Colorado State Rams MBA

Six Month Correlation Among iShares ETFs

Richard,

Have you attempted to use efficient frontier methodoly in constructing an ETF only portfolio? In theory, with the diversification that well chosen ETFs across multiple sectors would create, it would seem that the efficient frontier approach would work. What are your thoughts?

ETF Family Attributes: Vanguard

Has anyone attempted to use or heard of anyone trying to use the efficient frontier methodoloy with ETFs?

Amazon Prime: Continued Growth All But Guaranteed

Randy,

I was looking through the items I bought on eBay and noticed that back in 2004 I bought a Leaving Las Vegas movie soundtrack from you. It is funny how our paths have crossed on such seperate circumstances. From a contrarian standpoint, your thoughts and opinions could very well assist and influence eBay to becoming a stronger company.

Amazon Prime: Continued Growth All But Guaranteed

Randy,
Good points indeed but I think the answer lies somewhere in between. While eBay has a mature business model when it comes to their services, they also have Wall Street and shareholders to answer to which essentially means they cannot afford to operate completely autonomously thus increasing revenues via fee increases etc. I do agree with you that there needs to be a concentration on their core strategy rather than over diversifying themselves with anything that is not aligned to their business plan. There seems to be a bit of clarity for their strategic vision starting to develop with the new leadership in place. I will be interested to hear the new CEO outline how he will tactically employ action steps to attain his vision. This next earnings call will be quite interesting to hear and could very well be a tell tale sign of the future of this company.

Amazon Prime: Continued Growth All But Guaranteed

Randy,
Thank you for your reply. Let me begin with full disclosure. I do own shares of eBay. However, my investment perspective for this company is more for the longer term over the next 3-5 years not the next six months. With that being said, from a comparative standpoint, there are some similarities to Amazon and eBay but overall when comparing the complete business model these companies are quite different. Amazon has extensive overhead in the other portions of their business which constitutes a majority of their revenues and has only recently experimented with becoming a portal for web-sellers. eBay has essentially created a “Blue Ocean” in a previous non-existing business concept meaning that it has completely changed a process of buying on the internet and thus has paved the way for companies like Amazon among others to replicate.
Regarding the reference to gas savings from the previous poster, how long do you think this price will last with rising fuel costs? Since this is not a manufacturing company the only way they can potentially increase productivity would be through either additional modules to an ERP software system which could very well cost into the hundreds of millions or find a way to increase web traffic by offering a service as you reference that very well may be below actual costs so as to increase their market share. If the later is the case then this is not sustainable over the long term with Blockbuster being a prime example of market share tactics. Either way both are indicators of price increases to come. Regardless, I think it is only a matter of time before you will see prices rise since Amazon like eBay is but a mere cork in the ocean that will rise and fall with the tide of the economy.

Great dialogue…let’s keep it going!

Amazon Prime: Continued Growth All But Guaranteed

RRandy,
Thank you for your reply. Let me begin with full disclosure. I do own shares of eBay. However, my investment perspective for this company is more for the longer term over the next 3-5 years not the next six months. With that being said, from a comparative standpoint, there are some similarities to Amazon and eBay but overall when comparing the complete business model these companies are quite different. Amazon has extensive overhead in the other portions of their business which constitutes a majority of their revenues and has only recently experimented with becoming a portal for web-sellers. eBay has essentially created a “Blue Ocean” in a previous non-existing business concept meaning that it has completely changed a process of buying on the internet and thus has paved the way for companies like Amazon among others to replicate.
Regarding the reference to gas savings from the previous poster, how long do you think this price will last with rising fuel costs? Since this is not a manufacturing company the only way they can potentially increase productivity would be through either additional modules to an ERP software system which could very well cost into the hundreds of millions or find a way to increase web traffic by offering a service as you reference that very well may be below actual costs so as to increase their market share. If the later is the case then this is not sustainable over the long term with Blockbuster being a prime example of market share tactics. Either way both are indicators of price increases to come. Regardless, I think it is only a matter of time before you will see prices rise since Amazon like eBay is but a mere cork in the ocean that will rise and fall with the tide of the economy.

Great dialogue…let’s keep it going!

Amazon Prime: Continued Growth All But Guaranteed

Okay Randy let's begin with disclosers in your article. There is an obvious bias that permeates any of your blogs throughout and by failing to disclose how you were an eBay powerseller of which appears to be disgruntled now takes the term "poetic licensing" to a different level.

There are only three items worth addressing in your comments. The first suggesting that Amazon would not be expanding internationally if they weren't successful is purely a subjective comment at best. If there are no known numbers as to how much of an increase prime membership has increased, what metric is being used? An unquantified opinion is by no means a logically equitable argument.

Next, you mention you have seen a 5% increase from prime buyers but fail to put your numbers in perspective. I am sure you have heard the saying that when it comes to statistics it depends on how the numbers are put into context because the “numbers can lie.” What are your numbers for the year not just one quarter which statistically speaking could be an outlier and thus considered irrelevant when it comes to empirical studies?

Lastly, for the average buyer on eBay how many items need to be purchased before there is a breakeven point to even begin to justify paying a $79 membership fee. You realize that Costco has a $50 membership fee and offers many of their products with free shipping. It would appear to me that you have failed to realize that Amazon is using this fee as a shipping subsidy but fails to share this subsidy with its sellers. Is this another way for Amazon to pad the books with another form of revenue thus painting a rosier picture than the average investor realizes?