June 5, 2014 Newsletter

Dear Friends,

Tangents:

And on this day:

On June 5, 1968, Sen. Robert F. Kennedy was shot and mortally wounded just after claiming victory in California’s Democratic presidential primary. Gunman Sirhan Bishara Sirhan was immediately arrested.
2004 – Ronald Reagan, the 40th president of the United States, died in Los Angeles at age 93 after a long struggle with Alzheimer’s disease.

1883 – Economist John Maynard Keynes was born.

I was in NYC last weekend and came across this article in the New York Post:

THE ROAD TO D-DAY – AND ONWARD

By Victor Davis Hanson

Seventy years ago this June 6, the Americans, British and Canadians stormed the beaches of Normandy in the largest amphibious invasion of Europe since the Persian king Xerxes invaded Greece in 480 BC.

About 160,000 troops landed on five Normandy beaches and linked up with airborne troops in a masterful display of planning and courage.  Within a month, almost a million troops had landed in France and were heading eastward toward the German border.  Within 11 months, the war with Germany was over.

The western front required the diversion of hundreds of thousands of German troops.  It weakened Nazi resistance to the Russians while robbing the Third Reich of its valuable occupied European territory.

The impatient and long-suffering Russians had demanded of their allies a second front commensurate with their own sacrifices.  Their Herculean efforts by war’s end would account for two out of every three dead German soldiers – at a cost of 20 million Russian civilian and military casualties.

Yet for all the sacrifices of the Soviet Union, Josef Stalin was largely responsible for his war with Nazi Germany.  In 1939, he signed a foolish non-aggression pact with Hitler that allowed the Nazis to gobble up Western democracies.  Hitler’s Panzers were aided by Russians in Poland and overran Western Europe fueled by supplies from the Soviets.

The Western Allies had hardly been idle before D-Day.  They had taken North Africa and Sicily from the Germans and Italians.  They were bogged down in brutal fighting in Italy.  The Western Allies and China fought the Japanese in the Pacific, Burma and China..

America and the British Commonwealth fought almost everywhere.  They waged a multiform war on and under the seas.  They eventually destroyed Japanese and German heavy industry with a costly and controversial strategic bombing campaign.

The Allies sent friends such as the Russians and Chinese billions of dollars worth of food and war materiel.

In sum, while Russia bore the brunt of the German land army, the Western Allies fought all three Axis powers everywhere else and in every conceivable fashion.

Yet if D-Day was brilliantly planned and executed, the followup advance through France in June 1944 was not always so.  The Allies seemed to know the texture of every beach in Normandy, but nothing about the tick bocage just a few miles inland from Omaha Beach.  The result was that the Americans were bogged down in the French hedgerows for almost seven weeks until late July – suffering about 10 times the casualties as were lost from the Normandy landings.

So how did the Allies get from the beaches of Normandy to Germany in less than a year?  Largely by overwhelming the Wehrmacht with lots of good soldiers and practical war materiel.  If German tanks, mines, machine guns and artillery were superbly crafted, more utilitarian American counterparts were good enough – and about 10 times as numerous.  Mechanically intricate German Tiger and Panther tanks could usually knock out durable American Sherman tanks, but the Americans produced almost50,000 of the latter, and the Germans less than 8,000 of the former.

Over Normandy, UK and US fighter aircraft were not only as good or better than German models but were far more numerous.  By mid-1944, Germany had produced almost no four-engine bombers.  The British and Americans built almost 50,000 that by 1944 were systematically leveling German cities.

Winston Churchill and Franklin Roosevelt were far more pragmatic supreme commanders than the increasingly delusional and sick Adolf Hitler, American war planners such as George Marshall, Dwight Eisenhower and Alan Brooke understood grand strategy better than the more experienced German chief of staff.  Allied field generals such as George S. Patton and Bernard Montgomery were comparable to German legends like Gerd von Rundstedt or Erwin Rommel, who were worn out by 1944.

The German soldier was the more disciplined, experienced, armed and deadly warrior of World War II.  But his cause was bad, and by 1944 his enemies were far more numerous and far better supplied.  No soldiers fought better on their home soil than did the Russians, and none more resourcefully abroad than the British Tommy and the American GI, when bolstered by ample air, armor and artillery support.

Omaha Beach to central Germany was about the same distance as the Russian Front to Berlin.  But the Western Allies covered the same approximate ground in about a quarter of the time as had the beleaguered Russians.

D-Day ushered in the end of the Third Reich.  It was the most brilliantly conducted invasion in military history, and probably no one but a unique generation of British, Canadians and Americans could have pulled it off.

General George Smith Patton’s message to Eisenhower after he crossed the Seine in World War II:

Dear Ike, Today I spat in the Seine.

-from The American Treasury, C. Fadman.

Photos of the day

British World War II veteran Frederick Glover poses for a photograph as soldiers parachute down during a D-Day commemoration paratroopers launch event in Ranville, western France on the eve of the 70th anniversary of the World War II Allied landings in Normandy. D-Day ceremonies on June 6 this year mark the 70th anniversary of the launch of ‘Operation Overlord’, a vast military operation by Allied forces in Normandy. Thomas Bregardis/AP

History enthusiasts wearing World War Two US military uniforms re-enact a D-Day landing on Omaha Beach in Vierville sur Mer, on the coast of Normandy, France. Pascal Rossignol/Reuters

Market Closes for June 5^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Gerrit De Vynck

June 5 (Bloomberg) — Canadian stocks rose for a fifth day as losses among telecommunications companies were overshadowed by gains in mining and industrial companies.

Telus Corp. fell 0.9 percent to lead losses among telecommunications companies. Transcontinental Inc. added 2.1 percent after second-quarter earnings beat analyst estimates.  Detour Gold Corp. rose 7.9 for the best performance among mining shares.

The Standard & Poor’s/TSX Composite Index gained 3.39 points, or less than 0.1 percent, to 14,800.18 at 4 p.m.  Telecommunications companies have risen 7.6 percent this year as Telus and BCE Inc. add mobile phone subscribers.

The European Central Bank cut its deposit rate to minus 0.1 percent in a bid to ward off deflation. The stimulus announcement didn’t have a big effect on the Canadian market because the move was expected, said Irwin Michael, who helps oversee C$900 million ($820 million) as a fund manager at ABC Funds in Toronto.

“It was the worst-kept secret, we knew they would have to do something,” Michael said by phone. “They’ve got to get things moving there so we’re not surprised.”

Energy companies fell 0.2 percent as a group. ShawCor Ltd., Cameco Corp. and Husky Energy Inc. fell the most among energy companies on the benchmark index, dropping at least 1.4 percent.

Material producers rose 0.8 percent and industrial companies gained 0.6 percent.

Transcontinental rose 2.1 percent to C$15.41. The Montreal- based company, which owns newspapers and prints advertising fliers, made 47 Canadian cents per share in the second quarter compared with an average estimate from analysts of 43 Canadian cents.

Cogeco Cable Inc. fell 3.4 percent to C$61.80 as TD Securities cut its rating. The company is up 29 percent this year.

Just Energy Group Inc. rose 6.5 percent to C$6.55 after saying it would pay down debt and sell its water heater business for C$505 million.

Detour Gold gained 7.9 percent to C$11.35 after Raymond James Ltd. raised its rating on the stock to a strong buy from outperform and the price of gold climbed the most in two weeks.

USA

By Joseph Ciolli

June 5 (Bloomberg) — U.S. equity benchmarks rose to records and the Russell 2000 Index rallied to the highest since April, as European Central Bank stimulus boosted optimism in the global economy before tomorrow’s jobs report.

Twitter Inc. and Amazon.com Inc. soared more than 3 percent as Internet shares jumped after hedge fund manager David Tepper expressed renewed confidence in U.S. equities. Ciena Corp.

surged 18 percent as earnings beat analyst estimates. Sprint Corp. dropped 4 percent after people with knowledge of the matter said it is nearing a price agreement for a potential acquisition of T-Mobile US Inc.

The Standard & Poor’s 500 Index rose 0.7 percent to 1,940.46 at 4 p.m. in New York. The Dow Jones Industrial Average added 98.58 points, or 0.6 percent, to 16,836.11. Both gauges closed at all-time highs. The Russell 2000 index of smaller companies jumped 2 percent. About 5.9 billion shares changed hands today on U.S. exchanges, 5.8 percent below the three-month average.

“Mario Draghi is taking a sledgehammer to the disinflationary environment in the eurozone,” said Chad Morganlander, a fund manager at Stifel Nicolaus & Co., which oversees $160 billion, from Florham Park, New Jersey. “His actions are well beyond expectations.”

ECB President Mario Draghi reduced the deposit rate to minus 0.1 percent from zero, making the institution the world’s first major central bank to use a negative rate. Policy makers lowered the benchmark rate to 0.15 percent from 0.25 percent.

In a bid to get credit flowing to parts of the economy that need it, the ECB also opened a 400-billion-euro ($542 billion) liquidity channel tied to bank lending and officials will start work on an asset-purchase plan. A worsening in the euro area’s economic outlook and a prolonged spell of slow inflation prompted the ECB to act to preserve the fragile recovery in the world’s second-largest economy.

“The stimulus from Europe is a positive thing, especially when you compare it to the fact that the U.S. is starting to ease up,” Joe Bell, senior equity analyst at Cincinnati-based Schaeffer’s Investment Research Inc., said in a phone interview.

“Stimulus is being added from a different market.”

In the U.S., data showed fewer Americans filed applications for unemployment benefits over the past month than at any time in seven years, a sign the labor market continues to strengthen. The four-week average for jobless claims fell to 310,250 in the period ended May 31, the lowest since June 2007, a Labor Department report showed today in Washington.

A private report on payrolls yesterday indicated companies in the U.S. added fewer jobs than forecast in May, before tomorrow’s Labor Department data on employment. That report may show private payrolls, which exclude government agencies, increased 210,000 in May after a 273,000 gain in the month prior, according to the median estimate in a Bloomberg survey.

Fed officials are watching the labor market as they move to complete their bond-purchase program late this year and start considering the timing of the first interest-rate increase since 2006. Central-bank stimulus has helped propel the S&P 500 higher by as much as 187 percent from its bear-market low in March 2009.

The Fed said in its Beige Book business survey yesterday that the economy expanded at a modest to moderate pace last month as auto sales led household spending and the labor market improved. The survey, released two weeks before policy makers meet in Washington, supports Chair Janet Yellen’s view that the economy is rebounding from a 1 percent contraction in the first quarter caused largely by harsh winter weather.

Tepper, founder of $20 billion hedge-fund firm Appaloosa Management LP, said today in an interview with CNBC that his concerns over the market have eased. On May 15, he described the market as ‘‘kind of dangerous’’ and expressed nervousness because the economy wasn’t expanding at a sufficient pace.

The S&P 500 has rebounded 6.9 percent since a selloff in small-cap and Internet shares spread to the broader market, dragging the index to a two-month low in April. It advanced 2.1 percent in May for a fourth consecutive monthly increase. The measure trades at 16.4 times the projected earnings of its members, up from a multiple of 14.8 at the start of February.

The Russell 2000 has also seen a recovery. The gauge has increased 5.3 percent since reaching a low in May. The technology-heavy Nasdaq 100 Index is at the highest level in 13 years, while the Nasdaq Composite Index is 1.4 percent below a 14-year high reached in March.

The Dow Jones Internet Composite Index rose 1.5 percent, the most in two weeks, as 39 of the 41 companies in the gauge increased.

Twitter rose 3 percent to $33.89. Pacific Crest rated the shares outperform, projecting a gain in their price to $45 in 12 months. The company has jumped 6.7 percent in the past three days, paring its loss for the year to 47 percent. Amazon.com surged 5.5 percent to $323.57 after breaking above its average price for the past 50 days. TripAdvisor Inc. and Pandora Media Inc. added more than 2.8 percent.

Ciena surged 18 percent, its biggest gain since 2011, to $22.48. The provider of fiber-optic networking gear for carriers such as AT&T Inc. reported second-quarter revenue and profit that exceeded analyst forecasts.

The Chicago Board Options Exchange Volatility Index fell 3.3 percent to 11.68 today. The gauge of U.S. equity volatility known as the VIX dropped to 11.36 on May 23, its lowest level since March 2013.

All 10 major industries in the S&P 500 rose, with industrial and financial shares gaining the most. Phone companies were little changed as a group.

Sprint dropped 4 percent to $9.02. The third-largest U.S. wireless carrier is nearing an agreement that could value T- Mobile US Inc. at almost $40 a share, according to people with knowledge of the matter. The deal covering the price, capital structure and termination fee could be announced as soon as July, the people said.

T-Mobile fell 2.3 percent to $33.49.

Have a wonderful evening everyone.

Be magnificent!

How does seeing the difference permit unity?

Quite simply, because physically speaking there cannot be unity, since the physical plane consists of shapes,

and all shapes are different.

Unity only exists in the heart.  It is a feeling:  love.

And in love the notion of self disappears; only the other remains.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Never, never, never give up.

-Winston Churchill, 1874-1965

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