July 24, 2013 Newsletter

Dear Friends,

Tangents:

The Poem

Parting [1979]

Jasmine hung in clusters upon the vine,

water-lily buds spread everywhere upon the lake,

all along the boundary hedges

the thorny ironwood had flowered.

As I stood gazing,

“This is how spring should be,”

you said, and left.  That day.

Today

on the branch of a copper-leaf tree

a solitary bird shivers

ruffling its feathers,

a cloud

is set for a lifetime’s wandering,

and along the shores of the lake

standing on one leg

a lone heron

practices austerities.

-by Cheran

Translated by Lakshimi Holmstöm

Photos of the Day –July 24th, 2013

Linda Cerruti performs her routine in the synchronized swimming solo final at the FINA Swimming World Championships in Barcelona, Spain. David J. Phillip/AP

A toad swims between lily leaves in a little pond in Lofer, near Salzburg, Austria. Meteorologists forecast the hot and sunny weather to continue the next days. Kerstin Joensson/AP

Market Closes for July 24^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

July 24 (Bloomberg) — Canadian stocks fell the most in a month as a report showing a manufacturing slowdown in China spurred losses in commodity shares, while Loblaw Cos. rose on better-than-estimated earnings.

Shares in materials producers on the Standard & Poor’s/TSX Composite Index declined 3 percent for the biggest slump in four weeks. Torex Gold Resources Inc. and Barrick Gold Corp. slid more than 5.4 percent. Suncor Energy Inc. lost 1.1 percent as crude tumbled the most in more than a month. Loblaw, Canada’s largest grocer, gained 3.2 percent as profit climbed on higher food and clothing sales.

The equity gauge fell 73.08 points, or 0.6 percent, to 12,672.30 at 4 p.m. in Toronto. The index declined two straight days for the first time in a month, paring its gain for the year to 1.9 percent. Trading volume was 5.8 percent higher than the 30-day average at this time of the day.

“We’ve had a pretty good run here, so the market is taking a bit of a pause as we need to see more earnings reports,” said David Cockfield, a fund manager with Northland Wealth Management in Toronto. The firm manages C$225 million ($219 million).

“Metal producers, in general, are looking at less robust markets for the foreseeable future.”

China’s manufacturing weakened more than estimated in July, according to a preliminary purchasing managers’ index reading of 47.7 released by HSBC Holdings Plc and Markit Economics. Levels below 50 indicate contraction.

Torex Gold plunged 10 percent to C$1.38 and Barrick Gold, the world’s largest producer of gold, lost 5.4 percent to C$17.67. Gold for December delivery sank 1.1 percent, the most in two weeks.

Teck Resources, Canada’s largest diversified miner, fell 2.7 percent to C$23.69. First Quantum Minerals Ltd., a copper producer, retreated 1.4 percent to C$17.13. HudBay Minerals Inc., which produces zinc, copper, gold and silver, lost 6 percent to C$7.25. Copper slipped 0.6 percent in New York, snapping the longest rally in nine months.

Cenovus Energy Inc. sank 5.5 percent to C$30.49 as second- quarter profit slumped 55 percent on higher currency losses and lower hedging gains. More than 50 Canadian companies in the S&P/TSX are scheduled to report earnings over the next week.

Suncor lost 1.1 percent to C$32.85 and Canadian Natural Resources Ltd. retreated 1.2 percent to C$33.80. Energy stocks fell 1.3 percent as a group after crude for September delivery dropped 1.7 percent to settle at $105.39 a barrel in New York, the biggest decline since June 21.

Loblaw gained 3.2 percent to C$49.47. The grocer reported second-quarter adjusted profit of 67 Canadian cents a share, ahead of analysts’ estimates of 59 cents, according to data compiled by Bloomberg.

The company, which agreed to buy Shoppers Drug Mart Corp. this month, said it expects “mid-single” digit operating income growth for 2013.

Rogers Communications Inc. rose 1.8 percent to C$41.95.

Canada’s biggest wireless carrier signed up 98,000 customers to long-term contracts in the second quarter, compared with the 74,000 average estimate of seven analysts surveyed by Bloomberg.

US

By Lu Wang and Katie Brennan

July 24 (Bloomberg) — U.S. stocks fell, giving the Standard & Poor’s 500 Index its first-two day drop in a month, as investors weighed global manufacturing data and earnings reports from Caterpillar Inc. and Apple Inc. Caterpillar slipped 2.4 percent after cutting its forecast.

Broadcom Corp. sank 15 percent after predicting revenue that trailed estimates. Utility shares and homebuilders tumbled amid rising interest rates. Apple advanced 5.1 percent after profit and sales topped forecasts. Ford Motor Co. rose to a 36-month high after raising its full-year earnings target. Facebook Inc. surged 19 percent after the markets closed as the company reported earnings that beat estimates.

The S&P 500 slid 0.4 percent to 1,685.94 at 4 p.m. in New York, after earlier climbing within 3 points of 1,700 for a third straight day. The Dow Jones Industrial Average lost 25.50 points, or 0.2 percent, to 15,542.24, retreating from a record close yesterday.York, extending a record. About 6.3 billion shares traded hands on U.S. exchanges today, in line with the thee-month average.

“The earnings are validating and supporting the market as opposed to pushing the market higher,” Mark Freeman, who oversees about $15.8 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said by telephone. “It just speaks to how far we have come and the amount of positive expectations that have already been cleared by the market.”

The S&P 500 declined yesterday as investors weighed earnings amid speculation on when the Federal Reserve may scale back its asset purchases. Support from central banks and better- than-estimated corporate earnings have driven the S&P 500 up as much as 151 percent from its March 2009 low.

The rally has pushed valuations close to the highest level since May 2010, with the S&P 500 trading at 16.3 times reported earnings, data compiled by Bloomberg show.

When the benchmark index rose to a record close on July 22, the gauge had gained for 12 of the previous 13 trading days, a stretch that hasn’t happened since September 1995, data compiled by Bloomberg show. The 14-day relative-strength index for 83 S&P 500 stocks exceeded 70 that day, the most since May 21, Bloomberg data show. RSI measures the degree to which gains and losses outpace each other and some analysts who watch charts to predict market moves consider a reading over 70 as indicating the stock has risen too far too fast.

“The market has had a big run and we are a bit overbought here,” Bruce Bittles, chief investment strategist at RW Baird & Co., said in a telephone interview from Sarasota, Florida. His firm oversees $100 billion. “There is a lot of optimism coming into the market short-term, so I wouldn’t be surprised if we rested in here for a while.”

The Fed has said economic data will determine the timing and pace of any reduction in its $85 billion in monthly asset purchases. A report today showed sales of new U.S. homes rose more than forecast in June to the highest level in five years.

Separate data from London-based Markit Economics showed manufacturing indexes based on surveys of purchasing managers rose in the U.S. and Germany this month, while China’s manufacturing contracted more than economists estimated.

Investors have turned to corporate earnings, with some 48 members of the S&P 500 reporting today, for additional clues about the health of the U.S. economy. Of the 169 companies in the benchmark gauge that have posted quarterly results so far, 72 percent have exceeded analysts’ profit estimates and 56 percent have topped sales projections, data compiled by Bloomberg show.

Facebook, which is not a member of the S&P 500, jumped 19 percent to $31.66 at 4:25 p.m. in New York. The operator of the world’s most popular social-networking service reported sales and profit that exceeded estimates as the company attracted more marketers to its mobile-advertising services.

The Chicago Board Options Exchange Volatility Index, or VIX, rose 4.2 percent today to 13.19. 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 in June and has since fallen 36 percent.

All 10 S&P 500 main industries fell except for technology companies, which added 1 percent. Utility and commodity shares fell the most, sinking at least 1 percent.

Caterpillar dropped 2.4 percent to $83.44 for the steepest loss in the Dow. The world’s largest maker of mining and construction machinery posted earnings that trailed analysts’ estimates for a third straight quarter and cut its forecast as mining-equipment sales declined on slower commodity demand.

The commodities supercycle, or longer-than-average period of rising prices, is coming to an end and Caterpillar “is tied to the wrong products at the wrong time in the cycle,” short seller Jim Chanos said July 17. Caterpillar’s resource- industries unit is the company’s largest segment by revenue.

Rising Treasury yields, fueled by speculation the Fed will taper bond-buying, accelerated declines among shares of companies that have the highest dividend yields. Utility stocks plunged 1.6 percent today and telephone shares slid 0.6 percent.

The two industries yield the most in the S&P 500.

AT&T Inc. dropped 1.1 percent to $35.40. The largest U.S. phone company posted profit that fell just below analysts’ estimates as costs rose for smartphone discounts used to persuade more customers to sign long-term contracts.

The S&P Supercomposite Homebuilding Index slipped 4.2 percent, with all 11 members declining amid concern rising interest rates may hurt a housing recovery. Lennar Corp. declined 3.8 percent to $33.92. Toll Brothers Inc. retreated 6.2 percent to $32.31.

Broadcom tumbled 15 percent to $27.01 for the biggest drop in the S&P 500. The maker of chips that connect mobile devices to the Internet late yesterday issued a revenue forecast that trailed analysts’ estimates amid slowing smartphone sales.

Motorola Solutions Inc. dropped 6.6 percent to $56.04. The bar-code and two-way radio manufacturer lowered its 2013 sales forecast for the second time since April, citing weak orders.

Walter Energy Inc. plunged 18 percent to $11.53. The metallurgical-coal producer cut its quarterly dividend to 1 cent from 12.5 cents as a condition for amending a $2.73 billion credit pact.

Apple rose 5.1 percent to $440.51, the biggest gain since November. The world’s most valuable technology company, which hasn’t refreshed its iPhone and iPad since last year, managed to top analysts’ earnings projections, even as profit declined from a year earlier and sales were largely flat. The company is slated to release updated versions later this year of its iPhone and iPad, Apple’s top-selling devices. The stock tumbled 40 percent from a record $702.10 on Sept. 19 through yesterday.

“Apple is certainly not a forgotten name, but clearly not looked at with the same intensity as it was when it’s trading at $600, $700,” Rick Bensignor, head of trading strategy at Wells Fargo Securities in New York, said in a phone interview.

“People are just going to look at it to get a sense of some psychology – has it found a bottom?”

Ford gained 2.5 percent to $17.37, the highest since January 2011. The second-largest U.S. automaker raised its forecast after second-quarter earnings climbed more than estimates as the Focus compact and Fusion sedan led a stable of competitive cars.

Eli Lilly & Co. jumped 3.1 percent to $52.55. The maker of the antidepressant Cymbalta and diabetes treatment Humalog reported profit that beat analysts’ estimates and raised its full-year forecast after sales grew faster than expected and cost-cutting programs took effect.

EMC Corp. added 5.6 percent to $26.75. The world’s biggest maker of storage computers posted earnings and sales that matched analysts’ projections. The company said it will buy back $3.5 billion shares in 2013 and the first half of next year.

Electronic Arts Inc., the second-largest U.S. video-game maker, rallied 6.7 percent to $25.41 for the biggest advance in the S&P 500. Growth in sales of Web-delivered titles led to a smaller-than-projected first-quarter loss.

Have a wonderful evening everyone.

Be magnificent!

This craving for position, for prestige, for power, to be recognized by society

as being outstanding in some way, is a wish to dominate others, and this wish to dominate

is a form of aggression.  And what is the reason for this aggressiveness?  It is fear isn’t it?

Krishnamurti, 1895-1986

As ever,

Carolann

Courage is the price that life exacts for granting

peace.

-Amelia Earhart, 1897-1939

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