September 23, 2014 Newsletter

Dear Friends,

Tangents:

On this date in 1846, it is believed that German astronomer Johann Gottfried Galle discovered the planet Neptune.

Neptune is the Roman god of the sea corresponding to the Geek Poseidon, hence, allusively, the sea itself.  Neptune is represented as an elderly mand of stately mien, bearded, carrying a trident and sometimes astride a dolphin or horse.

Today Bruce Springsteen turns 65 years old.

PHOTOS OF THE DAY

Fifty-year-old ginsengs are on sale at a market in Baishan, Jilin province, China. Each is worth approximately 150,000 yuan ($24,430), according to the seller. Reuters

A zookeeper holds an owl while attending a funeral service for zoo animals at Ueno Zoo in Tokyo. The zoo holds an annual service in remembrance of zoo animals that have passed away over the last year. Toru Hanai/Reuters

Market Closes for September 23^rd, 2014    

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     Sept. 23 (Bloomberg) — Canadian stocks were little changed at a six-week low after an advance in metal producers offset data showing retail sales unexpectedly fell for the first time in seven months.

     OceanaGold Corp. and Eldorado Gold Corp. increased at least 4.3 percent as gold stocks snapped a four-day loss. Tekmira Pharmaceuticals Corp. gained 2.9 percent as the drugmaker joined a consortium conducting Ebola treatment trials.

     The Standard & Poor’s/TSX Composite Index fell less than 0.1 percent to 15,125.67 at 4 p.m. in Toronto. Canadian equities have advanced 11 percent this year, the second-best performer among the world’s developed countries behind Denmark. The index touched a record Sept. 3.

     Canadian retail sales fell 0.1 percent to C$42.5 billion ($38.7 billion) in July amid lower receipts at general- merchandise stores. Retail spending remains near last month’s record high after rising from a low of C$33.3 billion in December 2008. Future consumption may be crimped by near-record debt loads and sluggish job growth over the last year.

     OceanaGold climbed 4.3 percent to C$2.41 and Eldorado Gold increased 4.8 percent to C$7.84 as raw-materials stocks rallied 1.3 percent as a group, the most in the S&P/TSX. Four of the 10 main industries in the S&P/TSX advanced on trading volume 8.3 percent higher than the 30-day average.

     Gold prices added 0.3 percent to settle at $1,222 an ounce in New York. The U.S. and its Arab allies launched a barrage of airstrikes against Islamic State positions in Syria, while Israel shot down a Syrian fighter jet.

     Tekmira Pharmaceuticals rose 2.9 percent to C$26.77 for a six-month high. A U.S. doctor who contracted Ebola in Western Africa was treated with the company’s experimental therapy for a week while hospitalized in Nebraska, his doctors said. The stock has rallied 18 percent in the past two days.

     BlackBerry Ltd. fell 2.9 percent to C$11.70, snapping a two-day advance, after Cormark Securities Inc. analyst Richard Tse lowered his rating for the stock to market perform, the equivalent of a hold, after the stock advanced 53 percent this year through yesterday.

     BlackBerry has four buys, 24 holds and 10 sells, with an average 12-month price target of C$9.68, implying a 17 percent decline from current levels, according to data compiled by Bloomberg.

     Merus Labs International Inc. plunged 20 percent to C$1.60, the biggest drop since January 2009, after Chief Executive Officer Elie Farah resigned to pursue other opportunities.

US

By Joseph Ciolli

     Sept. 23 (Bloomberg) — U.S. stocks fell, with the Standard & Poor’s Index sinking a third day, as health-care shares slid amid a government crackdown on tax-saving mergers and as the Middle East conflict escalated.

     Medtronic Inc. slid 2.9 percent after the Treasury Department disclosed plans to limit inversion deals. CarMax Inc. sank 9.5 percent after earnings missed estimates. Alibaba Group Holding Inc. fell 3 percent for a second day of losses. Nabors Industries Ltd. led energy shares higher, as crude oil prices advanced after the U.S. launched a series of airstrikes against the Islamic State.

     The S&P 500 lost 0.6 percent to 1,982.77 at 4 p.m. in New York. The Dow Jones Industrial Average slid 116.81 points, or 0.7 percent, to 17,055.87. The Russell 2000 Index dropped 0.9 percent for a third straight decline. About 6.1 billion shares changed hands on U.S. exchanges today, 8.4 percent above the three-month average.

     “We’re going to continue to consolidate until we get better visibility as to whether the slowdown this month is for real,” Sam Turner, a fund manager with Richmond, Virginia-based Riverfront Investment Group LLC, said in a phone interview. His firm oversees $4.6 billion. “The tax inversion issue is also hanging over the market in the short-term.”

     The S&P 500 lost 0.8 percent yesterday and has now declined 1.4 percent since closing at a record on Sept. 18. The Russell 2000 has lost 3.5 percent during its three-day slide, the most since April. The small-cap gauge has fallen 5.2 percent from a high on Sept. 2.

     The equity benchmark rallied last week as the Federal Reserve maintained a commitment to keep interest rates near zero for a considerable time after completing asset purchases in October. The gauge has not had a four-day losing streak this year and has not fallen more than 10 percent in three years.

     Data today showed the Markit Economics preliminary index of U.S. manufacturing held at a more than four-year high of 57.9 in September. A reading above 50 for the purchasing managers’ measure indicates expansion.

     “We’re really at a crossroads in terms of what direction we’ll take,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. “What’s going to be the impetus to get us going higher, or to see a correction? The market has gotten a little bit soft here and it needs to get something going. Right now it just doesn’t have that.”                        

     The Treasury’s new rules on inversions apply to deals that close starting yesterday. The changes will have the biggest effect on the eight U.S. companies with pending inversions, including Medtronic and AbbVie, which plan the two largest such deals in U.S. history.

     The rules include a prohibition on “hopscotch” loans that let companies access foreign cash without paying U.S. taxes.  They also curb actions that companies can use to make such transactions qualify for favorable tax treatment.

     “People are concerned that some of the froth in the market will decrease with lower prospect for larger deals,” John Carey, a Boston-based fund manager at Pioneer Investment Management Inc., which oversees about $230 billion, said in a phone interview. “That’s affecting some specific stocks, particularly health care. And the geopolitical situation is very uncertain and fraught with risk. A major event could have serious effects on the economy.”

     In the Middle East, The U.S. and Arab allies Saudi Arabia, Jordan, the United Arab Emirates, Qatar and Bahrain launched a series of airstrikes against Islamic State positions in Syria along the Iraqi border.

     The airstrikes against the militant Khorasan Group in Syria were prompted by plans for an “imminent” terror attack on U.S. soil, the Pentagon said. Meanwhile, the Israeli army said it shot down a Syrian fighter jet after it penetrated Israeli air space over the Golan Heights.

     “There are a lot of geopolitical worries going around,” said William Hobbs, head of equity strategy at Barclays Plc’s wealth-management unit in London. “The Middle Eastern situation feels like it’s not going to go away very quickly. The Islamic State is a significant and very organized military threat.”

     The Chicago Board Options Exchange Volatility Index, the gauge known as the VIX, increased 8.8 percent to 14.90, the highest since Aug. 8. The index has surged 24 percent in the past three days.

     All of the 10 main S&P 500 groups retreated, with producers of consumer staples sliding 0.9 percent for the biggest decline.

     CarMax Inc. sank 9.5 percent to $47.80 for the biggest drop in the S&P 500. The company reported second-quarter adjusted earnings that missed analysts’ estimates.

     UnitedHealth Group Inc. slid 1.3 percent to lead losses in 29 of the 30 components in the Dow.

     AbbVie fell 2 percent to $57.56. The company agreed in July to buy Dublin-based Shire Plc in a 32 billion pound ($52.4 billion) deal where it planned to move its legal address abroad to lower its taxes.

     Medtronic declined 2.9 percent to $64.08. Covidien Plc, the Irish medical supplies company that the U.S. company is trying to buy, lost 2.5 percent to $88.11.

     Abbott Laboratories declined 2.1 percent to $42.50. Mylan Inc. said in July it agreed to buy Abbott’s generic drug business in developed markets and would form a new company incorporated in the Netherlands to cut taxes. Mylan added 0.2 percent to $46.61.

     Burger King Worldwide Inc. slid 2.7 percent to $30.23. The company, which agreed at the end of August to buy Canada-based Tim Hortons Inc., will proceed with the deal even amid the crackdown on inversions. The deal is driven by long-term growth and not tax benefits, according to Tim Hortons spokesman Scott Bonikowsky.

     Salix Pharmaceuticals Ltd. jumped 5.8 percent to $169.17. Allergan Inc. is in talks to acquire the company to help it fend off a hostile takeover offer from Valeant Pharmaceuticals International Inc., people with knowledge of the matter said.

     Alibaba fell 3 percent to $87.17. The company soared 38 percent on its trading debut on Sept. 19 and fell 4.3 percent yesterday.

Have a wonderful evening everyone.

Be magnificent!

The spirit of democracy

is not a mechanical thing

to be adjusted by abolition of forms.

It requires change of heart.

Mahatma Gandhi

As ever,

Carolann

Our greatest foes and whom we must chiefly combat, are within.

                                       -Miguel de Cervantes, 1547-1616

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM, FCSI

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7