July 16, 2013 Newsletter

Dear Friends,

Tangents:

JULY

“This is the season for picnics, when the weather is set and fair and the ground quite dry; little rain has fallen with us for weeks.   It is perfect to spread out the rug on a newly-mown field and to sit back for a while and feel you are part of the countryside, smelling the grass and the hedgerows and listening to the sounds of the insects around you.  You may find yourself sharing a hamper full of exotic food and sparkling champagne in the peace and beauty of the Glyndbourne garden, the music of the first act still ringing in your ears….In contrast, when the spirit moves you, at a moment’s notice you may gather up a slice of bread, wash a lettuce, hard-boil egg, fill a bottle with newly-made elderflower cordial and settle at the end of your own garden or somebody else’s – unpack your basket and enjoy the solitude of the countryside where you cannot hear the telephone ringing…” –from A Countrywoman’s Notes by Rosemary Verey.

Photos of the Day –July 16th, 2013

A climate-controlled gondola of the SkyView, a 200-foot tall Ferris wheel, rises over Atlanta, Georgia. The giant ferris wheel opened to the public Tuesday. Jaime Henry-White/AP

A Prince Harry lookalike turns up to donate toys to the hospital as a publicity stunt outside the Lindo Wing at St Mary’s Hospital in London. Britain’s Kate, the Duchess of Cambridge will give birth to her first child, who will be third-in-line to the throne, at the hospital in mid-July. Kirsty Wigglesworth/AP

Market Closes for July 16^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

July 16 (Bloomberg) — Canadian stocks fell, dragged down by a drop in health-care companies, as investors awaited earnings and watched for signals from central bank officials.

WestJet Airlines Ltd. lost 3.7 percent to pace declines among industrial stocks. Barrick Gold Corp. and Iamgold Corp. added at least 5.9 percent as gold rose for a second day. Wi-Lan Inc. rallied 14 percent after plunging the most in 12 years yesterday. Teck Resources Ltd. gained 2.3 percent as copper advanced.

The Standard & Poor’s/TSX Composite Index fell 11.46 points, or 0.1 percent, to 12,516.89 at 4 p.m. in Toronto. The gauge has gained 0.7 percent this year. Trading was in line with the 30-day average.

“The summer rally has already happened so now it’s tough to continue further,” said Paul Gardner, a fund manager with Avenue Investment Management in Toronto. The firm manages about C$300 million ($288 million). “You’re waiting for earnings to come in and earnings have generally been pretty good.”

More than 60 Canadian companies on the TSX are scheduled to report second-quarter earnings in the next two weeks.

Bank of Canada Governor Stephen Poloz is set to deliver his first interest-rate decision since taking over the job in June from former governor Mark Carney, who departed to run the Bank of England. Poloz, who has said Canada’s expansion requires “patience,” will probably keep his benchmark interest rate at 1 percent tomorrow where it’s been since September 2010, according to a Bloomberg economist survey.

The world’s 11th largest economy has been slowed by weak foreign demand, leading to the longest streak of trade deficits in a quarter century.

The U.S. Federal Reserve will publish tomorrow its latest beige book, which updates local economic conditions. Fed Bank of Kansas City President Esther George, speaking today on Fox Business News, said the U.S. was on the “right path” for economic recovery and that cuts in the pace of stimulus are “appropriate.” Central bank stimulus has helped fuel a surge in stocks worldwide.

Valeant Pharmaceuticals International Inc. fell for the first time in five days, dropping 2.8 percent to C$94.93 for the biggest loss in a month. Health-care stocks lost the most among 10 industries in the S&P/TSX, declining 2.4 percent.

WestJet, the Calgary-based discount airline, slumped 3.7 percent to C$20.69. North American low-cost airline demand jumped 6.1 percent year-over-year in June, according to a report from George Ferguson, an air transport analyst with Bloomberg Industries.

Load factor, a measure of aircraft capacity and use, rose 20 basis points to 84.7 percent for the industry, with WestJet and JetBlue Airways Corp. registering the only declines, Ferguson said.

Wi-Lan, a patent licensing company based in Ottawa, rallied 14 percent to C$3.83, the biggest gain in two years. The stock yesterday plunged 31 percent, the most since 2001, after losing a U.S. patent infringement trial against Alcatel-Lucent and Ericsson AB.

A jury in Tyler, Texas, said the two companies didn’t infringe on three Wi-Lan patents, while phones made by HTC Corp. and Sony Corp. were cleared for infringement for a fourth patent.

Barrick Gold, the world’s largest producer of the metal, climbed 5.9 percent to C$16.62 while Iamgold increased 6.8 percent to C$4.86. Gold futures for August delivery gained 0.5 percent to settle at $1,290.40 an ounce in New York, for the sixth advance in seven sessions.

Fortuna Silver Mines Inc. rallied 5.3 percent to C$3.61 as silver for September delivery rose 0.5 percent.

Teck Resources, Canada’s largest diversified miner, rose 2.3 percent to C$23.73 as copper advanced for the first time in three days.

US

By Alex Barinka and Nikolaj Gammeltoft

July 16 (Bloomberg) — U.S. stocks fell, halting the longest rally in the Standard & Poor’s 500 Index since January, as Coca-Cola Co.’s profit dropped and a Federal Reserve official called for cuts to stimulus.

Coca-Cola slid 1.9 percent as the beverage company said volumes missed estimates amid slowing economic growth in China and Europe. Goldman Sachs Group Inc. dropped 1.7 percent even after profit beat analysts’ projections. Automakers plunged 1.8 percent after Goldman downgraded the group to neutral from buy, with Ford Motor Co. sliding 3 percent. Baidu Inc. jumped 4 percent after agreeing to acquire 91 Wireless for $1.9 billion.

The S&P 500 fell 0.4 percent to 1,676.26 at 4 p.m. in New York, after rising eight straight sessions to a record close yesterday. The Dow Jones Industrial Average lost 32.41 points, or 0.2 percent, to 15,451.85. Almost 5.5 billion shares traded hands on U.S. exchanges today, or 15 percent below the three- month average.

“Hawkish comments from Kansas City Fed President George as to the timing of adjustments to the Fed’s bond purchases are putting modest pressure on the indices,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $290 billion. “Outside of that, earnings are in the early stages and many are waiting for chairman Bernanke’s testimony to Congress tomorrow for further direction about future Fed policy.”

The S&P 500’s decline accelerated after Fed Bank of Kansas City President Esther George said the U.S. was on the “right path” for economic recovery and that cuts in the pace of stimulus are “appropriate.” George, speaking on Fox Business Network, also said inflation appears to be “moderate” and the benchmark interest rate should not be held too low for too long.

Fed Chairman Ben S. Bernanke bolstered the rally last week after he backed sustained monetary stimulus. Bernanke will deliver his semi-annual monetary policy report to Congress this week, starting tomorrow at the House Financial Services Committee.

Central bank stimulus has helped fuel a surge in stocks worldwide, with the benchmark U.S. index jumping as much as 149 percent from its March 2009 low. Fed policy makers have been debating the timing and pace of any cuts in the central bank’s $85 billion in monthly bond purchases. Bernanke has said any reduction will be tied to sustained improvement in the labor market or an increase in inflation.

A report today showed the cost of living in the U.S. rose in June as gasoline prices increased the most in four months.

The consumer-price index increased 0.5 percent after a 0.1 percent gain the prior month, Labor Department figures showed.

The median forecast in a Bloomberg survey called for a 0.3 percent rise.

Separate data showed that industrial production rose in June by the most in four months, signaling U.S. manufacturing is improving heading into the second half of the year. Output at factories, mines and utilities climbed 0.3 percent, the biggest advance since February, after being little changed in May.

The Chicago Board Options Exchange Volatility Index, which measures the cost of protecting against swings on the S&P 500, jumped 4.6 percent to 14.42. The gain snapped eight consecutive declines, the longest streak of losses since October 2011.

About 72 percent of the S&P 500 companies that have reported earnings so far have beaten analyst forecasts, data compiled by Bloomberg show. Yahoo! Inc. fell 1.9 percent at 4:41 p.m. in New York after reporting sales that missed estimates.

Coca-Cola declined 1.9 percent to $40.23 for the biggest drop in the Dow. Profit fell 4 percent, the second quarterly decline in a row, as sales were sapped by economic weakness in China and Europe, shifting tastes in the U.S. and unseasonable weather in places such as India.

Goldman Sachs dropped 1.7 percent to $160.24 even as the bank reported earnings that topped analysts’ estimates on a jump in fixed-income trading and investment-banking revenue. The stock had gained 28 percent this year through yesterday.

Automakers plunged 1.8 percent as a group, the biggest decline among 24 industries in the S&P 500. Goldman cut the industry to neutral for the first time since 2009, saying car stocks typically lag when interest rates rise. Data yesterday showed sales at car and parts dealers gained the most in seven months in June.

Ford Motor Co. slid 3 percent to $16.60 after Goldman removed the carmaker from its conviction buy list. The firm maintained a buy rating on the stock. Delphi Automotive Plc fell 1.8 percent to $54 after Goldman downgraded the parts supplier to neutral from buy.

General Motors Co. dropped 0.9 percent to $36.18, reversing an earlier gain of as much as 1.2 percent. The company said its global first-half sales climbed 3.9 percent on gains in the U.S. and China. Goldman added the stock to its conviction buy list.

Charles Schwab Corp. sank 3.3 percent to $21. The company reported second-quarter adjusted profit of 18 cents a share, below estimates for 19 cents a share.

Cintas Corp. retreated 1.7 percent to $47.06. The uniform maker forecast earnings for the 2014 fiscal period of $2.66 to $2.75 a share. That’s less than the $2.79 per share projected by analysts.

Energy shares dropped 0.6 percent as Marathon Petroleum Corp. became the second oil refiner to say second-quarter results would miss estimates.

Marathon fell 4.3 percent to $69.93, the most in the S&P 500. The company said late yesterday that it expects second- quarter earnings of $1.75 to $1.85 a share, below estimates of $2.62 a share. Competitor Valero Energy Corp. last week issued a forecast that fell short of forecasts. Valero slid 1.7 percent to $34.78 today.

HCA Holdings Inc. climbed 4.4 percent to $38.86. The largest for-profit U.S. hospital chain preliminary earnings beat analysts’ estimates on an increase in patient admissions. Tenet Healthcare Corp. added 3.4 percent to $45.19 for the second- biggest gain in the S&P 500.

DaVita HealthCare Partners Inc. dropped 1.9 percent to $117.96 as Goldman Sachs cut its rating on the provider of kidney-dialysis services to sell from neutral. The stock had slipped only 0.7 percent since the U.S. Medicare system proposed cutting payments by 9.4 percent next year, showing investors may be too optimistic regarding a final dialysis rate, Goldman said.

Baidu Inc. rose 4 percent to $105.69, the highest since February. The owner of China’s largest search engine agreed to buy app store 91 Wireless for $1.9 billion in its biggest announced acquisition, hoping to gain a greater share of the mobile user market.

Have a wonderful evening everyone.

Be magnificent!

As long as you pursue pleasure, you are attached to the sources of pleasure;

and as long as you are attached to the sources of pleasure,

you cannot escape pain and sorrow.  The soul shines in the hearts of all living beings.

When you see the soul in others, you forget your own desires and fears,

and lose yourself in the service of others.

The soul shines equally in people on the farthest island, and in people close at hand.

Mundaka Upanishad

As ever,

Carolann

I must govern the clock, not be governed by it.

-Golda Meir, 1898-1978

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