April 5, 2016 Newsletter

Dear Friends,

Tangents:

Notable & Quotable: Cicero on Growing Old

From a new translation by classicist Philip Freeman, “How to Grow Old” (Princeton University Press), an imagined dialogue involving the Roman philosopher Cato written by the orator and statesman Cicero (106-43 B.C):

Scipio: When Gaius Laelius and I are talking, Marcus Cato, we often admire your outstanding and perfect wisdom in general, but more particularly that growing old never seems a burden to you. This is quite different from the complaints of most older men, who claim that aging is a heavier load to bear than Mount Etna.

Cato: I think, my young friends, that you are admiring me for something that isn’t so difficult. Those who lack within themselves the means for a blessed and happy life will find any age painful. But for those who seek good things within themselves, nothing imposed on them by nature will seem troublesome. Growing older is a prime example of this. Everyone hopes to reach old age, but when it comes, most of us complain about it. People can be foolish and inconsistent.

They say that old age crept up on them much faster than they expected. But, first of all, who is to blame for such poor judgment? Does old age steal upon youth any faster than youth does on childhood? Would growing older really be less of a burden to them if they were approaching eight hundred rather than eighty? If old people are foolish, nothing can console them for time slipping away, no matter how long they live.

So if you compliment me on being wise—and I wish I were worthy of that estimate and my name—in this way alone do I deserve it: I follow nature as the best guide and obey her like a god. Since she has carefully planned the other parts of the drama of life, it’s unlikely that she would be a bad playwright and neglect the final act. And this last act must take place, as surely as the fruits of trees and the earth must someday wither and fall. But a wise person knows this and accepts it with grace. Fighting against nature is as pointless as the battles of the giants against the gods. –from WSJ.

PHOTOS OF THE DAY

A Palestinian girl collects anemone coronaria flowers in a field at the West Bank village of Beit Dajan near Nablus, Tuesday. Abed Omar Qusini/Reuters

A bumblebee arrives at a cherry tree blossom in Erfurt, central Germany, Tuesday. Weather forecasts predict changeable weather for Germany in the next few days. Jens Meyer/AP

Market Closes for April 5^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

April is 3^rd Best Month for S & P, 4^th Best for NASDAQ, Since 1971.

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks slipped a fourth day, the longest losing streak in almost two months, as crude traded near a one-month low and data showed exports posted their biggest fall since the recession.

     The Standard & Poor’s/TSX Composite Index fell 0.2 percent to 13,304.66 at 4 p.m. in Toronto, extending the longest stretch of declines since February 11. While the Canadian benchmark equity gauge has lost 1.5 percent in that time, it’s still up 2.3 percent this year and remains one of the best-performing developed markets in the world. Trading volume was 32 percent lower than the 30-day average.

     Canadian exports in February fell 5.4 percent, the biggest drop since May 2009 after rising to a record in January. Canada’s trade deficit widened to twice what economists forecast. Non-energy exports fell 4.2 percent, a blow to the Bank of Canada’s narrative that those industries will drive the country’s economic recovery in coming years.

     The S&P/TSX has stumbled out of the gates in the second quarter amid a retreat in commodities, especially crude, in a reversal from the first quarter’s resource-fueled rally. The broader S&P/TSX’s valuation has slipped from last month’s high of 21.9 times reported earnings to 21.1 times. That’s still 13 percent more expensive than the 18.6 times multiple of the Standard & Poor’s 500 Index, data compiled by Bloomberg show. 

     Crude rose 0.5 percent in New York, erasing losses to rebound from a one-month low, after tumbling 6.9 percent in the previous two sessions. The rally in crude has lost momentum amid speculation whether major OPEC producers will be able to reach an output freeze agreement. Kuwait’s OPEC governor said producers can still come to an agreement without the participation of Iran.

     Financial services stocks and energy producers fell more than 0.5 percent to contribute the most to Tuesday’s declines. Raw-materials companies climbed 1.9 percent as a group, with gold producers advancing the most in a week. Barrick Gold Corp. and Kinross Gold Corp. added at least 4.7 percent.

     Valeant Pharmaceuticals International Inc. surged 10 percent, rebounding from a five-year low. The drugmaker said a special “ad hoc” board committee found no additional accounting issues that would require more restatements and the company plans to file its annual report on or before April 29.

     Valeant is facing push back from some of its lenders as it seeks to waive a default and loosen restrictions on its debt, according to people with knowledge of the matter. The company has been seeking relief from a technical default that arose when it didn’t file its 10-K before March 15.

     Hudson’s Bay Co. dropped 2.9 percent after reporting fourth-quarter earnings short of analysts’ estimates. The retailer also boosted its sales forecast range for the year, predicting C$14.9 billion to C$15.9 billion, compared a previous C$14.2 billion to C$15.2 billion estimate.

US

By Oliver Renick

     (Bloomberg) — U.S. stocks fell, with the Standard & Poor’s 500 Index posting the steepest loss in four weeks, amid simmering concerns that weakness in global growth will deepen.

     Banks paced the retreat, sinking along with Treasury yields as bonds rallied on haven demand. Bank of America Corp. slid 2.4 percent. Health-care companies fell for the first time in three days, dragged lower by Allergan Plc’s 15 percent tumble after the government took steps to limit so-called inversion deals, threatening its merger with Pfizer Inc.

     The S&P 500 dropped 1 percent to 2,045.17 at 4 p.m. in New York, leaving it little changed for the year and ending the longest streak of calmness in 13 months. The index’s move had been capped within 1 percent in either direction in the last 15 days, something not seen since March 2015. The Dow Jones Industrial Average fell 133.68 points, or 0.8 percent, to 17,603.32. The Nasdaq Composite Index lost 1 percent. About 7.3 billion shares traded hands on U.S. exchanges, 13 percent below the 2016 average.

     “We’re stalling out,” said Michael Block, chief strategist at Rhino Trading Partners LLC in New York. “That’s part of it, and it’s being exacerbated by this continued rally in the Japanese yen and the release from the Treasury that’s causing a lot of pain in Allergan. We have Fed minutes tomorrow and the expectation is for it to be super dovish, and if it’s not then people might get confused.”

     The rally that lifted the S&P 500 as much as 13 percent from a 22-month low in February has started to lose momentum, with sentiment shifting as investors assess whether central banks can fend off weakness in the global economy. Worries that a slowdown in China would spread, intensified by tumbling crude prices had sent stocks to their worst-ever start to a year. Stabilizing oil and signals that policy makers would continue efforts to boost growth supported the late-quarter comeback.

     Comments today from International Monetary Fund Managing Director Christine Lagarde provided no comfort to investors who are apprehensive about global growth. The downside risks have increased and “we don’t see much by way of upside,” she said in an interview with Bloomberg TV.

     The Chicago Board Options Exchange Volatility Index rose 9.2 percent to 15.42, the biggest back-to-back gain in almost two months. The measure of market turbulence closed Friday at a seven-month low.

     Tuesday’s selloff in Allergan came after the S&P 500 health-care group’s best two-day rally in more than six weeks. It also summoned paper losses of more than $200 million each for hedge funds run by John Paulson, Daniel Loeb and Andreas Halvorsen. For Halvorsen and Paulson, the latest loss adds to declines the two have experienced on another common holding, Valeant Pharmaceuticals International Inc., which is down more than 70 percent this year.

     U.S. stocks climbed the most in a month last week, after jobs and manufacturing data strengthened confidence in the economy and Federal Reserve Chair Janet Yellen reaffirmed any interest-rate increases will be gradual. Fed Bank of Chicago President Charles Evans said in a Bloomberg TV interview today the U.K.’s “Brexit” vote and the U.S. presidential elections are fueling uncertainty, complicating decisions for policy makers as well as businesses and investors.

     With Fed officials scrutinizing data to guide their rate decisions, a report today showed activity in services industries picked up in March, indicating the economy was improving after a sluggish start to the year. A separate measure showed the U.S. trade deficit widened in February to a six-month high as an increase in imports exceeded a more modest pickup in shipments overseas.

     The Fed will release minutes tomorrow from its latest meeting. Traders are pricing in zero possibility of a rate increase at the end of April, with December now the first month with at least even odds of higher borrowing costs.

     The recent equity rebound coincided with a weakening dollar and has made the S&P 500 this year’s third-best performer in the developed world, though recent gains in which the index erased losses for the year have come in light volume. In the past two weeks, the daily amount of shares trading hands on U.S. exchanges was more than 20 percent below the 2016 average.

     “I think it’s really more a consolidation. We came a long, long way in the first quarter, the second half,” said Gabriela Santos, global market strategist at JPMorgan Asset Management on Bloomberg TV. “We went down a long way and we came back a long way, and I think it’s a realization that things weren’t as dire as they seemed in January and February but they’re not perfect either.”

     Traders are also awaiting the start of the corporate earnings season, with Alcoa Inc. reporting its first-quarter results on April 11. Analysts estimate profit at S&P 500 firms fell 9.5 percent during the period, compared with forecasts for flat earnings growth at the beginning of the year.

     “The market is taking a more realistic view again of what the fundamental prospects are like,” said Veronika Pechlaner, who helps oversee $10 billion at Ashburton Investments, part of FirstRand Group, in Jersey, Channel Islands. “There is definitely pressure on corporate earnings in certain sectors still, and from a fundamental point of view it’s worrying.”

     All of the S&P 500’s 10 main industries declined Tuesday, with utilities, financial and health-care shares falling at least 1.2 percent. Industrial and phone companies slipped 0.6 percent.

     Allergan fell the most since 2004 to lead the drop in health-care, after the Treasury Department released rules that would limit the ability of U.S. companies to avoid paying taxes by issuing debt to their foreign parents, putting a planned $160 billion merger with Pfizer in jeopardy. Baxalta Inc. lost 7.4 percent amid the fallout, though Shire Plc said its proposed deal with Baxalta is not an inversion. Pfizer rallied 2.1 percent to the highest since Jan. 7, extending a three-day gain to 5.8 percent.

     Elsewhere in the group, health insurers Aetna Inc., Humana Inc. and Anthem Inc. decreased at least 2.3 percent. The retreat follows a release of the government’s Medicare Advantage payment rates to insurers, which were below the rates proposed in February. Valeant Pharmaceuticals rose 10 percent after a board committee found no additional accounting issues that would require more restatements.

     Banks in the benchmark retreated the most since March 8 amid speculation low interest rates will continue to weigh on profits. The 10-Year Treasury yield fell to its lowest in more than a month. Wells Fargo & Co. and Regions Financial Corp. lost more than 2 percent. Within the broader financial group, insurers Chubb Ltd. and Willis Tower Watson Plc fell at least 2.1 percent.

     Fallout from the crackdown on inversion deals was also being felt among merger-advisory firms. Boutique investment banks Evercore Partners Inc., Moelis & Co., Lazard Ltd. and Greenhill & Co. each fell more than 4.2 percent.

     Power producers cooled for a second day after the group posted the strongest quarterly advance in nearly 13 years. Dominion Resources Inc. and NRG Energy Inc. sank more than 2 percent after their best monthly gains in at least five years.

     Among other stocks moving on corporate news, Walt Disney Co. lost 1.7 percent, the biggest slide in more than three weeks. Chief Operating Officer Tom Staggs, who was groomed to succeed CEO Robert Iger, is stepping down in a surprise move that forces Disney to look outside the company for its next chief executive.

     Lumber Liquidators Holdings Inc. jumped 11 percent after winning a tentative ruling dismissing claims that it failed to adequately warn consumers about cancer-causing formaldehyde found in some of its laminate flooring.

Have a wonderful evening everyone.

Be magnificent!

Each morning,

we are born again.

What we do today

is what matters most.

Buddha

As ever,

Carolann

Self-discipline is a form of freedom.  Freedom from laziness and lethargy,

freedom from expectations  and demands of others, freedom from weakness

and fear – and doubt.

                            -Harvey A. Dorfman, b. 1935

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