September 9, 2016 Newsletter

Dear Friends,

Tangents:

On this day in 490 BC, the Battle of Marathon took place.  It was the decisive Athenian victory over the Persians on the eastern coast of Attica, which brought the first of the Persian Wars to an end.  The long distance race known today as a marathon was named after this battle, the result of which was announced at Athens by an unnamed courier who fell dead on his arrival, having run nearly 23 miles (37 km).  This runner is sometimes cited as Pheidippides or Philippides, who actually ran from Athens to Sparta to seek help against the Persians before the battle.
    In the modern Olympic Games, the Marathon race was instituted in 1896, the distance being standardized at 26 miles 385 yards (42.195 km) in 1924.

On September 9, 1976, Communist Chinese leader Mao Tse-tung died in Beijing at age 82.
And.…in 1087 William the Conqueror died.
1828, Leo Tolstoy was born.
1960, Hugh Grant was born.

What a strange illusion it is to suppose that beauty is goodness. –Leo Tolstoy.
PHOTOS OF THE DAY

A spider waits for prey in the midday sun in Herdecke, Germany, on Friday. Bernd Thissen/dpa/AP

A man uses scissors to make intricate decorative patterns on a camel’s back before displaying it for sale at a makeshift cattle market ahead of the Eid al-Adha festival in Karachi, Pakistan, on Friday. Akhtar Soomro/Reuters
Market Closes for September 9^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Dani Burger and Eric Lam
     (Bloomberg) — Canadian stocks dropped the most since February, erasing gains for the week, as speculation mounted that central-bank support that’s bolstered global financial markets may end sooner than previously anticipated.
     The S&P/TSX Composite Index lost 1.8 percent to 14,539.88 at 4 p.m. in Toronto. The benchmark finished the holiday- shortened week with the worst weekly decline since May, trimming its gain this year to 12 percent.
     “We were pretty complacent on interest rates so this was a bit of a shock,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto. His firm manages about C$5 billion. “Oil was up yesterday, but it’s giving it all back so Canada is getting hit extra hard. And the jobs data is pretty weak for Canada so it’s all dependent now on the U.S. recovering in the second half and our ability to export to them.”
     Stocks retreated worldwide as signs emerged that central banks are starting to reassess the benefits of further monetary easing. Federal Reserve Bank of Boston President Eric Rosengren warned that waiting too long to raise rates threatened to overheat the U.S. economy and could risk financial stability. European Central Bank President Mario Draghi on Thursday downplayed the need for more stimulus measures to bolster growth.
     Data Friday showing Canadian employment rose faster than economists had forecast in August did little to bolster optimism in the nation’s economy. Earlier this week the Bank of Canada maintained interest rates while also warning that risks of weak inflation and economic growth have increased.
     The S&P/TSX is closely linked to commodity prices with raw- materials and energy producers making up about 28 percent of the overall gauge. West Texas Intermediate crude futures dropped the most in more than a month, falling 3.7 percent in New York after the biggest U.S. stockpile slump in 17 years was seen as a one- time event.
     Raw-material and energy producers in the S&P/TSX dropped more than 2.3 percent to weigh most on the index, as all of the 10 industries retreated. Concordia International Corp. and Valeant Pharmaceuticals International Inc. dropped at least 4.5 percent as the health-care group also sank 4.5 percent.
     First Quantum Minerals Ltd. and Kinross Gold Corp. slid at least 4 percent as gold fell for a third day, while most industrial metals also tumbled amid persistent concerns about the strength of demand in China.
     Crescent Point Energy Corp. fell 6.9 percent, the biggest drop since January, after the company announced Thursday a secondary stock offering. The funding will be used to accelerate drilling and boost activity. Enbridge Inc. and Canadian Natural Resources Ltd. lost at least 1.7 percent.

US
By Oliver Renick
     (Bloomberg) — U.S. stocks fell in the worst selloff since Britain voted to leave the European Union, with the Dow Jones Industrial Average falling almost 400 points after a Federal Reserve official signaled more willingness to raise interest rates.
     Equities were jolted out of an eight-week stretch of calm as central bankers weigh the benefits of further stimulus efforts. Boston Fed President Eric Rosengren warned today that waiting too long to raise rates threatened to overheat the U.S. economy and could risk financial stability. Shares slipped from near-record levels Thursday after European Central Bank President Mario Draghi downplayed the need for more stimulus measures.
     The S&P 500 Index fell 2.5 percent to 2,127.81 at 4 p.m. in New York, marking a two-month low and its biggest weekly drop since February. The gauge sank below its average price during the past 50 days for the first time since July 6. The Dow lost 394.46 points, or 2.1 percent, to 18,085.45, while the Nasdaq Composite Index declined 2.5 percent. The CBOE Volatility Index surged the most since the Brexit vote, up 40 percent, to a two- month high.
     “Dovish Fed members getting called up to bat for a hike is putting people on edge,” Yousef Abbasi, a global market strategist at JonesTrading Institutional Services LLC, said by phone. “It’s certainly one of those days where people are positioning for that September hike being back on the table. It’s happening as economic data lately is coming in more softly than people would like.”
     Shares of phone companies, which flourished this year along with utilities as yield-starved investors flocked to their high dividends, marked their steepest loss since February 2014. Utilities dropped the most in 19 months. Two other 2016 leaders — energy and raw-material producers — slumped more than 2.8 percent, while consumer-staples had the worst day in a year. Banks and insurers were less hard-hit, buffered by speculation higher rates will lift profits, though the financial group still lost 1.9 percent.
     Among the biggest drags on the benchmark, AT&T Inc. saw its worst drop in more than two years, while Apple Inc., Amazon.com Inc. and Exxon Mobil Corp. each sank at least 2.2 percent. Now 2.9 percent from its all-time high, the S&P 500 trades at 18.1 times forecast earnings, still the highest since 2009. About 8.4 billion shares traded hands on U.S. exchanges Friday, 24 percent above the three-month average.
     “Boring utilities and other defense trades started behaving like Apple in the glory days or hot biotech stocks, and it attracted momentum players, so that’s another factor embedded in this,” Michael Purves, chief global strategist at Weeden & CO LP in Greenwich, Connecticut, said by phone. “Today what we’re having is an unwind of the 10-year that’s been so key to that support — the equity move today has been more about the 10- year.”
     Following Rosengren’s comments, traders briefly pushed bets for a rate increase this month to 38 percent, before moderating to 30 percent. Odds fell to 22 percent on Wednesday following a string of weaker-than-forecast gauges on hiring, manufacturing and services activity. December is the first month with at least an even chance for a move. Next week’s reports on retail sales, consumer sentiment and industrial production are among the last major economic releases before the central bank meets Sept. 20-21.
     Fed Governor Lael Brainard, seen as a leading opponent of rate increases for much of the past year, is scheduled to deliver a speech in Chicago Monday outlining her views on the economy and monetary policy. The yield on the 10-year U.S.
Treasury note rose Friday to a more than two-month high.
     “This is a big move in yields the last couple days,” Mark Kepner, managing director and equity trader at Themis Trading LLC in Chatham, New Jersey, said by phone. “If you’re going to get a big move in the bond market, equities can only be under pressure and we’re seeing it already. Investors do not like a move like this so fast.”
     The S&P 500 capped its first move of at least 1 percent after 43 sessions, the longest such streak since 2014, as it broke below a roughly 30-point range it’s held for about two months. The gauge had hovered near a record reached on Aug. 15 amid mixed economic data and speculation about the Fed’s stance on rates. Before today’s selloff, the index was up 19 percent from a 22-month low in February, and less than half a percent from its all-time high.
     “It’s really difficult to be an investor in U.S. equities right now because benchmarks are just glued to those all-time highs,” said Steven Santos, a broker at Banco de Investimento Global SA in Lisbon. “There isn’t much conviction to really push stocks higher, but you also don’t want to completely give up on stocks when returns elsewhere look miserable.”
     Adding to the angst over the prospects for higher borrowing costs, DoubleLine Capital Chief Investment Officer Jeffrey Gundlach said it’s time to prepare for rising rates and inflation. “This is a big, big moment,” Gundlach said during a webcast Thursday. “Interest rates have bottomed. They may not rise in the near term as I’ve talked about for years. But I think it’s the beginning of something and you’re supposed to be defensive.”
 

Have a wonderful weekend everyone.

Be magnificent!

In nature, action and reaction are continuous.  Everything is connected to everything else.
No one part, nothing, is isolated.  Everything is linked, and interdependent.
Everywhere everything is connected to everything else.  Each question receives the correct answer.
Swami Prajnanpad

As ever,

Carolann

While we speak, envious time will have sped away: pluck the fruit of today,
putting as little trust as possible in tomorrow.
                                     -Horace, 65-8 BC

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