January 20, 2015 Newsletter

Dear Friends,

Tangents:

Today in history:

On Jan. 20, 1981, Iran released 52 Americans held hostage for 444 days, minutes after the presidency had passed from Jimmy Carter to Ronald Reagan.
1841    Hong Kong was ceded to Great Britain.
1936    Britain’s King George V died.
1942    Nazi officials arrived at a “final solution” that called for exterminating Europe’s Jews, during a conference at Lake Wannsee in Berlin.

EARLY DARKNESS

         -D. Patrick Miller

Think of it as ink:
an indigo dye descending
between the leaves of the trees
and down to the grasses.
There is no dying of the light –
just the washing of a bowl,
and overturning it for night.
When day arrives we must write with bottled darkness.
In the night we can dream free messages of light.

PHOTOS OF THE DAY

People stroll under the Lorraine Bridge on the bank of river Aare in Bern, Switzerland, Sunday. Alessandro della Valle/Keystone/AP

Skiers dressed as witches participate in the 33. downhill race at Blatten-Belalp, southwestern Switzerland, Saturday. During the event, called ‘Hexenabfahrt’ (downhill of the witches,) many participants race down the 5 km slope in colorful costumes. Olivier Maire/Keystone/AP

Market Closes for January 20^th, 2015   

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Michelle F. Davis

     (Bloomberg) — Canadian stocks were little changed as energy shares slumped with oil and the International Monetary Fund cut its global-growth outlook by the most in three years, offsetting gains among mining companies.

     Gran Tierra Energy tumbled 32 percent, the most ever, as the company said work at its Eslabon Sur well in South America had been suspended. Suncor Energy Inc. fell 1.7 percent to pace declines among energy shares. Barrick Gold Corp. and Goldcorp Inc. advanced more than 2.4 percent as gold futures posted the longest rally in 11 months. OceanaGold Corp. rallied 6.7 percent after a UBS analyst recommended the stock.

     The Standard & Poor’s/TSX Composite Index slid 4.06 points, or less than 0.1 percent, to 14,308.44 at 4 p.m. in Toronto.

     Crude fell as much as 5.8 percent in New York and 2.2 percent in London after Iraqi crude production surged to a record and the IMF cut its global growth outlook.

     The world economy will grow 3.5 percent in 2015, down from the 3.8 percent pace projected in October, the IMF said in its quarterly global outlook released late Monday in Washington. The IMF said slowing growth almost everywhere except the U.S. will more than offset the benefits from lower oil prices.

     Data today showed Canadian factory sales dropped faster than economists predicted in November, with the second straight decline ranging from automobiles to food.

     Bank of Canada Governor Stephen Poloz will deliver his latest estimates for inflation and growth tomorrow along with a decision on interest rates. Policymakers must account for a plunge in the price of crude oil, Canada’s biggest export.

     Canada’s dollar weakened to the lowest in more than five years today on speculation the central bank may signal it’s more likely to lower interest rates than raise them when it releases a growth outlook tomorrow. BOC hasn’t raised its benchmark interest rate in more than four years.                          

     Oil companies comprised eight of the 10 worst performers today in the benchmark index, with Gran Tierra dropping 32 percent and Pacific Rubiales Energy Corp. losing 14 percent. Suncor Energy slid 1.7 percent.

     Five of 10 industries in the S&P/TSX slumped on volume 10 percent higher than the 30-day average.

     Gold rose 1.4 percent to the highest in almost five months as concerns about global growth led to “safe-haven buying in gold,” according to Jonathan Butler, a precious metals strategist at Mitsubishi Corp.

     OceanaGold rose 6.7 percent as UBS equity analyst Jonathan Battershill upgraded the company to buy from neutral. B2Gold Corp. increased 7.4 percent to a near five-month high as the company announced a higher-grade gold mineral resource estimate in a zone adjacent to its new mine in Namibia.

     Potash Corp. of Saskatchewan Inc. rose 3.4 percent following an S&P report that said North American potash producers are poised to benefit from stabilizing market conditions and the completion of capacity expansion projects.

     Canadian Pacific Railway Ltd. gained 2.2 percent and Dream Unlimited Corp. increased 3.2 percent after the companies said they formed a real estate venture to develop about 30 of the rail operator’s properties in Canada and the U.S.

US

By Joseph Ciolli

     (Bloomberg) — U.S. stocks rose, with the Nasdaq 100 Index rallying as gains from Apple Inc. to Netflix Inc. helped offset concerns that global growth is slowing.

     Yahoo! Inc., Micron Technology Inc. and Apple jumped more than 2.3 percent to lead technology shares. Netflix surged 13 percent in late trading after adding more subscribers than analysts forecast. Delta Air Lines Inc. climbed 7.3 percent after earnings beat projections. Johnson & Johnson tumbled 2.6 percent after forecasting lower earnings in 2015 as competition cuts into revenue for some of its best-selling drugs. A gauge of homebuilders retreated 3 percent, after plunging almost 7 percent last week.

     The Standard & Poor’s 500 Index gained 0.2 percent to 2,022.55 at 4 p.m. in New York, after an earlier decline of 0.7 percent. The Dow Jones Industrial Average added 3.66 points, or less than 0.1 percent, to 17,515.23. The Nasdaq 100 Index gained 0.7 percent. About 7.3 billion shares changed hands on U.S. exchanges today, 8.2 percent above the three-month average. Exchanges were closed yesterday for Martin Luther King Day.

     “Volatility has been so pronounced day-to-day, hour-to- hour,” Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion, said in a phone interview. “The fact that the market is marginally positive is encouraging given all the elements that are out there.”

     The S&P 500 slipped 1.2 percent last week, even with a 1.3 percent rally on Friday, as falling oil, shrinking earnings estimates and concern that slowing global growth will hurt the U.S. economy led to selling. The index is down 1.8 percent for the year.                          

     The International Monetary Fund made the steepest cut to its global-growth outlook in three years, with diminished expectations almost everywhere except the U.S. more than offsetting the boost to expansion from lower oil prices.

     The world economy will grow 3.5 percent in 2015, down from the 3.8 percent pace projected in October, the IMF said in its quarterly global outlook released late Monday. It also cut its estimate for growth next year to 3.7 percent, compared with 4 percent in October.

     “Although the theme is that the U.S. is the best market out there, from a global perspective, you can’t see a slowdown in every country and expect the U.S. to stay above water,” Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer’s Investment Research Inc., said in a phone interview.

     The global weakness, along with prolonged below-target inflation, is challenging policy makers across Europe and Asia to come up with fresh ways to stimulate demand more than six years after the global financial crisis.

     The ECB sets monetary policy this week as speculation grows that it will expand asset purchases. President Mario Draghi will probably announce a 550 billion-euro ($638 billion) program of quantitative easing, economists said in a Bloomberg survey.

     “The market is a little oversold here after a pretty wild January so far,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $110 billion, said in a phone interview. “If the ECB comes through with a strong quantitative easing strategy, that may be able to pull Europe away from the edge in terms of recession and deflation, which would ease concerns that the U.S. would succumb to slower growth as well.”

     China’s economic growth beat economists’ estimates last quarter, helping the full-year expansion remain close to the government’s target. Gross domestic product rose 7.3 percent in the three months ended December from a year earlier, the statistics bureau said in Beijing, beating the median estimate of 7.2 percent in a Bloomberg survey of analysts. The economy expanded 7.4 percent in 2014, the slowest pace since 1990.

     Later this week, investors will weigh U.S. economic reports including data on housing and manufacturing to gauge the health of the world’s largest economy.

     Netflix rose 3.4 percent during the regular session and then surged 13 percent in late trading after reporting fourth- quarter subscriber growth that exceeded its forecasts, benefiting from faster international growth and more gains in the U.S.

     Bank of America Corp. strategists lowered their estimate for S&P 500 earnings for a second time. The forecast was cut “in order to reflect lower oil and the stronger dollar,” according to the BofA Merrill Lynch Global Research report.

     Earnings per share for companies in the gauge will expand 1 percent in 2015 to $119.50, down from $124 previously and an earlier prediction of $126. The mean estimate among 18 strategists surveyed by Bloomberg was $124.83 as of Jan. 5.

     The Chicago Board Options Exchange Volatility Index, known as the VIX, fell for a second straight day, declining 5.1 percent to 19.89.

     Seven out of 10 major groups in the S&P 500 rose today. Technology and industrial shares had the biggest advance, adding at least 0.7 percent.

     Delta rose 7.3 percent, the most since September 2013, as fourth-quarter profit beat analysts’ estimates, boosted by cheap fuel and strong demand in the U.S.

     Carriers from Southwest Airlines Co. to American Airlines Group Inc. rallied, sending the Dow Jones Transportation Average to a 1 percent gain.

     Johnson & Johnson, the world’s biggest maker of health-care products, tumbled 2.6 percent. The company is seeking to replenish its product lineup as drugs such as hepatitis C treatment Olysio and blood thinner Xarelto face new competition.                       

     Jami Rubin, an analyst at Goldman Sachs Group Inc., lowered her recommendation to sell from neutral on Jan. 15 because she sees the company bringing fewer new drugs to market this year than in previous years, she said in a note.

     Morgan Stanley lost 0.4 percent. The owner of the world’s largest brokerage reported profit that missed analysts’ estimates as fixed-income trading revenue fell to the lowest since the financial crisis.

     Financial companies are the worst-performing group in the S&P 500 so far this year, dropping 5.4 percent. Energy companies have the second-biggest decline, at 4.6 percent.

     JPMorgan Chase & Co. and Citigroup Inc. posted earnings last week that missed analysts’ estimates on bigger-than- expected drops in fixed-income trading revenue. Goldman Sachs posted its lowest full-year trading revenue since 2005.

     An S&P index of homebuilders decreased 3 percent as PulteGroup Inc., D.R. Horton Inc. and KB Home fell more than 3.4 percent.

Have a wonderful evening everyone.

Be magnificent!

The universe is like an ocean in perfect equilibrium.

A wave cannot rise in one place, without creating a hollow elsewhere.

The sum total of the energy of the universe remains identical from one end to the other.

If you take from one place, you must give elsewhere.

Swami Vivekananda

As ever,

Carolann

Forever is composed of nows.

     -Emily Dickinson, 1830-1886

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