September 3, 2013 Newsletter

Dear Friends,

Tangents:

From the tribute by Erica Wagner to Irish wordsmith Seamus Heaney (1939-2013) in the weekend Financial Post:

“…Heaney, who has died in Dublin aged 74, was that rarest of creatures:  a great poet who was also a popular poet.  He was, too, a passionate advocate for his art, along with friend and mentor, Ted Hughes.  It was Hughes’s work that offered proof modern poetry could be made from the matter of rural life.  He recalled reading Hughes’s ‘View of a Pig’.  ‘The poem begins, ‘The pig lay on a barrow dead./  It weighed, they said, as much as three men.’  And I thought, ‘How does he know about all this?’

Heaney and Hughes together would bring their natural worlds to poetic life and go on to influence generations not just of poets but of readers, most notably through the two anthologies they edited, The Rattle Bag (1982) and The School Bag (1987)….His 1995 Nobel Prize for literature was one of many honours.  He was professor of poetry at Oxford and Ralph Waldo Emerson poet in residence at Harvard…..With the poet’s death, once for all has come;  but th work, like the human chain itself, endures.”

The cold smell of potato

mould, the squelch and slap

Of soggy peat, the curt

cuts of an edge

Through living roots awaken in my head.

But I’ve no spade to follow men like them,

Between my finger and my thumb

The squat pen rests.

I’ll dig with it.

-Seamus Heaney, from Digging, in The Death of a Naturalist (1966).

So now, as a thank–

offering for one

Whose long wait on the

shaded bank has ended,

I arrive with my bunch of

stalks and silvered heads

Like tapers that won’t dim

As her earthlight breaks

and we gather round

Talking baby talk.

–Seamus Haney, from Route 110, in The Human Chain (2010).

Photos of the Day –September 3rd, 2013

Elementary school children share an electronic tablet on the first day of class in the new school year in Nice, France. Eric Gaillard/Reuters

Sunlight glints from the Walkie Talkie tower in central London. The London skyscraper reflects sunlight at such intense levels that it warped panels and melted mirrors on a parked car. Its developers will not need to break the bank to fix the problem, a project source told Reuters. Stefan Wermuth/Reuters

The eastern span of the new San Francisco-Oakland Bay bridge is seen from inside a vehicle in Oakland, Calif. The largest self-anchored suspension bridge in the world opened before the morning’s rush hour across San Francisco Bay, six years behind schedule and five times over budget.Stephen Lam/Reuters

Market Closes for September 3^rd, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

Sept. 3 (Bloomberg) — Canadian stocks rose, for the highest close in a week, as the nation’s largest wireless carriers rallied after U.S.-based Verizon Communications Inc. said it would not enter the market.

Rogers Communications Inc. and Telus Corp. advanced at least 5.5 percent as telephone stocks surged the most in more than four years. Teck Resources Ltd. and First Quantum Minerals Ltd. added more than 1.7 percent as the price of copper climbed on signs of improving growth in China and the U.S. BlackBerry Ltd., which is weighing a sale, increased 1 percent after Microsoft Corp. agreed to acquire Nokia Oyj’s handset business.

The Standard & Poor’s/TSX Composite Index rose 86.60 points, or 0.7 percent, to 12,740.50 at 4 p.m. in Toronto, the best close since Aug. 26. The gauge earlier climbed as much as 1.4 percent to the highest since March 20. Markets were closed yesterday for a holiday in Canada.

“The 800-pound gorilla is not coming to Canada,” said Irwin Michael, portfolio manager with ABC Funds in Toronto. His firm manages C$800 million ($760 million). “Clearly the fears of Verizon coming to Canada was there overhanging the market. Right now it’s a knee-jerk reaction to the surprise.”

Telephone stocks jumped 5.1 percent, the steepest rise since November 2008, to lead seven of 10 industries in the benchmark index higher. Trading volume was 18 percent lower than the 30-day average at this time of the day.

Verizon said yesterday it was not going to make an acquisition in Canada. Shares of the country’s existing wireless providers had slumped after the U.S. company said in June it was weighing a bid to buy Wind Mobile, the largest of three new Ontario-based carriers.

Rogers, Canada’s largest wireless carrier, soared 7.2 percent to C$44.59, the biggest gain since November 2008. Telus gained 5.5 percent to C$34.50, the most since August 2009. BCE Inc. added 3.9 percent to C$44.86, its best day in two years.

BlackBerry advanced 1 percent to C$10.75. Microsoft agreed to buy BlackBerry rival Nokia’s handset business and license its patents, casting together the lot of two technology companies trying to stay relevant against more fleet-footed rivals.

The Waterloo, Ontario-based smartphone maker said in August it has formed a special committee to explore various options for the company including a possible sale. Both Nokia and BlackBerry have lost market share to Apple Inc. and devices running Google Inc.’s Android software.

Teck Resources rose 3.2 percent to C$27.38 and First Quantum Minerals added 1.7 percent to C$17.85. Copper futures jumped 2.2 percent, the most in more than three weeks, as signs of improving economic growth buoyed demand prospects in China and the U.S., the world’s biggest consumers of the metal.

Manufacturing in the U.S. expanded more than forecast in August to the fastest pace since June 2011. Data yesterday showed China’s manufacturing index increased to a 16-month high in August, while other gauges showed euro-area factory output expanded at a faster pace than initially estimated in August.

Eldorado Gold Corp. increased 2.6 percent to C$9.20 and Goldcorp Inc. gained 1 percent to C$31.42. Gold rose for the first time in a week, as tension in the Middle East spurred demand for assets considered safe havens.

Trinidad Drilling Ltd. gained 4.4 percent to C$9.48, the biggest rise in eight months, after entering into a joint venture with a wholly-owned subsidiary of Halliburton Co. to provide drilling rigs in Saudi Arabia and Mexico.

Gabriel Resources Ltd. plunged 18 percent to C$1.39 as a potential referendum on a mine it is developing in Romania could delay what would be Europe’s largest gold mine.

The Romanian government proposed a referendum next year on allowing the project to proceed, following a protest by thousands of people over the company’s plan to use cyanide at the Rosia Montana mine. Gabriel had said it could “hopefully” receive approval by November.

US

By Lu Wang

Sept. 3 (Bloomberg) — U.S. stocks rose, following the worst month since May 2012 for the Standard & Poor’s 500 Index, as better-than-forecast economic data overshadowed concern over possible military action against Syria.

CBS Corp. jumped 4.7 percent after the broadcaster’s programs returned to Time Warner Cable Inc. Microsoft Corp. slipped 4.6 percent after agreeing to buy Nokia Oyj’s mobile- phone business and license its patents for 5.44 billion euros ($7.2 billion). Verizon Communications Inc. dropped 2.9 percent after agreeing to buy Vodafone Group Plc’s 45 percent stake in Verizon Wireless for $130 billion.

The S&P 500 climbed 0.4 percent to 1,639.77 at 4 p.m. in New York, paring an earlier advance of as much as 1.1 percent.

The Dow Jones Industrial Average added 23.65 points, or 0.2 percent, to 14,833.96. About 6.6 billion shares changed hands, the highest level since Aug. 1. U.S. exchanges were closed yesterday for the Labor Day holiday.

“The economy, things are coming in pretty good,” Karyn Cavanaugh, a vice president and market strategist at ING U.S. Investment Management in New York, said in a phone interview.

Her firm oversees about $190 billion. “We know there are a lot tensions in the Middle East. If you wait for the dust to settle in order to get in the market, you’re going to be waiting forever. Look at the fundamentals and if the fundamentals are increasing, that’s your directional signal.”

Global stocks rose yesterday as data showed China’s manufacturing index increased to a 16-month high in August, while other gauges showed euro-area factory output expanded at a faster pace than initially estimated in August.

Among today’s reports in the U.S., the Institute for Supply Management’s manufacturing index increased to 55.7 in August, the strongest since June 2011, from 55.4 a month earlier.

Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 54. Another report showed construction spending in the U.S. increased in July to the highest level in four years, propelled by gains in residential real estate.

Equities pared gains after President Barack Obama won endorsement from the two top Republicans in the U.S. House for taking action against Syria. Backing from Speaker of the House John Boehner and Majority Leader Eric Cantor will help the president as he makes his case to lawmakers who’ve questioned the evidence presented by the administration that the Syrian government was behind a sarin gas attack last month or whether the U.S. has a vital interest in the region.

Obama urged Congress to take a “prompt” vote authorizing military action. He announced on Aug. 31 that he’d seek support from Congress, after previously saying he had authority to order a military mission.

The benchmark index fell 3.1 percent in August amid concern the Federal Reserve would reduce its monthly bond purchases and the U.S. would take military action against Syria.

Investors in August pulled money from exchange-traded funds at the fastest rate since January 2010, with withdrawals reaching $17.7 billion, according to data compiled by Bloomberg from about 1,500 funds. The SPDR S&P 500 ETF Trust, the largest ETF for American equities, experienced $14 billion in outflows, the data show.

Better-than-estimated corporate earnings and monetary stimulus from the Fed helped the index rally as much as 153 percent from a 12-year low in 2009, with the gauge reaching a record 1,709.67 on Aug. 2.

The Fed holds a policy meeting on Sept. 17-18 to decide whether to slow the pace of its bond-buying program. Chairman Ben S. Bernanke has said that the central bank may reduce its monthly purchases if the employment outlook substantially improves and the economy grows in line with forecasts.

The S&P 500 failed to stay above its average in the past 100 days after briefly surpassing the threshold that’s watched by some analysts to gauge the market’s trends. The index closed below the trend measure for a fifth session, the longest stretch since Nov. 21, data compiled by Bloomberg show. The average was at 1,640 recently.

Financial, consumer-discretionary  and health-care shares climbed more than 0.6 percent for the biggest gains among 10 S&P 500 industries. Utilities and phone companies had the biggest declines, dropping at least 1.1 percent.

CBS rose 4.7 percent to $53.50. The broadcaster’s programs returned to Time Warner Cable in New York, Los Angeles and Dallas after the companies ended a one-month blackout, in time for the start of National Football League regular-season games.

Time Warner Cable agreed to pay a significant increase for the right to transmit CBS signals, according to people with knowledge of the situation who asked not to be identified because the terms are private. Shares of Time Warner Cable added 1.8 percent to $109.25.

Citigroup Inc. climbed 2.2 percent to $49.37. The third- biggest U.S. bank by assets has sold more than $6 billion in private-equity and hedge-fund assets in the past month, the Wall Street Journal reported, citing unidentified people familiar with the transactions.

Bank of America Corp. added 0.9 percent to $14.25. The lender confirmed plans to sell its remaining stake in China Construction Bank Corp. for a gain of about $750 million before taxes. The second-biggest U.S. lender first invested in Construction Bank in 2005.

Apple Inc. rose 0.3 percent to $488.58, trimming an early rally of as much as 2.8 percent. The world’s largest technology company said it will hold a Sept. 10 event, when it’s projected to announce new iPhones.

J.C. Penney Co. advanced 1.9 percent to $12.72. Hayman Capital Management LP reported a 5.2 percent passive stake in the department store chain that is seeking to rebound from its worst sales year in more than two decades.

Stocks gained as the U.S. market is poised for the busiest month of takeovers since October 2012. More than $130 billion of mergers and acquisitions have been announced since the end of August, data compiled by Bloomberg show.

Jarden Corp. jumped 10 percent to $47.43. The company agreed to buy Yankee Candle for $1.75 billion, making its biggest acquisition to add the 43-year-old scented candle maker to its collection of more than 120 consumer brands.

More acquisitions are “indicative of increased confidence in the corporate space in that they view opportunities to take advantage of and feel comfortable using some of their capital to do so.” Ethan Anderson, senior portfolio manager at Rehmann Financial in Grand Rapids, Michigan, said in a phone interview. His firm oversees about $1.5 billion.

Microsoft slid 4.6 percent to $31.88. The maker of the Windows operating system will pay 3.79 billion euros for Nokia’s devices and 1.65 billion euros for its patents, according to a statement from the companies. Microsoft is deepening a push into hardware as dwindling computer sales sap demand for the programs that made it the world’s largest software maker. Nokia’s U.S.-traded shares surged 31 percent to $5.12.

Verizon lost 2.9 percent to $46.01. Verizon will get full control of the most profitable U.S. mobile-phone carrier in the biggest acquisition in more than a decade. The deal, sought by Verizon since at least 2004, implies a total value for Verizon Wireless of almost $290 billion — larger than the market capitalization of Google Inc.

The Chicago Board Options Exchange Volatility Index, or VIX, fell 2.4 percent to 16.61 today, after a 26 percent rally in August. Options strategists from JPMorgan Chase & Co. to Weeden & Co. are predicting that U.S. equity volatility will extend its increase in September after posting its biggest monthly advance in more than a year.

JPMorgan said in an Aug. 29 note that volatility is likely to increase in September and October, and recommended buying puts on global stocks gauges including the S&P 500. Weeden told investors to implement a bearish strategy using October contracts on a security tracking the Russell 2000 Index. The VIX has fallen every September in years when volatility was below its historical average at the start of the month, data since 1996 compiled by Bloomberg show.

“There are a number of catalysts that could drive volatility higher in September such as an escalation in the Syrian crisis, further deterioration in emerging markets, or larger-than-expected tapering by the Fed,” Mandy Xu, a New York-based equity-derivatives strategist at Credit Suisse Group AG, said in an Aug. 29 interview.

Have a wonderful evening everyone.

Be magnificent!

All the responsibility of good and evil is on you.  This is the great hope.

What I have done, that I can undo.

Swami Vivekananda, 1863-1902

As ever,

Carolann

The bad end unhappily, the good unluckily.

That is what tragedy means.

-Tom Stoppard, 1937-

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