November 20, 2013 Newsletter

Dear Friends,

Tangents:

A recent news item gives us this to contemplate:

40 MILLION – habitable Earth-size planets in the galaxy, perhaps, based on a new analysis of NASA data.

Individualism, private property, the law of accumulation of wealth and the law of competition….are the highest result of human experience, the soil in which, so far, has produced the best fruit.  –Andrew Carnegie, 1835-1919.

Photos of the day

A kite surfer makes the most of the strong winds and dramatic stormy weather at Rest Bay, Porthcawl, Wales. Ben Birchall/PA/AP

Sculptor Sven Morawietz of Germany pauses on his throne sculpture based on Disney’s newest movie ‘Frozen’ at the Snow and Ice Sculpture Festival in Bruges, Belgium. Some 28 artists from all over the world made 55 sculptures out of 250 tons of ice depicting characters from Disney movies.Francois Lenoir/Reuters

Market Closes for November 20th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Aubrey Pringle

Nov. 20 (Bloomberg) — Canadian stocks fell for a third day as gold companies tumbled after U.S. Federal Reserve officials said they may reduce economic stimulus “in coming months” as the economy improves.

Semafo Inc. lost 8.7 percent as the price of gold plummeted. Maple Leaf Foods Inc. fell 1 percent as the food producer was said to have drawn bids for its bread unit. Trican Well Service Ltd. added 1.7 percent after the pressure pumping company’s rating was upgraded by Raymond James.

The Standard & Poor’s/TSX Composite Index dropped 12.76 points, or 0.1 percent, to 13,430.01 at 4 p.m. in Toronto. The gauge has climbed 8 percent this year.

“There’s some uncertainty now whether the tapering will begin sooner,” Tim Lazaris, chief investment officer at Red Sky Capital Management Ltd., said by phone from Toronto. “Commodity prices are dropping here post the Fed minutes, primarily gold and that’s taking the materials sector down.”

Fed officials said they might reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves, minutes of their last meeting show. Policy makers will probably pare that pace to $70 billion at their March 18-19 meeting, according to the median estimate in a Bloomberg survey conducted Nov. 8. The U.S. is Canada’s biggest trading partner.

Five of 10 main S&P/TSX industries dropped on trading volume 1.1 percent above the 30-day average, with raw-materials sliding 2.2 percent.

The S&P/TSX Gold Index tumbled 3.8 percent, with all 24 members retreating. Gold for immediate delivery lost 2.5 percent to $1,244.20 an ounce, the lowest level since July 10.

Speculation that policy makers may reduce monetary stimulus in upcoming months curbed demand for the metal as a hedge against inflation. Semafo plunged 8.7 percent to C$2.84 while Dundee Precious Metals Inc. dropped 8.5 percent to C$3.56.

Maple Leaf Foods fell 1 percent to C$16.43. The Toronto- based food producer has drawn bids for its bread unit from Grupo Bimbo SAB, Flowers Foods Inc. and several private-equity firms, three people with knowledge of the matter said.

Maple Leaf, which owns 90 percent of Canada Bread Co., said in October it would explore options for the stake, including a possible sale as it divests assets to focus on its meat business.

Energy producers gained 0.6 percent for the best group performance. Tourmaline Oil Corp. jumped 3.4 percent to $41.92.

Trican Well Service added 1.7 percent to C$12.40 after Raymond James equity analyst Andrew Bradford raised his rating of the pressure pump producer’s stock to outperform from market perform. Bradford made a similar upgrade to Calfrac Well Services Ltd. The provider of oilfield equipment gained 1.4 percent to C$31.60.

Air Canada climbed 1.8 percent to C$6.68 after the Montreal-based carrier began discussions with Cargojet, a Canadian freight company, to explore strategic commercial cooperation in an attempt to expand the reach of both carriers’ air cargo services domestically and internationally. The partnership would increase revenues and reduce operating costs, according to a statement released by the two companies today.

USA

By Nick Taborek

Nov. 20 (Bloomberg) — U.S. stocks dropped, sending the Standard & Poor’s 500 Index to a third day of losses, after minutes from the Federal Reserve signaled the central bank may reduce bond purchases in the coming months.

J.C. Penney Co. jumped 8.4 percent as its sales decline abated in the third quarter. Yahoo! Inc. advanced 2.9 percent after the owner of the largest U.S. Internet portal boosted its stock-buyback plan by $5 billion. Deere & Co. rose 2.1 percent as it forecast better-than-estimated annual earnings on rising demand for construction and forestry machinery. Lowe’s Cos., the second-biggest home improvement retailer, slipped 6.2 percent after profit trailed analysts’ projections.

The S&P 500 fell 0.4 percent to 1,781.37 at 4 p.m. in New York. The Dow Jones Industrial Average retreated 0.4 percent to 15,900.82 and has topped 16,000 for three straight days before returning below the threshold. About 5.9 billion shares changed hands on U.S. exchanges, in line with the three-month average.

“We’ve also had a very, very good year, so this may be a decision-making point for those who have enjoyed a very good return in the equity market,” Paul Mangus, head of equity strategy and research for Wells Fargo Private Bank in Charlotte, North Carolina, said in a phone interview. His firm manages $170 billion. “The minutes were a continuation of what the FOMC has been saying all along.”

The S&P 500 has rallied 25 percent in 2013, poised for its best year in a decade, following stimulus from the Fed and better-than-estimated earnings. The gauge traded for about 17 times its companies’ reported earnings at its last record on Nov. 15, the highest valuation since May 2010.

Policy makers expected that the economic data will show ongoing improvement in the labor market and “thus warrant trimming the pace of purchases in coming months,” according to the record of the Federal Open Market Committee’s Oct. 29-30 gathering. Stocks pared gains earlier as Fed Bank of St. Louis President James Bullard said a reduction in bond buying is “on the table” for the next policy meeting in December.

As of yesterday, four of five investors expected the Fed to delay a decision to begin reducing its bond buying until March 2014 or later, with just 5 percent looking for a move next month, according to the latest Bloomberg Global Poll. Only one in 20 said the central bank will begin to reduce its purchases at its Dec. 17-18 meeting, according to the poll yesterday of investors, traders and analysts who are Bloomberg subscribers.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, was little changed at 13.40 today. The measure is down 26 percent this year.

J.C. Penney jumped 8.4 percent to $9.44. Chief Executive Officer Mike Ullman showed progress in reviving the department- store chain ahead of the holiday-shopping season. Revenue in the quarter ended Nov. 2 fell 5.1 percent to $2.78 billion, less than the 27 percent drop in the same period last year. Gross margin, or the percentage of sales left after the cost of goods sold, will improve in the fourth quarter, J.C. Penney said.

Yahoo advanced 2.9 percent to $35.62. The company is returning more cash to shareholders as Chief Executive Officer Marissa Mayer seeks to revive growth. The company will also sell $1 billion in convertible debt maturing in 2018, in a private placement, according to a statement.

Deere climbed 2.1 percent to $84.52. The company said it sees sales of construction and forestry equipment advancing by about 10 percent in the current financial year, partly because of the recovery in the U.S. economy and an increase in housing starts.

Herbalife Ltd. gained 6.5 percent to $70.24. Bill Stiritz, chief executive officer of Post Holdings Inc., the Raisin Bran maker, boosted his holding in Herbalife to 6.4 percent and said he’ll seek talks with the nutrition company.

Stiritz, who previously reported a 5.3 percent stake, said last week that he’s willing to take part in a leveraged buyout of the company that would reward shareholders and help Herbalife fend off allegations by hedge fund billionaire Bill Ackman, who for a year has accused it of operating an illegal pyramid scheme.

BioMarin Pharmaceutical Inc. jumped 3.3 percent to $69.14.

The company yesterday received the backing of advisers to the Food and Drug Administration for a drug treating a rare metabolic disease that can affect growth. Vimizim should be approved for Moriquio A syndrome, which can cause joint deformities and contractures, a panel of advisers to FDA voted.

Lowe’s fell 6.2 percent to $47.33. Third-quarter earnings- per-share amounted to 47 cents, falling short of the 48 cents analysts had projected. The company also predicted full-year profit will be $2.15 a share, compared with the $2.19 analysts estimated.

J.M. Smucker Co. slid 6.5 percent to $101.49 for the biggest decline in the S&P 500. The maker of peanut butter and fruit spreads cut its sales forecast and said price reductions are hurting margins.

Have a wonderful evening everyone.

Be magnificent!

When a man possesses in his being the notion of God, that is the miracle of miracles.

Rabindranath Tagore, 1861-1901

As ever,

Carolann

The truth of the matter is, we always know the right thing

to do.  The hard part is doing it.

-Norman Schwarzkopf, 1934-2012.

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