July 17, 2014 Newsletter

Dear Friends,

Tangents:

The World

-William Brighty Rands

Great, wide, beautiful, wonderful World,
With the wonderful water round you curled,
And the wonderful grass upon your breast-
World, you are beautifully drest.

The wonderful air is over me,
And the wonderful wind is shaking the tree,
It walks on the water, and whirls the mills,
And talks to itself on the tops of the hills.

You friendly Earth, how far do you go,
With the wheatfields that nod and the rivers that flow,
With the cities and gardens, and cliffs, and isles,
And people upon you for thousands of miles?

Ah, you are so great, and I am so small,
I tremble to think of you, World, at all;
And yet, when I said my prayers today,
A whisper inside me seemed to say,
“You are more than the Earth, though you are such a dot:
You can love and think, and the Earth cannot.”

Photos of the Day

Britain’s Queen Elizabeth meets construction workers as she attends the official opening of the refurbished Reading Station, west of London. Ben Gurr/Reuters

Peoples cool off in fountains, in Nice, southeastern France. Temperatures in the area rose to 32 degrees Celsius (90 Fahrenheit). Lionel Cironneau/AP

Market Closes for July 17^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

July 17 (Bloomberg) — Canadian stocks fell from a record after a Malaysian passenger jet went down over Ukraine and reports that Israel sent ground forces into the Gaza Strip and

Birchcliff Energy Ltd. and Painted Pony Petroleum Ltd. retreated at least 3.4 percent to pace declines among energy stocks. Canadian Pacific Railway Ltd., the country’s second- largest railroad, rose 2.3 percent as profit beat estimates, powered by a rise in grain and coal shipments. Eldorado Gold Corp. and Agnico Eagle Mines Ltd. increased more than 4 percent as gold posted the biggest gain in four weeks.

The Standard & Poor’s/TSX Composite Index fell 21.86 points, or 0.1 percent, to 15,204.48 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has advanced 12 percent this year, the third-best performer among the world’s developed markets.

The Malaysian plane crashed in the main battleground of Ukraine’s civil war, threatening to further raise tensions just days after the U.S. said the rebels are getting weapons from Russia and tightened sanctions against the country.

Israel sent troops and tanks into the Gaza Strip in an offensive intended to stop the barrage of missiles fired by Hamas and other Palestinian militants. This is Israel’s first significant ground operation in the area since 2009 as the 10- day-old conflict has escalated after an Egyptian peace plan was spurned.

The MSCI All-World Index dropped 0.9 percent while the Chicago Board Options Exchange Volatility Index jumped 32 percent, the most since April 2013.

Canadian Pacific climbed 2.3 percent to C$202.33, a record.  Leftovers from a record Canadian wheat crop helped Canadian Pacific post a 32 percent jump in grain revenue in that category. Earnings in the latest period also benefited from a 15 percent increase in coal sales.

Energy stocks declined 0.8 percent as a group, the most in the S&P/TSX, as eight of 10 industries retreated on trading volume about 1 percent above the 30-day average.

Eldorado Gold added 4.2 percent to C$8.15 and Agnico Eagle advanced 4 percent to C$44.84 as the S&P/TSX Gold Index jumped 2.7 percent. Gold for August delivery rose 1.3 percent to settle at $1,316.90 an ounce in New York, the biggest gain in four weeks, as investors sought a safe haven on concern conflicts in Ukraine and the Middle East will escalate.

US
By Joseph Ciolli and Callie Bost

July 17 (Bloomberg) — The Standard & Poor’s 500 Index fell the most in three months and the VIX had the biggest jump in more than a year amid intensifying tension in Ukraine and the Middle East.

The S&P 500 fell 1.2 percent to 1,958.12 at 4 p.m. in New York. The gauge hadn’t risen or fallen 1 percent on a closing basis for 62 days, the longest streak since 1995. The Dow Jones Industrial Average slipped 161.39 points, or 0.9 percent, to 16,976.81. The Chicago Board Options Exchange Volatility Index surged 32 percent, the most since April 2013, to 14.54. More than 6.6 billion shares changed hands on U.S. exchanges today, 15 percent above the three-month average.

“People are selling out of fear,” Todd Lowenstein, a fund manager who helps manage $16 billion at Highmark Capital Management Inc. in Los Angeles, said in a phone interview. “The market is really acute to geopolitical risk. Given where valuations are and the move lately amid all the M&A activity, when you have some geopolitical shocks, people will look for a reason to sell.”

Equities extended losses in the final hour of trading after Israel sent ground forces into the Gaza Strip. The military offensive was intended to stop the barrage of missiles fired by Hamas and other Palestinian militants, raising the stakes of the 10-day-old conflict after an Egyptian peace plan was spurned.

The crisis in Ukraine escalated after a Malaysian Airlines passenger jet crashed, killing all 295 people on board. The government in Kiev blamed pro-Russian rebels for shooting down the jet, while the separatists deny the accusation.

The Malaysian plane crashed in the main battleground of Ukraine’s civil war and is one of a number to have been downed in the region in the past month. Russian President Vladimir Putin has repeatedly denied his country has any involvement in the insurgency. The U.S. said this week that Russia is supplying the rebels with weapons.

Airlines began shifting planes away from the region, which sits astride some of the busiest air routes between Europe and Asia. Delta Air Lines Inc. said it was staying away from the entire country. Delta, American Airlines Group Inc. and United Continental Holdings Corp. retreated more than 3.4 percent.

Stocks fell earlier today after the U.S. and European Union imposed sanctions on Russian banks, energy companies and defense firms in the latest attempt to pressure the country to end support for Ukrainian rebels.

The VIX rose to the highest level since April 15. The gauge jumped 17 percent last week for its biggest rally in three months, after closing July 3 at the lowest since 2007.

The S&P 500 rallied 7.2 percent this year through yesterday amid better-than-estimated corporate earnings and central bank stimulus as the U.S. economy shows signs of recovering from a 2.9 percent contraction in the first quarter. The benchmark index increased 0.4 percent yesterday as companies from Time Warner Inc. to Intel Corp. rallied amid deals and better-than- forecast earnings.

A total of 24 companies on the S&P 500 report earnings today, including Google Inc. and Schlumberger Ltd. Profit by the gauge’s members increased 4.5 percent in the second quarter, and revenue rose 3.1 percent, according to analysts’ estimates compiled by Bloomberg.

SanDisk Corp. dropped the most since 2009 percent after posting profit margins and sales forecasts that fell short of some analysts’ estimates. UnitedHealth jumped to a record as earnings topped forecasts.

Economic data showed beginning home construction unexpectedly declined in June to a nine-month low as a record plunge in the South swamped gains in the rest of the U.S. The number of Americans filing applications for unemployment benefits dropped last week, showing further healing in the labor market, while the Federal Reserve Bank of Philadelphia’s factory index increased in July.

Fed Bank of St. Louis President James Bullard said gains in the U.S. labor market and accelerating inflation may prompt an earlier exit from unprecedented stimulus.

“If macroeconomic conditions continue to improve at the current pace, the normalization process may need to begin sooner rather than later,” Bullard said in remarks prepared for a speech today in Owensboro, Kentucky.

Fed Chair Janet Yellen said told lawmakers yesterday the central bank plans to press on with record easing to combat persistent weakness in the job market.

Yellen also said asset valuations in general aren’t out of line with historical norms, after a central bank report earlier in the week indicated prices for smaller social-media and biotechnology companies are substantially stretched.

With the Dow at a record and the S&P 500 close to an all- time high reached this month, financial professionals are growing more anxious. Forty-seven percent of investors, analysts and traders in a Bloomberg Global Poll said the equity market is close to unsustainable levels, while 14 percent already see a bubble. Most respondents said stock swings will increase within six months, the July 15-16 poll showed.

All 10 main industries in the S&P 500 fell today, with energy and industrial shares dropping at least 1.5 percent for the largest declines.

Airlines slumped, as Delta Air Lines Inc., American Airlines Group Inc. and United Continental Holdings Corp.retreated more than 3.4 percent.

SanDisk tumbled 14 percent, its biggest loss in five years. The company, which had rallied 53 percent this year, has held back on increasing production, seeking to avoid a repeat of supply gluts that have caused semiconductor prices to fall below the cost of manufacturing. The chipmaker expects it won’t have enough inventory to meet all orders this quarter, it said.

AutoNation Inc. dropped 8.2 percent, the most since 2009, after the largest U.S. new-vehicle retailer reported quarterly profit that missed forecasts as investment in an online sales system increased costs.

Yum! Brands Inc. retreated 6.9 percent. The owner of fast- food chains such as KFC and Taco Bell posted second-quarter profit that trailed some analysts’ estimates, dragged down by a slump at its Pizza Hut restaurants.

Mattel Inc. fell 6.6 percent, the most since January, as second-quarter earnings and sales missed analysts’ estimates.

UnitedHealth added 1.6 percent to a record $85.11. The largest U.S. health insurer by sales beat analyst earnings estimates as revenue grew from its technology and consulting unit that helped fix the Obamacare insurance website.

Microsoft Corp. increased 1 percent after saying it will eliminate as many as 18,000 jobs, the largest round of cuts in its history, as Chief Executive Officer Satya Nadella integrates Nokia Oyj’s handset unit and slims down the software maker. The restructuring amounts to about 14 percent of its workforce.

Have a wonderful evening everyone.

Be magnificent!

Do not destroy.  Iconoclastic reformers do no good to the world.

Help, if you can;  if you cannot, fold your hands, stand by, and see things go on.

Therefore say not a word against any man’s convictions, sp far as tjeu are somcere.

Secondly, take man where he stands, and from thence give him a lift.

Swami Vivekananda, 1863-1902

As ever,

Carolann

Things do not change; we change.

-Henry David Thoreau, 1817-1862

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