August 6, 2015 Newsletter

Dear Friends,

Tangents:

On Aug. 6, 1945, the United States dropped an atomic bomb on Hiroshima, Japan, that instantly killed an estimated 66,000 people in the first use of a nuclear weapon in warfare.

Colonel Tibbetts, USAAF, drops the first atomic bomb on Hiroshima and wrote later that day, August 6^th, 1945:

The problem after the release of the bomb is not to proceed forward but to turn away.  As soon as the weight had left the aeroplane I immediately went into this steep turn and we tried then to place distance between ourselves and the point of impact.  In this particular case that bomb took fifty-three seconds from the time it left the aeroplane until it exploded and this gave us adequate time of course to make the turn.  We had just made the turn and rolled out on level flight when it seemed like somebody had grabbed hold of my aeroplane and gave it a real hard shaking because this was the shock wave that had come up.  Now after we had been hit by a second shock wave not quite so strong as the first one I decided we’ll turn around and go back and take a look.  The day was clear when we dropped that bomb, it was a clear sunshiny day and the visibility was unrestricted.  As we came back around again facing the direction of Hiroshima we saw this cloud coming up.  The cloud by this time, now two minutes old, was up at our altitude.  We were 33,000 feet at this time and the cloud was up there and continuing to go right on up in a boiling fashion,, as if it was rolling and boiling.  The surface was nothing but a black boiling, like a barrel of tar.  Where before there had been a city with distinctive houses, buildings and everything that you could see from our altitude, now you couldn’t see anything except a black boiling debris down below.

Before the war, and especially before the Boer War, it was summer all the year round.  –George Orwell.

PHOTOS OF THE DAY

Children release lanterns into the Motoyasu river in front of the Atomic Bomb Dome Thursday to remember the atomic bomb victims on the 70th anniversary of the bombing of Hiroshima in western Japan. Bells tolled and thousands bowed their heads in prayer. The anniversary highlighted rising tensions over Japan’s moves away from its pacifist constitution. Thomas Peter/Reuters

Local residents hold paper lanterns in front of the Atomic Bomb Dome during a procession Wednesday commemorating the victims of the atomic bombing in Hiroshima, western Japan. On Thursday, Japan will mark the 70th anniversary of the attack on Hiroshima, when the US dropped an atomic bomb on Aug. 6, 1945, killing about 140,000 by the end of the year in a city of 350,000 residents. It was the world’s first nuclear attack. The Atomic Bomb Dome, or Genbaku Dome, was the only structure left standing in this district of the city and has been preserved as a peace memorial. Thomas Peter/Reuters

Market Closes for August 6^th, 2015

International Markets

Bonds

Currencies

Commodities

Money is a terrible master but an excellent servant. –P.T. Barnum, 1810-1891

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell, snapping the longest rally in four months, as the nation’s largest lenders declined for the second time in three days and Valeant Pharmaceuticals International Inc. retreated with U.S. health-care companies.

     Equities fell as Valeant, the largest company in the Standard & Poor’s/TSX Composite Index by market value, slumped 6 percent after four days of gains. The drug maker fell the most in a year, and joined a 2.1 percent slide among health-care stocks in the S&P 500. The Nasdaq Biotechnology Index slumped 4 percent.

     The S&P/TSX fell 97.08 points, or 0.7 percent, to 14,405.91 at 4 p.m. in Toronto. The gauge has fallen 1.6 percent in 2015, one of only three developed markets in negative territory for the year among the the 24 tracked by Bloomberg.

     Energy and materials producers rebounded, erasing earlier losses despite further declines in oil prices. U.S.-listed energy companies gained as offshore driller Transocean Ltd. rallied after posting better-than-estimated profits. Energy and materials are the worst-performing industries in Canada this year and account for almost 30 percent of the benchmark Canadian equity gauge.

     The Bloomberg Commodity Index, which tracks a basket of prices for raw materials including gold, natural gas and crude, slipped 0.3 percent, after paring an earlier 0.6 percent decline.

     The resource-dominated S&P/TSX had added 3.6 percent during a six-day rally that was the longest since April. The advance follows a seven-day rout of 5 percent that was the longest since 2011.

     Bank of Nova Scotia sank 1.9 percent and Toronto-Dominion Bank retreated 0.8 percent as financial services stocks declined 0.7 percent as a group.

     Barrick Gold Corp. rallied 3.8 percent to lead an advance among gold producers after intensifying efforts to strengthen its balance sheet.

     Trilogy Energy Corp. lost 1.3 percent, trimming an earlier drop of 16 percent after reporting a second-quarter loss Wednesday. SNC-Lavalin Group Inc. tumbled 8.4 percent, the most since February 2012, after posting a second-quarter profit that missed analysts’ estimates, dragged down by losses in the engineering and construction unit.

US

By Callie Bost

     (Bloomberg) — The Standard & Poor’s 500 Index declined for the fourth time in five sessions, as biotechnology shares tumbled while media companies sold off on disappointing results from Viacom Inc. and Twenty-First Century Fox Inc.

     The Nasdaq Biotechnology Index dropped 4 percent, snapping a five-day winning streak. Viacom and Fox slumped at least 6.4 percent after joining a parade of media companies reporting disappointing results. Keurig Green Mountain Inc. plunged 30 percent after cutting its sales and profit forecasts. Transocean Ltd and Michael Kors Holdings Ltd. added at least 10 percent after posting better-than-estimated results.

     The S&P 500 lost 0.8 percent to 2,083.56 at 4 p.m. in New York, falling below its average prices during the past 50 and 100 days. The Dow Jones Industrial Average fell 120.72 points, or 0.7 percent, to 17,419.75. The Dow fell for a sixth day, its longest losing streak since October. The Nasdaq Composite Index decreased 1.6 percent, the most in almost a month.

     “It’s like panic buying and panic selling,” said Walter Todd, who oversees about $1.1 billion as chief investment officer for Greenwood Capital Associates. “The reactions you’re seeing in the marketplace are just very violent for companies reporting earnings, sometimes to the upside, sometimes to the downside.”

     Media shares were battered for a second day, with quarterly earnings marked by shrinking U.S. ad sales and profits propped up by stock buybacks. Viacom, owner of MTV, Nickelodeon and Comedy Central, posted a third-quarter revenue decline that was wider than analysts had forecast.                      

     Walt Disney Co. slid another 1.8 percent after tumbling 11 percent Wednesday following its results. The shares marked their worst back-to-back drop in more than six years. The Bloomberg U.S. Media Index lost 2 percent for its biggest two-day decline since September 2011.

     Media stocks have been the darlings of the U.S. bull market that began 6 1/2 years ago. Since global equities bottomed in March 2009, the 15-member S&P 500 Media Industry Index had risen 464 percent, second only to automakers. Within the gauge, CBS and Tegna Inc. — up more than 15 fold over the period — are among companies with the 20 biggest gains.

     About 85 percent of S&P 500 members have released earnings figures, with three-quarters beating profit estimates and half topping sales projections. Analysts now call for a 2.8 percent drop in second-quarter earnings, shallower than July 10 estimates for a 6.4 percent fall.                       

     Along with corporate earnings, investors are also watching economic reports to gauge when the Fed will increase interest rates. A report today showed jobless claims rose by 3,000 to 270,000, hovering near four-decade lows as employers hold on to more workers in response to increased demand following a slump in early 2015.

     Friday’s monthly payroll data will be parsed for indications on the likelihood of a September rate increase, with a particular interest in any signs of stronger wage growth. The government’s report is projected to show employers took on 225,000 workers last month, while the jobless rate held at a seven-year low of 5.3 percent.

     “If the number is above 225,000 and there are signs of wage pressure, then good news will certainly be met with a negative response,” said Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey.

     The S&P 500 snapped a three-day losing streak Wednesday amid better-than-expected earnings from technology companies. The gauge is coming off its best monthly gain since February, and closed Thursday 2.2 percent below its record set in May.                        

     The Chicago Board Options Exchange Volatility Index rose 10 percent Thursday to 13.77. The gauge, known as the VIX, in July posted its biggest monthly drop since February, down more than 33 percent. About 7.8 billion shares traded hands on U.S. exchanges, 21 percent above the three-month average.

     Eight of the S&P 500’s 10 main groups fell, with media shares pushing the consumer discretionary group down 1.3 percent, while biotechs dragged health-care 2.1 percent lower. Energy shares advanced 1.6 percent, despite oil’s retreat to its lowest in more than four months.

     Allergan Plc lost 5.1 percent, the most since October. The drug maker’s Actavis unit received a subpoena from the U.S. Justice Department seeking information on the marketing and prices of its generic drugs. Amgen Inc., Celgene Corp. and Biogen Inc. decreased at least 3.5 percent.

     Among consumer discretionary companies, Viacom plummeted 14 percent, the biggest drop in more than six years, sending shares to their lowest since December 2011. Fox sank 6.4 percent, paring an earlier 14 percent drop, to a two-year low. Time Warner Inc. slid 0.8 percent, nearly erasing an earlier 7 percent fall, after a 9 percent loss Wednesday following its results.  Chipmakers Qorvo Inc. and Skyworks Solutions Inc. sank more than 3.4 percent. Microsoft Corp. fell for the first time in four sessions, losing 2 percent.

     Tesla Motors Inc. slumped 8.9 percent, its largest retreat since September. Chief Executive Elon Musk dialed back his forecast for 2015 vehicle deliveries, saying that getting Tesla’s new sport utility vehicle’s middle-row seats just right is proving thornier than expected.

     Transocean Ltd. climbed 11 percent, the most since April to pace gains in energy. The world’s largest offshore rig owner posted earnings that exceeded expectations after cutting costs to confront declining demand for drillships. Chevron Corp. and Exxon Mobil Corp. rose for the first time in six days, up at least 1.2 percent to lead the Dow.                        

     Chesapeake Energy Corp. soared 17 percent, the biggest gain since October. The company is in discussions to sell more assets or stakes in oil fields as the prospect of a prolonged energy- market slump imperils cash flow.

     CF Industries Holdings Inc. rose 2.2 percent, after agreeing to acquire European and North American assets from OCI NV for about $8 billion. CF said the deal will create the world’s largest publicly traded producer of nitrogen fertilizer.

     Herbalife Ltd. climbed 17 percent to its highest in a year.  The nutrition company that’s battling hedge fund manager Bill Ackman had a second-quarter profit that beat analysts’ estimates, and it raised its forecast for the year, helped by sales gains in China.
 

Have a wonderful evening everyone.

Be magnificent!

When a man possesses in his being the notion of God, that is the miracle of miracles.

Rabindranath Tagore

As ever,

Carolann

If I had only known, I would have been a locksmith.

                                -Albert Einstein, 1879-1955

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