January 13, 2014 Newsletter

Dear Friends,

Tangents:

Blackout. Quiet.  The tick of clock

Shall bring you peace,

To your uncertain soul

Give slow increase.

The blackened windows shut

This inward room

Where you may be alone.

As in the tomb.

A tomb of life not death,

Life inward, true,

Where the world vanishes

And you are you…

It is not winter, not the cold we fear;

It is the dreadful echo of our void,

The malice all around us, manifest;

Loud-mouthed interpreter of constant whispers

Mostly ignored, or drowned within the song

Of cheerfulness and shallow disregard.

The athletic spirit, like a shouting boy,

Leaps to all reassurance, shuns the dour

Disquiet plucking mutely at his sleeve,

And seeks the climate native to his mind

Where day suffices day, but even he

When lowering Nature grips, must vacillate

Disconsolate before the frightful day

With a strange wonder and a strange alarm…

-by V. Sackwille-West, The Garden, Winter, 1946.

Photos of the day

People dance and sing Christmas carols, known locally as ‘Kolyadki,’ in the village of Noviny, Belarus. Many Orthodox Belarussians mark the New Year, according to the Julian calendar, on Jan. 13. Vasily Fedosenko/Reuters

Covered with branches and cow bells, ‘Silvesterchlaeuse,’ New Years Clauses, perform in front of a farm house in Urnaesch, Switzerland, to offer their best wishes for the New Year (according to the Julian calendar.) After their performance, they receive food, hot drinks or money. Ennio Leanza/Keystone/AP

Market Closes for January 13^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Jan. 13 (Bloomberg) — Canadian stocks fell the most in a month, ending a four-day streak of gains, as declining oil prices dragged down energy producers and Goldcorp Inc. dropped after making a bid for Osisko Mining Corp.

Goldcorp, the world’s second-largest producer of the metal, dropped 1 percent after offering to buy Osisko for about C$2.6 billion ($2.38 billion) in cash and shares. Osisko surged 21 percent. Savanna Energy Services Corp. lost 5.8 percent to lead declines among energy stocks. Fortuna Silver Mines Inc. added 11 percent after its silver production guidance was 30 percent higher than the previous year.

The Standard & Poor’s/TSX Composite Index fell 66.04 points, or 0.5 percent, to 13,681.48 at 4 p.m. in Toronto, the biggest decrease since Dec. 11. The gauge had rallied 1.9 percent in the previous four sessions.

“The oil stocks are looking weak today,” said David Cockfield, a fund manager with Northland Wealth Management in Toronto. The firm manages about C$250 million. “This is the way it’s going to be, not huge leaps forward. There’s some waiting for fourth-quarter earnings and a quiet edging upwards of the market to get us through 14,000.”

Energy stocks dropped 1.1 percent as a group, the most in a month, as eight of 10 industries in the S&P/TSX retreated.

Trading volume was 91 percent above the 30-day average.

Goldcorp slumped 1 percent to C$25.04 after it made an unsolicited offer to buy Osisko in a deal that would add 10 million ounces of gold reserves and make it the largest producer in Quebec. Osisko surged 21 percent to C$6.24.

As part of the proposed deal, Goldcorp would pay 0.146 Goldcorp shares plus C$2.26 cash for each Osisko share, valuing the company at C$5.95, a 15 percent premium based on Jan. 10 closing prices.

Lightstream Resources Ltd. fell 4.8 percent to C$5.81 and Savanna Energy Services dropped 5.8 percent to C$7.83, the biggest plunge in two years.

West Texas Intermediate crude declined as much as 1.2 percent. Iran agreed to curtail its nuclear program starting Jan. 20 under terms of a deal that will ease some sanctions on OPEC’s fifth-biggest oil producer, bringing additional supply to market.

Surge Energy Inc.lost 3.2 percent to C$6.34. The company agreed to acquire light oil producing assets in southeast Saskatchewan for C$109 million, paid for in part by issuing C$70 million worth of subscription receipts convertible to common stock.

BlackBerry Ltd. sank 4.7 percent to C$9.11 to snap five days of gains, the longest winning streak for the stock since August. BlackBerry had rallied 18 percent in that period.

John Chen, Chief Executive Officer at the Waterloo, Ontario-based smartphone maker, hired Eric Johnson for BlackBerry’s top sales job. Johnson was a colleague of Chen’s at SAP AG.

Finning International Inc., which sells, finances and services Caterpillar construction equipment, slumped 4.1 percent to C$26.22. Ben Cherniavsky, analyst with Raymond James Ltd., lowered his rating for the stock from “strong buy” to “outperform,” the equivalent of a buy. Cherniavsky lowered his rating as the stock has rallied more than the benchmark gauge since his last change.

Fortuna Silver Mines climbed 11 percent to C$3.64, the highest close since November, after reporting 2013 silver production of 4.6 million ounces from its two underground silver mines in Mexico and Peru and introduced 2014 guidance for 6 million ounces of silver, a 30 percent increase.

Centerra Gold Inc. added 4.5 percent to C$4.86 after reporting 2013 gold production of 690,720 ounces across its mines in the Kyrgyz Republic and in Mongolia.

“Both operations exceeded the company’s 2013 production guidance,” said Ian Atkinson, chief executive officer of Centerra, said in a release.

USA

By Callie Bost

Jan. 13 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index to its biggest loss in two months, amid concern over valuations after benchmark indexes rallied to all-time highs in 2013.

Companies from Microsoft Corp. to Nike Inc. and Walt Disney Co. dropped more than 2 percent, with all 10 main industries in the S&P 500 declining. Lululemon Athletica Inc. slumped 17 percent after the sportswear maker lowered its profit and sales forecast. Intercept Pharmaceuticals Inc. plunged 18 percent after the stock soared sixfold last week. Beam Inc. jumped 25 percent after Suntory Holdings Ltd. said it will acquire the spirits maker in a $16 billion deal.

The S&P 500 fell 1.3 percent to 1,819.20, the lowest level since Dec. 20, at 4 p.m. in New York. Some 464 companies in the S&P 500 declined today, the most since Aug. 27, data compiled by Bloomberg show. The Dow Jones Industrial Average lost 179.11 points, or 1.1 percent, to 16,257.94, for the biggest drop since September. About 7.2 billion shares changed hands on U.S. exchanges, the most since Dec. 20.

“Sentiment is extremely optimistic and that’s a negative for stocks,” Bruce Bittles, chief investment strategist at RW Baird & Co., said by phone from Sarasota, Florida. His firm oversees $105 billion. “That means for the short term they’re fully invested. Stocks have entered the new year overbought and over-believed and until we digest that, we’re likely to stay in this range.”

The S&P 500 has dropped 1.58 percent so far in 2014, the worst start to a year since 2009, according to data compiled by Bloomberg. The index ended last year at a record, having climbed 30 percent for its biggest annual rally since 1997.

Valuation for the S&P 500 is “lofty by almost any measure,” Goldman Sachs analysts wrote in a note Jan. 10. Further price-to-earnings expansion will be difficult to achieve, according to the note.

The benchmark index trades at 15.4 times the estimated earnings of its members, more than the average multiple of 14.1 over the last five years, data compiled by Bloomberg show. The gauge ended 2013 at its highest valuation since the end of 2009.

“The way to think about the market is the level of earnings and the multiple which should be applied to that earnings growth,” David Kostin, chief U.S. equity strategist at Goldman Sachs, said today on Bloomberg Television. “Those really are the fundamental drivers of the level of U.S. equity markets this year.”

JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs, and Citigroup Inc. are among 29 members of the S&P 500 to report quarterly results this week. Earnings for companies in the index probably climbed 4.9 percent on average in the fourth quarter, while sales increased 1.8 percent, according to analyst estimates compiled by Bloomberg.

Stocks extended declines today after Federal Reserve Bank of Atlanta President Dennis Lockhart said the U.S. economy is on “solid footing” and he would support continued cuts to stimulus.

Three rounds of monetary stimulus from the Fed have helped push the S&P 500 higher by 169 percent from a 12-year low in 2009. The Fed, which next meets Jan. 28-29, last month announced a reduction in its monthly bond-buying program, citing a recovery in the labor market.

The S&P 500 increased on Jan. 10 after a report from the Labor Department showed employment rose in December at the slowest pace in almost three years. The data ended months of improving job growth that had signaled the world’s largest economy was picking up.

“It sounds as if the Fed is staying on its course of tapering,” John Carey, a fund manager at Boston-based Pioneer Investment Management Inc., said in a telephone interview. His firm manages about $220 billion worldwide. “Whatever mixed signals could have come from the jobs numbers, they’re looking at the overall picture.”

The Chicago Board Options Exchange Volatility Index, which measures expected swings on the S&P 500 using options prices, rose 9.4 percent, the most in a month, to 13.28. The gauge fell 12 percent last week to its lowest level since Aug. 5.

The Morgan Stanley Cyclical Index and the Dow Jones Transportation Average each fell 1.4 percent. Microsoft decreased 2.9 percent to $34.98, while Disney tumbled 2.8 percent to $73.27 for the largest declines in the Dow industrial average. Nike fell 2.3 percent to $75.18 and Exxon Mobil Corp. slid 2 percent to $98.55.

The KBW Bank Index slumped 1.3 percent as Bank of America dropped 2 percent, the most since October, to $16.43 and Citigroup slipped 1.8 percent to $53.72. Homebuilders in the S&P erased 2.5 percent as PulteGroup Inc. lost 3.8 percent to $19.40 and D.R. Horton Inc. decreased 2.7 percent to $21.55.

All 10 main industries in the S&P 500 retreated. Consumer- discretionary companies and energy producers fell more than 1.9 percent. Kohl’s Corp. plunged 6.2 percent to $53.46 and Michael Kors Holdings Ltd. slipped 3.9 percent to $76.67. Gap Inc. dropped 4 percent to $38.25.

Lululemon slumped 17 percent to $49.70, the lowest level in two years. The yogawear retailer cut its revenue and earnings forecast for its fourth quarter ending Feb. 2. Lululemon joins retailers from L Brands Inc. to Family Dollar Stores Inc. that have cut forecasts this month in the wake of a margin-eating price war this holiday season.

Vancouver-based Lululemon has been trying to win back customers after being forced to recall pants last year for being too sheer and has struggled to overcome supply-chain delays as it expands overseas and fends off growing competition.

Intercept plunged 18 percent to $364.36. Chief Executive Officer Mark Pruzanski said he may need the help of a larger drugmaker to bring the company’s experimental liver-disease treatment to market. The stock soared 545 percent last week after a trial of the drug worked well enough for the testing to be stopped.

Symantec Corp. fell 5.4 percent to $22.20 after Morgan Stanley lowered its rating on the stock to underweight from equal weight. The brokerage predicted that revenue would rebound more slowly as Symantec reorganizes its sales force, potentially limiting its profitability.

Beam jumped 25 percent to $83.42, an all-time high. Osaka- based Suntory, the maker of Yamazaki whiskey and the Premium Malt’s beer, is seeking to boost overseas growth by gaining brands such as Maker’s Mark whiskey, Jim Beam and Canadian Club liquor.

Suntory will pay $83.50 per share in cash and take over all of Beam’s outstanding debt, according to a joint statement. The companies said they expect to complete the deal by the end of June. The deal, once completed, will create the world’s third- largest premium spirits company.

Juniper Networks Inc. climbed 7.6 percent to $25.32, the highest level since July 2011. The maker of computer-networking equipment has been targeted by activist hedge fund Elliott Management Corp., run by billionaire Paul Singer, which will seek cost cuts, stock buybacks and other changes, two people familiar with the matter said.

Elliott is seeking talks with management and the company’s board, the people said.

Merck & Co. was the only company in the Dow to rise today, surging 6.5 percent to $53.12, the highest level in six years.

The second-largest U.S. pharmaceuticals said it will seek early approval of a new cancer treatment and decide the future of the company’s animal health and consumer businesses this year.

Twitter Inc. rose 1.4 percent to $57.82. Goldman Sachs analyst Heath Terry raised the stock’s price target to $65 a share from $46, citing Twitter’s “significant acceleration” in innovation during the fourth quarter.     Twitter has seen five trading sessions of declines, falling 17 percent last week as the microblogging service was hit with analyst downgrades and Cowen & Co. initiating coverage of the stock with the equivalent of a sell rating.

Have  a wonderful evening everyone.

Be magnificent!

Very few people in this world can reason normally.

There is a terrible tendency to accept all that is said, all that is read, and to accept it without question.

Only he who is ready to  question, to think for himself, will find the truth!

To understand the currents of a river,

he who wishes to know the truth must enter the water.

-Nisargadatta, 1897-1981

As ever,

Carolann

Don’t cry because it’s over.

Smile because it happened.

-Dr. Seuss, 1904-1991

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