June 14, 2016 Newsletter

Dear Friends,

Tangents:

In the NY Times last Sunday, excerpts from some of the commencement speeches given over the past few weeks as thousands of college students graduated are cited, and, for the most part, had  a fairly common theme: Times are Tough, but Take Heart.

University of California, Berkeley
Sheryl Sandberg, COO, Facebook (Ms. Sandberg’s husband died suddenly last year).
“For many months afterward, and at many times since, I was swallowed up in the deep fog of grief – what I think of as the void –an emptiness that fills your heart, your lungs, constricts your ability to think or even to breathe.
Dave’s death changed me in very profound ways.  I learned about the depths of sadness and the brutality of loss.  But I also learned that when life sucks you under, you can kick against the bottom, break the surface, and breathe again.  I learned that in the face of the void – or in the face of any challenge – you can choose joy and meaning.”

University of Pennsylvania
Lin-Manuel Miranda
Creator of Hamilton
“In a year when politicians traffic in anti-immigrant rhetoric, there is also a Broadway musical reminding us that a broke, orphan immigrant  from the West Indies built our financial system.  A story that reminds us that since the beginning of the great unfinished symphony that is our American experiment, time and time again, immigrants get the job done.”

Harvard University
Stephen Spielberg
Filmmaker
“And I want to be clear that your intuition is different from your conscience.  They work in tandem, but here’s the distinction:  Your conscience  shouts, ‘Here’s what you should do,’ while your intuition whispers, ‘Here’s what you could do.’  Listen to that voice that tells you what you could do.  Nothing will define your character more than that.”

Washington University
John Lewis
Congressman and civil rights leader
“On May 20, 1961, the same year that President Barack Obama was born, some of us on the freedom rides, black and white college students, arrived in Montgomery, Ala., at the Greyhound bus station.  We were met by an angry mob.  We were beaten.  We were left bloody.  We were left unconscious, some of us.  And later, we traveled by bus to Mississippi and other parts of the South where we were arrested and jailed.
 We din’t give up.  We didn’t give in.  We didn’t lose faith.  We kept our eyes on the prize.  And as students, as graduates,  you must keep your eyes on the prize.  You have a moral obligation, a mission and a mandate to do your part.  You must play a role, help to redeem the soul of America, help create a beloved America, a beloved world wher no one is left our or left behind because of their race or their class.”

On this day in…

1777 – the Continental Congress adopts the Stars and Stripes as the nation’s flag.

1851 – Province of Canada issues 12 penny Queen Victoria stamp.

1841 – Lord Sydenham opens the Province of Canada’s first Parliament.

1919 – Alcock and Brown leave St. John’s on the first nonstop transatlantic flight.

PHOTOS OF THE DAY

Britain’s Prince William and his wife Kate, Duchess of Cambridge, sign a book of condolences for the victims of the shootings at a gay nightclub in Orlando at the US Embassy in London on Tuesday. Philip Toscano/Reuters

Racegoers are decked out for the Royal Ascot horse races at the Ascot Racecourse in Britain on Tuesday. Toby Melville/Reuters

Market Closes for June 14^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Number of the Day
– 0.001%
The yield Tuesday on the 10-year government debt of Germany, the first time it dipped below zero.

Canada

By Dani Burger and Eric Lam

     (Bloomberg) — Canadian stocks slumped a fifth day, the longest losing streak in four months, as riskier assets retreated ahead of key central-bank meetings this week and Britain’s vote on its membership of the European union.

     The S&P/TSX Composite Index tumbled 0.8 percent to 13,884.23 at 4 p.m. in Toronto, extending losses after opening little changed in the morning. The index has lost 3.4 percent over five days, the biggest drop over that stretch of time since Feb. 11.

     Global stocks declined on Tuesday with the MSCI All-Country World Index posting its worst four days since January, as investors grow increasingly cautious on the looming Brexit vote and volatility ahead from U.S. elections and Federal Reserve rate decisions.

     Canadian stocks have gained 6.7 percent this year, lifted by the rebound in commodity-sensitive producers. Raw material and energy producers have gained the most in the index year to date, posting advances of 42 percent and 14 percent respectively. That’s put the S&P/TSX within striking distance of beating New Zealand’s S&P/NZX 50 Index as the top performer in 2016 among developed nations.

     Financial shares and raw-material producers contributed the most to declines on Tuesday. Royal Bank of Canada dropped 1.8 percent. The Bloomberg Commodities Index retreated for the third time in four sessions with base metals producers First Quantum Minerals Ltd. and Teck Resources Ltd. slumping more than 4.1 percent.

     Energy producers slipped 0.6 percent as crude prices in New York dropped. Oil has fallen for four days. Global oil markets will be almost balanced next year as demand continues to rise faster than output, while the current oversupply is much smaller than previously thought, the International Energy Agency said.

     Seven of 10 industries retreated in the S&P/TSX on trading volume 2 percent lower than the 30-day average. Telecommunications and health-care stocks led gains. Telus Corp, the telephone stock, rose 1.6 percent after it said it is buying back as much as 1.58 million shares through private agreements with a third-party seller.

     Valeant Pharmaceuticals International Inc. rose 1.4 percent, ending the day higher after swinging between gains and losses. Valeant is working with advisers at Morgan Stanley as it weighs the sale of dermatology units to reduce debt and raise cash, according to people familiar with the matter. The embattled drugmaker also hosted its annual meeting. Valeant stock remains down more than 90 percent from an August peak.

US

By Joseph Ciolli

     (Bloomberg) — U.S. stocks retreated for a fourth day, the longest since February, amid growing uncertainty about the U.K.’s future in the European Union and as investors awaited Wednesday’s Federal Reserve announcement.

     Equities staged a late rebound, surging from the day’s lows in the final hour to pare much of the session’s losses that reached as much as 0.7 percent in the S&P 500 Index. Banks dropped on speculation low rates will continue to weigh on earnings, while haven buying boosted the dollar, dragging down raw-material producers. Investors seeking safety gravitated to the high dividend yields offered by utilities and phone companies.

     The S&P 500slipped 0.2 percent to 2,075.32 at 4 p.m. in New York, remaining at a three-week low. The gauge dropped below its average price during the past 50 days, which then became the ceiling on the late-day recovery. The Dow Jones Industrial Average declined 57.66 points, or 0.3 percent, to 17,674.82, after falling as much as 136 points. The Nasdaq Composite Index lost 0.1 percent. About 7.4 billion shares traded hands on U.S. exchanges, 7 percent above the three-month average.

     “It was nice to see a good retail sales number, but folded on top of that you have Brexit, speculation around the Fed and the market still near some highs,” said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion. “That’s causing investors to remain cautious. The news cycle has been taken over by what the Fed is going to do.”

     The CBOE Volatility Index fell 2.2 percent Tuesday to 20.50 on the late-day comeback, halting its longest stretch of gains since August. The measure of market turbulence known as the VIX erased a 5.7 percent climb today, after jumping 23 percent Monday, the most this year.

     The bout of selling is occurring just days after the S&P 500 hit its highest in almost 11 months, buoyed by optimism that low rates, steady job gains and modest growth would continue to support rising stock prices. Sentiment has shifted, with the potential fallout from a June 23 vote on Britain’s membership of the EU increasingly unsettling global markets. Britain’s largest-selling newspaper now backs a so-called Brexit, while five polls in the past 24 hours put the “Leave” campaign ahead of “Remain.”

     As policy makers and investors scrutinize data to weigh U.S. growth, a report today showed retail sales rose more than forecast in May, indicating consumer spending will help boost second-quarter growth. A separate gauge showed inflation pressures are building. The costs of goods imported into the U.S. climbed 1.4 percent in May, the biggest gain in four years.

     Although traders are pricing in zero chance of a rate move tomorrow, Chair Janet Yellen’s commentary afterward will be parsed for hints on the trajectory of borrowing costs. At least even odds for a rate increase have been pushed out to February 2017.

     The S&P 500 had rallied as much as 16 percent from a 22- month low in February to within 0.6 percent of an all-time high, before its four-day slide amid growth worries and Brexit anxiety. The benchmark is less than 3 percent from its record set nearly 13 months ago, and has gone the longest without a fresh high outside of a bear market since 1984.

     “Brexit is adding fuel to the fire for risk-averse investors,” said Jasper Lawler, an analyst at CMC Markets Plc in London. “Markets are already worried about slowing global growth and the inability of central-bank policy to stem the decline. Global growth concerns are present because we don’t know where the Fed is on that, but depending on the language they use, this could cause the market to gain again.”

     In Tuesday’s trading, six of the S&P 500’s 10 main industries rose, led by gains of 0.5 percent in phone companies and utilities. Consumer staples added 0.3 percent, while technology, health-care and industrials all edged up less than 0.2 percent. Financial shares dropped 1.5 percent and raw- materials lost 0.8 percent.                       

     Credit-card companies were hammered, leading the slide in financials as Synchrony Financial tumbled 13 percent near a four-month low. The issuer of private-label cards said it was setting aside more money for loan losses. Capital One Financial Corp. fell 6.6 percent, the worst since July, and American Express Co. decreased 4.1 percent to the lowest since April 12.

     Banks in the benchmark declined at least 1 percent for a fourth straight session, sliding to a two-month low. KeyCorp and Citizens Financial Group Inc. slumped at least 3.4 percent. The KBW Bank Index fell to the lowest in nine weeks.

     Freeport-McMoRan sank to a two-month low to pace the drop in raw-materials. Alcoa Inc. retreated 2.4 percent, while Mosaic Co. and Owens-Illinois Inc. fell more than 2.3 percent.

     Airlines were battered for a second day, with a Bloomberg index of U.S. carriers marking its worst back-to-back drop in more than a year. Southwest Airlines Co. slumped 5.4 percent to an almost four-month low, while United Continental Holdings Inc.lost 4.5 percent to its lowest since October 2014.

     Home Depot Inc. and Lowe’s Cos. fell at least 1.8 percent after May retail sales data showed weakness in building materials and garden equipment. Department stores also saw sales declines, sending Nordstrom Inc. and Kohl’s Corp. down at least 2.3 percent.

     Among companies moving on corporate news, Yahoo! Inc. rose 2.6 percent, among the strongest in the S&P 500. Private equity suitors TPG, Advent International Corp. and a partnership of Sycamore Partners and Vector Capital Management are into the final round of bidding for its core internet business, as well as some of its intellectual property and real estate assets, according to people familiar with the matter.

     General Electric Co. added 2 percent, the most in the Dow and steepest in a month. The conglomerate affirmed its 2016 forecast in an analyst presentation, and also said it’s opening a research and development center in Paris to work on software design for industrial applications as part of a push to boost sales from information technology.
 

Have  a wonderful evening everyone.

Be magnificent!

I must confess that I do not draw a sharp line

or any distinction between economics and ethics.

Mahatma Gandhi

As ever,

Carolann

It’s easy to make a buck.  It’s a lot tougher to make a difference.

                                                           -Tom Brokaw, 1940-

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