August 8, 2013 Newsletter

Dear Friends,

Tangents:

On this day in 1876, Thomas Edison patented the mimeograph, a  precursor to the photocopier. This low cost printing press revolutionized the independent publishing industry.

August 8^th:  When we were visiting a garden this past May in the English countryside, the gardener told us the 8-8-8 rule:  In order to keep beautiful lavender, one must cut in down to 8 inches on August 8^th.

–from A Countrywoman’s Notes, August:

The local flower show was great fun, with lovely dahlias, long carrots, solid cabbages, pansies with delightful faces as well as large, mop-headed chrysanthemums.  The flower arrangements showed plenty of imagination and, I thought, so did the people who had compiled the competitions, for without creative classes there will not be good entries.  There proved to be much scope in the class entitled ‘A nursery rhyme’ when Little Boy Blue and the Old Lady who lived in a Shoe appeared in well-chosen floral form.  While the tug-of-war was going on and the rain threatened we watched small children on fat ponies negotiating painted fences.  But the best value for me, a chance visitor, was undoubtedly the dog show.  The majority were family pets but I spotted a few who had been taught ring behavior.  When under the scrutiny of the judge they held their pose like Hollywood children awaiting the photographer.  Those without  this discipline demonstrated their fondness for the family when the saw them at the ringside.  It was the diverse range of shapes and sizes that gave me such pleasure and must surely have presented the judge with a serious problem.  The smallest was an obviously highly intelligent border terrier, a good ratter, I was sure.  There was a mystery black dog which looked like a soft black shawl, so well draped that no one could really see what its feet were doing.  The lurchers were graceful and the Dobermans well groomed and fit, but it was the Pyrenean mountain dog that I would like to have been given.  I had a chat with its owner who explained how these Blaireau dogs act as guards for sheep in the mountains.  Perhaps in his native country Ben would have taken on  a fiercer attitude but here on show he was deceptively gentle. –Rosemary Verey.

I’ve failed over and over and over again in my life and that is why I succeed. –Michael Jordan.

Photos of the Day –August 8th, 2013

Chinese inventor Tao Xiangli (behind the robot) controls his self-made humanoid robot at his house located in a old residential area in Beijing, China. The self-taught Chinese inventor built the home-made robot, named ‘The King of Innovation,’ out of scrap metal and electronic wires that he bought from a second-hand market. Kim Kyung-Hoon/Reuters

A US Air Force Wideband Global SATCOM (WGS-6) mission lifts off on a ULA Delta IV rocket from Cape Canaveral Air Force Station, Fla., Wednesday night. The unmanned rocket is carrying a communications satellite for the US military and its partners. Mike Brown/Reuters

Market Closes for August 8^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Aug. 8 (Bloomberg) — Canadian stocks rose the most in a month as exports rebounded in Germany and China, gold rallied and earnings from companies including Canadian Tire Corp. and Tim Hortons Inc. topped analyst estimates.

Canadian Tire soared to a record high and Tim Hortons, the nation’s largest coffee and doughnut chain, gained 0.7 percent.

Turquoise Hill Resources Ltd. jumped 12 percent after parent Rio Tinto Plc loaned $600 million to the company to fund development of its copper and gold mine in Mongolia. Air Canada rallied for a second day after reporting better-than-forecast profits.

The Standard & Poor’s/TSX Composite Index rose 140.19 points, or 1.1 percent, to 12,552.92 at 4 p.m. in Toronto, the biggest increase since July 11. The index has gained 1 percent this year.

“The reasons for the past few down days have been pretty tenuous,” said David Cockfield, a fund manager with Northland Wealth Management in Toronto. The firm manages about C$200 million ($193 million). “The numbers out there aren’t bad at all. This is a long, drawn out recovery but we’re still on the recovery path and I don’t see any reason why this market won’t continue to chug along. I’d like to see the Canadian market shake itself out of its doldrums.”

Chinese shipments overseas climbed 5.1 percent in July from a year earlier after sliding 3.1 percent in June, the General Administration of Customs in Beijing said. China is Canada’s second-largest trading partner. German exports increased 0.6 percent in June from May.

Raw-materials producers climbed the most in the S&P/TSX, gaining 5.9 percent, the most since 2011, as eight of 10 industries advanced. Trading volume was 62 percent higher compared with the 30-day average at this time of the day.

Turquoise Hill jumped 12 percent to C$5.10. Rio Tinto agreed to provide the $600 million loan after Turquoise Hill repaid an earlier $225 million bridge loan, the company said in a statement. The latest loan will mature in December.

Iamgold Corp. surged 14 percent to C$5.13 after announcing an agreement yesterday with the government of Suriname to reduce power rates at its Rosebel mine and lower costs by as much as $50 an ounce.

Barrick Gold Corp. climbed 8.2 percent to C$17.58 and Yamana Gold Inc. advanced 7.7 percent to C$10.03 as the price of gold jumped 1.9 percent to $1,309.90 an ounce in New York, the biggest gain in two weeks.

Teck Resources Ltd. jumped 7.7 percent to C$26.31 and First Quantum Resources Ltd. rallied 8.4 percent to C$17.12 after copper soared to an eight-week high as imports rose to the highest in 14 months in China.

Canadian Tire surged 7.1 percent to C$89.45, a record high.

The retailer reported second-quarter earnings of C$1.91 a share, compared with analysts’ estimates for C$1.77 a share. Canadian Tire is seeking a partner for its C$4.4 billion credit-card portfolio.

Tim Hortons, the nation’s largest coffee-and-doughnut chain, rose 0.7 percent to C$59.90 after the company posted a 14 percent increase in net income. Tim Hortons also announced it will buy back as much as 10 percent of its shares.

Air Canada, the nation’s largest airline, jumped 9.4 percent to C$2.90. The stock has gained 37 percent in the past two days, after reporting second-quarter profit that topped analysts’ estimates as fuel costs dropped.

US

By Nick Taborek

Aug. 8 (Bloomberg) — U.S. stocks rose, with the Standard & Poor’s 500 Index halting a three-day drop, as Chinese trade data topped estimates and jobless claims fell to the lowest monthly rate since before the recession.

Cliffs Natural Resources Inc. and Newmont Mining Corp. gained at least 8.7 percent as metals prices rallied. Tesla Motors Inc. surged 14 percent after reporting second-quarter results that surpassed analysts’ estimates. AT&T Inc. slid 0.8 percent as phone stocks fell the most in the benchmark index.

JPMorgan Chase & Co. dropped 0.9 percent after saying it’s under federal criminal investigation for practices tied to sales of mortgage-backed bonds.

The S&P 500 climbed 0.4 percent to 1,697.48 at 4 p.m. in New York, paring the index’s weekly drop to 0.7 percent. The Dow Jones Industrial Average gained 27.65 points, or 0.2 percent, to 15,498.32. About 5.9 billion shares changed hands on U.S. exchanges, 6.9 percent below the three-month average.

“It shows that the data is moving in the right direction, so at the end of the day that is a positive catalyst for stocks,” Anastasia Amoroso, Global Market Strategist at JPMorgan Funds, which oversees about $400 billion, said in a phone interview. “There could be some short-term volatility around how that impacts Fed policy. One thing to keep in mind is if the Fed does actually reduce the pace of purchases, that is for some very good reasons.”

The S&P 500 declined 1.1 percent the first three days of the week amid growing speculation the Federal Reserve will pare bond purchases this year as the economy strengthens. Fed Bank of Cleveland President Sandra Pianalto said yesterday there had been “meaningful improvement” in the labor market and a scaling back of stimulus may be warranted if it continues.

Fed Bank of Dallas President Richard Fisher told Germany’s Handelsblatt newspaper in an interview today that the central bank should start reducing bond purchases in September if “economic data doesn’t significantly deteriorate.” Fisher, one of the most vocal critics of quantitative easing, said on Aug. 5 the Fed is closer to slowing its stimulus.

Data today showed claims for U.S. unemployment benefits in the four weeks ended Aug. 3 declined to 335,500 on average, the least since November 2007. They rose to 333,000 last week, in line with the median forecast of 50 economists surveyed by Bloomberg, from 328,000 the prior week.

A separate report showed consumers last week were the most upbeat in more than five years. The Bloomberg Consumer Comfort Index rose to minus 23.5 for the period ended Aug. 4, its strongest reading since January 2008.

In Asia, data indicated China’s exports and imports exceeded economists’ forecasts, adding to signs that the world’s second-largest economy is stabilizing following a two-quarter slowdown. Improved trade may bolster Premier Li Keqiang’s chances of achieving the year’s 7.5 percent target for expansion, after official manufacturing and service-industry indexes rose in July.

The trade data “could be a sign that we see some stabilization in Chinese activity,” said Patrick Moonen, who helps oversee $244 billion as senior strategist at ING Investment Management in The Hague. “I don’t think the U.S. equity market is only a matter of monetary policy. As the economy recovers, the earnings backdrop will become the most important element.”

The S&P 500 has rallied 19 percent this year and closed at a record 1,709.67 on Aug. 2. The gauge topped 1,700 for the first time on Aug. 1, after climbing within two points of that level for three times in the week before only to retreat by the close of trading. It briefly rose above 1,700 twice today before slipping back below.

Stocks have also advanced this year as corporate earnings have surpassed estimates. Of the 445 companies in the S&P 500 to have reported quarterly results this period, 72 percent have exceeded analysts’ profit estimates and 56 percent have beaten sales projections, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index, or VIX, fell 1.9 percent today to 12.73. The equity volatility gauge reached its 2013 peak in June and has since dropped 38 percent.

Nine of 10 industries in the the benchmark gauge advanced.

Materials stocks rallied 1.5 percent to pace gains, boosted by the data from China, which is the largest consumer of raw- materials.

Cliffs Natural Resources, a diversified miner, jumped 8.9 percent to $22.01. Newmont Mining rallied 8.7 percent to $28.78, snapping a six-day losing streak, as copper rose to an eight- week high and gold added the most in two weeks.

Tesla, the electric-car company led by Elon Musk, soared 14 percent to a record $153.48. The carmaker’s results surpassed analysts’ estimates on a surge in Model S sedan deliveries. The company also said it will make money all year on an operating basis, even as it expands to Europe and Asia.

Groupon Inc. rallied 22 percent to $10.60, the biggest jump since December. The operator of the largest daily-deals website’s second-quarter net loss was narrower than analysts forecast. The company also named co-founder Eric Lefkofsky as CEO to lead turnaround plans.

Consumer discretionary shares climbed 0.7 percent as a group. L Brands Inc., which operates Victoria’s Secret, gained 5.2 percent to $60.25 after reporting same-store sales in July rose more than analysts estimated.

J.C. Penney Co. jumped 6.7 percent to $13.66. The department-store chain seeking to rebound from its worst sales year in more than two decades gained for the first time since July 29 after CNBC said the retailer is searching for a new chief executive officer. The stock had lost 23 percent in the seven sessions through yesterday.

Microsoft Corp. rose 2.6 percent to $32.89 for the biggest gain in the Dow. The maker of the Windows operating system was raised to overweight from equalweight by Evercore Partners.

Analyst Kirk Materne said in a note the company has an attractive valuation and may increase its dividend in September.

Phone stocks tumbled 1 percent to pace declines in the S&P 500. AT&T dropped 0.8 percent to $35.29 and Verizon Communications Inc. lost 0.6 percent to $49.62.

CenturyLink Inc. fell 5.6 percent to $34.36 for the biggest drop in the S&P 500. The telecommunications company cut its sales forecast, citing slower acceleration in data-hosting revenue and a faster rate of decline in low bandwidth data services.

JPMorgan Chase declined 0.9 percent to $54.83 for the biggest slide in the Dow and a fifth straight losing session.

The biggest U.S. bank said the Justice Department’s civil division found in May that the bond-sales practices broke civil laws after it examined securities tied to subprime and Alt-A loans sold to investors from 2005 through 2007.

Have a wonderful evening everyone.

Be magnificent!

What is the object of jnâna yoga?  Freedom.

Freedom from what?  Freedom from our imperfections, freedom from the suffering of life.

Why are we unhappy?  We are unhappy because we are enslaved.  And what are we enslaved by?

The enslavement of nature.  Who enslaves us?

We do, ourselves.

Swami Vivekananda, 1863-1902

As ever,

Carolann

Nothing is a waste of time if you use the

experience wisely.

-Auguste Rodin, 1840-1917

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