May 20, 2014 Newsletter

Dear Friends,

Tangents:

This is interesting, fascinating how far we’ve come considering that it was on this day in 1932 that Amelia Earhart took off from Newfoundland; she landed in Ireland nearly 15 hours later, becoming the first woman to fly solo across the Atlantic Ocean.

New cameras to probe planets based in chile, new cameras will search outside solar system.

A new phase in the study of planets beyond the solar system is about to begin.  Two new cameras designed to directly image Jupiter-class planets orbiting other stars and gather data on extrasolar-planet atmospheres have been brought on line at two of the world’s major observatories located on arid mountaintops in Chile’s Atacama Desert.

On May 4, the European Southern Observatory lifted the figurative lens cap off of its camera, Sphere, for the first time at its Very Large Telescope array near Paranal, Chile.  Meanwhile, astronomers associated with the Gemini Planet Imager at the Gemini South Observatory have reported the first science results from their camera, which captured its first light last November. The studies were conducted during GPI’s commissioning phase, which is still underway.

Both cameras are slated to undertake the most ambitious direct-imaging campaigns astronomers have yet conducted, surveying up to 600 stars for signs of large, hot, young plants in wide orbits around their host stars.  Sphere’s search aims to span distances ranging from five to 10 astronomical units from their host stars – comparable to the distances between Jupiter and Saturn. GPI is designed to cast a wider net, ranging from five to 30 AU, the distance from Jupiter to Neptune.

At these orbital distances, planets spend a decade or more completing one orbit. The evidence for their presence is so faint that most common planet-hunting techniques couldn’t detect them. Even if they could, astronomers generally want to log multiple detections in order to confidently claim a discovery. Several decades is a long time to wait before shouting “Eureka!” – By PETE SPOTTS.

To conquer oneself is a greater task than conquering others. –Buddha.

Photos of the day

Britain’s Prince Charles watches traditional dancers in Halifax, Nova Scotia, May 19. Prince Charles and his wife Camilla, Duchess of Cornwall, are on a four-day visit to Canada that begins in Halifax and includes stops in Pictou, Nova Scotia; the Prince Edward Island towns of Charlottetown, Bonshaw, and Cornwall; and concludes in Winnipeg. Mark Blinch/Reuters

The pack pedals during the 10th stage of the Giro d’Italia, Tour of Italy cycling race, from Modena to Salso Maggiore, Italy. Fabio Ferrari/AP

Participants in the Sydney Harbour Bridge Climb wear lighted vests as they climb the bridge high above the city traffic (r.) at night, during a preview of the Vivid Sydney light and music festival. For 18 days beginning on May 23, Sydney will light up at night as part of the Vivid Sydney festival, combining outdoor lighting sculptures and installations at one of the world’s largest creative industry forums, according to the organizers. Jason Reed/Reuters

Market Closes for May 20^th, 2014

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada
By Eric Lam

May 20 (Bloomberg) — Canadian stocks snapped three days of losses as Valeant Pharmaceuticals International Inc. gained before a meeting with Allergan Inc. investors, offsetting losses among the banks ahead of earnings.

Valeant rose 3.7 percent after saying it will discuss an improved offer for the company at meeting in New York next week. CAE Inc., the flight simulator maker, gained 0.9 percent after analysts at Desjardins Securities raised their rating for the shares citing stronger earnings. Element Financial Corp. and Canadian Western Bank slid more than 1.2 percent to lead losses among finance stocks.

The Standard & Poor’s/TSX Composite Index rose 10.45 points, or 0.1 percent, to 14,525.19 at 4 p.m. in Toronto. The equity gauge swung between losses of as much as 0.2 percent and gains of 0.4 percent. It’s up 6.6 percent this year. Trading volume was about 4.1 percent higher than the 30-day average.

“It’s a wait-and-see attitude for the Canadian banks, and also for economic statistics before people get back on the bandwagon,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto. His firm manages about C$4.7 billion ($4.31 billion). “People are saying the sluggishness of the first quarter was due to weather, so they’re waiting to see evidence the second or third quarter will pick up.”

Valeant increased 3.7 percent to C$142.76, the most in a month, as health-care stocks paced gains in the S&P/TSX. The company said it will present an improved bid for Allergan shareholders at the May 28 meeting, which will not be an all- cash deal.

Aaron Gal, an analyst at Sanford Bernstein & Co., said in a report that Valeant’s offer should be in the $190 a share range.

Element Financial lost 2.9 percent to C$13.21 and Canadian Western Bank retreated 1.2 percent to C$36.42 to pace declines as 34 of 46 members of the S&P/TSX Financials Index fell.

Toronto-Dominion Bank slipped 0.1 percent to C$51.56 and Royal Bank of Canada added 0.8 percent to C$73.40. The two lenders, the largest in Canada by market value, are scheduled to report second-quarter earnings on May 22.

CAE added 0.9 percent to C$14.68 after Benoit Poirier at Desjardins raised his rating for the stock to buy from hold and increased his price target to C$17 from C$16.

“There is more upside ahead,” Poirier said in the report to clients, with the company benefiting from a solid backlog and improved margins.

HudBay Minerals Inc. rose 0.5 percent to C$10.05 after the metals mining company extended its offer to buy Augusta Resource Corp. to May 27. The all-stock offer values Augusta at about C$453.8 million.

Balmoral Resources Ltd. jumped 20 percent to C$1.30, the highest level since August 2011, after the Vancouver-based exploration company said it confirmed the discovery of a high- grade nickel and copper deposit.

US
By Callie Bost

May 20 (Bloomberg) — U.S. stocks fell, halting a two-day gain, as retailers from Staples Inc. to Urban Outfitters Inc. posted worse-than-estimated results and smaller companies slid.

Staples tumbled 13 percent after forecasting second-quarter profit that was less than analysts estimated. Urban Outfitters sank 8.8 percent as earnings missed forecasts. Caterpillar Inc. led industrial shares lower after reporting a steepening decline in retail machine sales.

The Standard & Poor’s 500 Index slipped 0.7 percent to 1,872.83 at 4 p.m. in New York. The Dow Jones Industrial Average fell 137.55 points, or 0.8 percent, to 16,374.31. The Russell 2000 Index of small-cap stocks slid 1.5 percent. About 5.7 billion shares changed hands on U.S. exchanges, 13 percent below the three-month average.

“What we’re seeing is a re-assessment of the growth prospects of earnings,” Brad McMillan, the chief investment officer for Commonwealth Financial Network, said by phone. His firm oversees $83 billion. “It’s not a question of ‘are we going to grow?’ Because we are. It’s ‘are we going to grow as fast as we thought we would?’”

Investors are favoring fixed income over equities as concern over valuations roiled stocks from small-cap companies to Internet shares. Exchange-traded funds that buy American bonds attracted $138.8 million yesterday while $2 billion was taken out of equity ETFs, data compiled by Bloomberg show. That reversed year-to-date equity ETF flows and drove withdrawals for the quarter to $711 million. Should the trend continue through June, that would be the first quarterly deficit since the three months ended March 2010, the data show.

The S&P 500 climbed 0.4 percent yesterday in one of the slowest trading days of the year as Internet and smaller companies extended a rebound from last week’s losses. The benchmark index closed at an all-time high of 1,897.45 on May 13 before a selloff in small-cap stocks spread to the broader market.

The Russell 2000 Index fell 3.3 percent over three days last week before rebounding 0.6 percent on May 16 and a further 1 percent yesterday. The gauge is 9.2 percent below its record set in March.

“Between now and June, waning earnings data and no significant U.S. economic data suggest equities have no appreciable catalyst for why they should march significantly higher,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which oversees  $65 billion in assets, said in a phone interview. “We’re going to be in this trading range for several months.”

Salesforce.com Inc. and Intuit Inc. are among S&P 500 companies reporting results today. About 75 percent of those that have posted results this season have beaten analysts’ estimates for profit, while 53 percent have exceeded sales projections, data compiled by Bloomberg show.

Federal Reserve Chair Janet Yellen said last week the U.S. economy has further to go to achieve full health and predicted small businesses will play a vital role in the recovery.

The Fed will release minutes from its latest meeting tomorrow. Policy makers said last month the economy is showing signs of picking up and the job market is improving. The central bank pared its monthly asset buying and said further reductions in “measured steps” are likely.

Fed Bank of New York President William Dudley said the pace of eventual rate increases “will probably be relatively slow,” depending on the economy’s progress and how financial markets react. A “mild” response “might encourage a somewhat faster pace,” Dudley said today to the New York Association for Business Economics. “If bond yields were to move sharply higher,” on the other hand, “a more cautious approach might be warranted.”

“Investors seem to be nervous and the market seems very reactionary right now,” Walter Todd, who oversees about $980 million as chief investment officer at Greenwood Capital Associates LLC, said by phone. “People are trying to get a handle on what exactly the Fed’s reaction function is on when they are raising rates. The problem for them there is I don’t know if they even know themselves.”

Three rounds of bond purchases by the Fed have helped send the S&P 500 up as much as 180 percent from a 12-year low in 2009. The gauge trades at 15.9 times estimated earnings, compared with a five-year average of 14.3 times, according to data compiled by Bloomberg.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility known as the VIX, rose 4.4 percent to 12.96. The measure has lost 5.5 percent this year.

Nine out of 10 S&P 500 groups fell today, with phone and industrial shares tumbling at least 1.3 percent for the biggest declines. Retailers lost 1 percent as a group.

Staples slid 13 percent to $11.71 after posting first- quarter adjusted earnings of 18 cents a share. Analysts on average had projected 21 cents. The biggest U.S. office-supply chain also said sales will decline in the second quarter from a year earlier.

Urban Outfitters declined 8.8 percent to $32.98 after reporting first-quarter earnings of 26 cents a share, missing the 27-cent average projection of analysts in a Bloomberg survey. The teen-clothing retailer also said comparable sales were little changed for the quarter, versus a 0.3 percent gain that analysts predicted.

Dick’s Sporting Goods Inc. tumbled 18 percent, the most ever, to $43.60 after weak sales of golfing and hunting gear crimped its profit forecast. TJX Cos. fell 7.6 percent to $53.95 after cutting the top end of its full-year projection.

Home Depot Inc. rose 1.9 percent to $77.96 for the biggest gain in the Dow. While the company posted first-quarter profit that trailed some analysts’ estimates, Chief Financial Officer Carol Tome said it expects revenue lost due to the grim winter will be recouped this quarter.

Caterpillar lost 3.6 percent to $101.56. Global sales fell 13 percent in the three months through April compared with the same period a year earlier, Caterpillar said today in a filing. In the resource industries segment, sales fell 70 percent in the Asia-Pacific region and 68 percent in Latin America in the most recent period. Sales were also down 3 percent in North America and 45 percent lower in Europe, Africa and the Middle East.

The Dow Jones Internet Composite Index slipped 0.7 percent. The gauge rallied 2 percent over the previous two days, and is down 8.8 percent this year.

Amazon.com Inc. increased 1.5 percent to $301.19. Netflix Inc. advanced 2 percent to $371.67 for the largest gain in the S&P 500.

Carnival Corp. climbed 0.9 percent to $39.18 after saying P&O Cruises Australia, one of its 10 brands, will add two ships to its fleet next year. That will bring the total to five, making it Australia’s biggest year-round fleet, the world’s largest cruise-line operator said in a statement. Morgan Stanley raised its stock rating.

Ophthotech Corp. jumped 24 percent to $39.16. The drug developer granted Novartis AG the exclusive rights to commercialize its Fovista treatment in markets outside the U.S. Ophthotech said it may get more than $1 billion from the deal, including $200 million upfront and further payments if it reaches some targets.

Have a wonderful evening everyone.

Be magnificent!

We must learn to love those who think exactly opposite to us.

We have humanity for the background, but each must have his own individuality and his own thought.

Push the sects forward and forward till each man and woman are sects unto themselves.

We must learn that differentiation is the life of thought.

We have one common goal,

and that is the perfection of the human soul, the god within us.

Swami Vivekananda, 1863-1902

As ever,

Carolann

Character building begins in our infancy

and continues until death.

-Eleanor Roosevelt, 1884-1962

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