September 24, 2013 Newsletter

Dear Friends,

Tangents:

“September is an optimistic month,” writes Lindsey Taylor in the Wall Street Journal.  “all one has to do is look up.  The clouds in the vast, clear, corn-flower-blue skies are transfixing – whiter, fresher and puffier than seems possible….a restless September sky.”

Pompeii up Close: If you happen to have London on your itinerary, you can take in the exhibit “Life and Death in Pompeii and Herculaneum” at the British Museum.  The rest of us can head to the nearest movie theater that shows Fathom Events on Sept. 25 to catch an in-depth tour of the museum’s blockbuster exhibit (open through September).  Pompeii From the British Museum is a behind-the-scenes look at this collection of artifacts from the ancient Roman civilization destroyed by the eruption of Mount Vesuvius.  Check for local showings at www.fathomevents.com. –CSM, September, 2013.

Jim Henson, the muppet creator was born on this day in 1936.

Photos of the day

Bert and Ernie, as well as Elmo are among a donation of additional Jim Henson objects to the Smithsonian’s National Museum of American History in Washington, D.C. Henson’s daughter, Cheryl Henson, is donating 20 more puppets and props to the National Museum of American History. Jacquelyn Martin/AP

Left to right, Florence Mayor Matteo Renzi, New York Mayor Michael Bloomberg, London Mayor Boris Johnson, and Warsaw Mayor Hanna Gronkiewicz-Waltz, during the Mayors Challenge competition, at City Hall in London. Mayor Bloomberg is offering European cities millions of dollars to be government groundbreakers, tapping his personal fortune to extend his cities-as-civic-laboratories campaign. Matt Dunham/AP

Market Closes for September 24^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Aubrey Pringle and Eric Lam

Sept. 24 (Bloomberg) — Canadian stocks rose for a second day as consumer shares rallied after better-than-expected retail sales boosted prospects for economic growth.

Alimentation Couche-Tard Inc. advanced 2.5 percent to lead consumer-staples producers higher. Canadian Utilities Ltd. added 2.5 percent to pace gains among utilities companies. Air Canada, the nation’s largest airline, rallied to a two-year high.

BlackBerry Ltd. dropped 3.3 percent as investors weighed a $4.7 billion deal to take the smartphone maker private.

The Standard & Poor’s/TSX Composite Index rose 37.71 points, or 0.3 percent, to 12,848.89 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has surged 5.9 percent this quarter and is up 3.3 percent in 2013. Trading volume was 2.9 percent below the 30-day average.

“The retail numbers are showing that GDP numbers are going to look a little bit better because of that,” said Paul Harris, partner and portfolio manager at Avenue Investment Management, which manages C$300 million ($290 million), said in a phone interview from Toronto. “They show that the market is a little bit better.”

Statistics Canada said today that retail sales rose more than forecast in July, reversing a drop a month earlier and adding to evidence that growth in the world’s 11th largest economy is gaining momentum.

All 10 main industries in the benchmark equities gauge advanced. Producers of consumer staples rallied the most, adding 1.1 percent with 10 of 11 members rising.

Alimentation Couche-Tard, which operates 24-hour convenience stores, jumped 2.5 percent to C$65.33. North West Co., a general purpose retailer, gained 2.8 percent to C$24.

Canadian Utilities gained 2.5 percent to C$35.68 as utilities stocks increased 0.8 percent as a group.

Air Canada gained 5.7 percent to C$3.52, the highest close since January 2011. The stock has rallied 7.3 percent in the past three days. The company yesterday said it was looking for bids for several U.S. cross-border routes, beginning in mid-2014.

Phone stocks gained for an eighth day, with the S&P/TSX Telecom Services Index closing at its highest level since June 18. Manitoba Telecom Services Ltd. gained 0.9 percent to C$33.20 and Telus Corp. rose 0.3 percent to C$35.56, a three-month high.

Energy shares added 0.1 percent, erasing earlier losses after U.S. President Barack Obama said recent overtures from Iran may offer a basis for a “meaningful agreement” to resolve the confrontation over the Persian Gulf nation’s nuclear program, one of the primary sources of instability in the Middle East. Oil fell to an eight-week low but remained 6.8 percent higher this quarter, the most in a year, and up 12 percent in 2013.

Commodities stocks “are quite attractive,” said John Kinsey, fund manager with Caldwell Securities Ltd. in Toronto.

The firm manages about C$1 billion. “The oil stocks, some of them now have performed quite nicely so they’re catching up” to the price of oil, he said.

Commodity shares, which have lost 29 percent this year, fluctuated between gains and losses as investors watched a looming political clash over the U.S. budget that could shut down the federal government as early as next week and damp growth in the world’s biggest economy. America is Canada’s largest trading partner and the second-biggest user of industrial metals such as copper.

BlackBerry dropped 3.3 percent to C$8.78, below the $9 a share that its biggest shareholder, Fairfax Financial Holdings Ltd., agreed to pay in a tentative buyout deal.

The $4.7 billion offer forges a path to go private after years of losing ground to Apple Inc.’s iPhone and Google Inc.’s Android.

US

By Lu Wang

Sept. 24 (Bloomberg) — U.S. stocks fell for a fourth day amid concerns over budget talks and economic growth as investors weighed prospects for easing tensions in the Middle East.

Red Hat Inc. slumped 12 percent after billings at the largest seller of the Linux operating system trailed estimates.

Homebuilders gained 2.3 percent as a group after a report showed home prices increased by the most in more than seven years and Lennar Corp.’s profit beat analyst estimates. Applied Materials Inc. advanced 9.1 percent after agreeing to buy Tokyo Electron Ltd. for about $9.39 billion in stock.

The Standard & Poor’s 500 Index fell 0.3 percent to 1,697.42 at 4 p.m. in New York. The Dow Jones Industrial Average lost 66.79 points, or 0.4 percent, to 15,334.59. About 6 billion shares changed hands on U.S. exchanges, in line with the three- month average.

The market is “riding waves of news, both good and bad,” Malcolm Polley, the chief investment officer at Stewart Capital Advisors LLC in Indiana, Pennsylvania, said in a telephone interview. His firm manages $1.1 billion. “The market is very dependent on macro news.”

The S&P 500 initially fell as much as 0.4 percent after the Conference Board’s index of U.S. consumer confidence slumped in September to a four-month low. A separate report showed a gauge of manufacturing in the region covered by the Federal Reserve Bank of Richmond shrank in September.

The equity benchmark index erased earlier losses as President Barack Obama said recent overtures from Iran may offer a basis for a “meaningful agreement” to resolve the confrontation over the Persian Gulf nation’s nuclear program, one of the primary sources of instability in the Middle East.

Iranian officials told the U.S. that the time isn’t right for direct contact between the two countries’ leaders.

Stocks turned lower in the last 30 minutes of trading as investors watched the debate in Washington over spending cuts.

U.S. Senate Democrats offered a new proposal that funds the government through Nov. 15, complicating efforts to avoid a government shutdown in a week as Republican Senator Ted Cruz began an extended speech in opposition to funding for the health-care law.

“We may have a couple few weeks where there is still lingering concern over the Fed along with very much headline risk around the budget ceiling debate,” David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages more than $115 billion. “Over the short term, we would see the market continue to either muddle through or consolidate before we hit earnings season.”

The S&P 500 has declined 1.6 percent over four days after reaching an all-time high of 1,725.52 as the Federal Reserve refrained from cutting stimulus. The Federal Open Market Committee said after its Sept. 17-18 meeting that it wants more evidence of an economic recovery before paring its $85 billion of monthly asset purchases, surprising economists who had forecast a reduction. The S&P 500 has gained 5.7 percent this quarter and is up about 19 percent for the year.

Fed Bank of New York President William C. Dudley said today the central bank may reduce the pace of its quantitative easing program in 2013 depending on the economy’s performance.

“If the economy were behaving in a way aligned with the Fed’s June forecast, then it’s certainly likely that the Fed would begin to taper later this year,” Dudley said in an interview with CNBC. “I certainly wouldn’t want to rule it out. But it depends on the data.”

Stocks fell on Sept. 20 as Fed Bank of St. Louis President James Bullard said policy makers may decide to reduce their monthly bond purchases at the meeting in October.

“There are so many different views from the Fed itself and there is no one voice that seems to be articulating a common message,” Mark Freeman, who oversees about $15.8 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said by phone. “What they ultimately created is uncertainty and that’s never a positive for the market.”

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, slipped 1.6 percent to 14.08, extending its drop for the year to 22 percent.

Seven out of 10 S&P 500 groups fell as telephone and consumer-staples companies declined more than 0.7 percent for the worst performance.

Red Hat tumbled 12 percent, the most in the S&P 500, to $46.73. Billings, a predictor of future revenue, rose 8 percent in the second quarter from a year earlier to $376 million.

Analysts at CLSA had projected an increase of 17 percent, and Stifel Nicolaus & Co. predicted 14 percent growth.

JPMorgan Chase & Co. fell 2.2 percent to $50.32 for the biggest retreat in the Dow. The lender resumed settlement talks with the U.S. as the government was preparing to sue the bank in California federal court alleging it misrepresented the quality of mortgage-backed securities it sold from 2005 to 2007, according to a person familiar with the matter.

The bank offered to pay about $3 billion to settle an array of probes, the Wall Street Journal reported today, citing a person familiar with the matter. The Justice Department pressed the bank to pay more, the report said, citing the person.

Carnival Corp. slipped 7.7 percent to $34.54. The world’s largest cruise-ship operator forecast fourth-quarter results that trailed analysts’ estimates, citing a decline in advance bookings and higher fuel prices.

The S&P Supercomposite Homebuilding Index rose 2.3 percent, with all its 11 members gaining, as an industry report showed home prices in 20 U.S. cities increased in the 12 months through July by the most in more than seven years.

Lennar, the third-largest U.S. homebuilder by revenue, rose 4.3 percent to $36.01 after fiscal third-quarter earnings topped analysts’ estimates, driven by higher sales and home prices.

Applied Materials advanced 9.1 percent to $17.45 as the largest supplier of chipmaking equipment agreed to buy Tokyo Electron. Gary Dickerson, chief executive officer of Applied Materials, will become CEO of the combined company, which will be 68 percent owned by Applied Materials shareholders.

Facebook Inc. climbed 2.7 percent to $48.45. Citigroup Inc.’s Mark May raised his recommendation on the social-network operator to buy from neutral, saying feedback from advertisers and agencies suggest that the growth seen in the second quarter is sustainable. May also boosted his price estimate by 72 percent to $55 a share.

CarMax Inc. gained 3.6 percent to $51.79. The car dealer’s second-quarter profit beat analyst estimates as used car sales climbed 20 percent from a year ago.

Have a wonderful evening everyone.

Be magnificent!

We would rather cling to the known than face the unknown –

the known being our house, our furniture, our family,

our character, our work, our knowledge, our fame, our loneliness, our gods –

that little thing that moves around incessantly within itself,

with its own limited embittered existence.

Krishnamurti, 1895-1986

As ever,

Carolann

At 18 our convictions are hills from which we look; at 45

they are caves in which we hide.

-F. Scott Fitzgerald, 1896-1940

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