Sometimes people and investors just seem to get lost in the hype and spin. Amazon specializes in hype and not profits! When the stock of a company that earns no profit trades above $350 a share we are there. The combination of a market disconnected with Main Street coupled with a Federal Reserve that is afraid to taper because it will show just how weak the economy is plays a massive role in this story. Like Tesla Motors the stock of Amazon defies logic, but has been propelled forward by an environment of cheap and easy money. Add to this blowing shorts out of the market and momentum trading and you arrive at a bubble ready to burst.
For years Wal-Mart took the heat for being a monster that raced across America destroying small businesses and our way of life. Wal-Mart sold cheap China make goods that lowered the cost of living with the hidden cost of ending thousands of jobs at distribution companies and manufactures that were unable to compete. Now Amazon comes at us with a image packaged as much friendlier and sporting a logo on their boxes that comes across almost as a smiley face with claims they are a kinder disruption. Great self-promotion can only mask the truth for so long. Beware Amazon is far from transparent.
It is hard to see why Amazon has any fans when you consider how they
abuse and exploit the brick and mortar stores that line streets
throughout America. These are the stores that employ our family members,
support little league teams in the community, and add value to our
lives. These stores build or lease space, buy supplies from the other
local businesses, and pay both sales and real-estate taxes. While Amazon sends out the signal that their customers are smart, forward thinking, and upscale they exploit America and have an evil side, this is a side we should and must recognize.
Putting the spin and hype aside more signs continue to revel that Amazon is not your friend but still the Juggernaut rolls on. Three more signs that Amazon is not your friend occurred in October 2013. First more labor problems continue in Germany. The other two highlighted with a positive spin in a press conference where Bezos talked about 1,382 newly deployed Kiva robots, in Amazon’s warehouses
a sign of future intentions to limit "job creation"? Add to this Bezos referring to Amazon's victory over IBM in a legal battle to service the cloud computing needs of the
Central Intelligence Agency. We can only assume this has to be in relationship to Amazon's role in collecting more data and spying on the American people.
Words like "evolving" are used to describe Amazon's business model, a better word might be undefined. Regardless Amazon rolls on. Pointing towards gaining synergy as they continue to buy companies, some unproven. The revenues from these companies add to their growth but still no profits exist. Does this growth mask a weakness at their core? If they are indeed a distribution company their stock should be trading at around 18 times earnings. When you look for a P/E ratio on Amazon you find NA because the company makes no money. Another key weakness is that new competition can now cheaply and easily replicate the most profitable parts of Amazon and cherry pick much of their future potential. The bigger they are, the harder they fall, it is only a question of time.
Footnote; Other related articles may be
found in my blog archive, thanks for reading, your comments are
encouraged. Below are links to a few articles related to this subject,
http://brucewilds.blogspot.com/2013/05/tesla-motors-and-elon-musk.html
http://brucewilds.blogspot.com/2013/11/usps-and-amazon-another-unholy-alliance.html
The following MarketWatch article may also be of interest,
http://www.marketwatch.com/story/10-things-amazon-wont-tell-you-2012-06-26
Good points. Another scary aspect of Amazon's growing power is its ability to censor. There was the recent CTV article (http://www.ctvnews.ca/business/amazon-called-on-to-pull-books-denying-holocaust-glorifying-rape-and-incest-1.1512570), as well as the fact that Bezos now owns a major newspaper. When he bought the Washington Post, he told the employees not to worry about censorship, because he lives in the other Washington.
ReplyDeleteDavid, many thanks for mentioning the recent purchase of the Washington Post by Mr. Bezos. This "One Man Band" does indeed appear to be turning up the volume on a tune called "Political Connections." I find the Amazon cloud and NSA connection very troubling.
DeleteI saw your comment and link to your blog this morning on a MarketWatch.com story about Amazon, whence I arrived here. I no longer claim to understand much about how the market values various companies, the latest perplexer being Twitter's IPO. Ful disclosure: I do not buy from Amazon, nor do I tweet or even know how to tweet. But then, I'm more of a 'socialist networker' and less of a 'social networker' :)
ReplyDeleteGood day sir, socialist networker is an interesting term. I tend to think we can all connect on different levels. While an economic conservative I often find that on social issues I lean towards more liberal views. Years ago I started out very "socialistic" but found that I was frustrated by those who failed to even attempt to carry any of our burdens. I welcome your views.
ReplyDeleteSmith's Invisible Hand at work. If Amazon didn't offer what folks wanted at great prices, they would fold. Their business model of using distribution centers that reach most of America's population makes sense. I love small, independent businesses, but I also enjoy saving hard-earned money on my purchases. Yeah, I think WalMart makes sense, too. As you know, many types of businesses have become outdated and then disappeared over that past fifty years. Simple economics- people appreciate convenience, a great selection, and a bargain.
ReplyDeleteI've never actually shopped at Amazon, nor plan to. What you may consider a bargain or somewhere near, you're just paying a little more than msrp. Most businesses do not sell things for what they are actually worth, they include business costs in that price. Even amazon does it. All though, the reason you can get it so cheap is also what they do with your data they constantly collect. But if you only care about price and catching a bargain and care not at all about who has all your cc and bank account information Amazon is the place for you.
Delete