December 4, 2014 Newsletter

Dear Friends,

Tangents:

On this day in 1956, rockabilly singer Carl Perkins was in the Sun Records studio in Memphis, recording a follow-up to his big hit “Blue Suede Shoes.” Among the session players was Jerry Lee Lewis, not yet a household name. Another artist hanging around the studio joined in as well. But even Johnny Cash was overshadowed by the next Sun artist to walk through the door: Elvis Presley. The four men sat down – the one and only time – for an impromptu jam session. The gathering came to be called the “Million Dollar Quartet.” –Wall Street Journal.

Joe Kernen enlightened us with this fact on CNBC’s Squawk Box  this morning:
The world’s best whisky, if you’re to believe the Jim Murray Whisky Bible 2015, is now the Japanese Yamazaki single malt sherry cask.
Also, countries without an “e” in their spelling, spell whisky without an “e” such as Japan and Canada and Scotland.  Countries with an “e” in their spelling, spell whiskey with an “e” such as Ireland and the USA.

From CNNMONEY:
Watch out, Scotland! Japanese whisky is no longer an insider secret — it’s grown into a $6 billion industry, competing with scotch for the spotlight.
Whiskies from Japan have been winning accolades at the Whisky Magazine Awards for years, including world’s best single malt. This year, a Japanese distiller took home the prize for best blended malt whisky.
Some Japanese whiskies are so coveted that buyers have pushed prices at auction up to tens of thousands of dollars a bottle. A Yamazaki single malt aged 50 years went for $33,169 earlier this year at auction in Hong Kong — only 150 bottles were ever produced.
There’s no doubt about it: International demand for Japanese whisky is growing — exports have increased by 86% since 2008. Taiwan, France, Russia and China are bringing in the most Japanese whisky by volume, according to Euromonitor.
“Japanese whisky as a whole is absolutely fantastic,” said Nicholas Pollacchi of Whisky Dog. “The quality that’s coming out of Japan is exceptional, and that’s been happening there for almost 100 years.”
Commercial production started in Japan in 1924 when liquor entrepreneur Shinjiro Torii opened a distillery in Yamazaki and hired Masataka Taketsuru to run the distillery. Taketsuru learned his craft at distilleries in Scotland, and brought the techniques back to Japan.
Early manufacturers tweaked Scottish methods to make original whiskies that catered to Japanese tastes, said Euromonitor analyst Mariko Takemura.
“It was hard for Scotch whiskies to be accepted by Japanese consumers, because they were considered too smoky, so manufacturers tried to find tastes that could be accepted,” said Takemura.
Taketsuru later started his own company, Nikka, which is now one of Japan’s most famous whisky producers. Nikka’s Yoichi single malt, aged 20 years, was named by Whisky Magazine as the world’s best in 2008.

PHOTOS OF THE DAY

Whiskey On The Rocks

Their First Flight

Market Closes for December 4^th, 2014     

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     Dec. 4 (Bloomberg) — Canadian stocks fell the most in more than a year as the nation’s biggest banks posted results that missed estimates and energy shares resumed a selloff with the price of crude.

     Toronto-Dominion Bank, the country’s largest lender by assets, tumbled the most in more than five years after posting fourth-quarter profit short of estimates. Energy stocks tumbled 2.1 percent as a group as oil fell. Canadian Oil Sands Ltd. Sank 16 percent to a decade low after slashing its dividend. Enbridge Inc. jumped 10 percent to a record on plans to transfer C$17 billion ($14.9 billion) in assets to a fund.

     The Standard & Poor’s/TSX Composite Index slumped 284.11 points, or 1.9 percent, to 14,469.95 at 4 p.m. in Toronto, the biggest drop since June 2013. The equities benchmark pared its gain to 6.2 percent this year.

     “We had crabby investors who woke up on the wrong side of the bed this morning and were in a fighting mood and wanted to sell,” said Barry Schwartz, fund manager at Baskin Wealth Management in Toronto. He helps manage C$740 million with the firm. “The Canadian banks had a great year but the people wanted more. There’s a lot of people out there who saw how poorly their energy stocks have done and want to rip off Us stoous the heads of their advisers.”

     All of the 10 industries in the S&P/TSX dropped at least 0.6 percent on trading volume 45 percent higher than the 30-day average today. Global equities slumped after the European Central Bank said policy makers will reassess stimulus next quarter, damping hopes for additional bond purchases this year.                         

     Financial stocks, the largest group by weighting, sank 2.2 percent, the most in the benchmark Canadian equity gauge. Toronto-Dominion fell 5.1 percent to C$54.03, the biggest decline since April 2009.

     Canadian Imperial Bank of Commerce lost 3.4 percent to C$103.52, the worst drop since September 2011, as fourth-quarter profit declined 1.7 percent amid weakness in its wholesale banking and Canadian lending businesses.

     “Bank earnings came in with a disappointment, and it’s putting pressure on the index,” said Youssef Zohny, portfolio manager at StennerZohny Investment Partners of Richardson GMP Ltd. in Vancouver. Richardson GMP manages about C$29.3 billion. “The thing that’s moving markets today from a macro perspective is the ECB meeting. Bottom line, the markets were expecting more.”                         

     Mario Draghi, president of the ECB, left interest rates unchanged, unveiled “substantially” lower forecasts for inflation and growth in the euro area and said the central bank will reassess the effects of existing monetary stimulus in early 2015.

     Raw-materials and energy shares, which together make up about a third of the broader index, each slumped 2.1 percent as gold and crude prices slipped.

     Canadian Oil Sands retreated 16 percent to C$10.97, the lowest since September 2004, after cutting its quarterly dividend 42 percent to 20 Canadian cents a share.

     Gildan Activewear Inc., the wholesale apparel manufacturer, slumped 9.2 percent to C$60.22, the biggest retreat since December 2011. Revenue of $666 million fell short of the company’s most recent projection of $700 million due to issues including weak market demand and inventory destocking, the company said.

     Enbridge surged 10 percent to C$60.04, a record, as the pipeline operator unveiled a plan to transfer its Canadian liquids pipelines to the Enbridge Income Fund. The company is also considering a similar move for its U.S. liquids pipelines assets and boosted its dividend.

US

By Callie Bost

     Dec. 4 (Bloomberg) — U.S. stocks fell from record levels, led by energy shares, as Mario Draghi’s remarks on European Central Bank stimulus disappointed investors before a report on the American labor market.

     Chevron Corp. slid 1.3 percent as energy shares tumbled the most among groups in the Standard & Poor’s 500 Index. Microsoft Corp. rose 1.6 percent as Barnes & Noble Inc. said it will buy back the company’s stake in its Nook business.

     The Standard & Poor’s 500 fell 0.1 percent to 2,071.92 at 4 p.m. in New York. The Dow Jones Industrial Average lost 12.52 points, or less than 0.1 percent, to 17,900.1. The Russell 2000 Index of smaller companies dropped 0.5 percent, after a two-day rally. About 6.1 billion shares changed hands on U.S. exchanges, 9.6 percent below the three-month average.

     “Draghi’s going to have to start doing some bond-buying if they want to get out of the malaise they’re in,” Karyn Cavanaugh, the New York-based senior market strategist at Voya Investment Management LLC, said by phone. Voya oversees $215 billion. “The writing is on the wall. I think it’ll eventually be good news and QE will have to happen.”

     ECB President Mario Draghi said policy makers will wait until next quarter before assessing if additional stimulus measures are needed. His comments damped speculation the central bank was poised to start a program of sovereign-debt purchases known as quantitative easing, or QE.                        

     Draghi also unveiled “substantially” lower forecasts for inflation and growth. With euro-area inflation well below the ECB’s target, Draghi has warned of a deflationary spiral of falling prices and households postponing spending.

     Stocks briefly erased losses after two euro-area central- bank officials familiar with deliberations said the ECB’s Governing Council expects to consider a proposal for broad-based asset purchases including sovereign debt next month. While the proposal is envisaged to include various types of bonds, it won’t encompass equities, said the officials, who asked not to be identified because the discussions are private.

     “Nothing Draghi has said surprised me,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said by phone. “Until you see some kind of QE stimulus from Europe, whatever he says about it isn’t going to matter too much. Everyone will be focused on the strength of the jobs number.”

     Bill Gross said the creation of more debt by policy makers worldwide to solve the credit crisis will be judged by future generations much like smoking in public or discrimination against gays is viewed by people today.

     Gross, who left Pacific Investment Management Co. in September to join Janus Capital Group Inc., recommended in an investment outlook that investors put money into higher-quality assets and reduce the duration of their holdings. He also said they should prepare for asset prices to stop increasing.

     The S&P 500 has rebounded as much as 11 percent from a low in October on speculation that the U.S. economy is strong enough to withstand a slowdown overseas and tighter monetary policy after the Federal Reserve wound up its asset-purchase program.

     Investors are watching economic reports to help gauge the pace of the recovery. Fewer Americans filed applications for unemployment benefits last week as employers retained staff to meet domestic demand for goods and services ahead of the holiday season, data showed today.

     A release tomorrow may show employers added more than 200,000 jobs in November for the 10th straight month, while the unemployment rate held at the lowest level since July 2008.                       

     The Chicago Board Options Exchange Volatility Index declined 0.7 percent to 12.38, its third day of losses.

     Seven of the 10 main industries in the S&P 500 declined. Industrials shares dropped 0.5 percent. Raw-material producers added 0.3 percent for the biggest gains.

     Energy companies slumped 0.8 percent, following three days of gains as oil slipped as much as 1.9 percent. Transocean Ltd. dropped 4.6 percent. Newfield Exploration Co. and Ensco Plc lost more than 3.5 percent. Chevron slid 1.3 percent, the most in the Dow, and Exxon Mobil Corp. declined 0.6 percent.

     Crude fell 18 percent last month as OPEC maintained its output target, letting prices fall to a level that may slow U.S. production growth.

     Sears Holdings Corp. decreased 4.4 percent. The department- store chain controlled by hedge fund manager Edward Lampert posted its 10th straight quarterly loss as sales continued to decline.

     Microsoft gained 1.6 percent. Barnes & Noble said today it will buy back Microsoft’s stake in its struggling Nook business, which posted a loss that pulled down the U.S. bookstore chain’s second-quarter results. The bookstore operator lost 5.4 percent.

     Avago Technologies Ltd. rose 8.4 percent, the most in the S&P 500, after reporting better-than-estimated fourth-quarter profit and sales, and increasing its forecast for the first quarter.
 

Have a wonderful evening everyone.

Be magnificent!

Silence is a great benediction, it cleanses the brain, gives vitality to it,

and this silence builds up great energy, not the energy of thought or the energy of machines,

but unpolluted energy, untouched by thought.

It is the energy that has incalculable capacity, skills.

And this is a place where the brain, being very active, can be silent.

That very intense activity of the brain has the quality and the depth

and the beauty of silence.

Krishnamurti

As ever,

Carolann

People need to be reminded more often than they need to be instructed.

                                                           –Samuel Johnson, 1709-1784                 

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7