January 22, 2015 Newsletter

Dear Friends,

Tangents:

Lord Byron’s birthday today, b. 1788

OCEAN

From Childe Harold’s Pilgrimage

Roll on, thou deep and dark blue Ocean – roll!
Ten thousand fleets sweep over thee in vain;
Man marks the earth with ruin; his control
Stops with the shore; upon the watery plain
The wrecks are all thy deed, nor doth remain
A shadow of man’s ravage, save his own,
When for a moment, like a drop of rain,
He sinks into thy depths with bubbling groan,
Without a grave, unknelled, uncoffined and unknown.

His steps are not upon thy paths – thy fields
Are not a spoil for him – thou dost arise
And shake him from thee; the vile strength he wields
For earth’s destruction thou dost all despise
Spurning him from thy bosom to the skies,
And sendst him, shivering in thy playful spray,
And howling, to his Gods, where haply lies
His petty hope in some near port or bay,
And dashest him agin to earth – there let him lay.

The armaments which thunderstrike the walls
Of rock-built cities, bidding nations quake,
And monarchs tremble in their capitals,
The oak leviathans, whose huge ribs make
Their clay creator the vain title take
Of lord of thee, and arbiter of war: –
These are thy toys, and, as the snowy flake,
They melt into thy yeast of waves, which mar
Alike the Armada’s pride, or spoils of Trafalgar.

Thy shores are empires, changed in all save thee –
Assyria, Greece, Rome, Carthage, what are they?

They waters washed them power while they were free,
And many a tyrant since: their shores obey
The stranger, slave or savage; their decay
Has dried up realms to deserts: – not so thou,
Unchangeable save to thy wild waves’ play –
Time writes no wrinkle on thine azure brow –
Such as creation’s dawn beheld, thou rollest now.

Thou glorious mirror, where the Almighty’s form
Glasses itself in tempests: in all time,
Calm or convulsed – in breeze, or gale, or storm,
Icing the pole, or in the torrid clime
Dark-heaving; boundless,  endless, and sublime –
The image of Eternity – the throne
Of the Invisible; even from out thy slime
The monsters of the deep are made; each zone
Obeys thee; thou goest for the, dread, fathomless, alone.

                                   -George Gordon, Lord Byron

PHOTOS OF THE DAY

Boats sail in the Mediterranean Sea off the coast in Herzeliya, Israel, Thursday. Ariel Schalit/AP

The glow from a Noctiluca scintillans algal blooming along the seashore in Hong Kong, Thursday. The luminescence, also called Sea Sparkle, is triggered by farm pollution that can be devastating to marine life and local fisheries, according to University of Georgia oceanographer Samantha Joye. Kin Cheung/AP

Market Closes for January 22^nd, 2015   

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose to a two-month high, reversing a loss for the year, as Canadian National Railway Co. rallied and the European Central Bank unveiled a 1.1 trillion euro ($1.3 trillion) stimulus program.

     Canadian National Railway surged 3.9 percent to a record to lead industrial stocks higher. Pengrowth Energy Corp. climbed 4.8 percent after cutting its budget on a drop in oil prices. Royal Bank of Canada lost 1.5 percent after agreeing to buy City National Corp. for about $5.4 billion in its biggest takeover ever. BlackBerry Ltd. climbed 6.6 percent as Samsung Electronics Co. was said to still be considering a bid for the company, according to the Financial Post said.

     The Standard & Poor’s/TSX Composite Index rose 203.56 points, or 1.4 percent, to 14,763.98 at 4 p.m. in Toronto, its highest close since Nov. 27. The Canadian benchmark is up 0.9 percent for the year.

     The ECB will buy 60 billion euros a month of securities until September 2016, in a push to revive inflation and the euro-area economy. The move joins a stimulative push among central banks around the world. The Bank of Canada yesterday unexpectedly cut its key rate, along with surprise cuts in Denmark, Turkey, India and Peru in the past week.

     All 10 industries in the benchmark Canadian equity gauge advanced at least 0.8 percent today on trading volume that was 4.2 percent higher than the 30-day average. Industrials rallied 2.2 percent, while consumer shares gained at least 1.8 percent.

     OceanaGold Corp. added 7.2 percent and Barrick Gold Corp. rose 1.2 percent as gold settled above $1,300 an ounce for the first time since August.

     Bombardier Inc. soared 4.9 percent, the most since April, as industrials companies increased 2.2 percent as a group.

     Royal Bank tumbled 1.7 percent after agreeing to buy City National, the Los Angeles-based banker to the stars, in a cash- and-share deal to expand sales to wealthy U.S. residents.

US

By Joseph Ciolli and Michelle F. Davis

     (Bloomberg) — U.S. stocks rallied for a fourth day, wiping out losses for the year in the Standard & Poor’s 500 Index, as the European Central Bank unveiled an expanded stimulus plan and banks and transportation companies surged on better-than- forecast earnings.

     KeyCorp led gains among banks after fourth-quarter results topped analyst estimates. Southwest Airlines Co. jumped to a record as profit rose 71 percent on lower jet fuel prices. Union Pacific Corp. added 4.8 percent as a strengthening U.S. economy and growing construction market boosted traffic on the rails in the fourth quarter. EBay Inc. increased 7.1 percent after entering a standstill agreement with activist investor Carl Icahn.

     “It’s that halo effect of the follow-through on ECB finally coming to the table and embracing a pretty material stimulus program,” Todd Lowenstein, who helps manage $16 billion at Highmark Capital Management in Los Angeles, said by phone. “It brings some hope that Europe will get pointed in the right direction.”

     The S&P 500 gained 1.5 percent to 2,063.15 at 4 p.m. in New York, the highest since Dec. 30. The gauge climbed above its average price for the past 50 days. The Dow Jones Industrial Average climbed 259.70 points, or 1.5 percent, to 17,813.98. The Russell 2000 Index surged 2.1 percent, the most since Dec. 17. About 7.7 billion shares changed hands on U.S. exchanges today, 15 percent above the three-month average.

     The Chicago Board Options Exchange Volatility Index, known as the VIX, fell 13 percent to 16.40, its lowest level of the year.

     ECB President Mario Draghi announced an expanded asset- purchase program, including private and public securities, of up to 60 billion euros ($69 billion) a month. The buying will continue through September 2016. The announcement came after the ECB kept benchmark rates unchanged at record lows.

     “Markets were expecting big and this sounds like a pretty big program, so that’s good news,” Karyn Cavanaugh, the New York-based senior market strategist at Voya Investment Management LLC, said by phone. Voya oversees $215 billion. “We were all expecting it and finally we got what we were looking for.”

     A near-stagnant economy and the risk of deflation forced Draghi’s hand six years after the Federal Reserve took a similar step to inject cash into the U.S. The 67-year-old Italian’s gamble is that the benefits of quantitative easing  outweigh the threat of a backlash in Germany and that the ECB ends up bailing out profligate, reform-wary governments.                       

     The ECB’s shift exacerbates an emerging global divergence in monetary policy. While the Fed is now considering when to tighten credit, central banks in Denmark, Turkey, India, Canada and Peru all announced surprise rate cuts in the past week. The Swiss National Bank shocked investors by dropping a cap on the franc.

     In the U.S., three rounds of Fed stimulus helped the S&P 500 more than triple from a bear-market low in March 2009. The central bank ended its quantitative easing program three months ago.

     The S&P 500 has climbed 3.5 percent following its second five-day slide this year as investors have weighed earnings reports and oil held above an almost six-year low set Jan. 13. The gauge is 1.3 percent from its all-time high reached Dec. 29.

     The S&P 500 has moved 1.9 percent from its lowest to highest levels on Thursday. That’s the 15th straight swing of more than 1 percent intraday, the longest stretch since an 18- day run ending on June 21, 2012, data compiled by Bloomberg show.

     Daily moves in the U.S. equity benchmark have almost doubled from 2014 as oil’s decline spurred concerns about deflation and earnings estimates fell the most since 2009. While investors are the most rattled they’ve been since Europe’s debt crisis more than two years ago, an accelerating U.S. economy should calm them down, according to a Jan. 20 client note from Goldman Sachs derivatives strategists.

     A majority of those surveyed in a Bloomberg poll forecast that the S&P 500 will rise in the next six months, while only a quarter see it declining. The index is trading at 17 times the projected earnings of its members, according to data compiled by Bloomberg. Valuations reached a five-year high at the end of last year.

     Capital One Financial Corp. and Starbucks Corp. are among 16 companies reporting earnings on Thursday. Profit at S&P 500 companies climbed 0.8 percent in the last three months of 2014, analysts predict, down from an October estimate of 8.1 percent.

     Economic data on Thursday showed more Americans than forecast filed applications for unemployment benefits last week, a sign of lingering holiday turnover.

     Leon Cooperman, who runs Omega Advisors Inc., said stocks can extend their gains as the economy improves and corporate profits rise.

     “There’s no basis to call for a market peak,” Cooperman, 71, said today in an interview on Bloomberg Television with Betty Liu. “It could be a couple more years.”

     Eight out 10 major industries in the S&P 500 advanced. Financial, technology and consumer-discretionary shares had the biggest gains, increasing more than 1.9 percent.

     The Dow Jones Transportation Average rallied the most since October, gaining 2.9 percent. Union Pacific rose to the highest level since Dec. 30 after quarterly profit topped analysts’ estimates on higher cargo shipments. 

     A Bloomberg index of U.S. airlines rose 4.7 percent to the highest since January 2001. United Continental Holdings Inc. and Southwest Airlines predicted that fuel costs will be at their lowest in more than five years this quarter, helping boost profits in a period where travel demand typically slows.

     JetBlue Airways Corp. surged 7.9 percent to the highest since 2007.

     KeyCorp added 7.6 percent as fourth-quarter revenue and earnings topped estimates. City National Corp. surged 19 percent after Royal Bank of Canada agreed to buy the Los Angeles-based banker to the stars for about $5.4 billion. Other regional banks rallied. Regions Financial Corp., Hudson City Bancorp Inc. and M&T Bank Corp. soared more than 4.3 percent.

     Larger institutions also climbed. JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. surged at least 2.8 percent. Banks have been the worst performers among S&P 500 groups this year, with a loss of 2.9 percent.

     EBay increased 7.1 percent, the biggest gain since September. The company is cutting 2,400 positions, buying back shares and entering into a standstill agreement with Icahn as the company prepares to split its marketplace and payments businesses.

     EBay also said it’s exploring options for its enterprise unit, including a sale or initial public offering, and is adding three new board members, including a representative for Icahn, who had pushed the company to split up.

     Google Inc. climbed 3.2 percent and Apple Inc. advanced 2.6 percent.

     Avon Products Inc. rose 15 percent, the most in the S&P 500, after dealReporter said the company has been having talks with TPG about a potential transaction, citing industry sources.

     Phone companies had the biggest decline among S&P 500 groups, dropping 0.6 percent. Verizon Communications Inc., the largest U.S. wireless carrier, tumbled 0.9 percent after missing analysts’ fourth-quarter profit estimates as a surge in sales of deeply discounted phones squeezed margins. AT&T Inc. lost 0.6 percent.

     American Express Co. fell 3.8 percent, the most in the Dow, after reporting a fourth-quarter profit that missed some analysts’ estimates and saying it would cut more than 4,000 jobs this year.

Have a wonderful evening everyone.

Be magnificent!

If you see the soul in every living being, you see truly.

If you see immortality in the heart of every mortal being, you see truly.

The Bhagavad Gita

As ever,

Carolann

Make learning your business, speak little, do much, and receive everyone kindly.

                                                                         -Shammai, 50 BCE-30CE

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