January 2, 2014 Newsletter

Dear Friends,

Tangents:

As Carolann is out of the office this afternoon, I will be writing the newsletter on her behalf.

Happy New Year Everyone!!!! Hope everyone had a wonderful holiday season spent with friends and family.  How did everyone spend their New Years Day? Many Victorian’s headed down to Thetis Lake to take a plunge in the cold water for the 38^th annual Polar Bear Swim!  Every year there is always an array of costumes.  This year there were girls dressed up as Hawaiian hula dancers, people wearing masks and one man even dressed up as a lobster!  Were your brave enough to take the plunge this year?

Participants run into Lake Washington during the 12th annual Polar Bear Plunge in Seattle. Hundreds participated in the chilly New Year’s Day tradition organized by Seattle Parks and Recreation. David Ryder/Reuters

“A leader is one who knows the way, goes the way, and shows the way.”
John C. Maxwell

Photos of the Day:

Visitors skate at the Tower of London ice rink in London. Based on the grounds of the famous castle that is over a thousand years old, the temporary rink will remain open until January 5. Toby Melville/Reuters

A giant panda rests in a tree at Hangzhou’s zoo, Zhejiang province, China. China Daily/Reuters

Market Closes for January 2^nd, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Jan. 2 (Bloomberg) — Canadian stocks fell the most in three weeks, after the benchmark index rose to its best annual performance in three years, as declines among energy companies and banks overshadowed a rally in gold and silver producers.

Canadian Natural Resources Ltd. and Suncor Energy Inc. retreated at least 1.2 percent as crude had the largest slump in more than a year. Detour Gold Corp. gained 11 percent after resuming milling operations at its mine. B2Gold Corp. and Silvercorp Metals Inc. rose more than 4.1 percent as precious metals prices surged.

The Standard & Poor’s/TSX Composite Index fell 27.36 points, or 0.2 percent, to 13,594.19 at 4 p.m. in Toronto, for the biggest decline since Dec. 11. The index rose 9.6 percent for 2013, its largest annual gain since 2010.

“It’s a bit of market malaise following a strong 2013, people are reassessing their portfolios,” said Brian Huen, fund manager with Red Sky Capital Management Ltd. in Toronto. The firm manages C$225 million ($212.1 million). “In the gold sector, people have stopped selling. People are looking at underperforming sectors from last year and making bets they won’t underperform like last year.”

Bank of Nova Scotia dropped 0.6 percent to C$66.01 and Toronto-Dominion Bank slipped 0.4 percent to C$98.87 as financial services stocks retreated 0.5 percent as a group.

Eight of 10 industries in the S&P/TSX declined on trading volume 26 percent lower compared with the 30-day average.

Manulife Financial Corp. fell 1.1 percent to C$20.73 and Great-West Lifeco Inc. dropped 1.4 percent to C$32.28 as 35 of 46 stocks in the S&P/TSX Financials Index declined.

Canadian Natural Resources dropped 1.6 percent to C$35.35 and Suncor Energy lost 1.2 percent to C$36.79 as crude prices sank 3 percent in New York for the biggest decline in almost 14 months.

Prices fell as an improving U.S. economy added to speculation the Federal Reserve will further curb stimulus. Data today showed applications for U.S. unemployment benefits declined last week.

A government report tomorrow will probably show U.S. crude supplies fell a fifth week, a Bloomberg survey showed.

Legacy Oil & Gas Inc. lost 1.3 percent to C$6.05 and Surge Energy Inc. slumped 3.4 percent to C$6.52.

Air Canada, the best-performing stock in the S&P/TSX in 2013, retreated 2 percent to C$7.26 for a third day of losses.

The stock surged 323 percent in 2013.

Detour Gold, the worst-performing stock in the benchmark equity gauge last year, jumped 11 percent to C$4.56. The company said the processing plant at its Detour Lake open pit gold mine is targeted to resume operations at a rate of 50,000 metric tons a day within a week of restart. Detour Gold had shut down the plant on Dec. 17.

Detour Gold lost 84 percent in 2013. Eight of the 10 worst- performing stocks in the S&P/TSX were gold mining companies.

B2Gold gained 4.1 percent to C$2.27 and Yamana Gold Inc. climbed 4.6 percent to C$9.58 as the price of gold jumped the most in three weeks on speculation demand for bars and jewelry will increase in Asia. Gold for February delivery rose 1.9 percent to $1,225.20 an ounce in New York. Novagold Resources Inc. surged 10 percent to C$2.97.

Silvercorp Metals surged 5.7 percent to C$2.58 and Silver Wheaton Corp. gained 5.9 percent to C$22.71 as silver rallied 3.9 percent to $20.13 an ounce.

Gold and silver prices plunged the most in more than 30 years in 2013 as investors lost faith in the metals as an alternative investment amid a U.S. equity rally and muted inflation.

US

By Alexis Xydias and Callie Bost

Jan. 2 (Bloomberg) — U.S. stocks declined, following the best year since 1997 for the Standard & Poor’s 500 Index, as technology shares retreated amid an analyst downgrade of Apple Inc.’s shares and investors weighed manufacturing data.

Apple fell 1.4 percent after Wells Fargo & Co. cut its rating on the stock, sending technology shares to the worst performance in the benchmark index. Analog Devices Inc. lost 3 percent after Goldman Sachs Group Inc. advised investors to sell the shares. Newmont Mining Corp. added 4.5 percent as gold futures rose the most in three weeks in New York.

The S&P 500 slid 0.6 percent to 1,837.09 at 11:16 a.m. in New York. The Dow Jones Industrial Average dropped 89.09 points, or 0.5 percent, to 16,487.57. Trading in S&P 500 stocks was 9 percent above the 30-day average at this time of day. U.S. markets were closed yesterday for New Year’s Day.

“More people seem to be wary, as we are, of potential corrections as markets get overexcited,”  Oliver Wallin, who helps oversee $5.6 billion as investment director at Octopus Investments Ltd. in London, said by phone. “The question is just when to time it. A lot of people are willing to continue in this rally but are nervous at the same time. We’ve got one eye on the exit but we know there is money to be made in the short term.”

The S&P 500 surged 30 percent in 2013, finishing the year at an all-time high for the first time since 1999. The index gained 2.4 percent in December, its fourth straight monthly advance, as the Federal Reserve announced plans to reduce the pace of bond buying amid faster-than-estimated economic growth.

Three rounds of Fed stimulus sent the S&P 500 up as much as 173 percent from a 12-year low in 2009.

The Dow average climbed 27 percent in 2013 for its best performance since 1995, led by Boeing Co. and American Express Co. International Business Machines Corp. is the only member of the 30-stock gauge that declined last year.

The first trading session of January has proven profitable for investors over the previous five years, with the S&P 500 gaining an average of almost 2 percent that day since 2009, according to data compiled by Bloomberg.

Improving economic data that bolstered optimism about strength in the world’s largest economy also helped propel equities higher last year.

Data today indicated applications for U.S. unemployment benefits declined last week to the lowest level in a month.

Jobless claims fell by 2,000 to 339,000 in the period ended Dec.28, Labor Department data showed. The median forecast of 26 economists surveyed by Bloomberg called for 344,000 claims.

A separate report showed the Institute for Supply Management’s factory index fell to 57 in December from the prior month’s 57.3, which was the highest since April 2011. Readings above 50 indicate expansion.

Reports from Europe today confirmed factory output in the euro area expanded last month at the fastest pace since May 2011 as Italy’s manufacturing beat estimates and Germany production grew for a sixth month. Data yesterday showed China’s official Purchasing Managers’ Index slipped to a four-month low in December, while a private report today also signaled manufacturing grew at a slower pace.

American consumers in 2013 were more upbeat than at any time in the previous six years as views on the economy, finances and the buying climate improved. The Bloomberg Consumer Comfort Index averaged minus 31.4 for 2013, the highest since 2007, when it was minus 10.5.

“I don’t think this sell-off will be a trend,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said in a telephone interview. “In fact, I would expect the market to trade up into earnings season and January. Once people start getting a read on the fundamentals for companies and outlooks, that will dictate how the market goes from there.”

Analysts estimate earnings for S&P 500 companies in the fourth quarter grew by 5.2 percent, according to data compiled by Bloomberg. Alcoa Inc. will unofficially begin the reporting season when it discloses results after the markets close on Jan.9.

Analysts are predicting 116 stocks in the index will see price declines this year, according to average year-end targets compiled by Bloomberg. That’s the greatest number of bearish forecasts for the S&P 500 in nine years, the data show.

The average company in the index is estimated to rise 4.8 percent this year, according to the data. That’s the least optimistic forecast since Dec. 31, 2004, when the average was 4.7 percent. Alcoa Inc. and Harris Corp. are among the companies projected to fall the most this year.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 2.5 percent to 14.06 today for a fourth straight day of increases. The gauge finished 2013 with a 24 percent drop, the largest decline since 2009.

All 10 main S&P 500 groups retreated today, with technology shares sliding 1 percent to pace losses. Intel Corp. dropped 1.6 percent to $25.54 for the biggest decline in the Dow.

Apple sank 1.4 percent to $553.32. Wells Fargo analyst Maynard Um cut the rating on the stock to market perform from outperform, saying the iPhone maker’s gross margin could come under pressure later in the year.

Analog Devices fell 3 percent to $49.43. Goldman Sachs analyst James Covello cut the circuit maker from sell from neutral and lowered the stock’s price target to $41 a share.

Wells Fargo analyst David Wong also downgraded the stock, to market perform from outperform, citing lower semiconductor demand through the end of last year.

Newmont Mining increased 4.5 percent to $24.06. Gold for February delivery advanced 1.7 percent in New York after the metal posted its largest annual decline in three decades.

Newmont fell 50 percent last year for the biggest decline in the S&P 500.

Retailers fell 0.1 percent for the second-best performance among 24 S&P 500 groups.

Urban Outfitters Inc. jumped 3.9 percent to $38.55.

Jefferies Group LLC analyst Randal Konik upgraded the clothing retailer to buy from hold. Urban Outfitters dropped 5.7 percent last year, making it the only consumer discretionary stock in the S&P 500 to decline.

American Eagle Outfitters Inc. rose 3.1 percent to $14.85 after Konik raise his rating to buy from hold.

Have a wonderful evening everyone.

Be magnificent!

“Wherever I go meeting the public… spreading a message of human values, spreading a message of harmony, is the most important thing.”
Dalai Lama

As ever,

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7