September 27, 2013 Newsletter

Dear Friends,

Tangents:

51 years ago today, on September 27^th, 1962, Rachel Carson’s book, Silent Spring, was published, spurring the environmental movement.

Today, The Wall Street Journal, featured this article:

U.N. Says Humans Are ‘Extremely Likely’ Behind Global Warming Report Says Long-Term Planetary Warming Trend Likely to Continue

By GAUTAM NAIK And JOHANNES LEDEL

A U.N. report on climate change said that while human activity is “extremely likely” to blame for global warming, temperatures aren’t expected to rise as quickly as previously thought. Gunnar Myhre, coordinating lead author for the IPCC, explains the details to WSJ’s Gautam Naik.

STOCKHOLM—A landmark United Nations report issued Friday reaffirmed the growing belief that human activity is the dominant cause behind a rise in global temperatures and reiterated that a long-term planetary warming trend is expected to continue.

The report could have a significant impact on policy-making because it underscores that human activity is pushing atmospheric carbon-dioxide concentrations toward levels whereby the surface temperatures may increase by 2 degrees Celsius. Many governments have pledged to try to keep the temperature rise below that level, which they believe is a threshold beyond which the consequences of climate change will be severe.

Between 1750 and 2011, human activity released 545 gigatons of carbon dioxide, the main greenhouse gas. If a total of 1,000 gigatons is emitted, there is a one-in-three chance that the 2-degree limit will be breached, said Corinne Le Quere, a geophysicist at the University of East Anglia in the U.K. and a lead author of a chapter in the U.N. report.

“We’re eating up our allocation very rapidly. At the current rate, we’ll hit the 1,000-gigaton-level sometime between 2040 and 2050,” she added.

Of all the carbon dioxide emitted so far, two-thirds comes from burning fossil fuels and one-third from land-use change and deforestation. However, in the last decade, 90% of the carbon dioxide released has come from burning fossil fuels, according to Dr. Le Quere.

A summary of the report, the work of more than 800 scientists working for the U.N.’s Intergovernmental Panel on Climate Change over several years, said there is a 95% likelihood that humans are behind global warming, up from the 90% level of certainty in a similar 2007 report.

Enlarge Image

An iceberg floats through the water on July 20, 2013, in Ilulissat, Greenland

Getty Images

The IPCC noted that air and oceans are getting warmer, ice and snow is less plentiful, and sea levels are rising.

“Warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over the millennia,” the report says.

The IPCC said the past three decades have been successively warmer at the Earth’s surface that any preceding decade since 1850. That is “a robust signal of a changing planet,” said IPCC co-chair Thomas Stocker at a news conference in Stockholm.

At the same time, the IPCC has moderated projections of rising temperatures for the end of this century. The latest report outlines four scenarios, with the worst scenario predicting a possible increase of 4.8 degrees Celsius toward the end of the century. The prior report had outlined six scenarios, with the worst scenario peaking above 6 degrees Celsius.

Associated Press

Kali, an orphaned male polar bear cub from Point Lay, Alaska, explores the enclosure outside the infirmary at the Alaska Zoo, in a photo taken on March 22, 2013.

IPCC reports draw the attention of governments, environmentalists and key industries such as the oil, gas and coal sector because they provide the scientific backing for many policies on climate change. The narrower range of possible scenarios could help scientists and policy makers fine-tune their responses.

The summary previews a full report that will be issued next week as part of the group’s fifth assessment, which will come in several phases. It is considered a more definitive document than its predecessors because it incorporates more recent scientific findings, a larger set of satellite, oceanic and terrestrial measurements and more robust computer modeling.

“Observations of changes in the climate system are based on multiple lines of independent evidence,” said Qin Dahe, co-chair of the IPCC working group.

The IPCC’s credibility took a hit after some shoddy data made its way into the 2007 report, including a claim that Himalayan glaciers would melt by 2035.

More recently, climate change science has come under attack because of a flattening of temperatures over the past 15 years, even though greenhouse gas emissions have continued to rise.

Scientists at the IPCC played down the apparent slowdown, arguing that a 15-year period is too short to reflect long-term climate trends.

Among the factors that could be behind the apparent slowdown are a cooling of the Pacific Ocean, a natural change in the 11-year solar cycle and nearly a dozen volcanic eruptions since 2005, which can spew sunlight-blocking particles into the atmosphere.

“We couldn’t attribute exactly what was the contribution from each of these factors,” said Dr. Le Quere. “But the overall picture is that the earth is continuing to take up heat even when the surface is warming slowly.”

The newest measurements suggest that current carbon-dioxide concentration in the earth’s atmosphere is 40% above preindustrial levels. Such levels are “unprecedented in at least the last 800,000 years,” the report said. The 2007 report had calculated the same figure but only for the past 650,000 years.

Arctic sea-ice cover has been declining for several decades. The IPCC now says it is “very likely” that the ice cover will continue to shrink and thin, and there will be a reduction in glacier volumes and declines in spring snow cover in the Northern hemisphere. This past summer, Arctic sea ice levels registered an increase, but that partly reflected the record-low levels achieved a year earlier.

The U.N. report also concludes that the global mean sea level will “very likely exceed that observed during 1971 through 2010.”

Corrections & Amplifications
Thomas Stocker said the global surface temperature change for the end of the 21st century is projected to be likely to exceed 1.5 degrees Celsius, which is about 2.7 Fahrenheit. A previous version of this article gave an incorrect conversion of Celsius to Fahrenheit.

Those who dwell, as scientists or laymen, among the beauties and mysteries of the earth are never alone or weary of life. – Rachel Carson, 1907-1964

Market Closes for September 27^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Sept. 27 (Bloomberg) — Canadian stocks rose, with the benchmark gauge poised for the best quarterly performance in a year, as gains in consumer-staples companies and oil producers offset a decline in phone shares amid concern that a U.S. budget impasse may shut down the government.

Trilogy Energy Corp. soared 11 percent after providing an update on its operations in Alberta. Telus Corp. and Rogers Communications Inc. slipped at least 1 percent after an analyst with Canadian Imperial Bank of Commerce lowered his price targets for the nation’s largest wireless carriers due to regulatory risks. BlackBerry Ltd. increased 0.7 percent to snap three days of losses after reporting second-quarter earnings.

The Standard & Poor’s/TSX Composite Index rose 2.46 points, or less than 0.1 percent, to 12,844.08 at 4 p.m. in Toronto. The benchmark Canadian equity gauge has jumped 5.9 percent this quarter, the biggest gain since September 2012, and is up 3.3 percent in 2013.

“There’s a lot of anxiety going into the weekend,” said Andrew Pyle, fund manager with ScotiaMcLeod Inc. in Peterborough, Ontario. He manages about C$210 million ($204 million). “Nobody should be naive out there, to think if we get a worst-case scenario with respect to the U.S. budget impasse that Canada comes out of this unscathed. You could see some very heavy losses in the TSX.”

The U.S. Senate voted to finance the government through Nov. 15, sending the bill to the House and setting up a weekend of negotiations and brinkmanship three days before federal spending authority runs out and a few weeks until the country reaches its borrowing limit.

President Barack Obama said in a televised statement that Congress’s failure to approve funding would have a destabilizing effect on the economy. Democrats and Republicans can’t agree on the inclusion of funds for Obama’s health-care law in the bill.

Energy stocks added 0.1 percent as a group, as six of 10 industries in the S&P/TSX rose. Trading volume was 20 percent below the 30-day average.

Trilogy Energy soared 11 percent to C$28.80 after reporting an operating update for its Montney and Duvernay oil projects.

The company said unexpected plant outages reduced third-quarter volumes to about 31,000 barrels of oil equivalent per day, and anticipates levels returning to normal in the fourth quarter.

Athabasca Oil Corp., which is seeking a joint-venture partner for its Duvernay holdings, jumped 9.3 percent to C$7.97, the most in seven weeks.

BlackBerry added 0.7 percent to C$8.28, the first increase in six days. The smartphone maker reported more complete second- quarter earnings, including a loss of 47 cents a share from continuing operations and a 45 percent plunge in sales to $1.57 billion, after disclosing preliminary results on Sept. 20.

“The slight upside likely reflects that there was nothing hidden in the results,” said Bill Kreher, an analyst with Edward Jones & Co., in a phone interview from St. Louis.

Jean Coutu Group Inc. rose 1.8 percent to C$18.29 to pace gains among consumer-staples companies.

Telus dropped 1.2 percent to C$34.52 and Rogers retreated 1 percent to C$44.64. Analyst Robert Bek with CIBC World Markets cut his price targets for the two wireless carriers by 11 percent and 17 percent, respectively, due to the Canadian government’s increasing attention to the space.

Canada’s largest carriers signaled on Sept. 23 their intent to bid in a wireless spectrum auction in January, with no sign of interest from major foreign companies after Verizon Communications Inc. said earlier this month it wouldn’t enter the Canadian market.

Teck Resources Ltd., Canada’s largest diversified miner, dropped 4.1 percent to C$28.10 following two days of gains.

Paretosh Misra, analyst with Morgan Stanley, said the company may move ahead with an oil sands project, as investing in energy assets is an “emerging trend” among miners.

Martinrea International Inc., a metal auto-parts maker, slumped 10 percent to C$10.96 after the company said it received a press release discussing a claim from Nat Rea, former vice chairman of the company. Martinrea has not received the claim or reviewed the allegations and will “respond appropriately in due course.”

Rea, who was fired in June 2012, said he filed a statement of claim alleging breaches of fiduciary duties related to several deals involving suppliers and customers and is calling for a new board of directors. The claims have not been proven in court.

US

By Lu Wang

Sept. 27 (Bloomberg) — U.S. stocks fell, giving the Standard & Poor’s 500 Index its first weekly drop since August, as concern grew that the budget impasse will hurt economic growth in the world’s largest economy.

Accenture Plc slid 2.4 percent on a disappointing profit projection. United Continental Holdings Inc. dropped 9.3 as the world’s largest carrier cut its third-quarter forecast for a benchmark revenue gauge. J.C. Penney Co. sank 13 percent after the retailer began selling 84 million shares to raise as much as $932 million in cash. Nike Inc. surged 4.7 percent as fiscal first-quarter profit topped analysts’ estimates.

The S&P 500 fell 0.4 percent to 1,691.75 at 4 p.m. in New York. The Dow Jones Industrial Average lost 70.06 points, or 0.5 percent to 15,258.24. About 5.5 billion shares changed hands on U.S. exchanges, 5.7 percent below the three-month average.

“There is nothing in the economic data I can see that tells me I should worry about a recession,” Sam Wardwell, an investment strategist at Pioneer Investments in Boston, said in a phone interview. His firm oversees about $217 billion. “A government shutdown would be a fiscal cliff that’s big enough in this case to drive the economy into a recession and I think that the market is increasingly worried about that risk because the risk seems to be rising.”

The S&P 500 dropped six of the past seven sessions, including a 1.1 percent slide this week, amid the Congressional impasse over the budget that threatens to shut down the government. The index rose 0.3 percent yesterday, snapping its longest losing streak this year, after an unexpected drop in jobless-benefit claims.

The U.S. Senate voted today to finance the government through Nov. 15 after removing language to choke off funding for the health care law. The bill now returns to the House, setting up a weekend of negotiating and brinkmanship that could continue until spending authority expires on Sept. 30.

Congress must also reach a deal to avoid hitting the limit on the government’s ability to borrow. Treasury Secretary Jacob J. Lew said the extraordinary measures being used to avoid breaching the debt ceiling “will be exhausted no later than Oct. 17.” Failure to increase the debt cap could lead to a downgrade of the government’s credit rating.

President Barack Obama said that Congress’s failure to approve funding to keep the government open and an increase in the debt ceiling would have a destabilizing effect on the economy.

A federal shutdown would cut fourth-quarter economic growth by as much as 1.4 percentage points depending on its length, economists said. 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.

Today’s slide trimmed the S&P 500’s third-quarter rally to 5.3 percent. That compared with a 0.7 percent loss in U.S. Treasuries, according to data compiled by Bloomberg and Bank of America Corp. Investors should expect $23.5 billion in selling of equities and buying of bonds as pension fund managers rebalance their portfolios at the end of the third quarter, Ramon Verastegui, head of engineering and strategy at Societe Generale SA in New York, wrote in a Sept. 25 note.

“The momentum isn’t terrible, but has basically been progressively weakening,” Jim Welsh, a market strategist who helps oversee $5.7 billion at Forward Management LLC in San Francisco, said in a phone interview. “The market is vulnerable to the largest correction so far this year, and it just comes down to what kind of news shows up, whether it turns out to be because of Congress, or whatever.”

The S&P 500’s biggest retreat in 2013 was the 5.8 percent slide that started May 21, when Federal Reserve Chairman Ben S.

Bernanke first suggested the central bank could cut monetary stimulus this year. The gauge is down 2 percent since closing at a record Sept. 18, after the Fed unexpectedly refrained from slowing its monthly bond purchases. The stimulus has helped the S&P 500 rally as much as 155 percent from its 2009 low.

Investors have been weighing data to determine whether economic growth is strong enough to prompt the Fed to begin tapering at its next meeting in October. Fed Bank of New York President William C. Dudley said today he wants to see more momentum in the economy before making cuts.

The showdown in Washington “creates uncertainty about the fiscal outlook and may exert a restraining influence on household and business spending,” he said.

A report today indicated consumer spending rose in August for a fourth consecutive month, as a pickup in incomes bolstered the biggest part of the economy. Separate data showed confidence among consumers declined to a five-month low in September as Americans’ views on the economy dimmed.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, jumped 10 percent to 15.46. The measure has advanced 18 percent this week.

Eight out of 10 S&P 500 main industries fell today as materials and telephone shares sank at least 1 percent for the worst performance.

International Paper Co. dropped 3.9 percent to $45.44, its eighth retreat in the past nine session to lead declines among raw-materials producers. The world’s largest maker of office paper could be forced to shut down some capacity as the industry faces an increasing supply amid sluggish demand, Mark Wilde, an analyst with Deutsche Bank AG, said in a note. He cut the stock’s rating to hold from buy.

Accenture slipped 2.4 percent to $74.09. The world’s second-largest technology-consulting company forecast earnings that may fall short of analysts’ estimates amid increasing competition from Indian providers.

International Business Machines Corp., the largest technology-services provider, lost 1.7 percent to $186.92.

United Continental slid 9.3 percent to $30.91. Revenue for each seat flown a mile will increase 2.5 to 3.5 percentage points, according to a filing yesterday, a range that the carrier said was about 1 percentage point less than previous projections. It cited lower fares on some overseas flights operated in conjunction with other airlines and rivals adding seats on China routes.

J.C. Penney lost 13 percent to $9.05, extending its weekly loss to 30 percent. The stock has plunged the past five days to its lowest since 2000 after a Goldman Sachs Inc. debt analyst said cash will be strained this quarter. J.C. Penney said today it will end the fiscal year with about $1.3 billion in liquidity, excluding the offer proceeds.

International Game Technology dropped 7 percent to $19.23.

The world’s largest maker of slot machines was cut to hold from buy at Deutsche Bank. The stock’s price has reflected expectations for increasing returns to shareholders while the gaming industry is likely to become “more challenged,” analyst Carlo Santarelli wrote in a note to clients.

Nektar Therapeutics tumbled 24 percent, its biggest slide in five years, to $10.54. The company said a study of the slow- release painkiller NKTR-181 showed it failed to meet the primary endpoint of a Phase 2 study, citing an “unusual lack” of a gain in pain scores for patients taking a placebo.

Nike gained 4.7 percent, the most in the Dow, to $73.64.

The world’s largest sporting-goods company posted fiscal first- quarter profit that topped analysts’ estimates after demand for running and basketball shoes helped North American sales.

Microsoft Corp. climbed 1.5 percent to $33.27 for the second-biggest gain in the Dow.

Cerner Corp. rallied 8 percent, the most in the S&P 500, to a record $52.61. The provider of electronic medical records said it reached a multiyear agreement to provide services to Intermountain Healthcare.

Have a wonderful weekend everyone.

Be magnificent!

Sleep is temporary death.  Death is longer sleep.

If the man dies while yet alive, he need not grieve over others’ death.

One’s experience is evident with or without the body, as in waking, dream, and sleep.

Then why should one desire continuance of the bodily shackles?

Let man find out his undying Self and die and be immortal and happy.

Sri Ramana Maharshi, 1879-1950

As ever,

Carolann

And that’s the way it is.

-Walter Cronkite, 1916-2009

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