September 29, 2016 Newsletter

Dear Friends,

Tangents:

CALIFORNIA POEM

There’s trouble on the mountain
And the valley’s full of smoke
There’s crying on the mountain
And again the same heart broke.

The lights are on past midnite
The curtains closed all day
There’s trouble on the mountain
The valley people say.
                     -Johnny Cash, 1932-2003

PHOTOS OF THE DAY

A member of the gallery stands inside a piece called ‘Passage,’ by artist Antony Gormley, which forms part of an exhibition entitled ‘Fit’ at the White Cube gallery in London on Thursday. Peter Nicholls/Reuters

Israeli member of parliament Mickey Levy (3rd r.) stands in front of the flag-draped coffin of former Israeli President Shimon Peres as he lies in state at Knesset plaza in Jerusalem on Thursday. Amir Cohen/Reuters
Market Closes for September 29^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks ended higher Thursday after swinging between gains and losses, as oil a and gas producers extended a rally that offset weakness among lenders sparked by worries over Deutsche Bank AG’s finances.
     Bloomberg reported that some Deutsche Bank clients are concerned about doing business with the firm after the U .S. Justice Department requested $14 billion to settle an investigation into residential mortgage-backed securities.
     The S&P/TSX Composite Index rose 0.2 percent to 14,754.55 at 4 p.m. in Toronto, recovering from a brief dip after an earlier advance of as much as 0.6 percent. The index has risen 4.9 percent since the end of June and is headed for a third quarterly gain, its longest streak in two years. The S&P/TSX is up more than 13 percent this year, making it the the second-best performing developed market equity index in the world behind New Zealand.
     Not coincidentally, Canadian stocks are now more expensive than their U.S. peers, with the S&P/TSX carrying a price-to- earnings ratio of 23.6 compared with 20.6 for the the S&P 500 Index. The current valuation of Canadian equities is near the highest levels in 14 years, according to data compiled by Bloomberg.
     Financial shares lost 0.2 percent after Bloomberg reported that a number of funds that clear derivatives trades with Deutsche Bank have withdrawn some excess cash and positions held at the firm. Meanwhile, U.S. lender Wells Fargo & Co. is now facing Justice Department sanctions over improperly repossessing cars owned by members of the military, according to two people with knowledge of the investigation. A penalty of as much as $20 million is expected. This comes after weeks of pummeling over the bank’s practice of opening fraudulent customer accounts.
     Energy producers continued to rally following an agreement by OPEC members for their first output cut in eight years. Suncor Energy Inc. rose 2.3 percent and Canadian Natural Resources Ltd. gained 2.4 percent as the energy sector advanced 1.4 percent.
     The S&P/TSX Energy Index has rallied 5.1 percent in its best two-day gain since March, rising to a three-week high. Meanwhile, raw-materials producers slipped 0.1 percent as gold drifted to a loss amid gains in the dollar on evidence the U.S. economy is improving. Torex Gold Resources Inc. declined 2.2 percent. Kirkland Lake Gold Inc. fell 7.6 percent, its biggest loss in two months, after agreeing to buy Newmarket Gold Inc. in a stock deal valued at C$1.01 billion to create a producer with operations in Canada and Australia.
     U.S. gross domestic product rose 1.4 percent in the second quarter, ahead of analysts’ forecasts, while jobless claims increased less than predicted last week. The dollar climbed against most major peers, after a three-day slide, as traders priced in a 54 percent chance the Federal Reserve will raise rates in December.
     Crude added 1.7 percent in New York to the highest in a month, erasing an earlier decline, after posting the biggest advance since April on Wednesday. Energy and raw-materials producers are the top-performing industries in Canada this year, fueling a rebound in the wider gauge. The S&P/TSX Materials Index is up 51 percent and set to halt its longest yearly losing streak since 1988, while energy producers are second with a 24 percent gain.

US
By Joseph Ciolli and Dani Burger
     (Bloomberg) — U.S. stocks fell as banks retreated amid growing concern that Deutsche Bank AG’s woes will spread to the global financial sector. Health-care shares sank on speculation tighter regulations will crimp profits.
     Financial shares erased gains and tumbled 1.5 percent after a Bloomberg News report that signaled growing concern among some Deutsche Bank AG clients roiled markets. A number of funds that clear derivatives trades with Deutsche withdrew some excess cash and positions held at the lender, according to an internal bank document seen by Bloomberg. Johnson & Johnson and Pfizer Inc. fell more than 1.7 percent, pacing declines among drug companies.
     The S&P 500 Index slid 0.9 percent to 2,151.13 at 4 p.m. in New York, after falling as low as 2,145, the level that marked the bottom of a selloff on Monday. The Dow Jones Industrial Average declined 195.79 points, or 1.1 percent, to 18,143.45, and the Nasdaq Composite Index lost 0.9 percent. About 7.7 billion shares traded hands on U.S. exchanges, 17 percent more than the three-month average.
     “There’s some problems in the financial industry now,” Brian Frank, portfolio manager at Key Biscayne, Florida-based Frank Capital Partners LLC, said by phone. “There’s no fear and no volatility in the stock market so something like Deutsche Bank could make people say, maybe we shouldn’t be trading at such high valuations. It doesn’t make it easier for U.S. banks, especially with what’s going on with Wells Fargo.”
     The S&P 500 trades at 18.4 times forecast earnings, the highest since 2002. The main U.S. equity benchmark slipped below its average price during the past 50 days on Thursday, while erasing its climb for the month. Stocks fluctuated earlier amid a gain in energy shares sparked by the first output-reduction decision by OPEC in eight years.
     All of the 11 main industries in the S&P 500 retreated Thursday. Health-care shares paced declines with a 1.8 percent rout, led by drugmakers on concern that a Hillary Clinton presidency would tighten regulations on the industry and hurt profits. Financials and utilities tumbled more than 1.4 percent. Banks in the benchmark sank 1.6 percent.
     Deutsche Bank fell to all-time lows on Monday amid concerns that mounting legal bills may force the lender to raise capital. That dragged lenders in the S&P 500 to the steepest slide in almost three months. The CBOE Volatility Index on Thursday jumped nearly 27 percent before paring the surge to 13 percent by the close of trading. The measure of market turmoil known as the VIX is now on track for a second straight monthly gain.
     Investors were also reminded today that borrowing costs may be rising before year-end, with a handful of Federal Reserve officials publicly endorsing a rate hike in the near-term. Fed Bank of Atlanta President Dennis Lockhart on Thursday said the central bank is nearing its goals of maximum employment and steady inflation near 2 percent, a day after Chair Janet Yellen testified that jobs growth will likely soon warrant tighter policy.
     The latest eruption of selling spurred by anxiety over banks reignited a bout of turbulence from earlier this month. Markets had calmed briefly, after the Fed’s decision last week to leave rates unchanged and signals of a slower pace of future increases soothed investors. The S&P 500 is on the verge of a second-straight monthly loss and its worst since January.
     Wells Fargo & Co. fell 2.1 percent and was headed toward the worst month since 2010, as Chief Executive John Stumpf endured a second day of withering assaults from lawmakers furious over the bank’s fake-account scandal. The bank was also said to be facing sanctions over improperly repossessing cars owned by members of the military. Among other banks, Citigroup Inc. dropped 2.3 percent to a seven-week low.
     Within the health-care group, biotechnology shares skidded to a three-month low, with EpiPen maker Mylan NV losing 4.4 percent, while Celgene Corp. and Allergan Plc declined at least 2.8 percent. Drug giant Merck & Co. fell 2.2 percent, the second-worst in the Dow behind Goldman Sachs Group Inc.’s 2.8 percent retreat.
     Energy producers were little changed along with phone companies. Crude oil extended yesterday’s rally, rising to a one-month high after OPEC’s agreement to reduce production. Murphy Oil Corp. and Transocean Ltd. added more than 4.9 percent. Still, refiners Valero Energy Corp. and Tesoro Corp. lost at least 6.1 percent to help offset those gains.

Have a wonderful evening everyone.

Be magnificent!

Man progresses, from epoch to epoch, toward the full realization of his soul,
of this soul that is greater than all the riches he can accumulate,
than all the actions he can accomplish and all the theories he can set forth,
this soul that continues onward, never ending in death or dissolution.
Rabindranath Tagore

As ever,

Carolann

The point is not to pay back kindness but to pass it on.
                                          -Julia Alvarez, b. 1950

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