July 18, 2013 Newsletter

Dear Friends,

Tangents:

Birthday: July 18, 1918, Nelson Mandela.

After great pain, a formal feeling comes-

The Nerves sit ceremonious, like Tombs-

The stiff Heart questions was it He, that bore,

And Yesterday, or Centuries before?

The Feet, mechanical, go round-

Of Ground, or Air, or Ought-

A Wooden way

Regardless grown,

A Quartz contentment, like a stone-

This is the Hour of Lead-

Remembered, if outlived,

As Freezing persons, recollect the Snow-

First-Chill-then Stupor-then the letting go-

-Emily Dickinson

Photos of the Day –July 18th, 2013

Learners from the Melpark Primary School in Johannesburg listen to the history of former president Nelson Mandela as they celebrate the 95th birthday of Mandela during their school assembly. The presidency has issued a statement that Mandela’s condition is steadily improving after fears that he was close to death during ongoing hospital treatment. Denis Farrell/AP

Genetically engineered Pterophyllum Scalara fish glow in a tank under a blacklight while being displayed at the 2013 Bio Expo in Taipei, Taiwan. Pichi Chuang/Reuters

Market Closes for July 18^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katie Brennan

July 18 (Bloomberg) — Canadian stocks rose, sending the benchmark index to the highest in almost seven weeks, as lenders climbed and U.S. Federal Reserve Chairman Ben S. Bernanke said it’s too early to determine when the central bank will reduce stimulus.

Royal Bank of Canada and Toronto-Dominion Bank each climbed 1.5 percent to record highs. Husky Energy Inc. and Trilogy Energy Corp. jumped more than 3.8 percent as oil rose to an almost 16-month high. Rubicon Minerals Corp. advanced 4.8 percent as gold increased for the third time in four days.

The Standard & Poor’s/TSX Composite Index rose 60.08 points, or 0.5 percent, to 12,628.85 at 4 p.m. in Toronto.

Trading volume was in line with the 30-day average.

“Investors are focusing on earnings in the U.S. to reengage the market,” said Jeffrey Bradacs, a fund manager with Manulife Asset Management Ltd. He helps oversee about C$1.5 billion ($1.4 billion). “Financials have outperformed and beat expectations.”

Banks, brokerages and insurers in the S&P/TSX climbed 1.2 percent as a group, the most among 10 industries. In the U.S., Morgan Stanley gained after reporting a 66 percent increase in second-quarter profit. Bank of America Corp. and Goldman Sachs Group Inc. reported earnings this week that beat analysts’ forecasts.

More than 80 Canadian companies in the TSX are scheduled to report earnings in the next two weeks.

Royal Bank, Canada’s largest lender by assets, rose 1.5 percent to a record C$64.78. Toronto-Dominion, the second- largest bank, advanced 1.5 percent to C$87.48, also a record high.

Canadian banks are rising as the nation’s housing market defies predictions of a major slowdown. Existing home sales rose 3.3 percent in June, almost matching the previous month’s gain that was the fastest in more than two years, according to Canadian Real Estate Association data on July 15.

Canadian wholesale sales rose at the fastest pace in more than two years in May, reaching a record on sales of fertilizer and food. Sales rose 2.3 percent to C$50.3 billion, Statistics Canada said today in Ottawa, compared with the median estimate for a 0.3 percent gain in a Bloomberg survey with 15 responses.

Fed policy makers have been debating the timing and pace of any cuts in the U.S. 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.

The Fed’s $85 billion in monthly asset purchases “are by no means on a preset course,” Bernanke said yesterday in his semiannual testimony to Congress. He added that the Federal Open Market Committee will “be responding to the data.”

Husky Energy Inc. added 4.1 percent to C$30.60. Trilogy Energy Corp. jumped 3.8 percent to C$31.02. Oil rose 1.5 percent to $108.04 a barrel on the New York Mercantile Exchange, the highest settlement level since March 2012.

Rubicon Minerals Corp. advanced 4.8 percent to C$1.31. Gold futures for December delivery rose 0.5 percent to settle at $1,285.50 an ounce on the Comex in New York.

US

By Nikolaj Gammeltoft and Alex Barinka

July 18 (Bloomberg) — U.S. stocks rose, sending benchmark indexes to records, as earnings from Morgan Stanley and UnitedHealth Group Inc. beat estimates and jobless claims fell amid testimony from Federal Reserve Chairman Ben S. Bernanke.

Morgan Stanley rallied 4.8 percent as stock-trading revenue bolstered profit. International Business Machines Corp. added 2 percent after raising its full-year earnings target.

UnitedHealth jumped 6.7 percent after profit beat estimates as membership surged. Intel Corp. lost 3.7 percent after forecasting third-quarter sales that may fall short of some analysts’ predictions. EBay Inc. tumbled 6.7 percent after its forecast for third-quarter sales missed estimates.

The Standard & Poor’s 500 Index gained 0.5 percent to 1,689.37 at 4 p.m. in New York. The index surpassed its previous intraday high of 1,687.18 set on May 22. The Dow Jones Industrial Average added 78.02 points, or 0.5 percent, to 15,548.54, also a record. More than 6 billion shares traded hands on U.S. exchanges today, or 5.4 percent below the three- month average.

“The underlying concept of what Bernanke is trying to accomplish is taking hold in the marketplace, and that’s a good thing,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in an interview. His firm oversees about $8 billion. “The market gets the idea that a tapering is coming, the economy is improving and rates are still going to be low for a time. The initial jobless claims were better than expected. Earnings are coming in OK. All in all it’s hard not to be bullish on the market here.”

Fed stimulus and better-than-forecast corporate earnings have fueled a surge in stocks worldwide, with the benchmark U.S. index jumping as much as 150 percent from its March 2009 low.

Today’s S&P 500 rally pushed the estimated 2013 price-to- earnings ratio to 15.3, the highest since April 2010.

About 81 percent of stocks in the index traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg. While that’s below a 19-month high of 93 percent reached in May, it’s up from its 2013 bottom of 27.8 percent in June. There were 56 stocks in the index that closed at a 52-week high yesterday and none at a 52-week low.

The S&P 500 rose yesterday as Bernanke said the pace of economic recovery will determine when the Fed reduces its asset purchases. In a prepared report, he said the central bank’s asset purchases are not on a preset course. In testimony to the Senate Banking Committee today, Bernanke said data since the Fed’s June meeting is mixed and it is “way too early to make any judgment” as to whether policy makers will start tapering purchases in September.

“Bernanke is really guiding the market so that there are no real shocks when Fed actions do take place,” Jonathan Aldrich-Blake, who helps oversee about $10 billion at Ashburton Ltd., said by phone from Jersey, Channel Islands. “The ‘bad news is good news’ we saw in the market earlier this year is starting to die down as people have more belief in this recovery.”

Equity futures rose today after a report showed fewer Americans than forecast filed applications for unemployment benefits as the effects of auto-plant shutdowns began to ebb.

Separate data from the Conference Board indicated an index of leading indicators in the U.S. economy was unchanged in June.

Stocks extended gains after a report showed the Philadelphia Fed’s general economic index increased to 19.8 in July from 12.5 the prior month. Readings greater than zero signal expansion in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware.

“Jobless claims were a little bit better than expected which gives some comfort,” Richard Sichel, who oversees about $1.9 billion as chief investment officer at Philadelphia Trust Co., said by phone. “And then you have earnings rolling full steam now so it becomes a stock-by-stock market.”

Stocks may also be getting a boost as equity exchange- traded funds and mutual funds are attracting money at the fastest rate since January. Investors pulled in about $27 billion to equity ETFs so far this month after $19.1 million of outflows in June, according to Bloomberg data tracking about 1,500 securities.

Mutual funds that invest in U.S. shares had $4.55 billion of inflows during the week through July 10, ending seven consecutive weeks of withdrawals, according to data from the Washington-based Investment Company Institute released yesterday.

The Chicago Board Options Exchange Volatility Index, which measures the cost of protecting against swings on the S&P 500, dropped 0.1 percent to 13.77 for the 10th decline in 11 sessions. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, reached a six-month high on June 20 and has fallen 33 percent since.

Some 32 companies, including Google Inc. and Microsoft Corp., were scheduled to post quarterly results today. Per-share earnings topped estimates at about 73 percent of S&P 500 members that have reported for the quarter so far, data compiled by Bloomberg show.

Google slid 5.5 percent to $860.36 at 4:33 p.m. New York time. The owner of the world’s most popular Internet search engine reported second-quarter sales that fell short of analysts’ estimates as advertising tied to mobile devices crimped average prices.

Microsoft, which also reported after the markets closed, dropped 4.8 percent as profit missed analysts’ projections after Windows sales were hurt by shrinking demand for personal computers and the company wrote down the value of unsold inventory of its Surface tablet.

Futures on the Nasdaq 100 Index dropped 1 percent to 3,047.50 after the technology-heavy gauge fell 0.2 percent during the regular session.

Eight of 10 groups in the S&P 500 advanced today, led by a 1.3 percent surge among financial companies. The KBW Bank Index added 1.7 percent to its highest level since October 2008.

Morgan Stanley jumped 4.4 percent to $27.70 after posting a 66 percent earnings increase that beat analysts’ predictions as trading revenue rose and the profit margin at its wealth- management unit climbed.

Bank of America Corp., which yesterday reported earnings that beat estimates, gained 3.1 percent to 14.76. SLM Corp., the student lender known as Sallie Mae, advanced 4.4 percent to $24.44 after reporting second-quarter core earnings that beat analysts’ estimates as private education delinquencies fell.

Shares in companies whose earnings are most closely tied to economic growth rose to a record. The Morgan Stanley Cyclical Index added 1.1 percent to the highest level since the gauge started in 1978.

Automakers climbed 2.3 percent as a group, the biggest gain among 24 industries in the S&P 500. Johnson Controls Inc. led the advance, as shares surged 8.3 percent to $40.43, the most in the benchmark gauge. The largest U.S. auto-parts maker will sell its HomeLink line of installed garage-door openers to Gentex Corp. for $700 million as it seeks a buyer for the rest of its automotive electronics unit.

The Bloomberg U.S. Airlines Index climbed 1.9 percent to the highest since November 2007 as nine of 10 members advanced.

Boeing Co., which is not in the index, jumped 2.7 percent to $107.63. U.K. authorities said a beacon made by Honeywell International Inc. was likely the cause of last week’s fire on one of the planemaker’s 787 Dreamliner jets. Honeywell added 0.6 percent to $82.97, reversing a dip of as much as 0.5 percent.

IBM gained 1.8 percent to $197.99 after predicting earnings will be at least $16.90 a share in 2013, up from its earlier prediction for $16.70. The company is betting that faster- growing market such as cloud computing and data analysis can offset a slowdown in information-technology spending.

UnitedHealth jumped 6.5 percent to $70.55, the most in the Dow. The biggest U.S. health insurer reported second-quarter profit that beat analyst estimates as a Brazilian acquisition and gains in U.S. plans swelled enrollment by 25 percent.

Sherwin-Williams Co. fell 8.3 percent to $167.94. The paint maker’s $2.34 billion bid to acquire Mexican competitor Consorcio Comex SA was rejected by the country’s antitrust regulator, which said the combined company would be able to set artificially high prices.

Intel dropped 3.8 percent to $23.24 for the biggest slide in the Dow. The world’s largest semiconductor maker said late yesterday sales in the current period may miss estimates as a slump in the personal-computer market erodes its largest business.

EBay tumbled 6.7 percent, the most in almost two years, to $53.52. Third-quarter sales will be $3.85 billion to $3.95 billion as e-commerce growth rates in Europe and Korea slow and currencies weaken against the U.S. dollar, the online marketplace provider said. That’s less than the average analyst projection of $3.97 billion.

American Express Co. fell 3.6 percent to $74.01 after the biggest credit-card issuer reported revenue that missed some estimates. The drop extends a two-day decline to 5.4 percent, the most since November 2011, after some analysts said yesterday that a European Commission proposal to cap bank-card fees would crimp profit.

Phone stocks dropped 0.9 percent as a group, for the biggest drop among 10 S&P 500 industries. Verizon Communications Inc. slumped 1.5 percent to $49.97. The second-largest U.S. phone company said the surge in demand for high-speed wireless Internet cut into profit margins and boosted the need for network investments.

Amphenol Corp. plunged 9.7 percent to $76.35 for the biggest drop in the benchmark gauge. The maker of fiber-optic connectors and other telecommunications equipment for companies such as Apple Inc. cut its profit and sales forecasts for the year.

Celgene Corp. declined 2.6 percent to $133.05 after saying it will stop a late-stage trial of its Revlimid drug for treatment of leukemia in elderly patients because of the number of deaths in the study.

Have a wonderful evening everyone.

Be magnificent!

The absurd denial of the truth is natural in man.

Man does not want to be, but to appear to be.

He does not want to see what he is, but tries only to see himself as the person other people take him for, when they talk about him.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Know how to live the time that is given you.

-Dario Fo,  1926-

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