July 23, 2013 Newsletter

Dear Friends,

Tangents:

110 years ago, on July 23^rd, 1903, Henry Ford and his Ford Motor Company, sold the very first Model A car to a dentist in Chicago.

Whether you think you can or think you can’t, you are right. –Henry Ford.

-from, The Garden, Summer:

Water is living; water springs from earth,

Whether from mountains poured in melting stream

Or risen in the stones, a bubbling birth

Struck by some Moses from a somber dream,

Some Pisgah vision, some divining-rod

That finds in rock the hidden hint of God.

Water is living; water tells its tale,

It’s legendary music; coots and swans

Swim to the summons in their various plume,

Olive as water glossy in the gloom,

Blue-white as sumptuous as mountain snows

Sun-smitten where the sources first arose,

-The high land paramount, the land paravail, –

And circle at that bidding, dark or pale,

Around the pool, explore the little creek,

And delicately drink with dipping beak

The silver water from the urn of bronze.

-V. Sackville-West

Photos of the Day –July 23rd, 2013

Kate, the Duchess of Cambridge, carries her new born son, the Prince of Cambridge, who was born on Monday, into public view for the first time, outside the Lindo Wing of St. Mary’s Hospital, in London, Tuesday, July 23, 2013. The boy will be third in line to the British throne. John Stillwell/AP

Michael and Carole Middleton leave the Lindo Wing of St Mary’s Hospital the day after their daughter, Britain’s Catherine, Duchess of Cambridge, gave birth to a baby boy, in London. Suzanne Plunkett/Reuters

Market Closes for July 23^rd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

July 23 (Bloomberg) — Canadian stocks fell after climbing to a four-month high yesterday, as a decline among industrials and financial stocks overshadowed gains for copper producers.

Canadian National Railway Co. lost 3.2 percent after the company discussed possible weakness in shipping in the second half of the year. Aimia Inc., a credit card loyalty program manager, jumped 3.8 percent after agreeing to buy a technology provider to U.S. retailers. Teck Resources Ltd. and First Quantum Minerals Ltd. gained at least 1.6 percent.

The Standard & Poor’s/TSX Composite Index lost 13 points, or 0.1 percent, to 12,745.38 at 4 p.m. in Toronto. The drop snapped a four-day rally and left the gauge up 2.5 percent for the year. Trading volume was in line with the 30-day average at this time of day.

“For Canada, today is a bit of a pause” after four days of gains, said Ian Nakamoto, director of research with MacDougall MacDougall & MacTier Inc. in Toronto. The firm manages about C$4 billion ($3.89 billion). “There’s a natural inclination to look for laggards when we’re at highs and the whole Canadian market has lagged this year.”

Six of 10 industries in the S&P/TSX retreated. Financial stocks dropped 0.4 percent as a group. National Bank of Canada slid 1.4 percent to C$77.96, snapping a streak of eight straight advances. Bank of Nova Scotia dropped 1 percent to C$58.35.

Industrial shares slid the most, declining 1.5 percent.

Canadian National slumped 3.2 percent to C$101.69. Luc Jobin, the company’s chief financial officer, said on a conference call with analysts yesterday the railroad may face a “challenging” second half due to weakness in shipping bulk products such as grain. Canadian Pacific Railway Ltd. fell 1.8 percent to $130.18.

Canada’s Transport Department also said today it is setting new emergency requirements for railway companies, including having at least two employees operating shipments of dangerous goods and stronger policies about setting brakes, after a deadly train derailment and explosion in Quebec on July 6 killed about 50 and destroyed much of downtown Lac-Megantic.

Health-care stocks declined 0.7 percent, led by a 0.8 percent drop at Valeant Pharmaceuticals International Inc. The drugmaker was sued by a pension fund over allegations its Medicis unit conspired to preserve a monopoly on its acne drug Solodyn.

AlarmForce Industries Inc., a home security system provider, rose 2 percent to C$10, erasing earlier losses, after firing President and Chief Executive Officer Joel Matlin. The company said Matlin will continue as a director. Anthony Pizzonia, the chief financial officer, will serve as the interim CEO while AlarmForce searches for a replacement.

Aimia, which manages customer loyalty programs including the Aeroplan credit-card service, jumped 3.8 percent to C$15.68.

The company agreed to buy Smart Button, a technology provider for national retailers in the U.S., for about $18 million.

Telus Corp. advanced 0.6 percent to C$30.83 after the wireless carrier increased the number of shares it may purchase in a buyback to 31.9 million common shares from 15 million shares, or about 4.9 percent of outstanding stock as of May 17.

Copper miners Teck Resources gained 1.6 percent to C$24.35 and First Quantum Minerals rallied 6.6 percent to C$17.37 as the metal’s price rose for a fourth day ahead of a preliminary report on manufacturing in China tomorrow.

Chinese Premier Li Keqiang said the slowest economic growth policy makers will tolerate is 7 percent, Beijing News reported today. China, Canada’s second-largest trading partner, is the world’s largest consumer of raw materials. Its economy is forecast to grow 7.6 percent in 2013 and 2014, according to the median estimate from a Bloomberg survey of economists.

US

By Lu Wang

July 23 (Bloomberg) — The Standard & Poor’s 500 Index fell, halting a streak of four straight gains, as investors weighed corporate earnings amid speculation on when the Federal Reserve may scale back its asset purchases.

Travelers Cos. sank 3.8 percent after posting the biggest quarterly decline since 2008 in a key measure of the company’s value as higher interest rates pressured its bond portfolio.

Netflix Inc. dropped 4.5 percent amid slower-than-expected subscriber gains. Apple Inc. lost 1.7 percent before the company reports results after the close of regular trading. Texas Instruments Inc. climbed 4 percent after forecasting sales and profit that may exceed estimates.

The S&P 500 dropped 0.2 percent to 1,692.39 at 4 p.m. in New York. The Dow Jones Industrial Average gained 22.19 points, or 0.1 percent, to a record 15,567.74.

“What you’re seeing is revenues are coming in pretty lackluster and profits seem to be doing a little better than gains in sales,” Hank Herrmann, Overland Park, Kansas-based chief executive officer of Waddell & Reed Investment Management Co., said by phone. His firm manages $104 billion. “The market had a period of digesting the confusion over Fed tapering. For the moment, it’s focused on individual company fundamentals.”

The S&P 500 extended a record yesterday, adding to a rally from last week after Fed Chairman Ben S. Bernanke said the central bank remains flexible about the duration of its asset- purchase program. Fed stimulus has helped fuel a surge in stocks worldwide, with the S&P 500 jumping as much as 151 percent from its March 2009 low.

The benchmark equity gauge erased earlier gains of as much as 0.2 percent today after the Richmond Fed’s gauge of manufacturing in the mid-Atlantic region unexpectedly fell in July. The factory index slid to minus 11. Readings greater than zero signal expansion in the area that includes the Carolinas, the District of Columbia, Maryland, Virginia and West Virginia.

The median projection in a Bloomberg survey of economists called for a reading of 9.

Investors have been weighing data to determine the timing and pace of any stimulus reduction by the Fed. Half of the economists in a July 18-22 Bloomberg survey expect the central bank to trim at its September meeting the pace of its monthly bond buying to $65 billion from the current $85 billion. That’s up from 44 percent in last month’s poll.

The S&P 500 fell as much as 5.8 percent after Bernanke said on May 21 the Fed could reduce its bond purchases as early as in September. The gauge rallied 7.8 percent from June 24 through yesterday.

“The big step the market has made is that the market now accepts that it needs to be prepared for the Fed beginning to taper sometime in the next four to five months,” Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said by phone. The firm manages $4.2 billion. “People have accepted a low growth scenario for the U.S., but they also see it a low risk market. The U.S. market is guardedly healthy.”

In Asia, Chinese Premier Li Keqiang said the slowest economic growth policy makers will tolerate is 7 percent, Beijing News reported. China, the world’s second-largest economy, is the biggest consumer of energy and raw materials.

Investors have increasingly turned their attention to earnings, with 35 S&P 500-listed companies releasing results today. Of the 130 companies on the gauge to have already reported, 71 percent have beat analysts’ profit estimates while about 52 percent have surpassed revenue expectations, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index, or VIX, added 2.8 percent today to 12.63, halting a streak of four straight declines. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, is down 30 percent this year.

Six of 10 S&P 500 main industries fell, with technology and health-care shares retreating at least 0.3 percent to lead losses.

Travelers dropped 3.8 percent to $82.21 for the biggest retreat in the Dow. Book value, a measure of assets minus liabilities, slipped to $66.65 per share from $68 three months earlier, the second-largest U.S. commercial insurer said today in a regulatory filing as it announced second-quarter results.

The decline was driven by a $1.77 billion drop in net unrealized gains in its $62.8 billion portfolio of fixed-maturity securities.

Netflix slumped 4.5 percent to $250.26 after saying it added 630,000 new U.S. customers for its Internet TV service in the second quarter, fewer than the average analyst projection of 700,000. The company forecast earnings of 30 cents to 56 cents a share in the third quarter, while the average analyst estimate called for 43 cents. Netflix shares have surged 183 percent this year through yesterday.

Waters Corp. slipped 5.9 percent to $99.17. The maker of laboratory products and instruments cut its full-year earnings forecast to a range of $5 to $5.10 a share. Analysts had estimated $5.21, according to the average estimate.

Broadcom Corp. fell 4.3 percent to $31.83. The maker of chips that help mobile devices connect to the Internet may be losing its market share, Michael McConnell, an analyst with Pacific Crest Securities LLC., said in a note. He cut the stock’s rating to sector perform, an equivalent of neutral, from outperform. The company is due to report results after the market close today.

Tobacco companies fell. The industry may face limits on selling menthol cigarettes in the U.S. after regulators determined the minty flavoring may encourage people to start smoking. Lorillard Inc. dropped 4.5 percent to $44.08. Altria Group Inc. retreated 2.4 percent to $36.

Texas Instruments climbed 4 percent to $38.93 after forecasting third-quarter sales of $3.09 billion to $3.35 billion. Analysts on average had forecast $3.2 billion. The world’s largest analog-chip maker predicted earnings will reach 49 cents to 57 cents a share, according to a statement. Analysts had projected 51 cents.

United Technologies Corp. gained 3 percent to $105.12 for the biggest gain in the Dow. The company boosted the lower end of its 2013 profit forecast after rising demand for jet engines and aerospace components helped second-quarter earnings exceed analysts’ estimates.

Lockheed Martin Corp. added 2 percent to $117.92. The world’s largest defense contractor raised its full-year profit forecast as it reported second-quarter earnings that beat analysts’ estimates. Profit rose at the Lockheed divisions that make missiles and provide training and logistics services, while it fell at the aeronautics unit.

Peabody Energy Corp. added 5 percent to $17.14 for the biggest gain in the S&P 500. The largest U.S. coal producer reported a surprise profit and forecast lower mining costs.

Wendy’s Co. jumped 8.2 percent to $7.23, a five-year high.

The fast-food chain reported earnings that beat estimates and boosted its dividend. The company said it will sell 425 restaurants to franchisees while reducing company ownership to around 15 percent from 22 percent.

Sourcefire Inc. rallied 28 percent to $75.49. Cisco Systems Inc., the biggest maker of networking equipment, agreed to acquire the cybersecurity company for about $2.7 billion. Cisco slid 0.6 percent to $25.56.

CapitalSource Inc. surged 22 percent to $11.97, the most since October 2008. PacWest Bancorp. said it agreed to buy the lender in a deal that will create California’s eighth-biggest commercial bank. CapitalSource investors will get about $11.64 a share in PacWest stock and cash, according to a joint statement.

Have a wonderful evening everyone.

Be magnificent!

Freedom is a state of mind – not freedom from something.

Krishnamurti, 1895-1986

As ever,

Carolann

I believe in pink.

I believe that laughing is the  best calorie burner.

I believe in kissing, kissing a lot.

I believe that happy girls are the prettiest girls.

I believe that tomorrow is another day and I believe in miracles.

-Audrey Hepburn, 1929-1993

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