August 14, 2013 Newsletter

Dear Friends,

Tangents:

As Carolann is out of the office this afternoon, I will be sending the newsletter on her behalf.

Looking for a new way to travel around downtown Victoria?  Check out the Victoria Harbour Ferry! Offering about 16 designated pick-up spots and stops for shopping, eating, touring and sleeping, Victoria Harbour Ferry offers tours, charters and a hop-on, hop-off taxi service from 10 a.m. to 9 p.m. throughout the summer. The delight for many passengers is the discovery that the journey might be the best part of the trip. Hop-on and hop-off locations cost as little as $5 per person for most destinations from the Fairmont Empress dock within the Inner Harbour, $10 further out and $15 for locations including Bamfield Park and Tillicum Landing at Tillicum Road. It’s a fun way to travel and see the beautiful sights our gorgeous city has to offer!

“Don’t cry because it’s over, smile because it happened.” ― Dr. Seuss

Photos of the Day –August 14^th, 2013

South Koreans take part in a candlelight demonstration demanding the resignation of President Park Geun-Hye and calling for reform at the national spy agency in central Seoul. According to local media reports, the spy agency’s former chief Won Sei-hoon, who served under the regime of former President Lee Myung-Bak, was indicted on June 14, 2013 on charges of ordering an online smear campaign to sway public opinion in favor of the ruling Saenuri Party candidate Park Geun-hye before last December’s presidential election, in violation of the country’s election law. Lee Jae-Won/Reuters

A woman stands on a lotus-shaped island as a boatman takes tourists for a ride around a lake at Zizhuyuan Park, known as Purple Bamboo Park in Beijing, China. Purple Bamboo Park, one of the seven biggest parks in Beijing, is a classical Chinese garden which draws many tourists. Andy Wong/AP

Market Closes for August 14^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Aug. 14 (Bloomberg) — Canadian stocks fell for the first time in three days, retreating from a two-week high, as retailers including Rona Inc. retreated on weaker-than-estimated results.

Rona dropped 3.7 percent as earnings fell short of projections. Metro Inc. fell the most since May 2010 after announcing it will take a C$40 million ($39 million) charge to reorganize its Ontario store network and that sales fell short of estimates. First Majestic Silver Corp. and Silvercorp Metals Inc. rallied at least 7.6 percent to lead raw-materials producers higher as the metal advanced for a fifth day.

Three stocks fell for every two that rose as the Standard & Poor’s/TSX Composite Index slipped 2.89 points, or less than 0.1 percent, to 12,639.30 at 4 p.m. in Toronto. The index swung as high as 0.2 percent and as low as 0.2 percent.

“The Canadian economy is growing marginally slower than the U.S., so companies missing estimates is to be expected,” said Anish Chopra, a fund manager with TD Asset Management Inc. in Toronto. The firm manages C$216 billion. “When you look at precious metals, for both gold and silver the pricing has come down significantly so there are people who think there’s value at these levels.”

Economists estimate Canadian gross domestic grew 1.6 percent in the second quarter, according to a Bloomberg survey.

The U.S economy expanded by 1.7 percent in that period.

Eight of 10 main industries in the gauge fell, with consumer staples stocks dropping 1.4 percent. Materials producers added 2.3 percent as a group.

Metro declined 3.7 percent to C$69.30, the lowest since July 5. Canada’s third largest grocery chain reported a 0.9 percent drop in same-store sales last quarter, the worst result in at least 10 years, data compiled by Bloomberg show. The figure measures performance at locations open for at least a year. Metro reported sales of C$3.57 billion in the period, compared with analysts’ estimates for C$3.64 billion.

Rona dropped 3.7 percent to C$10.84. The country’s largest home-improvement store chain posted second-quarter adjusted earnings of 28 Canadian cents, short of the 33 cents estimated by analysts.

Same-store sales fell 1 percent in the quarter, affected by poor weather, a June strike in the Quebec construction industry and falling housing starts across the country, Rona said in a statement.

Silvercorp Metals soared 7.6 percent to C$3.84, highest in four months, and First Majestic jumped 9.3 percent to C$14.85.

Silver rallied for a fifth straight day, advancing 12 percent in that time. The metal remains 28 percent lower in 2013.

Kinross Gold Corp. added 6.5 percent to C$5.94 and Iamgold Corp. rose 6.9 percent to C$6.01 as the price of gold increased for the fifth time in six sessions. The metal had fallen 21 percent this year through yesterday.

Teck Resources Ltd. gained 2.7 percent to C$28.42, the highest since May, as copper traded near a nine-week high.

Bankers Petroleum Ltd. climbed 3 percent to C$3.14. Oil revenue surged 34 percent to $131.8 million as production rose to 17,866 barrels a day in the second quarter, compared with 14,161 barrels a year ago.

Bankers said it will ramp up spending on surface facilities in the second half of the year, including the potential acquisition of a sixth drilling rig that should allow the company to reach the “high-end of our annual guidance,” Chief Executive Officer David French said in a statement.

US

By Nick Taborek and Lu Wang

Aug. 14 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for the sixth time in eight days, after economists predicted the Federal Reserve will reduce stimulus in September as European data added to signs that the global economy is strengthening.

Macy’s Inc. fell 4.5 percent as the department-store chain cut its profit forecast after weaker-than-estimated sales.

Homebuilders and utility stocks slumped amid rising bond yields.

Apple Inc. rose 1.8 percent, extending a rally after billionaire investor Carl Icahn said yesterday he’s a shareholder. Cisco Systems Inc. tumbled 9.4 percent after the close of regular trading as it plans to cut 4,000 jobs.

The S&P 500 lost 0.5 percent to 1,685.39 at 4 p.m. in New York, the lowest level since July 29. The benchmark gauge has dropped 1.4 percent since a record high on Aug. 2. The Dow Jones Industrial Average declined 113.35 points, or 0.7 percent, to 15,337.66, the lowest since July 10. About 5.4 billion shares changed hands on U.S. exchanges, 14 percent below the three- month average.

“The market is scope-locked on Fed tapering in September,” Douglas Cote, chief market strategist at ING U.S.

Investment Management in New York, said in a telephone interview. His firm oversees $190 billion. “Quantitative easing is creating some excess in the financial system. The last thing Bernanke wants when he finishes his term is to be responsible for the next bubble.”

The S&P 500 has fallen from a record high this month on growing speculation the Fed will pare stimulus, or quantitative easing, this year. Central bank stimulus helped propel the S&P 500 up more than 150 percent from its bear-market low in 2009.

The Fed, led by Chairman Ben S. Bernanke, will probably reduce its $85 billion in monthly bond purchases at its meeting on Sept. 17-18, according to 65 percent of economists surveyed by Bloomberg from Aug. 9 to Aug. 13. In a survey last month, half of economists predicted a reduction at next month’s meeting.

A report today showed wholesale prices in the U.S. were little changed in July, reflecting the biggest drop in auto costs in four years. Fed policy makers continue to see inflation running below the central bank’s 2 percent goal even as the expansion picks up in the second half of the year.

Separate data showed the euro area’s economy emerged from a record-long recession in the second quarter, led by Germany and France. Gross domestic product expanded 0.3 percent after a 0.3 percent contraction in the first quarter, the European Union’s statistics office said.

Fed Bank of St. Louis President James Bullard, who has backed continued bond purchases by the Fed, said policy makers should be careful in changing course based solely on their economic forecasts, which have proven in the past to be too rosy.

Federal Open Market Committee forecasts “have tended to be too optimistic over the last several years,” Bullard, who votes on monetary policy this year, said today in the text of prepared slides for a speech in Paducah, Kentucky. “Given this experience, I think caution is warranted in taking policy action based on forecasts alone.”

Last week, Charles Evans, Sandra Pianalto and Richard Fisher, regional Fed presidents in Chicago, Cleveland and Dallas, said the central bank may be closer to tapering as the labor market recovers. Fed Bank of Atlanta President Dennis Lockhart said yesterday that policy makers may start to slow buying at any of their next few meetings amid “uneven performance” by the economy.

“The market is beginning to get a little nervous of the fact that most things are probably lining up towards a taper,” Burt White, chief investment officer who helps oversee $390 billion at LPL Financial in Boston, said in a phone interview.

“If you look at the data that’s been coming through in the last week or so, they’ve been supportive of taper.”

The Chicago Board Options Exchange Volatility Index, or VIX, rose 5.9 percent to 13.04. The equity volatility gauge reached its highest level this year in June and has since fallen 36 percent.

Nine of 10 S&P 500 industries slipped today as health-care and consumer-discretionary stocks fell the most, sinking at least 0.7 percent. Home Depot Inc. slid 2.5 percent to $77.44, for the largest drop in the Dow.

Macy’s fell 4.5 percent to $46.33. Chief Executive Officer Terry Lundgren used promotions during the quarter to clear inventory that had built up as a cool spring curtailed purchases of summer clothing and the bumpy economy restrained consumers’ spending.

Boeing Co. lost 2 percent to $104.16. The company’s 787 Dreamliner suffered a fresh setback after ANA Holdings Inc., the model’s biggest operator, said it discovered wiring defects in the fire-suppression system on three aircraft. Boeing’s flagship jet is already under scrutiny following a fire in London last month that U.K. investigators linked to an emergency beacon.

An S&P gauge of homebuilder stocks sank 1.8 percent to the lowest since November as yields on Treasuries approached the highest level this year, spurring concern rising interest rates will hinder a housing recovery. Ten of the index’s 11 members declined. PulteGroup Inc. slid 1.7 percent to $15.11. D.R. Horton Inc. fell 2.4 percent to $18.09 for an eighth day of losses.

US Airways Group Inc. slumped 1.2 percent to $16.17, extending its two-day slide to 14 percent. The U.S. Justice Department yesterday recommended blocking a proposed American Airlines-US Airways merger, saying the deal would lead to less competition in the industry and higher prices for consumers.

TripAdvisor Inc. tumbled 9.2 percent to $73.55 for the biggest drop in the S&P 500. The online travel research company fell after an executive speaking at the Canaccord Genuity Growth Conference in Boston said summer so far has been “bumpier” than forecast and traffic is “holding but not as strong” as anticipated.

Cree Inc. plunged 22 percent to $58.83. The maker of energy-efficient lighting products predicted earnings in the first quarter will be no more than 41 cents a share, missing the average analyst estimate by 2 cents.

Moody’s Corp. declined 5.1 percent to $65.50. The owner of the second-largest credit rater declined the most in six months as the pace of bond issuance worldwide slowed this month. Sales of corporate bonds have declined 32 percent to $97.7 billion this month, compared with $144 billion in the corresponding period of August 2012, according to data compiled by Bloomberg.

JDS Uniphase Corp. lost 3.9 percent to $14.23. The provider of network analytics for the telecommunications and broadband industries forecast first-quarter revenue below analysts’s estimates.

Cisco Systems tumbled 9.4 percent to $23.90 as of 5:16 p.m.

New York time. The biggest maker of networking equipment reported fiscal fourth-quarter profit and sales in line with estimates and said it would cut 4,000 jobs, or 5 percent of its work force. The company said the environment is improving, though not at the pace it wants.

Utilities, whose 4 percent yield is the second-highest among 10 industries, dropped 0.8 percent amid concern rising bond yields will cut demand for equity income.

Apple gained 1.8 percent to $498.50, and briefly traded above $500 for the first time since January. Icahn, the billionaire activist investor who has made a career of pushing companies to make changes to boost shares, bought $1 billion worth of stock and wants Apple to allocate $150 billion for a repurchase, said a person with knowledge of his plans who asked not to be named because the investment was made privately.

The maker of iPhones and iPads has rallied 9.7 percent over three days.

Brocade Communications Systems Inc. advanced 16 percent to $7.99. The networking-equipment maker reported third-quarter profit that beat estimates as demand for its products improved.

Steinway Musical Instruments Inc. climbed 7.9 percent to $41.29. The 160-year-old piano maker agreed to be acquired by Paulson & Co., the hedge fund owned by billionaire John Paulson, in a deal valuing the company at about $512 million. The offer for $40 a share tops that of private-equity firm Kohlberg & Co., which had bid $35 a share last month for Waltham, Massachusetts- based Steinway.

Newmont Mining Corp. rallied 6.2 percent to $31.94 for the biggest gain in the S&P 500. Cliffs Natural Resources Inc. increased 2.6 percent to $24.54. Freeport-McMoRan Copper & Gold Inc. jumped 1.4 percent to $31.59. Gold prices climbed 0.6 percent while copper added 0.8 percent.

Have  a wonderful evening everyone.

Be magnificent!

“Be the change that you wish to see in the world.” ― Mahatma Gandhi

As ever,

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.