August 23, 2016 Newsletter

Dear Friends,

Tangents:
August 23:
Nicola Sacco and Bartolomeo Vanzetti, two Italian-born anarchists, were sentenced to death for murder and robbery in America in 1927.  The public outcry against their conviction and execution is reflected in Vanzetti’s unforgettable words.
If it had not been for these things, I might have lived out my life talking at street corners to scorning men.  I might have died, unmarked, unknown, a failure.  Now we [Sacco and himself] are not a failure.  This is our career and our triumph.  Never in our full life could we hope to do such work for tolerance, for justice, for man’s understanding of man as now we do by accident.  Our words – our lives – our pains – nothing!  The taking of our lives – lives of a good shoemaker and a poor fish-pedlar – all!  The last moment belongs to us – that agony is our triumph.

Something I read this morning, thought it worth passing on:

10 THINGS THAT REQUIRE ZERO TALENT

BEING ON TIME
WORK ETHIC
EFFORT
BODY LANGUAGE
ENERGY
ATTITUDE
PASSION
BEING COACHABLE
DOING EXTRA
BEING PREPARED

PHOTOS OF THE DAY

The sun sets over the northern Gaza Strip as seen from the Israeli border, Israel on Tuesday. Amir Cohen/Reuters

Cows are driven down to the valley during the traditional ‘Alpfahrt’ – the ceremonial driving down of cattle from the alps to the valleys in autumn – from the ‘Soll’ alp, in Ruete, canton of Appenzell Innerrhoden, Switzerland on Tuesday. Gian Ehrenzeller/Keystone/AP
Market Closes for August 23^rd, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks edged higher, overcoming a drag from falling raw-materials shares, as Bank of Montreal led gains in lenders after its quarterly results beat estimates.
     The S&P/TSX Composite Index rose 0.1 percent to 14,764.77 at 4 p.m. in Toronto, after rising as much as 0.3 percent, for the first back-to-back gains in two weeks. Trading volume Tuesday was 7.7 percent lower than the 30-day average. The S&P/TSX remains the second-best performing developed market in the world behind New Zealand.
     Bank of Montreal, Canada’s fourth-largest lender, added 2.3 percent to reach a record as third-quarter adjusted profit was C$1.94 a share, beating the C$1.81 average estimate of 15 analysts surveyed by Bloomberg. Net income climbed 4.4 percent from year-ago figures as U.S. banking and capital markets trading revenue rose. Royal Bank of Canada rose 1.7 percent to a 20-month high.
     Royal Bank is scheduled to report Wednesday, followed by Canadian Imperial Bank of Commerce and Toronto-Dominion Bank on Thursday. Bank of Nova Scotia is set for Aug. 30, and National Bank of Canada on Aug. 31. Financial services stocks increased 0.8 percent as only three of 10 main industries in the S&P/TSX advanced.
     Barrick Gold Corp. and Goldcorp Inc. each drifted to a loss of 1.8 percent as raw-materials producers fell 1.1 percent, erasing a morning increase. Gold futures in New York ended the day with a 0.2 percent climb, after swinging between gains and losses, as investors remain uncertain of the Federal Reserve’s plans for interest rates this year. Fed Chair Janet Yellen is set to speak Friday at an annual symposium in Jackson Hole, Wyoming. Traders have priced in nearly 54 percent odds of a U.S. rate increase in December.
     Raw-materials producers trimmed their climb this year to 56 percent, the biggest contributors to the rally in Canadian equities in 2016, as the top gainers among 10 industries in the S&P/TSX. The group is on track for the first annual advance in six years, an increase that would halt the longest yearly losing streak since 1988. Energy producers have gained 22 percent in the same period, on pace for the strongest in seven years. That’s boosted the Canadian equity benchmark to a 13 percent jump in 2016, rebounding from a slump last year that was the worst for the S&P/TSX since the 2008 financial crisis. The rally has made Canadian stocks more expensive than their U.S. peers, with a price-earnings ratio of 23.5 for the S&P/TSX, opening up a 15 percent premium over the S&P 500 Index.
     Energy producers rose 0.2 percent Tuesday, reversing an earlier decline as oil bounced back on speculation Iran may be more willing to cooperate with other producers seeking to freeze output. Reuters reported Iran is sending “positive signals” it may support joint action, according to unidentified OPEC and industry sources.
     TMX Group Ltd. lost 1.6 percent, capping a three-day slide of 7.5 percent that’s the worst since December. Three of Canada’s largest pension funds sold a combined 10 percent stake in the operator of the Toronto Stock Exchange for about C$312 million, cutting by almost half their holdings in the stock.

US
By Joseph Ciolli
     (Bloomberg) — What do you do when volatility dissipates and the stock market gets mired in its sleepiest stretch since before the internet bubble? Buy momentum, of course.
     An exchange-traded fund tracking shares that have risen the most in recent months has absorbed more than $400 million since the start of June, the most ever for a period of that length. The ETF has gained 4.7 percent over the 12 weeks, outpacing more popular smart-beta strategies like low-volatility and value, as well as the S&P 500. The benchmark gauge added 0.2 percent to 2,186.90 at 4 p.m. in New York, after briefly topping its record closing high of 2,190.15 reached on Aug. 15.
     The flows are another example of bullish positioning in a market that, while up almost 20 percent since reaching lows in February, lately has refused to budge. They join bears covering short bets and hedge funds speculating on declines in the CBOE Volatility Index in the ranks of investors wagering against an imminent collapse in equity prices.
     “The move into momentum is affirmation that investors see an upward trend,” said John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York. “Market fears are evaporating. Investors that have sat on the sideline are finally gaining confidence and deciding they want to participate.”
     The iShares MSCI USA Momentum Factor ETF, which tracks the biggest stock-market gainers of the last six to 12 months, was little changed on Tuesday. The Dow Jones Industrial Average rose 17.88 points, or 0.1 percent, to 18,547.30, erasing most of an early 102-point jump. The Nasdaq Composite Index increased 0.3 percent, and also briefly exceeded its closing record. About 5.6 billion shares traded hands on U.S. exchanges, 18 percent below the three-month average.
     Among stocks in the iShares ETF, none have rallied more than Newmont Mining Corp. and Nvidia Corp. over the past 12 weeks. Already having surged more than 40 percent in 2016 through May, both companies added at least 33 percent over the period. AT&T Inc., which has the biggest weighting in the iShares ETF, has climbed 4.3 percent since the end of May, bringing its year-to-date increase to almost 19 percent.
     The S&P 500 has barely moved in the past four sessions while options traders have pushed the average level of the VIX to around 12 through yesterday, making this the calmest August since 1994. Outside of a jump that took equities to an all-time high on Aug. 15, the benchmark index has wobbled around the 2,180 level for two weeks. The measure trades at 18.6 times estimated earnings, at its highest levels in more than a decade.
     Investors will get more policy information on Friday when Federal Reserve Chair Janet Yellen gives a speech at the annual monetary policy symposium in Jackson Hole, Wyoming. In recent days, Fed Vice Chairman Stanley Fisher signaled that a 2016 rate hike is still under consideration, saying the U.S. economy is close to meeting the central bank’s goals. San Francisco Fed President John Williams said a hike in September is “in play,” while New York’s William Dudley warned that investors are underestimating the likelihood of a rate increase.
     “The earnings season is largely over and the only thing we can look at is Fed-speak, which is antagonizing,” Brian Frank, portfolio manager at Key Biscayne, Florida-based Frank Capital Partners LLC, said by phone. “We’re in the most aggressive dip- buying market I’ve ever seen. I wouldn’t even call the last two days a dip, but any little tiny decline seems to be an excuse to buy and talk about the Fed.”
     Traders are pricing in a 28 percent chance the central bank will raise its benchmark rate in September. December is now the first month showing at least even odds of an increase, from June about two weeks ago. A report today showed purchases of new homes unexpectedly jumped in July to the highest level in almost nine years, led by soaring demand in the nation’s south and adding to signs of persistent housing-market strength.
     Among shares moving, Monsanto Co. led gains in raw materials as it’s said to be closer to a merger with Bayer AG. Chipmakers extended their recent rally to boost the technology group, and Best Buy Co. surged almost 20 percent, the most in more than 15 years, after better-than-estimated quarterly results. J.M. Smucker Co. posted the steepest drop since 2012 after the company cut its annual sales forecast.
     HP Inc. and Tiffany & Co. are among the few remaining companies to report this week. Among S&P 500 members that have announced results so far, 79 percent have topped profit projections, while 56 percent beat sales estimates. Analysts predict net income fell 2.3 percent in the second quarter, and that it will slide 0.9 percent in the current period. That would mark a sixth consecutive quarterly drop, the longest since the financial crisis.

Have a wonderful evening everyone.

Be magnificent!

Amidst this chaos there is harmony, throughout these discordant sounds there is a note of concord,
and he who is prepared to listen to it will catch the tone.
Swami Vivekananda

As ever,

Carolann

Our revels now are ended.  These our
actors, / As I foretold  you, were all
spirits, and / Are melted into air,
into thin air, / And, like the baseless
fabric of this vision, / The cloud-
capped tower, the gorgeous
palaces, / The solemn temples, the
great globe itself –
Yea, all which it inherit – shall
dissolve And, like this insubstantial
pageant faded, / Leave not a  rack
behind.  We are such stuff / As
dreams are made on, and our little
life / Is rounded with a sleep.
      The Tempest, Act 4, Scene1.
 

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