July 20, 2015 Newsletter

Dear Friends,

Tangents:

On this day in 1969, American astronaut Neil Armstrong became the first person to walk on the moon.

However foolish, however impossible in the end, Disney gives life to the notion that happiness is a creation, something made rather than inherited, a beautiful, necessary lie. –Andrew O’Hagan, The Happiness Project, NY Times, July 19, 2015.

From WHO’S HAPPY NOW?, SHOUTS & MURMURS by Paul Rudnick, The New Yorker, June 1, 2015:

Conservatives are happier than liberals, or so decades of surveys that ask about life satisfaction would suggest….but a new series of studies questions the gap itself, raising the possibility that although conservatives may report greater happiness than liberals, they are no more likely to act in ways that indicate that they really are happier. –The Times.

Young conservatives are made especially happy by:
-Just knowing that, on  a conservative scale, forty=-six is still considered young.
-Turning down offers of marijuana, a free weekend of Showtime, and a trip to New York City, because a young conservative would rather play golf with his dad and maybe learn something.
-Rocking out to Katy Perry while studying for the L.S.A.T., watching Fox News on an iPad, and trying to decide which of these activities is the most fun.

Young liberals are made especially happy by:
-All liberals are young.  Just ask one.

Things that would make a conservative and a liberal equally happy:
-if all of their children got into their first-choice school but didn’t have to room together.
–if no one ever challenged them to find Syria on a map.
-The trailer for the new “Star Wars” movie.

PHOTOS OF THE DAY

US and Cuban national flags hang from a balcony to mark restored diplomatic relations between Cuba and the Unites States, in Old Havana, Cuba, Monday. The new era began with little fanfare when an agreement between the two nations to resume normal ties on July 20 came into force just after midnight Sunday and the diplomatic missions of each country were upgraded from interests sections to embassies. Ramon Espinosa/AP

Queen’s Swan Uppers put swans back in the water during the annual count of the Queen’s swans on the river Thames in Staines-upon-Thames, England, Monday. Frank Augstein/AP

Market Closes for July 20^th, 2015

International Markets

Bonds

Currencies

Commodities

All there is to investing is picking good stocks at good times and staying with  them as long as they remain good companies. –Warren Buffett

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canada’s commodity-heavy stock market fell the most in three weeks, as gold and oil producers sank to levels last seen in the financial crisis amid a rout in basic resources.

     Barrick Gold Corp. and Goldcorp Inc. sank as gold’s lowest settlement in five years pushed miners in the benchmark index to a 14-year low. Pacific Rubiales Energy Corp. and Athabasca Oil Corp. slumped more than 9.1 percent as U.S. crude sank below $50 a barrel for the first time since April.

     The rout in commodities worsened amid signals from the Federal Reserve that the central bank may raise rates this year on the back of an improving U.S. economy. Higher borrowing costs curb the attractiveness of assets such as gold, which doesn’t pay interest or give returns like assets including bonds and equities. Producers of energy and raw materials account for about 30 percent Canada’s equity benchmark.

     The Standard & Poor’s/TSX Composite Index fell 217.29 points, or 1.5 percent, to 14,425.55 at 4 p.m. in Toronto. The benchmark equity gauge has declined 2.1 percent in two days, after rallying 3.2 percent in the previous five sessions.

     Gold miners bore the brunt of selling Monday, as the metal sank to as low as $1,080 an ounce, the lowest since 2010. Barrick sank 16 percent to close at a 25-year low, while Goldcorp tumbled 12 percent to its worst close since 2005.

     An index of gold miners retreated 12 percent to end at the lowest since April 2001, with Yamana Gold Inc. sliding 12 percent and Kinross Gold Corp. plunging 13 percent.

     Raw-materials producers retreated 6.3 percent for a fourth day of losses that now total 10 percent. The Bloomberg Commodity Index dropped 1.4 percent, falling for a fifth day to a 2002 low.

     Energy producers declined 2.7 percent as crude slipped below $50 a barrel for the first time since April before settling at $50.15. The group has lost 13 percent so far in 2015, the worst performance among 10 industries in the S&P/TSX.

US

By Callie Bost

     (Bloomberg) — U.S. stocks were little changed, after the Standard & Poor’s 500 Index briefly climbed above its previous closing record, as better-than-forecast corporate results offset a slump in commodities producers.

     Hasbro Inc. jumped 6.3 percent on better-than-estimated earnings, while Halliburton Co. advanced 1.8 percent after its profit fell less than predicted. Apple Inc. rose 1.9 percent to pace gains in technology shares. Newmont Mining Corp. lost 12 percent, while energy shares declined with oil prices. International Business Machines Corp. fell in late trading after quarterly revenue missed analysts’ estimates.

     The S&P 500 increased 0.1 percent to 2,128.28 at 4 p.m. in New York, to close within three points of an all-time high set two months ago. The Dow Jones Industrial Average climbed 13.96 points, or less than 0.1 percent, to 18,100.41. The Nasdaq Composite Index gained 0.2 percent to extend its record. About 6.3 billion shares changed hands on U.S. exchanges, in line with the three-month average.

     “While I wouldn’t be shocked if we move to new highs, the market may hesitate here,” said Mark Luschini, chief investment strategist in Philadelphia at Janney Capital Management LLC, which oversees about $68 billion. “The earnings that we’ve gotten so far have been better than expected. M&A activity remains alive and well, so that’s a positive.”

     The S&P 500 had lost as much as 4 percent from its May 21 record before rebounding, with most of the gains coming during a 2.4 percent rally last week amid signs that Greece’s standoff with creditors is near a conclusion and a rout in Chinese equities has been contained.                          

     The next 10 percent move in the U.S. equities market will be higher as low analyst earnings forecasts, a rising economy and muted investor sentiment paves the way for further gains, Morgan Stanley chief U.S. equity strategist Adam Parker wrote in a note to clients on Monday. “Why sell the market when numbers are too low, the economy is improving, and you can still romanticize that you are a contrarian bull?” Parker said.

     While benchmark indexes are climbing back to record levels, the S&P 500’s rebound kept it within a historically tight range. The gauge hasn’t closed in 2015 more than 3.5 percent above or below where it started the year, the first time that’s happened, according to data compiled by Bespoke Investment LLC and Bloomberg.

     “There’s quite a while to go before this particular bull market ends,” Omega Advisors Inc.’s Steven Einhorn said Sunday on the television program “Wall Street Week,” predicting the rally since 2009 has at least another two years left.                       

     The vice chairman of the New York-based hedge fund, which oversees more than $9 billion, said economic fundamentals remain strong and the pace of the Fed’s interest-rate tightening is likely to be gradual, boding well for equities.

     Earnings season will draw more attention as the flow of quarterly reports increases this week, with about 25 percent of companies in the S&P 500 scheduled to release results. Analysts have moderated projections for a drop in S&P 500 members’ second-quarter earnings to a 5.3 percent decline from 6.4 percent on July 10.

     IBM lost 4.4 percent after hours as of 4:49 p.m. Quarterly earnings beat analysts’ estimates as reduced administrative and research costs helped offset a decline in its services and software businesses. Revenue fell more than analysts estimated from a year earlier, the 13th straight quarterly decline. Shares had gained 0.4 percent during regular trading Monday.

     Investors will also watch economic reports for clues on when the Federal Reserve will move on interest rates, with housing and jobless-claims data due later this week.                         

     The Chicago Board Options Exchange Volatility Index rose 2.5 percent Monday to 12.25 after Friday reaching its lowest level since December. The gauge, known as the VIX, tumbled 29 percent last week, the biggest such slide since January.

     Technology and phone companies advanced the most among the S&P 500’s main industries, while energy and raw-material companies were the worst-performing groups. Banks in the benchmark rose for the seventh time in eight sessions.

     Apple gained 1.9 percent to a two-month high, rising for a fourth consecutive day to help lift the tech group. Visa Inc. rallied 2.6 percent to a record, and Texas Instruments Inc.climbed 1.5 percent after UBS AG raised the shares to buy from neutral. PayPal Holdings Inc. rose 5.4 percent, and earlier as much as 11 percent, in its market debut after separating from EBay Inc.

     Hasbro rose 6.3 percent to an all-time high. The toymaker’s second-quarter profit and sales beat analysts’ estimates, helped by merchandise tied to the “Jurassic World” summer blockbuster.

     Halliburton added 1.8 percent as results in North America were better than expected due to cost-cutting efforts and higher sales than analysts were forecasting.

     Lockheed Martin Corp. increased 2 percent to an almost five-month high after agreeing to buy United Technologies Corp.’s Sikorsky helicopter unit for $9 billion and said it expects to divest its government information systems division via a sale or spinoff.

     Southwestern Energy Co. and Chesapeake Energy Corp. lost at least 5.9 percent as West Texas Intermediate crude declined for a fourth straight session on the prospect that increasing Iranian shipments will extend the global supply glut. Energy shares capped their worst two-day drop since January.

     Newmont led declines in raw-materials, losing the most since Oct. 2008 as gold prices fell to the lowest since 2010. Barrick Gold Corp. tumbled 16 percent to a 25-year low, and Freeport-McMoRan Inc. slid 5.2 percent. The Bloomberg Commodity Index was down 1.4 percent, closing at a 13-year low.

     Raw materials are losing favor with investors as the dollar gains amid signals from Fed Chair Janet Yellen that the central bank may raise rates this year on the back of an improving U.S.

economy. Higher borrowing costs curb the attractiveness of commodities such as gold, which doesn’t pay interest or give returns like assets including bonds and equities.

     “We’ve seen a resumption of a rally in the dollar and if you do the math, that’s bad for commodity prices,” said Peter Sorrentino, a Cincinnati-based fund manager at Huntington Asset Advisors Inc., which oversees $1.8 billion.

Have  a wonderful evening everyone.

Be magnificent!

It is not a question of belief.

Stop believing in that which is;

this is what is taught in jnana yoga.

Believe in no other,

stop believing in that which is;

this is the first stage.  Dare to be rational.

Dare to follow reason where it may take you.

Swami
Vivekananda

As ever,

Carolann

Marriage is the greatest earthly happiness when founded on complete sympathy.

                                                                 -Benjamin Disraeli, 1804-1887

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM

Senior Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7