FOR MOST 2015 CAN NOT END SOON ENOUGH

Equites advanced yesterday on “relatively” light volume as data indicated consumer spending buoyed the economy in the third quarter. Oil halted its decline for a second day on the prospect of greater stimulus from China.
Most are happy 2015 is coming to an end as nothing appeared to work. Personally 2015 is perhaps one of the most difficult years in my 30 years of experience as nothing appeared to make sense.
In my view, a view that is now becoming more accepted, the markets were/are overly influenced by algorithmic or technology based trading, or a strategy based upon cross correlated momentum. To hell with analysis and forward looking thought.
I also believe 2015 trading was overly influenced by ETFs. As most know, ETFs are capitalization weighted indices, where the proverbial snowball gets bigger and bigger at the expense of everything else.
SEC data indicate 70% of the volume in the “typical stock” is the result of indexing, thus suggesting analytic work is not meaningful. There are now more ETFs than listed securities.
I reiterate that 2016 may be a transitional year where the typical stock outperforms the indices, the first such occurrence in about 4 years. My rational is simple. Stronger than expected growth that hampers profit margins of the largest capitalized growth companies via higher interest rates and labor costs.
Paraphrasing a commentary from JP Morgan, large cap growth is now only about 10 companies. If everyone owns a security, who is left to buy when selling commences?
A possible catalyst for greater than expected growth is increased bank lending. Based upon Federal Reserve data, bank loans grew by 8% in November and at a 7.8% rate over the last nine months. The average growth in bank loans from 2005-2014 was 4.9%. From 1960-2014, bank loans grew at an average rate of 5.5%
Bank lending is high powered money which increases monetary velocity (the turnover of money) which is stuck at a record low of less than 4x versus the historical average of 12x per annum according to the Chicago Fed.
The Chicago Fed hypothesized that if monetary velocity accelerated to its historical average, GDP would be over 12% given the massive amounts of excess bank reserves. As noted many times excess reserves are over $2.5 trillion versus the historical average of $1 to $2 billion.
Today is the last full trading day before the Christmas holiday and I am certain activity will further wane as the day progresses.
I would like to take this opportunity to wish all a Merry Christmas and Happy Holidays. I further would like to express my gratitude for everyone’s confidence and business, especially in a very trying year. It is greatly appreciated
I look forward to a prosperous 2016 for the only constant is change as in many ways today’s environment is similar to that of 2002-2003 when the individual security began to greatly outperform the indices.
Last night the foreign markets were up. London was up 1.84%, Paris up 1.87%, and Frankfurt up 1.71%. China was down 0.43%, Japan closed for a holiday and Hang Sang up 0.96%
The Dow should open little changed ahead of numerous economic reports including new home sales, durable goods orders and personal spending. The 10-year is off 3/32 to yield 2.25%.