July 29, 2013 Newsletter

Dear Friends,

Tangents:

July 29^th, 1958: NASA established.

-from a recent article in the NY Times by Richard A. Friedman, Professor at the Weill Cornell Medical College:

“Ah, the languorous days of endless summer!  Who among us doesn’t remember those days and wonder wistfully where they’ve gone?  Why does time seem to speed up as we age?  Even the summer solstice – the longest, sunniest day of the year – seems to have passed in a flash.  No less than the great William James opined on the matter, thinking that the apparent speed of time’s passage was a result of adults’ experiencing fewer memorable events:

‘Each passing year converts some of this experience into automatic routine which we hardly note at all, the days and the weeks smooth themselves out in recollection to content-less units, and the years grow hollow and collapse.’

Don’t despair.  I am happy to tell you that the apparent velocity of time is a big fat cognitive illusion and happy to say there may be a way to slow the velocity of our later lives….here’s a possible answer:  Think about what it’s like when you learn something for the first time – for example how, when you are young, you learn to ride a bike or navigate your way home from school.  It takes time to learn new tasks and to encode them in your memory.  And when you are learning about the world for the first time, you are forming a fairly steady stream of new memories of events, places and people.  When, as and adult, you look back at your childhood experiences, they appear to unfold in slow motion probably because the sheer number of them gives you the impression that they must have taken forever to acquire.  So when you recall the summer vacation when you first learned to swim or row a boat, it feels endless.  But this is merely an illusion, the way adults understand the past when they look through the telescope of lost time.   This, though, is not an illusion:  almost all of us faced far steeper learning curves when we were young.  Most adults do not explore and learn about the world the way they did when they were young;  adult life lacks the constant discovery and endless novelty of childhood.  Studies have shown that the greater the cognitive demands of a task, the longer its duration is perceived to be.  Dr. David Eagleman at Baylor College of Medicine found that repeated stimuli appear briefer in duration than novel stimuli of equal duration.  Is it possible that learning new things might slow down our internal sense of time?

The question and the possibility it presents put me in mind of my father, who died a few years ago at age 86.  An engineer by training, he read constantly after he retired.  His range was enormous; he read about everything from astronomy to natural history, travel and gardening.  I remember once discovering dozens of magazines and journals in the house and was convinced that my parents had become the victims of a mail-order scam.

Thinking I’d help with the clutter, I began to bundle up the magazines for recycling when my father angrily confronted me, demanding to know what the hell I was doing.  ‘I read all of these,’ he said.

And then it dawned on me.  I cannot recall his ever having remarked on how fast or slow his life seemed to be going.  He was constantly learning, always alive to new ideas and experience.  Maybe that’s why he never seemed to notice that time was passing.

So what, you might say, if we have an illusion about time speeding up?  But it matters, I think, because the distortion signals that we might squeeze more out of life.

It’s simple:  if you want time to slow down, become a student again.  Learn something that requires sustained effort; do something novel.  Put down the thriller when you’re sitting on the beach and break out  a book on evolutionary theory or Spanish for beginners or  a how-to book on something you’ve always wanted to do.  Take a new route to work; vacation at an unknown spot.  And take your sweet time about it.”

Photos of the Day –July 29th, 2013

People walk underneath an umbrella canopy in downtown Belgrade, Serbia. Marko Djurica/Reuters

A child plays at a public fountain in a park in Bucharest, Romania. Bogdan Cristel/Reuters

A person slides down a huge water pipe at a public swimming pool on a hot sunny day in Vienna. Leonhard Foeger/Reuters

Market Closes for July 29^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katie Brennan

July 29 (Bloomberg) — Canadian stocks rose, snapping a four-day slump in the benchmark index, as Hudson’s Bay Co. rallied after announcing a $2.4 billion acquisition and telephone stocks jumped.

Hudson’s Bay, the operator of Canada’s largest department- store chain, surged 5.8 percent after agreeing to acquire luxury U.S. retailer Saks Inc. Telus Corp. and Rogers Communications Inc. added more than 1.4 percent as the industry minister reportedly met with executives of the country’s largest phone companies. Turquoise Hill Resources Ltd. fell 17 percent after parent Rio Tinto Group delayed work on a $5.1 billion underground expansion of a copper mine in Mongolia.

The Standard & Poor’s/TSX Composite Index added 21.14 points, or 0.2 percent, to 12,669.04 at 4 p.m. in Toronto. The gauge declined 0.3 percent last week. Trading volume was 33 percent lower than the 30-day average.

“The Hudson’s Bay, Saks merger is a decent-sized transaction so it’s getting lots of interest. The real-estate implications will continue to garner additional interest as they spin this thing out,” said Brian Huen, managing partner with Red Sky Capital Management Ltd. in Toronto. He helps manage C$220 million ($210 million). “We expect lots of M&A and we are focused on that.”

Hudson’s Bay, Canada’s oldest company, gained 5.8 percent to C$17.45 after agreeing to pay $16 a share in cash for Saks, in a deal that may spur the creation of a real estate investment trust. The price is a 30 percent premium to New York-based Saks’s closing price on May 20, the day before media reports began, according to a statement today. The transaction, which brings together the Lord & Taylor and Saks Fifth Avenue brands, creates a company that will operate 320 stores.

Seven of the 10 groups in the benchmark index rose, as telephone stocks gained the most with a 0.9 percent advance.

Telus added 1.8 percent to C$31.95 and Rogers Communications climbed 1.4 percent to C$41.92.

Canadian Industry Minister James Moore met with senior executives from the country’s mobile-phone companies about their concerns over the possible entry of Verizon Communications Inc. into the market, according to a person familiar with the meetings. Verizon said June 18 that it is interested in acquiring Canadian carriers such as Wind Mobile.

Commodities producers slumped, with energy and raw- materials companies erasing at least 0.1 percent. Health-care companies fell the most, losing 0.6 percent as a group.

Bombardier Inc. added 3.3 percent to C$5.06 after GMP Securities LP analyst Deepak Kaushal rated the world’s largest maker of corporate jets a buy in new coverage, with a target price of C$7. The company also won a contract to provide technology for a new metro line in Riyadh, Saudi Arabia.

Bombardier’s share of the contract amounts to $383 million.

Canadian Natural Resources Ltd. slid 0.7 percent to C$31.97 as Macquarie Research analyst Chris Feltin and Toronto-Dominion Bank downgraded their ratings on the stock to the equivalent of hold. The nation’s largest producer of heavy crude fell the most in more than three months Friday on concern that output next year will be affected due to a leak at its Primrose oil-sands project.

Turquoise Hill lost the most in the S&P/TSX, falling 20 percent to C$4.38 after Rio Tinto delayed the expansion of its Oyu Tolgoi copper mine, pending financing approval by Mongolia’s parliament. Rio controls the mine through its 51 percent stake in Turquoise Hill, which in turn owns 66 percent of the operation. The government owns the remaining stake in the mine, which is forecast to account for a third of Mongolia’s economy.

US

By Alex Barinka

July 29 (Bloomberg) — U.S. stocks fell, paring a monthly gain for the Standard & Poor’s 500 Index, as fewer Americans signed contracts in June to buy previously owned homes.

Energy stocks and financial companies lost more than 0.7 percent for the biggest declines among 10 industries in the S&P 500. Perrigo Co. fell 6.8 percent after saying it will buy Irish drugmaker Elan Corp. for $8.6 billion. Facebook Inc. gained 4.2 percent to the highest price since May 2012, the month of its public offering, amid optimism over mobile ad sales.

The S&P 500 slipped 0.4 percent to 1,685.33 at 4 p.m. in New York. The equity benchmark lost less than 0.1 percent last week, halting its longest streak of weekly gains since May 17.

The Dow Jones Industrial Average dropped 36.86 points, or 0.2 percent, to 15,521.97 today. About 5.19 billion shares changed hands, 18 percent below the three-month average.

“Some of the economic data appears softer than we anticipated,” Eric Teal, who helps oversee $5 billion as chief investment officer at First Citizens BancShares Inc., said via phone from Raleigh. “Some pause might be in order over the next few months after the strong gains the first half of the year.”

The S&P 500 has climbed 4.9 percent this month. The benchmark index surged 149 percent since March 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases by the U.S. central bank. The gauge fell in June, after seven consecutive months of gains, as investors examined economic data to assess when the Federal Reserve will reduce its $85 billion of monthly bond purchases.

The Fed has said economic data will determine the timing and pace of any reduction in its asset purchases. The central bank will probably maintain its benchmark interest rate at 0.25 percent after concluding its two-day policy-setting meeting on July 31, economists predicted. The Fed will begin to reduce its bond-purchase program in September, according to economists surveyed by Bloomberg.

Fewer Americans signed contracts in June to buy previously owned homes, showing rising mortgage rates are beginning to restrain the housing market. The index of pending home sales dropped 0.4 percent, less than forecast, to 110.9 in June after climbing a month earlier to the highest level since December 2006, figures from the National Association of Realtors showed today in Washington. The median forecast in a Bloomberg survey of 40 economists called for a 1 percent decline.

The week will offer further clues to the state of the economy, with the release of data on U.S. gross domestic product and the monthly labor report, as well as monetary policy announcements by the Fed and the European Central Bank.

Investors will also watch this week’s earnings from more than 130 companies listed on the S&P 500. Of the 269 companies in the S&P 500 that have posted results so far this earnings season, 73 percent have exceeded analysts’ estimates for profit and 56 percent have beaten sales projections, data compiled by Bloomberg show.

“It’s still the case that macro is driving markets at the moment,” Ramin Nakisa, an asset allocation strategist at UBS AG in London, told Francine Lacqua on Bloomberg Television. “We are entering a world in which rates are rising, and the Fed’s going to taper. There may be higher volatility, but there will be a bigger appetite for risk. Now we’re seeing a rotation into cyclicals, so markets are saying we want growth.”

The Chicago Board Options Exchange Volatility Index, or VIX, climbed 5.3 percent to 13.39, after adding 1.4 percent last week. The equity volatility gauge reached its highest level this year in June and has since fallen 35 percent.

Energy and financial stocks fell 0.8 percent each. Exxon Mobil Corp. slipped 0.8 percent to $94.03 and Chevron Corp. slumped 1.1 percent to $126.17. Bank of America Corp. lost 1.4 percent to $14.52 for the biggest decline in the Dow while JPMorgan Chase & Co. declined 0.6 percent to $55.69.

Chesapeake Energy Corp., the second-biggest U.S. natural- gas producer after Exxon, dropped 0.4 percent to $22.75. Gas futures slumped in New York to the lowest price in 21 weeks on forecasts for mild weather, after tropical storm Dorian fell apart in the Atlantic.

Perrigo lost 6.8 percent to $125.17 today. The maker of over-the-counter medicines will pay holders of Elan’s American depositary receipts $16.50 per ADR in cash and stock, according to a joint statement today. That’s 11 percent greater than the July 26 closing price for the ADRs. Elan rose 3.6 percent to $15.46 in U.S trading.

Omnicom Group Inc. slipped 0.6 percent to $64.75, reversing an earlier rally of as much as 8.3 percent, after agreeing to merge with Publicis to create a company with revenue of $23 billion and a market value of $35 billion. The shareholders of Publicis and Omnicom will each hold about 50 percent of the new entity, Publicis Omnicom Group.

The combined business will use its scale to negotiate better advertising rates for its clients. Publicis’s Chief Executive Officer Maurice Levy and Omnicom’s CEO John Wren will jointly run Publicis Omnicom.

Interpublic Group of Cos. jumped 4.7 percent to $16.61.

AT&T Inc. rose 0.8 percent to $35.88 as phone stocks advanced the most in the S&P 500.

Saks Inc. added 4.2 percent to $15.95. Toronto-based Hudson’s Bay Co. will buy the luxury department-store retailer for $16 a share in cash, or $2.4 billion, according to a joint statement today.

Facebook gained 4.2 percent to $35.43, the highest price since the month of its initial public offering. The world’s largest social network last week reported that ads on smartphones and tablets generated 41 percent of revenue in the second quarter, up from 14 percent a year earlier.

Caterpillar Inc. rose 1.2 percent to $83.02 for the biggest gain in the Dow. The largest maker of mining equipment said it will buy back $1 billion of common stock from Societe Generale.

Pfizer Inc. added 0.6 percent to $29.54. The world’s biggest drugmaker said it will split up its three major internal businesses and shuffle the management that leads them, part of the company’s preparation for a further break up.

Synta Pharmaceuticals Corp. soared 41 percent to $7.15 for the biggest gain in more than four years. A small trial of its drug in breast cancer met goals warranting expansion of the study.

U.S. financial companies, fueled by the fastest earnings growth in the S&P 500, are poised to reclaim their position as the market’s biggest industry for the first time since the credit crisis.

Banks, brokers and insurance companies make up 16.8 percent of the S&P 500, almost double the level from 2009 and closing in on technology companies at 17.6 percent, according to data compiled by Bloomberg. Bank of America and Morgan Stanley are helping lead gains in the index this month after profits topped analyst estimates. Intel Corp. and Microsoft Corp. are among the worst after earnings trailed forecasts.

For bulls, the change signals banks will lead the economy even after the Fed begins to reduce stimulus. Bears say S&P 500 profits would be down this quarter if not for banks. They note that the last time financials were the biggest industry was in 2008 and the consequences were disastrous.

“The fact that we are seeing banks perform reasonably well provides a certain sense of confidence in the underlying economy,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $130 billion, said in a July 25 phone interview. “Without the financials working, it would be hard to imagine that all the rest would be working at all.”

Have a wonderful evening everyone.

Be magnificent!

Fear is man’s greatest enemy,

and it manifests itself in forms as diverse as shame, jealousy, anger, insolence, arrogance…

What causes fear?  Lack of confidence in oneself.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Our lives improve only when we take chances – and the first

and most difficult risk we can take is to be honest

with ourselves.

-Walter Anderson, 1903-1965

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