May 31, 2013 Newsletter

Dear Friends,

Tangents:

May 31^st, 1819: Poet  Walt Whitman was born:

When lilacs last in the dooryard bloom’d,

And the great star early droop’d in the western sky in the night,

I mourn’d, and yet shall mourn with ever-returning spring.

Ever-returning spring, trinity sure to me you bring…

-Walt Whitman

-from When Lilacs Last in the Dooryard Bloom’d

“One curious effect of the May downpours has been the behaviour of the bees on our doormat.  The stone canopy over our garden door crashed during last winter’s frost with the result that even when the shutters are closed the water seeps in the drenches the new doormat.  When I open the shutters after a wet night, the bees are waiting.  They arrive in their tens and alight on the mat – real coconut – and apparently enjoy some delicious goody secreted in the matting.  There they stay, paying no attention to my comings and goings.  I wish I knew what they are after.”  -Rosemary Verey,  from A Countrywoman’s Notes during the month of May.

Photos of the Day – May 31st, 2013

A cat sits behind a rain covered window and watches the outside world on a rainy day in Berlin, Germany. Wolfgang Kumm/dpa/AP

Sara Errani of Italy eyes the ball during her women’s singles match against Sabine Lisicki of Germany at the French Open tennis tournament at the Roland Garros stadium in Paris. Errani beat Lisicki 6-0 6-4. Philippe Wojazer/Reuters

Market Closes for May 31st, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

May 31 (Bloomberg) — Canadian stocks fell, erasing a weekly gain, as declines in metal and crude oil dragged down raw-materials producers and U.S. consumer spending unexpectedly declined in April.

Teck Resources Ltd. and First Quantum Minerals Ltd. lost at least 1.9 percent as copper fell ahead of a report that may show China’s manufacturing is close to contracting. BCE Inc. fell 0.6 percent after a government agency said it will introduce a code of conduct for the wireless carrier industry. Canadian Natural Resources Ltd. dropped 2.1 percent as crude headed for a second weekly decline.

“There some nervousness about general market levels and anything that happens south of the border gets magnified up here,” David Cockfield, fund manager with Northland Wealth Management, said from Toronto. He helps manage C$225 million ($218 million) with the firm. “Materials are so volatile right now. The utilities and pipelines have been taking a beating for a while. I think it’s an overreaction, we need to see interest rates really go up before I lose interest.”

The Standard & Poor’s/TSX Composite Index fell 85.03 points, or 0.7 percent, to 12,661.52 at 2:39 p.m. in Toronto.

The index has fallen 0.1 percent in the past five days, on track for its first losing week since April 19. Trading volume was 3.7 percent lower than the 30-day average at this time of the day.

U.S. household purchases, which account for 70 percent of the economy, dropped 0.2 percent, after a 0.1 percent rise the previous month, a Commerce Department report showed today.

Economists surveyed by Bloomberg had projected no change. The U.S. is Canada’s largest trading partner.

Canada’s economy in the first quarter grew at a 2.5 percent annualized pace, the fastest in six quarters, Statistics Canada said today from Ottawa. Economists surveyed by Bloomberg had forecast a 2.3 percent quarterly increase, the median of 24 estimates.

Raw-materials stocks paced losses in the S&P/TSX, dropping 1.5 percent as a group, as nine of 10 industries retreated.

Teck Resources lost 2.4 percent to C$27.91 and First Quantum Minerals fell 1.9 percent to C$18.60. Copper slid 0.7 percent to $3.2925 a pound in New York.

China’s official Purchasing Managers’ Index tomorrow will show a final reading for May of 50, down from 50.6 in April and on the line between growth and contraction, economists surveyed by Bloomberg said.

Silvercorp Metals Inc. retreated 3.4 percent to C$3.10 and Silver Wheaton Corp. declined 2 percent to C$24.58 as the price of the metal fell 2 percent for the biggest loss since May 15.

Canadian Natural Resources slipped 2.1 percent to C$31.27 and Enbridge Inc. lost 1.9 percent to C$44.94 as crude retreated 1.4 percent to $92.32 a barrel in New York.

BCE slipped 0.6 percent to C$46.48 after the Canadian Radio-television and Telecommunications Commission said yesterday it will issue a code of conduct on June 3 that may impose checks on fees, including charges for canceling contracts with wireless carriers. The new guidelines would also apply to companies including Rogers Communications Inc. and Telus Corp.

Bank of Nova Scotia, Canada’s third-largest lender, lost 0.5 percent to C$58.95 after announcing CEO Richard Waugh will retire on Nov. 1, to be replaced by President Brian Porter.

Waugh, who joined the company 43 years ago as a teller, will serve as deputy chairman of the board until Jan. 31, the company said in a statement.

Rainy River Resources Ltd. surged 36 percent to C$3.68 after agreeing to be acquired by New Gold Inc. for C$381.9 million ($370.4 million) to add a 4 million-ounce reserve in Ontario. New Gold plunged 8.4 percent to C$7.07.

CVTech Group Inc., a maker of transmission systems based in Drummondville, Quebec, jumped 20 percent to C$1.48 before trading was halted this morning. A shareholder yesterday released a letter saying two non-public offers by an electrical contractor were declined this year. The proposals valued the company as high as C$1.95 a share.

Mediagrif Interactive Technologies Inc., which operates e- commerce marketplaces, jumped 7.5 percent to C$20 after agreeing to buy the online labor recruitment website Jobboom and online dating site Reseau Connect from Quebecor Inc. for C$65 million.

US

By Inyoung Hwang

May 31 (Bloomberg) — U.S. stocks fell, paring the seventh monthly gain for the Standard & Poor’s 500 Index, as better- than-forecast data on business activity and consumer confidence bolstered concern the Federal Reserve will scale back stimulus.

All 10 groups in the S&P 500 retreated, as health-care, energy and consumer staple stocks led declines. Pall Corp. retreated 5.1 percent after lowering an earnings forecast.

American International Group Inc. slid 3.8 percent after saying it hasn’t received a deposit in the sale of its plane-leasing unit. Monsanto Co. fell 4.1 percent after an unapproved, genetically modified strain of wheat was discovered growing.

The S&P 500 fell 1.4 percent to 1,630.74 in New York after rising as much as 0.3 percent earlier. The Dow Jones Industrial Average lost 208.96 points, or 1.4 percent, to 15,115.57 today.

More than 7.5 billion shares traded hands on U.S. exchanges today, 20 percent higher than the three-month average.

“May will be the seventh month in a row where the S&P 500 has traded higher, and the markets are maybe looking for a reason to pause or consolidate,” Jim Russell, a senior equity strategist in Cincinnati at U.S. Bank Wealth Management, which oversees about $110 billion in assets, said by telephone. “We wouldn’t be surprised to see the market trade sideways to down in the weeks ahead on, call it, slow summer months, questions around Fed tightening and perhaps sluggish earnings growth in the second quarter.”

Changes by MSCI Inc. to its global and U.S. equity indexes were implemented at the close of trading today, a process that can lead to swings in affected stocks. The additions and deletions of stocks, known as rebalancing, to gauges such as the MSCI All-Country World Index and the MSCI World Index of developed-market equities were announced on May 15.

The S&P 500 retreated today after data showed consumer confidence advanced in May to the highest level in almost six years. Separate reports showed business activity rebounded this month after declining for the first time in more than three years in April, while consumer spending in the U.S. unexpectedly declined last month.

The data renewed concerns that the Fed would curtail its $85 billion in monthly bond purchases after Chairman Ben S.

Bernanke said last week the central bank could reduce monetary stimulus, known as quantitative easing, if officials see signs of sustained improvement in growth.

“If the data comes in strong, it really reinforces the message that the Fed has been delivering over the past few weeks and probably justifies the tapering of QE,” Joseph Tanious, a New York-based global market strategist for JPMorgan Funds, which oversees $400 billion, said in a telephone interview.

Today’s decline left the S&P 500 down 1.1 percent in the past four trading days for the first two-week drop since November. The benchmark equity gauge advanced 2.1 percent in May, the seventh month of gains for the longest winning streak since September 2009.

“It’s been a wonderful month,” Richard Sichel, who oversees about $1.8 billion as chief investment officer at Philadelphia Trust Co., said by phone. “Sell in May and go away was blown apart. That doesn’t mean there isn’t some nervousness out there and more so since the Fed statement.”

The Chicago Board Options Exchange Volatility Index, or VIX, rallied 12 percent to 16.30. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, rose 17 percent this week after rallying 12 percent in the prior week.

Procter & Gamble Co. sank 3 percent to $76.76 and Pfizer Inc. erased 3.6 percent to $27.23 for declines that were among the biggest in the Dow.

Pall retreated 5.1 percent to $68.20 for the largest slide in the S&P 500. The producer of water-filtration and purification systems cut its earnings forecast for 2013 to no more than $3.05 a share, below an earlier projection of as much as $3.15 and falling short of the average analyst estimate of $3.08.

AIG slid 3.8 percent to $44.46 after saying it hasn’t received a deposit that was called for under the deal to sell its plane-leasing unit to a Chinese investor group, presenting another challenge to divesting the business.

Newfield Exploration Co. slid 4.4 percent to $23.79.

Chairman Lee Boothby filed with the Securities and Exchange Commission to sell 15,103 shares of the oil producer.

Monsanto declined 4.1 percent to $100.64. Japan suspended wheat imports from the U.S., where the government discovered an unapproved, genetically modified strain growing in an Oregon field. Scientists said the rogue wheat was a strain tested from 1998 to 2005 by the world’s top seedmaker. South Korea also increased inspections of feed wheat imports from the U.S.

Palo Alto Networks Inc. slumped 11 percent to $48.52. The maker of network security systems’ said sales in the fiscal fourth quarter ending in July will be $106 million to $110 million. The average analyst projection called for revenue of $113.7 million, according to data compiled by Bloomberg.

Dell Inc. climbed 0.6 percent to $13.36 as shareholders sued founder Michael Dell, the company’s board and private- equity partners over their bid to take the computer maker private. Investors led by a private investor and the Mid-South Iron Workers Pension Fund said the founder’s $24.4 billion offer to take the company private is underpriced when measured against the recent stock-buyback program and competing valuations proposed by major-stakeholder Carl Icahn.

Health-care shares plunged 2.2 percent as a group and producers of consumer staples lost 1.8 percent today. While yield-seeking investors drove so-called defensive stocks to among the biggest gains in the S&P 500 in the first quarter, they’ve been lagging other industries since then. Utilities, phone companies and consumer-staple companies are the worst performers, while financials and consumer discretionary stocks have posted the biggest gains.

Savita Subramanian, Bank of America Corp.’s head of equity strategy, said investors should buy inexpensive cyclical stocks that have improved balance sheets, the ability to raise dividends and earnings stability over high-yielding sectors like utility and telephone stocks that have gotten expensive.

JPMorgan Chase & Co.’s Thomas J. Lee also wrote in a note today that the recent focus on Fed tapering may signal a shift from investors’ favoring “bond-like” equities to companies most tied to economic growth. Credit Suisse Group Inc.’s Andrew Garthwaite said that while cyclical companies have outperformed recently, the rally has further to go as U.S. economic momentum is still rising.

Have a wonderful weekend everyone.

Be magnificent!

In this world there are two orders of being,

the perishable and the imperishable.

The perishable is all that is visible.  The imperishable

is the invisible substance of all that is visible.

The Bhagavad Gita

As ever,

Carolann

All change is not growth, as all movement

is not forward.

-Ellen Glasgow, 1873-1945

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