May 14, 2013 Newsletter

Dear Friends,

Tangents:

On this day in…

1948 – The independent state of Israel was proclaimed as British rule in Palestine came to an end.

1998 – The last episode of Seinfeld was aired.

And I have to go to the polling station to vote before it closes!  J Aren’t we lucky to live in a country where we can vote?

Photos of the day – May 14^th, 2013

A bird flies underneath an atmospheric phenomenon known as a ‘sun dog’ in the sky over Seaside Heights, New Jersey. Lucas Jackson/Reuters

A percussion soloist of the New York Philharmonic makes checks during a rehearsal of the composition ‘Kraft’ (Power) by Finnish composer and pianist Magnus Lindberg, inside the Glaeserne Manufaktur (transparent factory) where Germany’s car maker Volkswagen AG assemble the luxury model Phaeton, in Dresden. The orchestra is using original car parts of the Phaeton as percussion instruments. Fabrizio Bensch/Reuters

Market Closes for May 14th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Inyoung Hwang

May 14 (Bloomberg) — Canadian stocks rose as industrial and energy shares advanced amid improving confidence in economic growth in the U.S., the country’s largest trading partner.

Energy companies added 0.7 percent as a group. Canadian National Railway Co. gained 1.6 percent and Canadian Pacific Railway Ltd. jumped 4.4 percent to a record as industrial shares rallied. Chorus Aviation Inc. fell 12 percent after Canaccord Genuity Corp. downgraded the stock. BlackBerry lost 3.1 percent after announcing plans to open up its BBM instant- messaging system to other smartphones.

The Standard & Poor’s/TSX Composite Index rose 47.50 points, or 0.4 percent, to 12,577.05 at 4 p.m. in Toronto. The benchmark equity gauge has added 1.2 percent this year. Trading volume was 13 percent lower than the 30-day average.

“There’s a shift as people are getting more comfortable as they reduce staples to more cyclical stocks,” Robert McWhirter, fund manager of Selective Asset Management Inc., said by telephone. The Toronto-based firm manages about C$3 million ($3 million). “The market seems to be moving back toward resumption of an upward trend.”

U.S. equities rallied as confidence among U.S. small businesses climbed in April to a six-month high, bolstering optimism over growth in the world’s largest economy. David Tepper, co-founder and owner of hedge fund Appaloosa Management LP, told CNBC he’s still bullish on U.S. stocks and that the economy is getting better.

Energy shares contributed most to gains in the benchmark Canadian equity index, rising 0.7 percent as a group even as oil retreated for a fourth day.

Suncor Energy Inc., Canada’s largest energy company by market value, advanced 1.2 percent to C$32.42. Athabasca Oil Corp. added 2.3 percent to C$5.89.

Industrial stocks climbed 1.7 percent for the second- biggest gain out of 10 groups in the S&P/TSX. Canadian National Railway added 1.6 percent to C$103.73, the highest in two months. Canadian Pacific Railway jumped 4.4 percent to a C$136.91, the highest since it began trading in 2001.

Kirkland Lake Gold Inc. surged 14 percent to C$3.82 for the biggest gain in the S&P/TSX. The miner reported fiscal-year gold sales that met its updated forecast and said sales would jump in the year ending April 30, 2014.

The S&P/TSX Materials Index was unchanged, maintaining its loss for the year at 23 percent, as industrial metals slumped on concern that growth will slow in China, the biggest consumer of raw materials.

Money managers are the most bearish on commodities in more than four years as a majority expected a weaker Chinese economy for the first time in 14 months, a Bank of America survey showed.

A net 29 percent of the fund managers surveyed were underweight the asset class in May as their positions “collapsed” to the lowest level since December 2008. One in four now consider a “hard landing” in China as the biggest risk to their investments. The bank surveyed professional investors who together oversee $517 billion.

Separately, JPMorgan Chase & Co. reduced its second-quarter growth forecast for the Chinese economy to 7.8 percent from 8 percent and the full-year estimate to 7.6 percent from 7.8 percent. The firm cited weak domestic demand suggested by April data.

Chorus Aviation fell 12 percent to C$2.38,the lowest since April 2009. Canaccord Genuity analyst David Tyerman lowered his recommendation on the carrier to sell from buy. The Halifax, Nova Scotia-based regional airline reported profit that missed analysts’ estimates on May 10 and halved its quarterly dividend amid a dispute with Air Canada. The stock has erased 38 percent this year.

BlackBerry, formerly known as Research In Motion Ltd., lost 3.1 percent to C$15.55. Chief Executive Officer Thorsten Heins said today the company will begin offering BBM as a free application on Apple Inc.’s iPhone and devices running Google Inc.’s Android, a move that loosens BlackBerry’s grip on one of its most valuable services.

Heins also unveiled the BlackBerry Q5, a lower-end phone with a physical keyboard that comes in four colors, at an annual conference in Orlando, Florida. The new model is part of the CEO’s turnaround plan for the long-struggling smartphone maker.

US

By Lu Wang and Nikolaj Gammeltoft

May 14 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index to its eighth record high in the past nine sessions, on increased optimism over growth in the world’s largest economy.

Financial shares climbed the most among 10 S&P 500 industry as hedge-fund manager David Tepper called U.S. banks “a good sector.” Bank of America Corp. and Citigroup Inc. rose more than 2.4 percent. Edwards Lifesciences Corp. advanced 6.3 percent after announcing a share buyback program. Apple Inc. slipped 2.4 percent, dragging technology companies to the worst performance among the 10 groups.

The S&P 500 increased 1 percent to 1,650.34 at 4 p.m. in New York. The Dow Jones Industrial Average gained 123.57 points, or 0.8 percent, to a record 15,215.25. About 6.2 billion shares changed hands on U.S. exchanges, 1.9 percent below the three- month average.

“There’s an encouraging pattern of continued growth in the economic data,” Alan Gayle, a senior strategist at RidgeWorth Capital Management, which oversees about $48 billion of assets, said in a phone interview. “What is helping the market is the belief that downside risks to stocks are limited right now.”

Confidence among small businesses climbed in April to a six-month high as the outlook for the economy and sales brightened, the National Federation of Independent Business’s optimism index showed today.

Tepper, co-founder and owner of Appaloosa Management LP, said in an interview on CNBC that he is still bullish and the economy is getting better. Tepper, who led Institutional Investor’s ranking of the top earners in hedge funds last year with $2.2 billion, said in January in a Bloomberg Television interview that the U.S. “is on the verge of an explosion of greatness.”

Equity futures slumped earlier as JPMorgan Chase & Co. reduced its second-quarter growth forecast for the Chinese economy to 7.8 percent from 8 percent and the full-year estimate to 7.6 percent from 7.8 percent. It cited weak domestic demand suggested by April data, after reports yesterday showed China’s fixed-asset investment unexpectedly decelerated last month while industrial output trailed estimates.

Money managers are the most bearish on commodities in more than four years as a majority expected a weaker Chinese economy for the first time in 14 months, a Bank of America survey showed. A net 29 percent of the fund managers surveyed were underweight the asset class in May as their positions “collapsed” to the lowest level since December 2008. One in four now consider a “hard landing” in China as the biggest risk to their investments. The bank surveyed professional investors who together oversee $517 billion.

“There has been a marked uptick” in concern about China, said John Bilton, an investment strategist at Bank of America’s Merrill Lynch unit, at a press conference in London today. “A hard landing is not our core scenario, but certainly investors are right to start thinking they should at least hedge some of that tail risk.”

The U.S. bull market has entered its fifth year. The S&P 500 has surged 144 percent from a 12-year low in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases from the Federal Reserve.

The Chicago Board Options Exchange Volatility Index, or VIX, rose 1.8 percent to 12.77. The benchmark gauge for options, which moves in the opposite direction to the S&P 500 about 80 percent of the time, has fallen 29 percent this year. The S&P 500 has only dropped 3 times in the past 18 days and is up 3.3 percent in May, heading for the seventh straight month of gains.

About 87 percent of S&P 500 stocks traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg. That’s near the highest level in three months, while below the two-year high of 93 percent in January. There were 67 stocks in the index that closed at a 52- week high yesterday and none at a 52-week low.

All 10 industries in the S&P 500 advanced today as financial and commodity companies climbed at least 1.2 percent.

Bank of America added 2.8 percent to $13.34 for the biggest increase in the Dow. Citigroup increased 2.4 percent to $50.09.

Goldman Sachs Group Inc. rallied 3.3 percent to $154.52.

Tepper said his firm still owns stock of Citigroup and other U.S. banks. “We have a certain amount of the U.S. banks, which are a good sector,” he told CNBC.

Tepper also said he cut his stake in Apple at the start of the year as the maker of the iPhone and iPad devices hasn’t been “evolutionary” or “revolutionary” recently. Shares of Apple dropped 2.4 percent to $443.86.

Education companies surged as the market rally forced investors who had expected declines in Apollo Group Inc. and ITT Educational Services Inc. to buy back the shares to stem losses.

Apollo, the largest U.S. for-profit college chain, jumped 9.1 percent to $20.49. The stock’s short interest reached 15 percent of its shares available for trading in April, the highest level since at least 2006, according to data compiled by Bloomberg and Markit, a London-based research firm. The ratio has since fallen to 13.6 percent as of May 10. That compared with an average 2.6 percent for the S&P 500, the data show.

ITT Educational, whose short interest has climbed to 30.1 percent from a low of 18.5 percent in January, soared 18 percent to $25.11 today.

Actavis Inc. gained 1 percent to a record $121.68. The generic drugmaker rejected a cash-and-stock offer from Mylan Inc. for $15 billion, deciding instead to pursue talks to take over Warner Chilcott Plc, said people familiar with the matter.

Edwards Lifesciences advanced 6.3 percent to $71.57. The biggest maker of aortic heart valves implanted with a catheter announced a $750 million share-buyback program. Chief Financial Officer Thomas M. Abate plans to retire, the company also said.

Fusion-io Inc. climbed 4.2 percent to $15.12 as UBS AG raised its rating on the maker of data storage to buy from neutral. The stock’s drop after the company’s co-founder and chief executive officer resigned last week was overdone, according to UBS analysts led by Steven Milunovich.

SolarCity Corp. slid 12 percent to $31.44. The second- largest U.S. solar company by market value posted a first- quarter loss as it bore higher costs from installing rooftop solar systems at little or no charge to customers.

Have a wonderful evening everyone.

Be magnificent!

There are thousands of lives in one single life.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

We have forty million reasons for failure,

but not a single excuse.

-Rudyard Kipling, 1865-1936

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

Senior Vice-President &

Senior Investment Advisor