The Newsletter for Friday July 5, 2013

Dear Friends,

Tangents:

Virginia Woolf wrote in her diary on July 5^th, 1924:

Just back….from Knole, where indeed I was invited to lunch alone with his Lordship [Lord Sackville].  His Lordship lives in the kernel of a vast nut.  You perambulate miles of galleries; skip endless treasures – chairs that Shakespeare might have sat on – tapestries, pictures, floors made of the halves of oaks; and penetrate at length to a round shiny table with a cover laid for one.  A dozen glasses form a circle each with a red rose in it.  One solitary peer sits lunching by himself, with his napkin folded into the shape of a lotus flower.  Knole is a conglomeration of buildings half as big as Cambridge I dare say; if you stuck Trinity, Clare and King’s together you might approximate.  But the extremities and indeed the inward parts are gone dead.  Ropes fence off half the rooms; the chairs and the pictures look preserved; life has left them.  Not for a hundred years have the retainers sat down to dinner in the great hall.  Then there is Mary Stuart’s altar, where she prayed before execution.  “An ancestor of ours took her the death warrant,” said Vita.

Vita Sackville-West, daughter of Lord Sackville and wife of Harold Nicolson, was soon to become Virginia Woolf’s lover.   A central figure in the Bloomsbury group of artists and writers, she was the model for Virginia Woolf’s Orlando.

It wasn’t raining when Noah built the ark. –Warren Buffett, b. 1930.

Photos of the Day –July 5th, 2013

The Great Mosque of Djenné is the largest mud-brick structure in the world. Built in 1906 by order of the French colonial administration in Mali, the mosque is an African icon. (Note the many palm wood platforms sticking out of the building’s walls.) Thomas Martinez

The minarettes of the mosque are repaired as the sun rises over the horizon. The mud festival is the only time of the year when everyone has complete access to the mosque, regardless of race, religion, or sex. For most people of Djenne, this is the only time they are allowed up to the roof of the mosque, and dozens rush to help repair the minarettes before they’re finished. Thomas Martinez

Market Closes for July 5^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

July 5 (Bloomberg) — Canadian stocks fell, with the benchmark index paring a weekly gain, as gold producers tumbled after better-than-forecast jobs reports fueled bets the U.S. Federal Reserve will begin to reduce stimulus.

Torex Gold Resources Inc. and Yamana Gold Inc. slumped at least 3 percent as the precious metal touched a one-week low.

Barrick Gold Corp., the world’s largest producer, sank to a 21- year low. Tourmaline Oil Corp. surged to a record after announcing expansion plans in Alberta. Progressive Waste Solutions Ltd. jumped the most in almost two years after an investor boosted its stake in the garbage-disposal company.

The Standard & Poor’s/TSX Composite Index fell 31.75 points, or 0.3 percent, to 12,134.91 at 4 p.m. in Toronto. The gauge rose 0.1 percent this week and is off 2.4 percent for the year.

“When you look at gold, investors were holding it as a potential inflation hedge,” said Anish Chopra, fund manager with TD Asset Management Inc. in Toronto. The firm manages C$204 billion ($192 billion). “Here you have the U.S. probably pulling back on quantitative easing because economic growth is starting to pick up. The risk of inflation gets reduced as easing gets pulled back. For sure the economic data supports tapering.”

The U.S. economy added 195,000 jobs in June, ahead of the average economist estimate of 165,000 in a Bloomberg survey.

Canada lost 400 jobs last month, better than analysts’ forecasts for a decline of 7,500.

Fed policy makers said last month they would trim stimulus before the end of the year if unemployment continues to fall.

Today’s jobs report fueled speculation the Fed would begin to curtail bond purchases in September, boosting the U.S. dollar to the biggest gain in almost eight months.

Seven of 10 groups in the S&P/TSX fell, led by a 1.6 percent plunge among raw-materials producers. Metals prices tumbled as the dollar advanced, with gold for August delivery declining 3.1 percent to $1,212.70 an ounce, the lowest since June 28.

Torex Gold Resources plunged 12 percent to C$1.17 and Yamana Gold slumped 3 percent to C$9.74. Barrick Gold sank 4.8 percent to C$14.57, the lowest since 1992.

Silver Wheaton Corp. tumbled 2.5 percent to C$19.95 and Silvercorp Metals Inc. retreated 1.1 percent to C$2.75. Silver for September delivery dropped 4.9 percent to extend the loss for the year to 38 percent, the most among the 24 raw materials in the S&P GSCI Spot Index.

Teck Resources Ltd., Canada’s largest diversified miner, lost 3.2 percent to C$21.55 and First Quantum Minerals Ltd.

slipped 1.3 percent to C$15.35. Copper fell 3.4 percent, the most since April, in New York.

Tourmaline jumped 4.4 percent to C$44.65, its highest close on record. The company said late yesterday it expects to get

10,000 barrels of oil equivalent per day production by the fourth quarter from its Spirit River Charlie Lake site in Alberta.

The oil and gas producer has surged 43 percent this year, making it the top-performing stock in the S&P/TSX Energy Index.

Progressive Waste, based in Vaughan, Ontario, soared 4.9 percent to C$23.38, the most since August 2011. Blue Harbour LP, a Greenwich, Connecticut-based investor, said in a regulatory filing today it has paid $130.8 million to raise its stake in the company to 5.6 percent, making it the third-largest investor.

US

By Lu Wang and Alex Barinka

July 5 (Bloomberg) — U.S. stocks rose, sending the Standard & Poor’s 500 Index to the biggest rally in three weeks, after government data showed the nation added more jobs than forecast last month.

Lincoln National Corp. climbed 5.4 percent, leading a rally among life insurers as bond yields surged on bets the Federal Reserve will begin to reduce its asset buying. KeyCorp advanced as Wells Fargo & Co. said regional banks benefit more than larger rivals from new rules on capital. Tesla Motors Inc. added

4.2 percent after saying it received enough orders to double the number of electric cars in Hong Kong. Homebuilders slumped amid concern rising interest rates may curtail a housing recovery.

The S&P 500 gained 1 percent, the most since June 13, to 1,631.89 at 4 p.m. in New York. The index advanced 1.6 percent for the week. The Dow Jones Industrial Average added 147.29 points, or 1 percent, to 15,135.84. About 4.95 billion shares changed hands, 24 percent below the three-month average. U.S. markets were closed yesterday for the Independence Day holiday.

“The jobs report is pretty strong. It’s a good number for equities because it’s supportive for earnings growth, which is what we need,” Matthew Peron, head of active equities at Northern Trust Corp. in Chicago, said by telephone. His firm manages about $810 billion. “We have to digest the backup in yields, we have to see how far do they go and get used to that level of rates.”

Payrolls rose by 195,000 workers for a second straight month, the Labor Department reported today in Washington. The median forecast in a Bloomberg survey projected a 165,000 gain after a previously reported 175,000 increase in May. The jobless rate stayed at 7.6 percent, while hourly earnings in the year ended in June advanced by the most since July 2011.

Economic growth amid monetary stimulus from the Federal Reserve has helped send the S&P 500 up 141 percent from its bear-market low in 2009, including a 14 percent rally so far this year. The index has slipped 2.2 percent from its last record on May 21 after Fed Chairman Ben S. Bernanke said the central bank could begin to reduce bond purchases should the employment market show sustainable growth.

“Part of this focus on the Fed easing is that they haven’t been enthusiastic about the underlying economics,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “If investors can be reassured about that, then it opens the door to a more sustainable rally.”

Equities rose earlier today as European Central Bank President Mario Draghi predicted that interest rates will remain low for an extended period of time. Draghi said yesterday that key interest rates will remain at their current levels or lower for as long as necessary. The Bank of England signaled that it will leave interest rates at a record low for longer than investors had expected.

Alcoa Inc. will unofficially start the second-quarter earnings season as the biggest U.S. aluminum producer will report results after the market closes on July 8.

Profits for S&P 500 stocks probably grew 1.8 percent, according to analyst estimates compiled by Bloomberg. That’s down from a projected increase of 6.2 percent at the beginning of the quarter. Earnings are forecast to jump 5.5 percent for the third quarter and 11 percent for the final three months of this year, the data show.

“We know this is not going to be a terrific earnings season,” Northern Trust’s Peron said. “The focus will be on guidance – are we going to get improvement as the year continues, which is in expectation? The criticism of the market has been that it has been supported by Fed actions and now this is the time for that hand-off to happen.”

The Chicago Board Options Exchange Volatility Index, or VIX, slipped 8.1 percent today to 14.89, the lowest level since May 30. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, reached a six-month high in June and has since fallen 27 percent.

Nine of 10 S&P 500 main industries gained as financial, industrial and health-care companies rose more than 1.3 percent.

JPMorgan Chase & Co. added 2.3 percent to $53.99 and Bank of America Corp. advanced 1.8 percent to $13.06.

Lincoln, the life insurer with more than $200 billion in assets, climbed 5.4 percent to $38.98. Higher interest rates can boost profits for life insurers, which invest premiums from clients in bonds and other assets to back future payouts.

MetLife Inc., the largest U.S. life insurer, gained 2.7 percent to $47.52.

Regional lenders rose as KeyCorp, Ohio’s second-largest bank, jumped 5 percent to $12. Smaller banks face less onerous risk weightings for residential mortgages under the Basel Committee on Banking Supervision’s latest set of global standards, Wells Fargo analyst Matthew Burnell wrote in a note.

The capital rules are scheduled to be decided next week.

SunTrust Banks Inc. advanced 4.2 percent to $34.31, while Zions Bancorporation increased 4.3 percent to $30.97.

Tesla Motors Inc. added 4.2 percent to a record $120.09 after saying it received hundreds of orders for its new Model S sedan, enough to double the number of electric cars on Hong Kong’s streets. The company, headed by billionaire Chief Executive Officer Elon Musk, has forecast it will sell 21,000 units of the Model S globally this year, with deliveries to Europe and Asia beginning in the second half.

Zoetis Inc., the animal-health company spun off from Pfizer Inc., gained 3 percent to $30.17. Bank of America boosted the stock’s rating to buy.

An S&P index of homebuilders fell 3.4 percent to the lowest level since December as Treasury yields rose to the highest level in almost two years. All its 11 members retreated. Toll Brothers Inc. dropped 3 percent to $31.52 while Lennar Corp. slipped 4 percent to $33.93.

A Bloomberg index of real estate investment trusts that buy mortgage debt tumbled 3.9 percent for the biggest retreat since October 2011. Annaly Capital Management Inc., the largest of the companies, plunged 5.1 percent to $11.51 and American Capital Agency Corp., the second biggest, slumped 5.3 percent to $20.76.

Gold producers declined as the metal’s price plunged 3.1 percent. Barrick Gold Corp., the world’s largest miner of the precious metal, sank 6.3 percent to $13.76. Newmont Mining Corp. fell 4.3 percent to $27.78 for the biggest loss in the S&P 500.

Dell Inc. erased 2.1 percent to $13.03. Michael Dell and Silver Lake Management LLC won’t sweeten their $24.4 billion offer to take the personal-computer maker private, people with direct knowledge of the situation said.

Have a wonderful weekend everyone.

Be magnificent!

If you wish to free yourself from suffering, you must free yourself from pleasure,

and not free yourself from suffering.  Suffering is a reaction.

If you wish to release yourself from suffering,

you must first of all release yourself from pleasure.

Then the suffering will disappear.

Swami Prajnanpad, 1891-1974

As ever,

Carolann

The test of good manners is to be patient

with the bad ones.

-Solomon ibn Gabriol, 1021-1058

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

Tel: 778.430.5808

(C): 250.881.0801

Toll Free: 1.877.430.5895

Fax: 778.430.5828

www.carolannsteinhoff.com