November 18, 2015 Newsletter

Dear Friends,

Tangents:

Good News This Week:

US – A major multinational company eyes wind power for a manufacturing division.  Proctor & Gamble announced that the plants for its fabric and home-care divisions will draw electricity generated by a wind farm in Cooke County, Texas, by December 2016.  It has pledged to have 30 % of energy generated by renewable and to cut emissions by 30 % by 2020.  –The NY Times.

Dublin, Ireland – Modular houses for the homeless should be in place before Christmas, with 22 government-funded units planned and another 128 being fast-tracked to follow.  Placement – and permanence – are still being debated.  The number of homeless families has doubled in the past year, by some accounts. –The Journal.IE.

London – Those iconic black cabs will be going green.  A new plug-in hybrid London taxi, developed by the Chinese auto firm Geely, should be on the road in 2017.  That’s ahead of regulations that will take effect in January 2018 requiring that all new taxis and private-hire vehicles in the city be able to run with zero emissions for at least 30 miles.  –The Guardian.

Chile – a new marine conservation park, one of the world’s largest, was announced.  The area will include Easter Island, or Rapa Nui, some 2,300 miles west of Chile’s capital, Santiago.  The Rapa Nui people have long petitioned Chile’s government to curb overfishing of species such as tuna.  A second park will include other islands where fishing disputes have occurred.  Together more than 386,000 square miles will be protected.  Globally, plans to protect more than 1 million square miles of ocean were announced in 2015 alone.  –Reuters, The Washington Post.

Worldwide – Maternal deaths declined by 45% between 1990 and 2013, the United nations notes.  (That’s the death of a woman while pregnant or within 42 days after the end of pregnancy).  A new report underscores the persistence of discrimination and violence against women but also notes key gains:  Women continue to marry a few years earlier than men, the report found.  But “women’s age at marriage has also increased, reflecting higher education levels, later enry into the labor force, as well as increased economic independence.” –United Nations.

PHOTOS OF THE DAY

A monkey is reflected on a pond while drinking water at Swayambhunath stupa, also know as Monkey Temple, in Kathmandu, Nepal. The letters in the background reads, ‘May peace prevail on earth’. Navesh Chitrakar/Reuters

Waves and high winds hit the sea wall and light beacon at Newhaven in south England, Britain, Wednesday. Toby Melville/Reuters

Market Closes for November 18^th, 2015

International Markets

Bonds

Currencies

Commodities

The political problem of mankind is to combine three things: economic efficiency, social justice, and individual liberty. –John Maynard Keynes, 1883-1946.

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose as Canadian Pacific Railway Ltd. rallied on merger prospects and Valeant Pharmaceuticals International Inc. rebounded from a two-year low.

     Canadian Pacific surged 5.6 percent to a three-week high as the railroad operator went public with its pursuit of Norfolk Southern Corp., wooing the U.S. company’s shareholders with an offer of about $28 billion that would create a transcontinental railroad. Raw-materials and energy producers advanced as oil recovered after briefly dipping below $40 a barrel in New York for the first time since August.

     The Standard & Poor’s/TSX Composite Index rose 119.58 points, or 0.9 percent, to 13,399.97 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has alternated between gains and losses for three days. It fell yesterday after snapping the longest losing streak in more than a decade Monday. The S&P/TSX has declined 8.4 percent this year, trailed only by Singapore and Greece among developed markets.

     Canadian equities have faltered this year amid declines in commodity and health-care stocks of at least 19 percent. The country’s equity market has been hampered by a slump in oil prices, slowing overseas growth and the prospect of an interest- rate increase from the Federal Reserve.

     Federal Reserve policy makers inserted language into their October statement to stress the potential for a December rate liftoff and largely agreed that the pace of increases would be gradual, according to minutes of the FOMC’s Oct. 27-28 meeting released Wednesday.

     Fed official Dennis Lockhart earlier said while he’s comfortable with higher rates this year, additional hikes will be slow and shallow. Investors are searching for clues to the Fed’s strategy for increasing interest rates, with the probability of a rate hike in December now at 66 percent.

     Valeant Pharmaceuticals jumped 3.6 percent, rebounding from the lowest since July 2013. Valeant, briefly the largest stock in Canada by market capitalization this year, has lost 72 percent from an Aug. 5 high amid pressure over how it prices its drugs. Concordia Healthcare Corp., which has dropped 57 percent since Sept. 4, surged 8.9 percent to a five-week high today.

     Teck Resources Ltd. added 1 percent after the diversified miner lowered its 2016 spending plan by C$650 million and said it will eliminate a further 1,000 jobs, including senior management positions. The latest cuts raise the total to about 2,000 in the past 18 months. The decision is a “major positive” for shares and should ease concerns about cash flow generation, according to a report from FBR Capital Markets analyst Lucas Pipes.

US

By Dani Burger and Oliver Renick

     (Bloomberg) — U.S. stocks rallied the most in almost a month as Federal Reserve meeting minutes signaled policy makers think the economy is strengthening enough to withstand higher interest rates as soon as next month, while stressing the pace of any increases will be gradual.

     Gains among banks and biotechnology companies led a rally as eight of the S&P 500’s 10 main industries rose more than 1.2 percent. A cluster of deal activity ranging from railroads to food manufacturers also helped lift equities Wednesday.

     The S&P 500 added 1.6 percent to 2,083.58 at 4 p.m. in New York, rising the most since Oct. 22. The Dow Jones Industrial Average climbed 247.66 points, or 1.4 percent, to 17,737.16. The Nasdaq Composite Index gained 1.8 percent. About 7.2 billion shares traded hands on U.S. exchanges, 3.9 percent below the three-month average.

     “Now the question is going to be what it should have been along — not when, but how far and how fast,” said John Canally, chief economic strategist at LPL Financial Corp. in Boston. “They’ve been trying to communicate not just that the Fed is going to hike in December, but that the dot plots path will be lowered, and that’s a good outcome for the market.”

     Fed officials inserted language into their October statement to stress that “it may well become appropriate” to raise the benchmark lending rate in December and largely agreed that the pace of increases would be gradual, minutes of the meeting showed. A majority of Fed officials have signaled they expect to raise interest rates this year for the first time since 2006.

     Equities rallied ahead of the minutes as policy makers earlier signaled confidence in the economy and stuck to the message that rate increases will not be hurried. The S&P 500 had fallen as much as 4 percent after Fed Chair Janet Yellen earlier this month reminded investors that raising rates in December was a “live possibility,” and jobs data showed the biggest increase in hiring this year. The gauge has since pared its drop since Yellen’s comments to a 1.2 percent decline.

     Federal Reserve Bank of Atlanta President Dennis Lockhart said today he’s comfortable with raising rates soon, and the path of increases will be shallow and slower than in the past. His remarks came during a panel at a Clearing House event in New York. Traders are pricing in a 66 percent probability of a move — odds that shot up after a stronger-than-expected October jobs report on Nov. 6.

     As policy makers assess the strength of the economy, data today showed new-home building declined more than projected in October, led by a slump in apartment construction. On the positive side, construction permits for single-family homes increased the most since 2007, indicating ground-breaking will rebound in coming months.

     “It’s the pace and the duration now that’s the topic of conversation as opposed to when liftoff will take place,” Kevin Mahn, president of Parsippany, New Jersey-based Hennion & Walsh Asset Management Inc., said in phone interview. “The next thing the bull market needs is reassurance from the Fed that the economy is on stable ground, and that will come in the form of a rate hike.”

     The Chicago Board Options Exchange Volatility Index fell 11 percent Wednesday to 16.85, the most since Oct. 22. The measure of market turbulence known as the VIX has rebounded about 12 percent in November after posting its biggest monthly drop ever in October.

     Among companies moving on corporate news, Apple Inc. climbed 3.2 percent after Goldman Sachs Group Inc. added the shares to its “conviction buy” list. Norfolk Southern Corp. gained 6.4 percent as Canadian Pacific Railway Ltd. pursues a merger with the railroad. Fairchild Semiconductor International Inc. rallied 8.5 percent after ON Semiconductor Corp. agreed to buy it for $2.4 billion. ConAgra Foods Inc. advanced 4 percent amid a plan to spin off its Lamb Weston food-service business.

     All of the S&P 500’s 10 main industries advanced, with health-care and financial shares the best performers, up more than 1.8 percent. Utilities and phone companies were the only groups rising less than 1 percent after erasing earlier declines.

     The Nasdaq Biotechnology Index climbed 2.9 percent to rise for a fourth day. Gilead Sciences Inc., Biogen Inc. and Celgene Corp. each added more than 3.4 percent. Allergan Plc led the S&P 500’s broader health-care group, advancing 4.5 percent.

     A rally in banks bolstered the financial group. Citigroup Inc. and Bank of America Corp. increased more than 2.4 percent, while the KBW Bank Index gained 2.1 percent as all 24 of its members rose.

     The benchmark’s technology sector climbed 1.6 percent, with another acquisition in the semiconductor group adding to the more than $90 billion of global chip deals in the past year. Fairchild Semiconductor rose to its highest price in more than five months. PMC-Sierra Inc. gained 1.9 percent after Microsemi Corp. raised its offer in a deal valued at $2.3 billion. Fairchild suitor ON Semiconductor dropped 7.9 percent, while Microsemi advanced 0.7 percent.                        

     Apple’s climb helped boost the sector’s performance. The tech giant is transitioning to an “Apple-as-a-service business model” to ease its dependence on selling hardware, according to Goldman analyst Simona Jankowski. Apple, the best performer in the Dow, rose the most in three weeks.

     The Nasdaq Internet Index increased 2 percent for its best session in more than three weeks. TripAdvisor Inc. surged 7.1 percent to pace the advance as travel-related companies rebounded. Amazon.com Inc. and Netflix Inc. rose more than 3 percent.

     Angie’s List Inc. jumped 9 percent to a 16 month high. The company rejected an unsolicited proposal from IAC/InteractiveCorp Tuesday, and people familiar with the matter said shareholders and the board need to review new Chief Executive OfficerScott Durchslag’s turnaround plan in the first quarter of next year before considering deals.

     The Dow Jones Transportation Average gained 1.7 percent as railroads rallied on Canadian Pacific’s interest in Norfolk Southern. Kansas City Southern and CSX Corp. advanced more than 4 percent, while Union Pacific Corp. increased 2.4 percent.

     Energy companies erased a 1.2 percent drop on Tuesday, overcoming oil’s swings between gains and losses. Consol Energy Inc., the S&P 500’s worst performer this year, jumped 7.7 percent for the index’s best climb today. Baker Hughes Inc. added 4.5 percent.

     Citrix Systems Inc. sank 10 percent, the most more than two years and the day’s worst performer in the S&P 500. The company announced on Tuesday plans to cut about 1,000 jobs as it plans to spin off its GoTo business of virtual meeting products.

     Staples Inc. and Target Corp. both sank after releasing quarterly results today. Target fell 4.3 percent to a one-year low after online sales growth slowed, underscoring the challenge of competing with Amazon. Staples Inc. lost 2.7 percent after its fourth-quarter forecast missed analyst expectations amid the impact from a stronger U.S. dollar.

     Qualcomm Inc. tumbled 9.4 percent to a four-year low after South Korea’s Fair Trade Commission accused the chipmaker of violating local competition law in the way it licenses technology to customers. Qualcomm called its practices “lawful and pro-competitive.”

     With earnings season coming to an end, 74 percent of companies in the S&P 500 that have reported results beat profit estimates, while only 44 percent exceeded sales projections. Analysts project profits for members of the benchmark dropped 3.7 percent, an improvement on a predicted 7.2 percent fall at the start of the season.
 

Have a wonderful evening everyone.

Be magnificent!

There will have to be rigid and iron discipline

before we achieve anything great and enduring,

and that discipline will not come by mere academic argument

and appeal to reason and logic.

Discipline is learnt in the school of adversity.

Mahatma Gandhi

As ever,

Carolann

A goal is a dream with a deadline.

          –Napoleon Hill, 1883-1970

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