April 7, 2014 Newsletter

Dear Friends,

Tangents:

I read the full page obituary of  Holocaust survivor Chana Szpilman Wallace in the Globe & Mail from this past Saturday and was inspired by this extraordinary woman who died at the age of 106.  She radiated optimism and wisdom and was an inspiration to all she knew, despite the horrors visited upon her in her life.  Asked once about a message for future generations, Mrs. Wallace squared up and answered:  “To have a will to live.  To go a straight way.  To be gentle with people.  To be happy.  That’s all I have to say.”

Photos of the day

A musician plays a piano designed by car manufacturer Peugeot for Pleyel piano maker, displayed at the Milan Design Fair, in Milan, Italy. The Milan furniture and design week fair, showcasing the latest in furniture and design from countries around the world. Antonio Calanni/AP

A young goat jumps over marsh marigolds during warm and sunny weather at Gut Aiderbichl in Henndorf in the Austrian province of Salzburg. Gut Aiderbichl is a place of mercy for rescued animals. Kerstin Joensson/AP

Market Closes for April 7^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Gerrit De Vynck

April 7 (Bloomberg) — Canadian stocks fell the most in two months as investors sold off some of the past year’s biggest gainers, including Redknee Solutions Inc., ATS Automation Tooling Systems Inc. and Avigilon Corp.

All three stocks fell more than 4 percent and are up at least 50 percent in the past 12 months. Valeant Pharmaceuticals International Inc. lost 4.5 percent after a joint venture with Swedish drugmaker Meda AB ended. Tweed Marijuana Inc. increased 40 percent on its second day of trading.

The Standard & Poor’s/TSX Composite Index slipped 122.77 points, or 0.9 percent, to 14,270.33 at the close in Toronto, the biggest intraday loss since Feb. 3. The benchmark index is up 4.8 percent for the year.

“This seems like a bit of profit-taking to me,” said Ian Nakamoto, director of research with MacDougall, MacDougall & MacTier Inc. in Toronto. The firm manages about C$4.7 billion ($4.3 billion). “Stocks that have done relatively well seem to be hit harder than those stocks that haven’t done so well.”

Oil and gas producing companies in the S&P/TSX fell 1.1 percent as a group. Brent crude fell for the first time in three days after Libyan rebels surrendered control of two oil ports to the government, enabling the OPEC country to increase exports. New York-traded oil for May delivery also snapped a two-day advance, losing 0.7 percent to $100.44 a barrel.

Industrial companies fell 1.6 percent, paced by declines in the country’s two major railroad stocks.

Canadian Pacific Railway Ltd. fell 2.5 percent to C$162.57.  Canadian National Railway Co. fell 1.6 percent to C$60.47.  Canadian Pacific is up 30 percent in the last year while Canadian National is up 23 percent.

Hudson’s Bay, a retailer that is Canada’s oldest company, fell 4 percent to C$17.08. The shares lost 5.1 percent on Apr. 3 after the company forecast lower earnings than analysts had predicted. Avigilon fell 4.8 percent to C$28.00. The company makes digital cameras for surveillance and has risen 149 percent over the last year. Redknee Solutions Inc. fell 4.1 percent to C$5.16. The software company is up 73 percent in the last year.

ATS, which makes machines used for manufacturing, fell 4.6 percent to C$14.60. The Cambridge, Ontario-based company has risen 50 percent over the last year. Badger Daylighting fell 1.7 percent to C$41.36. The Calgary-based excavation company is up 210 percent in the last year.

Valeant fell 4.5 percent to C$130.83. Meda said in a statement the joint-venture between the two companies would end in the second quarter because Meda had established its own affiliates in countries where it had up to now partnered with Valeant.

Tweed Marijuana jumped 40 percent to C$3.62. Based in a former chocolate factory in Smiths Falls, Ontario, Tweed grows medical marijuana as part of a government plan to replace a system where individual users have permits to grow their own cannabis.

Potash Corp. of Saskatchewan fell 1.9 percent to C$37.11 after the fertilizer miner said Bill Doyle, who has served as chief executive officer for almost 15 years, would leave the post in July.

US

By Callie Bost

April 7 (Bloomberg) — U.S. stocks fell, pushing the Nasdaq 100 Index to its biggest three-day retreat since 2011 and erasing the year’s gains in the Standard & Poor’s 500 Index, as technology shares extended last week’s selloff.

Pfizer Inc. and American Express Co. tumbled more than 3 percent for the largest drops in the Dow Jones Industrial Average. Yahoo! Inc. and Apple Inc. lost at least 1.6 percent to pace declines in technology shares. An index of homebuilders plunged 2.3 percent as D.R. Horton Inc. and KB Home fell more than 2.4 percent.

The S&P 500 dropped 1.1 percent to 1,845.04 at 4 p.m. in New York. The Dow slipped 166.84 points, or 1 percent, to 16,245.87. The Nasdaq 100 gauge of the biggest technology stocks fell 0.9 percent, bringing its three-day drop to 4.3 percent. The Russell 2000 Index of small companies sank 1.5 percent to an almost two-month low. About 7.6 billion shares changed hands on U.S. exchanges, 9.3 percent above the three-month average.

“If you take a closer look under the hood, things have been deteriorating for a while now,” Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati, wrote in an e-mail. “Small caps and tech have been breaking down all over the place the past month, with the big blue chips holding tough. Well, now it looks like the last place bulls were hiding is finally starting to crack.”

The S&P 500 rose to a record last week before trimming its weekly gain to 0.4 percent in the last two days, as the selloff in technology shares overshadowed optimism on Federal Reserve monetary stimulus. The Dow reached an intraday record on April 4 before sinking to the day lower.

Technology shares were hit as traders dumped the biggest winners of the bull market amid concern valuations have advanced too far. The Nasdaq 100 fell the most in two years on April 4 with declines in all but four stocks. The gauge sank 0.9 percent for the week after surging 35 percent in 2013.

The Nasdaq Composite Index, which slid the most in two months on April 4, dropped 1.2 percent today. It trades at 31.5 times reported earnings of the companies in the index. That’s almost twice the ratio for the S&P 500, which trades at 17 times earnings.

“It’s just a continuation of momentum,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which manages about $160 billion, said by phone. “The market, having had a very sharp rally last year, is set to consolidate some of those gains and that’s what we’re seeing here. It’s going to be a tug of war between valuations and the data from here on out.”

The selling in the Nasdaq 100 Index has sent anxiety among options traders to the highest levels since the flash crash four years ago. More than 1 million put options on an exchange-traded fund tracking the Nasdaq index changed hands on April 4 as investors sought protection during a 2.7 percent drop in the gauge. That’s the most trading in bearish contracts since May 7, 2010, the day after $862 billion was erased from the value of U.S. stocks in a matter of minutes.

Hedge funds that invested heavily in technology shares took a beating in the first quarter as popular holdings such as Chinese Internet company Baidu Inc. fell 14 percent and online retailer Amazon.com Inc. tumbled 15 percent.

Paul Tudor Jones, Michael Novogratz and Louis Bacon, hedge- fund managers that profited last year from bets on macroeconomic trends, posted losses in the period as some of those trades turned against them. The losses for macro managers have caused them to cut some of their bigger bets, Anthony Lawler, a money manager at he $120 billion Swiss firm GAM, wrote in a report last week.

The Chicago Board Options Exchange NDX Volatility Index, tracking contracts on the Nasdaq 100, gained 6.7 percent to 20.05 today. The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility known as the VIX, rose 12 percent to 15.57.

The Morgan Stanley Cyclical Index tumbled 1.7 percent and the Dow Jones Transportation Index slid 1.4 percent. An S&P gauge of homebuilders slipped 2.3 percent, as D.R. Horton lost 2.4 percent to $21.77 and KB Home erased 4.4 percent to $16.81.

Consumer discretionary shares dropped 1.9 percent, the most among the 10 main S&P 500 groups, after sliding 1.7 percent on April 4. The industry has lost 5.9 percent since a record close on March 6.

Retailers in the S&P 500 have slipped 7.8 percent this year after soaring 44 percent in 2013. The S&P 500 Retailing Index trades at 24.5 times earnings, more than seven points higher than the ratio for the benchmark gauge.

Amazon.com, which trades at 562 times reported earnings, fell 1.6 percent to $317.76. Best Buy Co., the company with the third-largest gain in the S&P 500 last year at 237 percent, slipped 1.8 percent to $27.19 today, extending losses for 2014 to 32 percent.

Financial stocks declined 1.5 percent as all 24 members of the KBW Bank Index fell. MetLife Inc. tumbled 2.8 percent to $51.37 and Morgan Stanley slid 2.8 percent to $29.52.

Visa Inc. decreased 2.1 percent to $203.41. Pfizer fell 3 percent to $31.20 and American Express retreated 2.9 percent to $86.60, pacing losses in the Dow.

Technology shares fell 0.8 percent as a group in the S&P 500, while the Dow Jones Internet Composite Index lost 1.3 percent. Yahoo dropped 3.5 percent to $33.07 and Apple slid 1.6 percent to $523.47. Groupon Inc. tumbled 5 percent to $7.45.

The technology group saw the second-biggest outflows among industry exchange-traded funds in the past five days, losing $173.4 million, while investors withdrew $223 million from real- estate ETFs over the past week.

Mark Mobius, who oversees about $50 billion at Templeton Emerging Markets Group, said he’s buying technology stocks after a global rout left companies such as Tencent Holdings Ltd. trading at “reasonable” valuations.

“If you look at Tencent for example, it’s come down about 20 percent and that’s a pretty good correction,” Mobius, whose Templeton Asian Growth Fund outperformed 88 percent of peers this year, said in an interview in Bloomberg’s Hong Kong office, declining to name specific stocks he’s buying.

Some of the older names in technology had the best performances today. International Business Machines Corp., which had its initial public offering in 1915, added 1.4 percent to $194.52 for the biggest advance in the Dow. Intel Corp., which started trading in 1971, jumped 1.2 percent to $26.49 for the second-largest gain. Cisco Systems Inc. increased 0.6 percent to $22.85.

“People decided that Nasdaq stocks, the high flyers, are too richly valued,” Donald Selkin, who helps manage about $3 billion as chief market strategist at National Securities Corp. in New York, said by phone. “What’s more bizarre to me is the retro tech stocks, the Mad Men — like we’re back in the 1960s – – are up. People are going into those old-timers, the retros, because of more reasonable valuations.”

The Nasdaq Biotechnology Index rose 0.5 percent today. The gauge has fallen six straight weeks, the longest streak since 1998, after rising 79 percent in the year through Feb. 28.

Alcoa Inc., the largest U.S. aluminum producer, unofficially kicks off the U.S. quarterly earnings season when it releases financial results after the close of trading tomorrow. JPMorgan Chase & Co. and Wells Fargo & Co. are also among the S&P 500-listed companies reporting this week.

Profit for members of the gauge probably climbed 1 percent in the period, analysts now forecast, after anticipating a 6.6 percent rise in January. Sales rose 2.9 percent on average, according to estimates compiled by Bloomberg. Analysts bet industrial companies will continue to deliver the fastest profit growth amid a weather-related slowdown.

“It will be an interesting few weeks with the earnings season kicking off tomorrow,” Heinz-Gerd Sonnenschein, an equity market strategist at Deutsche Postbank AG, said by phone from Bonn, Germany. “Everybody expects a weaker quarter given the headwinds that corporates faced earlier this year. The U.S. market is still strong, not far from a record, but we really need more profit growth to support valuations.”

Data last week boosted optimism that the economy is shaking off its winter doldrums and building momentum into the second quarter. Growth in manufacturing accelerated in March, driven by gains in production and orders. The government’s jobs report showed employers boosted payrolls last month and the unemployment rate held at 6.7 percent.

Have a wonderful evening everyone.

Be magnificent!

The important question for me is,

is the body a source for creating, for realizing yourself,

for realizing what life is all about?  You ask this question

and you go where it takes you and then you ask another question

and then again you follow.  So this understanding of the body, of the unity within the body

and the innumerable areas which it reveals to you is what I call realization.

Chandralekha, 1929-2006

As ever,

Carolann

Never be afraid to sit awhile and think.

-Lorraine Hansberry, 1930-1965

Carolann Steinhoff, B.Sc., CFP®, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7