September 2, 2016 Newsletter

Dear Friends,

Tangents:

We went to see the movie, The Light Between Oceans on the weekend.  It is fantastic so make sure to see it – you won’t be disappointed.  The acting is brilliant, starring Michael Fassbender and Alicia Vikander in the lead roles.  Haven’t seen a movie that good in a while.

September 6, 1920: First radio broadcast of a prize fight.

Numbers:
100
Macy’s stores to close, in order to focus on other areas of the business, in what some consumer experts call another sign of the end of the department store era.
400
Age, in years, to which the Greenland shark is thought to live, according to new research, making it the world’s longest-lived vertebrate.
2 Million
Residents of Aleppo, Syria, who are now without running water.
4
Distance (in inches) that Beijing is sinking each year because of its overconsumption of groundwater.

PHOTOS OF THE DAY

Windsurfer Chris Eldridge rides the waves Tuesday along the coast of South Kingstown, R.I. Tropical Storm Hermine is expected to begin weakening as it churns hundreds of miles offshore in the Atlantic Ocean, but forecasters warn it could continue to impact areas from New York to southern New England with pounding waves, coastal flooding and beach erosion before it moves out to sea. Steven Senne/AP

Super yacht ‘Motor Yacht A,’ owned by Russian tycoon Andrey Melnichenko, is moored on the River Thames besides the HMS Belfast (r.) in London on Tuesday. Toby Melville/Reuters

Market Closes for September 6^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks edged higher as commodities producers rallied with resource prices, led by a third straight increase in gold, offsetting weak services industries expansion in the U.S. that sent shares in industrial and consumer shares lower.
     The S&P/TSX Composite Index rose 0.1 percent to 14,812.99 at 4 p.m. in Toronto after swinging between gains and losses for most of the session. The benchmark capped a 1.1 percent rally last week for its best advance since July 15. Canadian equity markets were closed Monday for a holiday.
     Among shares moving, Enbridge Inc. climbed to the highest in almost two months after agreeing to a $28 billion cross- border deal to form the largest energy pipeline and storage company in North America. OceanaGold Corp. and Yamana Gold Inc. surged more than 5.7 percent to pace gains among gold miners. Bombardier Inc. plunged 5.1 percent after cutting its C Series delivery forecast.
     Canadian shares resumed the 2016 rally to start September after hitting a speed bump in August with the narrowest one- month climb since June 2009 after torrid gains in raw-materials producers faltered. The group is still up 55 percent and on track to halt the longest yearly losing streak since 1988. Energy producers have gained 21 percent in 2016, on pace for the strongest in seven years.
     The S&P/TSX is also the second-best performing developed market in the world, just behind New Zealand. Canadian stocks are more expensive than their U.S. peers, with a price-earnings ratio of 23.5 for the S&P/TSX, opening up a 14 percent premium over the S&P 500 Index.
     On Tuesday, Enbridge added 3.9 percent for a third day of gains after agreeing to buy Spectra Energy Corp. in a stock-for- stock deal, according to a company statement Tuesday. The deal is expected to close in the first quarter of 2017 and would be the biggest foreign purchase ever by a Canadian company.
     Energy producers edged higher, as crude climbed in New York while Brent slipped. A pledge by Russia and Saudi Arabia to cooperate to stabilize the market failed to include any specific measures to bolster prices. Brent crude had jumped Monday as the two countries planned a “significant” announcement. Bonavista Energy Corp. soared 20 percent after agreeing to an asset exchange pact.
     Barrick Gold Corp. gained 3.7 percent to lead raw-materials producers higher, as Goldman Sachs analysts led by Andrew Quail named the Canadian company as among its top ideas within gold companies. Gold prices held a three-day advance, climbing the most since June.
     Bombardier slumped the most in more than two months after it cut its 2016 forecast for C Series jet aircraft deliveries by more than half because of delays in engine shipments from supplier Pratt & Whitney. The Montreal-based planemaker now expects to deliver seven of the aircraft this year, down from 15, which will result in weaker revenue.
     Performance Sports Group Ltd. tumbled 10 percent, the biggest decline since Aug. 17. The maker of hockey and athletic equipment ended a shareholder nomination agreement with largest investor Sagard Capital Partners Friday.

US
By Joseph Ciolli
     (Bloomberg) — Warnings embedded in strategist price targets and historically low U.S. stock volatility are doing nothing to dissuade hedge funds.
     They just spent another week adding to long positions in the equity market and building up shorts against the CBOE Volatility Index that were already at a record, according to data from the Commodity Futures Trading Commission. Stocks languished for most of Tuesday before extending gains in the final minutes of trading, as the S&P 500 Index added 0.3 percent to 2,186.48 as of 4 p.m. in New York. The Nasdaq Composite Index advanced 0.5 percent to a fresh record.
     The positioning leaves the biggest speculators at odds with an increasingly skeptical analyst contingent on Wall Street, with the average strategist forecast sitting about 1.5 percent below the market’s closing level. It also puts them in the awkward position of betting on declines in a volatility gauge that in August posted one of its lowest average readings on record.
     “The market has gotten increasingly frustrating for hedge funds with a bearish bent,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “You’re seeing them throw in the towel and subscribe more to the thesis of a further grind higher. There are diminished expectations of significant volatility or a market pullback.”
     Large speculators extended bullish contracts on the S&P 500 to the most since May 2013, CFTC data show. The measure has been above zero, which delineates bullish from bearish, since mid- April. At the same time, VIX positions showed an expectation for low volatility even though the so-called fear gauge averaged 12.4 in August, the lowest monthly average in more than two years.
     The ongoing hedge-fund bullishness conflicts with the views of Wall Street equity strategists, who see the S&P 500 slipping from its current level to end the year at 2,150, according to estimates compiled by Bloomberg. The biggest bear, Ben Laidler of HSBC Holdings Plc, foresees the benchmark losing 10 percent to 1,960 by year-end.
     Amid the underlying strategist pessimism, stock bulls received a boost on Friday when August payroll data signaled steady labor-market growth, although not enough to force the Federal Reserve to raise interest rates. The central bank’s reluctance to hike borrowing costs ahead of the November presidential election has been a boon for U.S. equities slogging higher, as mixed economic data has neither inspired the Fed to act, nor given investors cause to sell.
     Data on Tuesday showed services industries expanded in August at the weakest pace since February 2010, joining manufacturers in an abrupt slowdown that may signal waning optimism about the economy. That sent bond yields lower, dragging banks to their worst drop in almost four weeks. Wells Fargo & Co. and Bank of America Corp. lost at least 1.1 percent.
     Mergers dominated corporate news Tuesday, boosting energy and health-care companies. Spectra Energy Corp. rallied 13 percent to a two-year high after agreeing to a $28 billion stock-for-stock transaction with Enbridge Inc. Cepheid jumped 53 percent after Danaher Corp. agreed to buy the company in a deal valued at about $4 billion, including debt. The Dow Jones Industrial Average rose 46.16 points, or 0.3 percent, 18,538.12. About 6.6 billion shares traded hands on U.S. exchanges, in line with the three-month average.
     “We’re still dealing with the ramifications from the jobs number,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “It was an exhale of relief that the number wasn’t too hot, diminishing the chance of a September rate hike. Price action will probably be dictated by the data we have forthcoming.”
     Investors are assessing the potential effects of a Fed hike while central banks across much of Europe and Asia are in the midst of easing cycles. Fed-funds futures currently reflect a 24 percent chance the Fed will increase borrowing costs at the September meeting, down from 36 percent before the services data. Odds had reached as high as 42 percent late last month. The first meeting with a better-than-even chance of a hike is in December.
     The S&P 500 has been treading water since reaching a fresh record in mid-August, amid monetary-policy speculation and lackluster data. The gauge has held in a band of 1.5 percent for 38 days, the narrowest ever for that length of time. It closed Tuesday less than 0.2 percent from its all-time high. The VIX rose 0.3 percent to 12.02, following its biggest one-day drop in two months.
     Among other shares moving on corporate news, Navistar International Corp. soared 41 percent, the most ever. Volkswagen AG is buying a stake in the company to gain a foothold in the U.S. heavy-truck market, as the German automaker still grapples with the fallout from the emissions-cheating scandal. Engine maker Cummins Inc., a supplier to both companies, lost 7.3 percent, its steepest in nine months.

Have a wonderful evening everyone.

Be magnificent.

One drop of the sea cannot claim to come from one river, and another drop of the sea from another river;
the sea is a single consistent whole.  In the same way all beings are one; there is no being
that does not come from the soul, and is not part of the soul.
Chandogya Upanishad

As ever,

Carolann

We don’t stop going to school when we graduate.
                               -Carol Burnett, b. 1933

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