June 3, 2013 Newsletter

Dear Friends,

Tangents:

On this day in 1621, the Dutch West India Company was granted a charter for a plot of land

that included the New Netherlands, what is now known as New York City. – Steven Russolillo, WSJ, June 3, 2013.

Allen Ginsberg was born on June 3, 1926.

Curtis Mayfield was born on June 3, 1942

I read this in the weekend FT:

SUNDAY MORNING

-by Rob A. Mackenzie

‘Cloquet hated reality but realized it was still the only place

to get a good steak.”

WOODY ALLEN

The New Year headlines are retro.  Graves

open and close like coinless fish-mouths.

The traffic police survive on fish fingers:

cod–and-tatties coffins, frozen stiffs.

I’m trying to deliver my frozen self.

A neighbor punches a hole in the wall,

wails that he’s on Songs of Praise.

That’s too much reality for my life.

In church, I range from point to point.

My sermon’s like a marathon speeded up.

Bible in one hand, New York in the other:

Lou Reed spitting out the Septuagint.

Someone has painted SLOW on the road

and witnessed a rush of broken exhausts.

Why bother?  – a little bread, a little wine,

the rest processed for the quick and dead.

From ‘The Good News” (Salt Publishing)

Photos of the Day –June 3rd, 2013

2-year-old Gigi Gibbs enjoys the colors of summer at Westonbirt Arboretum near Gloucester, England, as temperatures neared 20 Celsius (68 Fahrenheit), to perhaps finally herald in the summer after a spring that has been one of Britain’s coldest for many years. Tim Ireland/PA/AP

An egret feeds its baby on a tree along the River Brahmaputra in Gauhati, India. The arrival of egrets usually indicates the beginning of the monsoon season in this region. Anupam Nath/AP

Market Closes for June 3^rd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

June 3 (Bloomberg) — Canadian stocks dropped for a second day after U.S. manufacturing unexpectedly contracted in May and Goldman Sachs Group Inc. advised selling shares of Canadian Natural Resources Ltd.

Eight of 10 groups in the Standard & Poor’s/TSX Composite Index retreated, with health-care companies contributing most to the decline as Valeant Pharmaceuticals International Inc. slid the most in almost a year. Canadian Natural Resources declined 2.1 percent for a third day of losses. Bellatrix Exploration Ltd. plunged 6.4 percent after saying a joint venture with a Korean partner will not be continued past May 31.

The S&P/TSX fell 40.62 points, or 0.3 percent, to 12,609.80 at 4 p.m. in Toronto. The index has climbed 1.4 percent this year. Trading volume was 9.5 percent lower than the 30-day average.

“After the very good first couple of quarters in the U.S. and Canada, people are taking a bit of a pause before seeing where to go from here,” said Brian Huen, managing partner with Red Sky Capital Management Ltd. in Toronto. He helps manage C$220 million ($213 million). “There’s still lots of chatter around the Fed and whether stimulus gets taken out of the market sooner rather than later. Gold is rallying a little bit here as people are looking for protection against the risk-off trade.”

Data today fueled concern that growth in the U.S., the world’s largest economy and Canada’s biggest trading partner, could slow, as a report from the Institute for Supply Management showed manufacturing unexpectedly contracted in May at the fastest pace in four years.

U.S. equities reversed earlier losses after a Federal Reserve official said the central bank remains committed to unprecedented levels of stimulus that have helped fuel a five- year market rally.

Eight out of 10 industries in the S&P/TSX retreated, led by health-care and phone stocks.

Valeant slumped 4.9 percent to C$90.69, the biggest loss since June 2012, after its Ucyclyd Pharma Inc. subsidiary completed a deal to sell Buphenyl tablets and powder, used to treat urea cycle disorders, to Hyperion Therapeutics Inc.

Hyperion paid $19 million to purchase Buphenyl, and received about a $30 million payment from Ucyclyd, the company said in a release. Valeant has risen 53 percent this year.

Cellular phone companies fell after the Canadian Radio- television and Telecommunications Commission, the nation’s wireless regulator, issued a code of conduct that will allow users to terminate contracts after two years without cancellation fees and limit extra data and roaming charges.

BCE Inc. dropped 1.1 percent to C$46.07, Telus Corp. declined 0.9 percent to C$35.79 and Rogers Communications Inc. slipped 0.5 percent to C$46.77.

Canadian Natural Resources sank 2.1 percent to C$30.24 after Arjun Murti, an analyst with Goldman Sachs, lowered the stock’s rating to sell from neutral. The company has 19 buys, five holds and two sell ratings, according to data compiled by Bloomberg.

Bankers Petroleum Ltd. dropped 3.4 percent to C$2.85 after Christopher Jost, analyst with Goldman Sachs, reduced the stocks’s rating to neutral from buy. The stock has 14 buys and four holds.

Materials shares slipped 0.1 percent as a group. China Gold International Resources Corp. dropped 4.4 percent to C$3.24.

Potash Corp. of Saskatchewan Inc. decreased 2.4 percent to C$42.81.

The price of gold for August delivery gained 1.4 percent to settle at $1,411.90 an ounce in New York. The S&P/TSX Gold Index rallied 0.8 percent to a seven-week high. Centerra Gold Inc. jumped 9.2 percent to C$4.17 and Premier Gold Mines Ltd. added 5.5 percent to C$2.32.

Copper Mountain Mining Corp. surged 10 percent to C$1.73.

Copper climbed 1.2 percent to settle at $3.3305 a pound in New York, the most in almost four weeks. Aluminum, lead, tin and zinc also advanced in London.

Bellatrix Exploration Ltd. plunged 6.4 percent to C$5.10, the lowest since Feb. 12, after announcing that a Korean company that was intended to be a partner for a joint venture was not able to meet a May 31 deadline to close the $300 million Cardium Join Venture project. Bellatrix will consider other partners.

US

By Nikolaj Gammeltoft

June 3 (Bloomberg) — U.S. stocks rose, with the Standard & Poor’s 500 Index erasing earlier losses, after Federal Reserve Bank of Atlanta President Dennis Lockhart said central bank officials are committed to record stimulus measures.

Merck & Co. and Bristol-Myers Squibb Co. jumped at least 3.4 percent as a JPMorgan Chase & Co. analyst said the companies’ experimental cancer drugs show promise. Intel Corp. surged 4 percent after FBR Capital Markets upgraded the chipmaker’s shares. Bank of America Corp. and JPMorgan dropped at least 0.2 for the only losses among the 30 companies in the Dow Jones Industrial Average.

The S&P 500 rose 0.6 percent to 1,640.42 at 4 p.m. in New York. The Dow added 138.46 points, or 0.9 percent, to 15,254.03.

Almost 7.7 billion shares traded hands on U.S. exchanges today, 23 percent higher than the three-month average.

“There certainly seems to be an acute fixation on the timing of any adjustment to the asset purchase program and I guess I would just encourage everyone to not lose sight of the bigger picture,” Lockhart said today in a Bloomberg Television interview in New York with Michael McKee. “Any adjustment is not a major policy shift. The high level of accommodation will stay in place.”

The S&P 500 declined 1.1 percent last week, with stocks alternating between gains and losses during the four sessions, amid data showing uneven performance in the economy. Federal Open Market Committee members have been weighing economic data to determine whether to expand or taper bond purchases that, along with better-than-expected corporate earnings, have propelled the bull market in U.S. equities into a fifth year and driven the S&P 500 up 142 percent from a 12-year low in 2009.

Data today fueled concern that economic growth could slow, as a report from the Institute for Supply Management showed manufacturing unexpectedly contracted in May at the fastest pace in four years. A separate report from the Commerce Department showed construction spending climbed in April, as private projects rose and public spending slumped.

The S&P 500 initially traded higher on the reports before retreating as much as 0.5 percent. The index pared losses in the early afternoon before charging higher after Lockhart’s remarks.

“Bad news can only be good news for so long for stock prices,” John Lynch, the Charlotte-based regional chief investment officer for Wells Fargo Private Bank, said by telephone. His firm manages $170 billion. “At some point it will impact earnings and market levels. I prefer for this market to be more data-dependent going forward, but I think the market is using this report as another reason to say that one man’s speed bump is another man’s stepping stone. So the market is suddenly not concerned about tapering.”

Lockhart said the ISM report is a ‘good example’ that economic data remains ‘very mixed’ and suggests the economy isn’t strong enough to justify a reduction in bond buying.

“I’m not getting a clear picture of an economy that really is tracking with considerable momentum,” he said. “I’d tend to be a little more cautious, and say maybe August, September or later in the year” would be time to consider slowing purchases, he said.

The Chicago Board Options Exchange Volatility Index, or VIX, fell 0.1 percent to 16.28. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, has fallen 9.7 percent this year.

All 10 industries in the S&P 500 advanced, with producers of consumer staples and energy rising at least 1 percent.

Health-care companies added 0.6 percent. Merck rose 3.8 percent to $48.45 and Bristol-Myers Squibb added 3.4 percent to $48.11 after New York-based JPMorgan analyst Chris Schott said the two have promising cancer immunotherpaies.

Bristol-Myers is “well in the lead” with a combination of Yervoy, a medicine already on the market, with its experimental immune therapy nivolumab, Schott wrote in a note to investors today. Meanwhile, Merck is rolling forward “the next agent to watch,” he wrote.

Clovis Oncology Inc. soared 104 percent to a record $74.59.

The biotechnology company reported positive early results in a trial of its ovarian cancer drug.

A gauge of computer-chip makers gained 1.8 percent, the most among 24 industries in the S&P 500, led by Intel.

The chipmaker rallied 4 percent to $25.24, the highest level since August. FBR Capital Markets raised its rating on the stock to the equivalent of buy, saying the world’s largest chipmaker’s development of mobile technology gives it “enough new avenues of growth.”

Financial stocks added 0.2 percent for the smallest gain in among 10 groups in the S&P 500. Bank of America dropped 0.8 percent to $13.55 and JPMorgan slid 0.2 percent to $54.49 for the only drops in the Dow.

An index that tracks homebuilder stocks plunged 1.2 percent, paring a loss of as much as 3.4 percent. Eight of 11 members in the gauge retreated. PulteGroup Inc. slid 1.3 percent to $21.32 and D.R. Horton Inc. slumped 2.4 percent to $23.78.

F5 Networks Inc. declined 4.9 percent to $79.16 for the biggest drop in the S&P 500. Morgan Stanley downgraded its rating on the maker of data-management equipment to equal weight, similar to a neutral rating, from overweight.

Pandora Inc. slumped 11 percent to $15.22. The biggest online radio provider fell after CNET and the New York Times reported Apple Inc. aims to unveil a competing service as early as next week.

Zynga Inc. tumbled 12 percent to $2.99. The biggest maker of online social games said it will cut 520 jobs, or 18 percent of its staff, and close some offices amid disappointing results from its titles outside the Farmville series.

The S&P 500 gained 2.1 percent in May, pushing its winning streak to seven months of advances, the longest stretch since September 2009. The rally, combined with the index’s strong start to the year, may indicate further gains for stocks in June, according to Sam Stovall, S&P’s New York-based chief equity strategist.

A seven-month winning streak has happened 13 times since 1945 and it has led to advances of 0.4 percent on average in the eighth month as stock prices rose 62 percent of the time, Stovall wrote in a note today. The S&P 500’s advances in January and February may also help, as the benchmark U.S. equity index has returned annual gains in each of the 26 years with such a positive start since World War II. The strong starts to the year have been followed by increases of 1 percent in June compared with its normal flat performance.

“Could sell in May have started in the end of the month, rather than the usual? One could easily infer that from the performance of the last three days,” the strategist wrote, referring to the gauge’s 1.8 percent drop in the month’s closing days. “However, history says, but does not guarantee, that the S&P 500’s performance in June could surprise to the upside.”

Have a wonderful evening everyone.

Be magnificent!

A man is a universe in miniature, and the universe, a giant living body;

the cosmos is similar to a large man,

and a man is similar to a small cosmos; so say the Sufis.

Kabir, 1440-1518

As ever,

Carolann

This above all: to thine own self

be true.

-William Shakespeare, 1564-1616

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