TWTR/Tstep – See Friday's comments.   My new theory is that TWTR, for whatever reason, has been pushed into culling all the bots and fake subscribers and THAT is why their growth seems anemic and that's why they are no longer going to report subscriber growth – just income, which is up nicely from last year (and revenues are up 24% too).  

So I think this is just TWTR's pain of cleaning house but that will make them more marketable in the future so we can now bet on the future (and get our money back) with the following for the OOP:

• Sell 10 TWTR 2021 $25 puts for $4.20 ($4,200) – TOS ordinary margin is $2,514
• Buy 15 TWTR 2021 $25 calls for $10.50 ($15,750) 
• Sell 15 TWTR 2021 $37 calls for $6.00 ($9,000)  

That's net $2,550 on the $17,000 spread that's $7,500 in the money to start so all TWTR has to do is hold $30 and we are profitable.  The potential profit is $14,450 profit (566%) at $37.  

And, of course, I'm doing 15 with the intention of selling 5 short calls down the road.  The April $33s are 10% out of the money and pay $1.20 so 5 short would be $600 using 66 of our 704 days.  10 sales like that would at $6,600 to our bottom line – but not yet.

S&P/Soma – As I said, my kids' college funds are in CASH!!! as the S&P has not proven itself about the 200dma so – bonds for now.  As I've mentioned before, you can only buy ETFs with the tax-free college funds and the choices are super-limited and no inverse funds so you can't protect them so, since they were adequate to pay for my girls' colleges, I didn't see the sense of risking a year's education on a 20% drop – especially since any extra money left in the fund is taxed 50% so, outside of expensive grad schools, there's little benefit to letting it ride.  Still, if I think the market is strong enough, no sense not putting $500,000+ back to work but the risks still outweigh the rewards at the moment with China and another shutdown possible and, of course, a President that's likely to be impeached.  

JPMorgan’s analysts do see real GDP slowing in 2019, for four reasons:

• “First, the fiscal stimulus from tax cuts enacted late last year will begin to fade. …”
• “Second, higher mortgage rates and a lack of pent-up demand should continue to weigh on the very cyclical auto and housing sectors.”
• “Third, under our baseline assumptions, the trade conflict with China worsens entering 2019 with a ratcheting up of tariffs to 25% on USD 200 billion of U.S. goods. Even if the conflict does not escalate further, higher tariffs would likely hurt U.S. consumer spending and the uncertainty surrounding trade could dampen investment spending.”
• “Finally, a lack of workers could increasingly impede economic activity. … With the unemployment rate now well below 4.0%, a lack of available workers may constrain economic activity, particularly in the construction, retail, food services and hospitality industries.”

The cautious tone JPMorgan set in its outlook for the U.S. economy continues in its view of the investing environment for 2019.

“Investors have recognized that trees do not grow to the sky, and that the robust pace of profit and economic growth seen this year will gradually fade in 2019 as interest rates move higher. While history suggests that there are still attractive returns to be had in the late stages of a bull market, the transition away from quantitative easing and toward quantitative tightening has contributed to broader investor concerns. Many equate this new environment to walking on an investment tightrope without the liquidity safety net that has been present for over a decade.”

“This leaves investors in a tough spot – should they focus on a fundamental story that is softening, or invest with an expectation that multiples will expand as the bull market runs it course? The best answer is probably a little bit of each.”

JPM’s allocation suggestions for the new year: “We are comfortable holding stocks as long as earnings growth is positive, but do not want to be over-exposed given an expectation for higher volatility. As such, higher-income sectors like financials and energy look more attractive than technology and consumer discretionary, and we would lump the new communication services sector in with the latter names, rather than the former. However, given our expectation of still some further interest rate increases, it does not yet seem appropriate to fully rotate into defensive sectors like utilities and consumer staples. Rather, a focus on cyclical value should allow investors to optimize their upside/downside capture as this bull market continues to age.”

More notable to investors is the letter to investors from Darrell L. Cronk, CFA, President of Wells Fargo Investment Institute, which concisely presents some of the headwinds that loom ahead.

• “The end of cheap capital: As interest rates rise from generational lows, consumers and businesses will have to rationalize how rising costs of capital affect borrowing and spending decisions.”
• “The end of outsized job gains: Multidecade tight labor conditions put upward pressure on wages, making it difficult for employers to attract and retain needed talent for growth. This, in return, should slow job growth.”
• “The end of extremely low volatility across equities, rates and currencies: One of the hallmarks of this cycle has been the extraordinarily low volatility regimes for most major asset classes. We believe that this began to change in 2018, and we expect this trend to continue throughout 2019.”

Cronk does provide one glimmer of light, however:

“The end of equity returns driven by only a few sectors: Outsized investor performance has come from only a few equity sectors through much of this cycle. We see the range of opportunities broadening, resulting in appealing valuations across a number of equity sectors.”

Charles Schwab’s Jeffrey Kleintop paints a gloomy picture for the global economy, and international stocks, for the coming year.

“Global growth may slow in 2019 as the economic cycle nears a peak, with increasing drag from worsening financial conditions combining with full employment and rising prices. Global stock markets may peak in 2019 if leading indicators signal the gathering clouds of a global recession.”

“If we borrow the severe weather scale for storms and apply it to the global economy and markets, we aren’t forecasting ‘Recession Warning,’ meaning a recession is here or imminent. A better term is ‘Recession Watch,’ in which conditions are favorable to a recession if a number of risk factors (e.g., trade, interest rates, inflation) deteriorate.

“For all the concerns about trade policy, Brexit and other issues, 2018's big stock market declines generally were driven by inflation and interest rate concerns. These are the indicators investors should watch most closely in 2019. Historically, when unemployment and inflation rates have converged to become the same number – signaling an overheating economy – it has marked the beginning of a prolonged downturn for the stock market, followed about a year later by a recession. The gap between the unemployment rate and the inflation rate is close to one percentage point in major countries like Germany, Japan, the United Kingdom, and the United States.”

2018 largely was a down year for commodities. Oil prices made the most noise with their precipitous drop, but gold – despite a year-end revival – finished the year lower, too. However, BofA sees rosier times ahead for several commodities in 2019.

“The outlook for commodities is modestly positive despite a challenging global macro environment. We forecast Brent and WTI crude oil prices to average $70 and $59 per barrel, respectively in 2019.” Respective 2018 year-end prices of $53.80 and $45.41 would imply potential annual gains of 30.1% and 25.2% at those averages.

“Weather-induced volatility is expected in the near term for U.S. natural gas, as cold weather could propel winter natural gas over $5/MMbtu (million British thermal units), yet we remain bearish longer term on strong supply growth.” Natural gas closed 2018 at $2.94 per MMbtu; thus, BofA’s outlook implies gains of as much as 70% for winter natural gas.

“In metals, we remain cautious about copper because of Chinese downside risk. We forecast gold prices will rise to an average of $1,296 per ounce, but could rally to as high as $1,400, driven by U.S. twin deficits and Chinese stimulus.” That target average price of $1,296 is a mere 1% higher than gold’s 2018 close of $1,281.30, but the high-end projection of $1,400 would represent a more substantial 9% gain for the yellow metal.