August 18, 2016 Newsletter

Dear Friends,

Tangents:

FULL MOON TONIGHT!

We’ve been enjoying watching the Olympics in the evening and I hope you have too.  Last night featured the most amazing basketball game I have ever watched – it was Serbia vs Croatia.   Croatia got an early lead only to Serbia eventually  take it from them with a 13 point lead and finally, Croatia catching up again.  The Serbs however, won by one point.  It was truly an exciting game.  Looking forward to tonight.

On Aug. 18, 1963, James Meredith became the first black to graduate from the University of Mississippi.

-from Advisor.Analyst today:
Too often we underestimate the power of a touch, a smile. A kind word,
a listening ear, an honest compliment, or the smallest act of caring, all
of which have the potential to turn a life around.
PHOTOS OF THE DAY

Americans Stuart McNay and Dave Hughes compete in the men’s two person dingy sailing final on Thursday. Benoit Tessier/Reuters

Laura Ludwig of Germany competes in the women’s beach volleyball gold medal match against Brazil on Thursday. The Germans took the gold. Tony Gentile/Reuters

Market Closes for August 18^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks closed little changed as Valeant Pharmaceuticals International Inc. retreated, combining with a drop in lenders to offset gains among energy producers as crude entered a bull market.
     The S&P/TSX Composite Index fell less than 0.1 percent to 14,695.68 at 4 p.m. in Toronto, extending losses to a third day, the longest in two months. Trading volume was 13 percent lower than the 30-day average.
     Valeant lost 3.4 percent, after a 13 percent rally on Wednesday. T. Rowe Price Group Inc. filed a lawsuit against the drugmaker, accusing its executives of using a secret network of pharmacies, deceptive pricing, reimbursement practices and accounting tricks to artificially inflate its revenue and profit. A Valeant spokeswoman said the complaint repeats allegations and claims made in a suit filed last October that seeks class-action status, and the company “intends to defend itself.”
     The latest news highlights a roller coaster of events for the struggling drugmaker in recent weeks. The stock jumped the most in more than two decades Aug. 9 after Chief Executive Joseph Papa allayed investor concerns by affirming guidance in its 2016 results and embarking on a plan to sell assets and reduce debt, only to fall the most in a month the same week on a report it was the target of a criminal probe by U.S. prosecutors. Two analysts upgraded their ratings for the stock this week.
     Elsewhere, financial services stocks lost 0.4 percent for the biggest contribution to losses in the S&P/TSX as six of 10 industries retreated. Brookfield Asset Management Inc. fell 1.4 percent, stretching its losing streak to a seventh day, the longest in a year. Raw-materials stocks ended a mixed day of trading higher, halting a five-day slide that was the longest since October.
     Encana Corp. and Crescent Point Energy Corp. increased at least 1.8 percent as energy producers gained 1 percent as a group. Oil advanced 3.1 percent in New York, extending the longest winning streak in more than a year after gaining 12 percent over the prior five sessions. Brent crude topped $50 a barrel in London for the first time since July 5. WTI oil has risen 22 percent from its early-August low, meeting the common definition of a bull market.
     Raw-materials producers have led the rally in Canadian equities in 2016, surging 60 percent as the top gainers among 10 industries in the S&P/TSX. It’s the best year-to-date performance for the category in at least 30 years, according to data compiled by Bloomberg. Energy producers have gained 23 percent in the same period.
     That’s boosted the Canadian equity benchmark to a 13 percent jump in 2016, rebounding from a slump last year that was the worst for the S&P/TSX since the 2008 financial crisis. The rally has made Canadian stocks more expensive than their U.S. peers, with a price-earnings ratio of 23.4 for the S&P/TSX, about 14 percent higher than the S&P 500 Index.

US
By Joseph Ciolli
     (Bloomberg) — Add companies with shoddier finances to the list of U.S. stocks that have led the advance since February — a potentially bullish sign for investors waiting for the S&P 500 Index to snap out of its paralysis.
     Shares of firms with weaker balance sheets are up 24 percent since markets bottomed in Feb. 11, outpacing their sturdier brethren by 7 percentage points, according to data compiled by Goldman Sachs Group Inc. and Bloomberg. That’s the widest spread in two years for a period of that length. The S&P 500, which rallied 19 percent over the stretch, increased 0.2 percent to 2,187.02 as of 4 p.m. in New York on Thursday, closing at a session high.
     While it sounds like bad news, gains in leveraged companies has generally been a sign of economic confidence. The weak balance sheet group rallied 50 percent in 2013, beating the 30 percent advance in the S&P 500 that was itself the best return since 1997. Value stocks are also outperforming growth shares over the last six months.
     “You’ve seen a much more risk-on appetite since oil bottomed in February, which, to investors, has made it more OK for companies to be leveraged,” said Randy Warren, who manages more than $100 million at Exton, Pennsylvania-based Warren Financial Service & Associates Inc. “It indicates people are feeling comfortable with the pace of economic growth.”
     The rebound in crude oil that helped catalyze the S&P 500’s recovery from a two-year low continued on Thursday, with the resource entering a bull market after a July swoon. Energy shares surged 1.8 percent to a nine-month high, leading gains in the equity benchmark. The Dow Jones Industrial Average added 0.1 percent to 18,597.70, while Nasdaq Composite Index climbed 0.2 percent. The CBOE Volatility Index fell 6.2 percent to 11.43, as the measure of market turbulence held near a two-year low.
      “We’re just melting up right now,” said Warren. “There’s no reason to go down, so we’re hanging in there, moving slowly higher.”
     The U.S. stock market’s climb has also been aided by data showing steady improvement in the world’s largest economy. Citigroup Inc.’s U.S. Economic Surprise Index last month hit its highest level since September 2014. The gauge, which measures the strength of data relative to analysts’ forecasts, has been above zero since early July, a feat it hadn’t managed since November.
     The signs of improvement, most notably in labor-market data, have emboldened investors to favor industries with higher levels of leverage. Technology shares, which had the highest weighting in the Goldman basket of weak balance sheet companies as of June, have surged 15 percent since June 27, outpacing the S&P 500’s 9 percent advance. Among the leaders, NetApp Inc. jumped the most in six years Thursday after better-than- estimated quarterly results, pushing its gain since February past 50 percent.
     The broader index’s seven-week advance since a two-day rout following the U.K. secession vote has delivered 10 fresh records after more than a year without one, though the rally has slowed in the last three weeks. Valuations remain at the highest levels of the seven-year bull market and recent data have painted a mixed picture on the economy’s strength.
     At the same time, chances that the Federal Reserve will raise interest rates this year have fallen below 50 percent. March is now the first month with at least even odds of such a move.
     Among shares moving Thursday, commodity producers rose with crude oil. Wal-Mart Stores Inc. advanced 1.9 percent after boosting its earnings forecast, and NetApp soared 17 percent on its results. 
     Caterpillar Inc. fell 1.2 percent after disappointing July sales data, and Cisco Systems Inc. slipped amid plans to cut about 7 percent of its workforce as the networking-equipment maker tries to recast itself as a provider of software-based systems and services.
     Corrections Corp. of America and GEO Group Inc., two real estate investment trusts that operate prisons for the federal government and other clients, plunged more than 35 percent after the U.S. Justice Department announced plans to stop using private correctional facilities. About 5.9 billion shares traded hands today on U.S. exchanges, 14 percent below the three-month average.
     Earnings season is winding down with fewer than 30 of the S&P 500’s companies yet to post results. Of those that have, 78 percent beat profit projections and 56 percent topped sales predictions. Results have mostly exceeded estimates, though analysts forecast index members will still report a 2.5 percent drop in net income, and see a 0.8 percent decline for the quarter ending in September.

Have a wonderful evening everyone!

Be magnificent!

The saffron of virtue and contentment

Is dissolved in the water gun of love and affection

Pink and red clouds of emotion are flying about,

Limitless colors raining down.

All the covers of the earthen vessel of my body are wide open;

I have thrown away all shame before the world.

Mira’s Lord is the Mountain Holder, the suave lover.

I sacrifice myself in devotion to His lotus feet.

Mira Bai

As ever,

Carolann

If you want to be happy, be.

    -Leo Tolstoy, 1828-1910

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