October 24, 2016 Newsletter

Dear Friends,

Tangents:

On this day in 2005, civil rights activist Rosa Parks dies at age 92.
On Oct. 24, 1945, the United Nations charter took effect.
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Confidence is silent.
Insecurities are loud.

Try to Praise the Mutilated World
by Adam Zagajewski

Try to praise the mutilated world.
Remember June’s long days,
and wild strawberries, drops of wine, the dew.
The nettles that methodically overgrow
the abandoned homesteads of exiles.
You must praise the mutilated world.
You watched the stylish yachts and ships;
One of them had a long trip ahead of it,
while salty oblivion awaited others.
You’ve seen the refugees heading nowhere,
you’ve heard the executioners sing joyfully.
You should praise the mutilated world.
Remember the moments when we were together
in a white room and the curtain fluttered.
Return in thought to the concert where music flared.
You gathered acorns in the park in autumn
and leaved eddied over the earth’s scars.
Praise the mutilated world
and the grey feather a thrush lost,
and the gentle light that strays and vanishes
and returns.
PHOTOS OF THE DAY:

Jury members stand behind a show piece by the Canadian national team during the International Exhibition of Culinary Art (IKA), also known as the Culinary Olympics, in Erfurt, Germany, on Monday. The ‘Olympics of Chefs’ has more than 2,000 participants and is the most important event for chefs and cooks worldwide. Jens Meyer/AP
Goshi, a black jaguar, stands on top of a carved Halloween pumpkin in its enclosure as part of the Enchantment event at Chester Zoo in Chester, England, on Monday. Phil Noble/Reuters
Some of the 8,000 participants in the Zombie Bike Ride pedal down South Roosevelt Boulevard during the annual Fantasy Fest costume and mask festival in Key West, Fla., on Sunday. Rob O’Neal/Florida Keys News Bureau/Reuters
Market Closes for October 24^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By John Hyland
     (Bloomberg) — Canadian stocks slid back from a five-day rally on Monday as a drop in commodities prices pressured oil and gold companies.
     The S&P/TSX Composite Index fell 0.1 percent to 14,923.01 at 4 p.m. in Toronto. The gauge rose 2.4 percent last week to its highest level since June 2015. Gains among miners and energy producers have propelled the index to a 15 percent increase this year, making it the top performing developed equity market in the world, ahead of the U.K. and New Zealand.
     Seven of the 11 sectors in the index edged higher, led by information technology, which picked up 0.9 percent, paced by a 2 percent increase in Montreal-based CGI Group Inc. Financials, which account for about a third of the index, rose 0.2 percent after Toronto-Dominion Bank and TD Ameritrade Holding Corp. agreed to buy St. Louis-based brokerage Scottrade Financial Services Inc. for $4 billion. Toronto-Dominion, the largest stakeholder in TD Ameritrade, expects the deal to bolster its U.S. expansion. The lender’s stock rose 0.2 percent to a record high.
     Energy producers, Canada’s second largest sector, fell 0.7 percent as crude dropped 0.4 percent at 4 p.m. in New York, hovering just above $50 a barrel. Oil slumped after Iraq, OPEC’s second-biggest producer, said it should be exempt from planned output cuts. Enbridge Inc. fell 0.9 percent and TransCanada Corp. was down 1.4 percent.
     Raw-materials producers fell 0.9 percent from a monthly high. Gold fell 0.2 percent as the dollar slipped from its highest level in seven months, supporting demand for the metal that has sunk more than $100 from its high this year. That rally, which took gold prices to the best first half in almost four decades, is fading as traders price-in increasing odds that interest rates will rise. Rising rates dull the precious metal’s appeal because it doesn’t pay interest. Barrick Gold Corp. fell 1.9 percent.
     The Bank of Canada renewed a two percent inflation targeting agreement, as Canada’s inflation rate quickened in September for the first time in five months. The consumer price index rose 1.3 percent in September from a year ago, led by higher gasoline prices.
     Canadian stock valuations remain 17 percent higher than their U.S. peers, with the S&P/TSX carrying a price-earnings ratio of 23.7 compared with 20.2 for the the S&P 500 Index, according to data compiled by Bloomberg.
     Restaurant Brands International Inc., which owns Burger King and Tim Hortons, fell 4.5 percent despite posting third- quarter profit that topped analysts’ estimates. The Oakville, Ontario-based company has gained 16 percent this year.

US
By Anna-Louise Jackson
     (Bloomberg) — Acquirers may be paying less in acquisitions, but that isn’t keeping equity bulls from celebrating another round of merger mania.
     AT&T Inc.’s planned takeover of Time Warner Inc., at $108.7 billion the largest of the year, led a spate of announcements since Friday totaling nearly $124 billion. B/E Aerospace Inc. jumped 16 percent after Rockwell Collins Inc. said it would purchase the aircraft-parts supplier for $6.4 billion. Financial companies reached a six-week high as TD Ameritrade Holding Corp. and its largest stakeholder agreed to buy Scottrade Financial Services Inc.
     The S&P 500 Index rose 0.5 percent to 2,151.33 at 4 p.m. in New York, closing at a two-week high as one of the earnings reporting season’s busiest weeks began. The Nasdaq 100 Index added 1.2 percent to a record as Microsoft Corp. led a rally in technology shares.
     While dealmaking is picking up, the average premium has shrunk to a two-year low of 28 percent in the fourth quarter, according to data compiled by Bloomberg. Cash-and-stock transactions, which represent about 37 percent of total volume when proposed deals are excluded, also are being proffered at lower premiums. The measure has ticked up from a one-year low in the second quarter, but at 26 percent in the current period it’s below a longer-term average of nearly 32 percent.
     Even if animal spirits are a little more muted, the flurry is good for sentiment, said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee. “Clients like to see that M&A because it just means companies are still optimistic about the future. There’s an optimism that encircles this many deals in one day.”
     Amid a backdrop of lackluster growth, many companies still have cash on hand, and buying other companies has become a more compelling way to appease investors rather than increasing dividends or making infrastructure investments, said Steve Chiavarone, a portfolio manager with Federated Investors in New York. With the S&P 500 trading about 19 percent above its five- year average price-earnings ratio, that’s made share repurchases less attractive.
     “When you’re trading near all-time highs, you have to ask what’s the incremental value of that share repurchase,” Chiavarone said. “To see companies engaging in M&A, as long as it’s intelligent and thoughtful M&A, that’s a better use of cash than buying more shares.”
     After surging as much as 7.2 percent this year to a record in August, the S&P 500 has been stuck in a 64-point trading range as investors weigh Federal Reserve policy, the strength of corporate profits and economic reports. The main benchmark for U.S. equity crept up 0.4 percent last week as S&P 500 companies looked poised to report profit growth for the first time in six quarters. The gauge trades at 18.2 times forecast earnings, the highest since at least 2009.
     The Dow Jones Industrial Average gained 77.32 points on Monday, or 0.4 percent, to 18,223.03. About 5.8 billion shares traded hands on U.S. exchanges, 10 percent below the three-month average.
     While dealmaking helped send stocks higher Monday, some of the companies involved in the latest wave held back stronger gains in the S&P 500. AT&T lingered at an eight-month low, losing 1.7 percent, while Time Warner retraced part of a two- day, 13 percent jump that came on speculation their merger was imminent. Rockwell Collins marked its biggest drop in five years, and TD Ameritrade sank the most since June.
     “You would think there’d be a bigger pop on all these deals,” Antonelli said. “Today’s price action, where the market jumps significantly overnight and then opens and goes sideways, doesn’t give you a warm and fuzzy feeling because it leads you to believe that a lot of people are just watching and waiting.”
     More than a third of S&P 500 members are scheduled to post earnings this week, including Apple Inc., Alphabet Inc. and Boeing Co. Analysts now predict year-on-year profit will be flat once the third-quarter reporting is finished, better than projections for a 1.5 percent contraction a month ago.
     Among other shares moving on corporate news, T-Mobile US Inc. gained 9.5 percent to a nine-year high after posting profit that exceeded estimates. Hilton Worldwide Holdings Inc. added as much as 3.7 percent before paring gains as China’s HNA Group is acquiring about 25 percent of the hotel company from from Blackstone Group LP in a deal valued at about $6.5 billion.
     Kimberly-Clark Corp. lost 4.7 percent to a one-year low after cutting estimates for annual sales growth. Genworth Financial Inc. dropped 8.1 percent after China Oceanwide Holdings Group Co. agreed to purchase the financial-services firm in a $2.7 billion cash deal.
     Microsoft Corp. extended Friday’s post-earnings rally, stretching to a fresh all-time high to bolster gains among technology companies as the group closed at the loftiest level in more than 16 years.

Have a wonderful evening everyone.

Be magnificent!

The freedom of the seed resides in its fulfillment of its dharma, of its nature and its destiny,
which is to become a tree; the failure to achieve this
becomes for the seed a prison.
The sacrifice through which one thing reaches its fulfillment is not a sacrifice that leads to death,
it is the casting off of chains and the attainment of freedom.
Rabindranath Tagore

As ever,

Carolann

The inherent vice of capitalism is the unequal sharing of blessings;
the inherent virtue of socialism is the equal sharing of miseries.
                                                         -Winston Churchill, 1874-1965

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

Tel: 778.430.5808
(C): 250.881.0801
Toll Free: 1.877.430.5895
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www.carolannsteinhoff.com