August 27, 2015 Newsletter

Dear Friends,

Tangents:

  There is a boom in short-term home lets by the super-rich, according to an article in  the Financial Times last weekend.  In June, the number of one bed listings at Airbnb charging more than $1500 US per night was nearly three times what it had been a year before.  Asia is leading the charge: high-end apartments – those with pools and gyms – grew quickest in Tokyo (up 78 %) and Hong Kong (up 70 %).  Over the same 12-month period, London listings grew by half and those in Paris by a third.   

  Luxury Retreats, which claims to turn away 95 % of those who offer their (mainly) holiday homes, now has 2,800 properties largely in the US and Caribbean with nightly rates ranging from $1000 to $124,000 for the plushest private island.

  Second –home owners are getting younger, meaning more look to the internet for smart rental solutions when they are not using their homes themselves.  The average age of second-home buyers in the US dropped from 52 to 43 in the 10 years to 2013, according to the US National Association of Realtors.

  Increasingly, people are renting their main homes too.  “Where the super-rich have listed secondary residences for some time, now they’re starting to offer their main homes while staying in other properties or holidaying,” says Olivier Gremillon, who runs Airbnb’s European business.

  Many rich users once avoided posting photos on their Airbnb profiles for fear of friends thinking they were hard up, says Mr. Grmillion.  All that has changed: “now it’s cool to be part of the sharing economy; it’s something for people to talk about over dinner parties.”

  The motivation is social as well as financial.  Laurent likes the company.  A scion of a large French family – he won’t give his surname – he lets his sumptuous 4,300 sq ft Louis XVI period spare apartment in Paris.  Extra income for maintenance is handy, he says, but his guests, and their generous reviews are what he gets excited about.  He’ll give tours of the house, explaining which family castle features in this painting, which French king once sat in that armchair and when that celebrity came to stay.  For between $100 and $1500 US per night, depending on the season, he’ll throw in  a few of his own staff of “cleaners, driver, guardian and cooks.”  Owners can add their own deposit requirements and checking procedures.  In 10 years, Laurent has lost only a Bose sound system and a few bottles of champagne from the cellar.

  A few users with posh pads may not be super-rich.  Lower- income European aristocrats are increasingly employing Airbnb to rent outbuildings on their estates, helping to fix leaking roofs, says Mr. 
Gremillon.

Renting guide

Home rentals:
Luxuryretreats.com
Fees: host rate agreed with owner; site sets guest rate independently and pockets the difference.
Perks: full concierge; host specifies level of pampering from basic housekeeping to full-time staff.

Onefinestay.com
Fees: host rate agreed with owner; site sets guest rate independently.
Perks: concierge, full housekeeping, imported linen, toiletries, mobile preloaded with host’s local tips

Luxury.homeaway.com
Fees: host pays annual fee of $349 or a 10-13 % fee per booking.
Perks: at discretion of host.

Airbnb.com
Fees: host pays 3% per booking; guest pays 6-12%.
Perks: whatever host will offer from use of servants to party invitations.

House swaps:
3rdhome.com
Fees: Free to list; each booking costs between $395 -$995
Perks: the sky’s the limit.

HomeExchange.com
Fees: Host chooses membership package.
Perks: negotiated with your swap.

PHOTOS OF THE DAY

Balloons in the installation ‘Heartbeat’ hang in Covent Garden Market in London Thursday. ‘Heartbeat’ is French artist Charles Petillon’s first public art installation and his first ever live work outside of France, uniting modern art with world-class architecture. The piece is created from 100,000 white balloons and stretches 54 meters in length and 12 meters in width, incorporating gentle pulsating white light to symbolize the beating of a heart and reflect the history, energy and dynamism of the district. Frank Augstein/AP

President Obama holds a child as he greets residents in the Tremé neighborhood of New Orleans Thursday for the 10th anniversary of hurricane Katrina. Tremé is one of the oldest black neighborhoods in America. Andrew Harnik/AP

Market Closes for August 27^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rallied, capping its best performance since 2011, as crude prices had the biggest jump in six years and the U.S. economy grew more than forecast.

     Markets in the U.S. and Europe climbed after Chinese stocks snapped the worst sell-off since 1996. The Chinese government resumed its intervention in the stock market Thursday and is also supporting the yuan, according to people familiar with the matter. Better-than-expected U.S. gross domestic product bolstered confidence in the outlook for the world’s largest economy.

     Energy producers jumped 5.8 percent, the biggest one-day gain since 2009. Oil climbed 10 percent, after falling below $40 this week as concern over slowing demand in China fueled volatility in global markets.

     Toronto-Dominion Bank added 1.6 percent after third-quarter profit rose to a record on retail banking. The lender reclaimed the position of Canada’s largest bank as assets climbed to C$1.1 trillion, surpassing Royal Bank of Canada. Canadian Imperial Bank of Commerce rallied 5.9 percent, the most in four years, as profit topped analysts’ estimates. It also raised its dividend.

     Canadian banks have soared 7.1 percent in three days, the biggest such rally since November 2011, as the nation’s largest lenders reported earnings. Bank of Nova Scotia is scheduled to report Friday.

     The Standard & Poor’s/TSX Composite Index jumped 385.08 points, or 2.9 percent, to 13,766.67 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has rebounded 5.5 percent in three days, the biggest such increase since November 2011. The rally cut the S&P/TSX’s loss for the month to 4.9 percent. The index is headed for a fourth straight monthly decline, the longest such streak since September 2011.

     “There’s still some concern with respect to China, but if the U.S. continues to grow bit by bit I can see further gains in this rally,” said Prab Sagoo, a Canadian equity market analyst at Nasdaq Advisory Services on the phone from Montreal.

     The MSCI All-Country World Index of developed and developing markets has increased 4.1 percent in two days, the best two-day rally since 2011. The S&P 500 rose 2.4 percent in New York while the Stoxx Europe 600 Index soared 3.5 percent.

     Global markets were buoyed today after the U.S. economy grew at a 3.7 percent annualized rate in the second quarter on bigger gains in consumer spending, and China’s government stepped up its attempts to stabilize the country’s stock market and currency by buying equities and selling U.S. treasuries, according to people familiar. China and the U.S. are Canada’s two largest trading partners.

     The resource-rich Canadian benchmark equity gauge has been one of the worst-performing developed markets in the world this year amid a collapse in crude prices. China unexpectedly devalued the yuan on Aug. 11, further fueling concerns about global growth and the demand for commodities from oil to copper.

     Teck Resources Ltd., Canada’s largest diversified miner, jumped 24 percent for the biggest gain since April 2009 after agreeing to combine its Chile copper-and-gold project with Goldcorp Inc. to cut costs.

US

By Callie Bost

     (Bloomberg) — The Standard & Poor’s 500 Index posted the biggest two-day surge since 2009 as a relief rally swept across global markets and the economy grew stronger than expected in the second quarter.

     U.S. stocks briefly pared gains in late-afternoon trading, trimming an advance of as much as 2.5 percent in the S&P 500 to less than 0.5 percent before resuming its climb, indicating markets are still vulnerable to violent swings.

     The benchmark gauge rose 2.4 percent to 1,987.66 at 4 p.m. in New York, capping a two-day gain of 6.4 percent, its strongest since the bull market began more than six years ago. The Dow Jones Industrial Average climbed 369.26 points, or 2.3 percent, to 16,654.77. The Dow had its best back-to-back run-up since December 2008. The Nasdaq Composite Index gained 2.4 percent. About 10 billion shares traded hands on U.S. exchanges, 44 percent above the three-month average.

     “We got our pullback, and now we’re going to focus on U.S. things like GDP and the Fed,” said John Canally, chief economic strategist at LPL Financial Corp. in Boston. “When you’re in a correction, it’s not fun, but when you’re out, you can refocus on what matters.”

     Raw-material and energy companies advanced the most as commodity prices rebounded, with crude oil rising 9 percent. Copper producer Freeport-McMoRan Inc. soared 29 percent after unveiling plans to cut production. Consol Energy Inc. and Transocean Ltd. added more than 11 percent. Netflix Inc. rallied for a third day, up 6.8 percent, and Apple Inc. increased 2.9 percent. Tiffany & Co. slipped as quarterly profit missed analysts’ estimates.

     Data today showed gross domestic product rose at a 3.7 percent annualized rate, exceeding all estimates of economists surveyed by Bloomberg, and up from the 2.3 percent reported last month. Bigger gains in consumer and business spending showed the U.S. expansion getting back on track. A separate report showed filings for jobless benefits declined to a three-week low.

     Contracts to purchase previously owned homes climbed in July for the sixth time in the last seven months, another report showed. The 0.5 percent increase in the pending home sales index was less than a 1 percent rise forecast by economists surveyed by Bloomberg.

     “The economy is in good shape and we’re chugging along at a good pace and that’s good for earnings,” Canally said. “It also should clear some of the noise out of this market. There has been a lot of concern about a slowdown in the economy.”

     The data come as Federal Reserve policy makers debate whether growth is strong enough to withstand the first increase in the benchmark interest rate since 2006. Additionally, the global plunge in stocks also could argue for a delay.

     Market turmoil sparked by growth concerns has reduced expectations for the Fed to increase interest rates as soon as next month. New York Fed Bank President William Dudley said Wednesday the upheaval has made the case for raising rates in September “less compelling.”

     Traders are pricing in a 30 percent chance the central bank will act at its next meeting, down from almost even odds before China’s surprise currency move earlier this month.

     Investors will seek further clues on an impending rate increase from an annual symposium at Jackson Hole, Wyoming starting today. Central bankers gather there for an academic discussion on inflation just as China’s slowdown renews fears of falling prices. Fed Chair Janet Yellen won’t attend this year.

     The Chicago Board Options Exchange Volatility Index fell 13 percent Thursday to 26.29, after trimming its drop to just 1.4 percent during equities’ brief afternoon pullback. The measure of market turbulence known as the VIX stretched its three-day decline to 36 percent after a record six-day jump sent the gauge to its highest level since October 2011.

     Thursday’s bout of late-session turbulence came on a day when JPMorgan Chase & Co. derivatives strategist Marko Kolanovic warned that “price insensitive” program traders are likely to cause repeated selloffs in coming days.

     The biggest moves will probably happen at the beginning and end of sessions as investors employing strategies such as trend following and managed volatility seek to balance their funds to reflect recent price changes in stocks.

     “The obvious risk is if these technical flows outsize fundamental buyers,” Kolanovic said in a note to clients. “In the current environment of low liquidity, they may cause a market crash such as the one we saw at the U.S. market open on Monday.”

     All of the S&P 500’s main groups advanced, with industrial and financial companies joining energy and materials at the top. Utilities and consumer staples shares lagged for a second day.

     The energy group had the best back-to-back gain in more than six years, up 8.6 percent since Tuesday’s close. Newfield Exploration Co. increased 9.4 percent, the most in six months, after losing 25 percent during the recent market selloff. Chevron Corp. added 6.2 percent to lead the Dow amid its best two days since November 2008. Apache Corp. and Halliburton Co. rose at least 8 percent.

     Freeport-McMoRan’s strongest rally ever led raw-materials higher. The largest publicly traded copper producer unveiled plans today to cut production and investments in an effort to preserve margins after commodity prices tumbled. Freeport’s shares are still down 56 percent this year. After the close of trading, Carl Icahn disclosed a new activist stake in the miner. Alcoa Inc. jumped 7.2 percent, while Dow Chemical Co. headed for its largest increase in 19 months, up 6.6 percent.

     Signet Jewelers Ltd. surged 14 percent, its best gain since February 2014 and the most among consumer discretionary shares, after second-quarter sales and profit exceeded analysts’ forecasts. Apparel makers Michael Kors Holdings Ltd., PVH Corp. and Under Armour Inc. advanced more than 5.3 percent amid signs of better consumer spending in today’s GDP data.

     Semiconductors continued to be the driver behind the technology group, rising 8.9 percent since Tuesday. Avago Technologies Ltd. climbed 8.6 percent to bring its two-day increase to 16 percent. Micron Technology Inc. rose 8.7 percent, while Applied Materials Inc. and Qorvo Inc. added at least 3.7 percent.

     Railroads helped pace a climb among industrial companies after the second-quarter GDP report showed the economy improved more than expected. Norfolk Southern Corp., CSX Corp. and Kansas City Southern each rallied more than 4.2 percent, after sliding at least 12 percent during the five sessions that ended on Tuesday. The Dow Jones Transportation Average is up 5.4 percent after yesterday’s gain, its strongest back-to-back advance since 2011.

Have  a wonderful evening everyone.

Be magnificent!

The human soul travels from the law to love,

from discipline to freedom,

from the moral plane to the spiritual plane.

Rabindranath Tagore

As ever,
 

Carolann

Common sense is instinct, and enough of it is genius.

                                      -Josh Billings, 1818-1885

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