Thoughts on 2015 – A Few Surprises

Thanks for reading this blog this year.  

Here is our bullish case for 2016, and here is the biggest worry headed into the last two weeks of 2015, which hasn’t really materialized.

We’ll be out with earnings-related blog posts over the holidays.

Some thoughts on 2015 – what really surprised: 

  • As of Christmas Eve, the SP 500 and the Barclay’s Aggregate are both flat on the year. Hard to believe we see another year of this in 2016.
  • Coal stocks were decimated. Peabody (BTU) traded as high as $80 in 2008. We bought some for clients between $15 – $20 in 2014. Sold at $5. Luckily, it was the only coal stock purchased. The decline in natural gas and the emphasis on climate change all conspired to destroy the sector. It reminded me of tobacco under the Clinton Administration. If the government wants to make life difficult for you, the sector is a short. Tobacco stocks recovered after the year 2000. Doubt that coal ever will.
  • Is Amazon the greatest business model of the 21st Century ? It seemed like e-commerce, particularly Amazon (AMZN), hit an inflection point this fall as a total of retail sales. I was shocked at the damage to Wal_mart (WMT), Macy’s, (M), Nordstrom’s, (JWN) and it continued this week with Bed, Bath (BBBY). Sure some of the blame can be put on the weather, but you would think falling gas prices would offset some of that. Outside of Nike (NKE), Costco (COST), and Home Depot (HD), nothing retail-related seems impervious to the Amazon model.
  • Growth really outperformed Value this year. Depending on the date, the spread was anywhere from 600 – 900 bp’s of relative performance. FANG went a long way here, Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOGL). I wonder how Growth did ex-FANG ?
  • Will the electric car “disrupt” the Energy and Auto business ? Per the IEA, gasoline distillation accounts for 50% of the demand for crude oil. Does anybody reading this think we will see fewer electric cars or hybrids in the next 10 years ? There is too much capacity in the auto business, and most of it the traditional combustion engine. I wonder what a barrel of crude oil is worth assuming not a gallon of gasoline is ever sold again. Sounds ridiculous, but that is your base case for crude (I’m guessing).
  • Uber – started using the service this year. Another great disruptor. Brilliant idea. I was listening to a venture capitalist on CNBC one day and he said that with Uber and Lyft, a driver can drive 5 am to 9 am in the morning, and with the demand for same-day delivery exploding for retailers, grocers, and even Amazon’s 2-hour delivery (cars are starting to pop up in Chicago with the Amazon signs tacked to the driver door) the same entrepreneur can deliver packages from 9 am to 3 – 4 pm, and then go back to driving for Uber / Lyft through evening rush hour, and make a nice living I chat up the Uber drivers up all the time – some do it full-time, some do it part-time. Hard to say if that is being picked up in the employment numbers. Anyone with a car is now an entrepreneur and their own businessman/woman.

“Eventually all things merge into one, and a river runs through it”. (From the movie, “A River Runs Through it”)

Have a wonderful Christmas and New Year.




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