December 3, 2015 Newsletter

Dear Friends,

Tangents:

1967 : 

The first human heart transplant happened on this day in 1967 at Groote Schuur Hospital in Cape Town, South Africa.  Surgeons in Cape Town, South Africa, led by Dr. Christiaan Barnard performed the first human heart transplant.

WORLD PROGRESS RECENTLY REPORTED:

BHUTAN: 

It’ll be paving with – plastic.  Plastic waste will be mixed with bitumen for highway blacktop, curbing bitumen imports from India and cutting plastic waste – a growing problem.  The planned “Plastic Roads” (or “Green Roads”) initiative involves a public-private partnership between a construction company, the  first recycling plant, and the public sector.  –Thomson Reuters Foundation.

SAN DIEGO:

Some orcas may get a break once SeaWorld delivers on its pledge – developed in the wake of harsh criticism – to replace at least some shows involving the killer whales at its southern California park with an “all-new orca experience with a conservation theme in a more natural setting” in 2017.  (Shows may continue in Florida and elsewhere.)  Some critics were unimpressed: “SeaWorld fully intends to continue forced breeding of orcas in captivity,” said the International Marine Mammal Project of Earth Island Institute. –Reuters, Earth Island Institute.

MEXICO:

Journalists are working more aggressively, expanding their use of a freedom-of-information law that came into effect in 2002.  In the past year alone the law has been deployed in covering major stories such as the disappearance OF 43 college students in  Guerrero State, a house-buying scandal at high levels of  government, and inefficiencies in the state-owned oil company Pemex.  Mexico remains one of the most dangerous places in the world for journalists, with 35 killed since 1992.  –The Christian Science Monitor.

NIGERIA:

Anti-corruption efforts are taking hold.  The administration of President Muhammadu Buhari, who has been in office six months, is delivering on  a campaign promise to clean up graft: Fines have been imposed on companies, executives have been arrested, and investigations are expanding into the laundering of public revenues directed into foreign bank accounts.  The president spent months vetting a new, smaller cabinet; that too, was billed as a move to prevent corruption. –The Christian Science Monitor; National Law Journal, Deutsche Welle.

CANADA:

Women claimed 15 of 30 cabinet positions in appointments made by incoming Prime Minister Justin Trudeau – with some adjustments to titles likely being made to ensure full minister status.  The nation joins Finland, Cabo Verde, Sweden, France and Liechtenstein among those in which at least half the national ministerial positions are held by women.  –CBC, Inter-Parliamentary Union.

PHOTOS OF THE DAY

A woman photographs a sea of fog over Lake Leman at the Tour de Gourze near Lausanne, Switzerland, Thursday. Denis Balibouse/Reuters

A renewable energy innovation called ‘Wind Tree’ is seen at COP21, the United Nations Climate Change Conference, in Paris Thursday. Each ‘leaf’ acts as a mini wind-turbine to generate electricity. Wind Tree is presented by Engie, the French multinational electric utility company. Francois Mori/AP

Market Closes for December 3^rd, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell to a two-week low, as Europe’s central bank sparked a rout in risk assets after the scale of additional stimulus disappointed.

     Global markets slipped as some investors were disappointed by the extent of the European Central Bank’s latest moves at the same time Federal Reserve Chair Janet Yellen reiterated that tightening is imminent.

     “The market is still nervous,” said David Cockfield, fund manager at Northland Wealth Management in Toronto. His firm manages about C$325 million. “I’d say because the market is so unpredictable we’ve been kind of edging into and out of things. You just try to keep your head down.”

     The Standard & Poor’s/TSX Composite Index fell 139.15 points, or 1 percent, to 13,324.67 at 4 p.m. in Toronto, after sliding 1.3 percent yesterday for the biggest loss since Nov. 12. The benchmark equity gauge has dropped 8.9 percent this year, trailed only by Singapore and Greece among developed markets.

     Canada’s banks paced declines. Toronto-Dominion Bank, the nation’s largest lender, lost 1.3 percent as higher earnings offset C$243 million ($183 million) in restructuring costs related to job cuts. Canadian Imperial Bank of Commerce fell 2.2 percent, the most in three months, after net income slid.

     A gauge of developed and developing equity markets lost 0.7 percent, to a Nov. 17 low, as the S&P 500 slumped 1.4 percent for the biggest decline in more than two months.

     Canadian energy and raw-materials producers, which account for about 30 percent of the nation’s benchmark index, have each slumped more than 21 percent this year and are the second and third worst-performing industries in the S&P/TSX ahead of health-care stocks.

     A combination of slowing economic growth in China, concerns about the economic health of European nations and a rally in the U.S. dollar with impending interest-rate increases from the Fed as soon as Dec. 16 have crimped commodities prices this year.

     Barrick Gold Corp. and Goldcorp Inc. increased at least 1.9 percent as raw-materials producers gained 0.5 percent as a group. Gold futures for February delivery rose 0.7 percent, rebounding from a February 2010 low.

US

By Oliver Renick and Lu Wang

     (Bloomberg) — The Standard & Poor’s 500 Index slumped the most in two months as the scale of the European Central Bank’s additional stimulus measures disappointed some investors, while Federal Reserve Chair Janet Yellen signaled the economy is ready for higher borrowing costs.

     Equities fell to their lowest level in almost three weeks as investors grapple with an array of influences, including divergent policies from major central banks, uneven economic data and turbulence in commodities markets. Energy shares slid Thursday for a second session despite a rebound in oil prices, and health-care companies had their biggest tumble in nearly two months.

     The S&P 500 dropped 1.4 percent to 2,049.62 at 4 p.m. in New York, following a 1.1 percent slide yesterday. The gauge sank below its average price during the past 200 days for the first time in three weeks. The Dow Jones Industrial Average lost 252.01 points, or 1.4 percent, to 17,477.67. The Nasdaq Composite Index declined 1.7 percent. About 8 billion shares traded hands on U.S. exchanges, 13 percent above the three-month average.

     There is “no panic, just disappointment’’ with the ECB, as the selloff seems to be orderly, Ryan Larson, head of equity trading at RBC Global Asset Management U.S. Inc. in Chicago, said in an interview. “Couple that with renewed terrorism concerns following yesterday’s tragic events in California, Chairwoman Yellen reiterating again this morning the desire to raise rates sooner rather than later, albeit gradually, and it’s all been enough for participants to take money off the table.”

     The ECB will extend its quantitative easing program until at least March 2017 and broaden the range of assets purchased while keeping the pace of monthly buying steady at 60 billion euros ($65 billion), President Mario Draghi said. The bank’s Governing Council cut its deposit rate to minus 0.3 percent, in line with forecasts by economists in a Bloomberg survey. Policy makers left the main refinancing rate and the marginal lending rate unchanged.

     “There were huge expectations for Mr. Draghi and the ECB to provide further stimulus at today’s meeting, and in the markets mind they fell short of those expectations,” Larson said. Draghi had been preparing markets for further stimulus since October, prompting economists surveyed by Bloomberg to unanimously predict the central bank would boost its efforts this week.

     Following the ECB, Yellen delivered a cautiously upbeat outlook for the U.S. economy, signaling the conditions necessary for an interest-rate increase have been met and that she hopes to tighten monetary policy slowly after liftoff. Her comments before Congress’s Joint Economic Committee were nearly identical to portions of a speech she gave Wednesday to the Economic Club of Washington. Traders are pricing in 74 percent odds the Fed will raise rates at the conclusion of its next meeting on Dec. 16.

     As policy makers assess the strength of the economy, an index of activity at service industries expanded in November at the slowest pace in six months, indicating malaise in manufacturing is impeding progress in other parts of the economy. The measure saw its biggest monthly decrease in seven years. A separate report showed applications for unemployment benefits rose last week, maintaining a see-saw pattern around four-decade lows.                          

     The Chicago Board Options Exchange Volatility Index rose 14 percent Thursday to 18.11, reaching a two-week high. The measure of market turbulence known as the VIX trimmed an earlier jump of almost 22 percent.

     The S&P 500 is down 2.5 percent since a rally Monday to kick off December sent the index to its highest level in almost a month, and to within 1.4 percent of its record set in May. Performance among the benchmark’s 10 main industries was lopsided for a second day as all the groups fell. Health-care and energy companies led the drop, and have lost more than 3 percent since Monday’s close.

     “Everyone was positioned the same way going into today,” Michael Block, chief equity strategist at Rhino Trading Partners LLC in New York, said by phone. “It all snowballed and on days when that happens you have a problem. It’s the idea the central banks won’t be there to bail out equities — bonds got weaker and equities got weaker.”

     Energy stocks declined 2 percent, even as West Texas Intermediate oil futures climbed 2.9 percent. Cash-strapped OPEC nations from Venezuela to Iran are piling pressure on Saudi Arabia to reduce oil output as the group of producer nations prepare to meet tomorrow in Vienna. A report Saudi Arabia may propose a 1 million barrel a day output cut is “baseless,” a Saudi official told Bloomberg.

     Chesapeake Energy Corp. tumbled 12 percent after asking bond holders to accept longer-dated debt instruments. Shares fell to a 13-year low. Southwestern Energy Co. and Marathon Petroleum Corp. dropped more than 6.1 percent.

     Health-care companies fell 2.2 percent as biotechnology shares slumped. Vertex Pharmaceuticals Inc. and Celgene Corp. sank more than 4.3 percent with the Nasdaq Biotechnology Index losing 3.4 percent, its biggest slide since Oct. 6. Merck & Co. and UnitedHealth Group Inc. fell more than 2.2 percent to rank among the Dow’s worst performers.

     Following its strongest gain in two months, Yahoo! Inc. slid 3.7 percent to pace declines among technology companies. Corning Inc. decreased 4.9 percent, the most in 16 months. Microsoft Corp. and Facebook dropped more than 1.5 percent.

     Kroger Co. added 4.7 percent to a record as the largest U.S. supermarket chain reported third-quarter profit that topped analysts’ estimates and raised its annual forecast after new locations and organic products fueled sales. Costco Wholesale Corp. gained 1.6 percent after the company reported November sales that beat expectations.

     Avago Technologies Ltd. surged 9.5 percent, the most in the S&P 500 after reporting fourth-quarter profit that topped estimates on demand for mobile-phone components. Broadcom Corp., set to be acquired by Avago, rallied 4.1 percent on the news to the highest since May.

Have a wonderful evening everyone.

Be magnificent!

Man cannot be broken down into emotions, intellect, or action.

Man is a whole.

When these three elements of intellect, feelings, and action are in harmony, they make up man.

Swami Prajnanpad

As ever,

Carolann

The noblest pleasure is the joy of understanding.

                        -Leonardo da Vinci, 1452-1509

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