July 2, 2013 Newsletter

Dear Friends,

Tangents:

A new month – July ~ The seventh month, named by Mark Anthony in honour of Julius Caesar.  It was formerly called Quintilis, as it was the fifth month of the Roman year.  The old Dutch name for it was Hooy-maand, “hay month”, while the Anglo-Saxons knew it as Moedmonath, “meadow month”, because the cattle were turned into the meadows to feed then.  In the French Revolutionary Calendar the equivalent was Messidor, “harvest gift”, corresponding to the period June 20^th to July 19^th.  Until the 18^th century, July was accented on the first syllable.  Even as late as 1798 Wordsworth wrote:

In March, December, and in July,

‘Tis all the same with Harry Gill;

The neighbours tell, and tell you truly,

His teeth they chatter, chatter still.

“Goody Blake and Harry Gill.”

-from Brewar’s Dictionary of Phrase & Fable, 16^th ed.

And on July 2^nd, in…

1887: Writer Herman Hesse was born.  Eternity is a mere moment, just long enough for a joke. – Hermann Hess

1964: Civil Rights Act passed, outlawing racial segregation and discrimination.

1956: Model Jerry Hall was born.

1776: Declaration of Independence.

1937: Aviator Amelia Earhart disappears.

Photos of the Day –July 2nd, 2013

Fireworks celebrating Canada Day are seen over downtown Vancouver, as seen from Cypress Mountain in West Vancouver, British Columbia, Monday. Canadians were celebrating their country’s 146th birthday. Andy Clark/Reuters

A farmer carries freshly-picked sunflowers at a farm on the outskirts of Havana, Cuba, Monday. Desmond Boylan/Reuters

Market Closes for July 2^nd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

July 2 (Bloomberg) — Canadian stocks rose a third day, reaching the highest close in almost two weeks, as health-care shares surged and energy producers rallied on higher crude prices to offset losses among metal producers.

Valeant Pharmaceuticals International Inc. added 4.8 percent after setting up a physician loyalty program in the U.S. with Mentor Worldwide LLC. Penn West Petroleum Ltd. and Athabasca Oil Corp. jumped more than 5 percent as crude rallied to a 14-month high on concern that protests in Egypt will threaten supplies. Barrick Gold Corp. and Silvercorp Metals Inc. plunged at least 7.1 percent as prices for the metals retreated.

The Standard & Poor’s/TSX Composite Index rose 49.27 points, or 0.4 percent, to 12,178.38 at 4 p.m. in Toronto, the highest since June 19. The gauge has fallen 2.1 percent this year. Trading volume was in line with the 30-day average.

“There’s concern in Egypt, oil is up,” said Ian Nakamoto, director of research with MacDougall MacDougall & MacTier Inc. in Toronto. The firm manages about C$4 billion ($3.8 billion).

“We’re waiting for Friday’s non-farm payroll reports. The best thing for the equity market is if the U.S. economy continues to improve, but at a slower pace than the Fed expects, which will push out the end of QE.”

Markets in Toronto were closed yesterday for the Canada Day holiday, while the S&P 500 rose 0.5 percent in the U.S.

Investors there continue to weigh data and statements from Federal Reserve officials to determine whether the world’s largest economy is strong enough for the central bank to scale back stimulus measures. The S&P 500 slipped 0.1 percent, ahead of the monthly jobs report on July 5. The U.S. is Canada’s largest trading partner.

Seven of 10 industries in the S&P/TSX advanced, extending the index’s three-day rally to 1.9 percent. Health-care stocks paced gains, adding 3.1 percent. The group has surged 40 percent this year and closed today at its highest since 2000.

Valeant Pharmaceuticals jumped 4.8 percent to C$95, the biggest jump since May 27. The company’s Medicis skin care division is introducing a five-year loyalty program in the U.S. that will include Mentor’s line of breast implant products. The program gives physicians incentives for using Medicis and Mentor products.

Telus Corp. rallied 3.1 percent to C$31.66 after analysts with Canaccord Financial Inc. said investors had overestimated how much Verizon Communications Inc. may shake up Canada’s wireless market. Verizon said last month it was considering entering the Canadian mobile-phone market, and the Globe and Mail reported June 26 the company had submitted a bid for Toronto-based Wind Mobile.

Telus plunged 8 percent on the June 26 report, and Rogers Communications Inc., the largest wireless carrier in Canada, retreated 9.2 percent that day. Rogers added 2.8 percent to C$42.37 today.

Penn West Petroleum climbed 5 percent to C$11.65 and Athabasca Oil rose 6.1 percent to C$6.91, driving the S&P/TSX Energy Index to a 1.4 percent gain, the most in six weeks.

The price of crude rallied 1.6 percent to $99.60 a barrel, the highest settlement since May 2012, on speculation U.S. inventories may have dropped 2.25 million barrels last week to the lowest level since May 31, according to a Bloomberg survey before a report tomorrow. Oil extended gains as the political showdown escalated in Egypt, which controls the Suez Canal, a key transit point for oil tankers.

Raw-materials producers led declines in the S&P/TSX, falling 2.1 percent as a group. Gold slid for the first time in three sessions and silver futures slumped 1.4 percent. Endeavour Silver Corp. tumbled 9.9 percent to C$3.28 after surging 16 percent June 28. Silvercorp Metals plunged 7.1 percent to C$2.74.

Barrick Gold, the world’s largest producer, slumped 7.7 percent to C$15.32, the lowest level since 1992. Jefferies LLC analyst Peter Ward downgraded the stock to hold from buy. The gold miner on June 28 said it may write down as much as $5.5 billion on its Pascua-Lama project in the Andes after the price of the metal plunged close to a three-year low.

Barrick is also likely to take other “significant” impairment charges for the second quarter as it reviews goodwill and other assets, the Toronto-based company said.

BlackBerry slumped 7.3 percent to C$10.22, its lowest close since November. The BlackBerry 10 smartphone maker has plunged 35 percent in the past three days, after reporting a surprise loss in its first quarter due to lackluster sales of the Z10 touchscreen phone.

US

By Lu Wang and Katie Brennan

July 2 (Bloomberg) — U.S. stocks fell, erasing earlier gains, as the Standard & Poor’s 500 Index failed to hold above its average level from the past 50 days and investors awaited a monthly jobs report and the start of corporate earnings.

DaVita HealthCare Partners Inc. tumbled 5.9 percent after the government proposed reducing payments to dialysis-center operators. Constellation Brands Inc. slumped 3.6 percent after posting first-quarter earnings that trailed analysts’ estimates.

Ford Motor Co. and Abercrombie & Fitch Co. added at least 2.8 percent amid optimism over sales. Zynga Inc. jumped 6.5 percent after naming a new chief executive officer.

The S&P 500 slipped 0.1 percent to 1,614.08 in New York, after rising as much as 0.6 percent earlier. The Dow Jones Industrial Average dropped 42.55 points, or 0.3 percent, to 14,932.41. More than 6.1 billion shares traded hands on U.S. exchanges today, or 6.9 percent below the three-month average.

“The market is trying to find some ability to hold in there,” Jason Cooper, who helps oversee $2.5 billion in South Bend, Indiana, at 1st Source Investment Advisors, said in a phone interview. “It’s going to take some actual data to come in to at least reassure investors that the economy is doing OK and people are getting jobs. Corporate America is going to be the important one right now. The Fed has pretty much said what they have to say and not rock the boat any more.”

Stocks climbed earlier as factory orders topped estimates and the Federal Reserve’s William Dudley reiterated that the central bank may prolong bond purchases if needed. The S&P 500 reversed gains after momentarily rising above its 50-day moving average near 1,624. The benchmark gauge also pared gains yesterday after briefly exceeding the technical level.

Goldman Sachs Group Inc. cut its growth forecast for second-quarter U.S. gross domestic product by 1/10 to 1.7 percent after a slower-than-estimated expansion in manufacturing inventories.

Data tomorrow from the ADP Research Institute may indicate American companies increased employment in June. Investors will watch the monthly U.S. labor report later this week for further signs of economic strength. Employers in the U.S. probably created 165,000 jobs in June, almost the same as in the prior month, according to the median forecast of economists in a Bloomberg survey ahead of July 5 figures from the Labor Department. The unemployment rate probably fell to 7.5 percent, matching April’s four-year low.

Alcoa Inc. will unofficially start the second-quarter earnings season after the market close on July 8, as the biggest U.S. aluminum producer becomes the first company in the Dow to report results. Profits from S&P 500 companies probably grew 2.4 percent, according to analyst estimates compiled by Bloomberg.

That’s down from a projected increase of 6.2 percent at the beginning of the quarter.

“The recent economic news has been solid but now the market will look to see where earnings come in to drive the next leg up if we continue in this trend,” said James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia at PNC Wealth Management. “We have rebounded nicely after the stumble from the Fed meeting in June so we will start to run into some resistance as we head higher.”

The S&P 500 has dropped 3.3 percent since May 21, the day before Fed Chairman Ben S. Bernanke signaled the central bank could scale back asset purchases if the economy improves in line with forecasts. The benchmark gauge rallied 13 percent in the first half of the year, the best performance since a 17 percent gain in the first six months of 1998.

The Chicago Board Options Exchange Volatility Index, or VIX, added 0.4 percent today to 16.44. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, reached a six-year low in March and has since surged 45 percent.

Four out of 10 S&P 500 industries fell as industrial and raw-material companies dropped more than 0.3 percent. Energy and telephone stocks climbed at least 0.2 percent.

DaVita HealthCare tumbled 5.9 percent to $114. Dialysis- center operators may see U.S. payments reduced 9.4 percent in 2014 under a Medicare proposal. The government will consider phasing reductions over more than a year, the Health and Human Services Department said yesterday in a regulatory filing. The proposal is subject to public comment and may change before taking effect.

Constellation Brands lost 3.6 percent to $51.25. The wine company reported adjusted first-quarter earnings of 38 cents a share, missing the average analyst estimate of 40 cents.

Mead Johnson Nutrition Co. slipped 5.7 percent to $74.90.

The world’s largest baby-formula maker said the National Development and Reform Commission, China’s top economic planning agency, carried out a review of documents related to product pricing at Mead Johnson’s China unit recently. The U.S. company said it’s providing “full” cooperation.

China is probing foreign milk-powder companies including Danone and Nestle SA for possibly violating anti-monopoly laws and setting prices too high, the People’s Daily reported.

Achillion Pharmaceuticals Inc. plunged 25 percent to $6.26.

The company said U.S. regulators stopped the clinical trial of one of its drugs for hepatitis C after some patients experienced elevated liver enzymes.

Linn Energy LLC, the oil and natural gas partnership that agreed to buy Berry Petroleum Co. in February, plunged 19 percent to $27.05, after disclosing a U.S. Securities and Exchange Commission inquiry of the transaction and its accounting.

Ford rose 2.8 percent to $16.18. The automaker’s sales of cars and light trucks climbed 13 percent to 234,917 last month, beating the 12 percent increase that was the average of 11 estimates.

Retailers advanced. U.S. sales at stores open at least one year rose 2.9 percent from a year earlier during the week ended June 29 as concern over increased inventory and markdowns eased, Johnson Redbook Research said.

Abercrombie & Fitch climbed 3.8 percent to $47.93. The teen retailer may see acceleration in margin expansion amid sales stabilization and cost reductions, Piper Jaffray Cos. wrote in a note, reiterating the stock as a top pick.

Zynga jumped 6.5 percent to $3.27. The maker of social- networking games named Don Mattrick, the former head of Microsoft’s entertainment division, as its new CEO. Mattrick will start July 8, the company said.

Nielsen Holdings NV, the biggest provider of U.S. television ratings, increased 2.1 percent to $33.97. The company will replace Sprint Nextel Corp. in the S&P 500 after the end of trading July 8, S&P said in a statement.

iPhone maker Apple Inc. climbed 2.3 percent to $418.49 for a third straight day of gains. The world’s most valuable technology company is nearing a deal with Time Warner Cable Inc. to give subscribers of the cable television service access to channels via Apple TV, people with knowledge of the negotiations said.

Apple’s shares have retreated 40 percent from a record high in September amid concern that Chief Executive Officer Tim Cook has taken too long to deliver a new breakthrough product to help make up for stiffer iPhone competition.

Have  a wonderful evening everyone.

Be magnificent!

To understand pleasure is not to deny it.

We are not condemning it or saying it is right or wrong but if we pursue it,

let us do so with our eyes open, knowing that a mind that is all the time seeking pleasure

must inevitably find its shadow in pain.

They cannot be separated, although we run after pleasure and try to avoid pain.

Krishnamurti,1895-1986

As ever,

Carolann

Patience is bitter, but its fruit is sweet.

-Jean-Jacques Rousseau, 1712-1778

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