September 26, 2013 Newsletter

Dear Friends,

Tangents:

On this day in 1969, The Beatles released their last recorded album, Abbey Road.

And on September 26^th, 1960, the first presidential debate was broadcast – Richard Nixon and John F. Kennedy.  Polls indicated that those who listened to the debate on radio, thought Nixon won the debate and those who watched the debate on television thought Kennedy won.

Life imitates art far more than art imitates life.  –Oscar Wilde.

Spend time outdoors:  “Why?  We spend most of our time indoors.  Now researchers have found chemicals from indoor air someplace  we might not want it: our blood.  The research is in the journal Environmental Science and Technology.  A variety of the chemicals used to make everything from carpets to couches resist stains showed up in the serum of 31 Boston office workers.  The researchers found the highest levels of these chemicals in the air inside new buildings and, subsequently, in the blood of those who worked there.”  –from Scientific American.

Photos of the day

Bees fly between sunflowers at the Agricenter in Memphis, Tenn., Sept. 25. Jim Weber/The Commercial Appeal/AP

A man leaves ‘Flower Power,’ a vintage camping caravan that was converted into a hotel room at the Base Camp Bonn Young Hostel, the world’s first camping trailer and Pullman coach hostel, in Bonn, Germany, Sept. 20, 2013. Wolfgang Rattay/Reuters

Market Closes for September 26^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam and Aubrey Pringle

Sept. 26 (Bloomberg) — Canadian stocks rose for the third time in four days as data showing growth in the U.S. economy offset concern that a budget impasse in Washington could hurt the recovery.

Teck Resources Ltd., Canada’s largest diversified miner, gained 2.5 percent as copper rose the most in a week. Husky Energy Inc. climbed 4.1 percent after reporting “significant discoveries” in the Atlantic. Valeant Pharmaceuticals International Inc. added 0.7 percent after an analyst with Guggenheim Securities LLC initiated coverage of the stock with a buy rating. Alacer Gold Corp. dropped 6.1 percent as Credit Suisse reduced its rating on the shares and gold prices sank.

The Standard & Poor’s/TSX Composite Index rose 4.91 points, or less than 0.1 percent, to 12,841.62 at 4 p.m. in Toronto, trimming an earlier advance of as much as 0.5 percent. The benchmark Canadian equity gauge has surged 5.9 percent this quarter and is up 3.3 percent in 2013.

“The U.S. GDP and jobless claims data, those are the two reasons” for the market’s gains, said Ian Nakamoto, director of research with MacDougall MacDougall and MacTier Inc. in Toronto.

The firm manages about $4 billion. “The guys in Washington will find a compromise, the question is the impact on consumer confidence. My sense is the consumer will stay on.”

The U.S. economy grew at a 2.5 percent annualized pace in the second quarter, after expanding 1.1 percent in the first, a sign the country was weathering federal budget cutbacks and higher taxes. Fewer Americans applied for unemployment benefits last week, with claims dropping by 5,000 to 305,000.

Stocks pared an earlier rally as U.S. House Speaker John Boehner said President Barack Obama can’t avoid negotiations on raising the government’s debt limit, and he doesn’t expect his chamber to pass the stopgap spending bill anticipated from the Senate. The Senate likely will not vote on the bill until this weekend, leaving the House one full workday to act before spending authority for the federal government expires on Oct. 1.

Energy shares rose 0.4 percent as a group, as six out of 10 industries in the S&P/TSX advanced. Trading volume was 18 percent lower than the 30-day average.

Husky Energy climbed 4.1 percent to C$30.26 after the Calgary-based company said it discovered oil in the Flemish Pass Basin off the Atlantic coast of Canada.

Legacy Oil & Gas Inc. rose 1.8 percent to C$6.71 and Imperial Oil Ltd. gained 1.5 percent to C$45.54 as crude prices advanced for the first time in six days.

Teck Resources rose 2.5 percent to C$29.29 as copper jumped 1.1 percent, the most in a week.

Valeant, the biggest drugmaker in Canada, increased 0.7 percent to C$106.41. Louise Chen, analyst with Guggenheim, initiated coverage of Valeant with a buy rating.

Raw-materials companies had the biggest decline among the 10 main industries in the S&P TSX, dropping 1 percent as gold for December delivery sank 0.9 percent. Of 24 companies in the S&P/TSX Gold Index, 23 fell.

Semafo Inc. tumbled 6.9 percent to C$2.42. Alacer Gold sank 6.1 percent to C$3.21 after Credit Suisse cut the stock’s rating to underperform from outperform.

BlackBerry Ltd. lost 0.6 percent to C$8.22, the lowest close since November, for a third day of declines since agreeing to sell itself on Sept. 23 to a group led by Fairfax Financial Holdings Ltd. in a tentative deal worth $9 a share or $4.7 billion. The agreement is subject to securing financing and due diligence.

The smartphone maker has slumped 24 percent in the past five days and is scheduled to officially report second-quarter earnings tomorrow. The company on Sept. 20 disclosed worse-than- estimated earnings and smartphone sales and plans to fire 4,500 workers.

US

By Lu Wang and Sofia Horta e Costa

Sept. 26 (Bloomberg) — U.S. stocks rose, halting the longest slump this year for the Standard & Poor’s 500 Index, as an unexpected drop in jobless claims overshadowed concern that a budget impasse could hurt economic growth.

EBay Inc. jumped 4.5 percent after agreeing to buy Braintree for $800 million to expand its mobile-transactions business. Bed Bath & Beyond Inc. added 4.5 percent after raising the low end of its earnings forecast. Eli Lilly & Co. fell 3 percent as its experimental drug ramucirumab failed to meet its goals for treating breast cancer in a late-stage trial. Hertz Global Holdings Inc. sank 16 percent after cutting its forecasts.

The S&P 500 rose 0.3 percent to 1,698.67 at 4 p.m. in New York, extending its third-quarter rally to 5.8 percent. The Dow Jones Industrial Average climbed 55.04 points, or 0.4 percent, to 15,328.30. About 5.3 billion shares changed hands on U.S. exchanges, 8.6 percent below the three-month average.

“Economic news have been reasonably good,” Mark Foster, chief investment officer who oversees $620 million at Kirr Marbach & Co. in Columbus, Indiana, said in a telephone interview. “On the negative side, we have the short-term budget issues and debt ceiling. I don’t think that’ll end up being a major issue. People just get somewhat immune to all of that.”

The benchmark index declined 1.9 percent during a five-day losing streak through yesterday, retreating from an all-time high on Sept. 18, when the Federal Reserve refrained from reducing the pace of stimulus. Investors have been watching economic reports to help determine whether growth is sufficient for the central bank to begin cutting bond purchases at its next meeting in October.

A Labor Department report today showed the number of Americans filing applications for unemployment benefits unexpectedly fell last week, indicating further progress in the labor market. The economy expanded at faster pace in the second quarter from the previous three months, with gross domestic product rising at a 2.5 percent annualized rate, the Commerce Department said.

A separate report added to signs that rising mortgage rates may have slowed housing market momentum. Fewer Americans signed contracts in August to buy previously owned homes, figures from the National Association of Realtors showed. Data yesterday indicated purchases of new homes rose in August, capping the weakest two months this year.

Investors are also weighing whether lawmakers can avoid a looming government shutdown, with the S&P 500 paring an earlier gain of as much as 0.7 percent after House Speaker John Boehner, an Ohio Republican, said he doesn’t expect his chamber to pass a stopgap spending bill expected from the Senate. He also said he does not expect a government shutdown to happen.

The Senate likely will not vote on its version of the bill until this weekend, leaving the House just one full workday to act before spending authority for the federal government expires on Oct. 1. The House and Senate are at odds over language that withdraws funding for the 2010 health-care law.

The Office of Management and Budget estimated 30 days of shutdowns in 1995 and 1996 cost more than $1.4 billion, or $2.09 billion in today’s dollars.

On another fiscal front, Treasury Secretary Jacob J. Lew told Congress yesterday that the extraordinary measures being used to avoid breaching the debt ceiling “will be exhausted no later than Oct. 17.” Failure to increase the debt limit could lead to a downgrade of the U.S. government’s credit rating.

The S&P 500’s losing streak through yesterday was the longest since Dec. 28, when lawmakers wrangled over impending automatic spending cuts and tax increases known as the fiscal cliff. The index dropped as much as 3.4 percent over the last two weeks of 2012 and then jumped 5 percent in January for the best start to a year since 1997 after a last-minute budget deal was struck.

“Washington has been dragging their feet as of late but eventually they’ll be forced into action,” said Patrick Spencer, head of U.S. equity sales for Robert W. Baird & Co. in London. “We’ve been down this road before. It’s quite natural and healthy to have pull-backs in a bull market. We’ll shift into a stronger gear with a settlement on the budget and what I think will be a very positive earnings season.”

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, rose 0.4 percent to 14.06 today. The measure has fallen 17 percent this quarter.

Nine of 10 main groups in the S&P 500 advanced, with phone stocks and producers of consumer-discretionary products rising 0.9 percent. Nike Inc., which reported better-than-estimated quarterly earnings after the market’s close today, rose the most in the Dow, climbing 2.1 percent to $70.34. The stock added 5.6 percent to $74.30 at 4:34 p.m. in New York.

EBay climbed 4.5 percent to $56.64, its biggest rally since January. The owner of electronic-payments service PayPal said it will bolster that business by buying Braintree, a global payments platform that works with online and mobile-only startups such as room-rental service Airbnb and online restaurant-reservation company OpenTable Inc.

Bed Bath & Beyond gained 4.5 percent to $77.54. The retailer predicted full-year adjusted earnings per share of $4.88 to $5.01, up from a previous range of $4.84 to $5.01.

Air Products & Chemicals Inc. added 2.3 percent to $109.78.

The industrial gas producer said Chairman and Chief Executive Officer John E. McGlade will leave and it will add three independent directors, less than two months after investor William Ackman’s Pershing Square Capital Management LP became the company’s largest shareholder.

J.C. Penney Co. climbed 3 percent to $10.42, halting a six- day slide that peaked with a 15 percent plunge yesterday. The department-store chain repeated that it expects positive sales trends in the second half of the year, with some key items and sizes helping sales at stores and online. The shares have plunged 47 percent this year amid concern that it is running out of cash.

Eli Lilly fell 3 percent to $51.04. Lilly is counting on experimental drugs for Alzheimer’s, cancer and diabetes to revive growth as the company loses patent protection on some of its top products, including the antidepressant Cymbalta.

Hertz sank 16 percent, the most since May 2009, to $21.63.

The rental-car company trimmed its forecast for full-year revenue and profit, citing weaker than anticipated car rentals at U.S. airports.

Jabil Circuit Inc. lost 9.9 percent to $21.62 for the biggest retreat in the S&P 500. The electronics company that counts BlackBerry Ltd. as its second-largest customer said yesterday it will probably disengage from the struggling Canadian device maker in coming months. Jabil also forecast first-quarter profit below analyst estimates.

Have a wonderful evening everyone.

Be magnificent!

All of our selfish impulses, all of our personal desires, obscure our true vision of the soul,

as they only point out our shabby ego.  When we are aware of our soul,

we perceive the inner life that surpasses our ego

and that has profound affinities with the Whole.

Rabindranath Tagore, 1861-1901

As ever,

Carolann

The long arm of coincidence.

-Haddon Chambers, 1860-1921

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