January 9, 2014 Newsletter

Dear Friends,

Tangents:

As Carolann is out of the office this afternoon, I will be writing the newsletter on her behalf.

Reader’s Digest just released the 2014 version of Manners and Etiquette: The Best Rules to Follow.  Below you will find the top 12 rules everyone should follow!

1)   Wait for everyone to be seated before eating

2)   Keep things off the table, including keys, bags, sunglasses, etc

3)   Don’t text at the table

4)   If you prefer not to have wine while dining out, don’t turn your glass upside down

5)   Practice good speakerphone manners

6)   Whoever arrives at a door first holds it for the next person

7)   Don’t microwave stinky foods in the shared lunchroom

8)   At the airport, don’t crowd the boarding area

9)   Let people off the elevator and hold the doors for others before you board

10)  If all you have to say in your e-mail reply is “Thanks!” refrain from sending it.

11)  Keep your cell phone out of the conversation

12)  Be polite in e-mail

“There is nothing like returning to a place that remains unchanged to find the ways in which you yourself have altered.”
Nelson Mandela

Photos of the Day:

A flower blooms in the ash from Mt Sinabung near Sibintun village in Karo district, Indonesia’s North Sumatra province. Beawiharta/Reuters

A man shields himself from the rain as he walks along Holman Street in Houston. Cody Duty/Houston Chronicle/AP

Market Closes for January 9^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Jan. 9 (Bloomberg) — Canadian stocks rose for a third day, erasing a loss for the year, as gains in health-care and industrial shares offset declines in raw-material companies amid a slump in copper prices.

Air Canada soared 8.6 percent to lead industrial shares higher. Valeant Pharmaceuticals International Inc. added 3.5 percent. HudBay Minerals Inc. dropped 2.7 percent after announcing it would sell more than 18 million shares. First Quantum Minerals Ltd. lost 2.5 percent as copper prices slid 1.3 percent. Teck Resources Ltd. retreated 2.1 percent after Cowen & Co. analysts downgraded the stock.

The Standard & Poor’s/TSX Composite Index rose 14.78 points, or 0.1 percent, to 13,629.41 at 4 p.m. in Toronto. The gauge is up 0.1 percent for the year, erasing an earlier loss.

The Canadian dollar weakened to the lowest level since 2009 amid speculation slowing employment growth will push the Bank of Canada closer to considering lowering interest rates. The loonie, as the Canadian dollar is nicknamed for the waterfowl on its C$1 coin, fell 0.3 percent to C$1.0851 per U.S. dollar.

Copper fell the most in two months after a gauge of Chinese producer prices fell for a 22nd straight month, fanning concern about an economic slowdown in the biggest global user of the metal.

The producer-price index fell 1.4 percent from a year before and consumer-price gains trailed estimates at 2.5 percent, government reports showed in Beijing. Today’s releases followed declines in gauges of manufacturing and services based on surveys of purchasing managers.

Domestic building permits fell for the first time in three months. The value of municipal permits in Canada fell 6.7 percent to C$6.75 billion, Statistics Canada said today in Ottawa. Economists forecast a 2.7 percent reduction, according to the median of six responses to a Bloomberg survey.

Projects such as apartments and condominiums dropped 8.7 percent to C$1.88 billion in November, curbing the increase over the prior 12 months to 25 percent.

Five of the S&P TSX’s 10 main industries rose. Valeant Pharmaceuticals led health-care companies higher, jumping 3.5 percent to C$143.51.

Air Canada jumped 8.6 percent to C$7.95, reversing three days of losses. The carrier soared 323 percent last year, making it the best performer in the S&P/TSX.

Producers of raw materials and phone companies lost at least 0.6 percent for the largest declines.

First Quantum Minerals decreased 2.5 percent to C$18.31.

Copper futures for delivery in March lost 1.3 percent to $3.299 a pound, the biggest decline since Nov. 13.

HudBay Minerals plunged 2.7 percent to C$8.57. The mining company is planning to raise C$150 million in an offering of 18.2 million shares at C$8.25, implying a 6.4 percent discount to its closing price yesterday.

Teck Resources dropped 2.1 percent to C$25.72. Cowen analyst Daniel Scott downgraded the stock to market perform from outperform, citing concerns such as ample global supply and muted demand.

Advantage Oil & Gas Ltd. fell 5.1 percent to C$4.63 as natural gas futures declined 5 percent.

US

By Nick Taborek

Jan. 9 (Bloomberg) — U.S. stocks were little changed as retailers slumped and investors awaited tomorrow’s jobs report for clues to whether the Federal Reserve will accelerate the pace of stimulus cuts.

Bed Bath & Beyond Inc. sank 12 percent and L Brands Inc. slid 4.1 percent, leading losses among retailers, as earnings forecasts disappointed analysts. Macy’s Inc. and J.C. Penney Co. rallied more than 3.6 percent. Intercept Pharmaceuticals Inc. soared 281 percent after a trial of its liver disease drug worked well enough for the testing to be stopped. Alcoa Inc., the largest U.S. aluminum maker, slid 4.2 percent in extended trading after its quarterly results missed analysts’ estimates.

The S&P 500 rose less than 1 point to 1,838.13 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 17.98 points, or 0.1 percent, to 16,444.76. About 6.7 billion shares changed hands on U.S. exchanges, 11 percent above the 30-day average.

“You could be seeing some anticipation that the jobs number tomorrow could be really high,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said by phone. “That could change the timetable for the Fed’s ultimate exit from quantitative easing.”

The S&P 500 has fallen 0.6 percent in 2014, after climbing 30 percent last year, the most since 1997. Three rounds of Federal Reserve stimulus have helped propel the S&P 500 higher by as much as 173 percent from a 12-year low in 2009.

Equities slipped yesterday as minutes from the Fed’s latest meeting fueled concern that stimulus cuts may be accelerated.

Officials saw diminishing economic benefits from the central bank’s bond-buying program, according to the minutes, which didn’t describe a set schedule for the pace of reductions, although “a few” officials mentioned the need for a “more deterministic path.”

The Fed announced after the December meeting that it would begin trimming monthly bond buying by $10 billion to $75 billion this month as the U.S. economy continues to improve.

Data today showed applications for U.S. unemployment benefits declined by 15,000 to 330,000 in the period ended Jan. 4. The median forecast of 47 economists surveyed by Bloomberg projected 335,000. The data can be volatile after the holidays as temporary workers are dismissed, a Labor Department spokesman said as the report was released.

A report from the ADP Research Institute yesterday showed companies added 238,000 workers in December, the biggest increase since November 2012. A Labor Department report tomorrow may show total payrolls rose by 197,000 last month, according to a Bloomberg survey median. That would bring the total for the year to 2.27 million, the most since 2005.

Alcoa, the largest U.S. aluminum maker, marked the unofficial start of earnings season after the close of trading today by reporting fourth-quarter profit that missed analysts’ estimates amid a glut of product for the aerospace industry. The shares slid 4.2 percent to $10.24 in extended trading, after losing 1.3 percent in the regular session.

The company also agreed to pay $384 million to settle U.S. allegations that one of its units bribed members of Bahrain’s royal family and officials at a state-owned company to win business.

Analysts predict that companies in the S&P 500 will increase their earnings by 9.7 percent on average this year and their sales by 3.8 percent, according to estimates compiled by Bloomberg.

JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. will all post their results next week.

“We are at a tipping point — if not a turning point — where markets will start to be driven by earnings per share and not price-to-earnings ratios,” said Romain Boscher at Amundi Asset Management in Paris, which oversees about $1 trillion.

Five out of 10 main industries in the S&P 500 slumped, with phone companies falling 1.9 percent for the biggest decline.

AT&T Inc. fell 2 percent to $33.54 and Verizon Communications Inc. slid 2.1 percent to $47.50 for the steepest losses in the Dow.

Retailers retreated 0.2 percent as a group. Companies from L Brands, which owns the Victoria’s Secret and Bath & Body Works brands, to discount chain Family Dollar cut profit forecasts, showing the price war that marked the holiday season is taking a toll.

Family Dollar slid 2.1 percent to $64.97 and L Brands lost 4.1 percent to $57.75. The companies cut profit forecasts after reporting disappointing December sales as promotions that failed to lure shoppers hurt margins.

Bed Bath & Beyond slumped 12 percent to $69.75. The retailer projected fourth-quarter earnings of $1.60 to $1.67 a share, less than the $1.79 that analysts had estimated. Home- goods merchant Pier 1 Imports Inc. tumbled 12 percent to $20.44 as it also lowered its quarterly forecast.

Intercept Pharmaceuticals surged 281 percent to $275.87.

The company uses obeticholic acid, or OCA, to treat nonalcoholic steatohepatitis, or NASH, a liver disease in which people who don’t drink or drink very little alcohol get liver damage that resembles that of heavy drinkers. About 2 percent to 5 percent of Americans have the disease, according to the National Institutes of Health.

Copper fell the most in eight weeks, with futures for March delivery sliding 1.4 percent to $3.2975 a pound in New York as data showed China’s inflation eased in December while factory- gate prices extended the longest streak of declines since the Asian financial crisis.

Cliffs Natural Resources Inc. fell 6.5 percent to $22.96 and U.S. Steel Corp. lost 4.4 percent to $28.30.

Twitter Inc. dropped 3.8 percent to $57.05, extending its losses to a fourth straight day. The owner of the microblogging website has lost 17 percent since Jan. 3.

Macy’s jumped 7.6 percent, the most in the S&P 500, to $55.80. The second-largest U.S. department-store company forecast profit for its next fiscal year ahead of analysts’ estimates and disclosed a program to cut costs that includes eliminating about 2,500 jobs.

J.C. Penney climbed 3.7 percent to $7.64 after Piper Jaffray Cos. recommended buying the shares. J.C. Penney sank 10 percent yesterday after it published a two-paragraph statement on holiday results that didn’t include sales data, raising doubts about its turnaround. The brokerage said investors had overreacted and upgraded the retailer to overweight from neutral, citing the company’s decision to reiterate its guidance.

McKesson Corp. advanced 3.3 percent to $175.33 after raising its bid for German drug distributor Celesio AG, winning support from U.S. hedge fund Elliott Management Corp., which opposed the original offer as too low. The sweetened bid ends a stalemate that threatened to derail McKesson’s plan to expand in Europe. The acquisition may allow the U.S. company to buy as much as $10 billion a year in generic drugs for distribution, compared with $6 billion to $7 billion on its own.

Ford Motor Co. climbed 1.9 percent to $15.84. The auto company boosted its quarterly dividend for common shares and the stock held by its founding family to 12.5 cents, up from 10 cents and topping the 12-cent estimate by Bloomberg analysts.

Confidence in the U.S. economy is sending bets on stock correlation to the lowest levels since before the 2008 financial crisis, signaling an improved environment for stock pickers as the earnings season starts.

The Chicago Board Options Exchange S&P 500 Implied Correlation Index has fallen 16 percent from its November high to 50.22, according to data compiled by Bloomberg. The gauge, which uses options to measure expectations about whether S&P 500 shares will move in lockstep, reached 49.24 on Dec. 27, its lowest level since September 2008.

“It’s good news,” said Romain Boscher, head of equities at at Amundi Asset Management in Paris, which oversees about $1 trillion. “There is room for stock pickers and country pickers to create value. We are back to much more normal levels of market risk. It’s a much more comfortable market.”

Have a wonderful evening everyone.

Be magnificent!

“Lots of people want to ride with you in the limo, but what you want is someone who will take the bus with you when the limo breaks down.”
Oprah Winfrey

As ever,

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7