July 24, 2014 Newsletter

Dear Friends,

Tangents:

Zelda Fitzgerald (nee Sayre) was born on this day in 1900.  She was the beautiful daughter of a well-to-do family from Montgomery, Alabama. Zelda was a  free-spirited, rebellious girl when met author F. Scott Fitzgerald in July 1918.  He noted in his journal that on September 7^th he fell in love with Zelda and the two were married in a small ceremony at New York’s St. Patrick’s Cathedral in April 1920.  A failed ballet dancer and artist, she had a modestly successful career as a novelist, her most famous work being Save Me the Waltz (1932), which she wrote at Phipps Clinic in Baltimore, while recovering from her second mental breakdown.  From the very beginning, the two carried on an extremely codependent, unhealthy, yet enduring and intense love affair.  Diagnosed as a schizophrenic, she died in a fire at the Highland Hospital sanitarium where she had been admitted for depression.  Fitzgerald once wrote on e of Zelda’s doctors, “perhaps fifty percent of our friends and relatives would tell you in all honest conviction that my drinking drove Zelda insane – the other half would assure you that her insanity drove me to drink.  Neither judgement would mean anything.”

Zelda wrote this love letter to Scott:

I look down the tracks and see you coming – and out of every haze and mist your darling rumpled trousers are hurrying to me – Without you, dearest dearest I couldn’t see or hear or feel or think – or live – I love you so and I’m never in all our lives going to let us be apart another night.  It’s like begging for mercy of a storm or killing Beauty or growing old, without you.  I want to kiss you so…-from The Fifty Greatest Love Letters of All Time, edited by David H. Lowenhers.

Photos of the Day

A couple look at stone sculptures at the Remic Rapids in the Ottawa River during sunset at Ottawa July 23. Chris Wattie/Reuters

A man rows a boat on a river in front of new properties in Taiyuan, Shanxi province, China. Reuters

Market Closes for July 24^th , 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

July 24 (Bloomberg) — Canadian stocks were little changed, after reaching a record yesterday, as Domtar Corp. sank on worse-than-forecast earnings and commodities prices retreated.

Domtar, the pulp and paper manufacturer, plunged 7.1 percent as downtime at their mills led to higher unit costs. Teck Resources added 1.3 percent after reporting coal production costs will be lower than previously forecast. Potash Corp. of Saskatchewan Inc. added 0.3 percent after raising its full-year earnings forecast on higher Chinese demand for its fertilizer. Alacer Gold Corp. and OceanaGold Corp. fell at least 4.3 percent as gold declined to a five-week low.

The Standard & Poor’s/TSX Composite Index rose less than a point to 15,394.45 at 4 p.m. in Toronto. The equity index trades at 20.8 times earnings, the highest level since 2010.

Six of 10 industries in the S&P/TSX rose on trading volume 3.1 percent lower than the 30-day average.

Pacific Rubiales Energy Corp. slipped 0.8 percent to C$20.30. Bond investors are becoming increasingly concerned Pacific Rubiales will fail to strike a deal with Colombia’s state-owned Ecopetrol SA to continue drilling at the Rubiales field after its contract expires in 2016.

Domtar sank 7.1 percent to C$41.64, the biggest decline since April 2013, after the company said it took lack-of-order downtime totaling 51,000 tons of paper which resulted in higher unit costs.

Teck Resources, Canada’s largest diversified mining company, rose 1.3 percent for a fourth day of gains after it said its coal mining costs will be 5 percent lower than previously expected this year after job cuts. A ton of coal will cost $52 to $57 to produce, down from an earlier estimate of $55 to $60, Teck said in a statement. Teck expects to produce 6 million metric tons of coal in the third quarter.

Rogers Communications Inc., the nation’s largest wireless carrier, rose 1.1 percent to C$42.88 as the company met analysts’ estimates amid a turnaround plan to return to growth.

Talisman Energy Inc. dropped 1.8 percent to C$11.76 and Crew Energy Inc. fell 1.1 percent to C$10.35. Crude for September delivery slipped 1 percent in New York after gasoline inventories expanded a third week in the U.S.

Bombardier Inc. dropped 1.1 percent to C$3.70, falling for a third day. The aircraft manufacturer will slash about 1,800 jobs from its aerospace business and split the unit into three, in a move to cut costs and improve operations. Bombardier eliminated 1,700 jobs in January, after the company postponed the commercial debut of its CSeries jet for a fourth time.

US
By Oliver Renick

July 24 (Bloomberg) — The Standard & Poor’s 500 Index extended a record as Facebook Inc. rallied on higher revenue, and growth in global manufacturing offset a drop in home sales. Caterpillar Inc. sank on a disappointing forecast, leaving the Dow Jones Industrial Average little changed.

Facebook jumped 5.2 percent to a record after saying second-quarter sales surged 61 percent. Under Armor Inc. surged 15 percent after increasing its 2014 profit target. Caterpillar sank 3.1 percent after forecasting full-year profit that fell short of estimates. D.R. Horton Inc. plunged 12 percent to lead homebuilders lower. Amazon.com Inc. sank 6.2 percent in late trading after reporting a loss wider than analysts’ projected.

The S&P 500 added 0.1 percent to a record 1,987.98 at 4 p.m. in New York. The Dow average slipped 2.83 points, or less than 0.1 percent, to 17,083.80. About 5.7 billion shares changed hands on U.S. exchanges today, in line with the three-month average.

“Earnings are coming in better than expected and the market has taken a queue from that but the economy overall is kind of a mixed bag,” John Kvantas, director of equity research at USAA Investments, said in a phone interview. He helps oversee $63 billion in mutual fund assets. “Housing isn’t coming back and I think there was some hope for more improvement there.”

The S&P 500 rose 0.2 percent yesterday as Apple Inc. helped push technology companies higher, while health-care stocks rallied on earnings. The gauge has advanced 7.6 percent this year amid better-than-estimated corporate results and central- bank support. The index trades at 18.2 times the reported earnings of its members, the highest since 2010.

Global equities advanced today as data showed euro-area manufacturing and services grew in July while Chinese factory activity rose to an 18-month high. Economic reports in the U.S. were mixed, with fewer new U.S. homes sold in June than forecast while jobless claims unexpectedly fell.

U.S. equities pared gains in afternoon trading after Espirito Santo Financial Group SA, the owner of a 20.1 percent stake in Portuguese lender Banco Espirito Santo SA, sought protection from creditors. Global financial markets were roiled early this month on concern that the corporate debt troubles in Portugal could spread.

A Markit Economics Ltd. factory gauge for the U.S. unexpectedly declined to 56.3 in July from 57.3 the previous month. Readings above 50 indicate expansion.

The International Monetary Fund lowered its outlook for global growth this year as expansions weaken from the U.S. to China and military conflicts raise the risk of a surge in oil prices.

Investors are also weighing the threat of new European Union sanctions targeting Russia over the Krelmin’s actions in Ukraine. The EU is preparing to sanction top Russian security officials, including the chiefs of the main successor agency to the Soviet-era KGB and foreign intelligence, over the conflict in Ukraine, according to a draft document obtained by Bloomberg.

The U.S. is pushing Europe to toughen its stance toward President Vladimir Putin a week after the Malaysian jet was hit by a missile American officials say was probably fired from a Russian-supplied launcher. Russia denies involvement.

Ukrainian Prime Minister Arseniy Yatsenyuk resigned after two parties quit the ruling coalition and President Petro Poroshenko signaled his support for early elections.

Fifty companies in the S&P 500 report earnings today. About 77 percent of those that have posted results this season have beaten analysts’ estimates for profit, while 64 percent exceeded sales projections, according to data compiled by Bloomberg.

Profits at S&P 500 members probably rose 6.2 percent in the second quarter, while sales gained 3.3 percent, according to analyst estimates compiled by Bloomberg.

“I’m quite impressed with the results I’ve seen till now,” said Pierre Mouton, who helps oversee $8 billion at Notz, Stucki & Cie. in Geneva. “In most cases, we’ve had companies beating on revenues and earnings, and posting positive outlooks. I don’t think the market can go much higher in the short term because it’s overbought, but I don’t expect any meaningful correction.”

Six of the 10 main S&P 500 groups advanced today, with consumer shares advancing at least 0.3 percent to pace gains.

Facebook climbed 5.2 percent, the most since April, to $74.98. The operator of world’s biggest social network said mobile advertisements helped profit more than double as sales surged.

Tractor Supply Co. jumped 6.6 percent after releasing its financial results to help producers of consumer-discretionary products rally.

Under Armour surged 15 percent for the largest increase in the group. The maker of compression T-shirts and other athletic apparel raised its annual growth forecast. Nike Inc. jumped 1.6 percent for the biggest gain in the Dow.

Zillow Inc. jumped 15 percent and Trulia Inc. rallied 32 percent after a report said Zillow is seeking to acquire Trulia, according to people with knowledge of the matter, in a move to combine the two most-visited U.S. real estate websites.

Amazon.com sank 6.2 percent to $336.35. The world’s largest online retailer reported its biggest quarterly loss since 2012 as Chief Executive Officer Jeff Bezos builds more distribution warehouses, adds grocery deliveries and develops new smartphones and tablets. The shares closed 0.1 percent higher today.

Industrial stocks slid 0.5 percent to pace declines in the S&P 500. Precision Castparts sank 5.5 percent for the biggest loss after reporting profit and sales that missed estimates.

Caterpillar tumbled 3.1 percent, the most since May and the biggest decline in the Dow. The largest maker of mining machinery forecast full-year sales and earnings that fell short of analysts’ estimates as it said there’s no sign of an upturn in the industry in 2014.

Housing shares plunged, with an S&P index of home builders sinking 4.9 percent for its biggest drop in a year. Meritage Homes Corp. sank 3.9 percent and Toll Brothers Inc. slid 4.1 percent as all 11 members of the index retreated.

D.R. Horton dropped 12 percent for the biggest loss and its worst day since November 2009. The largest U.S. homebuilder by revenue said its fiscal-third quarter earnings declined as the company’s sales margin shrank.

Airline stocks slumped, as a third fatal airline crash in the past week left 2014 on track for the worst year in almost a decade for passenger fatalities.

United Continental Holdings Inc. slid 2.4 percent and American Airlines Group Inc. lost 2.7 percent even as the two carriers disclosed dividends earlier in the day.

The disappearance of a McDonnell Douglas MD-83 aircraft on the fringes of the Sahara desert today follows the loss of an ATR-72 turboprop in storms in Taiwan yesterday and the downing of Malaysian Air Flight MH17 over Ukraine last week.

AT&T Inc. fell 1.1 percent. The second-largest U.S. wireless carrier fell short of earnings estimates as more customers started paying for devices with installment plans, an option that’s reducing profits as it cuts monthly service bills.

Qualcomm Inc. dropped 6.7 percent. The chipmaker projected that net income in the current quarter that will fall short of the average analyst estimate. The company cited challenges to its technology-licensing business in China.

TripAdvisor Inc. slumped 5.2 percent. The online travel service posted second-quarter adjusted earnings of 55 cents a share, missing the 61-cent projection of analysts in a Bloomberg survey.

The Nasdaq Biotechnology Index slipped 1.4 percent after four days of gains. Celgene Corp. lost 3.3 percent as its 2014 profit forecast fell short of the average analyst estimate.

Puma Biotechnology Inc. slid 8.8 percent after yesterday surging 295 percent following a successful medical trial. Adage Capital Management LP, the Boston hedge fund started by two former money managers at Harvard University’s endowment, made almost $1 billion yesterday on its 19 percent stake in the company.

Have a wonderful evening everyone.

Be magnificent!

The sum-total of the experience of the sages of the world is available to us

and would be for all time to come.

Moreover, there are not many fundamental truths,

but there is only one fundamental truth which is Truth itself,

otherwise known as nonviolence.

Mahatma Gandhi, 1869-1948

As ever,

Carolann

If you smile when no one else is around, you really mean it.

-Andy Rooney, 1919-2011

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7