December 14, 2015 Newsletter

Dear Friends,

Tangents:

The Poem

Selected by Natasha Tretheway, NY Times, December 13^th, 2015:  Reading this poem, I thought of Percy Bysshe Shelley’s notion that “poetry is a mirror which makes beautiful that which is distorted.”  Here, the less-than-lovely pigeons – “huddled” scavengers “the color of sullied steel” – suddenly ascend to the sublime.

PIGEONS
     -by Danusha Laméris

Because they crowd the corner
of every city street,
Because they are the color
of sullied steel,
because they scavenge,
eating every last crust,
we do not favor them.

They raise their young
huddled under awnings
above the liquor store

circle our feet, pecking at crumbs
pace the sidewalk
with that familiar strut.

None will ever attain greatness.
Though every once in a while
in a tourist’s blurry snapshot
of a grand cathedral

they rise into the pale gray sky
all at once.

THIS DAY IN HISTORY:

On Dec. 14, 1981, Israel annexed the Golan Heights, seized from Syria in 1967.

1861 – Prince Albert, husband of Britain’s Queen Victoria, died suddenly in London at the age of 42, propelling the Queen into lifelong mourning.

1911 – Norwegian explorer Roald Amundsen became the first man to reach the South Pole.

1946 – The United Nations General Assembly voted to establish the U.N. headquarters in New York City.

1979 – The album “London Calling” by the Clash was released.

PHOTOS OF THE DAY

The Eiffel Tower is engulfed in early morning fog in Paris Monday. Gonzalo Fuentes/Reuters

Christmas lights and a lit Christmas tree adorn the Vittoriano monument, the tomb of the unknown soldier, in downtown Rome Monday.Gregorio Borgia/AP

Market Closes for December 14^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

     (Bloomberg) — Canadian stocks fell to their lowest level in more than two years as commodity prices continued to decline ahead of the U.S. Federal Reserve’s rate hike decision on Wednesday.

     The Standard & Poor’s/TSX Composite Index declined 0.7 percent to 12,695.49 at the close in Toronto, its lowest since Oct. 8, 2013. The gauge tumbled 4.3 percent last week, its third consecutive week of declines.

     As the Fed’s decision on Wednesday looms closer, a Bloomberg basket of prices for natural resources from copper to oil and gold extended its decline this year to 25 percent. Canada’s equity benchmark — 30 percent of which is commodity producers — has had the third worst returns year to date of all developed nations, only faring better than Greece and Singapore.

     Raw-materials producers lost 5 percent after Macquarie Group Ltd. said there are still doubts over improving demand for metals. First Quantum Minerals Ltd., Centerra Gold Inc. and Teck Resources Ltd. sank at least 6 percent. Gold decreased 1 percent, while copper lost 0.5 percent. The S&P/TSX gauge of commodity producers has fallen 25 percent in 2015.

     Energy producers in the S&P/TSX slid 0.7 percent even as oil rebounded after prices fell below $35 a barrel in New York for the first time since 2009. Encana Corp. and Enerplus Corp. lost more than 7.2 percent. Baytex Energy Corp. fell 5 percent to a record low, while Bankers Petroleum Ltd. decreased 4.1 percent to its lowest level since February 2009.

     Valeant Pharmaceuticals International Inc. climbed, as an index of S&P/TSX health-care companies rose 0.7 percent higher. Rogers Communications Inc. gained 1.1 percent, as Canadian phone companies advanced 1.3 percent.

US

By Anna-Louise Jackson

     (Bloomberg) — U.S. stocks rose, surging in the final minutes of trading as a rebound in crude oil overshadowed credit market turbulence and weakness in commodity shares before the Federal Reserve prepares to raise interest rates.

     The Standard & Poor’s 500 Index wiped out a 1 percent drop that briefly took the benchmark to its lowest since Oct. 6, as Chevron Corp. and Exxon Mobil Corp. rallied more than 2.2 percent. Amazon.com Inc. and Microsoft Corp. added at least 2 percent to help pace Monday’s advance.

     The S&P 500 rose 0.5 percent to 2,021.94 at 4 p.m. in New York, rebounding from its worst week since August. Equities erased earlier declines as crude oil rose 1.9 percent after swinging between gains and losses. The Dow Jones Industrial Average added 103.29 points, or 0.6 percent, to 17,368.50. The Nasdaq Composite Index gained 0.4 percent. About 8.9 billion shares traded hands on U.S. exchanges, 24 percent above the three-month average.

     “Right now the focus is macroeconomic, the Federal Reserve and commodities prices,” said John Carey, a fund manager at Pioneer Investment Management Inc. in Boston, which oversees $244.1 billion globally. “We’re on hold until Wednesday.”

     Stocks worldwide have sputtered this month, as the prospects for a Fed rate increase as soon as Dec. 16 and a drop in oil sparked a selloff in riskier assets. The deepening rout on commodities markets amplified concern that struggling resource producers won’t be able to stay solvent, while weakness in high-yield credit markets has sparked fear of contagion.

     Bond market anxiety has caught the notice of equity investors after Third Avenue Management froze redemptions at a high-yield mutual fund last week, and Lucidus Capital Partners liquidated its entire high-yield portfolio. The SPDR Barclays High Yield Bond ETF slipped 0.8 percent, trimming an earlier 1.4 percent drop, after its biggest one-day drop in four years on Friday. The iShares iBoxx $ High Yield Corporate Bond ETF fell 0.9 percent to its lowest since 2009.

     The S&P 500 slid to a two-month nadir on Friday, rounding off its first weekly drop in four as commodity and financial shares led the retreat. Asset managers extended declines today after a rout Friday following Third Avenue’s move to freeze redemptions in its $789 million Focused Credit Fund. Franklin Templeton Funds parent Franklin Resources Inc. lost 2.9 percent, while Legg Mason Inc. declined 3.4 percent.

     Nerves were further frayed just after 10 a.m. in New York when benchmark indexes such as the S&P 500 and Dow average briefly surged and retreated. In two minutes starting at 10:14 a.m., the SPDR S&P 500 ETF Trust exchange-traded fund jumped about 1 percent on volume of about 10 times the day’s earlier rate. Then it erased the move.

     “It’s clear somebody had a mistake, whether it’s a computer or a human,” said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee. “In these kind of illiquid market days when everybody’s just kind of nervous, it can disjoint the market for an instant. It’s something we deal with a lot these days.”

     The Chicago Board Options Exchange Volatility Index fell 6.8 percent Monday to 22.73, reversing an earlier 10 percent climb. The measure of market turbulence known as the VIX surged 65 percent last week, the most since a summer market swoon led the gauge to a record monthly jump in August.

     The 2.8 percent decline for the S&P 500 in December is so far proving an exception to a historical trend of strong performance for the month, and would mark the worst end to a year since 2002. The benchmark is 8.3 percent above an August low, after rebounding as much as 13 percent from a summer selloff. Its recent drop has dragged the gauge closer to levels that chart analysts call oversold. Its relative-strength index is the lowest since September.

     Next year isn’t looking too bright for U.S. equity investors, with valuations likely to contract after the Fed’s rate increase. Past hikes have almost always put a ceiling on S&P 500 price-earnings ratios, and this would come at a time when profits are already in decline. Such a combination hasn’t occurred in five decades.

     Traders are pricing in a 78 percent chance that the Fed’s meeting will confirm Chair Janet Yellen’s belief that the U.S. economy is strong enough to withstand the first increase in borrowing costs since 2006. Investors have wavered between optimism about the U.S. and concern that a slowdown in China will damp global growth prospects.

     There will be few economic cues to go on before the Fed’s announcement Wednesday, with reports on U.S. housing starts and industrial production scheduled for the day of the decision.

     FedEx Corp., Oracle Corp., General Mills Inc. and homebuilder Lennar Corp. are due to report quarterly results this week. With a little more than two weeks left in the fourth quarter, analysts forecast a 5.8 percent drop in S&P 500 companies’ profits for the period, after a 3.8 percent decline last quarter.

     In Monday’s trading, nine of the S&P 500’s 10 main industries climbed, led by phone, energy and consumer staples companies. Raw-materials shares lost 1.4 percent as the group fell for a third consecutive day to the lowest level in two months.

     “There are a lot of fireworks here coming down to the wire with the Fed,” said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management Inc. “Oil seems to be the big story today. If oil does show some stability, you’ve got people who would buy on a bounce.”

     Oil and gas producers advanced as crude rebounded on speculation hedge funds were buying back some of their record bearish bets after prices dropped below $35 a barrel in New York for the first time since 2009. ConocoPhillips and Chevron climbed more than 2.9 percent, after losing at least 2.2 percent on Friday. Diamond Offshore Drilling Inc. led the group with a 3.6 percent gain.

     Technology shares erased an earlier drop as Apple Inc. pared its decline after losing as much as 3 percent. Morgan Stanley cut its 2016 iPhone sales outlook while JPMorgan Chase & Co. noted signs of weakness in the company’s supply chain. Facebook Inc. and Google parent Alphabet Inc. added at least 1.6 percent.                    

     Financial companies closed little changed. In addition to the retreat among asset managers, American International Group Inc. and Hartford Financial Services Group Inc fell at least 1.4 percent. Those declines were offset as CME Group Inc. and Charles Schwab Corp. rose more than 1.5 percent.

     DuPont Co. and Dow Chemical Co., which last week agreed on the largest-ever chemicals merger, lost more than 3.5 percent. Dan Loeb, the founder of hedge fund Third Point which holds a 2 percent stake in Dow, is calling for the removal of Dow Chemical Co. Chief Executive Officer Andrew Liveris. Loeb supports the merger.

     Newmont Mining Corp. and Freeport-McMoRan Inc. fell at least 4 percent as gold and copper prices declined.

Have a wonderful evening everyone.

Be magnificent!

The like and dislike is the result of my culture, my training, my associations,

my inclinations, my acquired and inherited characteristics.

It is from that center that I observe and make my judgments,

and the observer is separate from the thing he observes.

Krishnamurti

As ever,

Carolann

Success is getting what you want.  Happiness is wanting what you get.

                                                       -Dale Carnegie, 1888-1955

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