Soldiers Coming Home (oh, yes, and the markets)

Quote of the Week:
"What a cruel thing is war: to separate and destroy families and friends, and mar the purest joys and happiness God has granted us in this world; to fill our hearts with hatred instead of love for our neighbors, and to devastate the fair face of this beautiful world" - Robert E. Lee, letter to his wife, 1864


Last week, we learned that all US soldiers will be returning from the war in Iraq by year's end.

In our family we're reminded of when John Calvin Davis (Lee's grandfather, Jeremy's great-grandfather) came home in 1918 from World War I. We love looking at his discharge papers. He had fought in France and Germany. He rarely spoke of the things that he'd seen, but one story did stand out. Early one morning, he was washing his shirt in a bucket, near a stream when the German army attacked his unit and others in the area. The Germans used chlorine gas, a lethal agent. The effect of chlorine gas on human beings is horrific. Thankfully for the Davis family, as the gas wafted into the area, young John, barely 18, threw his wet shirt over his face, grabbed his gun, and ran in the opposite direction of the gas. He regrouped, donned a gas mask, and came back to fight. When the battle subsided, a large part of his unit was dead.

John survived mostly by chance and partly by wit. He carried with him all the days of his life a horrific cough. The family says it shortened his life, but it's a tough case to make; he died at 92.

Regardless of political persuasions, we can all express our joy and gratitude at the return of today's soldiers. Millions just like them have paved the way for not just our own freedom in this Country, but much of the world's freedom. It's not a stretch to say we owe them everything.

So today, we think about the soldiers throughout the generations who have preserved our freedoms and we pause to thank them. Thank you, great American soldiers, all. And thanks, John.**


The Markets

A tug-of-war between earnings and Europe dominated equities last week. The Dow industrials overcame a discouraging start to the week and managed a third straight week of gains. However, the Nasdaq slipped back into the loss column, while the S&P 500's encouraging week still left it in negative territory for the year and the small-cap Russell 2000 continued to struggle.


Last Week's Headlines

• Despite strong words from G-20 finance ministers about the need for a formal plan for containing the damage from European debt problems, the eurozone continued to debate ways to enhance the European Financial Stability Facility's resources. However, any formal agreement failed to appear last week, though French and German leaders said they anticipated having one this week. In the meantime, Moody's warned that France's AAA debt could be hit with a negative outlook if its budget is strained by bailout demands; it also downgraded Spain's debt from Aa2 to A1.
• September's 0.3% consumer inflation rate was the third increase in as many months. According to the Bureau of Labor Statistics, that put the inflation rate for the last 12 months at 2%. At the wholesale level, inflation was worse; driven mostly by a 2.3% jump in energy costs and a 10% increase in the prices of vegetables, it spiked up 0.8% in September, for a 6.9% rate for the last year.
• Federal Reserve manufacturing numbers were mixed. The New York region was negative for a fifth straight month, while new orders were flat. However, the Philadelphia Fed survey showed improvement, jumping from -17.5 in September to 8.7, the first positive number in three months. Nationwide, industrial production rose 0.2% in September and was 3.2% higher than a year ago.
• China's efforts to try to control inflation there contributed to a slower pace of economic growth--9.1%--during the third quarter. According to China's National Bureau of Statistics, that's down from Q2's 9.5%.
• Housing starts shot up 15% in September, putting them 10.2% above last year. According to the Commerce Department, that's the highest level since before the homeowner's tax credit expired last year. Building permits, an indicator of future construction activity, fell 5% from August, though they also were up from a year ago.
• Sales of existing homes dropped 3% in September, according to the National Association of Realtors®, though compared to the previous September, they were up 11.3%.


Eye on the Week Ahead

Action or lack thereof at the midweek European debt summit is likely to affect the mood of the markets. A first look at Q3 economic growth also will be of interest.
Key dates and data releases: home prices, consumer confidence (10/25); new home sales, durable goods orders (10/26); initial estimate of Q3 gross domestic product, pending home sales, weekly new jobless claims (10/27); personal income/spending, labor costs, consumer sentiment (10/28).




Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.


Prepared by Lee Davis** and Broadridge Investor Communication Solutions, Inc. Copyright 2011