Your Weekly Update

The future is a daunting prospect.

All our great clients who are parents and grandparents (and some who are great-grandparents, uncles and aunts!) are all about the future. Especially where it concerns a family’s young ones.

This week’s Update takes a look at the future, financial and otherwise, of one Eli James Davis, Jeremy’s new son. And by extension, the young ones of all families.

We hope you have fun thinking about the future of your young ones. As you do, please jot us a note on your thoughts.

Best always,
Lee and Jeremy

P.S. Markets continue to dazzle, after scaring the devil out of many just a couple of weeks back. You’ll enjoy that part, too!


This Week’s Quote:

“Having a child is surely the most beautifully irrational act that two people in love can commit.”
― Bill Cosby


JL Davis Thoughts This Week:

A week ago Monday, Eli James Davis was born. A bouncing little baby boy to be sure. Having seen a few babies in my time, I found Eli very impressive. Beautiful. He was cool as a cucumber from the start. Relaxed, alert. Calm.

That will serve him well in the future.

By the time Eli graduates high school in the spring of 2032, it’s a good bet he will have intellectual wherewithal far beyond even the college graduate of today. His will be the first generation who can immediately access the answer to any question—any time, any place, from any device. The first generation to apply immediate answers collaboratively, by an order of magnitude, to any issue.

It’s hard to imagine what his generation will accomplish.

Of course, Mom and Dad (Beth and Jeremy) will stay sharp along the way too. They need to. It will take about $5,400/year (in today’s dollars, invested in a 529 plan) to send him to Colorado State, their alma mater. If Eli fancies DU instead, someone has to pony up about $14,000/year for a four year stint. Work hard, Mom and Dad! Pinch some pennies.

Eli will have plenty of part time work along the way in order to put back some cash. He’ll learn to save and invest his money, a little at a time. Maybe he can afford an entry level “pre-owned” Tesla with a two week fuel supply in a battery the size of a notebook computer. Or smaller.

His grandfather’s 2036 Corvette will have 1500 horsepower and run on hydrogen.

In the fall of 2038, Eli starts two years of graduate school, hot after a Masters in Finance and his MBA. For only another $2,100/year, thank you. He’ll pitch in with his earnings as an intern at JL Davis Financial Corporation. That’s where Cheryl Taylor and her team will be showing him the ropes, tuning him up for the future.

In addition to all the hard work, he’ll get to see the great clients coming through the office and meet them. They’ll be some impressive folks he will look up to.

Then in 2040 he’ll graduate with honors and start his career at J.L. Davis. We’ll be glad to have him.

Of course he could become an artist, policeman, architect, oil man, lawyer, doctor, factory worker, politician, computer specialist, engineer, salesman, journalist, or something else. Anything that suits him. Which would be just fine.**

Lee


Market Week: October 27, 2014

The Markets

Relief at last: Investors finally regained some appetite for risk as equities got a break from the recent wave of selling. After four straight weeks of losses, the S&P 500 saw a strong bounce. However, the Nasdaq's rebound was even bigger and the small caps of the Russell 2000 saw their second consecutive week of robust gains. Though the Dow industrials lagged the other three domestic indices, the rally brought the Dow back into positive territory for the year. The Global Dow also recovered from its slump, nearly managing to break even for the year.

The strong showing in equities helped send the benchmark 10-year Treasury yield up as prices fell. Meanwhile, the price of oil stabilized in the low $80s.


Key Dates/Data Releases
10/27: Dallas Fed manufacturing survey
10/28: Durable goods orders, home prices
10/29: Federal Open Market Committee announcement
10/30: Q3 GDP initial estimate
10/31: Personal income/spending


Last Week's Headlines
• Sales of existing homes jumped 2.4% during September, according to the National Association of Realtors®. That's the highest pace of 2014, though the number of sales was 1.7% lower than in the previous September. The $209,700 median sale price was 5.6% higher than a year earlier.
• Meanwhile, new home sales were up 0.2% in September; the Commerce Department said that put them 17% higher than in September 2013.
• Consumer prices rose 0.1% in September. The Bureau of Labor Statistics said that left the Consumer Price Index up 1.7% for the last 12 months--a level that might give the Federal Reserve some leeway to keep interest rates low. Increases in food and housing outweighed a 0.7% drop in energy costs.
• China's growth rate, while still robust compared to the rest of the world, slowed during the third quarter, according to the National Bureau of Statistics. The 7.3% increase in the country's gross domestic product was slightly lower than Q2's 7.5% and below the official target for annual growth (also 7.5%). Real estate prices and sales continued to be a soft spot in the Chinese economy.
• After subjecting 150 European banks to annual stress tests, the European Central Bank and the European Banking Authority said only 12 of them needed to raise additional capital as protection against a worst-case scenario. Italy had the most problem banks, with Greece and Cyprus tied for second.
• Similar stress tests for U.S. banks to be conducted by the Federal Reserve next year will measure how well they would withstand a sharp deterioration in the corporate bond market, especially high-yield bonds issued by highly indebted companies. As in previous years, the tests also will gauge exposure to threats from a variety of factors that include sharp declines in the job market and economic growth, a jump in oil prices to $110 a barrel, and a 60% drop in the stock market. Banks that fail the test could be restricted in their ability to pay dividends or buy back stocks until they address the deficiencies.


Eye on the Week Ahead

Once again, all eyes will be on the Fed as quantitative easing is expected to come to an end. And with recent volatility in the equities markets suggesting investor uncertainty, the first estimate of Q3 gross domestic product is likely to be significant. Also, the release of stress tests conducted on European banks could affect investor perception of the financial system there.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). 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.

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 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.


Prepared by Lee Davis** and Broadridge Investor Communication Solutions, Inc. Copyright 2014