July 22, 2015 Newsletter

Dear Friends,

Tangents:

July 22, 1376: Pied Piper of Hamelin, Germany:

The story is that the town of Hamelin (Hameln), in Wesphalia, was infested with rats in 1284, and that a mysterious piper in a parti-colored suit appeared in the town and offered to rid it of vermin for a certain sum., which offer was accepted by the townspeople.  The Pied Piper fulfilled his contract, but payment was not forthcoming.  On the following St. John’s Day, he reappeared and again played hi pipe.  This time all the children followed him and he led them to a mountain cave, where all disappeared save two: one blind, the other dumb or lame. Another version is that they were led to Transylvania where they formed a German colony.  The story, familiar in England from Robert Browning’s poem (1842), appeared earlier in James Howell’s Familiar Letters (1645-55).  The legend has its roots in the story of the Children’s Crusade.

July 22, 1844, Charles Dickens writes from Italy to the painter Daniel Maclise:

But such green – green – green – as flutters in the vineyard down below the windows, that I never saw; nor yet such lilac, and such purple as float between me and the distant hills; nor yet – in anything – picture, book, or verbal boredom – such awful, solemn, impenetrable blue, as is that same sea.  It has such an absorbing, silent, deep, profound effect, that I can’t help thinking it suggested the idea of Styx.   It looks as if a draught of it – only so much as you cold scoop up on the beach, in the hollow of your hand – would wash out everything else, and make a great blue blank of your intellect.

The Styx was one of the rivers of the Underworld.  From what Dickens goes on to say, it would seem he actually means another of them, Lethe: if you drank from Lethe, you forgot the past.

PHOTOS OF THE DAY

A member of a German team adjusts a humanoid robot during the 2015 Robocup finals in Hefei, Anhui province, China, Wednesday. The Robocup, or ‘Robot Soccer World Cup,’ is an annual international robotics competition. Stringer/Reuters

A detail of a fragment of a Quran manuscript is shown through a magnifying glass in the library at the University of Birmingham in England, Wednesday. Fragments of the Quran manuscript found in the university’s library are from one of the oldest surviving copies of the Islamic text in the world, possibly written by someone who might have known the Prophet Mohammad. Radiocarbon dating indicated that the parchment folios are at least 1,370 years old, which would make them one of the earliest written forms of the Islamic holy book in existence. Peter Nicholls/Reuters

Market Closes for July 22^nd, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks capped the longest losing streak since January as a deepening of the commodities rout pushed shares in materials producers to the lowest level since 2008.

     First Quantum Minerals Ltd. and Teck Resources Ltd. retreated at least 2.5 percent as the selloff in gold spread to metals from copper to zinc and tin. Energy producers continued their slide, with the group sinking to a six-year low as crude fell below $50 a barrel in New York. Bombardier Inc. slumped 3.9 percent to an August 1993 low, on concern demand is weakening for business jets.

     The selloff in commodities, with gold slumping a 10th day in the longest run of losses since 1996, is squeezing miners around the world. Producers of energy and raw materials, which account for about 30 percent of the equity benchmark, are the worst-performing stocks in Canada this year.

     The Standard & Poor’s/TSX Composite Index fell 69.12 points, or 0.5 percent, to 14,307.12 at 4 p.m. in Toronto, for a fourth day of losses. The gauge is lower by 2.2 percent on the year.

     The Bloomberg Commodity Index of 22 raw materials resumed declines, slipping 1.1 percent to an April 2002 low. Barrick Gold Corp. lost 0.9 percent for a ninth decline in 10 days, touching a 1990 low, and Iamgold Corp. fell 6.3 percent as raw- materials producers sank 0.9 percent as a group.

     Five of 10 industries in the S&P/TSX fell on trading volume 25 percent higher than the 30-day average today.

     Energy producers declined 1.5 percent for a fourth straight decline. Oil fell 3.3 percent in New York, approaching a bear market, or 20 percent drop from a June peak.

     West Fraser Timber Co. sank 4.2 percent to lead a drop among lumber products companies after reporting second-quarter profit short of analysts’ estimates.

US

By Callie Bost

     (Bloomberg) — The Nasdaq Composite Index slumped the most in two weeks as disappointing results from Apple Inc., Microsoft Corp. and Yahoo! Inc. rippled through technology stocks.

     Apple fell 4.2 percent after iPhone sales and revenue forecast missed estimates. Microsoft lost 3.7 percent after posting its largest-ever quarterly loss. Yahoo forecast sales that were below projections, sending its shares lower. Chipotle Mexican Grill Inc. jumped 7.8 percent after quarterly profit beat estimates and the company announced a stock buyback.

     The Nasdaq Composite slid 0.7 percent to 5,171.77 at 4 p.m. in New York. The Standard & Poor’s 500 Index erased 0.2 percent to 2,114.15. A bank rally, as well as positive results from Whirlpool Corp. and Chipotle, helped temper the benchmark’s decline. The Dow Jones Industrial Average sank 68.25 points, or 0.4 percent, to 17,851.04.

     “Investors are cautious because some of the bigger names have missed expectations,” said Robert Pavlik, who helps oversee $9.1 billion as chief market strategist at Boston Private Wealth. “The two giants reporting is what’s causing the weakness today. Earnings season really isn’t that bad.”

     Hopes were high for the industry as earnings season began, with technology shares leading a rebound in U.S. equities after overseas tensions eased. The Nasdaq Composite Index rallied to an all-time high on July 17 after Google Inc. surged 16 percent on its results, adding $65 billion to its market capitalization.

     Apple slid after releasing results late Tuesday. IPhone shipments for the fiscal third quarter and the company’s revenue forecast for the current period missed analysts’ projections, raising questions over whether demand for the device has peaked.

     As Apple’s biggest fall in nearly 18 months wiped more than $32 billion from its value, its results hit shares of suppliers worldwide. Cirrus Logic Inc., Skyworks Solutions Inc. and Avago Technologies Ltd. each slumped more than 3.6 percent.

     Adding to the bad news in the tech sector, Microsoft dropped the most since January following its largest-ever quarterly net loss, hurt by a $7.5 billion writedown after the purchase of Nokia’s handset unit failed to rescue the company’s mobile business.

     Yahoo fell 1.2 percent, and earlier as much as 3.7 percent, after forecasting sales in the current quarter below analysts’ estimates, a sign Chief Executive Officer Marissa Mayer’s turnaround effort is still a work in progress.

     Qualcomm Inc. declined 2.5 percent in late trading as of 4:45 p.m., after posting its worst quarterly sales decline since 2009. The company plans to reduce costs by a total of $1.4 billion, and forecast fiscal fourth-quarter sales and profit that may fall short of analysts’ estimates.

     “It seems that the expectations are a little bit too high on the tech sector,” said Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland. “The last weeks have been pretty good for the markets and everyone was a little over excited so it seems we’re going to be a bit more cautious over the next couple of days.”

     Some 27 S&P 500 companies were posting results today. Of those in the index that have reported so far, about three quarters beat earnings estimates and 55 percent have topped sales estimates.

     Beyond technology companies, there were some positive signs on earnings.

     Whirlpool gained 7.3 percent, its biggest rise this year, as profit beat forecasts and the company said it continues to expect a strong second-half performance.

     Intuitive Surgical Inc. jumped 8.9 percent, the most in a year, after the maker of robotic surgical devices raised its forecast for procedures performed in 2015, driven by growing demand for its da Vinci system.

     Chipotle also rallied the most in a year, to its highest since Feb. 3. Second-quarter profits topped analysts’ forecasts, helped by higher prices on its food.

     The Chicago Board Options Exchange Volatility Index fell 0.8 percent Wednesday to 12.12. The gauge, know as the VIX, tumbled 29 percent last week, the biggest such slide since January. About 6.9 billion shares changed hands on U.S. exchanges, 7 percent above the three-month average.

     “It’s a question of where leadership will come from,” said Yousef Abbasi, the global market strategist at JonesTrading Institutional Services LLC in New York. “Commodities are getting trounced again. That’s going to hurt energy, materials and industrials. Apple and Microsoft earnings didn’t look great, so you can rule tech out.”

     Five of the S&P 500’s 10 main groups declined, led by technology’s 1.6 percent slide, the most since the equity benchmark fell to a four-month low two weeks ago. Semiconductors decreased to a nine-month low. Linear Technology lost 6.3 percent, the most in more than six years, while Micron Technology Inc. and Qorvo Inc. slumped at least 4.2 percent.

     Caterpillar Inc. sank 3 percent, the most since January, and Joy Global Inc. lost 2.3 percent to a six-year low as the mining-equipment makers paced declines among industrial companies. Miner Freeport-McMoRan Inc. dropped 4.2 percent, nearly erasing a 4.5 percent rebound Tuesday. The Bloomberg Commodity Index fell back to a 13-year low after rising slightly yesterday.

     Diamond Offshore Drilling Inc. and Marathon Oil Corp. slumped more than 3.5 percent as oil prices fell for the fifth time in six sessions. Baker Hughes Inc. slid 3.9 percent, and earlier as much as 13 percent, after a person familiar with the matter said Halliburton Co.’s takeover of the oilfield services company is facing antitrust hurdles. Halliburton fell 0.8 percent.

     Investors are also watching economic reports for clues on when the Federal Reserve will move on interest rates. Data today showed sales of existing homes climbed 3.2 percent to an eight- year high in June as momentum in the residential real estate market accelerated. Prices rose to a record amid tight supply.

     An S&P gauge of homebuilders posted its biggest advance in five months, with Ryland Group Inc. and Toll Brothers Inc. rising more than 2.5 percent. June new-home sales data are scheduled for release Friday, with economists surveyed by Bloomberg predicting a 0.4 percent increase from the previous month.

     Banks in the S&P 500 rallied to their highest in seven years. Regions Financial Corp. added 2.8 percent to a 2.1 percent gain Tuesday, which followed quarterly results that were in line with estimates. KeyCorp, Bank of America Corp. and Comerica Inc. rose at least 1.7 percent. Citigroup Inc. climbed 2.1 percent to the highest since Jan. 2009.

Have a wonderful evening everyone.

Be magnificent!

We should never try to follow another’s path for that is his way, not yours.

When that path is found, you have nothing to do but fold your arms

and the tide will carry you to freedom.

Therefore when you find it, never swerve from it.

Your way is the best for you,

but that is no sign it is the best for another.

Swami Vivekananda

As ever,

Carolann

If little else, the brain is an educational toy.

                            -Tom Robbins, 1932-

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