February 5, 2015 Newsletter

Dear Friends,

Tangents:

This is sort of an amazing news item in this week’s Economist:

Dubai airport claimed it had overtaken Heathrow to become the world’s busiest international hub last year, with 70.5 million international passengers passing through its terminals.  That beat Heathrow, which recently said that 68.1 million international passengers had arrived at the airport in 2014.  Extensive repairs to Dubai’s runways over the summer had been expected to prevent the Emirati airport from soaring above its London rival.

Also in The Economist this week:

Astronomy: Old Planets
 

The picture above shows Ceres, the largest object in the asteroid belt, as seen a few days ago from Dawn, an American spacecraft that is en route there.  Ceres’s gravity is strong enough to make it round, like a planet.  And it probably has a core and a mantle, like Earth (though the core is thought to be rocky, and the mantle icy).  It may even have a thin atmosphere.

  But Ceres  is not a planet.  It was classified as such in 1801, when it was discovered, but soon after it was spotted astronomers started finding other objects in the junkyard of rock and ice that is now called the asteroid belt.   The idea of calling all of them planets began to look silly, and so Ceres was quietly demoted.  These days it is classed as a “dwarf planet”, one of at least five in the solar system.

  The most famous of them is Pluto, which was, in 2006, demoted from full planethood by the International Astronomical Union, amid much wailing and gnashing of teeth.  Pluto is merely the  biggest object in the Kuiper Belt, a second group of asteroids, which extends far beyond the orbit of Neptune, the most distant of the true planets.

… Neither Ceres nor Pluto has been visited before, though Dawn did visit another big asteroid, Vesta, in 2011.  Both are the cosmic equivalent of builder’s rubble, left over from the construction of the solar system 4.6 billion years ago.  These days, the best place to look for full-blown planets is in solar systems other than Earth’s.  More than 1,800 such exoplanets have been discovered  since the first turned up in 1992.  On January 26^th, a group of astronomers led by Tiago Campante of Birmingham University in Britain, announced the discovery of five rocky planets around Kepler-444, a star about 117 light years from Earth that is smaller, dimmer and more orange than the sun.

  The most striking thing about this star, though, is its immense age.  Using a technique called asterosesmology, which measures stellar pulsations, the researchers estimate this to be 11.2 billion years, give or take a billion.  This is ancient indeed.  The universe itself is only 13.8 billion years old.

  Assuming the planets are the same age as their star (likely but not definite; it is just conceivable they have arrived from elsewhere), that suggests planet formation began not long after the Big Bang.  Kepler-444’s worlds look uninhabitable.  All orbit scorchingly close to their parent star.  But if other, similarly ancient worlds exist in more temperate climes, then life may have been possible in the universe almost from the beginning.

PHOTOS OF THE DAY

A tree is covered by the ice as the snow covers the landscape in the Pyrenees small town of Roncesvalles, northern Spain, Thursday. A cold spell has reached northern Spain with temperatures plummeting far below zero. Alvaro Barrientos/AP

A couple kiss each other as a rainbow forms just after a storm in the Mediterranean Sea in Barcelona, Spain, Wednesday. Emilio Morenatti/AP

Market Closes for February 5^th, 2015    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose to a four-month high as energy producers rallied with crude oil and earnings from BCE Inc. bolstered phone shares.

     BCE extended a record after reporting earnings that topped analysts’ estimates. Suncor Energy Inc. rose 2.8 percent as the nation’s largest energy company maintained its dividend and said it will continue development of an oil sands project even as fourth-quarter profit plunged. Lightstream Resources Ltd. and Pacific Rubiales Energy Corp. advanced at least 20 percent as U.S. crude surged more than 4 percent in New York.

     The Standard & Poor’s/TSX Composite Index rose 129.27 points, or 0.9 percent, to 15,124.92 at 4 p.m. in Toronto, the highest close since Sept. 23. Trading volume was 7.4 percent higher than the 30-day average.

     Seven of 10 industries in the equities benchmark climbed Thursday. Energy producers gained 1.5 percent to lead the advance. Toronto-Dominion Bank jumped 2.1 percent to a one-month high to pace a 1.4 percent gain in financials shares.

     Lightstream Resources jumped 23 percent and Pacific Rubiales climbed 20 percent, as West Texas Intermediate oil surged 4.2 percent to settle at $50.48 a barrel in New York.

     Energy shares tumbled 3 percent Wednesday after rising more than 3 percent on each of the week’s first two sessions as the price of crude has swung between gains and losses. A gauge of crude oil volatility is at 63.14, the highest level since April 2009.

     Air Canada soared 5.8 percent to C$13.12 for a second day of gains, the highest close in more than seven years. The nation’s largest airline reported record traffic and load factor results in January. Load factor is a measure of airline efficiency.

     BCE added 0.2 percent to C$58.93, extending a record, after the telecommunications company added more than 117,000 new wireless contract customers and 52,000 Internet customers. The company has added wireless subscribers for the third quarter in a row, outpacing rival Rogers Communications Inc.

US

By Oliver Renick

     (Bloomberg) — U.S. stocks climbed, with benchmark indexes erasing declines for the year, as oil resumed a rebound and Pfizer Inc. announced a $17 billion deal.

     Denbury Resources Inc. and Noble Corp. jumped more than 3.7 percent as oil climbed 4.7 percent. Pfizer added 2.9 percent as it agreed to buy Hospira Inc., the biggest provider of injectable drugs and infusion technology. Hospira jumped 35 percent.

     The Standard & Poor’s 500 Index added 1 percent to 2,062.52 at 4 p.m. in New York. The Dow Jones Industrial Average rose 211.86 points, or 1.2 percent, to 17,884.88. The Russell 2000 Index surged 1.5 percent. About 7 billion shares traded hands on U.S. exchanges Thursday, 3.2 percent more than the three-month average.

     “Right now it’s earnings, Greece and M&A,” Krishna Memani, the New York-based chief investment officer at Oppenheimer Funds Inc., said by phone. “It’s more about the corporate outlook in the U.S. remaining good and the realization that while the Greek issue is important, it will eventually be resolved.”

     The S&P 500 fell 0.4 percent yesterday, following the biggest two-day rally in almost a month, as stocks gave up gains in the final 30 minutes after the European Central Bank tightened its rules on lending to Greek banks and oil retreated.

     The benchmark gauge in January posted its worst month in a year amid concern that slowing growth overseas will hurt the U.S. economy, while tumbling crude oil and the strengthening dollar weighed on earnings at multinational corporations.

     U.S. crude prices gained more than 6 percent Thursday, after plunging 8.7 percent Wednesday, the most since November. Oil’s swings have intensified since the Organization of Petroleum Exporting Countries decided in November not to cut output amid a global surplus. The Chicago Board Options Exchange Crude Oil Volatility Index, which measures price fluctuations using options of the U.S. Oil Fund, ended Wednesday at the highest since April 2009.

     Oil’s wide swings have rippled through equity markets. The CBOE Volatility Index fell 8.1 percent to 16.85 after rising 5.8 percent Wednesday. The gauge, known as the VIX, is down 20 percent this week after jumping 26 percent last week.

     A Goldman Sachs Group Inc. gauge of the most-shorted stocks in the Russell 3000 Index jumped 2.3 percent Thursday, bringing its rally since the end of January to 5.9 percent. The S&P 500 has advanced 3.4 percent in that period.

     About 78 percent of S&P 500 members that have posted results this season have beaten analyst estimates, while 55 percent have topped sales projections, data compiled by Bloomberg show.                           

     Data on Thursday showed fewer Americans than forecast filed jobless claims last week. Applications for unemployment benefits increased by 11,000 to 278,000 in the week ended Jan. 31, from a revised 267,000 in the prior period. The median forecast of 50 economists surveyed by Bloomberg called for a rise to 290,000.

     Friday’s jobs report from the Labor Department is predicted to show nonfarm payrolls rose by 230,000 last month, while the unemployment rate remained at 5.6 percent.

     A separate report showed the U.S. trade deficit increased unexpectedly in December to a two-year high on a pickup in imports of motor vehicles and fewer shipments overseas. Companies imported a record $48.8 billion in consumer goods along with more industrial supplies and capital equipment, showing U.S. demand is holding up as global economies cool.

     Progress toward reducing the trade gap will probably be difficult because of slower demand from overseas markets and a rally in the U.S. dollar.

     “Obviously Europe matters but what’s a little more important is what’s happening domestically,” Jerry Villella, a global investment specialist at JP Morgan Private Bank in Dallas, said by phone. “We’re about halfway through earnings season and with the exception of energy and financials, it’s been mostly a good story.”                         

     Materials, health-care and energy companies led as all 10 of the S&P 500’s industry groups rose.

     Pfizer had its biggest gain since April and Hospira climbed to a record. Pfizer has been looking to make an acquisition after a failed $120 billion bid for AstraZeneca Plc last year in what would have been the industry’s biggest-ever takeover. Buying Hospira will add a broad range of generic sterile injectable medicines to Pfizer’s portfolio and assist the company’s strategy to offer more biosimilar drugs.

     Ball Corp. saw its biggest gain since 2011, adding 8.9 percent and reaching a record high, after Rexam Plc confirmed talks about a possible sale to its U.S. competitor that may value the U.K. beverage-can manufacturer at about $6.6 billion.

     “Good companies are feeling comfortable enough that they want to merge and the market is generally positive toward that, but there’s always the question of if they are merging because they can’t grow their top line organically,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said by phone.

     Twitter Inc. climbed 1.3 percent as people with knowledge of the matter said it struck a deal with Google Inc. to facilitate easier online searches for its 140-character updates. It climbed an additional 7.6 percent in late trading as fourth- quarter revenue topped estimates, showing the company was able to draw more advertising even as user growth continues to slow.

     Visa Inc. added 2.6 percent to $271.80, a record high. The shares have rallied 10 percent in six sessions, the most since November, after announcing last week better-than-forecast earnings and a stock split.

     Frontier Communications Corp. advanced 5.8 percent on speculation it may buy landline assets. After the close of trading, Verizon Communications Inc. agreed to sell landline assets across California, Florida and Texas to Frontier for$10.54 billion in cash.                        

     Keurig Green Mountain Inc. slid 4.9 percent after cutting its 2015 profit outlook. The company cited slower-than-expected sales of a new coffee brewer.

     Michael Kors Holdings Ltd. fell 2.3 percent after North American sales missed estimates, raising concern that the maker of luxury goods is suffering a slowdown in its biggest market.

     Airline stocks declined for the fourth loss in five sessions, as oil prices gained. United Continental Holdings Inc. and American Airlines Group Inc. lost at least 1.1 percent as seven of 11 companies in a Bloomberg index of airlines fell.

Have a wonderful evening everyone.

Be magnificent!

The lamp is empty; the oil is used up.

The tambourine is dead, the dancer lies down,

The fire is out, and no smoke rises from it.

The soul is absorbed into the Unique, and there is no longer a duality.

Kabir,

As ever,

Carolann

I generally avoid temptation unless I can’t resist it.

                                    -Mae West, 1893-1980

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