January 8, 2014 Newsletter

Dear Friends,

Tangents:

It is truly amazing to contemplate how much scientific progress has been made in such a short period of time.  I was reading a story this morning about images released yesterday by NASA from the Hubble Space Telescope that reveal a “cosmic dawn.”  The telescope has peered back to a chaotic time 13.2 billion years ago when never-before-seen galaxies were tiny, bright blue and full of stars bursting to life all over the place; we’re starting to see the universe at its infancy in living colour and detail.  Astronomer Jennifer Lotz said at the American Astronomical Society convention in Washington, “I like to call it cosmic dawn; it’s when the lights are coming on….Things look clumpy and kind of weird.”  Because light travels nearly 9.6 trillion kilometers in a year, as telescopes look farther from Earth they see earlier into the past.  While Hubble and other telescopes using different light wavelengths have seen this far back, this is the first complete set of photos in the visible light spectrum that the human eye sees.  To do this, Hubble is using one of Albert Einstein’s concepts that massive clusters of galaxies have such super gravity that they magnify and stretch light, Lotz said.  By focusing on clusters, astronomers use them as natural binoculars to see what’s behind the.  –from an article by Seth Borenstein, The Associated Press.

So, contrast that story with the fact that on this day, January 8^th, in 1851, the Earth’s rotation was proved.

Today is also famous physicist Stephen Hawking’s birthday.  He turns 72 today.

My goal is simple. It is a complete understanding of the universe, why it is as it is and why it exists at all. – Stephen Hawking

On a related topic, also in the news today:

LEONARDO DICAPRIO’S CARBON FOOTPRINTS
The actor/environmentalist is planning a space voyage on Richard Branson’s Virgin Galactic. But FAA data show the trip will burn more than five times Mr. Branson’s estimated amount of fuel, amounting to twice the average American’s annual energy consumption. –Wall Street Journal, 1/8/2014.

We are just an advanced breed of monkeys on a minor planet of a very average star.  But we can understand the Universe.  That makes us something very special. –Stephen Hawking.

Photos of the day

Show attendee Limore Shur waits inside a Nikon-powered XXArray during the 2014 International Consumer Electronics Show (CES) in Las Vegas. The booth uses 68 cameras that fire at the same time. The images are processed to create a 3D model of the subject that can be placed inside a computer video game. Steve Marcus/Reuters

Participants arrange sushi to create the largest sushi mosaic in an attempt to break a Guinness World Record during the 10th anniversary of a sushi chain store in Hong Kong. A total of 20,647 sushi pieces were used for a 37-square-meter space to break the record. Bobby Yip/Reuters

Market Closes for January 8^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Lu Wang and Callie Bost

Jan. 8 (Bloomberg) — Canadian stocks rose a second day, following the biggest rally in three weeks, as a private report showed U.S. companies hired more workers than forecast.

Valeant Pharmaceuticals International Inc. advanced 2.6 percent after Morgan Stanley boosted the stock’s rating. Potash Corp. of Saskatchewan Inc. and Agrium Inc. climbed at least 2.2 percent, pacing gains among fertilizer stocks, as Monsanto Co.’s profit beat analysts’ estimates. Canadian National Railway Co. slipped 1.6 percent as a train carrying crude oil and propane derailed in the eastern province of New Brunswick.

The Standard & Poor’s/TSX Composite Index added 17.70 points, or 0.1 percent, to 13,614.63 at 4 p.m. in Toronto. The gauge rallied 0.8 percent yesterday. Trading was 18 percent above the 30-day average.

“Because we didn’t have a consumer debt crash or real- estate crash here, there is no dramatic recovery here either,”  Bill Harris, partner and portfolio manager with Avenue Investment Management in Toronto, said in a phone interview. His firm manages about C$250 million ($231 million). The question is, “The U.S. is recovering, but is Canada participating in it?” he said.

Companies in the U.S. boosted payrolls by 238,000 in December, compared with a 200,000 advance predicted in a Bloomberg survey, ADP Research Institute data showed. Federal Reserve officials saw diminishing economic benefits from the central bank’s bond-buying program and expressed concern about risks to financial stability when they took the first step to cut the pace of purchases, according to minutes of their last meeting released today.

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

Canadian stocks rose yesterday for the first time in four days, as the price of crude halted the longest slide since September. Oil retreated to the lowest level in six weeks today in New York.

Six out of 10 industries in the S&P/TSX advanced today as health-care companies rallied 2.4 percent to lead the gains.

Industrial stocks fell 0.8, the most of any group.

Valeant climbed 2.6 percent to an all-time high of C$138.54. The drug distributor was raised to overweight, an equivalent of buy, from equal-weight by Morgan Stanley.

Potash Corp., the world’s largest fertilizer company by market value, jumped 2.9 percent to C$36.19. Agrium gained 2.2 percent to C$97.90. Monsanto, the world’s largest seed company, reported fiscal first-quarter earnings that topped analysts’ estimates on rising sales of engineered soybean seeds and Roundup herbicide.

Questerre Energy Corp. climbed 6 percent to C$1.41. The independent energy company said Kim Anderson will become chief financial officer, replacing Brent Heagy, who plans to leave the company to join Inter Pipeline Ltd.

Canadian National Railway slipped 1.6 percent to C$58.63.

The 122-car train jumped the tracks about 7 p.m. local time yesterday near the town of Plaster Rock, sparking a blaze that was still burning more than 12 hours after the accident. A helicopter is being brought in today to help identify the source of fire, said Jim Feeny, a railroad spokesman.

The accident and a Dec. 30 crude-train derailment in North Dakota added to the attention on the risks of moving oil by rail.

Colabor Group Inc. dropped 5.6 percent to C$5.19. The wholesaler was cut to sector perform from outperform by Leon Aghazarian, an analyst with National Bank Financial.

USA

By Nick Taborek and Callie Bost

Jan. 8 (Bloomberg) — U.S. stocks fell, after yesterday’s rebound in benchmark indexes, as Federal Reserve minutes and better-than-estimated payrolls data fueled concern stimulus cuts may be accelerated.

Twitter Inc. dropped 3.5 percent, falling for a third day, amid an analyst downgrade. Ford Motor Co. gained 1 percent after Chief Executive Officer Alan Mulally ruled himself out from a race for the top job at Microsoft Corp. Micron Technology Inc. jumped 9.9 percent after reporting quarterly revenue that topped estimates. Forest Laboratories Inc. climbed 18 percent as it agreed to buy Aptalis Pharma for $2.9 billion.

The Standard & Poor’s 500 Index lost less than 0.1 percent to 1,837.49 at 4 p.m. in New York. The equities benchmark rose 0.6 percent yesterday after a three-day retreat. It climbed 30 percent last year, the most since 1997. The Dow Jones Industrial Average slipped 68.20 points, or 0.4 percent, to 16,462.74 today. Almost 7 billion shares changed hands on U.S. exchanges, 15 percent above the three-month average.

“I suspect from the minutes that there might be a bias toward pulling back stimulus sooner rather than later,” Brad McMillan, chief investment officer for Waltham, Massachusetts- based Commonwealth Financial Network, said in a phone interview.

“There seems to be a fairly wide consensus that stimulus should be gradually taken out.”

Fed officials saw diminishing economic benefits from the central bank’s bond buying program, according to the minutes of the meeting, when they took the first step to cut the pace of purchases. The minutes didn’t describe a set schedule for the pace of asset-purchase reductions, although “a few” officials mentioned the need for a “more deterministic path.”

“A majority of participants judged that the marginal efficacy of purchases was likely declining as purchases continue,” the record of the Federal Open Market Committee’s Dec. 17-18 meeting showed. Participants also were “concerned about the marginal cost of additional asset purchases arising from risks to financial stability” citing the potential for “excessive risk-taking in the financial sector.”

The central bank is trimming monthly bond buying by $10 billion to $75 billion this month. 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.

Companies in the U.S. boosted payrolls by 238,000 in December, figures from ADP Research Institute in Roseland, New Jersey, showed today. The median forecast of 36 economists surveyed by Bloomberg called for a 200,000 advance.

The Labor Department will announce on Dec. 10 figures for new hiring and the unemployment rate last month.

“We’re looking at a situation where equities are still likely to outperform most other markets,” Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors, said in a phone interview from Wilmington. His firm oversees about $79 billion. “The question is whether if we see a jump in growth in jobs, is that going to accelerate the tapering process?”

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, slid 0.4 percent to 12.87.

Global equity values are close to reaching a record for the first time since 2007. The total market capitalization of stocks around the world has risen to $61.5 trillion, near the all-time high of $62.6 trillion from October 2007, according to data compiled by Bloomberg.

The International Monetary Fund plans to raise its forecast for global economic growth this year, three months after lowering its prediction, underscoring confidence in the global recovery as the outlook for the U.S. improves. IMF Managing Director Christine Lagarde said yesterday that the revision will take place in three weeks. The multilateral institution now forecasts global expansion of 3.6 percent this year.

HSBC Holdings Plc cut U.S. stocks to underweight from neutral, citing high valuations compared with the rest of the world, earnings near record highs and the possible removal of monetary stimulus at a faster rate than in other developed markets. Companies in the S&P 500 are trading at 17.3 percent reported earnings, up from 14.5 at the start of 2013.

Alcoa Inc. will kick off the start of earnings season with the release of its 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. Sales will probably increase 3.8 percent, compared with 2.2 percent last year, according to analyst estimates compiled by Bloomberg.

Twitter dropped 3.5 percent to $59.29, increasing its slide for the week to 14 percent. An analyst at Cantor Fitzgerald LP downgraded the shares to sell from hold and said the company’s valuation is excessive. Twitter shares debuted in November and rallied 145 percent through the end of 2013.

J.C. Penney Co. lost 10 percent to $7.37, bringing its five-day slump to 19 percent. The retailer reiterated its fourth-quarter forecast and said it was “pleased” with the holiday performance as the retailer works to rebound from two years of losses. The shares fell as the company didn’t provide December sales after releasing figures the previous three months.

Tenet Healthcare Corp. slid 1.6 percent to $45.36 after Raymond James Financial Inc. cut the shares to market perform, a rating similar to hold, from outperform.

Ford added 1 percent to $15.54. Mulally said he has no other plans except to serve the automaker. He made the comments in an Associated Press interview to end speculation that he may leave for Microsoft. Microsoft slipped 1.8 percent to $35.76.

Micron Technology jumped 9.9 percent to $23.87. The largest U.S. maker of memory chips reported quarterly revenue that topped analysts’ estimates. Revenue in the period through Nov. 28 more than doubled to $4.04 billion, the company said.

Analysts on average estimated sales of $3.72 billion, according to a Bloomberg survey.

Forest Laboratories climbed 18 percent to $69.30 after it agreed to buy Aptalis, a closely held company whose shareholders include investment firm TPG Capital, to expand in gastrointestinal and cystic fibrosis treatments.

Constellation Brands Inc. gained 9.6 percent to $76.61. The alcoholic beverage company reported third-quarter profit that beat analysts’ estimates and raised its profit forecast on a stronger outlook for its beer business.

Macy’s Inc. rallied 4.8 percent to $54.32 in extended trading as of 4:50 p.m. New York time. The department-store chain issued a profit forecast after the market close that exceeded analysts’ estimates and said it would cut 2,500 jobs to reduce costs.

Have a wonderful evening everyone.

Be magnificent!

With the clouds hanging in the air above the trees,

and the birds falling silent before the storm,

this morning brings forth serious reflection,

bringing into question the entirety of existence,

the gods themselves, and all human activity.

Krishnamurti, 1895-1986

As ever,

Carolann

In the right light, at the right time,

everything is extraordinary.

-Aaron Rose, 1969-

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