October 25, 2016 Newsletter

Dear Friends,

Tangents:

On this day in 1854, the British suffered heavy losses against Russia in the Battle of Balaclava during the Crimean War. The battle inspired Alfred Lord Tennyson’s poem “Charge of the Light Brigade.”

The Charge of the Light Brigade
  By Alfred, Lord Tennyson

1.
Half a league, half a league,
  Half a league onward,
All in the valley of Death
  Rode the six hundred.
“Forward, the Light Brigade!
“Charge for the guns!” he said:
Into the valley of Death
  Rode the six hundred.
2.
“Forward, the Light Brigade!”
Was there a man dismay’d?
Not tho’ the soldier knew
  Someone had blunder’d:
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do and die:
Into the valley of Death
  Rode the six hundred.
3.
Cannon to right of them,
Cannon to left of them,
Cannon in front of them
  Volley’d and thunder’d;
Storm’d at with shot and shell,
Boldly they rode and well,
Into the jaws of Death,
Into the mouth of Hell
  Rode the six hundred.
4.
Flash’d all their sabres bare,
Flash’d as they turn’d in air,
Sabring the gunners there,
Charging an army, while
  All the world wonder’d:
Plunged in the battery-smoke
Right thro’ the line they broke;
Cossack and Russian
Reel’d from the sabre stroke
  Shatter’d and sunder’d.
Then they rode back, but not
  Not the six hundred.
5.
Cannon to right of them,
Cannon to left of them,
Cannon behind them
  Volley’d and thunder’d;
Storm’d at with shot and shell,
While horse and hero fell,
They that had fought so well
Came thro’ the jaws of Death
Back from the mouth of Hell,
All that was left of them,
  Left of six hundred.
6.
When can their glory fade?
O the wild charge they made!
  All the world wondered.
Honor the charge they made,
Honor the Light Brigade,
  Noble six hundred. 

PHOTOS OF THE DAY

A man makes his way under fall foliage in Garmisch-Partenkirchen, Germany, on Tuesday. Matthias Schrader/AP

A man stands on the shore of the Baltic Sea in Timmendorfer Strand, northern Germany, on Tuesday. Michael Probst/AP
Market Closes for October 25^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

NUMBER OF THE DAY
$199 billion
The record-breaking value of Chinese overseas acquisitions so far this year, reflecting an aggressive new generation of Chinese deal makers. On Monday, HNA Group announced the purchase of a 25% stake in Hilton Worldwide from Blackstone Group for $6.5 billion.
Canada
     By John Hyland
     (Bloomberg) — Canadian stocks fell for a second day as a selloff in crude dragged energy producers lower, overshadowing a rally in raw materials paced by West Fraser Timber Co. Ltd. and gold miners.
     The S&P/TSX Composite Index fell 0.4 percent to 14,870.63 at 4 p.m. in Toronto. Raw materials rebounded after snapping their longest winning streak in three months. Miners and energy producers have propelled the index to a 14 percent increase this year, making it the top performing developed equity market in the world, ahead of the U.K. and New Zealand.
     Nine of the 11 sectors in the index fell, paced by a 1.3 percent decline in energy shares, while raw-materials producers rose to a one-week high as gold climbed and West Fraser Timber Co Ltd. topped earnings and revenue estimates. The lumber company capped its largest gain in 16 years, rising 12 percent.
     Gold investors assessed demand from India before its Diwali festival that can lead to increased buying, with miners rebounding from yesterday’s decline. B2Gold Corp. added 8 percent and Barrick Gold Corp. increased 2.2 percent.
     Demand for gold has slipped recently, with the price falling more than $100 from its high this year, as traders price in increasing odds that interest rates will rise. Expectations for higher borrowing costs have strengthened the dollar, sending a gauge on the currency to its highest since March before easing back today. Rising rates dull the precious metal’s appeal when compared to higher yielding assets.
     Health-care shares advanced 0.8 percent, led by a 1.8 percent climb in Valeant Pharmaceuticals International Inc. Renowned fund manager Bill Miller said he purchased shares of the drug maker, predicting the stock will double in three years.
     Energy producers, Canada’s second largest sector, retreated as crude in New York dropped 1.1 percent to a one-week low. Oil slipped below $50 a barrel on speculation Russia won’t curb output, just after Iraq said it should be exempt from OPEC’s planned cuts. TransCanada Corp. and Canadian Natural Resources Ltd. fell at least 1.3 percent.
     Financials, which account for about a third of the index, declined 0.3 percent. Royal Bank of Canada slipped 0.4 percent to a one-week low, while Thomson Reuters Corp. declined 0.9 percent.
     Bank of Canada Governor Stephen Poloz said Monday Canada’s two-track economy complicates the decision to cut interest rates. Poloz reiterated the central bank considered cutting rates ahead of last week’s decision to stand pat, but held off because of uncertainties around the nation’s growth outlook. Yesterday, the central bank renewed a two percent inflation targeting agreement, as price increases quickened in September for the first time in five months.
     Canadian stock valuations remain 17 percent higher than their U.S. peers, with the S&P/TSX carrying a price-earnings ratio of 23.6 compared with 20.1 for the the S&P 500 Index, according to data compiled by Bloomberg.

US
By Rita Nazareth, Anna-Louise Jackson and Rebecca Spalding
     (Bloomberg) — U.S. stocks declined from a two-week high as mixed forecasts from industry giants and a slump in consumer confidence spurred concern over the outlook for the world’s largest economy. Oil retreated.
     Blue chips Caterpillar Inc. and 3M Co. dropped after cutting their estimates, outweighing optimism with United Technologies Corp. and Procter & Gamble Co.’s earnings. Apple Inc. fell in after-hours trading as it reported sliding prices for its smartphones and forecast lower-than-expected profitability over the holiday period. The pound pared losses as Bank of England Governor Mark Carney signaled that the chances of another interest-rate cut this year are diminishing. Oil sank on bets Russia won’t join OPEC to curb supply.
     Traders have been assessing the strength of corporate profits and the economy amid bets on a Federal Reserve hike by December. U.S. consumer confidence fell more than forecast in October as households became less upbeat about the labor market, the Conference Board said Tuesday. More than a third of S&P 500 companies are scheduled to report earnings this week, including Alphabet Inc., Coca-Cola Co., Amazon.com Inc. and Boeing Co. 
     “Given that we’re now in the thick of earnings season, there are going to be acute reactions nearly every day,” said Frank Cappelleri, executive director at Instinet LLC in New York. “Other than that, the price action is not materially different than what we’ve seen over the last two months. There have been multiple false starts where budding momentum has gotten cut short.”
     Global markets have actually seen declines in volatility — with a cross-asset gauge of price swings in equities, rates, currency and commodities down to the lowest since 2014.
     While risks exist, the drop in anxiety has coincided with a reduction in uncertainty when it comes to U.S. politics and policy. Hillary Clinton’s odds of victory are close to the highest on record at 86.5 percent, according to forecaster FiveThirtyEight. Likewise, investors appear to be coming to terms with the inevitability of a Federal Reserve hike in December.
     “Until we get something that really surprises the market, we’re going to continue in this low volatility,” said Hank Smith, who helps manage more than $6 billion as chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania “Neither the election nor the Fed’s rate decision have people particularly worried right now.”
     The S&P 500 dropped 0.4 percent to 2,143.16 at 4 p.m. in New York. The gauge has been stuck in a 64-point trading range after reaching a record in August and hasn’t climbed for three consecutive sessions in more than a month.
     Apple shares fell 2.3 percent to $115.55 in extended hours on Tuesday. The stock closed at $118.25 in New York regular trading. It had rallied 22 percent in the last three months. The company, which gets two thirds of revenue from the iPhone, experienced its first annual sales decline since 2001, amid waning smartphone demand.
     Among stocks moving on corporate news:
     * 3M slumped after cutting the top end of its 2016 profit forecast.
     * Caterpillar slipped after reducing its sales estimate for this year.
     * Sherwin-Williams Co.’s disappointing results weighed on shares of Home Depot Inc. and Lowe’s Cos.
     * Whirlpool Corp. tumbled after lowering its profit outlook.
     * Under Armour Inc. sank as its forecast renewed slowdown concern.
    * JetBlue Airways Corp. fell after reporting profit that missed estimates.
     * Procter & Gamble and United Technologies climbed after their results beat forecasts.A two-day lull for European equities ended as                Novartis AG led drugmakers down after saying its profit fell for a seventh straight quarter while Italian lenders slumped. The Stoxx Europe 600 Index fell 0.4 percent, erasing an earlier advance. Miners jumped to their highest level since August 2015, tracking a rally in metal prices.
     Most emerging-market stocks retreated as Brazilian consumer companies fell on prospects for a slower-than-expected reduction in borrowing costs, outweighing gains in commodity producers from South Africa to China.
     Oil fell 1.1 percent in New York. Output cuts aren’t “an option for us,” said Russia’s envoy at OPEC, Vladimir Voronkov, according to Interfax. U.S. crude supplies probably rose 2 million barrels last week, a Bloomberg survey showed before Energy Information Administration data Wednesday.
      “The nonsense around the production agreement comes in and out of the market,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “It’s coming out of oil today because of the Russian statements, which come after Iraq made it clear that they weren’t going to make a cut.”
     West Texas Intermediate for December delivery slipped 56 cents to $49.96 a barrel on the New York Mercantile Exchange. Brent for December settlement dropped 67 cents, or 1.3 percent, to $50.79 a barrel on the London-based ICE Futures Europe exchange.
     Arabica coffee, the mild-tasting bean type favored by Starbucks Corp., surged to the highest since February 2015 after Brazil’s largest producer cut its export estimate for 2016 amid rising domestic consumption and the effects of drought.
     Gold rallied on speculation that demand will accelerate before the Diwali religious festival in India, the world’s second-biggest buyer of the metal.
     Industrial metals surged as increasing profits at Chinese steelmakers and gains in global manufacturing boosted speculation that demand will improve.
     The pound rebounded from its lowest level since the flash crash earlier this month after Carney said there were limits to officials’ willingness to look beyond an overshoot of their inflation target. Sterling fell 0.4 percent at $1.2186, after earlier slumping 1.3 percent.
     “The comments by Carney do highlight that the latest sterling selloff is starting to worry policy makers as it brings closer the risk of stagflation,” said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA’s corporate- and investment-banking unit in London.
     Bloomberg’s Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.1 percent after rising to the highest in seven months.
     South Africa’s rand led gains in emerging markets amid a rally in metals. Russia’s ruble rose as companies lined up to make payments before a tax deadline. Chile’s peso rallied amid speculation of a change of government next year and as copper prices surged.
     A gauge of expected price swings in Treasuries fell to the lowest since December 2014 before the Fed meets next week as traders see a clearer outlook for monetary policy in the U.S. and abroad.
     “No one’s expecting anything from the Fed’s meeting next week,” said Justin Lederer, an interest-rate strategist in New York at Cantor Fitzgerald LP, one of 23 primary dealers that trade with the Fed. “People are looking for a December rate hike. Even with the presidential election, people are comfortable with rates.”
     The benchmark U.S. 10-year note yield was little changed at 1.76 percent, according to Bloomberg Bond Trader data. A $26 billion two-year Treasury auction drew the weakest demand since July.
     Austria sold 2 billion euros ($2.2 billion) of bonds due in November 2086 via banks, according to a person familiar with the matter. The sale follows this year’s century bond offerings from Belgium and Ireland, as well as 50-year deals from France, Italy and Spain, as countries take advantage of historically low interest rates to issue ultra-long debt.

Have a wonderful evening everyone.

Be magnificent!

Like the silkworm you have built a cocoon around yourself.  Who will save you?
Burst your own cocoon and come out as the beautiful butterfly, as the free soul.
Swami Vivekananda

As ever,

Carolann

No matter how rich you become, how famous or powerful, when you die the size of
your funeral will still pretty much depend on the weather.
                                                                          -Michael Pritchard, b. 1949

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

Tel: 778.430.5808
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