January 7, 2014 Newsletter

Dear Friends,

Tangents:

The Chinese New Year, Nóngli Xinnián, begins on January 31^st this year, the first day of the first month of the Chinese calendar for 2014.  The Chinese months are determined by both solar and lunar changes, with the new year coming in approximately one and a half months after the winter solstice and symbolizing the beginning of spring.  For this reason, the fifteen days of celebration that begin on January 31^st are also known as the spring festival.  The Chinese year consists of 354 days compared to our 365 day year.

The animal designations of the Chinese zodiac follow a 12-year cycle and are always used in the same sequence.  This year will be the year of the horse.  Persons born in the year of the horse are physically attractive and popular; like the company of others and are thought to be most compatible with persons born in tiger or dog years.  Their opposite is the rat.

Horse Years: 1906, 1918, 1930, 1942, 1954, 1966, 1978, 1990, 2002, 2014.

Photos of the day

A worker walks among newly-made red lanterns as she and other workers prepare for the sales boom ahead of the Spring Festival at a family workshop in Wenxian county, Henan province, China. China Daily/Reuters

A miniature sculpture made by Chinese artist Li Qici is displayed on his finger in Yuyao, Zhejiang province, China. Li worked several months to craft the miniature sculpture on an ivory plate. The sculpture imitates Chinese painter Xu Beihong’s painting of eight running horses and celebrates Chinese New Year, which welcomes the year of the horse. Reuters

Market Closes for January 7^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Jan. 7 (Bloomberg) — Canadian stocks rose for the first time this year, after tumbling to a two-week low, as the price of crude halted the longest slide since September and Valeant Pharmaceuticals International Inc. surged to a record.

Athabasca Oil Corp. and Encana Corp. rose at least 0.6 percent to pace advances among energy stocks. Valeant jumped 13 percent after providing a 2014 forecast. BlackBerry Ltd. increased 7.4 percent for a second day of gains. Semafo Inc. and Detour Gold Corp. lost more than 0.7 percent as gold slipped a second day.

The Standard & Poor’s/TSX Composite Index rose 101.39 points, or 0.8 percent, to 13,596.93 at 4 p.m. in Toronto. The benchmark equity gauge lost 0.9 percent over the previous three sessions.

“Today is a continuation of the run we had in December,” said Ian Nakamoto, director of research with MacDougall MacDougall & MacTier Inc. in Toronto. The firm manages about C$4.7 billion ($4.37 billion). “The past couple of days were an aberration during the holidays. People are coming back to work and there’s an air of optimism as the big jobs number comes on Friday.”

Statistics Canada and the U.S. Labor Department will provide unemployment rates and new hiring figures for last month on Jan. 10.

Brent crude halted its longest run of declines since September on concern clashes between Iraq’s government and al- Qaeda-linked militants may disrupt oil output. Brent for February settlement rose 0.6 percent in London. West Texas Intermediate crude increased 0.3 percent in New York.

The S&P/TSX Energy Index rallied 1 percent as 50 of 63 stocks advanced. Athabasca Oil climbed 3.7 percent to C$6.98, for the highest close in two months, and Encana added 0.6 percent to C$18.79.

Bellatrix Exploration Ltd. advanced 5.1 percent to C$8.08 after reporting record production levels at the end of 2013 of 38,000 barrels of oil equivalent per day.

Valeant jumped 13 percent to C$135.03 as health-care stocks soared 10 percent as a group, the most in the S&P/TSX. Nine of 10 industries advanced on trading volume 7.5 percent higher compared with the 30-day average.

Valeant said in a conference call that all of its business units are expected to expand in 2014, including double-digit growth across its Asia, Central and Eastern Europe, Latin America and Middle East markets. The company will pursue further acquisitions, including at least “one significant deal.”

BlackBerry surged 7.4 percent to C$9.14, the highest level since September. Chief Executive Officer John Chen said the smartphone maker will return its focus to keyboard-equipped phones after struggling to entice customers with touch-screen models last year.

“I personally love the keyboards,” Chen said in an interview yesterday with Bloomberg Television’s Jon Erlichman at the International Consumer Electronics Show in Las Vegas.

The stock has rallied 13 percent in the past two days.  BlackBerry yesterday hired former HTC Corp. and Sony Ericsson executive Ron Louks to run its devices business.

Semafo dropped 0.7 percent to C$3.04 and Detour Gold retreated 2.5 percent to C$5.04, ending a four-day advance, as gold futures for February delivery fell 0.7 percent to $1,229.60 an ounce in New York.

USA

By Nick Taborek and Sofia Horta e Costa

Jan. 7 (Bloomberg) — U.S. stocks rose, snapping a three- day retreat, as hospital and health-insurance stocks rallied ahead of Friday’s employment report and the start of fourth- quarter earnings season this week.

UnitedHealth Group Inc. and Johnson & Johnson rose more than 2.1 percent, leading gains in the Dow Jones Industrial Average, after brokerages raised their stock ratings.

Pharmacyclics Inc. jumped 20 percent after its leukemia medicine met a trial’s goals. Netflix Inc. slid 5.6 percent as Morgan Stanley said the company faces more competition.

The Standard & Poor’s 500 Index advanced 0.6 percent to 1,837.88 at 4 p.m. in New York. The gauge lost 1.2 percent from Jan. 2 through yesterday, the longest stretch of declines to start a year since 2005. The index climbed 30 percent last year, the most since 1997. The Dow average added 105.84 points today, or 0.6 percent, to 16,530.94.

“Equities are the place to be,” John Lynch, the Charlotte-based regional chief investment officer for Wells Fargo Private Bank, said by telephone. His firm manages $170 billion.    Everyone’s waiting on the Fed minutes tomorrow and the jobs report on Friday could be a driver of further confidence.”

Alcoa Inc. will mark the unofficial start of the fourth quarter earnings season when it reports results after the market close on Jan. 9. Earnings for companies in the S&P 500 will climb 9.7 percent on average this year, almost twice the rate of 2013, while sales will probably increase 3.8 percent, according to analyst estimates compiled by Bloomberg.

The ADP Research Institute reports the change in companies’ payrolls tomorrow and minutes from the Federal Reserve’s December meeting will be released the same day. The Labor Department will provide the unemployment rate and new hiring figures for last month on Friday. The Fed, which has made job creation a condition for reducing asset purchases, said on Dec. 18 that it would slow the pace of bond buying.

Three rounds of stimulus have helped propel the S&P 500 higher by as much as 173 percent from a 12-year low in 2009.

Janet Yellen won Senate confirmation with a 56-26 vote to become the 15th chairman of the Fed. She will replace Ben S. Bernanke, whose second term as chairman expires Jan. 31.

Data today showed the trade deficit in the U.S. shrank more than forecast in November as oil imports dropped to the lowest level in three years and exports climbed to a record. The gap narrowed 12.9 percent to $34.3 billion, smaller than projected by any economist surveyed by Bloomberg and the least since October 2009, figures from the Commerce Department showed today in Washington.

“Sentiment is still very high,” said Francois Savary, who oversees about $9.4 billion as chief investment officer at Reyl & Cie. in Geneva. “The key question now will be to see if earnings growth really does come through. When you have less liquidity in the system and good economic numbers to support the recovery, it’s time for companies to deliver.”

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, fell 4.7 percent to 12.92.

Nine out of 10 main industries in the S&P 500 rose as health-care stocks added 1 percent to pace gains. Almost four stocks rose for each that declined in the U.S. equity benchmark.

About 6.7 billion shares changed hands on U.S. exchanges, 11 percent above the three-month average.

UnitedHealth climbed 3.1 percent to $76.51. The largest publicly traded U.S. insurer was raised to buy from hold by analysts at Deutsche Bank AG. J&J, the world’s biggest maker of health-care products, increased 2.1 percent to $94.29 as RBC Capital Markets boosted the stock to outperform from sector perform.

Tenet Healthcare Corp. rallied 4.9 percent to $46.10 and HCA Holdings Inc. advanced 2.7 percent to $49.85. Credit Suisse, which rates both companies outperform, advised buying hospital stocks on any weakness.

Pharmacyclics, the cancer-drug developer partnered with J&J, rallied 20 percent to $125.90. Its leukemia drug Imbruvica helped patients live longer without their cancer progressing compared with GlaxoSmithKline Plc’s Arzerra, also known as ofatumumab, Pharmacyclics and J&J said in statements today.

Imbruvica also showed improvement in overall survival and had an acceptable safety profile, the companies said.

The Nasdaq Biotechnology Index added 1.4 percent, the biggest advance in two weeks. Health-care shares in the S&P 500 have risen 0.3 percent in 2014, the most among the 10 main industries.

Convergys Corp. jumped 7.3 percent to $22.39. The information management firm said it will buy Stream Global Services Inc. for $820 million, adding 35 cents to its adjusted earnings-per-share in the first 12 months after the deal’s projected completion in the first quarter of this year.

MGM Resorts International, Wynn Resorts Ltd. and Las Vegas Sands Corp. advanced after Nomura analyst Harry Curtis increased his estimates for the companies’ Macau earnings and raised his price targets for all three stocks.

MGM rose 4.4 percent to $24.51 and Wynn Resorts gained 2.9 percent to $201.51. Las Vegas Sands added 2.2 percent to $78.98.

Netflix dropped 5.6 percent to $339.50. Morgan Stanley cut its rating on the stock to underweight, similar to a sell recommendation, from equal weight, citing increased competition in U.S. digital-video streaming. The stock almost quadrupled last year.

PBF Energy Inc. declined 4.7 percent to $28.50. The oil refiner said funds affiliated with First Reserve Management LP and Blackstone Group LP will sell 15 million shares in PBF, according to a statement.

Accelerating earnings growth will pave the way for stocks to extend their bull market this year, according to Thomas J.

Lee, JPMorgan Chase & Co.’s chief U.S. equity strategist. After climbing 6 percent this quarter, S&P 500 profit will rise 10 percent in the second quarter, 11 percent in the third and 14 percent in the fourth, according to the New York-based strategist’s estimates.

Have a wonderful evening everyone.

Be magnificent!

The outward freedom that we shall attain will only be in exact proportion

to the inward freedom to which we may have grown at any given moment.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

Life is a long lesson in humility.

-James M. Barrie, 1860-1937.

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