November 6, 2013 Newsletter

Dear Friends,

Tangents:

AUTUMN

The breeze that autumn night was hot and south.

I met a frog that carried in his mouth

One of those berries, on unknown intent.

So brisk, so earnest, in his ranine hurry,

I stood aside to let him take his bent.

He had his right to’s life as I to mine;

I had my right to my descriptive line,

He had his right to his more precious berry.

I stopped, he hopped, I watched him where he went.

He had no fear of me and could not doubt

What love I had for him, that blebbed and queer

Visitant from the woodland mere

Who, gaudy with his berry sticking out,

Met me beneath the cavern of the porch

As we were meant to meet.

-Miniature monster circled at my feet

Within the coin of my miraculous torch.

He lowly, and the architectural porch so tall,

But he, in his way, also a miracle.

-V. Sackville-West, -from The Garden.

Photos of the day

A cyclist rides along a leaf-covered Cleveland Metroparks all-purpose trail in Strongsville, Ohio. Bikers, runners and hikers took advantage of dry weather and temperatures in the mid-60s, before forecast rain and cold arrives later in the day. Mark Duncan/AP

Flower blossoms from vegetation covered with volcanic ash from the eruption of Mount Sinabung in Mardingding, North Sumatra, Indonesia. The 2,600-meter (8,530-foot) -high volcano has been erupting since Sunday, unleashing volcanic ash high into the sky and forcing the evacuation of villagers living around its slope. Binsar Bakkara/AP

Market Closes for November 6^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Nov. 6 (Bloomberg) — Canadian stocks rose as a rally in gold prices boosted materials shares while investors analyzed earnings before employment data later in the week.

Magna International Inc. advanced 1 percent after boosting its 2013 forecasts for sales. Avigilon Corp., a surveillance equipment maker, soared 25 percent as sales topped estimates.

Semafo Inc. and Taseko Mines Ltd. rallied at least 5.2 percent as the price of gold climbed from a two-week low. Indigo Books & Music Inc. plunged the most ever on lower book sales and higher costs.

The Standard & Poor’s/TSX Composite Index increased 18.70 points, or 0.1 percent, to 13,380.41 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has advanced 7.6 percent this year to trade near a two-year high.

“We’re moving now into a period of data-watching and you’ll find people less inclined to make large bets going into Friday’s report,” said Andrew Pyle, fund manager with ScotiaMcLeod Inc. in Peterborough, Ontario. He manages about C$210 million ($201.6 million). “We haven’t had the same momentum there was in New York.”

The Dow Jones Industrial Average rose to a record close today as Federal Reserve officials said the U.S. economy warrants continued stimulus. The U.S. and Canada are scheduled to report jobs data for last month on Nov. 8. Economists forecast fewer workers hired and an increasing unemployment rate in both countries. The U.S. is Canada’s largest trading partner.

“You have to look at the Fed, with a new chairman coming in January, they will err on the side of generosity,” said Irwin Michael, fund manager with ABC Funds in Toronto. The firm manages about C$6 billion ($5.76 billion). “Keep rates low with the $85 billion monthly bond buyback, until they’re absolutely sure the economy has turned. And the market is happy to see that.”

Raw-materials shares increased 0.5 percent as a group to lead gains in the S&P/TSX as seven of 10 industries advanced.

Trading volume was in line with the 30-day average.

Taseko Mines climbed 5.2 percent to C$2.24 and Semafo increased 7.2 percent to C$2.98 as gold futures for December delivery rose the most in almost two weeks.

Magna International rose 1 percent to C$89.77 after increasing its forecasts for 2013 sales to $33.9 billion to $34.8 billion, from $33 billion to $34.7 billion previously.

Avigilon rallied 25 percent to C$25.55, a record high, as the Vancouver-based company posted third-quarter revenue of C$51.1 million, ahead of analysts’ projections for C$40.5 million. Gross margin rose to 53 percent from 51 percent a year ago, as demand worldwide for the company’s high-definition surveillance equipment grows, said Chief Executive Officer Alexander Fernandes in a statement.

Indigo plunged 20 percent to C$8.75 as the company lost C$10.1 million in the quarter, more than double the net loss in the same period a year ago. Indigo blamed the loss on lower book sales as well as higher operating, selling and administrative costs related to increased marketing and product initiatives.

Penn West Petroleum Ltd. slumped 16 percent to C$9.74, the biggest decline in more than four years, as the Calgary-based company reported third-quarter production declined 4.5 percent compared with the previous quarter. Penn West has also targeted as much as C$2 billion in asset sales before 2015 as part of a strategic review.

Air Canada, the nation’s largest airline, slipped 7 percent to C$5.42 after reporting that load factor decreased 1.6 percentage point in October to 81.3 percent from a year ago.

Capacity across the airline’s system rose 3.2 percent in the month as traffic climbed 1.3 percent. Load factor is a measure of airline efficiency relative to capacity.

The airline also said it has been told by market regulators the stock was halted this morning after triggering a circuit breaker. The company said no pending material news will be issued and external sources have suggested to Air Canada the halt may have been triggered by an “erroneous trade order.”

The company is scheduled to report third-quarter earnings on Friday before the markets open.

US

By Lu Wang

Nov. 6 (Bloomberg) — U.S. stocks advanced, sending the Dow Jones Industrial Average to a record close, as Federal Reserve officials said economic weakness warrants continued stimulus and investors await data this week on jobs and growth.

Microsoft Corp. climbed 4.2 percent as Nomura Holdings Inc. said the software company may exit its money-losing consumer business under a new chief executive officer. Ralph Lauren Corp. rallied 5.5 percent after the apparel maker boosted the lower end of its sales forecast and increased its dividends. Tesla Motors Inc. tumbled 15 percent as its vehicle sales missed some analysts’ estimates.

The Standard & Poor’s 500 Index rose 0.4 percent to 1,770.49 at 4 p.m. in New York, within two points of its all- time closing high. The Dow added 128.66 points, or 0.8 percent, to 15,746.88, surpassing its previous closing record of 15,680.35 on Oct. 29. About 6.1 billion shares changed hands on U.S. exchanges, 3 percent above the three-month average.

“The central bank has decided they will reward risk behavior and that’s what we’re going to get,” Bill Mann, chief investment officer at Motley Fool Asset Management in Alexandria, Virginia, said in a phone interview. His firm manages $560 million. “The market will keep hitting their highs until the stimulus reverses itself.”

The S&P 500 has surged 24 percent this year, heading for the best annual performance since 2003, as corporate earnings beat forecasts and the central bank maintained stimulus measures.

Two separate papers by members of the Fed board yesterday argued the need to maintain a loose monetary policy to support growth in the world’s biggest economy.

William English, head of the Division of Monetary Affairs, supported the Fed’s strategy of maintaining low interest rates while unemployment is above 6.5 percent and wrote that an even lower threshold may be helpful. Another paper by David Wilcox said the weakness of the U.S. economy calls for a “highly accommodative monetary policy.”

“Our initial assessment is that they considerably increase the probability that the FOMC will reduce its 6.5 percent unemployment threshold for the first hike in the federal funds rate,” Jan Hatzius, chief economist of Goldman Sachs Group Inc., wrote yesterday, referring to the studies.

Investors are watching data to gauge the health of the U.S. economy after Fed policy makers said last week they need to see more evidence of sustained improvement before slowing the pace of its $85 billion monthly bond purchases.

A report today showed the Conference Board’s index of U.S. leading indicators, a gauge of the outlook for the next three to six months, increased 0.7 percent in September. The median forecast of economists surveyed by Bloomberg called for a gain of 0.6 percent.

Data later this week may show the U.S. economy slowed in the third quarter and employers hired fewer workers in October.

Commerce Department data tomorrow may show gross domestic product grew at a 2 percent annualized rate after a 2.5 percent pace in the second quarter, according to the median forecast of economists surveyed by Bloomberg. Payrolls rose by 120,000 workers last month after a 148,000 gain in September, while the jobless rate rose to 7.3 percent, Labor Department figures may show on Friday.

Three rounds of bond purchases from the Fed and better- than-expected earnings have helped drive the S&P 500 up more than 160 percent from a bear market low in 2009.

Of the 423 S&P 500 companies that have reported earnings so far, 75 percent have beaten analysts’ profit forecasts, according to data compiled by Bloomberg. Income for the broad index probably increased 4.1 percent in the third quarter, according to estimates compiled by Bloomberg.

“We’re over the period where the market is lifting all boats,” Michael Binger, who helps oversee $410 million as senior portfolio manager for Gradient Investments in Arden Hills, Minnesota, said in a phone interview. “The economy is growing at a mediocre rate. Tapering news is put on hold. At the end of the day, stock prices follow earnings and earnings continue to grow. We have to pay attention to specific stocks.”

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, fell 4.5 percent to 12.68, extending its decline this year to 30 percent.

Eight out of 10 S&P 500 industry groups gained as consumer- staples and utility companies rose the most, climbing at least 1.1 percent.

Microsoft, the world’s largest software maker conducting its first-ever CEO search, gained 4.2 percent to $38.18 for the biggest increase in the Dow and its highest level since 2000.

Rick Sherlund, a Nomura analyst, increased his share-price forecast to $45 from $40, citing potential changes under a new CEO, including a disposal of Microsoft’s business in consumer products such as the Bing search engine and Xbox game console.

Ralph Lauren advanced 5.5 percent to $180.52. The company said it now expects full-year revenue to grow more than 5 percent, up from an earlier projection of an increase of at least 4 percent. Ralph Lauren raised its quarterly dividend to 45 cents a share from 40 cents.

Ensco Plc jumped 4.4 percent to $59.55. The offshore contract drilling company boosted its quarterly dividend by 50 percent to 75 cents a share.

Tesla plunged 15 percent to $151.16 for its biggest slide since January 2012. The company said it delivered about 5,500 Model S vehicles in the third quarter. Brian Johnson, an auto analyst at Barclays Plc, had expected 5,820, while Dan Galves of Deutsche Bank AG estimated the company would ship 5,850 cars.

Abercrombie & Fitch Co. slumped 14 percent to $33.13 for the biggest drop in the S&P 500 and its lowest level in almost a year. The retailer’s sales trailed analysts’ estimates as teens restrained spending on clothing.

Chesapeake Energy Corp. dropped 6.8 percent to $26.23. The company’s forecast implies a decline in oil production during the fourth quarter from the previous three months, raising concern over its ability to deliver growth next year, William Featherston, an analyst with UBS AG, wrote in a note to clients.

Twitter Inc., the San Francisco-based short-message Internet service, will probably set the price for its initial public offering tonight and begin trading on the New York Stock Exchange tomorrow. It’s likely to raise more than $1.75 billion in a deal several times oversubscribed, two people with knowledge of the matter said this week.

Have a wonderful evening everyone.

Be magnificent!

Even at the gate of death, in the greatest danger,

in the tick of the battlefield,

at the bottom of the ocean, on the tops of the highest mountains,

in the thickest of the forest, tell yourself,

“I am He, I am He.”

Swami Vivekananda, 1863-1902

As ever,

Carolann

They are proud in humility; proud that they

are not proud.

-Robert Burton, 1577-1640.

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