street Journal article:

Far in Space, a Glance at How Earth May End
‘It reinforces the idea that we are in a much more hostile environment than we sometimes imagine,’ an astrophysicist says
Black holes have long been a source of intrigue for astronomers and science fiction writers, but what happens when a star wanders too close to one?

By 
GAUTAM NAIK

Astronomers have made the first direct discovery of a planet being ripped apart by the tremendous forces unleashed by a dying star, a possible glimpse into how the Earth will end its days.

The cosmic drama is occurring 570 light-years from Earth in the constellation Virgo. There, a sun-like star is reaching the end of its life and, in the process, annihilating its solar system. Specifically, the researchers discovered a small planet being vaporized by the star’s searing heat and ripped apart by its gravity.

“The planet is in its death throes,” said Andrew Vanderburg, Ph.D student at the Harvard-Smithsonian Center for Astrophysics and lead author of the study. “Every second, it’s losing up to 10 million kilograms,” or 22 million pounds of material.

The discoveries were made using the planet-hunting space telescope Kepler, operated by the National Aeronautics and Space Administration, as well as ground-based telescopes. Details were published Thursday in the journal Nature.

When a sun-like star runs out of the hydrogen that fuels its nuclear fusion reaction, it swells into an object that is 100-200 times its original size. This “red giant” eventually collapses into a much smaller body known as a white dwarf—an object that possesses intense gravity.

In this artist’s conception, a dwarf planet disintegrates as it orbits a white dwarf star. Astronomers have discovered signs that a sun-like star has turned into a white dwarf, an object of such intense gravity that it can destroy its solar system. PHOTO: MARK A. GARLICK/HARVARD-SMITHSONIAN CENTER FOR ASTROPHYSICS

The white dwarf star discovered by Mr. Vanderburg and his team, for example, is only a little bigger than earth. A teaspoon’s worth of it has a mass of nearly 15 tons.

Our sun will go through a similar process about five billion years from now, scientists say. Because of its nearness to the sun, there’s a chance that Earth will be engulfed by the red giant that forms.

Even if Earth survives the sun’s red giant phase, other forces will claim it. The subsequent white dwarf that is created could destabilize the orbits of planets—including Earth’s—and cause many of them to fall toward the white dwarf and disintegrate. That appears to be the scenario unfolding in Virgo.

“It’s a glimpse into the future of Earth,” said Carole Mundell, head of astrophysics at the University of Bath, England, who wasn’t involved in the Nature study. “It reinforces the idea that we are in a much more hostile environment than we sometimes imagine.”

Kepler searches for planets by looking for a telltale dip in brightness that occurs when an orbiting body crosses a star. In the summer of 2014, Kepler took measurements from 20,000 stars. When Mr. Vanderburg and his team studied the data, one signal jumped out at them: the transit of a body across a white dwarf that was dimming the star by 40%.

It was the first planetary object ever seen transiting a white dwarf. The team estimated that the planet was a mere 520,000 miles from the white dwarf and orbiting it every 4.5 hours. They also discovered other bodies in a similar orbit.

Significantly, the planet is surrounded by a vast cloud of dust and debris. This is the material being blasted off its surface by gravity and the heat of the nearby white dwarf. It is evidence that the planet is disintegrating.

Scientists have speculated that when this happens, dust from the crumbling planet will settle on the surface of the host star. Mr. Vanderburg and his colleagues now plan to analyze that dust and from it infer what the dying planet is made of.

PHOTOS OF THE DAY

A home-made airship, made by Shi Songbo, lifts off during a test flight in Ningling county of Shangqiu, Henan province, China. The 10-meter-long, 23-meter-high, two-seated air ship, which cost Shi 300,000 yuan ($47,187 USD) and took four months to make, performed eight successful trial flights.China Daily/Reuters

Mea’ling, a sphinx cat, peers out at the crowd adorned in her costume at the Fantasy Fest Pet Masquerade in Key West, Fla., Wednesday. Owned by Diana Benton, Mea’ling was one of more than 50 entries in the competition for animals and their owners. Rob O’Neal/Florida Keys News Bureau/Reuters

Market Closes for October 29^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks slumped, paring the best monthly gain since February, as Bombardier Inc. plunged after receiving a rescue from the Quebec government of as much as $1.3 billion and resource producers sank on the prospect of higher interest rates in America.

     While the Canadian benchmark has jumped 3.6 percent in October, that’s the second-worst performance among 24 developed- nation markets in that time, as a gauge of global equities heads for its best month in four years. The rally stalled Thursday after the Federal Reserve signaled it’s still prepared to raise interest rates this year if warranted. That bolstered the U.S. currency and sent commodities tumbling.

     In Canada, Bombardier led declines as the jet maker’s tardy and over-budget CSeries program will get an investment from Quebec in exchange for a 49.5 percent stake and as much as 200 million Bombardier shares, the Montreal-based company said Thursday. The company’s $4.9 billion net loss is the third-worst by a Canadian company since the third quarter of 2007, according to data compiled by Bloomberg.

     The Standard & Poor’s/TSX Composite Index fell 71.28 points, or 0.5 percent, to 13,791.88 at 4 p.m. in Toronto. The index’s October gain would be its best month since February. It’s down 5.7 percent in 2015.

     Bombardier, the second worst-performing stock in the S&P/TSX this year with a 68 percent decline, dropped 15 percent for the biggest decline since Aug. 24. Materials producers fell 3.5 percent as a group as metals from copper to gold retreated.

     Potash Corp. of Saskatchewan Inc. lost 3 percent to lead raw-materials producers lower. The world’s largest fertilizer producer by market value cut its full-year profit forecast and shuttering reducing production in response to weaker demand from emerging markets.

     Valeant Pharmaceuticals International Inc. tumbled 3.7 percent after CVS Health Corp. said it would remove Valeant partner Philidor RX Services from its network of pharmacies after an audit of its practices.

     Barrick Gold Corp. added 1.6 percent to a two-week high after reporting better-than-estimated profit after the market close yesterday. Barrick’s lower costs and higher production helped to mitigate the impact of weak metals prices. Some 150 companies are scheduled to report earnings next week.

     Gold stocks have rallied 10 percent in October, on pace for the best performance since January as the prospect of an interest-rate increase from the Fed dimmed during the month amid slowing global economic growth and mixed U.S. data. Gold becomes a less attractive investment when rates rise as the metal doesn’t pay interest.

     Revived prospects for an increase in borrowing costs has stalled the best rally in global developed and developing markets since 2011. The odds the Fed, which left interest rates unchanged yesterday, will move on rates in December has now jumped to 50 percent from around 32 percent a week ago, based on futures prices.

US

By Joseph Ciolli and Oliver Renick

     (Bloomberg) — A rally in U.S. stocks stalled Thursday, after equities reached a two-month high, as investors weighed corporate earnings and prospects for higher interest rates this year.

     Technology shares fell, led by F5 Networks Inc. after its profit and sales outlook disappointed. NXP Semiconductors NV tumbled the most in five years after predicting a drop in sales, and Intel Corp. slid 2 percent. Delphi Automotive Plc sank 7.1 percent after cutting its revenue and earnings forecast. Allergan Plc. climbed 6 percent after confirming it’s in merger talks with Pfizer Inc., which fell 1.9 percent.

     The Standard & Poor’s 500 Index was little changed at 2,089.41 at 4 p.m. in New York, near the highest level since Aug. 18. The gauge is up 8.8 percent in October, poised for its best month in four years, boosted by gains in commodity producers and technology shares. The Dow Jones Industrial Average fell 23.72 points, or 0.1 percent, to 17,755.80. The Nasdaq Composite Index declined 0.4 percent, while the Russell 2000 Index slipped 1.1 percent following its best one-day gain this year.

     “It’s merely a re-evaluation of how people should be positioned given the Fed commentary yesterday,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “The door was left open for a rate hike in December, which is likely to lead to a much higher dollar. That won’t be a good read for anyone doing business internationally.”

     Fed officials yesterday forecast moderate growth, and dropped a reference to global risks in a policy statement following a two-day meeting. They also referred to their “next meeting” on Dec. 15-16 as they discussed the timing for raising interest rates. Traders are now pricing in a 50 percent chance of liftoff in December, compared with as low as 30 percent last week. Prior to the Fed meeting, March was the first month showing at least even odds for a rate increase.

     Data continues to be the Fed’s guide toward an eventual rate boost, and a report today showed the economy expanded at a slower pace in the third quarter as companies took advantage of gains in consumer and business spending to reduce bloated stockpiles. A separate measure showed contract signings to purchase previously owned homes unexpectedly fell in September by the most since the end of 2013, indicating the residential real estate market is cooling from its recent brisk pace.                        

     The S&P 500 has rebounded as much as 12 percent from an August low. The October rally has been spurred by advances in energy and raw-material shares, the same groups that helped drag the index to its worst quarter since 2011. Both are headed for their strongest monthly increase since 2011 amid easing concern that weakness in China will spread.

     “More people want to get into energy and get into the space, they just don’t know what the right time will be,” Adam Lustig, a managing director at Raymond James & Associates Inc. said by phone. “Not many think 2016 will be good for the space but they think 2017 will and we’re starting to see people initiate early.”

     Corporate earnings season remains an influence on investor sentiment, with a little less than half of the companies in the S&P 500 yet to report. Of those that have reported, 76 percent beat profit projections, while 56 percent missed sales estimates. Chevron Corp., Exxon Mobil Corp. and Colgate- Palmolive Co. are among 21 companies scheduled to release results on Friday.

     The Chicago Board Options Exchange Volatility Index rose 2 percent Thursday to 14.61. The measure of market turbulence know as the VIX is on course for its steepest monthly retreat ever amid equities’ strong rebound from the weak third quarter. About 7  billion shares traded hands on U.S. exchanges, 5 percent below the three-month average.

     Five of the S&P 500’s 10 main industries declined today, with utilities, financial and technology shares down the most. Health-care advanced for a fifth day while energy companies climbed for a second straight session. Chipmakers dragged down the tech group, with the Philadelphia Stock Exchange Semiconductor Index posting its biggest loss in almost two months. NXP Semiconductors lost nearly 20 percent after forecasting an unexpected decline in fourth-quarter revenue as customers pulled back on orders amid a slowing global economy and higher inventories of unsold chips. Avago Technologies Ltd. slid 5.5 percent.

     Earnings results took a toll on auto-parts suppliers. Delphi Automotive fell the most in four years after cutting it annual profit and sales forecasts to below analysts’ estimates as China’s vehicle market slows. The company got about 23 percent of sales last year from the Asia-Pacific region, up from 16 percent in 2010. BorgWarner Inc. lost 8.7 percent after reducing the high end of this year’s profit outlook.

     Financial shares in the benchmark retreated after rallying Wednesday the most in seven weeks. Invesco Ltd. dropped 2.5 percent after the owner of the PowerShares funds posted a profit that missed analysts’ estimates, and the firm had $6.3 billion in redemptions. Within the KBW Bank Index, New York Community Bancorp tumbled 12 percent, the most in six years, after agreeing to purchase Astoria Financial Corp. in a deal valued at about $2 billion. Astoria sank 7.7 percent.

     An S&P index of homebuilders had its worst drop in a month after the surprise slide in pending sales of previously owned homes. Lennar Corp. and D.R. Horton Inc. slumped more than 3.7 percent. Meritage Homes Corp. fell 9.7 percent as its fourth- quarter outlook disappointed.

     Allergan helped lead health-care higher amid its “preliminary friendly discussions” to merge with Pfizer. Vertex Pharmaceuticals Inc. added 5.1 percent after posting a third- quarter loss that was smaller than analysts’ estimates as sales of its new combination drug for cystic fibrosis grew faster than expected.

     The Nasdaq Biotechnology Index erased an early climb, halting its longest rally in almost three months. Zimmer Biomet Holdings Inc. added 7.2 percent to a two-month high after raising its 2015 profit outlook and reinstating a stock buyback program.

     Energy companies advanced as they head toward an October increase of more than 10 percent, the biggest monthly rally since 2011. The climb since September has been bolstered by Newfield Exploration Co., Apache Corp. and Transocean Ltd., with each up at least 18 percent. Thursday’s gains were paced by Anadarko Petroleum Corp. and Valero Energy Corp., rising more than 3.1 percent.                      

     Among other companies moving on corporate news, Hanesbrands Inc. jumped 15 percent, its biggest since 2009. The clothing maker posted third-quarter profit that topped analysts’ estimates and raising its earnings forecast for the year, helped by increasing sales of activewear.

     Buffalo Wild Wings Inc. plunged 17 percent, the in eight years, after sales growth missed analysts’ estimates and the chicken-wing chain cut its profit forecast.

     GoPro Inc. plummeted 15 percent to the lowest since it debuted last year, after the maker of action cameras reported profit and sales that trailed estimates. The company said the smaller Hero4 Session model introduced in July didn’t sell as well as it expected in the third quarter and its September price cut hurt revenue.

Have a wonderful evening everyone.

Be magnificent!

You can live with few clothes or with one meal a day, but that is not simplicity.

So be simple, don’t live in a complicated way, contradictory and so on, just be simple in inwardly.

Krishnamurti

As ever,

Carolann

All life is an experiment.  The more experiments you make the better.

                                            -Ralph Waldo Emerson, 1803-1882

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