The Newsletter for Monday July 8, 2013

Dear Friends,

Tangents:

I was reading a back issue of The Economist on the weekend and came across the obituary for Nguyen Chi Thien, the Vietnamese poet who died last year at age 73.  What an amazing story of courage and resolve was his life.  Nguyen Chi Thien sent his poems out of Communist Vietnam by running through the gate of the British embassy in Hanoi in 1979 with 400 of his poems under his shirt.  They were published as “Flowers of Hell”, translated into half a dozen languages and won the International Poetry Award in 1985.  He spent many years in prison and labour camps on various pretexts, contesting the regime’s view of history and writing ”irreverent” poetry for example.  It seemed the more the regime hurt him, the more he thrived.

Here is a sample of his poetry:

They exiled me to the heart of the jungle

Wishing to fertilise the manioc with my remains.

I turned into an expert hunter

And came out full of snake wisdom and rhino fierceness.

They sank me into the ocean

Wishing me to remain in the depths.

I became a deep sea diver

And came up covered with

scintillating pearls.

The pearls were his poems.  “If people could see his heart, he had written back in 1964, during his first spell in prison, they would see it was an ancient pen and inkstand, gathering dust; on a poor roadside inn, offering only the comfort of an oil lamp.  But it was also a paddy field waiting for the flood-rains of August,

So that it can overflow into a

thousand waves,

White-crested ones that will sweep

everything away!”

Photos of the Day –July 8th, 2013

A woman dressed in traditional costume smiles as she attends the gala show of the Latvian Nationwide Song and Dance Celebration in Riga. About 12,000 singers and 15,000 dancers from all over the country are participating. Ints Kalnins/Reuters

A swimmer approaches a statue meant to depict actor Colin Firth performing as Mr. Darcy, a character in Jane Austen’s novel ‘Pride and Prejudice,’ in Serpentine Lake, Hyde Park, London. David Parry/PA/AP

Market Closes for July 8^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Katie Brennan

July 8 (Bloomberg) — Canadian stocks rose, following last week’s gain, led by advances among utility companies and energy providers as investors looked to Alcoa Inc. for the the first major report of the second-quarter earnings season in the U.S.

Just Energy Group Inc. rose 4.9 percent, pacing gains among utility companies. Health-care companies gained 1.7 percent, led by a 3.1 percent advance in Catamaran Corp., a pharmacy services provider. Turquoise Hill Resources Ltd. added 7.5 percent after its copper mine in Mongolia was cleared to ship to China.

Lightstream Resources Ltd. surged 6.6 percent.

The Standard & Poor’s/TSX Composite Index gained 73.96 points, or 0.6 percent, to 12,208.87 at 4 p.m. in Toronto. The gauge rose 0.1 percent last week and is down 1.8 percent for the year. Trading volume was 6.8 percent lower than the 30-day average.

“Investors are getting ready for the earnings season,”

John Kinsey, a fund manager with Caldwell Securities Ltd. in Toronto, said in a phone interview. He helps manage about C$1 billion ($953 million). “It is nice to see the commodities and the stocks are up today. Gold is trying very hard to put a bottom in here. We are hoping it will do so and then maybe try and climb back up again.”

Alcoa reported second-quarter earnings after the market close that beat analysts’ estimates as U.S. carmakers used more of the lightweight metal in their latest models. The largest U.S. aluminum producer, the first Dow Jones Industrial Index member to release results for the quarter, had its credit rating cut to junk by Moody’s Investors Service in May.

Earnings at companies listed on the S&P 500 rose 1.8 percent last quarter, down from a projection of 8.7 percent six months ago, according to more than 11,000 analyst estimates compiled by Bloomberg. Lower expectations helped about 73 percent of the companies in the benchmark measure exceed forecasts by an average of 5.1 percent for the first three months of the year, Bloomberg data show.

Canadian building permits rose a fifth straight month in May, a surprise gain that caps the longest stretch in almost a decade, led by a jump in multiple-unit housing work in Toronto that has sparked warnings from policy makers about overbuilding.

Canadian business optimism about sales and investment faded in the second quarter on signs of sluggish domestic and global demand, a central bank survey showed.

The balance of opinion for sales growth over the next 12 months fell to 9 percentage points from 24 percentage points in the Bank of Canada’s survey of about 100 executives. Investment intentions declined to a balance of 9 from 12, the Bank of Canada said today.

Seven of 10 groups in the S&P/TSX advanced, led by a 2.8 percent gain in utilities companies. Just Energy Group added 4.9 percent to C$6.45 and ATCO Ltd. rose 4.3 percent to C$44.21.

Health-care companies rose 1.7 percent as Catamaran gained 3.1 percent to C$51.56 and Valeant Pharmaceuticals International Inc. added 1.5 percent to C$95.14.

Lightstream Resources, an oil production company, gained 6 percent to C$8.16, leading gains for energy companies. The group added 1.1 percent.

Raw-materials producers fell 0.1 percent as a group.  Metal prices rose, with gold gaining the most in a week and silver and copper adding at least 1.1 percent. Bullion has slipped 26 percent this year after some investors lost faith in the metal as a store of value as Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank may slow its $85 billion of asset purchases this year.

Turquoise Hill Resources advanced 7.5 percent to C$6.20.

Mongolia cleared Rio Tinto Group’s $6.6 billion Oyu Tolgoi copper mine to begin shipments this week. Turquoise Hill is a Rio unit that owns 66 percent of the mine. The government owns 34 percent.

Shipments to Chinese smelters were postponed twice last month as Mongolia sought to ensure revenue from the mine is processed through domestic banks. Mines Minister Davaajav Gankhuyag signaled in a post yesterday that the dispute has been resolved.

US

By Lu Wang and Whitney Kisling

July 8 (Bloomberg) — U.S. stocks rose, giving the Standard & Poor’s 500 Index a third straight day of gains, as the start of corporate earnings season fueled increased optimism about growth in the world’s largest economy.

Alcoa Inc. increased 1.4 percent before the biggest U.S. aluminum producer reported results. The stock added another 1.3 percent in extended trading after earnings beat analysts’ estimates. Dell Inc. gained 3.1 percent as the largest shareholder-advisory firm said investors should accept founder Michael Dell’s buyout offer. Priceline.com rallied 3.9 percent after Morgan Stanley raised its recommendation on the stock.

Intel Corp. slumped 3.6 percent amid an analyst downgrade.

The S&P 500 added 0.5 percent to 1,640.46 at 4 p.m. in New York, the highest since June 18. The Dow Jones Industrial Average rose 88.85 points, or 0.6 percent, to 15,224.69. More than 6 billion shares traded hands on U.S. exchanges today, about 8 percent below the three-month average.

“I really don’t think the earnings season is going to be so much about the second quarter, but more about the pickup in second half that the market appears to be anticipating,” Gary Flam, who helps oversee $7 billion at Bel Air Investment Advisors LLC in Los Angeles, said in a phone interview. “The market is getting comfortable that the economy is strong enough to withstand reduced Fed support. The market is inching toward normalcy. We’re not in an abnormal environment where the Fed and Fed actions are dictating market movements.”

The S&P 500 gained 1.6 percent last week, as better-than- estimated economic data tempered concern over a possible scaling back of Fed stimulus measures. Employers added more jobs than forecast in June, and other data during the week showed jobless claims decreased and manufacturing improved. While the index has fallen 1.7 percent since its May 21 record, the gauge is up 15 percent for 2013.

Investors will gain more insight into the central bank’s plans when the Federal Open Market Committee publishes minutes from its June meeting on July 10. Chairman Ben Bernanke also speaks that day. He said on June 19 the Fed may pare its asset- purchase program this year and end it in mid-2014 if growth meets policy makers’ estimates.

The S&P 500 fell nearly 5 percent in the four days after Bernanke’s comments following the FOMC meeting. The gauge has since gained 4.3 percent and is about 0.7 percent below its June 18 close.

“All eyes this week are likely to be on the latest FOMC minutes and comments from Ben Bernanke in light of Friday’s better-than-expected payrolls numbers,” Michael Hewson, a market analyst at CMC Markets Plc in London, wrote in an e-mail.

“Will he offer any clues as to the timing of possible tapering or will he simply reiterate previous comments made a few weeks ago?”

Earnings at companies listed on the S&P 500 rose 1.8 percent last quarter, down from a projection of 8.7 percent six months ago, according to more than 11,000 analyst estimates compiled by Bloomberg. Lower expectations helped about 73 percent of the companies in the benchmark measure exceed forecasts by an average of 5.1 percent for the first three months of the year, Bloomberg data show.

The Chicago Board Options Exchange Volatility Index, or VIX, fell 0.7 percent today to 14.78. 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 dropped 28 percent.

Eight of 10 industry groups in the S&P 500 advanced as utility companies and makers of consumer staples rose more than 1 percent. The Russell 2000 Index, a benchmark measure for smaller companies, climbed 0.4 percent to a record.

Alcoa rose 1.4 percent to $7.92 before becoming the first Dow member to report results. The stock added another 1.3 percent at 4:30 p.m. in New York after second-quarter earnings beat analysts’ estimates as U.S. carmakers used more of the lightweight metal in their latest models.

The company, which had its credit rating cut to junk by Moody’s Investors Service in May, said profit excluding one-time items was 7 cents a share, exceeding the 6-cent average of 15 estimates compiled by Bloomberg. Sales fell to $5.85 billion, exceeding the $5.79 billion average of nine estimates.

Dell rose 3.1 percent to $13.44 after Institutional Shareholder Services Inc. said investors should accept founder Michael Dell’s $24.4 billion leveraged buyout plan for the company. ISS cited a 25.5 percent premium to Dell’s unaffected share price, the certainty of value provided by an all-cash offer and the transfer of risk given Dell’s deteriorating PC business among reasons for supporting the bid.

Priceline.com added 3.9 percent to $888.63. The stock has rallied nine straight days, adding 10 percent since June 24.

Morgan Stanley upgraded the online travel agent to overweight, meaning investors should buy the stock, on expectation that the company will fetch a higher valuation as its profit margin stabilizes amid market-share gains.

Coal stocks rallied as Davenport & Co. said Walter Energy Inc. may idle some production, squeezing supplies. Walter Energy jumped 4.6 percent to $10.81. Consol Energy Inc. advanced 4 percent to $27.56 while Peabody Energy Corp. climbed 4.9 percent to $15.37.

Utility companies in the S&P 500 jumped 1.4 percent as a group. NRG Energy Inc. gained 4.2 percent to $27.23. The largest independent U.S. electricity generator said its NRG Yield Inc. unit is selling stock in an initial public offering.

Intel slumped 3.6 percent, the most in the Dow and S&P 500, to $23.19. Evercore Partners Inc. cut its 2013 and 2014 earnings estimates for the world’s largest computer-chip maker and lowered the rating to underweight from equal weight.

The earnings cut dragged technology shares lower, with the group retreating 0.2 percent. Hewlett-Packard Co., the only other stock in the Dow to retreat today, plunged 1.6 percent.

Phone stocks slipped 0.4 percent as a group to pace losses in the S&P 500. Sprint Nextel Corp. fell 1.3 percent to $7.07.

Regeneron Pharmaceuticals Inc., maker of the Eylea eye- disease medicine, dropped 1.9 percent to $229.02. Ohr Pharmaceutical Inc. has enrolled half of the 120 patients needed for a mid-stage study for an age-related eye disorder, as it seeks to compete with Regeneron.

Have a wonderful evening everyone.

Be magnificent!

Our responsibility is no longer to acquire, but to be.

-Rabindranath Tagore, 1861-1901

As ever,

Carolann

Have patience.  All things are difficult before

they become easy.

-Saadi, 1210-1292

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