June 29, 2015 Newsletter

Dear Friends,

Tangents:

On this day 20 years ago, American space shuttle Atlantis docked with Russian space station Mir to create the biggest man-made satellite ever to orbit the earth.

Numbers of the Day: 
10,928
The number of foreigners that applied to invest in the U.S. through the EB-5 immigrant-investor program—a fast track to green cards—in the fiscal year ended Sept. 30, up more than 70% from 6,346 a year earlier.

3.2 Billion
Combined earnings (in US dollars) of the world’s 100 highest paid athletes in the past 12 months, a rise of 17 percent.

PHOTOS OF THE DAY

The SpaceX Falcon 9 rocket and Dragon spacecraft breaks apart shortly after liftoff at the Cape Canaveral Air Force Station in Cape Canaveral, Fla., Sunday. The rocket was carrying supplies to the International Space Station. John Raoux/AP

Sailing ships take part at the traditional tall ship parade of the Kiel Week sailing event on the Baltic sea in Kiel, northern Germany, Saturday.Carsten Rehder/dpa/AP

Market Closes for June 29^th, 2015

International Markets

Bonds

Currencies

Commodities

A government which robs Peter to pay Paul can always depend on the support of Paul.  –George Bernard Shaw, 1856-1950.

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell the most since January, erasing gains for the year, as global equities slipped after Greek debt talks fell apart over the weekend.

     Royal Bank of Canada and Toronto-Dominion Bank, the nation’s largest lenders, tumbled more than 2.3 percent as financial shares slumped the most in three years. Manulife Financial Corp. lost 3.1 percent as the insurer seeks to raise S$569 million ($421 million) through an initial public offering in Singapore. Pacific Rubiales Energy Corp. and Cenovus Energy Inc. dropped more than 4.4 percent as crude slid.

     The Standard & Poor’s/TSX Composite Index fell 317.94 points, or 2.2 percent, to 14,490.15 at 4 p.m. in Toronto, its biggest drop since Jan. 5. A volatility index of S&P/TSX 60 options jumped 16 percent to 14.40, the biggest jump since Jan. 28.

     “Seems to me it’s an overreaction, it’s an irrational fear,” David Baskin, president of Baskin Wealth Management, said on the phone from Toronto. His firm manages about C$800 million. “I don’t think Europe is going to crumble into the Atlantic and we’ve had time to get used to this, so we’re seeing some buying opportunities.”

     Global markets slumped as investors weighed the chances of a Greek exit from the euro area. The MSCI World Index of developed markets dropped 2 percent, the most in two years. The S&P 500 retreated 2.1 percent in New York, erasing 2015 gains, and the Stoxx Europe 600 plunged 2.7 percent, the most since October.                        

     Greece imposed capital controls, shuttering banks and financial markets until at least July 6, the day after Greeks will vote in a referendum on proposals needed to restore bailout aid. German Chancellor Angela Merkel and French President Francois Hollande signaled they’ve reached the limits of their ability to safeguard Greece, offering no further concessions.

     Enbridge Inc. lost 2.1 percent and Canadian Natural Resources Ltd. tumbled 2.7 percent as energy producers sank 2.2 percent as a group. All 10 industries retreated on trading volume 4.4 percent higher than the 30-day average. Crude dropped to the lowest in more than two months.

     Financial services stocks plunged 2.5 percent, the most since June 2012. Bank of Nova Scotia sank 3 percent and Manulife slumped 3.1 percent. Brookfield Asset Management Inc. declined 4.2 percent.

     The Shanghai Composite Index dropped 3.3 percent, tumbling into a bear market after an interest-rate cut from China’s central bank failed to revive confidence. China’s stock market has plunged from first to worst on global performance rankings as leveraged speculators unwind their positions and a growing number of analysts warn that valuations have climbed too far. China is Canada’s second-largest trading partner after the U.S.

     Mapan Energy Ltd. surged 54 percent after agreeing to sell itself to Tourmaline Oil Corp. in a share deal worth about C$106 million.  Element Financial Corp. rose 1.7 percent after agreeing to buy the bulk of General Electric Co.’s vehicle fleet-management business for $6.9 billion.

US

By Joseph Ciolli

     (Bloomberg) — The Standard & Poor’s 500 Index retreated the most since April 2014, wiping out a gain for the year, as global equities sold off amid concern over fallout from the Greek financial crisis.

     Financial shares in the benchmark index fell 2.5 percent as Citigroup Inc. and JPMorgan Chase & Co. slipped at least 2.5 percent. DuPont Co., Visa Inc. and Boeing Corp. tumbled more than 2.6 percent to pace declines in the Dow Jones Industrial Average. National Bank of Greece ADRs plummeted 24 percent, and the Global X FTSE Greece 20 ETF tumbled 20 percent.

     The S&P 500 Index sank 2.1 percent to 2,057.64 at 4 p.m. in New York, falling toward its average price for the past 200 days. The Dow lost 350.33 points, or 2 percent, to 17,596.35, the biggest drop since October. The Nasdaq Composite Index fell 2.4 percent, the most since April 2014, while the Russell 2000 gauge decreased 2.6 percent for its worst day this year.

     About 7.4 billion shares traded hands on U.S. exchanges, 16 percent above the three-month average. The Chicago Board Options Exchange Volatility Index surged 34 percent, its biggest increase since April 2013.

     “We finally reached the breaking point,” said Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “With so much uncertainty around a potentially negative outcome, the knee-jerk reaction will be to reduce risk assets. You have a potentially very ugly situation this week.”                       

     Greece closed its banks and imposed capital controls, a measure that will deepen the country’s recession and risk driving it toward an exit from the euro. Talks over bailout aid with international creditors collapsed late Friday, as Prime Minister Alexis Tsipras unexpectedly called a July 5 referendum on the austerity demanded by creditors. The European Central Bank froze the level of emergency aid available to Greek lenders Sunday.

     U.S. stocks extended losses in afternoon trading as S&P cut its rating on Greece, with a negative outlook, and said the probability of the country exiting the euro zone is about 50 percent.

     “There was an expectation that something would break positively at the last minute, but it appears it’s going to be a little messier than that,” Kevin Caron, a market strategist and portfolio manager who helps oversee $170 billion at Stifel Nicolaus & Co. in Florham Park, New Jersey. “As things get worse with the Greek economy — social unrest, nervousness and the possibility of an EU exit — there’s the potential for even more weakness.”

     Global stocks plunged, with the MSCI All-Country World Index falling 2 percent for its steepest slide since June 2013. The Stoxx Europe 600 Index slipped 2.7 percent, the most this year, and the Nikkei 225 Stock Average lost 2.9 percent. The Shanghai Stock Exchange Composite Index lost 3.3 percent to enter a bear market.

     Gauges of stock volatility surged around the world as the weekend meltdown in Greece collided with China’s market unraveling and traders bought hedges to stanch the bleeding. The CBOE’s volatility index, known as the VIX, reached its highest level since February and erased its decline for the year.

     The tumble in U.S. equities jolted traders out of a two- month torpor, as many had shrugged off the drama unfolding in Greece. The S&P 500 hasn’t had a weekly move of more than 1 percent since April, and the last time it had a single-day move of more than 2 percent was Dec. 18.

     The benchmark’s decline Monday left it down for the last three months, threatening to halt a streak of nine straight quarterly gains, the longest run since 1998. The S&P 500 has dropped for four straight days, the longest stretch of losses since March.

     The Greek financial crisis provides a good opportunity for investors to snap up U.S. stocks, says Morgan Stanley chief U.S. equity strategist Adam Parker. The current level of U.S. economic strength should be enough to make stock investors look past temporary worries over Greece, especially with earnings coming up next month, he said.

     “I want to buy this dip right now,” Parker said in a television interview on “Bloomberg Markets” with Olivia Sterns and Scarlet Fu. “A couple of weeks from now when earnings kick off you’ll probably go a whole day on Bloomberg without mentioning the word Greece.”

     Leon Cooperman, the founder of the $9.2 billion Omega Advisors, said he sees less than a 50 percent chance of Greece leaving the euro zone.

     The turmoil in Greece prompted questions about the outlook for higher U.S. interest rates.

     “It’s possible that the Fed won’t be in as much of a hurry to raise rates” John Carey, a Boston-based fund manager at Pioneer Investment Management, which oversees about $230 billion, said by phone.

     Federal Reserve Bank of New York President William Dudley said in an interview with the Financial Times that a September interest-rate increase is “very much in play,” after recent stronger-than-forecast data.

     A report today showed contracts to purchase previously owned homes rose in May for a fifth month, indicating recent strength in the real-estate industry will be sustained. Other reports this week include data on manufacturing, home prices and construction spending, as well as the government’s monthly payrolls report due Thursday.

     All 10 of the S&P 500’s 10 main groups declined at least 0.6 percent Monday, with financial, consumer discretionary and raw-material shares tumbling more than 2.3 percent.

     Charles Schwab Corp. and Morgan Stanley decreased more than 3 percent to pace losses in the S&P 500’s financial sector, which saw all 88 companies fall. The group declined the most since February 2014. MetLife Inc. and Prudential Financial Inc. slid at least 3.3 percent.                        

     Shares of the two biggest bond insurers dropped while a gauge of their credit risk surged as Puerto Rico’s governor called the island’s $72 billion of debt “unpayable.” Assured Guaranty Ltd. lost 13 percent, the most in more than three years, while MBIA Inc. slumped 23 percent to its lowest since August 2011.

     Consumer discretionary stocks in the S&P 500 sank 2.5 percent. Macy’s Inc. fell 4 percent, its biggest decline since August, after Deutsche Bank AG downgraded the department-store chain, citing a sales slump and mounting expenses from shipping, retirement and health-care.

     Raw-material companies in the S&P 500 slid the most since January. Dow Chemical Co. dropped 3.6 percent while DuPont lost 3 percent to its lowest level in 16 months.

     Fiat Chrysler Automobiles NV, which makes about a quarter of its sales in the region that includes Europe, retreated 6.8 percent.
 

Have a wonderful evening everyone.

Be magnificent!

The very essence of the Hindu Philosophy

is that man is a spirit, and has a body,

and not that man is a body and may have a spirit also.

Swami Vivekananda

As ever,

Carolann

Where there is no desire, there will be no industry.

                                               -John Locke, 1632-1704

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

Senior Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7