December 16, 2015 Newsletter

Dear Friends,

Tangents:

Good News:

Indonesia “Loon balloons” could bring the Internet to at least 250 million people.  Alphabet, Google’s corporate parent, announced last month that it has secured a deal with three major Indonesian telecom firms to begin trials in 2016.  The project, developed in Google’s labs, is aimed at using helium balloons – at least somewhat controllable – to allow wireless service to penetrate remote rural areas. –MIT Technology Review.

Massarosa, Italy: Cycling to work can pay, literally, under a yearlong pilot program in this city north of Pisa.  The city council, using funds generated by traffic tickets, will be paying 50 commuters a small per-kilometer stipend – as much as 50 euros a month – for switiching from cars to bicycles.  A smartphone application is used to record the distance travelled daily. –BBC.

Numbers:

45 Billion: Value (in US dollars) of the Facebook stock that Mark Zuckerberg and his wife, Priscilla Chan, have pledged to donate to philanthropy and public advocacy causes during their lifetimes.

217:  Number of Michelin stars awarded to restaurants in Tokyo, according to Michelin’s just published 2016 guide, thus reaffirming that city’s status as the world’s culinary capital.

On This Day In History:

1770- Beethoven was born.

1773 – The Boston Tea Party happened on this day in 1773. A group of Massachusetts colonists disguised as Mohawk Indians boarded three British tea ships in Boston Harbor and dumped 342 chests of tea into the water.

1775 – Jane Austen was born.

On Dec. 16, 1950, President Truman proclaimed a national state of emergency in order to fight “Communist imperialism.”

1809 – Napoleon Bonaparte was divorced from the Empress Josephine by an act of the French Senate.

1944 – The Battle of the Bulge during World War II began as German forces launched a surprise counterattack against Allied forces in Belgium.

1985 – Reputed organized-crime chief Paul Castellano was shot to death outside a New York City restaurant.

1990 – Jean-Bertrand Aristide was elected president of Haiti in the country’s first democratic elections.

1998 – President Bill Clinton ordered a sustained series of airstrikes against Iraq by American and British forces in response to Saddam Hussein’s continued defiance of U.N. weapons inspectors.

PHOTO OF THE DAY

HERE WE ARE AT OUR 2015 OFFICE CHRISTMAS PARTY, THE BENGAL LOUNGE, EMPRESS HOTEL:

 
Carolann, Karen, Bonnie & Leyla – December 4^th, 2015

A good time was had by all!

Market Closes for December 16^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Dani Burger

     (Bloomberg) — Canadian stocks surged the most since September, as the end of seven years of near-zero interest rates in the U.S. bolstered confidence that the economy of Canada’s largest trading partner is on a steady growth path.

     The Standard & Poor’s/TSX Composite Index advanced 1.9 percent to 13,166.08 at 4 p.m. in Toronto, the biggest gain in 11 weeks. The gauge slumped on Monday to its lowest level since October 2013.

     Equities rallied as the Federal Open Market Committee boosted rates today for the first time since 2006. All 10 groups in the benchmark advanced today, with health-care stocks leading gains. Raw-material producers advanced 3.9 percent, as gold, silver and copper prices rallied. OceanaGold Corp., Barrick Gold Corp. and Lundin Mining Corp. rose as much as 7.8 percent.

     Canadian commodity and financial shares tumbled after the Fed didn’t raise rates in September, partly due to a slowdown in China, the world’s largest consumer of commodities. The concerns have weighed on Canada’s resource-rich equity gauge, making it third worst performer this year among developed-nation benchmarks.

     Canadian Pacific Railway Ltd. rose 2.9 percent after raising its takeover offer for Norfolk Southern Corp. The company is attempting to persuade Norfolk Southern to accept a proposal to create a transcontinental railroad.

     Valeant Pharmaceuticals International Inc. jumped 8.1 percent as it attempted to restore confidence during an investor conference Wednesday. The drugmaker said that the fallout with Philidor Rx Services will cut hundreds of millions of dollars from earnings this quarter and next year.

US

By Oliver Renick and Lu Wang

     (Bloomberg) — U.S. stocks rallied as the Federal Reserve ended seven years of near-zero interest rates, and assured investors that the world’s largest economy is resilient enough to withstand future increases in borrowing costs at a gradual pace.

     Equities extended gains following the central bank’s move, pushing the Standard & Poor’s 500 Index to its biggest three-day rally since Oct. 5 as the benchmark rebounded from its worst weekly drop since August. Gains were widespread with nine of the gauge’s 10 main industries rising more than 1 percent after Fed Chair Janet Yellen expressed confidence in the economic outlook.

     The S&P 500 jumped 1.5 percent to 2,073.07 at 4 p.m. in New York, rising for three consecutive days for the first time since October and erasing losses for the year. The benchmark surged above its average prices during the past 50 and 200 days. The Dow Jones Industrial Average added 224.18 points, or 1.3 percent, to 17,749.09. The Nasdaq Composite Index gained 1.5 percent. About 8.6 billion shares traded hands on U.S. exchanges, 18 percent above the three-month average.

     “This is a very dovish rate increase,” said Stephen Wood, who helps manage $237 billion as chief market strategist for North America at Russell Investments in New York. “It came right in in line with expectations and markets appear to like that. It’s the Fed giving its seal of approval on the economy and financial conditions, but also the Fed didn’t surprise with a more aggressive future path.”

     The Fed raised rates in a widely telegraphed move while signaling that the pace of subsequent increases will be “gradual” and in line with previous projections. The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent.

     Policy makers separately forecast an appropriate rate of 1.375 percent at the end of 2016, the same as September, implying four quarter-point increases in the target range next year, based on the median number from 17 officials.

     “The committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective,” the FOMC said in a statement. The Fed said it raised rates “given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes.”

     The action ends an era of unprecedented monetary stimulus that pushed stocks higher by more than 200 percent and added $15 trillion in value during the 6 1/2 year bull market. Investors will now find out how much stocks are worth in the absence of Fed support, and how high borrowing costs will be without the central bank stoking growth as aggressively.

     For equities, history suggests two immediate consequences from tightening: higher volatility and lower valuations, meaning earnings and ultimately the economy are left to drive prices.

     Investors have spent the second half of 2015 coping with the first correction in four years and an increase in volatility that by some measures was a record. From plunging oil to emerging-market turmoils and the selloff in junk bonds, anticipation of the Fed’s retreat added to anxiety that’s already pushed a measure of volatility above levels at the start of past Fed liftoffs.

     “This was probably the most expected rate change in the history of the Fed,” said Larry Peruzzi, managing director of international equities at Mischler Financial Group Inc. in Boston. “Markets had pretty fairly readjusted their pricing on the equity and fixed-income side going into this, and the optimism now is in the wording warranting gradual interest rate increases as opposed to measured ones.”

     While policy makers have deemed the economy ready for higher borrowing costs, they continue to stress that progress in data will dictate the ultimate pace of rate increases. A report today showed new-home construction rebounded in November, led by gains in single-family dwellings. Work began on the most stand- alone houses since January 2008, and permits for similar projects reached an eight-year high.

     A separate gauge showed manufacturing stagnated last month, held back by less production of durable goods such as automobiles and metals that reflects weak global demand.                         

     The Chicago Board Options Exchange Volatility Index fell 15 percent Wednesday to 17.86, extending its decline this week to 27 percent, on track for the steepest drop since July. The measure of market turbulence known as the VIX surged 65 percent last week, the most since a record monthly jump in August.

     Nine of the S&P 500’s 10 main industries rose, with utilities up 2.6 percent, the group’s biggest advance in nine months. Phone companies and consumer staples rose at least 1.9 percent. Energy shares fell along with crude oil.

     CVS Health Corp. climbed 5.4 percent, the most in four years, to lead consumer staples. The biggest provider of prescription drugs in the U.S. raised the low end of its 2016 earnings forecast and increased its dividend. Walgreens Boots Alliance Inc. added 3.2 percent.

     Honeywell International Inc. jumped 5.7 percent, its strongest gain in more than three years. The maker of jet engines and gas detectors forecast sales and earnings above analysts’ expectations, defying an industrial slump as it cuts costs and markets new products. General Electric Co. rallied 2.2 percent to a seven-year high after projecting the return of about $26 billion in cash to investors through dividends and stock repurchases in 2016.

     Sustainable energy power generator NextEra Energy Inc. jumped 5 percent, the most in six years, to help boost the utilities group. U.S. lawmakers agreed to extend a key federal tax credit and also provided a five-year retroactive extension for the production tax credit, which benefits wind-power developers and expired at the end of 2014.

     First Solar Inc. added 9.7 percent and SolarCity Corp. soared 34 percent, the most in two years, following the extension on the tax credits, and as California regulators upheld policies that promote the use of rooftop solar panels.

     West Texas Intermediate crude-oil futures lost 4.9 percent, dragging energy producers down for the first time in three days. Pioneer Natural Resources Co. fell 7 percent, while Marathon Oil Corp. and Devon Energy Corp. dropped at least 4 percent. A report today showed U.S. crude inventories climbed to the highest level for this time of year since 1930.
 

Have a wonderful evening everyone.

Be magnificent!

The state of mind is a vicious circle.  It creates problems for itself, and then tries to resolve them.

Swami Prajnanpad

As ever,

Carolann

I never wanted to be famous.  I only wanted to be great.

                                          -Ray Charles, 1930-2004

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