October 2, 2013 Newsletter

Dear Friends,

Tangents:

As Carolann is out of the office this afternoon, I will be writing the newsletter on her behalf.  Today in history, in 1869, Mahatma Gandhi was born. He was well known for his advocacy of non-violent resistance to fight tyranny and he inspired movements for civil rights and movements for freedom across the world.

“Non-violence is not a garment to be put on and off at will. Its seat is in the heart, and it must be an inseparable part of our being.” – Mahatma Gandhi

Also on this Day:

1870 – Rome was made the capital of Italy.

1950 – “Peanuts,” the comic strip created by Charles M. Schulz, was published for the first time in seven newspapers.

1959 – “The Twilight Zone” debuted on CBS-TV. The show ran for 5 years for a total of 154 episodes.

2001 – The U.S. Postmaster unveiled the “Tribute to America” stamp. The stamp was planned for release the next month.

2001 – NATO, for the first time, invoked a treaty clause that stated that an attack on one member is an attack on all members. The act was in response to the September 11, 2001, terrorist attacks in the United States.

“Happiness is when what you think, what you say, and what you do are in harmony” – Mahatma Ghandi

Photo of the Day:

Indian children dressed like Mahatma Gandhi assemble at an event during Gandhi Jayanti in Ajmer, India. Gandhi Jayanti is the birth anniversary of Gandhi, the father of the nation. Deepak Sharma/AP

Market Closes for October 2^nd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Oct. 2 (Bloomberg) — Canadian stocks fluctuated, after rising the most in almost two weeks yesterday, as gains in gold shares offset a slide in wireless carriers and investors watched for progress in efforts to end a U.S. budget impasse.

BlackBerry Ltd. erased losses after a report said investors have expressed interest in the smartphone maker. BCE Inc., Rogers Communications Inc. and Telus Corp. dropped more than 0.8 percent to pace declines among phone stocks. Semafo Inc. jumped 7.1 percent as gold rebounded. Paladin Energy Ltd. jumped 8.5 percent after reporting cost-cutting plans. Air Canada gained 4.3 percent after winning a pair of slots for flights to a Tokyo airport.

The Standard & Poor’s/TSX Composite Index fell 9.77 points, or 0.1 percent, to 12,837.67 at 2:24 p.m. in Toronto. The index has gained 3.3 percent this year for the third-worst performance among developed markets, ahead of only Hong Kong and Singapore. Trading volume was 12 percent higher than the 30-day average today.

“There was a lot of buying yesterday that was jumping the gun,” Bob Decker, a fund manager with Aurion Capital Management, said in a phone interview from Toronto. His firm manages about C$6 billion ($5.81 billion). “The obvious linkage is what’s happening in Washington isn’t friendly to the economic outlook.”

President Barack Obama summoned the top four leaders of Congress to the White House today for talks on re-opening the U.S. government and raising the debt ceiling.

The U.S. government began shuttering some operations yesterday because of a budget stalemate. Congress now faces a dispute over raising the $16.7 trillion debt ceiling this month. The Treasury has said measures to avoid exceeding the borrowing limit will be exhausted on Oct. 17.

A partial shutdown lasting one week would probably shave 0.1 percentage point from economic growth, according to the median estimate of economists, with the costs accelerating if the closing persists.

A private U.S. payrolls report said employment rose a less- than-forecast 166,000 in September, following a revised 159,000 gain in August that was also smaller than estimated, ADP Research Institute said.

BlackBerry was unchanged at C$8.19 after an earlier loss of as much as 5.4 percent. Dow Jones reported that Cerberus Capital Management LP and another investor have expressed interest in the company. Fairfax Financial Holdings Ltd., the largest shareholder of BlackBerry, announced Sept. 23 it was leading a group of investors planning a buyout of the money-losing smartphone maker.

BlackBerry tumbled earlier today after saying it will record costs of about $400 million, four times the amount it originally projected, as it reduces staff by 40 percent and sells off equipment and real estate.

Barrick Gold Corp. climbed 2.4 percent to C$19.04 and Semafo increased 7.1 percent to C$2.41 as gold rebounded from an eight-week low. Gold futures for December delivery rose 2.3 percent to $1,315.80 an ounce in New York, snapping two days of losses.

Canadian Natural Resources Ltd. declined 1.4 percent to C$32.36 and Suncor Energy Inc. slipped 1.2 percent to C$36.72 as energy stocks dropped 0.5 percent as a group.

The U.S. crude production rose last week, the Energy Information Administration said. Output rose to 7.8 million barrels a day in the week ended Sept. 13, the highest level since May 1989.

BCE lost 0.9 percent to C$43.85, Rogers Communications fell 0.9 percent to C$43.95 and Telus retreated 0.8 percent to C$33.93 as telephone stocks dropped the most in the S&P/TSX.

Paladin Energy jumped 8.5 percent to 51 Canadian cents. The company said yesterday it will cut cash costs for 2014 by $23 million, including a 10 percent reduction in board and management base salaries. The company is also pursuing joint venture partners for its undeveloped assets.

Air Canada soared 4.3 percent to C$3.91, headed for the highest close since November 2008. The company, Canada’s largest airline, will get one slot pair for flights to and from Tokyo’s Haneda airport, Japan’s transport ministry said in an e-mailed statement.

US

By Stephen Kirkland and Alex Barinka

Oct. 2 (Bloomberg) — Stocks slid around the world and gold rallied as the U.S. government shutdown entered a second day and a report showed American employers added fewer jobs than forecast. The dollar fell, while the yen and Treasuries rose.

The MSCI All-Country World Index dropped 0.1 percent at 4 p.m. in New York and the Standard & Poor’s 500 Index slipped 0.1 percent, paring an earlier drop of as much as 0.9 percent. Gold and silver jumped more than 2 percent to lead commodities higher, while oil rallied on speculation a pipeline expansion will fuel demand. The 10-year Treasury yield fell three basis points to 2.62 percent. The dollar weakened versus 11 of 16 major currencies, while the yen rose versus 14. The euro and Italian notes rallied.

President Barack Obama summoned the top four leaders of Congress to the White House today for the first high-level talks on reopening the partially shut U.S. government amid few signs of a resolution. Treasury Secretary Jacob J. Lew said the U.S. has begun final extraordinary measures that will be exhausted no later than Oct. 17 to avoid breaching its debt limit. The ECB kept its refinancing rate at 0.5 percent, matching economists’ estimates in a Bloomberg survey.

“It’s all about the lack of progress out of Washington and concerns about the debt ceiling and the government shutdown all being negotiated in one package,” Paul Zemsky, chief investment officer of multi-asset strategies for ING Investment Management, said by phone from New York. His firm oversees $190 billion. “If we fail to reach a debt-ceiling agreement, that could cause a global-type of concern and cause markets to sell off globally.”

The S&P 500 pared yesterday’s 0.8 percent gain as telephone, industrial and health-care shares led declines in six of the 10 main industry groups. The benchmark index has declined 2.3 percent after last reaching a record on Sept. 18 when the Federal Reserve refrained from reducing its stimulus program.

Companies that rely on government contracts helped lead losses today, with United Technologies Corp., Lockheed Martin Corp. and Raytheon Co. slipping at least 1.9 percent.

Monsanto Co. dropped 1 percent as the world’s largest seed company gave a full-year earnings forecast that trailed analyst estimates. Alcoa Inc. slumped 1.8 percent after Deutsche Bank AG lowered its rating on the aluminum producer. Global Payments Inc. rallied 11 percent after boosting its earnings forecast.

Companies increased payrolls by 166,000 in September, figures from ADP Research Institute showed today. The median forecast of 40 economists surveyed by Bloomberg called for an advance of 180,000.

U.S. stocks may reach a new high before dropping by as much as 4 percent in the next four to five weeks, as the S&P 500 forms a rising wedge, according to technical analysts at UBS AG.

While the S&P 500 doesn’t show any bearish divergence in trading indicators such as the NYSE McClellan Oscillator, which measures the moving average of net advancing shares in a market, or the number of stocks above their 20-day moving average, the index may reach another high by mid-October, before falling, Michael Riesner and Marc Mueller wrote in a note dated Oct. 1.

The Stoxx Europe 600 Index fell 0.7 percent for the third decline in four days.

Hochtief AG slumped 7.9 percent after the Sydney Morning Herald reported allegations of corruption at the company’s Australian business. KappAhl AB dropped 9.8 percent after the clothing retailer proposed paying no dividend this financial year. Portugal Telecom SGPS SA jumped 6.5 percent, the most in almost four months, after agreeing to merge with Brazil’s Oi SA to form a network operator with 100 million subscribers.

The MSCI Emerging Markets Index added 0.2 percent, a second straight gain. The Philippine Composite Index jumped 2.7 percent after the Asian Development Bank raised its economic growth forecast for the country, while gauges in Russia and Turkey fell more than 1 percent. Markets in India and China were shut for holidays.

Gold futures jumped 2.7 percent to $1,320.70 an ounce, the first gain in three days, and silver surged 3.4 percent to $21.88 an ounce. West Texas Intermediate oil added 2 percent to $104.10 a barrel after TransCanada Corp. said it expects to complete work on the southern portion of its Keystone pipeline expansion by the end of October.

The 10-year Treasury yield slid as low as 2.59, within one basis point of the lowest level since Aug. 12. The yield is down from the high this year of 3.005 percent on Sept. 6 and compares with the average of 3.53 percent over the past decade.

Treasury market volatility increased by the most in six weeks yesterday. Price swings as measured by the Merrill Lynch Option Volatility Estimate Index jumped 9 percent as the gauge advanced for a fifth day, the longest run of increases in four weeks. The index was at 87.37, versus the average of 69 for the past year.

The cost of insuring against losses on Treasuries fell, with credit-default swaps linked to U.S. government debt rose two basis points to 35.42 basis points, the highest since April.

That compares with a peak of 56 basis points in July 2011, when a political standoff threatened to shutter programs and delay bond payments.

The amount of debt protected by default swaps has fallen to $3.4 billion dollars from $5.6 billion two years ago and compares with $13 billion of outstanding insurance on German bunds. There are 886 credit-default swaps contracts linked to U.S debt outstanding, according to the Depository Trust & Clearing Corp. There were 56 trades covering a gross $2.1 billion of Treasuries in the week through Sept. 27, compared with 10 trades the week before.

Strategists from Bank of America Corp. to Wells Fargo & Co. predict dollar-denominated corporate bonds will outperform stocks this month if political gridlock persists with the government partially shut down this week.

Company debt in the U.S. has gained 1.1 percent since Sept. 17, the day before the Fed surprised investors with its decision to maintain unprecedented economic stimulus. In August 2011, the last time legislators approached a deadline to raise the debt limit, investment grade bonds returned 0.13 percent while U.S. stocks declined 5.4 percent.

Italy’s 10-year bond yield fell five basis points to 4.37 percent. Italian notes gained as Silvio Berlusconi said he’ll back Prime Minister Enrico Letta’s government. The yield on similar-maturity Portuguese notes jumped 18 basis points to 6.77 percent.

The yen appreciated for a second day, gaining 0.7 percent to 97.38 per dollar, while the euro gained 0.4 percent to $1.3586 after European Central Bank President Mario Draghi said the bank is attentive to exchange-rate developments.

Have a wonderful evening everyone.

Be magnificent!

“Live as if you were to die tomorrow. Learn as if you were to live forever.” – Mahatma Ghandi

As ever,

Karen Parnham

Assistant to Carolann Steinhoff

Queensbury Securities Inc.

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7

Tel: 778-430-5808