September 20, 2013 Newsletter

Dear Friends,

Tangents:

As Carolann is out of the office this afternoon, I will be writing the newsletter on her behalf!

Last Thursday, here in Victoria we had a lightning storm that lit up the sky.  Did any of you have the chance to watch it?  I found some amazing pictures of the storm last Thursday that I wanted to share with you, as well as some fun facts on lighting!

• There are bolts of lightning striking somewhere on Earth every second.
• Lightning strikes usually last around 1 or 2 microseconds.
• Lightning contains millions of volts of electricity.
• Thunder is the sound caused by lightning.
• The average temperature of lightning is around 20000 °C (36000 °F).
• The study of lightning is known as fulminology.
• Astraphobia is the fear of thunder and lightning.

“Health is the greatest gift, contentment the greatest wealth, faithfulness the best relationship.” – Buddha

Photos of the Day –September 20^th, 2013

The moon shines near the top of Tokyo SkyTree in Tokyo on the mid-autumn festival day. Kazunori Kasahara/Tokyo Shimbun/AP

Steam from the Verso paper mill is backlit by the light of the setting moon in this time-exposure in Bucksport, Maine. Verso makes coated papers used by publications such as catalogs and magazines. Robert F. Bukaty/AP

Market Closes for September 20^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Aubrey Pringle and Eric Lam

Sept. 20 (Bloomberg) — Canadian stocks fell for a second day as BlackBerry Ltd. plunged the most in three months and gold producers slumped after a Federal Reserve policy maker said a small tapering of bond buying is possible next month.

BlackBerry tumbled 16 percent after saying it will cut 4,500 jobs and record an inventory writedown of as much as $960 million after a new set of devices failed to catch on with consumers. Iamgold Corp. and Eldorado Gold Corp. retreated at least 7.7 percent as gold fell the most in 11 weeks. Goldcorp Inc. slid 3.8 percent after Chairman Ian Telfer agreed to pay a C$200,000 ($194,000) fine in a settlement over allegations that he violated securities laws.

The Standard & Poor’s/TSX Index fell 120.31 points, or 0.9 percent, to 12,806.47 at 4 p.m. in Toronto, paring a weekly gain of 0.7 percent. Trading volume was 117 percent higher than the 30-day average.

Once a quarter, futures and options for indexes and single stocks expire on the same day, leading to a phenomenon called quadruple witching, with increased volume as investors close out their positions.

A comment by Federal Reserve Bank of St. Louis President James Bullard “saying tapering could happen in October got people all nervous, and corresponding with that gold went lower,” said Brian Huen, managing partner with Red Sky Capital Management Ltd. in Toronto. His firm manages about C$220 million ($213.7 million). “The message is not clear, so there’s some nervousness out there.”

“There’s an index rebalancing happening as well as quadruple witching for options, so you’ll see some volatility at the close,” he said.

Bullard, a voter on policy this year who has backed the Fed’s bond buying, said today the decision not to taper stimulus was a close call and “small” cuts are possible next month.

Policy makers meet Oct. 29-30.

The benchmark Canadian equity gauge soared to a two-year high on Sept. 18 after the U.S. Fed said it will “await more evidence” for sustained economic recovery before reducing its $85 billion in monthly bond buying.

Iamgold plunged 11 percent to C$5.25 and Eldorado Gold sank 7.7 percent to C$7.15 as gold for December delivery tumbled 2.7 percent to $1,332.50 an ounce in New York, the biggest drop since July 5.

Gold stocks slumped 5.6 percent as a group, the worst decline in six weeks, as all 24 members of the S&P/TSX Gold Index retreated. Nine of 10 industries in the S&P/TSX fell.

BlackBerry, based in Waterloo, Ontario, plunged 16 percent to C$9.08, the most since June 28. The smartphone maker, which is evaluating a sale, expects to report a net operating loss of as much as $995 million for the fiscal second quarter, according to a statement today.

Sales in the quarter were about $1.6 billion, just more than half the $3.03 billion average estimate of analysts surveyed by Bloomberg. The company sold about 5.9 million smartphones in the quarter.

Goldcorp lost 3.8 percent to C$26.96. Telfer, the company’s chairman, was included in an Ontario Securities Commission statement of allegations in February 2012 regarding an alleged insider-trading scheme.

Telfer admitted his conduct fell below standards expected, Cullen Price, representing OSC staff, said at a hearing today in Toronto. In addition to paying a fine to the regulator, Telfer will be banned from arranging the right for people to buy shares in private placements for one year.

S&P Dow Jones Canadian Index Services said on Sept. 13 that it will make changes to the benchmark S&P/TSX at the close today. Additions include Air Canada, the nation’s largest air carrier, and NuVista Energy Ltd. Niko Resources Ltd. will be removed from the index.

Air Canada slid 2.4 percent to C$3.20 and NuVista slipped 4.9 percent to C$7.01. Niko lost 1.2 percent to C$4.07.

US

By Lu Wang and Jeff Sutherland

Sept. 20 (Bloomberg) — U.S. stocks fell the most since August and Treasuries rose as concerns grew that political debate over government spending and potential Federal Reserve stimulus cuts may pose a threat to economic growth. Emerging- markets shares dropped and gold retreated the most in 11 weeks.

The Standard & Poor’s 500 Index dropped 0.7 percent at 4 p.m. in New York for its biggest drop since Aug. 27. The Stoxx Europe 600 Index declined 0.3 percent. Yields on 10-year Treasuries slipped two basis point to 2.73 percent. The MSCI Emerging Markets Index fell after rallying 2.2 percent yesterday, as India’s banks drove a slump in financial shares.

The S&P GSCI Index slid 0.7 percent after gold declined 2.7 percent and silver had the biggest retreat in three months. Oil fell to a one-month low.

Fed Bank of St. Louis President James Bullard said a small tapering of bond buying is possible next month after the central bank made a close call this week in deciding not to slow purchases. The Federal Open Market Committee said it wants more evidence of an economic recovery before paring its $85 billion- a-month bond-buying program. The U.S. House voted to finance the federal government through mid-December and choke off funding for President Barack Obama’s health-care law, setting up a showdown with the Senate and the White House.

“It’s probably a little confusing to the market what’s coming out of the Fed,” John Kvantas, a San Antonio, Texas- based executive director who helps manage more than $16 billion at USAA Investments, said in a phone interview. “Maybe the Fed is trying to send a message that ‘yeah we didn’t taper, but it doesn’t mean we will never taper and maybe actually will taper still quite soon.’”

About 8.9 billion shares changed hands on U.S. exchanges, the most since June 28, as futures and options contracts expire in a process known as quadruple witching. Announced index changes, including the addition of Visa Inc., Goldman Sachs Group Inc. and Nike Inc. to the Dow Jones Industrial Average, take effect after the markets’ close. The operator of the S&P 500 also did its quarterly rebalancing of the index to adjust member weightings. The Dow tumbled 1.2 percent, the most since Aug. 15.

The S&P 500 rallied 1.3 percent this week and is up 4.7 percent for September, rebounding from its worst month since May 2012, after the central bank unexpectedly refrained from reducing monetary stimulus. The stimulus helped boost the equity index as much as 155 percent higher since March 2009. The S&P 500 and the Dow Jones Industrial Average reached record highs on Sept. 18 after the Fed’s announcement.

Bullard said today at the New York Association for Business Economics luncheon that he wants to see higher inflation before backing less accommodation from the central bank. Kansas City Fed President Esther George, who dissented at the last FOMC meeting, said at the Manhattan Institute for Policy Research that the Fed needs credibility for markets to trust its guidance. Policy makers meet Oct. 29-30.

“Weaker data came in,” Bullard said earlier in the day on Bloomberg Television’s “Bloomberg Surveillance” with Tom Keene and Michael McKee. “That was a borderline decision,” and “the committee came down on the side of, ‘Let’s wait.’” With inflation low, Bullard said, “we can afford to be patient.”

Twenty-four of 41 economists surveyed Sept. 18-19 said the Fed will now wait until December before taking the first step in slowing its $85 billion in monthly bond purchases, according to a Bloomberg survey. The median estimate in an Aug. 9-13 poll projected the Fed would begin paring at this week’s meeting.

Reports next week on data from second-quarter gross domestic product to consumer confidence and new home sales may help investors gauge the prospect of economic growth.

Investors are also watching the political wrangling over the approaching limit on federal spending. Government funding expires Oct. 1 and the Treasury is expected to exhaust its ability to borrow funds in mid-October, when it will hit the statutory debt limit. The White House said President Obama would veto the House bill. The Senate will consider its version of the funding measure next week.

“When you look at political uncertainty and a fight going forward and the government really faces a shutdown, I don’t know how that can be construed as a positive in markets’ mind,” Bill Schultz, chief investment officer who oversees about $1.1 billion at McQueen Ball & Associates in Bethlehem, Pennsylvania, said by phone. “If anything, it just means potentially less economic activities.”

Microsoft Corp. and General Electric Co. slipped at least 1.8 percent to pace declines among large companies. Caterpillar Inc. slumped 3.4 percent after its global retail machine sales dropped for a ninth consecutive month. BlackBerry Ltd. plunged 17 percent after announcing 4,500 job cuts. AK Steel Holding Corp. sank 8 percent, leading declines among steelmakers, after predicting a third-quarter loss.

Utilities and phone companies, which offer the highest dividend payouts among 10 S&P 500 groups, had the largest drops.

Apple Inc. fell 1 percent as its iPhone 5s and 5c handsets went on sale.

Among Dow additions, Visa climbed 2.1 percent, Goldman Sachs added 1.2 percent and Nike lost 0.2 percent. They will replace Hewlett-Packard Co., which slipped 0.4 percent, and Alcoa Inc. and Bank of America Corp, which fell 1.8 percent and 1.2 percent, respectively.

The yield on 10-year Treasuries dropped 15 basis points this week, the most since the five days ended July 12. The rate, the benchmark for loans ranging from mortgages to corporate bonds, climbed to a two-year high of 3.01 percent on Sept. 6, from 1.93 percent on May 21, the day before Fed Chairman Ben S.

Bernanke said the central bank could slow the pace of asset purchases in the next few policy meetings.

Global equity funds attracted the largest inflows since at least 2005 in the week ended Sept. 18 as investors piled into stocks.

The funds lured a net $25.9 billion in the period, Wei Liang Chang, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd., said by phone from Singapore today, citing data from EPFR Global. Developed markets posted $24.3 billion of inflows, while emerging-nation funds drew $1.6 billion, according to Chang.

The dollar rose versus most of its 16 biggest peers. The euro fell 0.1 percent to $1.3523, ending a four-day run of gains. It dropped 0.2 percent to 134.35 yen.

Germany holds elections on Sunday to decide whether Chancellor Angela Merkel wins a third term. An INSA opinion poll in Germany published yesterday showed the opposition Social Democrats climbing one percentage point to 28 percent, 10 points behind Merkel’s Christian Democratic-led group.

The Stoxx Europe 600 Index pared its gain for the week to 0.9 percent. Adidas AG fell 3 percent as the world’s second- largest maker of sporting goods cut its profit forecast. Direct Line Insurance Group Plc retreated 3.7 percent as Royal Bank of Scotland Group Plc sold a 630 million-pound ($1 billion) stake in the U.K. insurer. Foxtons Group Plc surged 16 percent in London on the real estate broker’s first day of trading after its initial public offering.

The MSCI Emerging Markets Index fell from a four-month high, dropping 0.9 percent to 1,013.18, led by Indian shares.

The gauge rose 2.7 percent this week. The measure’s 14-day relative strength index was at 69.6, falling below 70 for the first time in five days. The level of 70 indicates to some analysts a security has climbed too far too fast.

India’s benchmark Sensex Index tumbled 1.9 percent, the steepest drop in more than two weeks, after central bank Governor Raghuram Rajan surprised analysts by raising the benchmark interest rate in his first policy review. Lenders led the decline, with ICICI Bank Ltd. tumbling 4.7 percent. The rupee slid 0.8 percent against the dollar.

Rajan, who took office two weeks ago, boosted the repurchase rate by a quarter point to 7.5 percent. All 36 analysts in a Bloomberg News survey predicted no change.

Markets in China, Hong Kong, South Korea and Taiwan were shut for holidays.

Turkey’s lira weakened 1.1 percent to 1.9815 against the dollar, trimming this week’s rally to 2.3 percent, the biggest gain since January 2012.

Gold declined the most since July 5, losing 2.7 percent to $1,332.50 an ounce. The metal climbed 1.8 percent this week.

Silver slumped 5.9 percent, the biggest drop since June 20, to $21.93 an ounce to lead declines among 24 raw materials in the S&P GSCI Index.

West Texas Intermediate oil dropped 1.6 percent to $104.67 a barrel after decreasing the same amount yesterday as Libya’s oil production expanded and President Bashar al-Assad said Syria will make information about its chemical weapons available.

Crude lost 3.3 percent for the week, the biggest five-day drop since June.

Have a wonderful weekend everyone!!!

Be magnificent!

“Being busy does not always mean real work. The object of all work is production or accomplishment and to either of these ends there must be forethought, system, planning, intelligence, and honest purpose, as well as perspiration. Seeming to do is not doing.”
Thomas A. Edison

As ever,

Amanda Bourke

Assistant to Carolann Steinhoff

Queensbury Securities Inc.