March 12, 2014 Newsletter

Dear Friends,

Tangents:

I read with fascination this morning about an exhibition that just opened in Jerusalem showcasing the world’s oldest masks. The Face to Face exhibition is open at the Israel Museum from March to September.
The 9,000-year-old stone masks are thought to have been made to resemble the spirits of dead ancestors.
They have round holes for eyes, tiny noses and prominent displays of teeth.
Experts say they were made in the hills and deserts near Jerusalem and offer a rare glimpse of some of civilization’s first communal rituals.  They are thought to have made at a critical turning point that saw the birth of agriculture and the abandonment of the hunter-gatherer lifestyle.  James Snyder, director of the Israel Museum, said all of the masks were discovered at locations close to Jerusalem.  “What makes them remarkable is that they are all from within about a 20-mile (32km) radius not far from Jerusalem actually where the Judean hills meet the Judean desert.”  The exhibition’s curator, Debby Hershman, said the masks dated back to the creators of civilisation.

“They were made in the pre-pottery Neolithic period by the people that were living here, that were the first farmers, first people that actually lived in villages in large groups and they were the creators of civilisation.”

Eleven stone masks dated to 9,000 years ago went on display at the Israel Museum in Jerusalem on March 10. The masks are believed to be the oldest in the world and offer a rare glimpse into civilization’s first communal rituals. (Tsafrir Abayov/Associated Press)

James Taylor’s birthday today, born 1948.

March 12^th, 1957, Dr. Seuss’ beloved children’s book The Cat in the Hat is published.

Photos of the day

The characters of Kermit and Miss Piggy arrive at the premiere of ‘Muppets Most Wanted’ at El Capitan theater in Hollywood, California. The movie opens in the US on March 21. Mario Anzuoni/Reuters

A staff member from Sotheby’s presents the Meiyintang ‘Chicken Cup’ from the Chinese Ming Dynasty (1368-1644) during the media preview for the auction of Fine Art Chinese Ceramics and Works of Art sales in Hong Kong. The cup is expected to fetch HK$200-300 million (US$25.6-38.5 million). Kin Cheung/AP

Market Closes for March 12^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

March 12 (Bloomberg) — Canadian stocks rose as gold rallied to a six-month high, overshadowing declines in oil producers as crude slumped on rising U.S. supplies.

Iamgold Corp. and Detour Gold Corp. rallied at least 6.8 percent as gold futures climbed for a third day. Canadian Natural Resources Ltd. and BlackPearl Resources Inc. declined at least 1.4 percent as crude dropped the most in two months. Quebecor Inc. sank 1.8 percent after analysts at National Bank Financial lowered their rating for the stock.

The Standard & Poor’s/TSX Composite Index rose 51.77 points, or 0.4 percent, to 14,319 at 4 p.m. in Toronto, erasing earlier losses of as much as 0.5 percent. The index has gained 5.1 percent this year.

“Right now if you look at the medium to long-term time frame, everything is still very positive,” said Bruce Campbell, fund manager at StoneCastle Investment Management Inc. in Kelowna, British Columbia. The firm manages about C$100 million ($90 million). “In the short-term, we’ve been overbought here for a while since the market went straight up in February.”

Gold producers led gains today with the S&P/TSX Gold Index surging 3.3 percent for a second day of gains, as all 23 stocks in the gauge advanced. Gold for April delivery surged 1.8 percent to settle at $1,370.50 an ounce in New York, extending the fifth weekly gain in six as investors seek a haven amid tension between Russia and the West over the fate of the Crimea region of Ukraine.

Iamgold jumped 6.8 percent to C$4.40 and Detour Gold gained 7.8 percent to C$10.67. Detour Gold is the best-performing stock in the S&P/TSX this year, with a 160 percent advance.

Osisko Mining Corp. added 3.6 percent to C$7.72. The company said it will produce 525,000 to 575,000 ounces of gold in 2014, an increase of 11 percent to 21 percent from 2013 levels.

West Texas Intermediate crude decreased 2 percent to $97.99 a barrel in New York, settling at less than $100 for the first time since Feb. 11 after the Energy Information Administration reported U.S. supplies rose 6.18 million barrels last week, three times as much as expected.

Canadian Natural Resources dropped 1.4 percent to C$40.06 and BlackPearl Resources declined 2.4 percent to C$2.40 as energy stocks retreated 0.1 percent as a group. Seven of 10 industries in the S&P/TSX rose on trading volume 2.6 percent lower than the 30-day average.

A gauge of commodities prices slumped 0.7 percent, dropping to a three-week low. China, the world’s largest consumer of metals, announced last week an economic growth target of 7.5 percent, the weakest since 1990. The nation is scheduled to release industrial output data tomorrow.

HudBay Minerals Inc. fell 1.7 percent to C$8.25 and Turquoise Hill Resources Ltd. dropped 3.5 percent to C$3.85.

BlackBerry Ltd. lost 0.6 percent to C$10.27 for a sixth straight decline, the longest streak since July. Shares of the Waterloo, Ontario-based smartphone maker have slumped 11 percent during that period.

Quebecor Inc. fell 1.8 percent to C$24.94. The media company, which recently purchased wireless spectrum for C$233 million in a government auction and may become Canada’s fourth national mobile phone carrier, is scheduled to report fourth- quarter earnings tomorrow.

Adam Shine, analyst with National Bank, lowered his rating for the stock to sector perform, the equivalent of a hold, and cut his price target to C$27.50 from C$30.

“Our updated forecast reflects competitive pressures and the maturity of the cable platform,” Shine said in the note to clients. He forecasts 3,200 cable television cancellations in the quarter, due in part to competition from BCE Inc.

USA
By Callie Bost and Joseph Ciolli

March 12 (Bloomberg) — U.S. stocks erased losses, after the Standard & Poor’s 500 Index had its biggest decline in a week yesterday, as investors watched developments in Ukraine and weighed prospects for global economic growth.

Newmont Mining Corp. and Barrick Gold Corp. climbed more than 2.6 percent as gold jumped. EPL Oil & Gas Inc. surged 29 percent after Energy XXI (Bermuda) Ltd. agreed to buy it for $1.5 billion. Herbalife Ltd. lost 7.4 percent as it disclosed the Federal Trade Commission has started a civil probe into its practices. PulteGroup Inc. and Toll Brothers Inc. slipped after Credit Suisse Group AG downgraded the shares.

The S&P 500 rose less than 0.1 percent to 1,868.20 at 4 p.m. in New York, after declining as much as 0.7 percent earlier in the session. The Dow Jones Industrial Average dropped 11.17 points, or 0.1 percent, to 16,340.08. About 6.4 billion shares changed hands on U.S. exchanges, 3 percent less than the three- month average.

“We saw a pretty healthy sell-off based on China slowdown fears and potential Russian expansion,” Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said by phone. “The concerns of what’s going on are still on the minds of investors and they’re putting money into safe haven assets like U.S. Treasuries and gold. On the other hand, we’re seeing stocks aren’t completely out of the picture.”

The S&P 500 declined 0.5 percent yesterday as commodity shares slumped with copper and oil prices amid concern over China’s economy. China announced an economic growth target of 7.5 percent last week, the weakest since 1990, and had its first onshore bond default after a solar-panel maker failed to make an interest payment.

The nation, the biggest consumer of everything from copper to soybeans, is scheduled to release industrial output data tomorrow after reports over the weekend showed the steepest drop in exports since 2009.

In a meeting with the Ukrainian Prime Minister Arseniy Yatsenyuk today, Barack Obama called Russia’s incursion into Crimea a violation of international law and said the U.S. stands with Ukraine to protect its sovereignty and territory.

Ukraine warned Russia is amassing troops near its border as Prime Minister Arseniy Yatsenyuk visited Washington to step up the search for financial aid. Yatsenyuk met President Barack Obama today, and addresses the United Nations Security Council in New York tomorrow. Obama called Russia’s incursion into Crimea a violation of international law and said the U.S. stands with Ukraine to protect its sovereignty and territory.

Russia’s takeover of Crimea, home to its Black Sea Fleet, has sparked the worst crisis with the West since the Cold War as the European Union and the U.S. try to use sanctions to force President Vladimir Putin to retreat.

“Investors are keeping an eye on what’s happening with Ukraine and Russia,” said Christian Zogg, who manages about $540 million as head of equity and fixed income at LLB Asset Management AG in Vaduz, Liechtenstein. “After the good fourth- quarter earnings season, the positive sentiment is slowly but surely priced in.”

About 70 percent of S&P 500 companies that reported earnings for the latest quarter beat analysts’ profit estimates, data compiled by Bloomberg show.

The S&P 500 has gained 1.1 percent this year, reaching a record close on March 7, after Federal Reserve Chair Janet Yellen said the U.S. economy was strong enough to withstand measured reductions to the central bank’s monthly bond purchases. Three rounds of Fed stimulus have helped push the S&P 500 up 176 percent from a 12-year low, as U.S. equities begin the sixth year of a bull market that started March 9, 2009.

The Federal Open Market Committee, which meets March 18-19, has cut monthly bond buying to $65 billion from $85 billion in December. Policy makers have indicated they plan to taper by $10 billion at each meeting absent a weakening in the economy.

The Fed is trying to determine how much of recent economic cooling has been due to weather. The government’s monthly jobs report last week showed U.S. employers added more workers than estimated in February.

More than three-quarters of Americans say the bull market has had little or no effect on their financial well-being, according to a Bloomberg National Poll. Seventy-seven percent of respondents dismissed the S&P 500’s gains since the financial crisis, according to the poll, taken March 7-10. Barely one in five — 21 percent — said the market’s gains have made them “feel more financially” secure.

Investors have added $12.8 billion to U.S. equity exchange- traded funds in the past five days and withdrawn $2.4 billion from bond ETFs, data compiled by Bloomberg show. Real-estate stocks absorbed the most money among industry ETFs, taking in $156 million during the past week.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, fell 2.2 percent to 14.47 today. The measure has advanced 5.5 percent this year.

Six of 10 main industries in the S&P 500 declined today.  Industrial shares and phone companies lost 0.2 percent.  Utilities rose 1.3 percent.

Newmont Mining increased 2.7 percent to $25.01 and Barrick Gold rose 2.6 percent to $20.34. Gold rallied 1.8 percent, advancing to the highest level in almost six months as tension in Ukraine spurred demand for a haven.

EPL Oil & Gas climbed 29 percent, its biggest gain on record, to $37.50. Energy XXI agreed to buy the company to become the largest public independent producer on the Gulf of Mexico shelf.

Energy XXI fell 7.8 percent to $21.54. The company has sought to grow through acquisitions and the use of horizontal drilling to help boost oil recovery. The combined entity, termed independent because it won’t have refineries, will pump 65,000 barrels of oil equivalent a day, of which 70 percent will be crude.

Oxigene Inc. jumped 77 percent to $4.29 for its biggest gain since 2003. The pharmaceutical company said a second-phase trial showed its Zybrestat drug helped fight ovarian cancer.

PulteGroup dropped 1.3 percent to $19.67 and Toll Brothers fell 0.6 percent to $37.77. Credit Suisse analyst Dan Oppenheim cut both stocks’ ratings to neutral from outperform, citing continued weakness in demand and lower buyer traffic.

Herbalife tumbled 7.4 percent to $60.57. The nutrition company that hedge fund manager Bill Ackman has accused of being a pyramid scheme said it is confident it is in compliance with all laws and will cooperate with the FTC investigation.

Urban Outfitters Inc. fell for a third day, declining 1.7 percent to $35.29, as Barclays Plc downgraded the company to equal-weight from overweight. The Philadelphia-based teen- clothing retailer said yesterday it expects poor weather to contribute to lower sales and profit margins in the first quarter for its Urban Outfitters-branded shops.

Express Inc. slumped 12 percent to $16.05. The retailer forecast earnings will be between 12 cents a share and 18 cents in the first quarter, missing the average analyst projection for 41 cents. The company reported fourth-quarter profit of 57 cents a share, trailing the 59-cent estimate.

Progressive Corp. dropped 3.8 percent to $23.58 for the biggest loss in the S&P 500. The insurer’s operating earnings of 7 cents a share for February was less than an estimate of 13 cents from Keefe Bruyette & Woods Inc. analyst Meyer Shields.

Shields cited weak underwriting results in personal lines for Progressive’s earnings miss in a note today and lowered his full-year earnings forecast.

Have a wonderful evening everyone.

Be magnificent!

Life is very real –

life is not an abstraction – our problems begin when we encounter it only through images.

Krishnamurti, 1895-1986

As ever,

Carolann

Every human being is the author of his own health or disease.

-Buddha, 560 BC-480 BC

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7