December 16, 2013 Newsletter

Dear Friends,

Tangents:

As Carolann is out of the office this afternoon, I will be writing the newsletter on her behalf.

As Christmas season nears, a fun activity for the family is to take a drive and look at the Christmas lights around Victoria.  Many families spend hours, sometimes days, creating masterpieces of their homes.  Everything from Christmas lights, to inflatable Santa’s and Snowmen, these homes have it all.  The Times Colonist has compiled a list of homes around Victoria where you can go and look at the decorated homes.  Visit http://www.timescolonist.com/2.3412 for a complete Christmas Light Map!

“The best and most beautiful things in the world cannot be seen or even touched – they must be felt with the heart.”
Helen Keller

Photos of the Day:

Internally Displaced People (IDP’s) make their way back to the precarious safety of their camp at the airport in Bangui, Central African Republic. More than 40,000 IDP’s have found refuge at the airport. Some 1,600 French troops have been deployed to the country in an effort to put an end to sectarian violence. Jerome Delay/AP

A man takes a walk with his dog during a snowstorm in Quebec City, Quebec, Canada. Mathieu Belanger/Reuters

Market Closes for December 16^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Dec. 16 (Bloomberg) — Canadian stocks rose the most in a week after economic data showed U.S. industrial production climbed by the most in a year, a sign manufacturing is bolstering the world’s biggest economy.

BlackBerry Ltd. climbed 2 percent after analysts at Sanford C. Bernstein raised their rating on the stock to market perform from underperform. Primero Mining Corp., the operator of the San Dimas gold mine in Mexico, fell 6.7 percent after agreeing to buy Brigus Gold Corp. Brigus soared 33 percent. Alaris Royalty Corp. slumped 8.6 percent after analysts at Raymond James Financial Inc. cut the stock’s recommendation to market perform from outperform.

The Standard & Poor’s/TSX Composite Index advanced 58.71 points, or 0.5 percent, to 13,184.41 at 4 p.m. in Toronto, the biggest advance since Dec. 6. The benchmark equity gauge slid 1.2 percent last week, the most since June.

“Euro-manufacturing data was strong out of Germany and the industrial production number was really good overall, sending positive signals to manufacturing and commodities and pushing Canadian stocks higher,” Gareth Watson, vice president of investment management and research at Richardson GMP Ltd., which oversees C$28 billion ($26.5 billion), said by phone from Toronto. “When the global economy does well, the Canadian economy follows suit.”

Output at U.S. factories, mines and utilities rose 1.1 percent after a revised 0.1 percent gain in October that was previously reported as a decline, a report from the Federal Reserve showed in Washington. The median forecast in a Bloomberg survey called for a 0.6 percent increase. The index of industrial production rose to 101.3, exceeding for the first time its pre-recession peak in December 2007.

A Markit Economics report showed that euro-area manufacturing reached a 31-month high in December, led by Germany. Euro-area output rose to 52.7, from 51.6 in November, above the estimate of 51.9 in a Bloomberg News survey of 35 economists. The gauge has been higher than 50, indicating expansion, for six months.

The Federal Open Market Committee, or FOMC, begins a two- day meeting tomorrow. The number of economists who forecast policy markers may start curbing $85 billion of monthly bond purchases this month doubled from last month’s Bloomberg survey.

The S&P/TSX Gold Index rose 1.1 percent for a third day of gains. Torex Gold Resources Inc. rallied 6.8 percent to C$1.10 for the biggest advance in the gauge, while China Gold International Resources Corp. jumped 6.8 percent to C$2.84. Gold futures advanced 0.8 percent in New York.

BlackBerry climbed 2 percent to C$6.55 after Bernstein analyst Pierre Ferragu upgraded the stock, citing limited room for further declines because of the company’s valuation.

Primero declined 6.7 percent to C$4.87. Investors will get 0.175 of a Primero share for each Brigus share they hold, the company said. As part of the deal, Primero will spin out a company with Brigus’s interests in mining projects in Saskatchewan and Mexico. The new company will be 90 percent- owned by Brigus shareholders with Primero investors holding the rest. Brigus rose 33 percent to 84 Canadian cents.

Alaris dropped 8.6 percent to C$30.40, the lowest since June. Raymond James analyst Theoni Pilarinos downgraded the private-equity fund.

US

By Lu Wang and Whitney Kisling

Dec. 16 (Bloomberg) — U.S. stocks rose, after equities posted the biggest weekly drop since August, as investors watched data to gauge the outlook for stimulus before a two-day Federal Reserve meeting that starts tomorrow.

Exxon Mobil Corp. rallied 2.2 percent after Goldman Sachs Group Inc. raised the stock’s rating. American International Group Inc. rose 1.2 percent after agreeing to sell its plane- leasing unit to AerCap Holdings NV for $5 billion. LSI Corp. jumped 39 percent after Avago Technologies Ltd. agreed to buy it in a deal valued at $6.6 billion. Twitter Inc. retreated 4.9 percent after Wells Fargo & Co. downgraded the stock.

The Standard & Poor’s 500 Index advanced 0.8 percent to 1,788.61 at 2:59 p.m. in New York, halting a four-day streak of declines. The Dow Jones Industrial Average rose 143.69 points, or 0.9 percent, to 15,899.05. Trading in S&P 500 stocks was 8.1 percent above the 30-day average during this time of the day.

“The big issue this week is the Fed’s meeting and what, if anything, they’re set to do,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, which oversees $60 billion, said from Philadelphia.“The market seems to be increasingly prepared for the prospects of it, and yet at the same time, has not bought into the notion that it’s likely to occur this week.”

The S&P 500 last week retreated 1.7 percent, the biggest decline since Aug. 30, amid concern that improving economic data will prompt the Fed to cut stimulus. Policy makers will probably start reducing their $85 billion of monthly bond purchases at the meeting that starts tomorrow, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll.

The benchmark gauge has surged 25 percent this year, on course for the biggest annual gain since 2003, as the Fed maintained its stimulus and economic data exceeded expectations.

With 10 trading days left in 2013, the stock market enters a period where equities tend to outperform the rest of the year.

The S&P 500 has gained 1.2 percent on average in the last 10 days of the calendar year, according to data since 1928 compiled by Bloomberg. That compares with a 0.3 percent return over any 10-day period.

Fed policy makers have scrutinized data and watched Washington’s budget negotiations to determine whether economic growth is robust enough to withstand the withdrawal of some monetary support. The House of Representatives last week passed a budget that limits automatic spending cuts and avoids another government shutdown. The Senate is expected to vote this week.

Data today showed the Federal Reserve Bank of New York’s general economic index rose less than forecast in December. A separate report indicated industrial production climbed in November by the most in a year, a sign manufacturing is bolstering the world’s biggest economy.

In Europe, manufacturing in the euro area reached a 31- month high in December, led by Germany, a survey from London- based Markit Economics showed.

“We have some short-term issues to deal with on tapering, but long term we’re constructive because tapering will really come at the result of economic data being self-sustaining,” Dan Veru, the chief investment officer who helps oversee $4.5 billion at Palisade Capital Management LLC, said in a phone interview from Fort Lee, New Jersey.“My personal view is that they’re not going to taper yet. It’d be an odd time of the year to announce a significant reversal of policy like this because markets tend to be more vulnerable this time of the year, less liquidity, less trading volume.”

The central bank has said it will hold its target interest interest rate near zero “at least as long as” unemployment exceeds 6.5 percent, so long as the outlook for inflation is no higher than 2.5 percent. Unemployment fell to a five-year low of 7 percent last month, while inflation is running below the Fed’s target of 2 percent.

Three rounds of Fed bond buying, also known as quantitative easing, have helped propel the S&P 500 to a rally of more than 160 percent from a 12-year low in 2009.

U.S. stocks will rise as much as 5 percent while bonds decline in 2014 as the Fed reduces economic stimulus, Douglas Ramsey, chief investment officer at Leuthold Group LLC, said in a Bloomberg radio interview today. Ramsey said he’s bullish on large technology and health-care companies and predicted that shares of small companies will underperform next year.

Companies buying their own stock make up more of the U.S. equity market than ever before, underpinning share values even as the Fed prepares to reduce stimulus.

Stock acquired under company repurchase programs represented 6.4 percent of daily trading in the Russell 3000 Index by value through Sept. 30, exceeding 2007’s level of 4.1 percent, according to data compiled by Bloomberg and Birinyi Associates Inc. The proportion of trading is higher even as chief executive officers spend $343 billion less on buybacks so far this year, reflecting a seven-year decline in equity volume.

Apple Inc. to Walt Disney Co. and International Business Machines Corp. took advantage of record-low interest rates to raise an unprecedented amount of debt financing and repurchased stock, helping boost per-share U.S. earnings for four years.

With cash at a record, buying by companies is poised to continue in a bull market that is about to enter its sixth year.

The Chicago Board Options Exchange Volatility Index rose 0.8 percent today to 15.88. The gauge of S&P 500 options prices known as the VIX jumped 14 percent last week. The index closed above its one- and two-month futures in two of the final three days of that period, data compiled by Bloomberg show. The VIX’s premium over its own futures signaled demand is increasing for protection against stock losses.

All 10 main S&P 500 industries advanced today. Industrial, energy and technology stocks led gains, rallying at least 1.1 percent. International Business Machines Corp. surged 3.2 percent to $178.25, halting five days off losses for the biggest increase in the Dow.

Exxon climbed 2.2 percent to $97.44. Goldman Sachs boosted its recommendation on the largest U.S. energy producer to buy from neutral, saying the stocks is “inexpensive” relative to its own history and the company may see organic volume growth next year for the first time since 2006.

AIG rose 1.2 percent to $50.34. The insurer will sell to AerCap all of International Lease Finance Corp. for $3 billion in cash and 97.6 million shares, the Dutch company said in a statement today. The deal, which is expected to close in the second quarter of next year, gives AerCap control of the second- largest aircraft lessor, with a portfolio of almost 1,000 planes.

LSI surged 39 percent $10.96. LSI’s stockholders will receive $11.15 a share in cash from Avago, a supplier of components for wireless communications. The acquisition, which creates a semiconductor company with about $5 billion in annual revenue, will boost Avago’s free cash flow and earnings per share immediately. Avago rose 9.2 percent to $49.86.

General Motors Co. climbed 3.2 percent to $41.33. The automaker, amid a push to refresh most of its U.S. lineup, said it plans to spend $1.3 billion to upgrade five U.S factories on top of the $1.5 billion already announced this year.

Expedia Inc. added 5 percent to $65.86. Eric Sheridan, an analyst with UBS AG, increased the share-price estimate for the online travel agency to $74 from $70, saying the company may boost shareholder returns in coming years and investors haven’t fully appreciated the value in its Trivago and eLong assets.

Twitter dropped 4.9 percent to $56.23, snapping a five-day, 31 percent rally. The microblogging service was cut to underperform from market perform by Peter Stabler, an analyst with Wells Fargo. Investors underestimated the company’s challenges, including varying degrees of user engagement to the service, Stabler wrote in a note.

Robert Peck, an analyst with Suntrust Robinson Humphrey Inc., reduced Twitter to neutral from buy, saying the stock’s valuation was “stretched.”

Have a wonderful evening everyone.

Be magnificent!

“Happiness does not come from doing easy work but from the afterglow of satisfaction that comes after the achievement of a difficult task that demanded our best.”
Theodore Isaac Rubin

As ever,

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7