January 31, 2014 Newsletter

Dear Friends,

Tangents:

On this day in 1958:

56 years ago

Wernher von Braun, in conjunction with the U.S. Army, launches the first U.S. satellite, Explorer I.

I plan to finally get to see Gravity this weekend.  People have told me that it’s one movie that you should see in a movie theatre and it feels like you are in outer space.    Speaking of movies, we went to see American Hustler a few weeks ago and I thought it was terrific; I recommend it if you haven’t seen it yet.

Enjoy the Super Bowl on Sunday!

Photos of the day

A Seattle Seahawks fan wears a “12th Man” flag on “Super Bowl Boulevard” at Times Square, as part of the Super Bowl lead up, in New York. Andrew Kelly/Reuters

Year decorations with a golden horse are displayed outside a building in Hong Kong. Chinese communities around the world were welcoming the arrival of the year of the horse on Friday, Jan. 31 with equine-themed decorations and celebrations. Vincent Yu/AP

Market Closes for January 31^st, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Whitney Kisling

Jan. 31 (Bloomberg) — Canadian stocks fell, sending the benchmark equities gauge to a second weekly loss, as financial shares and materials producers sank after emerging-market currencies weakened.

Cameco Corp., Canada’s largest uranium miner, dropped 3.7 percent after selling its stake in Bruce Power. Atlantic Power Corp. plunged 17 percent after TD Securities Inc. cut its rating on the stock. Toronto-Dominion Bank slumped 0.9 percent to a six-week low, as an index of bank stocks dropped to the lowest since October. BlackPearl Resources Inc. climbed 1.2 percent after Canaccord Genuity Corp. recommended buying the shares.

The Standard & Poor’s/TSX Composite Index declined 40.34 points, or 0.3 percent, to 13,694.94 at 4 p.m. in Toronto. The gauge lost 0.2 percent in the past five days after dropping 1.3 percent last week. Trading volume was about 4.7 percent higher than the 30-day average.

“Everything relates to psychology, and the psychology of a fear of deflation, fear of China doing less well, the Fed and tapering,” Irwin Michael, fund manager at ABC Funds in Toronto, said in a phone interview. His firm manages about C$850 million.

“There’s still a real tug-of-war between the positive and negative forces out there.”

Copper fell for an eighth day in London, capping the longest losing streak since December 1998, on concern demand is set to weaken as the economy slows in China. West Texas Intermediate crude fell from the highest level of 2014 on concern that developing economies may shrink.

Canada’s gross domestic product expanded for a fifth straight month in November as the nation’s oil and gas production rebounded, Statistics Canada said today in Ottawa.

Consumer spending in the US. climbed more than forecast in December, even as incomes stagnated. Household purchases, which account for about 70 percent of the economy, rose 0.4 percent, after a 0.6 percent gain the previous month, Commerce Department figures showed today. The U.S. is Canada’s largest trading partner.

Seven of 10 industries in the S&P/TSX declined. Materials producers fell 0.3 percent as a group.

Financial stocks, which account for 34 percent of the index’s weighting, plunged 0.8 percent, extending a decline this year to 3.6 percent.

The S&P/TSX Banks Index lost 1.1 percent to a three-month low. TD Bank fell 0.9 percent to C$96.32 and Royal Bank of Canada slid 1.1 percent to C$68.93.

Cameco slipped 3.7 percent to C$23.67 in the biggest drop since July. The company is selling its stake in Bruce Power to Borealis Infrastructure, an investment arm of the Ontario Municipal Employees Retirement System, for C$450 million to focus on its uranium business. Bruce Power operates eight reactors at the world’s largest nuclear generating facility.

Atlantic Power plunged 17 percent to a record C$2.92 for the biggest drop in the index. The shares were cut to reduce from hold at TD Securities.

BlackPearl Resources, an oil and gas exploration and development company in Western Canada, climbed 1.2 percent to C$2.50. Canaccord Genuity Corp. recommended buying the shares, which have risen 10 percent in 2014.

TransCanada Corp., the Calgary-based company, rallied 1.2 percent to C$48.42, the biggest gain of the year. A proposed Keystone XL pipeline cleared a key hurdle today, with the U.S. State Department finding the Canada-U.S. oil pipeline would not greatly increase carbon emissions.

The S&P/TSX is up 0.5 percent in 2014, the seventh best performance among 24 developed markets. Canadian stocks fell short of American peers last year, gaining 9.6 percent compared to the 30 percent rally on the U.S. benchmark, as gold posted its worst annual decline since 1981.

Daily average moves in Canadian stocks are up in 2014. The S&P/TSX rose or fell an average of 0.51 percent per day this month, compared with 0.41 percent in December, according to data compiled by Bloomberg.

US

By Lu Wang

Feb. 1 (Bloomberg) — U.S. stocks fell for a third week, the longest slump since 2012 for the Standard & Poor’s 500 Index, after the Federal Reserve cut stimulus even as a rout in emerging markets spurred concern about the global economy.

Apple Inc. sank 8.3 percent after its sales projection missed expectations. Amazon.com Inc. tumbled 7.5 percent as its earnings report showed revenue growth slowed outside the U.S. and holiday shipping costs surged. Boeing Co. dropped 8.3 percent after its profit forecast trailed predictions amid a slowing pace of jet orders. Caterpillar Inc. jumped 9 percent after announcing a stock buyback and forecasting better-than- expected earnings amid demand for construction equipment.

The S&P 500 slipped 0.4 percent to 1,782.59 in the week and reached the lowest level since November on Jan. 29. The Dow Jones Industrial Average lost 180.26 points, or 1.1 percent, to 15,698.85. Both gauges capped the worst month in almost two years, with the S&P 500 finishing January down 3.6 percent while the Dow dropping 5.3 percent.

“It’s a volatile cocktail,” David Lafferty, chief market strategist for Natixis Global Asset Management in Boston, said in a phone interview from Boston. His firm oversees $838 billion. “The Fed provides an interesting backdrop for capital leaving emerging markets. Earnings have been solid, but the outlook has generally been fairly weak.”

Equities fell as currencies from Turkey to Argentina tumbled, spurring concern that the turmoil in emerging markets may threaten a global economic recovery. While surprise rate increases by central banks in Turkey and South Africa failed to boost their currencies, the U.S. Fed opted to press on with reductions to its monetary stimulus.

Fed policy makers said on Jan. 29 that the central bank will trim its monthly bond purchases by $10 billion to $65 billion, cutting the pace of stimulus for a second straight meeting because of an improving economy.

U.S. gross domestic product expanded 3.2 percent in the fourth quarter, matching economists’ estimates, according to Commerce Department figures. Other reports over the week showed that consumer spending climbed more than forecast even as incomes stagnated while orders for durable goods unexpectedly slumped in December by the most in five months.

Three rounds of Fed bond buying has helped drive the S&P 500 up 163 percent from a 12-year low in 2009 while pushing capital into emerging markets in search of higher returns. The benchmark gauge for U.S. equities reached a record 1,848.38 on Jan. 15 and has fallen 3.6 percent since then.

The S&P 500’s loss for the month marked its first January decline since 2010. A lower January resulted in a full-year decline for the index 58 percent of the time since 1950, according to data compiled by MKM Partners LLC.

“Momentum has weakened,” Jim Welsh, a portfolio manager at Forward Management LLC in San Francisco, said in a phone interview on Jan. 30. His firm oversees $5.5 billion. “Going into this year, a lot of people were talking about a synchronized growth story. I can see later this year where people are disappointed relative to their expectations.”

Walt Disney Co. and Merck & Co. are among 92 companies in the S&P 500 scheduled to announce financial results next week.

Of the 251 companies that have reported, 79 percent beat analysts’ profit estimates while 66 percent exceeded on sales, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index added 1.5 percent over the week to 18.41, the highest level since October. The gauge of S&P 500 options known as the VIX has jumped 34 percent this year.

Consumer, energy and technology companies fell the most among 10 S&P 500 groups, sinking at least 0.9 percent.

Apple slumped 8.3 percent to $500.60. The company’s iPhone sales for the holiday season missed analysts’ estimates, adding pressure for Chief Executive Officer Tim Cook to release new hit products to revive growth.

Even after releasing the iPhone through the world’s largest carrier, China Mobile Ltd., Apple said revenue will be $42 billion to $44 billion in the current quarter, compared with analysts’ estimates of $46.1 billion. Anything short of $43.6 billion would mark the company’s first sales decline since 2003.

Amazon sank 7.5 percent to $358.69 in the week, its worst drop since 2011. Net income was 51 cents a share in the fourth quarter, missing the average analyst estimate of 69 cents as the company’s global growth weakened. Amazon’s international sales growth slowed to 13 percent in the quarter from 21 percent a year earlier.

Boeing dropped 8.3 percent to $125.26. The world’s largest planemaker faces U.S. defense cuts and higher financing costs that analysts say may impede commercial aircraft sales that had risen for four years. Earnings excluding some pension expenses will be $7 to $7.20 a share for 2014, the company said. That compares with an average estimate of $7.46 in a Bloomberg survey of 23 analysts.

Yahoo! Inc. fell 5 percent to $36.01. The company forecast first-quarter sales that fell short of some analysts’ estimates as Chief Executive Officer Marissa Mayer struggles to turn user growth at the Web portal into advertising dollars.

ADT Corp., the provider of security services for residences and small businesses, plunged 23 percent to $30.04 for the biggest loss in the S&P 500 after profit and sales trailed analysts’ estimates.

Caterpillar advanced 9 percent to $93.91. The largest maker of mining and construction equipment said profit will be $5.85 a share this year excluding $400 million to $500 million in restructuring costs. That’s more than the $5.77 average estimate. Caterpillar approved a $10 billion share buyback plan through 2018.

Facebook Inc. jumped 15 percent to a record $62.57. The world’s largest social network said more than half its advertising revenue came from mobile devices in the fourth quarter, helping sales rise 63 percent to $2.59 billion.

Alexion Pharmaceuticals Inc. surged 19 percent to $158.73, the biggest gain in the S&P 500 and the most for the stock since 2008. The maker of the rare-disease drug Soliris reported fourth-quarter earnings that exceeded analysts’ estimates, helped by a lower-than-projected tax rate.

Have a fabulous weekend everyone.

Be magnificent!

But unless the development of the mind and body goes hand in hand

with a corresponding awakening of the soul,

the former alone would prove to be a poor lopsided affair.

By spiritual training I mean education of the heart.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

If winning isn’t everything, why do they keep score?

-Vince Lombardi, 1913-1970

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