September 24, 2015 Newsletter

Dear Friends,

Tangents:

Birthdays today:

1501 Gerolamo Cardano, mathematician, author of Games of Chance, the first systematic computation of probabilities.

1717 Horace Walpole, author, creator of the Gothic novel genre.

1755 John Marshall, fourth chief justice of the Supreme Court and U.S. secretary of state.

1870 George Claude, French engineer, inventor of the neon light.

1894 E. Franklin Frazier, first African-American president of the American Sociological Society.

1896 Francis Scott Key (F. Scott) Fitzgerald, novelist best known for The Great Gatsby.

1911 Konstantin Chernenko, president of the Soviet Union 1984-1985.

1936 Jim Henson, puppeteer who created the “Muppets” in 1954 and television’s Sesame Street.

1941 Linda McCartney, singer, photographer, activist; member of band Wings; former wife of Beatles member Paul McCartney.

1945 Louis “Lou” Dobbs, TV personality (Lou Dobbs Tonight, CNN), radio host (Fox Business Network).

1946 “Mean Joe” Greene, pro football player (Pittsburgh Steelers) considered one of the greatest defensive linemen ever to play in the NFL; member of Pro Football Hall of Fame.

On this day in 1925, Virginia Woolf wrote in her Diary:

But to tell the truth, I am exacerbated this morning.  It is 10:25, on  a fine grey still day; the starlings are in the apple trees; Leonard is in London.  But why am I exacerbated?  By Roger [Fry, artist and art critic].  I told him I had been ill all the summer.  His reply is – silence as to that; but plentiful descriptions of his own front teeth.  Egotism, egotism – it is the essential ingredient in a  clever man’s life I believe.  It protects; it enhances; it preserves his own vital juices entire by keeping them banked in.  Also I cannot help thinking that he suspects me of valetudinarianism and this enrages me; and Leonard is away and I can’t have my thorn picked out by him, so must write it out.  There!  it is better now; and I think I hear the papers come; and will get them, my woolwork, and a glass of milk.

PHOTOS OF THE DAY

Pope Francis, accompanied by members of Congress, waves to the crowd from the Speakers Balcony on Capitol Hill in Washington, Thursday, after addressing a joint meeting of Congress inside. Doug Mills/AP

Local skateboarder Markel Andronov jumps over an art work by a German street artist who goes by the name ‘Evol,’ in central Krasnoyarsk, Siberia, Russia, on Thursday. The artwork was created for the 11th Krasnoyarsk Museum Biennale, which will open September 30, with artists from Russia, the Unites States, Germany, Poland, Great Britain, Netherlands and other countries attending, according to organizers. Ilya Naymushin/Reuters

Market Closes for September 24^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canada stocks fell a third day, reaching the lowest level in a month, as industrial shares dropped after Caterpillar Inc. cut its sales forecast in response to a commodities slump.

     Equities dropped 0.3 percent, paring earlier losses of as much as 1.1 percent as raw-materials producers rallied as commodities from copper to gold and oil advanced. Finning International Inc., which sells, finances and services Caterpillar equipment, sank to a four-year low to lead industrials shares 1.3 percent lower.

     The Standard & Poor’s/TSX Composite Index lost 45.02 points to 13,338.67 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has tumbled 3.2 percent in three days, the most since the height of the global equities selloff in August. The index is headed for a fifth straight monthly drop and its worst quarter in four years.

     Global markets slid as fresh signs of slowing growth emerged. A gauge of developed and developing markets retreated 0.7 percent and has fallen for five straight days since the Federal Reserve held off raising borrowing rates last week. The S&P 500 lost 0.3 percent in New York.

     Canadian equities are among the worst-performing markets in the developed world this year, led by declines among raw- materials and energy producers of at least 22 percent, amid plunging oil prices and uncertainty about global economic growth, especially in China. China is Canada’s second-largest trading partner after the U.S.

     Finning dropped 5.7 percent after Caterpillar, the world’s biggest mining machinery producer, lowered its full-year sales forecast and said it will cut as many as 5,000 jobs amid the commodities slump.

     Gold producers soared 7.6 percent, the biggest rally since January, as futures for December delivery added 2 percent to settle at a four-week high in New York. Barrick Gold Corp. surged 10 percent and Goldcorp Inc. climbed 7.4 percent.

US

By Kate Garber and Anna-Louise Jackson

     (Bloomberg) — U.S. stocks retreated, with the Standard & Poor’s 500 Index sliding to an almost three-week low, as investors clamor for further clarity on the Federal Reserve’s stimulus policy.

     Equities trimmed losses in late-afternoon trading, surging as energy shares rallied with crude oil. Stocks further pared after JPMorgan Chase & Co.’s global head of derivative and quantitative strategies said in note today that technical selling pressure from volatility targeting strategies was largely completed, and in the coming days and weeks flows may be skewed toward buying.

     The S&P 500 fell 0.3 percent to 1,932.24 at 4 p.m. in New York, erasing most of an earlier 1.5 percent slide. The benchmark dropped for the fifth time in six days since the Fed cited turbulence in financial markets as reason to stand pat on interest rates. The Dow Jones Industrial Average sank 78.57 points, or 0.5 percent, to 16,201.32. The Nasdaq Composite Index declined 0.4 percent.

     “We’re seeing a defensively-led market today,” Todd Lowenstein, who helps manage $16 billion at in Los Angeles HighMark Capital Management Inc., said by phone. “I think there are some bargains emerging in the midst of this indiscriminate selloff. A lot of the daily trading is dominated by algorithms and quants and these dislocations can occur.”

     Equities pulled back on Aug. 27 after JPMorgan’s Marko Kolanovic said that “price insensitive” program traders are likely to cause repeated selloffs. Stock reacted again on Sept. 3 as Kolanovic argued that robotic selling by quantitative investment funds tuned to volatility and price trends was only about halfway completed.

     Such traders may deliver “$10 billion in purchases over the next few days,” Kolanovic said in a note to clients Thursday. He added that if indexes add 2 to 3 percent in that time, additional technical buying may occur.

     Meanwhile, uncertainty over the Fed’s actions has made equities more volatile in past weeks. The central bank held off raising rates last Thursday and said it would consider spillover risks from global markets. Fed officials have since said a 2015 increase is still warranted.

     Chair Janet Yellen speaks in Massachusetts after markets close, with investors desperate for guidance on whether she deems the economy robust enough to withstand higher rates this year.

     “The Fed backed themselves into a corner last week by talking about China and emerging markets,” said Andrew Brenner, the head of international fixed income for National Alliance Capital Markets. “The fact that they’re adding China and emerging markets into the mix and then still thinking about raising rates between now and the end of the year is very inconsistent. It adds uncertainty to the market. That’s why equities have been performing poorly since mid-day of the Fed announcement.”

     Prior to the afternoon surge, the S&P 500 was on track to close at its lowest in a month amid more evidence that China’s slowdown and weakness in commodities are having an impact in the U.S. Caterpillar Inc. tumbled 6.3 percent after lowering its sales outlook and will cut as many as 10,000 jobs over four years in response to a slowdown in the mining and energy industries. Other industrial companies slid amid data showing orders for business equipment stalled.

     The Chicago Board Options Exchange Volatility Index, the measure of market turbulence known as the VIX, has closed above 20 for 24 straight sessions, the longest stretch since June 2012. The gauge rose 6.1 percent Thursday to 23.47.

     Traders are split on whether the Fed will raise rates this year. They are pricing in about a 41 percent chance of an increase in December, down from 49 percent as recently as Monday, and a 48 percent probability in January. Odds of higher borrowing costs by January were 64 percent on the day before last week’s Fed meeting, according to data compiled by Bloomberg.

     Meanwhile, investors continue to evaluate economic data for hints on possible Fed action. A report today showed orders for durable goods fell 2 percent in August, reflecting declines in defense and aircraft. Momentum in orders for business equipment stalled following gains the prior two months as U.S. investment took a breather amid volatility in financial markets and concerns that global growth is slowing.

     Separate data showed fewer Americans than forecast filed applications for unemployment benefits last week, a sign that a steady labor market will bolster U.S. growth. Another measure showed purchases of new homes jumped in August to a seven-year high.

     Seven of the S&P 500’s 10 main groups declined Thursday, with health-care, financial and industrial shares losing the most. Utilities, energy and consumer staples rose.

     Biotechnology shares continued to weigh on the broader health-care group. Losses for U.S. biotechs have accelerated since Democratic presidential hopeful Hillary Clinton on Monday suggested there may be “price gouging” in the market for prescription pills. Biogen Inc., Celgene Inc. and Regeneron Pharmaceuticals Inc. slumped at least 1.7 percent. The Nasdaq Biotechnology Index is headed for its worst week in four years, down 8.4 percent.

     Financial companies in the S&P 500 fell as investors speculated that low interest rates would continue to crimp profitability. The yield on the 10-Year U.S. Treasury note sank to a two-week. Morgan Stanley and Goldman Sachs Group Inc. slumped more than 1 percent. Charles Schwab Corp. and Citigroup Inc. dropped at least 1.9 percent.

     Caterpillar’s lowered outlook and cost-cutting measures hammered home to investors the troubles faced by large-equipment manufacturers and their commodity producing customers. Rival Joy Global Inc., lost 1 percent, after trimming an early 6 percent drop, to its lowest since November 2008. Another Caterpillar competitor, Deere & Co., fell 2.5 percent.    

Have a wonderful evening everyone.

Be magnificent!

Very few people in this world can reason normally.

There is a terrible tendency to accept all that is said, all that is read, and to accept it without question.

Only he who is ready to question, to think for himself, will find the truth!

To understand the currents of a river,

he who wishes to know the truth must enter the water.

Nisargadatta

As ever,

Carolann

The last of the human freedoms is to choose one’s attitudes.

                                            -Victor Frankl, 1905-1997

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