August 7, 2014 Newsletter

Dear Friends,

Tangents:

The first photos of Earth from Space were seen on this day, August 7^th in 1959.  Here are a couple of them:

The U.S. satellite Explorer VI transmitted the first picture of Earth from space.  For the first time we had a likeness of our planet based on more than projections and conjectures.  But it would take years for the general public to see the pictures.  Stewart Brand, founder, Whole Earth Catalog, conceived an idea in 1966 to sell buttons which read, “Why Haven’t We Seen A Photograph of the Whole Earth Yet?”  The photographs of Earth that were made by NASA’s Apollo program were made public in 1969.  The first Earth Day was in 1970.  The ecology movement really took off after the photos were released.

Photos of the Day

Australian Ballet dancer Kismet Bourne climbs out of an empty oceanside pool in Sydney after she and three other dancers took advantage of the empty pool to promote their February 2015 production of Swan Lake. Jason Reed/Reuters

Women paint paper replicas of soldier’s hats for the Vu Lan Festival at Dong Ho village, outside Hanoi, Vietnam. Vietnam is celebrating the month-long festival of the hungry ghosts. Many Taoists and Buddhists believe that the living are supposed to please the ghosts by offering them food and burning paper effigies of daily items for spirits to use in the afterlife. Kham/Reuters

Market Closes for August 7^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Jacob Barach

Aug. 7 (Bloomberg) — Canadian stocks fell to a three-week low as the conflict over Ukraine worsened and earnings from Air Canada and Trinidad Drilling Corp. disappointed investors.

Air Canada, the country’s biggest carrier, dropped 8.1 percent after saying yields would continue to decline this year as it packs fuller planes. Trinidad Drilling sank 4.4 percent after earnings fell short of analyst estimates. Lightstream Resources Ltd., an oil exploration company, lost 8 percent after production fell.

The Standard & Poor’s/TSX Composite Index fell 83.32 points, or 0.6 percent, to 15,118.77 at 4 p.m. in Toronto. Health-care shares led declines among the main industries in the equity gauge, falling 2 percent.

Russia slapped import bans on an array of food goods from the U.S. and Europe and threatened to target the automotive, shipping and aerospace industries, striking back at sanctions over the conflict in Ukraine. The curbs target nations that sanctioned or supported punitive measures against Russia and also include Canada, Australia and Norway.

Air Canada dropped for a sixth day, the longest streak since 2011. The shares fell 8.1 percent to C$8.51. Yield, or average fare per mile, declined 2.1 percent in the second quarter, the company said today. Chief Executive Officer Calin Rovinescu said yields will continue to fall this year as the airline adds more economy class seats and operates longer flights with a view to boosting profit.

Trinidad Drilling slipped 4.4 percent to C$9.99. The company reported lower-than-estimated revenue and results were affected by re-activitating rigs to meet additional demand, leading to additional costs.

Lightstream Resources slumped 8 percent to C$6.31. The company cited reduced field activity for the drop in second- quarter production.

Semafo Inc. rose 10 percent to C$5.32. The gold producer said that it sees output reaching the upper-end of its estimates for the year. The company also beat analyst’s earnings estimates.

Pason Systems Inc., which rents oilfield equipment, jumped 11 percent to C$31.68. The company boosted its dividend and reported higher earnings from the previous year.

US
By Lu Wang and Elena Popina

Aug. 7 (Bloomberg) — U.S. stocks fell, sending the Dow Jones Industrial Average to the lowest level since April, as concern that the Ukraine conflict is escalating offset better- than-estimated earnings and a drop in American jobless claims.

Health-care companies tumbled 1.2 percent as Aetna Inc. dropped 4 percent. Tyson Foods Inc. slid 2 percent after Russia banned billions of dollars of food imports from the U.S. and other nations in retaliation for sanctions. 21st Century Fox Inc. climbed 5 percent as “X-Men: Days of Future Past” and “Rio 2” led to a jump in income at its film business.

The Standard & Poor’s 500 Index fell 0.6 percent to 1,909.57 at 4 p.m. in New York, closing below its average price for the past 100 days for the first time since April. The Dow dropped 75.07 points, or 0.5 percent, to 16,368.27, close to its 200-day moving average. About 6.2 billion shares traded hands on U.S. exchanges, 6.8 percent above the three-month average.

“The uncertainty over the situation in Ukraine has overshadowed the positive economic data we saw earlier today,” John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York said in a phone interview. “The market has adapted to the positive data, but when it comes to geopolitical tensions, it’s hard to adapt. Tensions rise and we’re reaching the last level before the situation spins out of control.”

The S&P 500 has lost 3.9 percent since reaching a record of 1,987.98 on July 24, and is about 60 points away from wiping out its gains for 2014. The U.S. equities benchmark extended losses in afternoon trading, with the gauge falling below 1,905 for the first time in more than two months.

Equities stemmed their declines as e-mini S&P 500 futures recovered after briefly falling below 1,900 and the Dow managed to hold above its average price in the past 200 days.

The S&P 500 fell below its 100-day moving average of 1,913.72 after NATO Secretary General Anders Fogh Rasmussen urged Russia to “step back from the brink” by pulling back troops and halting aid for rebels.

Russia has massed troops along its border with Ukraine, prompting the U.S. to say there’s a risk of an invasion.  President Putin retaliated yesterday against European Union and U.S. sanctions by ordering restrictions on food imports from countries that seek to punish Russia.

European Central Bank President Mario Draghi said the risks to the recovery from conflicts including that in Ukraine are increasing. Headwinds facing the 18-nation euro area’s recovery are intensifying after Italy slipped back into recession and the standoff between Russia and the U.S. and its allies escalated into the worst such conflict since the Cold War.

Draghi has said large-scale asset purchases are an option for dealing with a severe economic shock, leaving investors seeking clarification on what the trigger could be.

In the U.S., data showed fewer Americans filed applications for unemployment benefits last week, sending the average over the past month to an eight-year low, a sign the labor market continues to gain momentum.

The government’s employment report last week showed companies in the U.S. added more than 200,000 jobs for a sixth straight month in July, the longest such period since 1997. U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed’s view that a first- quarter contraction was transitory.

News Corp. and CBS Corp. are among 17 S&P 500 members that report their financial results today, according to data compiled by Bloomberg. About 75 percent of companies to have posted earnings this season beat analysts’ estimates for profit, while 65 percent exceeded sales projections.

Profit probably rose 9.4 percent in the second quarter, while sales gained 4.2 percent, according to analyst estimates compiled by Bloomberg.

“You just have some geopolitical fear out there that investors always place some risk premium on,” Greg Woodard, a strategist in Fairport, New York, at Manning & Napier Inc., which has about $54 billion under management, said in a phone interview. “If you have underlying fundamentals improving, you have individual companies doing well, and you get some volatility as a result of macroeconomic worries, we’d view that as an opportunity to selectively buy.”

The Chicago Board Options Exchange Volatility Index, which usually moves in the opposite direction to the S&P 500, rose 1.8 percent to 16.66 today. The VIX soared 34 percent last week, the most since January.

Eight out of 10 major industries in the S&P 500 declined.  Phone, health-care  and raw-materials companies lost more than 0.9 percent for the biggest losses. Utilities climbed 1.1 percent.

Aetna paced declines among health-care companies, sliding 4 percent as Goldman Sachs Group Inc. cut its rating on the company to neutral from buy. Humana Inc. slumped 3.4 percent and WellPoint Inc. lost 3.6 percent.

Tyson Foods, the largest meat producer in the U.S., slipped 2 percent. While Russia is the second-biggest market for U.S. chicken, its share of export volume has fallen to 7 percent from 40 percent in the mid-1990s, according to a joint statement yesterday from the U.S.-based National Chicken Council and USDA Poultry & Egg Export Council.

“As a result, we do not expect that a Russian ban on U.S.poultry imports will have a great impact on our industry,” the groups said. “Free and fair trade –- particularly with food -– should never be used as a political bargaining chip.”

Scripps Networks Interactive Inc. declined 5.7 percent. The owner of HGTV and the Travel Channel reported second-quarter revenue that missed analyst estimates.

Harman International Industries Inc., which makes technology for auto-navigation systems, slid 4 percent as it forecast 2015 earnings below projections.

Fox rose 5 percent. Fourth-quarter profit topped analysts’ estimates one day after the company dropped its $75 billion bid for Time Warner Inc. Box-office sales from “X-Men: Days of Future Past” and “Rio 2,” along with the addition of the YES Network, helped overcome a tough climate for cable ads and Fox Broadcasting’s struggle to develop hits to succeed the fading “American Idol.”

Symantec Corp. climbed 1 percent. The biggest computer- security software maker is getting a boost as demand picks up for anti-hacking tools, with revenue and profit topping estimates in the fiscal first quarter.

Have a wonderful evening everyone.

Be magnificent!

Nations cohere because there is mutual regard among

individuals composing them.

Some day we must extend the national law

to the universe,

even as we have extended the family law

to form nations – a larger family.

-Mahatma Gandhi, 1869-1948

As ever,

Carolann

The best time to make friends is before you need them.

-Ethel Barrymore,  1879-1959

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