October 6, 2016 Newsletter

Dear Friends,

Tangents:

Today is my wedding anniversary and Gary gave me a book of poetry this morning; it is entitled Robert Browning on Love, edited by Stephen Brenna.  This is from the poem Mesmerism:

Then, – if my heart’s strength serve,
And through all and each
Of the veils I reach
To her soul and never swerve,
Knitting an iron nerve –
Command her soul to advance
And inform the shape
Which has made escape
And before my countenance
Answers me glance for glance –
                        -Robert Browning

I love  David Tang’s column in the weekend edition  of the Financial Times (House & Home section).  Last weekend one of his readers wrote in and commented, “I felt certain that you were going to discover the old aphorism of American divorce lawyers: 50 per cent of marriages end in divorce; the other 50 per cent in death.”  To which David Tang replied, “Not exactly a happy proposition.  It reminds me of the story of the woman who consulted a gypsy clairvoyant.  Looking into her crystal ball, the gypsy looked alarmed and reluctantly warned the woman that her husband would soon die a violent death.  The woman then asked if the gypsy could gaze further into her crystal ball and tell her if she would be acquitted.

  Talking of death, a very old friend of mine aged 89 told me one day that he was marrying someone aged 25.  I was astonished by the age gap and asked how he had managed to persuade someone so much younger to marry him.  ‘I told her I was 98,’ he replied.”

PHOTOS OF THE DAY

Raindrops sit on leaves in a park in Wernigerode, central Germany, on Thursday. Matthias Schrader/AP

People stop to watch the sunset next to a public fountain at the Temple of Debod park in Madrid on Thursday. The park is popular with locals but also attracts tourists because of its view at sunset. Francisco Seco/AP
Market Closes for October 6^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
On this day in 2008, the Dow Jones Industrial Average closes below 10000 for the first time since 2004.
Number of the Day
19
The “cyclically adjusted price-earnings” ratio calculated using Commerce Department corporate profit data as of the end of the second quarter, just above its 50-year average of around 17.
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks ended the day lower as a rout in gold miners worsened while financial shares advanced on speculation that interest rates are poised to rise.
     The S&P/TSX Composite Index fell 0.1 percent to 14,595.50 at 4 p.m. in Toronto, after recovering from a three-day slide Wednesday that had wiped out 1.6 percent of its value. The index is up 12 percent this year, making it the second-best performing developed market equity index in the world just behind New Zealand.
     Canadian stock valuations remain 15 percent higher than their U.S. peers, with the S&P/TSX carrying a price-to-earnings ratio of 23.3 compared with 20.4 for the the S&P 500 Index, according to data compiled by Bloomberg.
     Raw-materials producers tumbled the most in the index, with gold miners dropping 2.3 percent to the lowest since April. Gold fell for a fifth day in New York, to the lowest in almost four months, wiping out more than 5 percent of value during a five- day slide. 
     Raw-materials and energy producers remain the top- performing industries in Canada this year, fueling a rebound in the wider gauge even as its first-half resurgence has sputtered somewhat in the second. The S&P/TSX Materials Index is up 35 percent and set to halt its longest yearly losing streak since 1988. Energy producers are second with a 25 percent gain.
     Traders have now priced in a 64 percent chance the Federal Reserve will raise interest rates in December, according to data compiled by Bloomberg. The U.S. is expected to report Friday that it added roughly 171,000 jobs in September, according to consensus estimates ahead of the latest jobs report. Gold is less attractive in an environment of higher rates as it doesn’t pay any yield.
     The prospect for higher rates lifted shares of some of Canada’s largest lenders, the largest component of the S&P/TSX.
     Canadian Western Bank jumped 2.6 percent, while Royal Bank of Canada added 0.6 percent. First National Financial Corp. fell 1.2 percent, erasing an earlier gain to extend losses for a fourth day. The alternative lender has now plunged 20 percent in four days, after Finance Minister Bill Morneau introduced measures this week to cool housing markets in Toronto and Vancouver and curb the rise in household debt.
     Imperial Oil Ltd. and Cenovus Energy Inc. rose more than 1.5 percent to lead gains among energy producers, as seven of 11 industries in the S&P/TSX advanced, offsetting some losses. Oil futures added 1.2 percent to settle at $50.44 in New York, extending gains after closing at the highest in more than three months Wednesday. The price of crude surged above $50 a barrel for the first time since June as U.S. stockpiles fell.
     Canopy Growth Corp. ended the day down 1.8 percent, after touching a record high. The marijuana producer’s Tweed brand is partnering with rapper Snoop Dogg to introduce a selection of varieties of cannabis under the “Leafs by Snoop” brand. Canopy is up 65 percent this year, after graduating to the Toronto Stock Exchange in July.

US
By Anna-Louise Jackson
     (Bloomberg) — U.S. stocks closed little changed, as rising technology shares helped offset declines among drugmakers, while investors awaited payrolls data for more evidence that the economy is strong enough to cope with higher borrowing costs.
     Apple Inc. rose for a third day to boost tech shares and Whole Foods Market Inc. rallied as much as 6.7 percent on takeover speculation, bolstering consumer staples. Mylan NV sank to a three-year low as drugmakers weighed on the health-care group, with lawmakers continuing to pressure the company over prices for its EpiPen allergy shot. Utilities extended their longest losing streak in 14 years.
     The S&P 500 Index added less than 0.1 percent to 2,160.77 at 4 p.m. in New York, erasing a 0.4 percent slide after a European Central Bank official affirmed that the ECB is still in an “accommodative mode.” The Dow Jones Industrial Average lost 12.53 points, or 0.1 percent, to 18,268.50, after reversing a 118-point drop. The Nasdaq Composite Index slipped 0.2 percent. About 6.3 billion shares traded hands on U.S. exchanges, 5 percent below the three-month average.
     “There is a lot of optimism priced into the market especially when it comes to the jobs,” said Kevin Kelly, chief investment officer at Recon Capital Partners LLC in Greenwich, Connecticut, which oversees $350 million. “The number this time better live up to expectations because every other indicator is showing that this economy is moving forward and it is doing well. The market is anticipating a rate hike in December, so should a really good jobs number come out, I don’t think it should spook it.”
     Stocks fell earlier Thursday as lackluster corporate results damped sentiment before the government’s jobs report Friday and the start of earnings season next week. The September employment release is in focus as recent data have exceeded forecasts, with a Bloomberg index tracking economic surprises turning positive yesterday for the first time since August. Odds of higher borrowing costs in December are almost 64 percent, while traders are pricing in a nearly 24 percent chance of a Fed hike in November, up from 17 percent last week.
     The labor market displayed further signs of strengthening as a report today showed filings for unemployment benefits fell last week almost to the lowest level since 1973. Continuing claims declined to the lowest since 2000. Economists surveyed by Bloomberg forecast data tomorrow will show the economy added 172,000 jobs in September, up from 151,000 a month earlier.
     “This is an economy that doesn’t need emergency rates any more,” said Ben Kumar, a London-based investment manager at Seven Investment Management LLP, which manages the equivalent of $13 billion. “Recent data and upbeat Fed comments on growth have allowed investors to get more comfortable with that idea, and it means they’re ready to tolerate a bit of higher market volatility.”
     Among shares moving today, Wal-Mart Stores Inc. dropped 3.2 percent and Yum! Brands Inc. fell 1.3 percent as their disappointing reports added to anxiety over corporate earnings on the cusp of the reporting period. Wal-Mart forecast profits for its next fiscal year that missed some estimates. American Express Co. lost 3.8 percent amid concerns its revenue will miss forecasts. Home Depot Inc. rallied 2.1 percent, the most in three months, as Florida braces for Hurricane Matthew.
     The upcoming earnings season will provide fresh indications on the health of corporate America. Analysts are still predicting a profit contraction for S&P 500 members in the third quarter, a sixth straight drop, before Alcoa Inc. unofficially kicks off the reporting period on Oct. 11.
     Stocks had a rocky start to the month, with the S&P 500 slipping 0.8 percent in the first two sessions before a bounce yesterday. While the gauge has historically been more volatile in October, it’s also a month that has typically yielded the best gains of the year, with an average advance of 1.9 percent over the past 25 such periods. The benchmark on Thursday closed 1.3 percent below the record it last reached in August.
     In today’s trading, the CBOE Volatility Index fell 1.2 percent to 12.84, wiping out an earlier 6.5 percent climb. The measure of market turbulence fell 1 percent in September after erasing a gain that reached 35 percent. Seven of the S&P 500’s 11 main industries advanced Thursday, with raw-materials producers leading with a 0.8 percent climb, while biotechnology shares dragged down the health-care group.
     Energy producers gained with crude oil futures above $50 a barrel today for the first time since June on optimism that the global glut will diminish. Schlumberger Ltd. and Occidental Petroleum Corp. increased more than 1.3 percent.
     Utilities fell for a 10th consecutive session, the longest since September 2002, with investors continuing to pivot away from shares that offer relatively high dividends as bond yields become more attractive. Amid increased wagers on higher rates, the yield on 10-year Treasuries rose to a three-month high. Phone companies retreated for the sixth time in seven days to hold at a four-month low.
     Health-care shares were the biggest drag today, with Endo International Plc down 3.7 percent, while Celgene Corp. and Gilead Sciences Inc. declined more than 1.2 percent. The Nasdaq Biotechnology Index dropped 2.2 percent to a three-week low.
      Alnylam Pharmaceuticals Inc. plunged 48 percent to a three- year low after ending development of its late-stage experimental drug for a rare disease because of safety concerns.

Have a wonderful evening everyone.

Be magnificent!

The divine music is incessantly going on within ourselves,
but the loud senses drown the delicate music,
which is unlike and infinitely superior to anything we can perceive with our senses.
Mahatma Gandhi

As ever,

Carolann

Can’t you read?  The score demands con amore, and what are you doing?
You are playing it like married men!
        -Arturo Toscanini, 1867-1957
Italian conductor, criticizing the playing of the
Austrian orchestra during rehearsal.

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