"Just one last thing."

-- Lt. Columbo

We discussed Twitter (TWTR) a bit in my Diary and in the Comments Section.

BTIG raises their Twitter price target to $42 after the close:

"Having last updated our Twitter model and price target in early 2018 (link) when the stock was at $24.35, we felt it was time to lay out revised forecasts that tie to management's new mDAU disclosure and year-end 2018 earnings. Worth noting, when we moved our price target to $30 last year, we forecasted $2.8 billion of 2018 revenue and Twitter ended up exceeding $3 billion. We are now raising our Twitter one-year price target to $42 (based on 20x estimated 2020 EBITDA, 16x adjusted 2020E EBITDA).

The key driver of our confidence in Twitter's upside over the coming year is based on its product offering continuing to get better and better. Twitter is iterating the product faster than at any time in its history, making the service more useful to users. Surfacing the right tweet at the right time and making events/information that you want to find easier to discover via the main feed, explore tab and/or search leads users to come back more often, driving DAUs. More daily users who are increasingly engaged around content that interests them leads to... "

* Like the character Jose Quintana in The Big Lebowski, the market was on a roll today* Nobody screws with The Jesus or Mr. Market (especially with the dominance of machines and algos)
* Dios mio, man!

"A wiser fella once said, sometimes you eat the bar, and sometimes, well, the bar eats you. (and then the Dude asks if this 'is some kind of eastern thing')."

-- The Stranger/Narrator, The Big Lebowski

If you wonder what the Stranger/Narrator meant, bar is an antiquated variation of the word bear. Frontiersman Daniel Boone, for instance, famously carved a tree once, after killing a bear:

"D. Boon cilled a bar on (this) tree in the year 1760."

It makes sense that The Stranger/Narrator would use such a colloquialism, as he's sort of the personification of the Old West (which is what he means when he says it's "far from being Eastern." The saying is attributed to baseball pitcher Preacher Roe. After being taken out of a game in the second inning, Roe commented that, "Sometimes you eat the bear and sometimes the bear eats you."


The phrase's general meaning is that you win some and you lose some. There are good days and bad ones.

The Stranger/Narrator says it to the dispirited Dude to try and make him feel a little better.

Feel better?

It was hard for me to find transactional ideas of interest today given the ramp from the "get go" but I did add to some laggards.

"Strikes and gutters, ups and downs."

I am checking out a bit early today to prepare for a company management meeting over lunch tomorrow.

Thanks for reading my Diary and enjoy the evening. 

I am fairly shocked that the DJIA is +400 points today.
But after a bunch of decades in the business, not too surprised.

"Nothing like price to change sentiment."
- The Divine Ms M
We might be approaching the time in which the most negative "talking heads" at the Christmas Eve bottom are now the most positive on the markets.
As I like to write, investment observations are always 20/20 when viewed in the rear view mirror.

Another one from Rosie:

I am bidding slightly under the market in (DWDP) , (M) , (DDS) and (TWTR) .
I am offering more (AAPL) on the short side a bit above the market.

I stopped out more than half of my (SPY) and (QQQ) short for a loss this morning.

In my opening missive I suggested that the reason for today's sharp move higher was less that the government shutdown is apparently coming to an end and more about the very cautious market positioning.
Here is a chart which depicts this (move to an overweight in cash allocations by fund managers):

Twitter (TWTR) and its role in politics.

I will be on the Fox Business Network at about 1:05 pm today.

In December, there were 7.3 million job openings, a record high and well above the estimate of 6.8 million, and up from 7.2 million in November. Hiring's though were up by a more modest 95k and the hiring rate was unchanged (likely reflecting the challenge of finding the right workers in terms of needed skills). The quit rate also was unchanged at 2.3%.

With respect to where the demand for labor mostly came from, the demand for construction rose by 90k and for education/health workers by 85k. The need for leisure/hospitality (specifically arts, entertainment and lodging) workers was up by 121k and for professional business services by 82k. Demand fell for workers in manufacturing, trade/transport, IT, and financial activities.

Bottom Line

December weather was mild and helps to explain the construction need for workers on top of what is already a tight labor market. There will be rising demand for education and health workers for years to come. For the rest of the labor force it was a more mixed picture. As for the need for workers in January, in today's NFIB small optimism index, Plans to Hire fell to match the lowest since April 2018, so today's December figure is somewhat dated.

Nice comeback rally in banks/selected financials, but I see no need to sell or chase at this point.

Hartford Financial Services Group (HIG) had a good beat to expected and consensus fourth-quarter earnings last week.

I am, however, beginning to see some modest price competition in some commercial lines.

Not enough to be concerned about yet, but certainly something I will continue to monitor closely.

HIG is a large investment long for me, having added in the recent dip in December. Since then the shares have rallied well -- but I haven't sold a share of stock.

Last weekend I did some additional work on Twitter (TWTR) -- following the lowering of guidance a few days ago.

More than ever, especially considering the share price drop, I believe that the reward vs. risk is now quite attractive.

As a platform (just like Facebook FB , which I also adore), Twitter has scarcity value and there is now no premium for a possible takeover of the company (which I believe is better than a 50% possibility).

I have steadily added to my already large position in Twitter over the last few days.

FB has dusted off its problems over the last month and I expect the same from Twitter.

* January's market performance was the best monthly gain in more than three decades and was achieved at a time in which the government was shut down
* Averting a government shutdown was to be expected and should not be a surprise; it's a sideshow to more serious economic and market headwinds
* The consequences of slowing global growth and the economic reverberations of a limited resolution to the U.S./China trade dispute will offset a more dovish Fed in the fullness of time
* Market participants have been caught offsides by a spirited rally since Christmas Eve, serving to extend the recent machine- and algo-dominated buying
* Yell and roar and sell some more
Here on Tuesday morning the futures are up big based on an apparent budget compromise between Democrats and Republicans in the House and Senate that will avert a government shutdown.
To this observer, it was an ultimately expected compromise full of sound and fury, signifying nothing, and, in isolation, is a good reason to pare down invested positions. After all, the January market performance was the best in 30 years during a point in time in which the U.S. government was in shutdown mode.
The magnitude of the positive response overnight (up by nearly twenty handles) likely has more to do with cautious market positioning than the belief that the shutdown is some sort of economic elixir.
The more meaningful issues that lie ahead that will mold the intermediate-term trajectory of the markets are weakening global economic growth and the likely byproduct that the U.S./China trade dispute will yield little in meaningful trade reform or improving economic results.
Worldwide economic growth is now clearly on the descent in rate-of-change terms. China's growth is appreciably less than reported publicly and Europe appears to be headed toward a recession. Meanwhile, our domestic economy is slowing and probably will contribute to an earnings recession in 2019-2020.
As to the trade negotiation between the U.S. and China, it is unlikely to yield anything beyond some cosmetic concessions. While the political will seems apparent on both sides, the barriers to substantive agreements are high as both powers compete for economic dominance. In the last few days, my pal Sir Larry Kudlow has outlined how wide a gap exists between the two countries and basically said the Trump administration hopes China says yes "to something."
My baseline expectation is that we will see a partial, superficial and cosmetic resolution that investors likely will greet with little enthusiasm.
In my view, we face an unfolding economic drama with China not dissimilar to the start of the Cold War in the late 1940s as our president thinks in time frames of a tweet while China operates in a time frame that lasts decades.
The likelihood that trade will be continually disrupted is large and the consequence is that, while China only conducts 14% of global GDP, it accounts for more than one third of the change in global GDP year over year. My 10 Market Fears

As expressed late last week I have 10 principal market concerns: 1. Domestic economic growth weakens, Chinese growth fails to stabilize and Europe enters a recession2. U.S./China fail to agree on trade3. Trump institutes an attack on European Union trade by raising auto tariffs4. U.S. treasury yields fail to ratify an improvement in economic growth5. The market leadership of FANG and Apple (AAPL) subsides6. Earnings decline in 2019 and valuations fail to expand7. The Mueller Report jeopardizes the president8. A hard and disruptive Brexit9. Crude oil supplies spike and oil prices collapse, taking down the high-yield market10. Draghi is replaced by a hawkBottom Line

The apparent resolution of a government shutdown is a sideshow.

The most important factors that threaten our markets are slowing in global economic growth and the force of the rally that started on Christmas Eve that has taken markets to well above "fair market value" and has delivered a market that now has large downside risk relative to upside reward.

Peter write that "we should find a better reason":

If the market is rallying this morning because the government won't shut down again, I'd find a better reason for chasing it at 9:30am est since we had the best January in 30 years when it was closed. Make your reason related to China trade talks (where the March 1st deadline is likely to be extended), earnings, Fed policy, economy, etc...

Small business optimism according to the NFIB continued to retreat in January. The index fell to 101.2 from 104.4. That's the lowest print since November 2016 when it sat at 98.4 during the month of the presidential election. Plans to Hire fell 5 pts to the least since April 2018. Those that Expect a Better Economy is down to 6% from 16%. It was 34% six months ago. There were also notable declines in those that Expect Higher Sales and it's a Good Time to Expand. Those that Plan to Increase Inventories fell to just 1% from 8% in December. Capital spending did hold steady, rising 1 pt after falling by 4 last month. Earnings expectations remained negative by a bit less so. The wage components were mixed as current plans for pay rose 1 pt but future plans for it fell by 4. Lastly, those expecting Higher Selling Prices fell 2 pts.

The number one business problem remained "the availability of qualified labor" followed by "regulations and red tape."

The NFIB is mostly blaming the government shutdown for the change in confidence even though the total dollar impact will be $3 billion in the context of a $20 Trillion economy and it's lower for a 5th straight month. It's thus noise but we'll certainly see next month just how much its reopening boosted confidence. They are also citing "plenty of financial market commentators talking 'slowdown' in Europe, China, and in the US." They also said "owners did express concerns about future sales growth, some weakness in business conditions later in the year and some deterioration in conditions that would be supportive of business expansion." The data is not market moving but does follow the sharp fall in consumer confidence data points seen over the past month that was also partially blamed on the shutdown. Again, the partial closure was an embarrassment and certainly a huge inconvenience for those not getting paid but for everyone else, it shouldn't have mattered much in their daily lives.

The US dollar is approaching a big level as another .50 rally in this euro heavy index would place it at the highest level since mid 2017. I've listened to a bunch of earnings conference calls and plenty of multinational companies were citing it as a crimp on earnings. That said, I remain a bear on the US dollar, especially now with the Fed backing off from more rate hikes and gold trades pretty well in the midst of the dollar bounce. As for when the ECB will try to get out of negative rates, which would theoretically be euro positive and damaging to their bond market, Governing Council member Ewald Nowotny today said they will look at that in the summer. If there is one monetary experiment that includes NIRP and QE to generate higher inflation, we've certainly seen a massive failure over the past few years.

EURO 5yr 5yr inflation swap since NIRP began



In response to the 10 yr JGB yield going back below zero last week, again just crushing the profits of Japanese banks, the BoJ overnight cut the amount of 10-25 year bonds to 180b yen from 200b last time in order to try to steepen the curve again. Banks live and die by the yield curve and they've certainly died in Japan and in Europe over the past few years. The 10 yr JGB yield rose 1.5 bps but is still negative at -.013%. The TOPIX bank stock index rallied 2.2% on the news. Here is a chart of the index since 1989 when the bubble popped and was followed by decades of rates around zero and years of QE. If the banks are supposed to be the transmission mechanism of monetary policy, where is the self introspection on the part of central bankers?

TOPIX BANK STOCK INDEX