June 27, 2013 Newsletter

Dear Friends,

Tangents:

On this day in 1859, the song “Happy Birthday to You”  was composed.

Helen Keller was born on June 27^th, 1880.

The world is full of suffering but it is also full of people overcoming it. –Helen Keller, 1880-1968.

I read an interesting article in the Wall Street Journal today entitled How Woody Allen Sees It.  It is amazing that as he approaches 80 years old, he shows no signs of slowing down.  His next film, Blue Jasmine, starring Cate Blanchett and Alec Baldwin is due to be released next month.  This will be his 48^th feature film!  I have always been a big fan of his movies – ever since Annie Hall.  Of his  recent ones, I loved Midnight in Paris and Vicky Cristina Bacelona.  Amazingly, he still rehearses  with his jazz ensemble most Thursdays and every Monday night he plays clarinet at the Carlyle Hotel in New York. I saw him there a few times – he really is a pretty good musician. And he frequently writes pieces for The New Yorker magazine, which whenever I see one, I immediately turn to it, because they are invariably funny and insightful.  Right now, according to the article, he’s also working with the theater director Susan Stroman on a Broadway musical version of his 1994 film Bullets Over Broadway, and he just finished acting in another movie written and directed by John Turtorro.

In the article, Allen ventured this explanation about his restlessness, “You know in a mental institution they sometimes give a person some clay or some basket weaving?  It’s the therapy of moviemaking that has been good in my life.  If you don’t work, it’s unhealthy – for me, particularly unhealthy.  I could sit here suffering from morbid introspection, ruing my mortality, being anxious.  But it’s very therapeutic to get up and think, Can I get this actor; does my third act work?  All these solvable problems that are delightful puzzles, as opposed to the great puzzles of life that are unsolvable, or that have very bad solutions.  So I get pleasure from doing this.  It’s my version of basket weaving.”

Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all. –Dale Carnegie, 1888-1955.

Photos of the Day –June 27th, 2013

Tristan Robertson Jeyes (l.) drives a $383 pink Cadillac next to Jayla Silva on a $244 mini dodgem in Hamleys toy store during the Christmas in June media event in London. Paul Hackett/Reuters

People line the streets to cheer the passing motorcade of first lady Michelle Obama as she travels to visit the all-girls Martin Luther King Middle School in Dakar, Senegal. Carolyn Kaster/AP

Market Closes for June 27^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

June 27 (Bloomberg) — Canadian stocks rose as higher crude and copper prices bolstered commodities producers and utilities shares rallied after TransAlta Corp. agreed to split off its renewable power facilities.

Aimia Inc. soared 11 percent after agreeing to a conditional deal for Toronto-Dominion Bank to be its primary credit card partner. First Quantum Minerals Ltd. gained 4.1 percent as copper advanced. Enerplus Corp. jumped 3.2 percent after crude prices rallied to a one-week high. TransAlta surged the most in nearly five years after saying it will raise as much as C$250 million ($238 million) by selling a stake in a new renewable power-generating unit.

The Standard & Poor’s/TSX Composite Index rose 53.88 points, or 0.5 percent, to 12,005.78 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has lost 5.1 percent this month, erasing its gain for 2013, and is headed for the first quarterly loss in a year. Trading volume was 2.2 percent lower than the 30-day average.

“We’re in a slow-growth period but the direction is still up, and I don’t see any major elements to disrupt this market,” said David Cockfield, fund manager with Northland Wealth Management in Toronto. He helps manage C$225 million ($215 million) with the firm. “In the U.S. economy there’s lots of pent-up demand and it looks like the consumer is out there spending.”

U.S. consumer spending rebounded in May, rising 0.3 percent after a 0.3 percent decline in April, which was the most in more than three years. The U.S. is Canada’s largest trading partner.

A semi-annual measure of exporter confidence in Canada rose to 72.6 from 70.7, according to a report from Export Development Canada, suggesting companies are less pessimistic about U.S. and European demand.

Eight of 10 groups in the S&P/TSX advanced today, paced by a 2.2 percent gain among utilities stocks.

TransAlta surged 10 percent to C$14.36, the biggest increase since October 2008. The electric generation and marketing company expects to raise C$200 million to C$250 million by selling a 15 to 20 percent stake in a new company that will house its wind and hydro power-generation assets.

Aimia, which operates the Aeroplan loyalty program, surged 11 percent to C$15.40, for the biggest gain since July 2009, after announcing the tentative deal with TD Bank. The company had been negotiating with Canadian Imperial Bank of Commerce, its existing credit-card partner, to extend a 22-year partnership that expires at the end of the year.

CIBC, which has the right to match the terms of the agreement by Aug. 9, added 0.4 percent to C$75.31. TD Bank climbed 0.6 percent to C$83.90.

Raw-materials producers rose 1 percent, with 43 of 55 stocks advancing. The group has plunged 18 percent in June, headed for the biggest slump since October 2008.

Teck Resources Ltd., Canada’s largest diversified miner, rose 2.2 percent to C$22.24 and First Quantum Minerals added 4.1 percent to C$15.25 as copper advanced 0.2 percent a pound in New York. Nickel prices in London rose from a four-year low to lead a rebound in base metals. Zinc and lead also gained.

B2Gold Corp. slid 3.9 percent to C$1.95 after the price of the precious metal fell below $1,200 to extend its slump to a 34-month low.

Enerplus increased 3.2 percent to C$15.34 and Bankers Petroleum Ltd. added 2 percent to C$2.61. Crude for August delivery rallied 1.6 percent to settle at $97.05 a barrel in New York, the highest since June 19.

Niko Resources Ltd. surged 23 percent to C$9.25, after the company said press reports in India indicate the government has approved a new pricing formula for domestic gas sales in the country. Upon expiry of current contracts next year, gas prices from the D6 block Niko is developing off the east coast of India will double, the company said.

Whitecap Resources Inc. climbed 2.5 percent to C$10.49 after agreeing to buy energy assets in Alberta from Barrick Gold Corp. for C$173.6 million. The light-oil assets produce 2,900 barrels of oil equivalent a day. The company is also raising its dividend by 5 percent to 5.25 Canadian cents a share, beginning with the October payment.

US

By Nikolaj Gammeltoft and Katie Brennan

June 27 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index to its biggest three-day rally since January, on better-than-estimated economic data and assurances on stimulus efforts from Federal Reserve officials.

Nine of 10 industries in the S&P 500 advanced. JPMorgan Chase & Co. and Citigroup Inc. gained more than 1.2 percent as financial companies rallied. An S&P index that tracks homebuilders surged 2.9 percent as D.R. Horton Inc. and Lennar Corp. increased at least 3.8 percent. Time Warner Cable Inc. jumped 4.4 percent as billionaire John Malone was said to be exploring scenarios for how Charter Communications Inc. could acquire the company.

The S&P 500 advanced 0.6 percent to 1,613.20 at 4 p.m. in New York. The Dow Jones Industrial Average rose 114.35 points, or 0.8 percent, to 15,024.49. Almost 6.2 billion shares changed hands on U.S. exchanges, 4.4 percent below the three-month average.

“The data continues to show that the economy is growing at a very slow pace and that unemployment is improving at a very slow pace,” Oliver Pursche, co-manager of the GMG Defensive Beta Fund and president of Suffern, New York-based Gary Goldberg Financial Services, said in a phone interview. The firm manages about $650 million. “It means the likelihood that the Federal Reserve changing course on its monetary policy this year is very low, and that further solidifies the case that last week’s correction was emotionally driven and an overreaction.”

The S&P 500 has rallied 2.6 percent over the past three days, the most since Jan. 4 and paring its decline for June to 1.1 percent. The index dropped more than 5 percent from May 21 through June 24 as the Fed said it may reduce its bond purchases if the economy and labor market improve as forecast.

Central bank stimulus has helped fuel a rally in stocks worldwide, with the benchmark U.S. index surging as much as 147 percent from its March 2009 low. Despite this month’s decline, the S&P 500 is up 2.8 percent for the quarter and has soared 13 percent for 2013.

Consumer spending in the U.S. rebounded in May following the largest drop in more than three years. Household purchases, which account for about 70 percent of the economy, rose 0.3 percent after a 0.3 percent decline the prior month, Commerce Department figures showed today in Washington. Incomes advanced 0.5 percent, more than projected.

More Americans signed contracts in May to buy previously owned homes than at any time in more than six years. Claims for unemployment benefits decreased by 9,000 to 346,000 last week, indicating employers are slowing the pace of firings.

Fed Bank of New York President William C. Dudley said in New York today that the central bank may prolong its asset- purchase program if the economy’s performance fails to meet its forecasts. Fed Governor Jerome Powell said in Washington that asset purchases may be scaled back later this year if growth holds up, and any such trimming depends on economic data rather than the calendar.

The comments came a day after Fed Bank of Richmond President Jeffrey Lacker said he expects the U.S. expansion to remain “sluggish” for “a couple more years.”

Data yesterday showed gross domestic product expanded at a slower-than-forecast 1.8 percent annualized rate in the first quarter, fueling speculation the Fed will maintain the pace of quantitative easing.

The Chicago Board Options Exchange Volatility Index, or VIX, retreated 2 percent to 16.86. The benchmark gauge for U.S. stock options surged to the highest level since Dec. 28 last week. The index has fallen 11 percent this week.

Financial and phone companies advanced more than 0.9 percent to lead gains among S&P 500 industries. The Morgan Stanley Cyclical Index of stocks whose earnings are most tied to economic growth increased 1.1 percent. Hewlett-Packard Co. climbed 3.2 percent to $24.77. Boeing Co., the world’s largest planemaker, rallied 2.4 percent to $103.15.

An S&P index of homebuilders jumped 2.9 percent for a third day of gains, as 10 of 11 members advanced following the report on existing-home sales. D.R. Horton jumped 3.8 percent to $21.71. Lennar surged 3.8 percent to $37.38.

Financial stocks jumped 1.3 percent as a group. JPMorgan climbed 1.2 percent to $53.15. Citigroup added 1.4 percent to $48.28. American Express Co. rose 1.7 percent to $75.12.

Time Warner Cable surged 4.4 percent to $108.22. Malone’s Liberty Media Corp., which owns 27 percent of Charter Communications, is working on how to structure an offer with enough cash to win over Time Warner Cable investors, according to people familiar with the discussions. Time Warner Cable isn’t interested in a deal and doesn’t think Liberty and Charter can come up with an offer that’s attractive, according to people familiar with management’s thinking.

ConAgra Foods Inc. added 5.1 percent to $35.04. The maker of Chef Boyardee pasta and Pam cooking spray reported quarterly profit that topped analysts estimates as acquisitions drove sales in its consumer foods unit.

Paychex Inc. dropped 3.7 percent to $36.60. The payrolls manager reported fourth-quarter earnings per share of 34 cents, below the average analyst estimate for profit of 37 cents.

Revenue in the period was $585.3 million, missing the $586.2 million average projection.

Investors should expect about $13 billion in selling of equities and buying of bonds as pension fund managers rebalance their portfolios at the end of the second quarter, Ramon Verastegui, a derivatives strategist at Societe Generale SA in New York, wrote in a June 25 note.

The S&P 500 has outperformed government bonds since the end of March with a total return of 2.7 percent through yesterday compared with a 5.1 percent loss for 10-year Treasuries, according to data compiled by Bloomberg and Bank of America Merrill Lynch.

U.S.-listed bond mutual funds and exchange-traded funds saw record monthly redemptions of $61.7 billion through June 24, according to TrimTabs Investment Research, amid concern the Fed may scale back its unprecedented stimulus. Mutual funds that invest in U.S. stocks had $463 million in outflows in the five days that ended with the Fed’s policy statement on June 19, according to data from the Investment Company Institute released today. Redemptions since May 16 total $7.3 billion.

“The flows coming out of fixed income need to go somewhere,” Bill Schultz, chief investment officer who oversees about $1.1 billion at McQueen Ball & Associates in Bethlehem, Pennsylvania, said by phone. “Money market funds don’t offer anything, bonds are less attractive, so U.S. domestic equities on a relative scale look like the most attractive asset going forward.”

Have a wonderful evening everyone.

Be magnificent!

We must always bear in mind

that we are not going to be free,

but are free already.

Every idea that we are bound is a delusion.

Every idea that we are happy or unhappy

is a tremendous delusion.

Swami Vivekananda, 1863-1902

As ever,

Carolann

Cock your hat – angles are attitudes.

-Frank Sinatra, 1915-1998

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