November 18, 2013 Newsletter

Dear Friends,

Tangents:

MY NOVEMBER GUEST

-Robert Frost

My Sorrow, when she’s here with me,

Thinks these dark days of autumn rain

Are beautiful as days can be;

She loves the bare, the withered tree;

She walks the sodden pasture lane…

Not yesterday I learned to know

The love of bare November days

Before the coming of the snow,

But it were vain to tell her so,

And they are better for her praise.

Photos of the day

A rainbow shines over buildings after heavy rain poured in Gaza City. Adel Hana/AP

A tree stands above a fog-covered valley near Oberbuergen, Switzerland. Urs Flueeler/Keystone/AP

Market Closes for November 18^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Nov. 18 (Bloomberg) — Canadian stocks fell, after the benchmark index reached a two-year high, as a drop in commodity shares offset an advance among banks.

Kinross Gold Corp. and Eldorado Gold Corp. retreated at least 3.8 percent as gold fell for the first time in three days.

Manulife Financial Corp. and Sun Life Financial Inc. added more than 1.5 percent. Bombardier Inc. increased 0.2 percent after announcing aircraft orders.

The Standard & Poor’s/TSX Composite Index slipped 24.51 points, or 0.2 percent, to 13,458.06 at 4 p.m. in Toronto, erasing a gain of as much as 0.2 percent.

“Most of the earnings are behind us now, although the banks still have to report,” said Michael O’Brien, a fund manager with TD Asset Management Inc. in Toronto. He helps manage about C$216 billion ($207 billion) with the firm. “The biggest thing is people will continue to watch the macro data as the Fed has said for a few months their decisions will be data dependent. The big fear of investors is the Fed beginning tapering too early.”

Equities rallied this year as the U.S. Federal Reserve embarked on a monthly $85 billion bond-buying program to stimulate the economy. Fed policy makers will probably scale back the pace of asset purchases at their March 18-19 meeting, according to the median of 32 estimates in a Bloomberg survey of economists on Nov. 8.

Foreign purchases of Canadian equities hit a four-year high in September as investors sought to take advantage of a stock rally. Non-resident investors acquired C$10.79 billion ($10.36 billion) of Canadian stocks after selling C$2.19 billion a month earlier, Statistics Canada said in a report. The S&P/TSX has climbed 11 percent since June 28, on track for the biggest six- month advance since 2010, data show.

Five of 10 S&P/TSX industries fell on trading volume in line with the 30-day average. Commodity shares sank more than 0.7 percent.

Kinross Gold retreated 4.1 percent to C$5.11 and Eldorado Gold lost 3.8 percent to C$6.59 as gold futures for December delivery fell 1.2 percent to $1,272.30 an ounce in New York.

Financial shares climbed 0.5 percent as a group for the best return among 10 main industries. Sun Life added 1.5 percent to C$37.43 for a fourth day of gains and the highest close since 2009. Manulife, the nation’s largest insurer, gained 1.8 percent to C$19.86.

Bombardier climbed 0.2 percent to C$4.65. The Montreal- based company said it has come to separate agreements to sell as many as eight Q400 aircraft to Palma Holding Ltd. and as many as four of the same aircraft to Air Cote d’Ivoire. The value of the combined contracts is worth as much as $423 million.

Boeing Co., the world’s largest planemaker, said it will team up with Bombardier to offer a low-cost maritime surveillance plane based on the Canadian manufacturer’s Challenger 605 business jet.

Cott Corp. climbed 2.7 percent, the most in the S&P/TSX, to C$8.88. Levin Capital Strategies LP reported a 5.3 percent stake in the beverage producer, according to a regulatory filing.

BRP Inc., the maker of Ski-Doo snowmobiles and three- wheeled motorcycles, added 0.4 percent to C$28.20. The stock has rallied 31 percent since its May debut, the best performer among Canada’s largest initial public offerings this year as revenue climbs on sales of its year-round products including all-terrain vehicles and its Can-Am Spyder three-wheel roadsters.

BRP, based in Valcourt, Quebec, raised C$262.3 million in its May stock sale and topped the 4 percent average increase of 10 companies that raised at least $100 million from IPOs in Canada this year, data show.

USA

By Nick Taborek and Nikolaj Gammeltoft

Nov. 18 (Bloomberg) — Most U.S. stocks fell after the Dow Jones Industrial Average rose above 16,000 for the first time, spurring concern that equities have risen too far, too fast.

Consumer companies and commodity stocks led the retreat.

Microsoft Corp. slid 1.7 percent after Bank of America Corp. cut its rating to underperform from neutral. Tyson Foods Inc., the largest U.S. meat processor, advanced 2.3 percent after reporting revenue above analysts’ estimates on a gain in prices and sales volumes for beef and chicken.

The Standard & Poor’s 500 Index slipped 0.4 percent to 1,791.53 at 4 p.m. in New York. Earlier, it topped 1,800. About three stocks fell for each that rose in the gauge. The Dow average gained 14.32 points, or 0.1 percent, to 15,976.02. About 6 billion shares changed hands on U.S. exchanges, in line with the three-month average.

“We’ve moved pretty far pretty fast,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $150 billion. “Obviously there’s a potential for a little bit of a pullback.”

While four years of earnings growth and the Federal Reserve’s near-zero interest rate have led the S&P 500 on a 165 percent rally since March 2009, they have also driven valuations to a three-year high. Billionaire investor Carl Icahn, speaking at the Reuters Global Investment Outlook Summit, said he is “very cautious” on equities.

The S&P 500 trades at 17 times reported operating profit, a 20 percent increase from the beginning of 2013, according to data compiled by Bloomberg. Last week, the benchmark’s valuation reached the highest level since May 2010.

“As we keep going and making new highs, we get into new territory and the air keeps getting thinner and thinner up here,” Tim Hartzell, who helps manage about $425 million as chief investment officer at Sequent Asset Management, said via phone from Houston. “Everybody is watching Yellen and feel comfortable that she’ll continue QE, maybe even put more into the system.”

U.S. stocks have risen for the past six weeks, reaching all-time highs as Janet Yellen signaled she will continue stimulus efforts as the central bank’s chairman. New York Federal Reserve Bank President William C. Dudley today said he’s “getting more hopeful” the U.S. economy is gaining strength as the drag from fiscal policy wanes. The central bank’s monetary policy is likely to be accommodative for a long time, he said.

The policy-setting Federal Open Market Committee is buying $85 billion of bonds every month and won’t taper its purchases until its March 18-19 meeting, according to the median estimate of 32 economists surveyed by Bloomberg News Nov. 8.

China’s leaders vowed to allow more private investment in state-controlled industries and expand farmers’ land rights as part of the ruling Communist Party’s biggest package of economic reforms since the 1990s. Chinese stocks rose, with the benchmark index for mainland companies in Hong Kong surging the most since December 2011.

“To the extent that these reforms might lead to some higher estimates of growth in the coming years, that would be welcomed by investors,” John Carey, a portfolio manager at Pioneer Investment Management, which oversees $20 billion.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 7.5 percent to 13.10. It has fallen 27 percent this year.

Eight out of 10 main industries in the S&P 500 fell, with consumer discretionary companies retreating 0.7 percent to pace declines. Phone stocks rallied 0.6 percent as a group for the biggest gain.

Consol Energy Inc. fell 4 percent to $34.56. The coal producer was cut to neutral from buy at Citigroup Inc. by analyst Brian Yu, who said in a note that the outlook for metallurgical coal looks worse than base metals. Peabody Energy Corp., the largest U.S. coal producer, lost 3.7 percent to $19.36.

Microsoft declined 1.7 percent to $37.20. Bank of America analyst Kash Rangan cut the shares to underperform from neutral, citing the risk that the board will select a chief executive officer that disappoints investors.

Tesla Motors Inc. fell 10 percent to $121.58. Safety officials in California are investigating an industrial accident at the company’s sole Model S plant that injured three workers.

The electric-car maker led by Elon Musk has fallen 25 percent since Nov. 1.

Nvidia Corp. dropped 2.4 percent to $15.78. The shares were cut to underweight, or sell, from equalweight, or hold, at Morgan Stanley.

Boeing added 1.7 percent to $138.36. The company took an early lead over rival Airbus SAS in the biennial Dubai expo, signing up Etihad Airways PJSC for its new 777X wide-body planes as well as for more 787 Dreamliners.

Tyson climbed 2.3 percent to $29.42. The company said fiscal fourth-quarter sales rose 7 percent to $8.89 billion, beating the $8.87 billion average of 12 analysts’ estimates compiled by Bloomberg.

Cheap is converging with expensive in the American equity market, narrowing options for investors looking for bargains after the broadest rally on record lifted almost 90 percent of the S&P 500 this year. A measure of the dispersion of price- earnings ratios in the S&P 500 compiled by Goldman Sachs Group Inc. narrowed to 41 percent in June, the lowest on record, and held around that level since.

Investors this week will scrutinize minutes of the Federal Open Market Committee from its Oct. 29-20 meeting and public remarks by Fed officials. The minutes are set to be released on Nov. 20. Fed Chairman Ben Bernanke is due to speak tomorrow, while Fed Bank of St. Louis President James Bullard will deliver a speech on Nov. 20.

“This week is crucial, there is a lot of Fed speak,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion, said by telephone. “Investors want to get a little bit more color and atmospherics from the minutes.”

Have a wonderful evening everyone.

Be magnificent!

This glorious soul we must believe in.   Out of that will come power.

Whatever you think, that you will be.  If you think yourselves weak, weak you will be;

if you think yourselves strong, strong you will be; if you think yourselves impure, impure you will be;

if you think yourselves pure, pure you will be.  This teaches us  not to think ourselves as weak, but as strong,

omnipotent, omniscient.  No matter that I have not expressed it yet, it is in me.

All knowledge is in me, all power, all purity, and all freedom.  Why cannot I express this knowledge?

Because I do not believe in it.  Let me believe in it, and it must and will come out.

This is what the idea of the Impersonal teaches.

Swami Vivekananda, 1863-1902

As ever,

Carolann

We would often be sorry if our wishes

were gratified.

-Aesop, 620-564 BC

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