October 16, 2015 Newsletter

Dear Friends,

Tangents:

Oscar Wilde was born on this day in 1854.

Poem Selected by Natasha Trethewey, NY Times, October, 2015.

I love the moment in a poem when two worlds collide, as in a movie theater.  Here, the action on-screen and in the audience reflects what is always present in a poem: something in the foreground and something in the background – a distance that must be bridged.

THE BRIDGE

   -by Linda Pastan

At Loew’s Burnside Theatre in the forties
an unknown boy pressed his face
to mine.  We were in the children’s section;
a glowering matron patrolled the aisles alert
as a watchdog, nose twitching, for noise
or fighting or missiles of wadded gum.
Not for the discovery of desire
by twelve-year-old strangers,
The Bridge of San Luis Rey looming
on the screen, Akim Tamiroff starring.
I still remember that bridge (woven by Incas
imagined by Thornton Wilder) falling
and falling, the actors in period costume spilling
like tenpins into space, caught in midair
as I was, partway between love and death.

I am not young enough to know everything. –Oscar Wilde.

I shall be in attendance at an investment conference Monday and Tuesday, so back to you on Wednesday. 

PHOTOS OF THE DAY

French President Francois Hollande walks on the Solheimajokull Glacier, where the ice has receded by more than 1 kilometer (0.6 miles,) during a visit to Iceland Friday. Hollande is in Iceland to experience firsthand the damage caused by global warming, ahead of major UN talks on climate change when Paris hosts the World Climate Change Conference 2015 (COP21) from Nov. 30 to Dec. 11. Thibault Camus/Reuters

A couple watch an illuminated fountain display in Tokyo Friday. Thomas Peter/Reuters

Market Closes for October 16^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam and Allison McNeely

     (Bloomberg) — Canada’s election introduces a wild card to volatile currency and equity markets as voters head to the polls Monday in a tight three-way race with little chance of a clear winner.

     Incumbent Conservative Prime Minister Stephen Harper enters the final weekend with his decade-long reign at risk, trailing the Liberal Party led by Justin Trudeau. The latest polls suggest Trudeau is poised to win the most seats in Canada’s Parliament, while falling short of the 170 required for a majority. New Democrat Thomas Mulcair remains in the mix, leading to potentially fraught negotiations to form a minority government through alliance.

     Canadian equities and the dollar have struggled this year amid a plunge in commodities prices, expectations of higher U.S. interest rates and slowing global growth in recent months. The multiple combinations and inherent instability of a minority government adds another element for investors to grapple with.

     “Canada may face a protracted period of uncertainty in various minority government scenarios,” said Derek Holt, a Bank of Nova Scotia economist, in a note to clients Oct. 15.

     The Standard & Poor’s/TSX Composite Index rose 9.13 points, or 0.1 percent, to 13,838.10 at 4 p.m. in Toronto. Canadian equities have rallied 4 percent in October after capping the worst quarterly slump in four years in September. The Canadian benchmark is down 5.4 percent this year and is the worst- performing market in the Group of Seven industrialized nations.

     The Canadian dollar retreated 0.3 percent to C$1.29082 per U.S. dollar on Friday. One loonie buys 77.47 U.S. cents. A recent bout of strength has lifted the currency off its lowest point in 11 years. It has risen five of the last six weeks as prices for crude oil, one of the country’s largest exports, strengthened and the economic growth outlook brightened. The currency, also known as the loonie for the aquatic bird, is down 10 percent for the year, headed for a 2003 low.

     Canadian 10-year government bonds, meanwhile, have been a source of relative stability through the volatility in the commodity, equity and corporate bond markets. The bonds are yielding 1.46 percent, up 2 basis point from yesterday’s close, and down from about 1.6 percent in the middle of September.

     A victory by the NDP, which has socialist roots, would create the greatest initial sell-off in the Canadian dollar, while a Conservative win would be a “big sigh of relief,” said David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc., in a phone interview.

     At the same time, “any Canadian dollar sell off based on a Liberal victory would probably have me pounding my fist on the table that this would be a buying opportunity,” he said. “The implications for economic growth under their policies is rather significantly positive.”

     If history is any guide, a win by Justin Trudeau and the Liberals bodes well for Canadian stocks. Stretching back to 1922 and the time of William Lyon Mackenzie King’s first term in office, stock returns have been three times higher under Liberal prime ministers than with Conservative leaders, according to monthly data to August 2015 compiled by Bloomberg from TMX Group Ltd., operator of the Toronto Stock Exchange.

     Many events next week have the potential to rock financial markets. China, Canada’s second-biggest trading partner after the U.S. and a key consumer of commodities, reports third- quarter economic growth ahead of the federal election, with results of the vote not expected until late in the evening Monday. The Bank of Canada, which has cut interest rates twice already this year, will deliver its next key borrowing rate decision on Wednesday.

     “There will be so much packed into next week both on the global and domestic calendars that determining sustained market reactions to any specific domestic event will be difficult,” says Scotiabank’s Holt.

US

By Joseph Ciolli

     (Bloomberg) — General Electric Co. rose to a seven-year high amid better-than-estimated quarterly profits, leading an advance in U.S. stocks as the Standard & Poor’s 500 Index posted its longest weekly winning streak since May.

     Equities stretched further above an area where a series of prior rebounds from a summer selloff had stalled. The leadership today shifted, however, to health-care and consumer shares, rather than this month’s stalwarts — energy, raw-materials and industrials — as those groups lagged amid a rising dollar. GE rallied 3.4 percent to its highest since September 2008. 

     The S&P 500 added 0.5 percent in a late-day flourish to 2,033.11 at 4 p.m. in New York, extending an eight-week high. The gauge posted its third consecutive weekly gain. The Dow Jones Industrial Average rose 74.22 points, or 0.4 percent, to 17,215.97. The Nasdaq Composite Index climbed 0.3 percent, while the Russell 2000 Index sank less than 0.1 percent after falling as much as 0.9 percent. About 6.6 billion shares traded hands on U.S. exchanges, 10 percent below the three-month average.

     “Investors are keying in on earnings season, which will really get rolling next week,” said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion. “It’s been a good week and month to date, which has the S&P back close to even for the year. The numbers are better than how it feels. Other issues, such as China, have quieted down.”

     Along with GE, other companies that reported results today included Honeywell International Inc., which slid 1.5 percent after its revenue missed expectations and the company trimmed its full-year sales forecast. Schlumberger Ltd. lost 2.2 percent after reporting quarterly profit that declined from the previous year.

     The focus on quarterly results is intensifying, with earnings at S&P 500 members projected to have fallen 6.7 percent in the last quarter. Energy and materials companies will see the steepest drop, according to analyst forecasts compiled by Bloomberg. Morgan Stanley, International Business Machines Corp., Boeing Co. and Microsoft Corp. are among 118 companies in the index scheduled to report next week.

     Stocks are rebounding from their worst quarter in four years, while investor sentiment oscillates between concern at the ripple effects of China’s slowdown, and optimism that the Federal Reserve will delay increasing interest rates until policy makers are satisfied that overseas turbulence won’t derail U.S. growth. The S&P 500 rose 0.9 percent this week, and has rallied 8.9 percent from the low during an August selloff.

     Traders now don’t see better-than-even odds of borrowing costs rising until March next year. The probability of an increase this year is 34 percent, down from 39 percent a week ago, after weaker-than-expected data in both the U.S. and China pushed out expectations for a rate boost.

     Reports today were mixed, with U.S. factory output falling in September for a second month as high inventories and lukewarm demand from overseas customers kept American producers bogged down. A separate report showed consumer sentiment climbed more than forecast in October as lower-income Americans projected wage gains will accelerate and falling energy prices helped stretch paychecks.

     The Chicago Board Options Exchange Volatility Index fell 6.2 percent Friday to 15.05, falling to its lowest since Aug. 18. The measure of market turbulence known as the VIX is down 39 percent this month, on pace for its biggest monthly drop ever. 

     Nine of the S&P 500’s 10 main groups advanced today, with consumer staples and health-care stocks the best performers. Industrial companies were the only sector to slip.

     Consumer staples companies in the benchmark increased 1 percent. as Altria Group Inc. and Tyson Foods Inc. added more than 1.4 percent. Philip Morris International Inc. rallied for a second day, up 2 percent. The world’s largest publicly traded tobacco company on Thursday topped quarterly profit estimates and raised the low end of its forecast, helped by higher prices and a recovering economy.

     Health-care companies gained for a second day, paced by Tenet Healthcare Corp. and Universal Health Services Inc., which rose more than 2.5 percent. An exchange-traded fund tracking health-care services companies extended its two-day gain to 2.1 percent.

     Twitter Inc. advanced 4.9 percent to a more than two-month high after former Microsoft Chief Executive Steve Ballmer said he has a 4 percent stake in the company. Ballmer tweeted early Friday a congratulations to the social-media company for its new Moments product, which helps users follow major events. “Glad I bought 4% past few months,” the post said.

     Energy stocks erased a loss to finish Friday up 0.2 percent as crude oil rose for the first time this week. Exxon Mobil Corp. advanced 1.2 percent, bringing its October gain to 11 percent which would be the most since 2006. Diamond Offshore Drilling Inc. increased 2.3 percent.

     Halliburton Co. slid 3.7 percent after competitor Schlumberger, the world’s largest oilfield services provider, declined the most in almost three weeks as its profit fell amid the deepening global crude market downturn. Halliburton is due to report quarterly results on Monday.

     Wynn Resorts Ltd. declined 1.2 percent, trimming an earlier 10 percent plunge, after the casino operator posted a 27 percent drop in third-quarter revenue as results in Macau shrank by more than a third. Chief Executive Officer Steve Wynn also criticized Chinese bureaucrats who haven’t told him how many gaming tables he’ll get at his $4.1 billion resort scheduled to open in Macau on March 25. Wynn is the best-performing stock in the S&P 500 so far this month.

     An index of transportation stocks slipped 1.6 percent as 16 out of 20 companies fell. The Bloomberg U.S. Airlines Index lost 1.5 percent, led by a 15 percent drop for Spirit Airlines Inc., the biggest in three years. The no-frills carrier that trumpets itself as “ultra low cost” tumbled to the lowest since 2013 after forecasting continued weakness in pricing. Kansas City Southern tumbled 11 percent, the most since January 2014, after the railroad’s quarterly results missed analysts’ forecasts.

     Freeport-McMoRan Inc., another of the S&P 500’s top performers in October, fell 4.3 percent, the most in the raw- materials group. The copper producer dropped for the fourth time in five days, losing 7.8 percent during the stretch, after rallying 27 percent last week to help lead the S&P 500 to its best weekly gain this year. Alcoa Inc. slumped for a sixth day, down 1.6 percent amid its longest losing streak since August.

Have a wonderful weekend everyone.

Be magnificent!

A child must be brought up to understand the word no.  He should be taught yes first of all,

then, yes and no, then no and yes, in such a way that he gradually comes to realize, that there is rally only no.

A child’s education is learning to understand no, and  this enables him to grow.

Growing up means accepting the concept of no.

Swami Prajnanpad

As ever,

Carolann

I’ve failed over and over again in my life and that is why I succeed.

                                                        -Michael Jordan, 1963-

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

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7