July 16, 2014 Newsletter

Dear Friends,

Tangents:

On this day in 1951, author J.D. Salinger published the novel The Catcher in the Rye.

A few memorable gems from Catcher in the Rye:

“Among other things, you’ll find that you’re not the first person who was ever confused and frightened and even sickened by human behavior. You’re by no means alone on that score, you’ll be excited and stimulated to know. Many, many men have been just as troubled morally and spiritually as you are right now. Happily, some of them kept records of their troubles. You’ll learn from them—if you want to. Just as someday, if you have something to offer, someone will learn something from you. It’s a beautiful reciprocal arrangement. And it isn’t education. It’s history. It’s poetry.”

“The mark of an immature man is that he wants to die nobly for a cause, while the mark of the mature man is that he wants to live humbly for one.”

“A lot of people, especially this one psychoanalyst guy they have here, keeps asking me if I’m going to apply myself when I go back to school next September. It’s such a stupid question, in my opinion. I mean how do you know what you’re going to do till you do it?”

“Don’t ever tell anybody anything. If you do, you start missing everybody.”

“Some game. If you get on the side where all the hot-shots are, then it’s a game, all right – I’ll admit that. But if you get on the other side, where there aren’t any hot-shots, then what’s a game about it? Nothing. No game.”

“I’m the most terrific liar you ever saw in your life. It’s awful. If I’m on my way to the store to buy a magazine, even, and somebody asks me where I’m going, I’m liable to say I’m going to the opera. It’s terrible.”

“What really knocks me out is a book that, when you’re all done reading it, you wish the author that wrote it was a terrific friend of yours and you could call him up on the phone whenever you felt like it. That doesn’t happen much, though.”

– Holden talking about authors like Ring Lardner, Isak Dinesen, and Thomas Hardy

“I am always saying “Glad to’ve met you” to somebody I’m not at all glad I met. If you want to stay alive, you have to say that stuff, though.”

Photos of the Day

A bolt of lightning strikes the Empire State Building during a summer rain storm in New York July 15. Lucas Jackson/Reuters

Honda’s latest version of the Asimo humanoid robot walks up stairs during a presentation in Zaventem near Brussels, Belgium. Honda introduced in Belgium an improved version of its Asimo humanoid robot that it says has enhanced intelligence and hand dexterity, and is able to run at a speed of some 9 kilometers per hour (5.6 miles per hour). Francois Lenoir/Reuters

Market Closes for July 16^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

July 16 (Bloomberg) — Canadian stocks rose to a record, after falling to a two-week low yesterday, as the central bank kept interest rates steady and commodities advanced the most in a month on faster-than-forecast growth in China.

Barrick Gold Corp. gained 2.9 percent after announcing executive changes less than three months after a breakdown in merger talks with its largest rival. Precision Drilling Corp. jumped 4.5 percent after agreeing to a strategic technology and service agreement with Schlumberger Ltd. BlackBerry Ltd. sank 12 percent after Apple Inc. and International Business Machines Corp. agreed to a partnership to reach more businesses.

The Standard & Poor’s/TSX Composite Index rose 145.02 points, or 1 percent, to 15,226.34 at 4 p.m. in Toronto, jumping the most since April to top a record set July 9. The benchmark Canadian equity gauge has gained 12 percent this year, the third-best performer among the world’s developed markets.

Bank of Canada policy makers kept their benchmark rate on overnight loans between commercial banks at 1 percent, where it’s been for almost four years, and said faster inflation has been caused by one-time gains in energy and import prices, not changes in economic fundamentals.

Canadian factory sales jumped 1.6 percent in May, to C$51.6 billion ($48 billion), after a revised 0.2 percent decline in April, Statistics Canada said today in Ottawa.

Nine of 10 industries advanced on trading volume in line with the 30-day average. Raw-materials stocks jumped 1.3 percent as a group and the S&P/TSX Energy Index rallied 1.4 percent to pace gains in the benchmark equity gauge.

The S&P GSCI Index, which tracks a basket of commodities prices, increased 0.4 percent, the most since June 19. Economic growth beat estimates in China. Gross domestic product rose 7.5 percent in the second quarter in China, the world’s biggest consumer of energy and raw materials, data showed.

Barrick Gold rose 2.9 percent to C$20.28. Chief Executive Officer Jamie Sokalsky said he will be stepping down two years into the job. Kelvin Dushnisky and Jim Gowans will be appointed co-presidents, the company said in a release.

BlackBerry plunged 12 percent to C$10.72, the most since November, after longtime rivals Apple and IBM agreed to a deal yesterday in which IBM will push iPhones and iPads in exchange for a chance to sell software and services to more companies. A key component of BlackBerry’s turnaround strategy has been to target that same business services market.

US
By Jacob Barach

July 16 (Bloomberg) — U.S. stocks advanced, sending the Dow Jones Industrial Average to an all-time high, as companies from Time Warner Inc. to Intel Corp. rallied amid deals and earnings reports.

Time Warner surged 17 percent as Rupert Murdoch’s 21st Century Fox Inc. made a takeover bid that was rebuffed. Intel jumped 9.3 percent as its third-quarter sales forecast fueled optimism the personal-computer market is emerging from a two- year slump. International Business Machines Corp. rose 2.1 percent after agreeing with Apple Inc. to develop applications for corporate users of wireless devices.

The Standard & Poor’s 500 Index added 0.4 percent to 1,981.57 at 4 p.m. in New York. The Dow increased 77.52 points, or 0.5 percent, to a record 17,138.20. The Russell 2000 Index of smaller companies fell 0.2 percent, after slumping 1 percent yesterday amid Federal Reserve concerns over valuations.

“I think Yellen might have derailed a few things yesterday, but today it’s back to earnings again and rightfully so,” Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion, said in a phone interview. “Earnings season is a big deal and you have a couple of big names that have looked good with many, many to come.”

Fed Chair Janet Yellen said today that asset valuations in general aren’t out of line with historical norms, after a central bank report yesterday indicated prices for smaller social-media and biotechnology companies are substantially stretched.

“I’m not seeing alarming warning signals,” Yellen said in response to questions from the House Financial Services Committee. While some asset values “may be on the high side and there may be some pockets where we see valuations becoming stretched,” in general “price equity ratios and other measures are not outside of historical norms,” she said.

The S&P 500 has rallied 7.2 percent this year amid better- than-estimated corporate earnings and central bank stimulus. The U.S. economy is showing signs of recovering from a 2.9 percent contraction in the first quarter.

Data today showed U.S. industrial production climbed 0.2 percent in June, capping the strongest quarter in almost four years. The Federal Reserve said in its Beige Book business survey released today that economic growth was modest to moderate in the latest period as all 12 of its districts reported stronger consumer spending and expanded manufacturing.

Equity futures climbed as a report showed China’s economic growth accelerated for the first time in three quarters. Gross domestic product rose 7.5 percent in the April-June period from a year earlier, beating the 7.4 percent median estimate in a Bloomberg News survey of economists.

“You’re starting to see the economy and leading indicators move in the direction that most people expected to start the year,” Chris Hyzy, chief investment officer of U.S. Trust in New York, said in a phone interview. That’s leading to better- than-forecast earnings for economically sensitive companies, he said, while increased merger activity is “emblematic of a corporate sector that has more comfort in the next couple of years.”

Fourteen companies in the S&P 500 including EBay Inc. and Yum! Brands Inc. are reported second-quarter results today. Profit by the gauge’s members increased 4.5 percent in the quarter, and revenue rose 3.1 percent, according to estimates compiled by Bloomberg.

Intel climbed 9.3 percent to $34.65, the highest level since 2002. The PC market has shown signs of improvement this year as corporate spending picked up and U.S. shipments returned to growth. Intel’s outlook indicates demand is starting to recover among consumers, who may be buying laptops and desktops again after years of opting for smartphones and tablets instead.

Intel also added $20 billion to its stock-repurchase program, including $4 billion planned for the third quarter.

Time Warner surged 17 percent, the most since 2000, to $83.13 for the largest gain in the S&P 500. Murdoch’s Twenty- First Century Fox is willing to pay more than $85 a share for Time Warner, according to people with knowledge of the matter, a sign the company is undeterred after being rebuffed in an initial offer. Fox shares fell 6.2 percent.

IBM gained 2.1 percent. The deal with Apple enables the iPhone maker to expand beyond individual customers and add more corporate clients through IBM’s sales force. IBM gets a boost in its effort to sell software and services to companies seeking to manage workers’ wireless devices. Apple shares fell 0.6 percent, reversing an earlier rally of 1.9 percent.

International Game Technology jumped 9.2 percent. Rome- based Gtech SpA agreed to buy the world’s biggest slot-machine maker for $4.7 billion.

General Electric Co. rallied 1.5 percent. The company is in talks with potential acquirers about selling its century-old household appliances business, said people familiar with the matter.

“This M&A just seems to have taken off, not that it was dead before, it just seems to be almost a daily event,” said Timothy Ghriskey, chief investment officer at New York-based Solaris Asset Management LLC, in a phone interview. “A bid for something like Time Warner, that’s big news. A takeover environment creates a lift to the markets. Everyone is looking for the next big name.”

The Russell 2000 fell, extending its loss to 1.2 percent over that period and erasing its gain for the year, after the Fed said valuations for smaller social-media and biotechnology companies are substantially stretched. Small-caps and Internet shares were the biggest victims of a market retreat earlier this year as investors dumped the best performers of the bull market amid concern valuations advanced too far.

The Dow Jones Internet Composite Index slid 0.5 percent today. Pandora Media Inc. retreated 1.8 percent, after a 1.2 percent loss yesterday. Groupon Inc. declined 1.6 percent.

Yahoo! Inc. fell 5.1 percent as the U.S. Web portal reported second-quarter earnings and sales that fell short of analysts’ estimates.

The Nasdaq Biotechnology Index declined 1.3 percent after tumbling 2.3 percent yesterday.       Seven of 10 main industries in the S&P 500 advanced today.  Energy companies increased 1.6 percent for the largest gain.  Technology shares jumped 1 percent.  The S&P Supercomposite Homebuilding Index rose 1.9 percent. Homebuilder confidence in July rose more than forecast to the highest level in six months as growing payrolls brightening the outlook. PulteGroup Inc. and D.R. Horton Inc. climbed more than 1.4 percent.

Financial shares dropped 0.1 percent and health-care companies lost 0.3 percent.

Bank of America Corp. dropped 1.9 percent. The second- biggest U.S. bank said profit declined 43 percent as it spent $4 billion to cover litigation costs, including a mortgage settlement with American International Group Inc.

The Chicago Board Options Exchange Volatility Index fell 8 percent to 11.00. The gauge known as the VIX jumped 17 percent last week for its biggest rally in three months, after closing July 3 at the lowest since 2007.

More than 6.3 billion shares changed hands on U.S. exchanges today, 9.2 percent above the three-month average.

Have a wonderful evening everyone.

Be magnificent!

We know that toleration is not sufficient toward another religion; we must accept it.

Thus it is not a question of subtraction, it is a question of addition.

The truth is the result of all these different sides added together.

Each religion represents one side, the fullness being the addition of all these.

Swami Vivekananda, 1863-1902

As ever,

Carolann

The test of good manners is to be patient

with the bad ones.

-Solomon Ibn Gabriol, 1021-1058

Carolann Steinhoff, B.Sc., CFP, CIM, CIWM, FCSI

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7