October 24, 2013 Newsletter

Dear Friends,

Tangents:

The United Nations was founded on this day in 1945.  It’s a wonderful concept isn’t it?  U n i t e d  N a t i o n s.

On October 24^th, 1664, King Charles II wrote to his sister Henrietta:

“You have heard of our taking of New Amsterdam, which lies just by New England.  ‘Tis a place of great importance to trade.  It did belong to England heretofore, but the Dutch by degrees drove our people out and built a very good town, but have got the better of it, and ‘tis now called New York.”

When I go to New York every October for the annual Barron’s investment conference, one of the things I try to sneak in is a walk along the streets of the Upper East Side to see the Halloween decorations.  Many of them are spectacular, amazingly imaginative and spooky.  If anyone happens to be going there before October 31^st, check out the display in front of the brownstone at 72^nd and 5^th.  It is amazing.  I tried to take a photo with my phone but it was already nighttime, so it didn’t turn out very well.  The attachment  is supposed to be a photo of a ghost with flashing purple eyes!

Photos of the day

A child looks through a magnifying glass at the ‘Cosmology of Life’ miniature wooden sculptures by Indonesia’s Toni Kanwa during a preview of the contemporary art exhibition titled ‘If The World Changed’ at a museum in Singapore. The exhibition features works by 82 artists from 13 countries.Edgar Su/Reuters

A shepherd guides a flock of sheep in Lyon, France, as ‘Confederation Paysanne’ farmers’ union members protest against the electronic chip system imposed on their animals. Robert Pratta/Reuters

Market Closes for October 24^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Oct. 24 (Bloomberg) — Canadian stocks rose, after snapping six days of gains yesterday, as resource companies including Agnico Eagle Mines Ltd. reported improving earnings and manufacturing in China grew more than forecast.

Agnico Eagle surged 19 percent and Goldcorp Inc. rallied 4.5 percent as both gold-mining companies reported better-than- projected earnings. Teck Resources Ltd., Canada’s largest diversified miner, advanced 3.8 percent as profit rose on increasing coal sales. Potash Corp. of Saskatchewan Inc. lost 1.6 percent after pricing for the fertilizer plunged. Wi-Lan Inc. sank 23 percent after losing a patent suit against Apple Inc.

The Standard & Poor’s/TSX Composite Index rose 81.43 points, or 0.6 percent, to 13,324.75 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has advanced 7.2 percent in 2013 and is trading at a two-year high.

“Materials stocks have been beaten down so much that it doesn’t take much to get them going, and an earnings beat is one of those things,” said Ian Nakamoto, director of research with MacDougall MacDougall & MacTier Inc., in an interview from Toronto. The firm manages about C$4 billion. “And you also have the China PMI number. Expectations are low, so all you need is a little positive push to get stocks going.”

A preliminary purchasing managers’ index reading for China of 50.9 came in ahead of a 50.4 median estimate from analysts surveyed by Bloomberg. Readings above 50 indicate expansion.

Raw-materials producers gained 2.9 percent as a group, the most in the S&P/TSX, as six of 10 industry groups in the benchmark index advanced. The gauge of commodity producers has lost 26 percent this year. Trading volume for S&P/TSX stocks was about 23 percent higher compared with the 30-day average.

Agnico Eagle jumped 19 percent to C$31.82, the most in almost five years. The company reported earnings that beat analysts’ estimates and said 2013 production and costs will be better than it previously forecast.

Agnico is among gold producers seeking to curb costs and cut spending after the metal slumped into a bear market in April.

Goldcorp, the largest gold miner by market value, gained 4.5 percent to C$27.76 as costs rose less than expected. The company, which operates mines in North and South America, wrote down the value of its assets by $1.96 billion in July and is slowing some project spending and seeking to cut costs. The company is building new mines in Canada and Argentina.

Barrick Gold Corp. gained 4.1 percent to C$20.95 and B2Gold Corp. rose 5.8 percent to C$2.73 as the S&P/TSX Gold Index rallied to a one-month high. Gold for December delivery climbed 1.2 percent to a three-week high.

Teck Resources increased 3.8 percent to C$30.54. The company’s coal sales climbed 36 percent from a year earlier to 7.57 million metric tons in the third quarter, while mine operating costs fell 14 percent to C$50 a ton.

Wi-Lan sank 23 percent to C$3.16, for the lowest close since June 2010. Apple won a patent-infringement trial and fended off a demand for $248 million in royalties for wireless technology used in mobile devices.

Potash Corp. declined 1.6 percent to C$32.41. The price of potash, a key nutrient used in farming, plunged 28 percent after the company’s biggest rival announced plans to raise output.

Potash Corp. received an average price of $307 a metric ton for its potash in the third quarter, compared with $429 a year ago, the company said in a statement.

Buyers of potash, a form of potassium used to boost crop yields, have deferred purchases since the end of July after OAO Uralkali, the world’s largest producer, quit a sales accord with its Belarusian rival and announced plans to boost output and take a larger market share.

USA

By Lu Wang

Oct. 24 (Bloomberg) — U.S. stocks rose, putting the Standard & Poor’s 500 Index three points from a record, as corporate earnings beat estimates and signs of slower economic growth fueled bets the Federal Reserve will maintain stimulus.

Homebuilders rallied 3.3 percent as a group after PulteGroup Inc.’s profit surged. McKesson Corp. jumped 4.9 percent after boosting its annual forecast and agreeing to buy Germany’s Celesio AG for about 3.9 billion euros ($5.4 billion).

Citrix Systems Inc. climbed 4.9 percent as it raised its share buyback. Xerox Corp. tumbled the most in four years after its forecast trailed analysts’ estimates.

The S&P 500 gained 0.3 percent to 1,752.07 at 4 p.m. in New York. The Dow Jones Industrial Average rose 95.88 points, or 0.6 percent, to 15,509.21. About 6.5 billion shares changed hands on U.S. exchanges, 10 percent above the three-month average.

“We are right at the heart of earnings season so everything at this point of time is very earnings driven,” Mark Spellman, a portfolio manager at Value Line Funds in New York, said by phone. His firm manages $2.3 billion. “Earnings have been as good if not slightly better than expected. We’ve done a lot on the cost side. What people want to see is continued progress in the sales line.”

The S&P 500 has advanced 4.2 percent this month, closing at a record of 1,754.67 on Oct. 22, as lawmakers agreed to raise the U.S. borrowing limit, avoiding a possible debt default. The benchmark gauge fell 0.5 percent yesterday, halting five days of gains, as forecasts at companies from Caterpillar Inc. to Broadcom Corp. disappointed investors.

Some 47 companies in the S&P 500 posted results today, the busiest day of the third-quarter season. Microsoft Corp. surged 5 percent to $35.40 at 4:27 p.m. in New York after reporting sales and profit that topped estimates. The stock slipped 0.1 percent during the regular session.

Amazon.com Inc. rallied 4.7 percent to $347.72 in extended trading, adding to today’s 1.7 percent gain. The company’s revenue beat analysts’ estimates as consumers flocked to the world’s largest online retailer, fueling sales growth while net losses shrank.

Of the 217 S&P 500 members that have released earnings so far, 77 percent exceeded analysts’ predictions for profit, while 53 percent beat sales estimates, according to data compiled by Bloomberg.

Earnings for members of the gauge probably increased 2.5 percent in the third quarter as sales climbed 2.2 percent, according to analysts’ estimates compiled by Bloomberg.

“We want to look at the quality of these earnings as far as looking at revenues and making sure there is actual growth and not just manufactured growth,” David James, director of research at Alpha, Ohio-based James Investment Research Inc., said in a phone interview. His firm oversees more than $4.5 billion.

Better-than-expected earnings and monetary stimulus from the Federal Reserve have driven the S&P 500 up 23 percent this year. The 16-day government shutdown dispute weighed on fourth- quarter growth and will prompt Fed policy makers to wait until March before starting to scale back the $85 billion of monthly bond purchases, a Bloomberg survey showed last week.

Data today added to signs that economic growth is slowing, as U.S. manufacturing expanded in October at a weaker pace than forecast, according to the Markit Economics preliminary index.

Euro-area services and factory output also missed economists’ projections while manufacturing output in China strengthened more than anticipated.

Government data showed the trade deficit in the U.S. was little changed in August and more Americans than forecast filed applications for unemployment benefits last week. A report Oct. 22 showed payrolls in the U.S. climbed by less than forecast in September. U.S. consumer confidence dropped last week to an eight-month low, according to the Bloomberg Consumer Comfort Index released today.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, fell 1.6 percent to 13.20 today, extending its decline for the month to 20 percent.

Six of 10 main industries in the S&P 500 advanced, with producers of consumer discretionary products adding 1 percent to lead gains.

The S&P Supercomposite Homebuilding Index jumped 3.3 for a third straight gain, as all its 11 members climbed. PulteGroup, the second-largest U.S. homebuilder by market value, surged 7 percent to $17.85 after recording a tax-related gain and rising revenue from house sales.

Home Depot Inc., the biggest U.S. home improvement retailer, advanced 2.3 percent to $76.78 for the steepest climb in the Dow.

The Bloomberg U.S. Airlines Index climbed 2.7 percent to the highest close since July 2007. Southwest Airlines Co. added 3.7 percent to $17.02 after earnings and operating revenue matched analysts’ forecasts.

U.S. Airways Group Inc. jumped 5.9 percent to $22.67, the highest level in almost six years, as Deutsche Bank AG lifted the stock’s rating to buy from hold.

McKesson rose 4.9 percent to an all-time high of $150. The largest U.S. pharmaceutical distributor said it will acquire the 50.01 percent stake in Celesio from Franz Haniel & Cie GmbH, a family-owned investment company, for 23 euros a share.

Citrix Systems Inc., the maker of software that lets people access work files from home, rallied 4.9 percent to $58.79 after saying it plans to buy back as much as $500 million in shares.

Visa Inc. gained 2 percent to a record $202.91. The world’s biggest payments network increased its quarterly dividend by 21 percent to 40 cents a share.

Telephone shares fell 1 percent for the worst performance among 10 S&P 500 industries, as AT&T Inc. slipped 1.8 percent to $34.63 to halt a six-day rally. While the second-largest U.S. wireless carrier reported better-than-expected profit, its subscriber gains of 363,000 customers were dwarfed by Verizon Communications Inc.’s 927,000 new contract users last quarter.

Xerox fell 10 percent, the most since September 2009, to $9.61. The printer and copier pioneer lowered its full-year earnings forecast to as little as $1.08 a share, raising concerns about the company’s attempt to shift into business services.

Boston Scientific Corp. dropped 6.1 percent to $11.54. The second-biggest maker of heart devices said it plans to eliminate as many as 1,500 more jobs as the industry struggles with shrinking markets and development costs. Chief Financial Officer Jeffrey Capello will leave the role at the end of the year and be replaced by Daniel Brennan, the company said.

Symantec Corp. sank 13 percent to $21.49. The maker of security software forecast sales and profit that missed analyst estimates. Chief Executive Officer Steve Bennett said that sales staff, who are being assigned fewer clients and getting additional training, weren’t able to close as many deals.

Akamai Technologies Inc. slumped 11 percent to $46.06, the lowest since August. The company, which helps customers deliver online content faster, forecast fourth-quarter revenue and profit that fell short of some projections.

Cameron International Corp. tumbled 14 percent, the most in the S&P 500, to $53.85. The maker of oilfield equipment forecast fourth-quarter revenue that trailed analysts’ estimates and cited delays in international bookings for the tempered outlook.

Have a wonderful evening everyone.

Be magnificent!

We gain our freedom when we realize our most true nature.

The man who is an artist gains his artistic freedom when he discovers the true ideal of art.

Rabindranath Tagore, 1861-1901

As ever,

Carolann

Eat food.  Not too much.  Mostly plants.

-Michael Pollan, 1955-

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