November 4, 2014 Newsletter

Dear Friends,

Tangents:

In answer to the question, What Is the Point?  The Poet, John Burnside writes:

As any teenager can tell you, it’s a short step from asking the question: “What does it all mean?” to arriving at the inevitable answer: “Nothing.”  Meaning is constructed by each person after her own fashion, his own nature; there is no universal formula or divine plan – no “all” – that can make individual lives meaningful.  At first, such a realization can lead to dismay; befuddled by the schemes and promises of our elders and betters we had trotted dutifully to school and kirk and community discos full of the blithe enthusiasm youth is cursed with, in the sure expectation that a worthwhile life would just fall into place, with a modicum of effort, so long as we did the right things.  Maturity, love and marriage, job satisfaction, happiness – they were all out there, waiting to be achieved.  So we thought, until this perennial teenager’s question cropped up, and we began to doubt.

  Doubt is a good thing, most of the time.  As is the shedding of illusions, however painful the process.  For after dismay, after the insomniac nights and the hollow feeling in the pit of the mind, what follows (if our supposed betters can be persuaded to refrain from meddling) is the gradual understanding that, since meaning is neither fixed nor universal, it is determined, to a significant extent, by the power of the individual imagination.  True, there is a world out there that would compel us to conform, to consume, to render unto Caesar.  But we are, nevertheless, free to resist, free to imagine, free to furnish our lives, and the terrain we inhabit, with meanings that derive from our own nature, and from the nature of our home terrain.

  Henry Miller remarked that “life has to be given a meaning because of the obvious fact that it has no meaning.”  But he also said that “the aim of life is to live, and to live means to be aware, joyously, drunkenly, serenely, divinely aware.”  In a conformist society, the attainment of that joyous, drunken, serene awareness is both an act of resistance and a personal achievement, for it says to hell with Caesar and his tawdry coin, and leaves each of us to invest life with all the intangible and unaccountable forms of wealth that the imperial minions in their counting house can scarcely begin to imagine.

PHOTOS OF THE DAY

Dark clouds fill the Autumn sky over the jetty in Andernos, southwestern France. Regis Duvignau/Reuters

A person looks at the almost complete ceramic poppy art installation by artist Paul Cummins entitled ‘Blood Swept Lands and Seas of Red’ in the dry moat of the Tower of London in London, Sunday. The finished installation will be made up of 888,246 ceramic poppies, with the final poppy being placed on Armistice Day on November 11. Each poppy represents a British and Commonwealth military fatality from World War I. Thousands of visitors have come to see the installation over the last few days. Tim Ireland/AP

Market Closes for November 4^th, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     Nov. 4 (Bloomberg) — Canadian stocks fell for a second day, sending the benchmark index to a two-week low, as crude oil dropped to the lowest level in three years and Bank of Nova Scotia cut jobs amid writedowns in Latin America.

     Scotiabank, the third-largest lender by assets in Canada, dropped 2.3 percent as it eliminates 1,500 jobs and writes down its investment in Venezuela. Lightstream Resources Ltd. and Athabasca Oil Corp. retreated at least 6.1 percent as energy shares traded near the lowest level in a year. WestJet Airlines Ltd. lost 5.7 percent after third-quarter profit missed estimates. The Canadian dollar sank to a five-year low versus the U.S. currency.

     The Standard & Poor’s/TSX Composite Index fell 147.19 points, or 1 percent, to 14,390.43 at 4 p.m. in Toronto, the lowest since Oct. 22. The index gained 0.5 percent last week, paring its second straight monthly loss to 2.3 percent.

     “It appears Saudi Arabia’s meddling has rattled resolve,”  said Greg Eckel, a fund manager at Morgan Meighen & Associates Ltd. in Toronto. His firm manages about C$1.4 billion. “These have been very volatile times. Hopefully this isn’t the start of another long drop-off we have to climb out of with energy getting spooked.”

     Five of the 10 industries in the benchmark Canadian equity gauge retreated today on trading volume 13 percent above the 30- day average at this time of the day.

     The loonie, as the Canadian dollar is known for the image of the aquatic waterfowl on the C$1 coin, lost 0.4 percent to C$1.1408 per U.S. dollar after touching C$1.1427, the weakest since July 2009. One loonie buys 87.65 U.S. cents.

     Scotiabank declined 2.3 percent to C$67.19, the biggest decline in two months. The bank will take a C$451 million ($396 million) charge as it cuts about 1,500 jobs, writes down its investment in Venezuela and loans sour in the Caribbean.

     Two-thirds of the job losses will be in Canada, including some head-office positions. The charge, to be taken in the fourth quarter, will cut diluted earnings per share by 28 Canadian cents.                           

     Athabasca Oil tumbled 9.7 percent to C$3.16, a record, and Talisman Energy Inc. sank 9.5 percent to C$6.26 as the S&P/TSX Energy Index retreated 3.2 percent, the most in three weeks. Lightstream Resources lost 6.1 percent for an eighth straight day of losses, reaching an all-time low.

     Bellatrix Exploration dropped 8.5 percent to C$4.72, the biggest decline in two years, after reporting third-quarter earnings short of analysts’ estimates.

     Crude for December delivery fell 2 percent to $77.19 a barrel in New York. U.S. crude inventories climbed 1.9 million barrels last week to a four-month high, a Bloomberg News survey shows before government data tomorrow. Saudi Arabia yesterday cut prices for crude exports to U.S. customers while also raising prices in Asia and Europe, sparking a selloff.

     WestJet lost 5.7 percent to C$30.20, the most since May 2013. The Calgary-based airliner said net income dropped 20 percent in the quarter as the Canadian dollar fell, spending rose on new capacity and maintaining planes and an aircraft disposal resulted in a one-time charge.

US

By Joseph Ciolli

     Nov. 4 (Bloomberg) — Most U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from near a record, as energy companies slumped after oil reached a three-year low and forecasts from Sprint Corp. to Priceline Group Inc. disappointed investors.

     Exxon Mobil Corp. and Chevron Corp. paced losses in energy shares as oil sank to as low as $75.84 a barrel in New York. Sprint tumbled 16 percent as the wireless carrier lost subscribers for an 11th straight quarter. Priceline slid 8.4 percent on a weaker-than-projected sales forecast.

     The Standard & Poor’s 500 Index fell 0.3 percent to 2,012.10 at 4 p.m. in New York as investors also await election results to see if Republicans wrest control of the Senate. The Dow Jones Industrial Average rose 17.6 points, or 0.1 percent, to 17,383.84 as Procter & Gamble Co. and Wal-Mart Stores Inc. led gains. About 7 billion listed shares changed hands in the U.S., 9.5 percent higher than the three-month daily average.

     “Look at the price of oil way down — that tells you everything you need to know,” Michael James, a Los Angeles- based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “There might be some important things that come out of the election, but none of them will be bigger than the momentum from earnings and the impact that the price of oil will have on market sentiment.”

     The S&P 500 rebounded 8.3 percent from a six-month low on Oct. 15 through yesterday, fueled by better-than-forecast economic data and improving earnings reports. The gain has pushed the index to trade at 16.7 times the members’ projected profit, near its highest multiple since 2009. Both the S&P 500 and the Dow closed at all-time highs last week amid optimism the Bank of Japan’s stimulus will fill some of the gap left by the end of Federal Reserve bond buying.

     Republicans are poised to make gains in U.S. elections today, though several races remain tight and it’s too close to call yet whether the party will capture enough seats to seize control of the Senate. In the House, Republicans appeared likely to expand their majority. The Senate is the question, with Republicans looking to pick up a net gain of six seats.

     A Commerce Department report showed factory orders slipped 0.6 percent in September, matching economists’ forecasts. Other data today showed the trade deficit in the U.S. widened in September as exports cooled from a record, highlighting how weakening global growth will affect the American economy. The gap grew by 7.6 percent to $43 billion, the largest since May.

     Concern over the global economy intensified as the European Commission cut its growth forecast for the euro area and said inflation will be even weaker than the European Central Bank predicts. The ECB meets Nov. 6 to deliberate on monetary policy amid increasing the pressure for the central bank to consider additional stimulus.

     Paul Singer’s Elliott Management Corp. said optimism on U.S. growth is misguided as economic data understate inflation and overstate growth, and central bank policies of the past six years aren’t sustainable.

     The market turmoil in the first half of October may be a “coming attractions” for the next real crash that could turn into a “deep financial crisis” if investors lose confidence in the effectiveness of monetary stimulus, Elliott wrote in a third-quarter letter to investors, a copy of which was obtained by Bloomberg News.

     Fed Bank of St. Louis President James Bullard said a drop in oil is bullish for the economy. He said in an interview on Fox Business Network that he’s looking for a fairly robust economy in the fourth quarter.

     About three stocks declined for every two that rose in the U.S. The Russell 2000 Index of smaller companies lost 0.4 percent. Energy shares sank 1.9 percent for the biggest drop among the 10 main industries in the S&P 500.

     Exxon Mobil slid 0.8 percent and Chevron fell 1.2 percent as 38 of 43 energy companies in the S&P 500 retreated. West Texas Intermediate crude slid for a fourth straight day as Saudi Arabia cut prices for oil exports to U.S. customers amid speculation that stockpiles increased. WTI has lost 28 percent from this year’s high in June. Brent crude touched a four-year low today.

     Investors are also watching earnings for further clues to the health of the U.S. economy. Prudential Financial Inc., 21st Century Fox Inc., and Walt Disney Co. are among more than 80 S&P 500 companies posting financial results this week.

     Of the S&P 500 companies that have reported results so far for the third quarter, 81 percent have exceeded profit projections, while 61 percent posted better-than-forecast sales.

     Sprint plunged 16 percent. Efforts to lure subscribers with price reductions have taken a toll on industry profits, and Sprint lowered its forecast for earnings for this year, citing the ongoing loss of customers. The wireless carrier also is eliminating about 6.5 percent of its 31,000 employees, a month after announcing an earlier round of job cuts.

     Priceline slipped 8.4 percent after forecasting fourth- quarter revenue less than analysts’ estimates as customers cut back on travel plans and a stronger dollar curbs growth. Third- quarter revenue climbed 25 percent, topping analysts’ average projection.

     Herbalife Ltd. tumbled 21 percent. The nutrition company cut its earnings forecast for the year and said sales are suffering following a change in some policies for its distributors in response to criticism by hedge-fund manager Bill Ackman.                          

     Johnson & Johnson, Hewlett-Packard Co. and Cisco Systems Inc. gained after Jefferies & Co. published a report naming them as companies that could benefit from tax reform. The companies may see a lower headline tax rate, fewer deductions and an improved ability to repatriate overseas cash at a lower tax rate, the report said.

     The Bloomberg U.S. Airlines Index rose 2.8 percent to its highest level since 2001 as the slump in crude oil boosted their earnings prospects. Delta Air Lines climbed 4.2 percent, while United Continental Holdings Inc. and American Airlines Group Inc. gained more than 1.6 percent.

     Michael Kors Holdings Ltd. shares fell 8.4 percent after same-store sales missed estimates, raising concern that one of fashion’s biggest growth stories is losing momentum.

     L Brands Inc. climbed 2.5 percent. The owner of the Victoria’s Secret lingerie brand raised its third-quarter earnings forecast. Office Depot Inc. surged 25 percent after boosting its forecast for the year.

Have a wonderful evening everyone.

Be magnificent!

The key to cosmic awareness, to a consciousness of God,

is in the understanding of the soul.

Rabindranath Tagore

As ever,

Carolann

Learning never exhausts the mind.

     -Leonardo da Vinci, 1452-1519

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

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7