July 7, 2014 Newsletter

Dear Friends,

Tangents:

I spent the weekend reading Donna Tartt’s The Goldfinch, which won the Pulitzer prize for fiction this year.  I am surprised really.  Have any of you read it?  I would really appreciate your comments, because I am not sure how I feel about it; I found it disturbing.  I look forward to hearing from you.

The Fiesta de San Fermin which Hemmingway made famous in The Sun Also Rises begins today in Pamplona, Spain.  It’s hard to believe, but July 2^nd marked the 50^th anniversary of Hemmingway’s death.  He remains one of my favorite writers ever and his books are indelibly printed in my memory.  I pick them up from time to time to read again.  The writing is so beautiful.

One of the most beautiful and frequently quoted examples of Hemingway’s style is the opening paragraph of A Farewell to Arms:

In the late summer of that year we lived in a house in a village that looked across the river and the plain to the mountains. In the bed of the river there were pebbles and boulders, dry and white in the sun, and the water was clear and swiftly moving and blue in the channels. Troops went by the house and down the road and the dust they raised powdered the leaves of the trees. The trunks of the trees too were dusty and the leaves fell early that year and we saw the troops marching along the road and the dust rising and leaves, stirred by the breeze, falling and the soldiers marching and afterward the road bare and white except for the leaves.

Photos of the Day Sunflowers are in full bloom in a field near Priestewitz, eastern Germany. Jan Woitas/dpa/AP

The pack climbs Cray pass during the first stage of the Tour de France cycling race over 190.5 kilometers (118.4 miles) with start in Leeds and finish in Harrogate, England, July 5. Laurent Cipriani/AP

Market Closes for July ^7th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Gerrit De Vynck

July 7 (Bloomberg) — Canadian stocks fell the most in two weeks, pulled down by energy stocks, as the price of West Texas Intermediate crude extended its longest losing streak since 2009.

Canyon Services Group Inc. and RMP Energy Inc. fell at least 4.9 percent to pace losses among energy companies on the benchmark Canadian index. Telus Corp. and Rogers Communications Inc. dropped more than 1.5 percent as phone companies slid.
BlackBerry Ltd. jumped 5.7 percent.

The Standard & Poor’s/TSX Composite Index fell 42.03 points, or 0.3 percent, to 15,172.93 at 4 p.m. in Toronto. The gauge is up 11 percent this year.

Energy companies fell 0.8 percent as a group as West Texas Intermediate fell for a seventh day and Brent oil dropped ahead of a planned increase in exports from Libya.

Canyon Service Group fell 8.6 percent to C$18.17 and RMP Energy decreased 4.9 percent to C$9.42.

Telecommunications companies lost 1.1 percent, the most among the 10 industries in the benchmark index, as the Canadian government said it will auction additional wireless spectrum next year to smaller carriers in a bid to fuel competition for telephone services. Telus, BCE Inc. and Rogers Communications together control 90 percent of the nation’s wireless customers.

BlackBerry gained 5.7 percent to C$12.01, its biggest gain since June 20, the day after it reported better-than-forecast earnings. Chief Executive Officer John Chen has said he has stabilized the company to the point where he is working toward revenue growth next year.

Avino Silver & Gold Mines Ltd. gained 2.5 percent to C$2.35 after saying it would sell up to $25 million in new shares. The company said it plans to use the money to acquire and develop the Bralorne mine in British Columbia.

Crown Point Energy Inc. lost 4 percent to 37 Canadian cents after saying it sold its El Valle oil concession in Argentina for $525,000.

Alimentation Couche-Tard Inc. fell 1.9 percent to C$28.80 after the convenience store operator missed analyst estimates for its fourth-quarter earnings.

USA

By Joseph Ciolli

July 7 (Bloomberg) — U.S. stocks fell from records, led by a plunge among small companies, as investors weighed valuations and speculated the Federal Reserve may raise interest rates sooner than expected.

GT Advanced Technologies Inc. sank 16 percent after Canaccord Genuity Group Inc. downgraded the stock to hold from buy. Expedia Inc. slid 1.7 percent after agreeing to make a $658 million acquisition. Peabody Energy Corp. fell 3.7 percent to lead energy producers lower. PetSmart Inc. gained 2.5 percent after a second large shareholder prodded the company to consider selling itself.

The Standard & Poor’s 500 Index fell 0.4 percent to 1,977.65 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 44.05 points, or 0.3 percent, to 17,024.21. The Russell 2000 Index of small companies slid 1.8 percent, the most since April. About 5.1 billion shares changed hands today on U.S. exchanges, 14 percent below the three-month average. U.S. equities markets were closed July 4 for the Independence Day holiday.

“Rates are going to go up before people expect,” Tom Stringfellow, president and chief investment officer of San Antonio-based Frost Investment Advisors LLC, which manages about $10 billion, said in a phone interview. “And when rates do go up, I expect some sort of a knee-jerk reaction. But I don’t believe for a moment that the Fed’s going to raise rates at a speed that derails this stable environment.”

Both the S&P 500 and the Dow average advanced 1.3 percent last week, with the 30-stock gauge closing above 17,000 for the first time, as monthly payroll addition exceeded 200,000 for a fifth month in June.

The Russell 2000 last week recovered nearly all its losses from a two-month selloff of Internet and small-cap shares, coming within a point of an all-time high.

Goldman Sachs Group Inc. brought forward its forecast for the Fed to raise interest rates, joining companies including JPMorgan Chase & Co. and Bank of Tokyo-Mitsubishi UFJ Ltd. in moving up estimates following the jobs data last week.

The central bank will increase its benchmark rate in the third quarter of 2015, rather than the first three months of 2016, Goldman Sachs Chief Economist Jan Hatzius wrote in a report yesterday.

Policy makers have kept their target for overnight lending between banks in a range of zero to 0.25 percent since December 2008. The central bank will publish the minutes of its June
17-18 meeting on July 9.

Fed Chair Janet Yellen said on July 2 that concerns about financial stability shouldn’t prompt a change in current policy.
Three rounds of monetary stimulus from the Fed and better than- forecast corporate earnings have driven the S&P 500 up more than 190 percent from its March 2009 bottom.

The equities benchmark is trading at 16.7 times the projected earnings of its members, higher than the five-year average multiple of 14.3. The Chicago Board Options Exchange Volatility Index, the measure known as VIX that tracks investors’ estimate of future volatility, slumped last week to the lowest level since February 2007. The gauge surged 9.8 percent to 11.33 today, the biggest gain since June 24.

“Valuations are pretty stretched, and we don’t see a lot of revenue growth, which might be negative for the market,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $110 billion, said in a phone interview. “There may be some concern about earnings, but this is basically a market being driven by an improving economy and guarantees by the Federal Reserve that they’re not going to raise interest rates.”

Alcoa Inc. will unofficially open the second-quarter earnings-reporting season tomorrow. Profit at companies in the S&P 500 increased 5 percent in the three months through June, estimates compiled by Bloomberg show.

Seven of the 10 main S&P 500 groups retreated today, with materials producers sliding 0.8 percent for the biggest loss.

Peabody Energy fell 3.7 percent, as energy stocks lost 0.6 percent as a group. Chesapeake Energy Corp. dropped 4.6 percent as the price of natural gas posted the biggest one-day drop in four months in New York.

Delta Air Lines Inc. sank 4.4 percent to the lowest since April and United Continental Holdings Inc. fell 3.2 percent as airlines retreated.

GT Advanced Technologies dropped 16 percent to $16.50.  Canaccord said the company is unlikely to get a boost in earnings in 2016 unless Apple Inc. uses its sapphire in all models of the iPhone.

Expedia fell 1.7 percent to $80.85. The online travel- booking service agreed yesterday to buy Australia’s Wotif.com Holdings Ltd. for about $658 million, seeking to expand its presence in the Asia-Pacific region.

Archer-Daniels-Midland Co. climbed 1.6 percent to $46.50.  Miller Tabak + Co. raised its rating on the stock to buy from hold after ADM said it will acquire Wild Flavors GmbH for $3 billion. The takeover will help the world’s top corn crusher diversify from grain processing and gain a bigger foothold in overseas markets for food and beverages made with more natural raw materials.

PetSmart gained 2.5 percent to $68.95. Shareholder Longview Asset Management LLC sent a letter to the board of the pet- supply retailer today saying the company should consider a sale.
PetSmart, under pressure from hedge fund Jana Partners LLC to pursue alternatives including a sale, said earlier it is reviewing changes to its capital structure to return more money to shareholders.

Have a wonderful evening everyone.

Be magnificent!

As long as individuality survives, that is,

as long as you continue to see others as separate from you,

a feeling of hostility towards them cannot fail to prevail.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

If wrinkles must be written upon our brows,

let them not be written upon the heart.

The spirit should not grow old.

-James A. Garfield, 1831-1881

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