December 2, 2013 Newsletter

Dear Friends,

Tangents:

ATMOSPHERE

Learning to

draw tenderness, the

sky is full of

snow for her,

and she knows the

road curves around

her and the chill

of the air has no

fear, and she

sees her sorrow

gleaming in the

hardening river, she is

learning to take

tenderness from the

atmosphere.

-Susan Griffin

Photos of the day

People walk near a Christmas tree in front of the Vendome Column as part of Christmas holiday season illuminations at Place Vendome in Paris. Charles Platiau/Reuters

A swimmer passes as surfers paddle on boards in the Mediterranean sea off the shore of Tel Aviv, Israel. Temperatures rise up to 30 Celsius (86 Fahrenheit) in Israel. Ariel Schalit/AP

Market Closes for December 2^nd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam and Lu Wang

Dec. 2 (Bloomberg) — Canadian stocks rose a fourth day, the longest streak in almost six weeks, as industrial companies and energy producers gained after manufacturing from the U.S. to Europe and China expanded more than forecast.

Air Canada, the best-performing stock in the Standard & Poor’s/TSX Composite Index this year, increased 4.1 percent.

Talisman Energy Inc. rallied 4.5 percent after agreeing to appoint two board members backed by billionaire activist investor Carl Icahn to avoid a proxy fight. B2Gold Corp. and Semafo Inc. sank at least 11 percent as gold declined, extending the worst monthly performance since June.

The S&P/TSX rose 24.17 points, or 0.2 percent, to 13,419.57 at 4 p.m. in Toronto, the longest winning streak since October.

Trading in the index’s stocks was in line with the 30-day average.

The economic data “is pointing to the right direction,” Pierre Bouchard, a portfolio manager at Toronto-based Toron AMI, said in a phone interview. His firm oversees C$3.8 billion ($3.6 billion). “As long as we don’t have a big issue from the economic point of view, markets should keep going up. But I don’t see them up a lot necessarily because we’ve had a lot of good performance already.”

The S&P/TSX finished November up 0.3 percent as data showed growth in Canada accelerated in the third quarter at the fastest pace in two years and the global economy improved. That’s the index’s fifth consecutive monthly advance, the longest rally since October 2012.

The Institute for Supply Management’s U.S. factory index rose to 57.3 in November from 56.4 a month earlier, the Tempe, Arizona-based group’s report showed today. The median projection in a Bloomberg survey of 77 economists called for a drop to 55.1. Manufacturing in the euro-area expanded, with Markit Economics’s factory index rising to 51.6 in November, while factory growth in China also beat estimates.

The S&P/TSX has risen 7.9 percent this year, the third- worst performer among developed markets ahead of Hong Kong and Singapore, as commodities are headed for their first annual loss since 2008. Energy and raw-materials producers accounted for more than a third of the index.

Raw-materials companies sank 2.8 percent today for the only loss among 10 S&P/TSX groups, as gold stocks slid. The price of the precious metal is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value.

Gold prices today fell to the lowest level since July after signs of a strengthening U.S. economy fueled speculation that the Federal Reserve is ready to slow the pace of its monetary stimulus. Silver tumbled.

B2Gold plunged 12 percent to C$1.96 and Semafo tumbled 11 percent to C$2.47.

Nine of the 10 main industries in the gauge advanced as health-care, consumer-staples and industrial companies climbed more than 1.2 percent for the best performance.

Air Canada, the nation’s largest carrier, rallied 4.1 percent to C$7.87, the highest level since June 2008. The stock has jumped 350 percent this year as profit beat analysts’ estimates amid progress in the company’s cost-cutting plan.

Talisman Energy climbed 4.5 percent to C$12.99. Samuel Merksamer and Jonathan Christodoro will join the board this month and will be on the company’s slate of board nominees for re-election next year, according to a filing from the oil and natural gas producer. In exchange, Icahn agreed not to conduct a proxy contest at the next Talisman annual meeting.

Activist shareholders from Icahn to Barry Rosenstein have pushed for changes at energy companies they believe have failed to realize the value of reserves. Icahn, who has amassed a 7.4 percent stake in Talisman, said in October he may seek talks with management on “strategic alternatives” and board seats.

Canacol Energy Ltd. jumped 9.9 percent to C$5.35. The company, which explores oil in South America, announced results from a well located in the Llanos Basin of Colombia.

USA

By Nick Taborek

Dec. 2 (Bloomberg) — U.S. stocks fell, with the Standard & Poor’s 500 Index extending declines in the final hour of trading, amid data showed manufacturing unexpectedly climbed last month and reports on holiday retail sales.

Urban Outfitters Inc. lost 3.5 percent as retail spending fell on the weekend after Thanksgiving for the first time since 2009. EBay Inc. climbed 1.6 percent as a report showed online spending on Black Friday rose to a record. Newmont Mining Corp., the world’s second-largest gold producer, slipped 4 percent as the precious metal’s price declined. 3M Co. lost 4.4 percent after Morgan Stanley downgraded the stock.

The S&P 500 dropped 0.3 percent to 1,800.90 at 4 p.m. in New York, after earlier rising as much as 0.2 percent. The Dow Jones Industrial Average lost 77.64 points, or 0.5 percent, to 16,008.77. About 5.8 billion shares changed hands on U.S. exchanges today, 4.8 percent below the three-month average.

“It seems like a sleepy day after Thanksgiving, nothing exciting going on,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said by phone. His firm oversees about $1.8 billion. “Investors are probably waiting to see if there’s any news from the Fed later in the month and trying to get a read on retail sales.”

It was the second time in two days that U.S. equities tumbled in the final hour. The benchmark index lost 0.5 percent to 1,803.98 over 20 minutes just before the close on Nov. 29, when stocks traded in an abbreviated session. Today’s drop took it down 0.4 percent to 1,798.73 between 3:24 p.m. and 3:53 p.m.

“We have seen some end-of-day weakness in recent trading sessions,” Alan Gayle, senior investment strategist and director of asset allocation at RidgeWorth Capital Management, said by phone from Atlanta. His firm oversees about $49 million. “It may be turning out to be a pattern.”

The S&P 500 climbed 2.8 percent last month and has gained 26 percent this year, challenging 2003 for the best annual performance since 1998, after the Federal Reserve refrained from tapering its third round of economic stimulus. The central bank next meets Dec. 17-18. The index ended November with its eighth straight weekly advance, the longest rally in almost a decade, as data on employment and consumer sentiment boosted confidence in economic growth.

The Institute for Supply Management’s factory index rose to 57.3 in November from 56.4 a month earlier, the Tempe, Arizona- based group’s report showed today. The median projection in a Bloomberg survey of 77 economists called for a drop to 55.1.

Estimates ranged from 53.5 to 57.5. Manufacturing accounts for about 12 percent of the economy.

A separate report from Markit Economics showed the final November index of U.S. manufacturing increased to 54.7 from 51.8 the previous month. The median forecast in a Bloomberg survey of economists called for no change from the preliminary November reading of 54.3. Other reports showed manufacturing in the euro area, U.K. and China expanded faster than estimated.

The Labor Department’s jobs report on Dec. 6 is forecast to show the U.S. added 180,000 jobs last month and the unemployment rate slipped to 7.2 percent, matching the lowest level in five years. The weakest employment recovery in seven decades is proving a boon to equity markets.

Five years into a rally that has restored $14 trillion to share prices, U.S. payrolls remain 1.5 million below the level in 2008, according to data compiled by Bloomberg. Resistance to hiring from ConocoPhillips to Walt Disney Co. will help push S&P 500 profit margins above 10 percent next year, the highest ever, data show. Below-average employment was cited last month by Fed chairman nominee Janet Yellen as the biggest obstacle to raising interest rates.

December has been the second-best month for U.S. equity returns, according to data compiled by Bloomberg that starts in 1928. The average return for the month is 1.5 percent, more than twice the overall monthly mean of 0.6 percent. Should stocks match their historic gains this month, it would put the index at 1,832.90 by the end of the year.

U.S. retailers are coming off the first spending decline on a Black Friday weekend since 2009. Purchases at stores and websites fell 2.9 percent to $57.4 billion during the four days beginning with the Nov. 28 Thanksgiving holiday, according to a survey commissioned by the National Retail Federation.

“I would have expected Thanksgiving weekend sales to be stronger, given how well financial markets have done,” Scott Clemons, chief investment strategist at Brown Brothers Harriman Wealth Management, which oversees $22 billion, said by phone.

“We’re skeptical that the price movement in stocks this year has been supported by fundamentals, so we’re lightening up.”

An S&P index of retailers fell 0.7 percent for the fifth- worst performance among 24 industries. Urban Outfitters paced declines, losing 3.5 percent to $37.66 after being downgraded to neutral from buy at Sterne, Agee & Leach Inc.

Online spending rose 15 percent to a record $1.2 billion, according to ComScore Inc., as more customers opted to shop from their couches rather than battling long lines at stores. Online retailers can expect 131 million shoppers for today’s Cyber Monday promotions, up from 129 million last year, the National Retail Federation said.

EBay climbed 1.6 percent to $51.35. The company was the second-most visited online retailer on Black Friday, behind Amazon.com Inc., ComScore said.

Eight out of 10 main industries in the S&P 500 fell. Phone companies lost 0.9 percent for the steepest decline, as a jump in Treasury yields reduced the appeal of companies paying higher dividends. Ten-year Treasury note yields increased five basis points to 2.80 percent.

Graham Holdings Co., which is changing its name from Washington Post Co., lost 3.6 percent to $649.62. The education and media company agreed to sell its headquarters building in downtown Washington to Carr Properties for about $159 million.

3M dropped 4.4 percent to $127.68 for the biggest loss in the Dow. Morgan Stanley downgraded the stock to the equivalent of sell and Oppenheimer & Co. chief market technician Carter Worth said the stock is overpriced.

Travelers Cos. slid 1.9 percent to $89. The second-largest U.S. commercial insurer was cut to neutral from buy at Goldman Sachs Group Inc.

Groupon Inc., the online discount-coupon company, slid 3.3 percent to $8.75. Goldman Sachs cut its rating on the stock to neutral from buy.

Newmont lost 4 percent to $23.83. Gold touched to the lowest level since July, as signs of the strengthening U.S. economy fueled speculation the Fed will curb its monetary stimulus.

Dow Chemical Co. added 2.4 to $39.98. The largest U.S. chemical maker by sales plans to separate chlorine-related assets including its epoxy business as the company focuses on higher-margin activities.

Freddie Mac rose 7.5 percent to $2.59. Bank of America Corp. agreed to pay the government-sponsored mortgage insurer $404 million to resolve mortgage-repurchase claims.

The deal covers about 716,000 loans created by Charlotte, North Carolina-based Bank of America from Jan. 1, 2000, to Dec. 31, 2009, and sold to Freddie Mac, the firms said today in separate statements.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 3.9 percent to 14.23 today. The measure has gained five straight sessions, rallying 16 percent, for the longest winning streak this year.

Have a wonderful evening everyone.

Be magnificent!

To go from opinion to perception,

from imagination to fact,

from illusion to reality,

from something that is not there,

to something that is;

that is the way forward.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

The world is a dangerous place to live; not because of the people

who are evil, but because of the people who don’t do

anything about it.

-Albert Einstein, 1879-1955.

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