January 16, 2014 Newsletter

Dear Friends,

Tangents:

-from  A Countrywoman’s Notes:

JANUARY

I enjoy patterns, man-made and natural, and as I start looking around me, they are everywhere.  The countryside in winter has tree skeletons silhouetted against the sky – trees without leaves.  One day their background is dark grey, another it is clear blue, but there is always a natural pattern of trunk and branches, a lesson in symmetry with variations.  As the snow slowly melts, man-made patterns, filled with snow, scar the fields where the wheelmarks of tractors crossed the newly sown corn last autumn, sometimes straight, sometimes following the line of the walls or hedgerows.  Then, looking up. you see a thin white line of snow clinging, still frozen, to the telegraph wires and television aerials.  The snow on the tops of walls lasts much longer than on the soil all around.  Look across the countryside and you will find a pattern created by the wall-builders years ago, a random pattern you may think, but as they worked the wall was dictated by the lie of the land, the farmer’s whims and needful boundaries.  The sheep have made their mark too – regular paths that they have walked crossing the hills for generations.  We know man takes great pleasure in creating a sense of order by devising geometric shapes in architecture and gardens but when we see regularity in the world of nature we react with surprise.  Snowflakes through the microscope, or fairy rings – have they happened by accident any more than the concentric circles on the pond when we throw in a stone and disturb its calm?  Sounds have their pattern too.  The repeated rhythmic song of the blackbird, the soft lilt of the woodpigeon, the cuckoo calling – these are more noticeable to our ears than the disorganized twitter of the house sparrows.  Wherever you look or listen there is some pattern to discover, creating rhythm or calm satisfaction…-by Rosemary Verey.

Photos of the day

A car drives away from the Colby Fire in the hills above Glendora, Calif. The fire had scorched 125 acres. Mario Anzuoni/Reuters

An entertainer dressed as Darth Vader from ‘Star Wars’ walks down the corridor to pose for the media during the opening of Lucasfilm’s new animation production facility, the Sandcrawler, in Singapore. Edgar Su/Reuters

Market Closes for January 16^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Jan. 16 (Bloomberg) — Canadian stocks rose for the seventh time in eight days, extending a two-year high, as a gain in energy and raw-materials shares offset losses at Bombardier Inc. and railroad companies.

Torex Gold Resources Inc. and Eldorado Gold Corp. climbed more than 3.4 percent as the metal’s price advanced. Bombardier dropped 7.7 percent after postponing its CSeries jetliner’s entry into commercial service until 2015, the latest in a series of delays for the aircraft. Canadian National Railway Co. slipped 1.8 percent after CSX Corp., the largest eastern U.S. railroad, missed profit forecasts for the first time in two years.

The Standard & Poor’s/TSX Composite Index rose 59 points, or 0.4 percent, to 13,831.58 at 4 p.m. in Toronto, erasing earlier declines of as much as 0.2 percent. The benchmark equity gauge has rallied 1.7 percent in the past eight sessions.

Trading was 34 percent above the 30-day average.

“Some stocks are doing well in the mining space and that’s encouraging,” said John Kinsey, fund manager with Caldwell Securities Ltd. in Toronto. The firm manages about C$1 billion ($916.6 million).

Raw-materials stocks added 1 percent, giving the S&P/TSX Materials Index its ninth advance in 11 trading days this year.  The gauge has rallied 8.2 percent in 2014 after plunging 31 percent last year.

Thompson Creek Metals Co. added 3.5 percent to C$3.27 for a third day of gains. The stock has rallied 38 percent since Jan. 14, after Bank of America Inc. upgraded its rating on the stock.

Torex Gold advanced 8.3 percent to C$1.18 and Eldorado Gold rallied 3.4 percent to C$6.96 as gold futures for February delivery added 0.2 percent to $1,240.20 an ounce.

Allied Nevada Gold Corp. rose 4 percent to C$5.25. The stock has increased for six days, the longest streak since August 2011. Allied Nevada surged as much as 28 percent on Jan. 14 after China Gold Stone Mining Development Ltd. retracted a $779.6 million offer for the company it said was published in error.

Birchcliff Energy Ltd. jumped 11 percent to C$8.43, the biggest gain since October 2011, after the company boosted its 2014 exit production forecast to 37,500 to 39,500 barrels of oil equivalent per day from 36,000 to 38,000 previously.

Raging River Exploration Inc. climbed 6.3 percent to C$7.10 and Baytex Energy Corp. rose 3.5 percent to C$41.45 to pace gains among energy stocks. The S&P/TSX Energy Index rallied 0.8 percent as all but 10 of its 63 members advanced.

Industrial stocks slumped 1.1 percent as a group, the only decline in the S&P/TSX. Bombardier tumbled 7.7 percent to C$4.17, an eight-month low. The Montreal-based company delayed its CSeries jetliner for a fourth time, saying the aircraft needs more time for flight tests.

Canadian National Railway declined 1.8 percent to C$58.64 and Canadian Pacific Railway Ltd. lost 0.4 percent to C$163.52.

CSX, the U.S. railroad, reported net income of 42 cents a share, short of the 43-cent average of 25 analyst estimates compiled by Bloomberg as coal shipments slumped.

Canadian Pacific is scheduled to report fourth-quarter results on Jan. 29, followed by Canadian National on Jan. 30.

U.S. competitors Union Pacific Corp., Norfolk Southern Corp. and Kansas City Southern report next week.

Alamos Gold Inc. plunged 17 percent to C$11.31, the biggest decrease since November 2008, after reporting 2014 gold production will be in the range of 150,000 to 170,000 ounces, short of the 190,000 ounces produced in 2013.

USA

By Lu Wang and Callie Bost

Jan. 16 (Bloomberg) — U.S. stocks fell, after the Standard & Poor’s 500 Index closed at a record yesterday, as Best Buy Co. tumbled and earnings at companies from Citigroup Inc. to CSX Corp. disappointed investors.

Best Buy slumped 29 percent after reporting a drop in U.S. same-store sales during the holiday shopping season. Citigroup and Goldman Sachs Group Inc. led declines among banks after releasing fourth-quarter results. CSX dropped 6.8 percent as profit missed analysts’ forecasts for the first time in two years. Intel Corp. slid 2.6 percent in extended trading after forecasting sales that may fall short of some estimates.

The S&P 500 lost 0.1 percent to 1,845.89 at 4 p.m. in New York, dragging the gauge lower for the year. The Dow Jones Industrial Average fell 64.93 points, or 0.4 percent, to 16,417.01. About 6.3 billion shares changed hands on U.S. exchanges, 4.4 percent above the 30-day average.

“It’s not going to be a straight road up like what we saw in 2013,” Robert Pavlik, chief market strategist at Banyan Partners LLC, which manages $4.5 billion, said in a phone interview. “A lot of what we saw in 2013 was predicated on money flowing into the market from the Fed. It’s going to be an upwards revision to earnings consensus this year that will push the market higher.”

The S&P 500 gained 0.5 percent yesterday, briefly erasing its losses for 2014, as the World Bank raised its global-growth forecast and better-than-estimated earnings from Bank of America Corp. fueled a rally in financial shares. The benchmark measure trades at 15.6 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.

Citigroup, Goldman Sachs and 12 other S&P 500 companies report earnings today. Per-share profit for companies in the index probably climbed 4.9 percent on average in the fourth quarter, while sales increased 1.8 percent, according to analysts surveyed by Bloomberg.

“When you look at fundamentals, the market is not screamingly cheap, but it’s not screamingly expensive either,” Sandy Lincoln, the Chicago-based chief market strategist in the U.S. with BMO Global Asset Management, which oversees about $130 billion, said in a phone interview. “We like the market here. There is reason be skeptical about what companies are able to do. The top line hopefully will be supportive enough to overcome the skepticism.”

BlackRock Inc. Chief Executive Officer Laurence D. Fink said U.S. stocks may rise as much as 10 percent this year after the S&P 500 jumped 30 percent in 2013.

Fewer Americans filed applications for unemployment benefits last week, a sign the labor market continues to strengthen. Jobless claims decreased by 2,000 to 326,000, the least since the end of November, from a revised 328,000 in the prior period, a Labor Department report showed today. The median forecast of 51 economists surveyed by Bloomberg called for 328,000.

Another report showed the cost of living in the U.S. climbed in December by the most in six months, led by gains in fuel and rents. The 0.3 percent increase in the consumer-price index was the biggest since June and followed no change the prior month.

The Fed said in its Beige Book yesterday that it saw “moderate” growth across most of the U.S. The business survey is based on reports gathered on or before Jan. 6. The central bank, which next meets Jan. 28-29, decided at its December meeting to start reducing the pace of monthly bond purchases by $10 billion to $75 billion.

The Chicago Board Options Exchange Volatility Index gained 2 percent to 12.53. The gauge of S&P 500 options known as the VIX is down 8.7 percent this year.

Four of 10 S&P 500 groups retreated as financial and consumer-discretionary shares dropped more than 0.5 percent to lead declines.

Best Buy tumbled 29 percent, the most in the S&P 500, to $26.83. The consumer-electronics retailer said same-store sales fell 0.9 percent in the nine weeks ended Jan. 4, as price cuts and the first new video-game consoles in several years didn’t draw as many shoppers as expected.

Citigroup lost 4.4 percent, the most since November 2012, to $52.60. The third-biggest U.S. bank reported fourth-quarter profit that missed Wall Street estimates as bond trading slumped.

Goldman Sachs fell 2 percent to $175.17 even as results beat analysts’ estimates. Chief Executive Officer Lloyd C. Blankfein reported a fourth straight year of lower profitability than the firm achieved in the decade before the financial crisis. Goldman Sachs’s return on equity, a gauge of profitability, was 11 percent last year, and the company has struggled to reach 10 percent in the past three years, a level that Blankfein has called “hardly aspirational.”

The Dow Jones Transportation Average slipped 0.6 percent from a record. CSX sank 6.8 percent, the most since September 2011, to $27.24 after the biggest railroad in the eastern U.S. said fourth-quarter net income slid 5.1 percent to $426 million, or 42 cents a share. Analysts had projected an average of 43 cents.

Other rail stocks fell. Norfolk Southern Corp. slid 3.7 percent to $87.76 while Kansas City Southern lost 1.7 percent to $117.10. Both companies report results next week.

J.C. Penney Co. dropped 1.6 percent to $6.90 after saying it will close 33 stores and eliminate about 2,000 jobs, resulting in pretax charges of $26 million in the fourth quarter and $17 million in future periods. The department-store chain has gone nine straight quarters without posting a profit.

Kroger Co. fell 4.9 percent to $37.35. The largest U.S. grocery chain is “particularly vulnerable” in the supermarket industry, where competition is rising and volume growth is weakening, analysts at Credit Suisse Group AG wrote in a note.

They cut the stock’s rating to neutral from outperform.

Intel slipped 2.6 percent to $25.86 as of 4:24 p.m. in New York. After the market’s close, the world’s largest chipmaker forecast first-quarter sales that may fall short of some estimates as corporate spending on personal computers falters.

Hewlett-Packard Co. added 2.5 percent to $29.56 in regular trading. Bank of America raised its recommendation to buy from neutral, citing potential for increased earnings amid a restructuring. The maker of personal computers is committed to returning cash to shareholders through dividends and buybacks, the brokerage said.

BlackRock gained 1.6 percent to $317.78. The world’s biggest money manager said fourth-quarter net income increased 22 percent as investors put money into funds, boosting client assets and fees for managing them.

PNC Financial Services Group Inc. jumped 2.7 percent to $80.93, the highest level since September 2008. The second- biggest U.S. regional bank said fourth-quarter profit grew 53 percent, beating analyst estimates, as the lender trimmed expenses and set aside less money for soured loans.

Charles Schwab Corp. climbed 3 percent to $26.80, the highest close since February 2001. The financial-services provider reported fourth-quarter earnings of 23 cents a share, beating analysts’ estimates of 21 cents.

Have a wonderful evening everyone.

Be magnificent!

Fearlessness is the first requirement of spirituality.

Cowards can never be moral.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

You always pass failure on the way

to success.

-Mickey Rooney, 1920-

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