The trade meeting in China between the U.S. and China went well, with some narrowing of differences on several topics. The event did not produce an agreement, but it did narrow differences, and was a good step toward an agreement — which might take place by March 1, or could drag on for much longer.

The U.S. economy remains strong, and employment data and retail sales data are the strongest parts of the economy. We will continue to see a steady growth rate in the U.S. with GDP probably slightly below 3% in the last quarter of 2018. This will lead to economic growth of over 3% for 2018 as a whole.

The U.S. stock market has rallied since around Christmastime, and could rally further until we come into corporate profit season reporting season next week. At that time we will get a good picture of the outlook for numerous companies in a large variety of industries.

Our expectation is that most companies will be somewhat conservative in their predictions for growth rates in 2019, and it will be important to see how the stock market reacts to this conservatism. Since we see no recession in 2019, we are interested in using periods of market correction as opportunities to buy very good companies at newly reasonable prices.

Within the U.S., we are finding growth companies with reasonable valuations and strong visibility for profit growth for the next few years. Finding such companies is a pleasure that was denied to investors while stocks were overpriced.

We believe that the Federal Reserve will support stock prices with reasonable behavior; we believe that weakness in overseas markets is not leading to a global recession in 2019; and we believe that U.S. companies can grow and extend their growth abroad if they are wise and frugal.

Global Markets: Brazil

Brazil, as mentioned above is an important part of the opportunity set that we see. We are bullish on the Brazilian currency, the Real; on Brazilian government bonds; and on Brazilian stocks. See above for our reasoning on Brazil.

Japanese Yen

We believe that the Japanese yen will rise in value versus the U.S. dollar this year, and we remain bullish on it.

Gold and Silver

Gold and silver are havens that we like at this time. Gold will benefit from inflation abroad, although there will be little inflation in the U.S. this year. The outlook for gold depends greatly upon the value of the U.S. dollar; a weak dollar will cause gold, silver, and other commodities to rise; absent that, we anticipate modest appreciation for gold in 2019.

Cryptocurrencies and Blockchain

We continue to read stories suggesting that the technologies underlying digital currencies are making strides in spite of the crypto market’s sharp decline, and in spite of the unclear nature of many of these markets. Particularly significant to us was the launch of a European-regulated exchange in Estonia which is executing trades in several U.S. technology stocks using a security token on the Ethereum blockchain. We feel this is an early harbinger of the transformation that blockchain technologies will ultimately accomplish in financial markets. A recent analyst report noted headwinds in cross-border transaction revenues from increasing adoption of cryptos for this purpose. This signals to us that digital currencies are achieving real, scaled use-value in cross-border exchange.

Thanks for listening; we welcome your calls and questions.