March 14, 2016 Newsletter

Dear Friends,

Tangents:

March 14, 1879: Albert Einstein’s Birthday

Albert Einstein, an only child and a slow learner, was born in Ulm, Germany, to a featherbed salesman and his wife.  He had little interest in formal schooling but eventually earned a doctorate in physics.  Not interested in the demands of academia, he went to work as a clerk in the Bern, Switzerland, patent office where he could work on physics in the afternoons.  During 1905, what is now called his “miracle year,” he wrote a series of five seminal papers.  One dealt with special relativity, and one introduced the world’s more familiar equation: E=m².

When Einstein moved to Berlin in 1914 to direct the Kaiser Wilhelm Institute for Physics, a campaign was begun to discredit him, but he survived it.

Later, during Hitler’s reign, Einstein’s work was described as “Jewish physics”  as opposed to the preferred “Aryan physics.”  Seeing the damage Hitler was doing, Einstein renounced his German citizenship and revised his views on pacifism, believing Hitler could only be stopped by force.  The FBI kept a record of Einstein’s activities and recommended denying him immigration to the U.S., but Einstein moved to New Jersey, and Princeton University, and became a permanent U.S. citizen in 1940.  In 1952, the government of Israel asked him to be its second president, an honor he declined.

As a personality, Einstein was noted for his kindness and amiability.  Quirky and practical, he minimized his wardrobe – buying identical sets of clothing – so that he wouldn’t have to think about what to wear.  Though he had been an early advocate of nuclear energy, on April 5, 1955, he signed a letter to protest nuclear tests and bombs.  Days late, on April 18, 1955, he died in his sleep. – by Kathleen Melin.

My religion consists of a humble admiration of the illimitable superior spirit who reveals himself in the slight details we are able to perceive with our frail and feeble mind. –Albert Einstein.

PHOTOS OF THE DAY

A hot air balloon flies near Australia’s Parliament House in Canberra Monday on the 30th anniversary of Canberra’s Balloon Spectacular festival. Lukas Coch/AAP/Reuters

Humanoid robot Pepper dances in front of visitors at CeBit, the world’s biggest computer and software fair, in Hanover, Germany, Monday.Nigel Treblin/Reuters

Market Closes for March 14^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks slipped, retreating from the highest level this year, as energy producers tumbled with the price of crude after Iran refused to join a freeze in production before increasing output to pre-sanctions levels.

     The Standard & Poor’s/TSX Composite Index fell 0.3 percent to 13,477.54 at 4 p.m. in Toronto, after reaching a Dec. 1 high and capping a second weekly increase last week. The resurgent S&P/TSX is one of the best-performing developed markets in the world this year, vying with New Zealand for the top spot, while posting returns ahead of the U.S., Germany and U.K.

     Canada’s equity benchmark has benefited from the recent rebound in commodities prices, from crude to copper and precious metals, with raw-materials producers leading gains in the S&P/TSX with a 21 percent rally this year. The index has clawed back rapidly after entering a bear market in January and subsequently tumbling to a 2013 low. A slide in 2015 resulted in the worst annual performance since the financial crisis.

     Shares in the Canadian gauge now trade at about 21.4 times earnings, roughly 17 percent more expensive than the valuation of the benchmark U.S. equity index, the Standard & Poor’s 500 Index, data compiled by Bloomberg show. 

     Raw-materials and energy producers dropped at least 0.9 percent, the most in the S&P/TSX as six of 10 industries retreated on trading volume 7 percent lower than the 30-day average. Goldcorp Inc. and Detour Gold Corp. declined more than 3 percent as gold in the spot market fell for the fifth time in six sessions on a strengthening dollar. Oil producers Enbridge Inc. and Crescent Point Energy Corp. lost at least 2.3 percent.

     Crude futures dropped in New York, falling from a three- month high. Iran plans to boost output by about a third to 4 million barrels a day before it will consider joining any move to rebalance the market, the Iranian Students News Agency reported, citing Oil Minister Bijan Namdar Zanganeh.

     A meeting of major oil producers among the Organization of Petroleum Exporting Countries to discuss the production freeze is now expected to occur in April, according to four Gulf OPEC delegates. Ministers from some members had previously suggested the meeting would take place in March.

     Veresen Inc. sank 7 percent, the most in two months, after U.S. regulators denied its application for a $5.3 billion liquefied natural gas export terminal in Oregon and BMO Capital Markets downgraded the stock on the unexpected news.

     Cascades Inc. tumbled 10 percent, to a September low, as the paper-products company forecast a drag this year from foreign-exchange effects and higher capital spending as it expands its box-making operations.

     Valeant Pharmaceuticals International Inc. slipped 0.6 percent as the drugmaker prepares to discuss its long-awaited fourth-quarter results and provide 2016 guidance March 15. Shares of Valeant have plunged almost 75 percent from an August peak as regulators and lawmakers have scrutinized the company’s operations.

US

By Dani Burger

     (Bloomberg) — U.S stocks closed little changed in light trading, near the highest levels this year, as investors awaited further assurances that central banks will continue to support growth.

     Gains in consumer shares, including Amazon.com Inc., Starbucks Corp. and Walt Disney Co., offset declines in energy and raw-materials companies, with commodity shares lagging Monday as crude oil fell. Banks also slipped for the first time in three sessions. Starwood Hotels & Resorts Worldwide Inc. added 7.8 percent after an unsolicited takeover offer from a group of companies led by by China’s Anbang Insurance Group Co.

     The Standard & Poor’s 500Index fell 0.1 percent to 2,019.64 at 4 p.m. in New York, closing above its average price during the past 200 days for a second session. The Dow Jones Industrial Average added 15.82 points, or 0.1 percent, to 17,229.13, after weaving between gains and losses. The Nasdaq Composite Index increased less than 0.1 percent. About 6.4 billion shares traded hands on U.S. exchanges, 29 percent below the 2016 average.

     “We’ve come so far so fast that at this stage, we’re just treading water after such a big move,” said Frank Cappelleri, executive director at Instinet LLC. “One area to watch for clues are financials and banks. That becomes even more important with the Fed announcement on Wednesday. They’ve been a major reason why the S&P has been able to extend further than it originally would have.”

     The Federal Reserve’s two-day meeting this week will be in focus for indications on the trajectory of interest rates, after equities on Friday surged in the wake of additional stimulus steps from the European Central Bank. The Bank of Japan concludes a policy review Tuesday, while the Bank of England has a rate decision Thursday. Central banks have indicated a willingness to continue measures to boost growth and stabilize markets, helping buttress a comeback for U.S. stocks in the past month.

     The S&P 500 has rebounded more than 10 percent since a Feb. 11 low and trimmed its 2016 drop to 1.2 percent, after losses of as much as 11 percent amid concern over China’s economic slowdown and a deepening oil rout. The gauge capped its fourth straight week of gains on Friday, the most since November, and closed above its 200-day moving average for the first time this year, ending its longest streak below that threshold since 2011.

     Constituents in the benchmark are poised to repurchase as much as $165 billion of stock this quarter, approaching a record reached in 2007. The buying contrasts with rampant selling by clients of mutual and exchange-traded funds, who after pulling $40 billion since January are on pace for one of the biggest quarterly withdrawals ever.

     While traders are pricing in little chance of a Fed rate increase on March 16, they have boosted the odds for later in the year. The probability of a June move is now 53 percent, from less than 2 percent a month ago, bolstered by improving economic data, stabilizing oil prices and the comeback in equities.

     Fed officials have stressed that the pace of rate increases, following December’s first boost since 2006, will be gradual and data-dependent. Reports on retail sales, industrial production and housing starts will also be assessed this week for signs of strength in the world’s biggest economy.

     “I think the Fed will tread very cautiously,” said Joachim Fels, global economic adviser for Pacific Investment Management Co., during an interview on Bloomberg TV. “They learned last year and very early this year that the rest of the world — debtors, emerging markets and in particular China — are not ready for higher rates.”

     Oil fell from a three-month high Monday as Iran said it would raise output to pre-sanctions levels before joining talks to freeze production, putting pressure on energy shares. West Texas Intermediate crude dropped 3.4 percent to $37.18 a barrel.

     The Chicago Board Options Exchange Volatility Index rose 2.6 percent to 16.92 after falling Friday to the lowest this year. The measure of market turbulence known as the VIX remains on track for its first monthly decline since October, which would halt the longest streak of gains since 2011.

     “The combination of some modest profit-taking and then a reaction to the price of oil declining is giving the market not even a hair cut, but just a slight trim,” said John Stoltzfus, the New York-based chief market strategist at Oppenheimer & Co. “After a 10 percent rally in this type of market, with job growth good but wage growth relatively anemic, earnings season still a few weeks away and energy sector earnings projected down, the curb-your-enthusiasm would be somewhat called for.”

     Six of the S&P 500’s 10 main industries fell, with energy, financial and raw-materials companies dropping at least 0.4 percent. Consumer discretionary shares gained 0.4 percent while industrial, technology and utility stocks were little changed.

     Consumer discretionary companies advanced, thanks in large part to a boost in travel-related shares. Starwood traded at a four-month high. Marriott International Inc., which reaffirmed its bid to buy Starwood, added 3 percent. TripAdvisor Inc. climbed 4.5 percent amid takeover speculation circulating on Twitter.

     Retailers ed for a fourth day, the longest stretch in almost a month. GameStop Corp. increased 3 percent, while Dollar Tree Inc. gained 1.2 percent amid its lengthiest rally since Feb. 1.

     Southwestern Energy Co. and Chesapeake Energy Corp. were among the worst performers in the S&P 500, falling more than 6.7 percent. Southwestern was the second-best performing stock on Friday, but gains reversed as the price of oil declined.

     Financials reversed part of a Friday gain, as banks in the index dropped 0.5 percent, after losing as much as 1.3 percent. Bank of America Corp. fell 1.1 percent, while Comerica Inc.  climbed 1.4 percent after CLSA upgraded the company on takeover speculation.

     Among other shares moving on corporate news, Fresh Market Inc. soared 24 percent, the most since 2010, after Apollo Global Management LLC agreed to buy the grocer for about $1.4 billion in cash. It’s the buyout firm’s third announced acquisition of more than $1 billion since the start of February.

     3D Systems Corp. jumped 25 percent, the most in five years to a seven-month high after the company’s quarterly profit and sales topped analysts’ estimates.

Have a wonderful evening everyone.

Be magnificent!

What though we have many bodies?  We have but one soul.

The rays of sun are many through refraction.

But they have the same source.

I cannot, therefore, detach myself from the wickedest soul

nor may I be denied identity with the most virtuous.

Mahatma Gandhi

As ever,
 

Carolann

Luck is the residue of design.

 -Branch Rickey, 1881-1965

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

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7