February 28, 2014 Newsletter

Dear Friends,

Tangents:

Remember that Monday, March 3^rd is the deadline for RRSP contributions for the 2013 tax year.  For those of you living in other provinces or elsewhere in BC, please call our office if you need instructions on how to deposit funds into your account online, if you haven’t done so already.

It’s Oscar weekend and I’m off to LA tonight for the weekend – back Monday.  There were so many fabulous movies this past  year, it’s hard to choose, but I think American Hustle is a top contender for best picture.  It was a great movie.

Photos of the day

An Oscar statue is covered in plastic as preparations are made for the March 2 awards ceremony in Los Angeles Feb. 26. Matt Sayles/Invision/AP

Hand-crafted envelopes by Marc Friedland for the 86th Oscars are displayed at the Governors Ball Press Preview on Feb. 20. Chris Pizzello/Invision/AP

Market Closes for February 28^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

Feb. 28 (Bloomberg) — Canadian stocks erased gains in the final hour of trading, paring the longest monthly winning streak in three years, as drop among miners offset gains in industrial and energy shares amid an unexpected acceleration in growth.

Mega Brands Inc., the world’s second-largest maker of snap- together blocks after Lego A/S, surged 36 percent after Mattel Inc. agreed to buy the toymaker. Atlantic Power Corp., which runs electricity generation stations, jumped 3.9 percent after posting the first per-share profit in three quarters. OceanaGold Corp. slumped 3.3 percent as gold fell for the second time in three days. Valeant Pharmaceuticals International Inc. dropped the most since June.

The Standard & Poor’s/TSX Composite Index fell 5.15 points, or less than 0.1 percent to 14,209.59 at 4 p.m. in Toronto, erasing an earlier gain of as much as 0.5 percent. The benchmark equity gauge advanced 3.8 percent in February, an eighth straight monthly gain. The index earlier surpassed its highest closing level since 2008.

“We’ve seen some choppiness on both sides so far this year, some volatility,” said Youssef Zohny, portfolio manager at Stenner Investment Partners of Richardson GMP Ltd. from Vancouver. Richardson GMP manages C$26 billion ($23 billion). “It’s possible there was some portfolio rebalancing and some profit-taking today at the end of a very good month.”

Canada’s economy grew 2.9 percent in the fourth quarter compared with 2.7 percent in the prior three months as consumer spending increased and companies added to inventories. Economists had projected growth to slow to 2.6 percent.

Bank of Canada Governor Stephen Poloz has said there is “significant slack” in the economy and that it will take about two years to reach full output. Economists predict he will keep his benchmark interest rate at 1 percent at a March 5 policy announcement.

“You have an economy that’s growing but not growing so fast that the central bank has to take away the punchbowl. Growth of 2.5 percent to 3 percent isn’t bad, and there are no worries about rising interest rates,” said Michael O’Brien, fund manager at TD Asset Management Inc. in Toronto. He helps manage C$218.3 billion with the firm.

Information technology stocks tumbled 1.2 percent as a group as four of 10 industries declined on trading volume 4 percent below the 30-day average.

BlackBerry Ltd. dropped 5.4 percent to C$11.05, the biggest decline in the S&P/TSX. A company spokesman said BlackBerry has no current plans to release a new tablet, in response to a report from the website Pocket-Lint.

Valeant fell 4.2 percent to C$6.90, paring its advance this year to 27 percent.

OceanaGold lost 3.3 percent to C$2.65 and Agnico Eagle Mines slipped 3 percent to C$35.53 as gold futures dropped 0.8 percent to $1,321.60 an ounce in New York. The metal price has rallied 9.9 percent this year, rebounding from the worst loss since 1981 last year.

Mega Brands soared 36 percent to C$17.72, the biggest gain since December 2009, after Mattel agreed to buy the company for $460 million. The board of Montreal-based Mega Brands unanimously approved the deal and investors holding 39 percent of the stock, including Chief Executive Officer Marc Bertrand and Fairfax Financial Holdings Ltd., have agreed to the sale.

Surge Energy Inc. rallied 3.5 percent to C$5.90 after buying a 20 percent block of shares in Longview Oil Corp. for C$41.4 million. Surge would like to pursue a “mutually beneficial business combination” with Longview, the company said in a statement. Longview advanced 4.7 percent to C$5.38.

Atlantic Power rose 3.9 percent to C$2.90 after posting adjusted earnings of 4 cents a share, following losses of 32 cents and 2 cents in the two previous quarters.

The company decided to defer a decision on whether to reduce its dividend, which may cause shares to temporarily rise, Nelson Ng, analyst with RBC Capital Markets, said in a note to clients. Ng said a cut is “much needed.”

US
By Lu Wang and Callie Bost

Feb. 28 (Bloomberg) — U.S. stocks rose to a record, capping the best month since October, as improving consumer confidence and speculation that the Federal Reserve will support the economy offset concern over escalating conflict in Ukraine.

Principal Financial Group Inc. rose 1.6 percent after Keefe, Bruyette & Woods Inc. raised its rating on the stock. Monster Beverage Corp. advanced 4 percent after reporting sales that beat analysts’ estimates. Apple slid 0.3 percent as shareholders approved the company’s proposals and rejected those that the board opposed at its annual meeting. Deckers Outdoor Corp., the maker of Ugg boots, dropped 12 percent after forecasting an unexpected first-quarter loss.

The Standard & Poor’s 500 Index climbed 0.3 percent to 1,859.45 at 4 p.m. in New York, capping a 1.3 percent gain for the week that left the gauge 4.3 percent higher in February. The Dow Jones Industrial Average gained 49.06 points, or 0.3 percent, to 16,321.71. About 7.7 billion shares changed hands on U.S. exchanges, 19 percent higher than the 30-day average.

“We continue to be in an environment of recovery and modest growth, but not at a point of excessive strength that would cause a reversal in Federal Reserve policy when it came to raising interest rates,” James Abate, who oversees about $1 billion as chief investment officer at Centre Asset Management in New York, said by phone. “It’s positive for stocks.”

U.S. equities are set to enter the sixth year of a bull market that started March 9, 2009. Three rounds of stimulus have helped push the S&P 500 up 175 percent from a 12-year low.

The index briefly erased gains in the afternoon after Ukrainian acting President Oleksandr Turchynov said Russia has invaded Ukraine’s southern region of Crimea as gunmen seized airports and other facilities on the peninsula.

Russian forces are trying to provoke a conflict similar to the 2008 war with Georgia over a breakaway region, Turchynov said today in a speech broadcast by the parliamentary television channel.

“Markets greet uncertainty with selling, especially entering a weekend,” Joe Bell, senior equity analyst at Cincinnati-based Schaeffer’s Investment Research Inc., said by phone. “Technically, the market is kind of overextended as well. It’s just an overbought situation. You’re having people take profits.”

Federal Reserve Chair Janet Yellen said yesterday that the central bank may consider changing its strategy for reducing asset purchases should the economy weaken. Earlier this month, she said that the economy can withstand stimulus cuts, adding that only a notable change to the outlook would prompt the central bank to slow the pace of tapering.

Her latest comments helped the S&P 500 close at a record yesterday, ending three days of failing to sustain all-time highs throughout the trading session. The index closed up 1.3 percent this week, capping its third weekly gain this month.

“Although they don’t expect to change tapering, Yellen did give a nod to if the economic data tells us that over the next couple months it’s not just weather, then they will re- evaluate,” Andres Garcia-Amaya, global market strategist at JPMorgan Chase & Co.’s mutual funds unit in New York, said by phone. The firm oversees $400 billion. “The market took it on a stride and says, ‘All right, the Fed still supports us.’”

U.S. consumer confidence improved in February from a month earlier as more consumers grew optimistic about the outlook for the economy. The Thomson Reuters/University of Michigan final index of sentiment rose to 81.6 this month from 81.2 in January. The median estimate in a Bloomberg survey of economists called for the measure to hold at its preliminary reading of 81.2.

The economy in the U.S. grew at a slower pace in the fourth quarter than previously estimated, giving the expansion less momentum heading into 2014. Gross domestic product grew at a 2.4 percent annualized rate from October through December, compared with the 3.2 percent gain issued last month, revised figures from the Commerce Department showed. The median forecast of 85 economists surveyed by Bloomberg called for a 2.5 percent increase.

Investors are favoring smaller companies, with exchange- traded funds that hold small-cap stocks attracting almost $400 million yesterday, according to data compiled by Bloomberg. More than $530 million was withdrawn from large-cap ETFs and overall equity funds lost $36 million.

The Chicago Board Options Exchange Volatility Index slipped 0.3 percent today to 14. The gauge of S&P 500 options known as the VIX fell 4.6 percent this week.

Eight of 10 S&P 500 main industries gained. Consumer- staples and utilities stocks rose the most, climbing at least 0.6 percent. Kroger Co. jumped 4.5 percent to $41.94, the most in the S&P 500, and Archer-Daniels-Midland Co. increased 1.8 percent to $40.60.

Principal Financial climbed 1.6 percent to $45.35. The life insurer was boosted to outperform from market perform at Keefe, Bruyette & Woods. Concern over the company’s business in emerging markets has been overdone, analyst Jeffrey Schuman wrote in a note to clients.

Monster Beverage surged 4 percent to $74. The distributor of energy drinks and fruit juices reported fourth-quarter sales of $540.8 million, beating the average analyst estimate of $526.3 million.

Jos. A. Bank Clothiers Inc. rose 3 percent to a record $62.08 as the retailer agreed to meet with Men’s Wearhouse Inc. to discuss a potential merger. Jos. A. Bank rejected a $1.78 billion bid from Men’s Wearhouse late yesterday because it failed to meet the interests of investors. The prospect of talks marks the latest twist in an almost five-month takeover battle between the two purveyors of discount suits.

Men’s Wearhouse climbed 6.7 percent to $53.79.

Apple slipped 0.3 percent to $526.24 as shareholders showed support for Chief Executive Officer Tim Cook at its annual meeting. Apple recently faced down activist investor Carl Icahn, who had called on the company to increase its share buybacks.

Earlier this month, Icahn dropped a plan to force a vote over the issue, saying he was satisfied with statements by Cook that Apple had bought back $14 billion of its own shares in two weeks, bringing its repurchases to more than $40 billion in a year.

Deckers Outdoor dropped 12 percent to $74.35 after projecting a loss of 16 cents a share for the current quarter.  Analysts had estimated a profit of 10 cents on average, according to data compiled by Bloomberg.

Southwestern Energy Co. fell 4.2 percent to $41.34 for the third-biggest decline in the S&P 500. The natural gas producer’s results from the Brown Dense holdings in the U.S. were disappointing, Tim Rezvan, an analyst with Sterne Agee & Leach Inc. in New York, wrote in a note to clients.

Salesforce.com Inc. slipped 5.8 percent to $62.37. The biggest maker of customer-management software forecast fiscal first-quarter earnings of 9 cents to 10 cents a share. Analysts, on average, estimated 10 cents.

KBR Inc. declined 14 percent to $27.62. The military contractor forecast earnings per share of $1.75 to $2.10 in 2014, less than the $2.49 that analysts had estimated. It also reported fourth-quarter revenue of $1.7 billion, missing the $1.93 billion average analyst projection.

Have a wonderful weekend everyone.

Be magnificent!

To conquer the subtle passions

seems to me to be far harder than the

physical conquest of the world by the force of arms.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Not all of us can do great things.

But one can do small things with great love.

-Mother Teresa, 1910-1997

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7