August 27, 2013 Newsletter

Dear Friends,

Tangents:

We were watching BBC’s program Hard Talk last night and it concerned climate change, specifically how it is affecting arctic animals.  It is pretty concerning.  There were not even any ice floes this past summer for the first time.  Normally, the polar bears tread the ice floes to find food.  Now they are scavenging on land.  And it also showed huge numbers of walruses clustered together on the shore, when normally they would be in the icy waters.  Their habitat is changing irrevocably.  The ice in winter is now too thin for the animals to move around on or for the indigenous peoples to walk on to fish in ice holes.  And the Russian government is preparing to expand its deep sea drilling exploration for oil and gas in the area, further disrupting the way of life.  The news that followed the program showed the fires raging in California and the flooding in Mexico, India and other places around the word – occurring right now.

I attended a lecture on climate change given by Al Gore a few years ago when he first published his book on the subject, An Inconvenient Truth.   It would appear his observations and predictions are accurate.   It’s pretty clear that the consequences of ignoring the triggers will be catastrophic for the planet; we need to ramp up political pressure for change.

Photos of the Day –August 27th, 2013

Sacramento Metropolitan firefighters monitor the Rim Fire near Camp Mather, Calif. The fire has burned 160,980 acres on the northwest side of Yosemite National Park. Max Whittaker/Reuters

A vender moves piles of bananas to a shallow area on a street over flowed with rainwater in Yangon, Myanmar. Gemunu Amarasinghe/AP

Market Closes for August 27^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Alex Barinka

Aug. 27 (Bloomberg) — Canadian stocks fell, giving the benchmark index its biggest drop since June, on growing tension over possible military action in Syria.

Raw-materials companies fell 3.7 percent, reversing an earlier rally of as much as 1.3 percent amid a surge in gold prices. Energy shares also erased an advance amid a jump in oil.

OceanaGold Corp. and Niko Resources Ltd. tumbled more than 7.4 percent. Bank of Nova Scotia dropped 1.7 percent while Bank of Montreal increased 0.4 percent as investors weighed quarterly earnings reports.

The S&P/TSX fell 169.09 points, or 1.3 percent, to 12,591.21 at 4 p.m. in Toronto, the most since June 24. The index trimmed its gain for the month to 0.8 percent. Trading volume was 4.7 percent higher than the 30-day average at this time of the day.

“The gold stocks are the surprise,” John Kinsey, a portfolio manager with Caldwell Securities Ltd. in Toronto, said in a phone interview. The firm manages about $1 billion. “They were up this morning and they have all turned around now. If you are nervous about the market, you tend to sell the ones where you have a profit. It has been a pretty good month for the gold stocks and the oil stocks.”

The benchmark gauge fell yesterday, erasing an earlier gain, after U.S. Secretary of State John Kerry said the nation will hold Syria’s government accountable for using chemical weapons, fanning concern unrest may disrupt Middle East oil supplies.

President Barack Obama is under growing pressure from U.S. allies and Congress to go beyond denunciations of Syria and take military action after the Aug. 21 attack that opposition groups say killed more than 1,300 people. Iran’s Foreign Ministry warned that a U.S. attack on Syria would drag the whole region into conflict.

All 10 industries in the benchmark index fell. Technology companies slid 2.6 percent, with CGI Group Inc. dropping 3.3 percent to C$34.45 and BlackBerry Ltd. declining 3.8 percent to C$10.54.

Gold shares dropped after erasing an early rally. The S&P/TSX Gold Index dropped 4.2 percent, paring its gain for the month to 14 percent. The metal’s price jumped to the highest since May as the Syrian political tension increased demand for the precious metal as a store of value.

OceanaGold slid 9.4 percent to C$1.94. Alacer Gold Corp. tumbled 5.1 percent to C$3.32.

Energy companies lost 0.2 percent, trimming their advance for the year to 2.6 percent. Niko Resources declined 7.4 percent to C$5.13. West Texas Intermediate crude rose to an 18-month high on speculation that tension in Syria will disrupt Middle East supplies.

The S&P/TSX Commercial Banks Index fell 0.9 percent even as two of its eight members reported third-quarter earnings that beat analysts’ estimates.

Bank of Montreal, the nation’s fourth-largest lender by assets, increased 0.4 percent to C$66.05, the highest close since 2007. Profit topped analysts’ estimates on record consumer lending and lower provisions for bad loans.

Bank of Nova Scotia fell 1.7 percent to C$57.71. Canada’s third-largest lender by assets said net income for the period fell 14 percent from a year earlier when the bank had a one-time gain. Earnings from its global banking and markets business slipped 3 percent in the latest quarter.

National Bank of Canada reports results tomorrow, followed by Canadian Imperial Bank of Commerce, Royal Bank of Canada and Toronto-Dominion Bank on Aug. 29. The country’s six biggest banks are expected to post average per-share profit growth of 3.3 percent excluding some items, according to Robert Sedran, an analyst with CIBC.

US

By Nick Taborek and Lu Wang

Aug. 27 (Bloomberg) — U.S. stocks fell, with the Standard & Poor’s 500 Index dropping the most since June 20, as growing tension over possible military action in Syria overshadowed a report showing consumer confidence unexpectedly rose in August.

Financial and technology shares lost at least 2 percent to lead declines among 10 S&P 500 main industries. American Express Co. and Microsoft Corp. sank more than 2.3 percent. Southwest Airlines Co. tumbled 3.5 percent amid concern surging oil prices will boost fuel costs. D.R. Horton Inc. fell 3.8 percent as a report showed residential real-estate prices increased in June at a slower pace.

The S&P 500 slid 1.6 percent to 1,630.48 at 4 p.m. in New York, the lowest closing level since July 3 and 4.6 percent below the latest record on Aug. 2. The Dow Jones Industrial Average dropped 170.33 points, or 1.1 percent, to 14,776.13, The gauge has fallen eight of the past 10 sessions to the lowest since June 25.

“Everybody’s waiting to see what’s going to happen,” Randy Bateman, who oversees $15 billion as chief investment officer of Huntington Asset Advisors in Columbus, Ohio, said by phone. “Is this going to escalate? Energy prices, if they rise a whole lot, could that mitigate all the strength we’ve been seeing lately in the economy? If we’ve got housing prices that start to rise at the same time we have food and fuel increasing, we could see inflation start to rise and that could impact Fed policy.”

The benchmark gauge fell 0.4 percent yesterday, reversing an early gain of as much as 0.4 percent after Secretary of State John Kerry said the U.S. will hold Syria’s government accountable for using chemical weapons, fanning concern unrest may disrupt Middle East oil supplies. Crude rose to an 18-month high today.

The U.S., France and Britain stepped closer today to a military strike against Syria, laying the legal groundwork to justify action, moving forces into place and rounding up allies in the region. Defense Secretary Chuck Hagel told the BBC that the U.S. has “assets in place” and forces are “ready to go.”

The introduction of troops isn’t being considered, nor is imposition of a no-fly zone over Syria, according to a U.S. official who asked for anonymity to discuss internal deliberations.

Growing speculation the Federal Reserve will reduce its monthly bond buying has also weighed on equities in recent weeks. Minutes of the central bank’s July meeting released Aug. 21 showed policy makers supported stimulus cuts this year if the economy improves.

Data today showed consumer confidence unexpectedly increased in August as Americans grew more optimistic about the outlook for the economy. A report from the Fed Bank of Richmond showed the overall business activity index for mid-Atlantic region, which accounts for 9.1 percent of gross domestic product, rose faster than estimated last month.

Investors are also watching the political wrangling over the approaching limit on federal spending. The U.S. government is expected to exhaust its ability to borrow funds in mid- October, when it will hit the statutory debt limit, according to an estimate from the Treasury Department in a letter to lawmakers released yesterday.

“It further adds to the degree of uncertainty that’s out there,” Bateman said.

Treasury Secretary Jacob J. Lew reiterated today that the Obama administration won’t negotiate over the debt limit, saying he thinks lawmakers understand the need to preserve the U.S.’s “rock-solid” pledge to meet its commitments.

House Speaker John Boehner said last month Republicans wouldn’t increase the debt ceiling “without real cuts in spending” that would achieve a further reduction in the deficit.

The Chicago Board Options Exchange Volatility Index, or VIX, jumped 12 percent to 16.72 today, headed for the highest close since June 28. The equity volatility gauge has surged 40 percent since a five-month low on Aug. 5.

Trading in U.S. exchanges is heading for the second-slowest month in at least five years, according to data compiled by Bloomberg. An average of about 5.5 billion shares changed hands each day this month. That’s about 60 million shares more than last August. About 6.2 billion shares traded today, in line with the three month average.

Today’s drop in the S&P 500 pushed the gauge below its average during the past 100 days for a second time this year, data compiled by Bloomberg show. The average measure, which is followed by some analysts who study charts to gauge the market’s trends, was last broken on a closing basis on June 24, when the index bottomed after a 5.8 percent retreat from its May peak.

The threshold stood near 1,638 recently.

All 10 main S&P 500 groups retreated. American Express fell 2.3 percent to $71.91, the lowest since May 14. Microsoft dropped 2.6 percent to $33.26 for the steepest slide in the Dow.

Airlines dropped as West Texas Intermediate crude rose to a the  highest since February 2012 amid the tension in Syria. The Bloomberg U.S. Airlines Index tumbled 5.1 percent to the lowest since June, as all 10 members retreated.

Southwest dropped 3.5 percent to $12.80. United Continental Holdings Inc. plunged 7.2 percent to $27.71 and Delta Air Lines Inc. slumped 5.7 percent to $19.11.

The S&P Supercomposite Homebuilding Index slipped 2.5 percent. The gauge has plunged 28 percent since a May high amid signs that the rate of improvement in the housing market is cooling.

Residential real-estate prices increased in June at a slower pace, the S&P/Case-Shiller index showed today. Data last week revealed a larger-than-forecast drop in sales of new homes in July. D.R. Horton dropped 3.8 percent to $17.99, the lowest in almost 13 months, while PulteGroup Inc. slid 3.5 percent to $15.59.

Best Buy Co. lost 2.2 percent to $35.02. Richard Schulze, the electronics retailer’s founder and largest shareholder, said he plans to sell an undisclosed amount of its stock to diversify his assets and raise money.

DSW Inc. jumped 7.9 percent to a record $87.75. The shoe retailer reported second-quarter profit excluding some items of 97 cents a share, beating the average estimate of 79 cents from analysts in a Bloomberg survey.

Have a wonderful evening everyone.

Be magnificent!

We are trying to understand violence as a fact, not as an idea,

as a fact which exists in the human being, and the human being is myself.

I must be in a state of mind that demands to see this thing right to the end

and at no point stops and says I will go no further.

Now it must be obvious to me that I am a violent human being.

Krishnamurti, 1895-1986

As ever,

Carolann

As a child my family’s menu consisted of

two choices: take it or leave it.

-Buddy Hackett, 1924-2003

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