January 15, 2016 Newsletter

Dear Friends,

Tangents:

Martin Luther King’s birthday today.  The US markets will be closed on Monday for Martin Luther King Day.

From The Book of Holidays Around the World:

In 1955, in Montgomery, Alabama, a black woman named Rosa Parks refused to give up her bus seat to a white passenger.  She had defied segregation, which required blacks to sit in the rear of southern buses, and she was fined $14.  The incident led to a boycott  of the city’s buses, and Martin Luther King Jr, a minister who was born on January 15, 1929, was chosen to lead it.  A year later, the city’s buses were integrated.  King  subsequently organized the Southern Christian Leadership Conference to promote civil rights and in 1964 won the Nobel Peace Prize.  By the age of 39, when he was assassinated, he had inspired millions to share his dream of equality.

From Martin Luther King Jr:

Our lives begin to end the day we become silent about things that matter.

Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree.
                                                                  -MLK, quoting Martin Luther

A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual doom.
                                                                         -The Trumpet of Conscience, 1967

In the end, we will remember not the words of our enemies, but the silence of our friends.
                                                                               –The Trumpet of Conscience, 1967

Freedom is never voluntarily given by the oppressor; it must be demanded by the oppressed.
                                                                        -Letter From Birmingham Jail, April 16, 1963

I said to my children, “I’m going to work and do everything that I can to see that you get a good education.  I don’t ever want you to forget that there are millions of God’s children who will not and cannot get a good education and I don’t ever want you feeling that your are better than they are.  For you will never be what you ought to be until they are what they ought to be.”
                                                                                 -MLK, January 7, 1968

It may be true that the law cannot make a man love me, but it can keep him from lunching me, and I think that’s pretty important.
                                                             -MLK, Wall Street Journal, November 13, 1962

www.thekingcenter.com

PHOTOS OF THE DAY

A section of ‘The Travellers’ by Cedric Le Borgne is seen suspended above St. James’s Square before being illuminated as part of the ‘Lumiere’ festival in London Thursday. The event, which takes place over four evenings in the capital, sees the illumination of famous landmarks and the display of artworks by international artists. Toby Melville/Reuters

Entomologist Anna Platoni poses with a blue morpho and pale owl butterflies on a floral hat made and designed by florist Emma Reynolds to celebrate the opening of ‘Butterflies in the Glasshouse’ at RHS Garden Wisley near Woking in Britain Friday. At the annual event, hundreds of butterflies from 40 different species, including the king swallowtail and malay lacewing, are released in the glasshouse from pupae. Luke Macgregor/Reuters

Market Closes for January 15^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Oliver Renick and Gerrit De Vynck

     (Bloomberg) — Canadian stocks tumbled to the lowest in 2 1/2 years as a rally on Thursday proved short-lived amid a rout in energy companies and the longest losing streak in history for the nation’s currency.

     The Standard & Poor’s/TSX Index declined 2.7 percent to 12,001.33 at 12:21 p.m. in Toronto, the lowest since June 2013. The rout erased a 1.4 percent surge yesterday. The gauge’s 7.9 percent plunge this year has wiped out about $150 billion in equity value. 

     “This is one of the largest peak to trough declines in oil prices in my lifetime,” Martin Pelletier, managing director and portfolio manager at TriVest Wealth Counsel in Calgary. “It is profound, it is material. It is something we can’t disregard.”

     Canadian shares joined a worldwide rout that has given global stocks the worst start to a year on record. Oil’s slip below $30 a barrel triggered selling Friday after China’s equities slipped into a bear market despite state intervention. Currencies of resource-producing nations plunged.

     Energy companies slid 4.1 percent to lead declines on Friday. Every stock in the 55-member group fell, with MEG Energy Corp. and Baytex Energy Corp. losing more than 10 percent.

     Health-care shares lost 3 percent, led by drops in ProMetic LifeSciences Inc. and Concordia Healthcare Corp. The group that includes Valeant Pharmaceuticals International Inc. has erased 13 percent so far this year, the worst sector in the S&P/TSX.

     Gold companies, which rallied earlier this year as investors sought a haven, were among the few stocks to gain Friday as the precious metal added 1.1 percent.

     The country’s currency weakened for an 11th straight day against its U.S. peer, the most since it broke its peg to the greenback in 1970, to trade at a 13-year low.

     “When people are very negative and there’s a lot of emotion flowing, people tend to make irrational decisions,” Irwin Michael, portfolio manager at Toronto-based I.A. Michael Investment Counsel Ltd., said by phone. “We just have to sit tight, let this emotion work off.”

US

By Dani Burger

     (Bloomberg) — U.S. stocks dropped, with the Standard & Poor’s 500 Index falling to its lowest level since Aug. 25, as the rout in oil persisted and data showing falling retail sales rekindled concern about the health of the economy.

     The S&P 500 pared earlier losses that sent it 3.3 percent lower, while technology and energy stocks led losses today.

Goldman Sachs Group Inc. fell 3.6 percent after agreeing to settle a U.S. probe into its handling of mortgage-backed securities, a move that will cut its fourth-quarter profit by about $1.5 billion. Citigroup Inc. and Wells Fargo & Co. lost at least 3.6 percent even after reporting quarterly earnings that topped projections. Wal-Mart Stores Inc. dropped 1.8 percent after saying it plans to close 269 stores.

     The worst start to a year in U.S. equities on record has left them trading at the most attractive level versus bonds in a year based on one valuation measure. Dividend yields in the S&P 500 have climbed 30 basis points above the yield offered by 10- year Treasuries, a reversal from just last week when the payout from bonds was higher. The S&P 500’s multiple based on profits is also at a cheaper level. The gauge is trading at 16.8 times reported profits, a 8.6 percent discount to its average multiple over the last year.

     The S&P 500 dropped 2.2 percent to 1,880.29 at 4 p.m. in New York, after earlier falling to the lowest level since April 2014. Volume on U.S. exchanges was 46 percent higher than the three-month average. The Dow Jones Industrial Average slid 391 points, or 2.4 percent, to 15,988.08, while the Nasdaq Composite index dropped to its lowest level since October 2014. U.S. equities markets are closed Monday for a federal holiday.

     “The laser focus with the markets is on oil and weaker oil bleeds beyond the energy sector,” said Joe Quinlan, New York- based chief market strategist at U.S. Trust, Bank of America Private Wealth Management. Quinlan, who recommends buying beaten down stocks that have growth potential like in defense spending, water infrastructure and global health care, also said, “This is one of these market moments when fear trumps all rationality. We will have to work through this panic period to move forward.”

     Oil plummeted to fresh new lows, hovering around $29 a barrel, and the Shanghai Composite Index entered a bear market. Concern over China’s slowdown and deepening crude losses have dominated investor sentiment in 2016, prompting a 8 percent plunge in the S&P 500. Losses pushed Tobias Levkovich, chief U.S. equity strategist at Citigroup, to trim his 2016 target on the S&P 500 yesterday. The measure posted its third straight weekly decline.

     The Chicago Board Options Exchange Volatility Index jumped 13 percent to 27.02. The measure of market turbulence known as the VIX has surged 48 percent so far in 2016.

     Corporate earnings may offer cues on the strength of the U.S. recovery, with seven S&P 500 companies posting results today. Analysts project earnings for firms on the gauge fell 6.7 percent in the fourth quarter, and downgrades to global profit growth haven’t been this bad in seven years.

     Stock index futures extended declines earlier after reports showed retail sales decreased in December to cap the weakest year since 2009 and a Fed gauge of manufacturing in New York slumped. The 0.1 percent drop in retail sales matched the median forecast of economists surveyed by Bloomberg. The New York Fed’s Empire manufacturing index plunged to minus 19.37, lower than the minus 4 economists had forecast.

     “The growth picture in the U.S. is getting cloudier, and the fact that the Fed tightened in a weak environment is certainly not helping,” said Krishna Memani, chief investment officer at Oppenheimer Funds Inc. in New York. “The data is clearly supporting how the markets are feeling at the moment.”

     The Fed has stressed the pace of further rate increases will be gradual, but data-dependent. Traders are pricing in about a 30 percent chance of the central bank acting in March, while odds for an increase this month have stayed low since the December liftoff.

     Intel Corp. dropped 9.1 percent after its quarterly sales forecast missed estimates.

     BlackRock Inc. fell 4.3 percent after the world’s largest money manager reported fourth-quarter earnings that missed analysts’ estimates as rising expenses offset higher revenue.

     Marathon Oil Corp. and Transocean Ltd. retreated 6.5 percent or more. All energy stocks in the S&P 500 except three declined today. Goldman Sachs said in a report that oil will turn into a new bull market before the year is out as the price rout shuts down production, putting the U.S. shale-oil boom into reverse in the second half of the year. As U.S. production slumps by 575,000 barrels a day, global oil markets will tip from surplus to deficit, the bank said in a report.

Have a wonderful weekend everyone.

Be magnificent!

I have always fought not to project but to be myself.

To retain my own scale, which is a dot, but a vibrating dot, a pulsating dot that is what I’d like to be.

I would like to remain that pulsating dot

which can reach out to the whole world, to the universe.

Chandralekha

As ever,

Carolann

Wealth consists not in having great possession, but in having few wants.

                                                                -Epicetus, 55 AD – 135 AD

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