August 5, 2014 Newsletter

Dear Friends,

Tangents:

Went to a concert in Vancouver on the weekend featuring Santana and Rod Stewart – both are still amazing musicians who can really put on a show at 67 and 69 years of age respectively.  Santana is as great as ever – maybe better than ever – what a guitarist!  If you get an opportunity to catch a concert somewhere before the tour is over, do so.  We went to a restaurant in Yaletown for the first time named West Oak and I highly recommend it – the food gets 5 stars for sure; check it out if you haven’t had a chance yet –  westoakrestaurant.com.

Photos of the Day

A girl walks along the shore while she plays with a ball at Ipanema beach at sunset in Rio de Janeiro. Pilar Olivares/Reuters

A makeshift marker in a sunflower field denotes evidence at the site of the downed Malaysian airliner MH17 near the village of Rozsypne in the Donetsk region of the Ukraine. Sergei Karpukhin/Reuters

Market Closes for August 5^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary

Canada
By Eric Lam

Aug. 5 (Bloomberg) — Canadian stocks fell to a three-week low amid rising tension in Ukraine and a slump in commodities after a report showed the Chinese service industries stagnated in July.

Imperial Metals Corp. plunged 39 percent after the copper and gold producer reported a breach in the waste storage facility at its Mount Polley mine in British Columbia. Lundin Mining Corp. and Copper Mountain Mining Corp. retreated more than 1.5 percent as copper capped the biggest decline in eight weeks. Silver Standard Resources Inc. retreated 4.6 percent as silver prices dropped. Bonavista Energy Corp. lost 5 percent to pace declines among oil producers as crude dropped to a six- month low.

The Standard & Poor’s/TSX Composite Index lost 27.55 points, or 0.2 percent, to 15,187.71 at 4 p.m. in Toronto, the lowest close since July 15. The S&P/TSX was closed yesterday for a holiday in Ontario. The benchmark Canadian equity gauge closed at a record on July 30.

Russian President Vladimir Putin ordered the government to prepare a response to U.S. and European sanctions as Poland warned that a renewed buildup of Russian troops on Ukraine’s border suggests a possible invasion.

Putin is showing no sign of backing down over Ukraine since the U.S. and the European Union tightened sanctions last week. Polish Foreign Minister Radoslaw Sikorski said Russia had restored its combat readiness on the Ukraine border. He did not give any indication that an incursion was imminent.

The services Purchasing Managers’ Index for China declined to 50.0, the dividing line between expansion and contraction, from June’s 53.1, HSBC Holdings Plc and Markit Economics said today. A similar official gauge released Aug. 3 dropped to a six-month low of 54.2.

Bonavista Energy fell 5 percent to C$13.68, the biggest loss in a year, and Penn West Petroleum Ltd. lost 2.3 percent to C$8.12 as energy stocks declined 0.4 percent as as group. Five of 10 industries in the S&P/TSX retreated.

Crude fell for the sixth time in seven days in New York amid forecasts that U.S. supplies will rebound from near six- year lows.

Imperial Metals sank 39 percent to C$10.19, its biggest loss ever. The storage facility at Mount Polley was breached early yesterday morning, Imperial said in a statement, releasing an undetermined amount of water and tailings, the materials left over after processing ore to extract valuable metals. The breach has been stabilized, although the cause of the incident is still unknown, the company said today.

Valeant Pharmaceuticals International Inc. fell 6 percent to C$121.44, the lowest close since January, after Allergan Inc. said Valeant’s second-quarter earnings results and disclosures were “insufficient, inconsistent” and lacking supporting data.

Glass Lewis & Co. in a report meanwhile criticized Allergan’s “cumbersome” bylaws and recommended shareholders support a special meeting to help Valeant’s efforts to take over the company. Valeant, backed by activist investor Bill Ackman, is pursuing a hostile takeover of Allergan.

US
By Joseph Ciolli and Jeremy Herron

Aug. 5 (Bloomberg) — U.S. stocks fell, with the Standard & Poor’s 500 Index sinking to the lowest since May, amid concern that tension in Ukraine may escalate. The dollar rose after American services data added to evidence growth is gathering pace.

The Standard & Poor’s 500 Index slid 1 percent, while the dollar strengthened to an almost nine-month high versus the euro. Treasury two-year note yields touched the lowest level in more than two weeks at 4:43 p.m. in New York. Ten-year yields trimmed earlier gains sparked by speculation interest rates may rise early next year. U.S. crude tumbled to a six-week low.

President Vladimir Putin ordered the government to prepare a response to U.S. and European sanctions as Poland warned that a renewed buildup of Russian troops on Ukraine’s border raises the specter of a possible invasion. Service industries in the U.S. expanded in July at the fastest pace since December 2005, driving speculation economic growth is robust enough for the Federal Reserve to raise its benchmark interest rate before the middle of 2015.

“The market had been jittery,” Lou Shaduk, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore, said in an interview. “You have Polish Minister Sikorski talking about Russian forces poised to pressure or invade Ukraine and that’s all the buyers needed today to go into hiding.”

The S&P 500 extended losses and Treasuries reversed after Polish Foreign Minister Radoslaw Sikorski said Russia had restored its combat readiness on the Ukraine border. He did not give any indication that an incursion was imminent.

Putin is showing no sign of backing down since the U.S. and the European Union tightened sanctions last week, with Russia massing forces on its neighbor’s border in the biggest military buildup since troops were withdrawn from the area in May.

Selling accelerated after the S&P 500 slipped below last week’s closing level of 1,925.15 and yesterday’s intraday low of 1,921.2. The gauge has lost 3.4 percent since reaching a record high of 1,987.98 on July 24 and came within 70 points of erasing its gain for the year.

“I would attribute the dip in S&P to the rumor that Russia’s getting ready to invade Ukraine,” Walter “Bucky” Hellwig, a Birmingham, Alabama-based senior vice president at BB&T Wealth Management, said by phone. “That created additional technical difficulties with high-frequency trading.”

Among stocks moving today, Target Corp. lost 4.4 percent after cutting its estimate for second-quarter profit on an expense stemming from a December data breach. Pioneer Natural Resources Co. sank 5.7 percent and Halliburton Co. dropped 3.4 percent to lead an index of energy stocks lower by 2.1 percent, the most among 10 S&P 500 groups.

U.S. airline stocks followed European carriers lower after business newspaper Vedomosti reported Russia may limit or ban trans-Siberian flights by European Union airlines, citing people familiar with the matter. Delta Air Lines Inc. fell 2.8 percent and United Continental Holdings Inc. slid 3.5 percent.

Treasuries retreated with equities earlier in the day as concern grew that the improving U.S. economy may force the Fed to act on rates sooner than anticipated, as the central bank remains on pace to wind down its monthly bond purchases in October. Fed Chair Janet Yellen has said officials will keep its benchmark low for a “considerable time” after the bond buying ends.

The pickup among service providers, combined with the strongest rate of growth in more than three years at American factories, shows the world’s largest economy was strengthening at the start of the third quarter. Faster payroll growth is helping fuel consumer demand, raising the odds a self- reinforcing cycle of increased hiring and spending is under way.

The Bloomberg Dollar Spot Index rose to the highest level in five months as the greenback appreciated 0.3 percent to $1.3375 per euro. The yen reversed an earlier decline against the dollar on haven demand amid the tension over Ukraine.

“In the last couple weeks we’ve been getting reports that the economy is definitely recovering,” John Fox, director of research at Fenimore Asset Management in Cobleskill, New York, said in a phone interview. “People are now focusing on the fact that the Fed isn’t going to be this accommodative forever.”

The stimulus and better-than-forecast corporate earnings have propelled the S&P 500 higher by as much as 194 percent since a bear-market low in March 2009. Hedge-fund manager David Einhorn is struggling to find value amid the five-year rally that pushed equity valuations to near the highest since 2010.

“We had a difficult time finding new investments this quarter,” Einhorn said today on a conference call discussing results at Greenlight Capital Re Ltd., the Cayman Islands-based reinsurer where he is chairman. “As the market continues to rise in the face of conflicting economic data, global unrest, and looming overdue Fed exit from quantitative easing we remain cautiously positioned.”

The S&P 500 gained 0.7 percent yesterday, rebounding from the worst week since 2012, as Portugal’s bailout of Banco Espirito Santo SA eased concern about Europe’s most indebted lenders, while earnings from companies including Berkshire Hathaway Inc. beat estimates. The index sank 2.7 percent last week, its worst since June 2012. It has gone without a 10 percent correction since 2011.

“The market is down on fears that Russia is going to invade Ukraine,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in an interview. “There was a feeling amongst traders that yesterday’s rally didn’t have sustainability. People came in today unimpressed with yesterday’s strength so we were sitting on wobbly legs even before this chatter around Ukraine came out.”

West Texas Intermediate crude slid 0.9 percent to close at $97.38. Refineries probably operated at 92.8 percent of capacity on Aug. 1, down 0.7 percentage point from the prior week, according to a Bloomberg survey before a government report tomorrow.

Silver slid to a six-week low, while platinum and palladium retreated as the dollar’s advance reduced the appeal of commodities as investments.

Copper sank 1.2 percent to settle at $3.2045 a pound in New York, leading industrial metals lower after data from China, the world’s biggest consumer of commodities, showed growth in the country’s services industries slowed. Zinc and lead retreated in London.

China’s non-manufacturing sector stagnated in July as a private index fell to a record low, suggesting the government’s stimulus measures are failing to gain traction outside manufacturing. A gauge of Chinese shares in Hong Kong slid 0.7 percent.

Have a wonderful evening everyone.

Be magnificent!

Duties to self, to the family, to the country,

and the world are not independent of one another.

One cannot do good to the country

by injuring himself or his family.

Similarly one cannot serve the country

by injuring the world at large.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Justice is the right of the weakest.

-Joseph Joubert, 1754-1824

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7