September 17, 2013 Newsletter

Dear Friends,

Tangents:

On this day in 2001, the U.S. stock market reopened for the first time following the 9/11 attacks, ending the longest shutdown on Wall Street since the Great Depression. The Dow fell 684 points, which at the time was the worst one-day point drop in history.  -Steven Russolillo, WSJ.

This week also marks the 5^th anniversary of the collapse of Lehman Brothers on  September 15th, 2008, which triggered the global financial crises.

As soon as questions of will or decision or reason or choice of action arise, human science is at a loss. –Noam Chomsky.

Photos of the day

Ben McCann, 11, and John Schunk, (r.) fish for rainbow trout on a dock at the east end of Sand Lake as the sun sets on Monday, Sept. 16th, in Anchorage, Alaska. Dan Joling/AP

An Indian devotee takes a picture of an idol of elephant-headed Hindu god Ganesha as it is lifted to be immersed in the Hussain Sagar Lake during Ganesh Chaturthi festival celebrations in Hyderabad, India. The festival is celebrated to mark the birth of Ganesha, the Hindu God of wisdom, prosperity and good fortune. Mahesh Kumar A./AP

Market Closes for September 17^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam and Aubrey Pringle

Sept. 17 (Bloomberg) — Canadian stocks rose a third day, after gaining the most in two weeks yesterday, as rising technology shares offset a slump in oil producers before a U.S. Federal Reserve policy statement tomorrow.

Wi-Lan Inc. rose 3.6 percent to lead technology stocks higher. Rockwell Diamonds Inc. soared the most in four years after the company found four rough diamonds of at least 100 carats. Potash Corp. of Saskatchewan Inc. and Agrium Inc. fell more than 1.5 percent after a rival producer cut its quarterly forecast for fertilizer sales and prices.

The Standard & Poor’s/TSX Composite Index rose 17.23 points, or 0.1 percent, to 12,834.11 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has added 1.4 percent in September. Trading volume was in line with the 30-day average.

“There’s a lot of wait-and-see attitude in front of the Fed meetings tomorrow, there’s not a ton of conviction,” said Bob Decker, a fund manager with Aurion Capital Management, in an interview from Toronto. His firm manages about C$6 billion ($5.8 billion). “There’s a large amount of cash on the sidelines that could be convinced to move once the uncertainty surrounding tapering is removed.”

The Fed began a two-day meeting to weigh potential reductions in the rate of its monthly bond buying. The stimulus has helped fuel a global rally in equities.

Factory sales rose 1.7 percent to C$49.5 billion in July, the fastest in five months, on gains for commodities producers from crude to lumber and fabricated metals. The increase exceeded all 18 economist forecasts in a Bloomberg survey.

In China, foreign-direct investment grew 0.6 percent last month, compared with the Bloomberg estimate of 12.5 percent growth.

Eight of 10 main groups in the benchmark gauge advanced today, led by a 1.5 percent gain among technology stocks. Energy stocks fell the most, sliding 0.3 percent.

Element Financial Corp., the top-performing company in the S&P/TSX Financials Index this year with a 91 percent gain, added 1 percent to a record C$13.55.

Royal Bank of Canada, the nation’s largest lender, rose 0.6 percent to C$66.32 and Toronto-Dominion Bank added 0.5 percent to C$91.43. Financial stocks added 0.3 percent as a group.

Wi-Lan increased 3.6 percent to C$3.75, extending a three- day rally to 12 percent. BlackBerry Ltd., the Waterloo, Ontario- based smartphone maker, rose 2 percent to C$10.88.

Valeant Pharmaceuticals International Inc. climbed 1.3 percent to C$105.83, the highest close in a month, after Gary Nachman with Goldman Sachs Group Inc. initiated coverage of the drugmaker with a buy rating.

Energy producers slid, halting a three-day winning streak.

Crude fell to the lowest level in almost four weeks as a U.S. agreement with Russia to eliminate Syria’s chemical weapons reduced supply risk and on speculation that the Federal Reserve will start tapering stimulus measures.

Niko Resources Ltd., an oil and gas exploration company, dropped 5.3 percent to C$3.91. Bankers Petroleum Ltd. lost 2.4 percent to C$3.74.

Potash Corp. of Saskatchewan fell 2 percent to C$33.39 and Agrium retreated 1.5 percent to C$93.46. Mosaic Co., North America’s second-largest fertilizer producer, cut its quarterly forecast for potash and phosphate sales and prices because crop- nutrient markets have “softened.”

Global fertilizer markets have weakened, in part, because of fertilizer distributors’ cautiousness related to the breakup of Belarusian Potash Co., Mosaic said in a statement. On July 30, OAO Uralkali, the world’s largest potash producer, quit Belarusian Potash, the largest trader of the crop nutrient, because of a dispute with its partner Belaruskali.

“Dealers are cautious and are deferring purchases,” Jim Prokopanko, Mosaic’s chief executive officer, said in the statement.

Rockwell Diamonds jumped 45 percent to 42 Canadian cents, the most since June 2009, after announcing it has recovered four rough diamonds, one as large as 169 carats, from its operations in the Middle Orange River region in South Africa. The stones will be sold into a joint venture with Steinmetz Diamonds at market value, the company said in a statement.

US

By Nick Taborek and Aubrey Pringle

Sept. 17 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index toward a record high, as Microsoft Corp. announced a $40 billion buyback and Federal Reserve policy makers gathered for a two-day policy meeting.

Microsoft increased 0.4 percent, pacing a rally among technology shares, as the world’s largest software maker also raised its quarterly dividend 22 percent. Safeway Inc. rallied 11 percent after adopting a poison-pill to protect against a potential hostile takeover. Mosaic Co. sank 1.2 percent after the fertilizer producer cut its quarterly forecast for potash and phosphate sales and prices.

The S&P 500 added 0.4 percent to 1,704.76 at 4 p.m. in New York. The benchmark index is less than five points below its record high of 1,709.67 reached on Aug. 2. The S&P 500 Equal Weighted Index, which strips out biases related to market value, jumped 0.5 percent to a record. The Dow Jones Industrial Average increased 34.95 points, or 0.2 percent, to 15,529.73 today.

About 5.1 billion shares changed hands on U.S. exchanges, 14 percent below the three-month average.

“Everybody’s looking forward to tomorrow to see what the Fed’s statement is going to be,” Jerry Braakman, the chief investment officer of First American Trust in Santa Ana, California, said by phone. His firm oversees $1 billion. “With inflation being benign, it doesn’t require a more aggressive tightening than the market would expect.” Large buyback plans are “returning capital to the market, which helps propel it to new highs,” he said.

The Federal Open Market Committee will probably lower its $85 billion of monthly bond purchases by $10 billion, according to the median response of 34 economists in a Bloomberg News survey this month. That’s down from the forecast of a $20 billion reduction in a July survey. The central bank’s stimulus program has helped the S&P 500 rally more than 150 percent from its March 2009 low.

Growing speculation about stimulus cuts has whipsawed stocks since May, when Fed officials first indicated reductions could start this year. The S&P 500 tumbled 5.8 percent from a record on May 21 through June 24. It rebounded 8.7 percent to close at its latest all-time high before slumping as much as 4.6 percent from that level.

The S&P 500 climbed 0.6 percent to a six-week high yesterday after tensions over dealing with Syria’s chemical weapons eased and Lawrence Summers withdrew his bid to be Fed chairman. The former Treasury secretary would tighten policy more than Janet Yellen, the current Fed vice chairman who was his main rival to replace Chairman Ben S. Bernanke, according to a Bloomberg Global Poll of investors, analysts and traders last week.

A Labor Department report today showed the cost of living in the U.S. rose less than forecast in August, a sign it will take time for inflation to reach the Fed’s goal. Central bankers have said they are watching prices to ensure the U.S. doesn’t slip into a long period of diminishing increases, or disinflation, that damages the expansion.

In Germany, Europe’s largest economy, investor confidence increased for a second month in September. Foreign-direct investment in China rose 0.6 percent last month, trailing the median estimate of 12.5 percent growth in a Bloomberg survey.

Nine out of 10 industry groups in the S&P 500 rose, as industrial, consumer-discretionary and technology shares added at least 0.5 percent to pace gains. The Russell 2000 Index advanced 1 percent to an all-time high.

The CBOE Volatility Index, the gauge of S&P 500 options prices known as the VIX, rose 1 percent to 14.53. The equity volatility gauge has tumbled 15 percent in September after rallying 26 percent in August, the biggest monthly gain since May 2012.

Microsoft increased 0.4 percent to $32.93. The repurchase program, which has no expiration date, replaces another $40 billion buyback plan that was due to lapse at the end of this month, Redmond, Washington-based Microsoft said in a statement.

The company’s dividend will rise 22 percent to 28 cents a share.

After struggling to keep up with rivals in the smartphone and tablet markets, Microsoft is retooling its strategy and seeking a new chief executive officer. The company has come under pressure from activist investor ValueAct Holdings LP, which pushed Microsoft to return more money to shareholders, according to a person with knowledge of the matter.

The size of the buyback eclipses most repurchase programs, though it’s smaller than the $50 billion plan announced by Apple Inc. in April. Authorized U.S. buybacks have reached a six-year high of $556 billion this year, data from Birinyi Associates Inc. show. Buyback authorizations have increased 58 percent this year compared with the same period in 2012, Birinyi data through Sept. 13 show.

“The news today is indicative of the trend we’ve seen all year, simply because companies are taking the low rates, borrowing some money, taking the cash, putting it to work,” John Canally, investment strategist for LPL Financial LLC in Boston, said in a phone interview. He helps manage $396.7 billion. “Companies have to find a way to be more efficient with their capital. Companies have to be able to generate earnings in a world where you’re getting relatively low growth.”

Safeway surged 11 percent to $30.99 for the biggest rise in the S&P 500. The grocery store chain adopted a shareholder rights plan to thwart any unfriendly takeovers, saying an undisclosed purchaser has accumulated a “significant amount” of stock.

An S&P 500 index of homebuilders advanced 0.4 percent. KB Home rose 0.6 percent to $17.27 and Lennar Corp. increased 0.8 percent to $35.04.

The National Association of Home Builders/Wells Fargo confidence index registered 58 this month, matching August’s revised reading as the strongest since November 2005, a report from the Washington-based group showed today. Readings greater than 50 mean more builders view conditions as good than poor.

US Airways Group Inc. climbed 3.6 percent to $18.72 and Delta Air Lines Inc. advanced 0.7 percent to $23.32. The two airlines were each raised to overweight from neutral at JPMorgan Chase & Co.

Broadcom Corp. gained 2 percent to $27.45. The chipmaker was raised to positive from neutral by Susquehanna Financial Group analyst Christopher Caso.

Mosaic, North America’s second-largest fertilizer producer, lost 1.2 percent to $45. Global fertilizer markets have weakened, in part, because of fertilizer distributors’ cautiousness related to the breakup of Belarusian Potash Co., Mosaic said in a statement. On July 30, OAO Uralkali, the world’s largest potash producer, quit Belarusian Potash, the largest trader of the crop nutrient, because of a dispute with its partner Belaruskali.

Potash Corp. of Saskatchewan Inc. fell 1.7 percent to $32.45 and Agrium Inc. retreated 1.3 percent to $90.69.

Outerwall Inc., owner of the Redbox DVD kiosks, dropped 12 percent to $49.49 after cutting its third-quarter and full-year forecasts because of discounts and shorter rentals.

Have a wonderful evening everyone.

Be magnificent!

What is change?

One form appears, and another disappears.

Can we say that the butterfly used to be a caterpillar?

A substance in the caterpillar takes on the form of the butterfly.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

Ocean, who is the source of all.

-Homer, c800 BCE-c701 BCE

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