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  • My Take On Amazon.com's Q4 2014 Earnings [View article]
    Bezos is the father of the internet, and he's a deft great CEO with vision.
    There are few like him.

    But it really doesn't matter when considering investing in the stock. First of all there are real problems people are currently ignoring and have been ignoring for years. Paulo has a nice outline here, even if not comprehensive.
    But even besides that, the math doesn't work for AMZN to be a successful investment for anything longer than a short time period where you're really just speculating on near-term greater fool methodology. There's a point where any great story becomes a trading vehicle, and AMZN has been there for the past couple years, which is why it's performance was so bad last year. It's takes so little to derail the perfection which is required to make money in the stock for longer than a month.
    Jan 30, 2015. 03:12 PM | 3 Likes Like |Link to Comment
  • My Take On Amazon.com's Q4 2014 Earnings [View article]
    That's why I'm saying 1 day of covering, here's the breakdown:
    a) 8mm >> 4mm daily volume avg
    b) Don't forget about all the put options, which are effectively shorts, in the next 3 major expiration dates there's more than a day of volume.
    c) don't underestimate the speed at which hedgies cover when they wanna get rid of the pain, typically they spread the volume over an entire day, which is why AMZN's stock today (after the call options unloaded this morning from $350 to $341) is a straight ramp up.

    So by 4pm, all of those effects, yes the small-ish short interest but panicky in nature, will have evened out. Monday will flop around, but if AMZN doesn't find a bunch of new believers, it's going to be very slow going in the upwards direction, whereas anyone seeing this article and the comments will or just doing their own analysis on the 5 year growth projection at much lower growth and margin expectancies (that you MBAs) will realize AMZN is SEVERELY upside limited, and with a great big risk side. so after 4pm, you're really dealing with irrational buyers with no sense of risk-reward, and I'm already assuming those new buyers love Amazon's biz model, and are assuming 5% net margins (from neg to zero in 2014) which is far greater than Wal-mart achieves. It's going to be a very tough slog in 2015 for Amazon, but that's less than half of it, it's going to be an even tougher slog for those long the stock due to the bad risk-reward vs the time it would take Amazon to prove themselves worthy of the valuation. At this point, longs are not only assuming everything goes right with the biz model, but would also be assuming there is no garden-variety recessions in the next 3-5 years (5 years plus the 6 behind us would in fact be the longest by far spell of good times in modern memory). Essentially, buying AMZN on Monday is essentially betting 1999 happens, where retail investors come in and instead of buying Shake Shack and 5,000 other IPOs that would come out of the woodwork, would instead buy another $50-100bn of AMZN. so it really doesn't matter at this point if you believe in the AMZN story or not, it's a bad play, a pure speculation hot potato.
    Jan 30, 2015. 03:07 PM | 7 Likes Like |Link to Comment
  • My Take On Amazon.com's Q4 2014 Earnings [View article]
    We are in a labor-cost bubble right now, it will be interesting to see all the robotics investments return cruddy ROIs when the double-whammy of
    a) Lower volumes hits in the next consumer downturn
    b) Labor prices come way way down
    c) Electricity prices go way way up after the energy crash

    Probably the worst timing to be investing in robotics instead of humans. Think of labor as like baseball player contracts. When the yankees are winning and the banksters are rolling in 6-year fat bonuses, the seats are ridic expensive and this allows the Yanks to keep increasing salaries.
    but when the consumer is tapped out (1967-1980), the Yankees must make pay cuts to theose big contracts bc banksters aren't able to pay $5,000 per tix anymore. Same goes for all labor, it gets relatively cheaper vs the robots which is the best solution when labor is dear.
    Jan 30, 2015. 02:48 PM | 2 Likes Like |Link to Comment
  • My Take On Amazon.com's Q4 2014 Earnings [View article]
    No luck is required. There were a LOT of new AMZN shorts in the stock after Q3, so today until 4pm there will be a LOT of covering. What's interesting about your comment about professionals, is professional investors were the main short culprits, so they are the ones covering today. All that was required to set them off on the after-hours short-covering rampage was jamming the bid after the report came out, easy.

    A few things you're missing:
    1. Growth vs eps. Q4 shows if AMZN runs ship for eps, they sell less and growth becomes pedestrian. This means they don't have any real advantage anymore. (see 3 below).
    2. 15% or 6-16% growth in a huge bull economy market, isn't what you expect from a company you're already giving stock market credibility to besting Wal-Mart's industry-leading profit margins by DOUBLE (from zero in 2014), AND growing like a startup thus deserving benefit of doubt.
    Sure, when AMZN was growing 30% it made more sense (as in 2 years ago) to gamble that no recession would hit and take the rug out from underneath you on the risk side. But now its even sketchier, bc you have to press the "I believe" button again on the profitability assumption (yours), but also on revenue growth which is heavily decelerating as AMZN's advantages (see 3 below) have left the building, but in addition you ALSO have to now press the "I believe" button on 5 years of unfettered growth. By unfettered, implying no recession which would bring a "sell a $1 good for 99 cents" model to its knees especially since the next recession will be credit-based. AKA, AMZN can run negative cashflows and "invest" all it wants, but it requires people giving them money to do it when the shit hits the fan, and those two things don't mix. Just on these two points alone, you must have a lot of shorts yourself to justify even owning AMZN stock's flying carpet. I'd be interested in what names you're short.

    3. AMZN's advantage has run out, they don't have sales tax advantage which is why growth is now challenged as well as EPS growth (which was negative in spite of running the company for eps beat in the qtr). They also now don't have a warehouse advantage, as a) a huge amt of what they sell is now digital, electronics dotcoms still offer no taxation plus free shipping due to expensiveness of electronics, and large cheap items cost too much to ship so AMZN can only sell dollars (diapers) for 99 cents to generate loss-making revenue growth. The stock market finances these losses. The loss of advantage is pretty evident in:
    a) Media, as pointed out by this write-up, but also it's pretty obvious that when media becomes digital AMZN has no advantage cost-wise. This is why they must piss off ALL of their media suppliers by now competing with them. Sure sounds like an interesting "investment" (Prime video, Amazon book publishing, etc....) until you consider that every day now the media suppliers are trying to figure out how to align with AMZN's competitors to remove their inventory from AMZN's clutches. That's not good for AMZN's marketplace business if people first think "Google Play" or "App Store" when they want to buy media.
    b) AMZN doesn't have a choice in these "investments". If it doesn't start Prime Video, it will lose all its video sales growth. If it doesn't start Publishing, it will lose all its growth in book sales. If it doesn't invent its own diaper, the margins on heavy but cheap items like diapers (and shoes) will continue to rot the income statement, and lower sales growth will indirectly hurt their highest-margin Marketplace biz. So now that the sales tax advantage is removed, AMZN must "invest" which is really another word for trying to survive by imitating the Apple Store model, where they still sell things via online but now offer a showroom. They must also "invest" in faster shipping, bc they've lose their advantage vs physical stores, which already have the model AMZN is "investing" in, namely a hub-spoke distribution network with "showroom" stores.

    Paulo's article will have more effect tomorrow after the short-covering by the VERY large PROFESSIONAL INSTITUTIONS stop their panic short covering today. Oh, and since the qtr really wasn't good, for real, those shorts will come back as soon as they feel like their business models aren't in jeopardy from runaway-herd buying like today.

    The non-recessionary target for AMZN once the market realizes mgt can only run each qtr for either EPS performance OR growth but never both at the same time, is immediately about $150. And the recessionary target takes you to half that price again, so below $80. When the 2007-2015 high-to-high period is looked back in history, it will be ironic that after 6 or 7 straight year of bull economy, AMZN with higher revenues was left in no better shape than they were in 2009 and 2001 when their very existence was challenged. And another thing you're forgetting, is all this bull economy "investing" doesn't come cheap, the company is being bet via the balance sheet. So while Bezos should be admired for his bravado and risk-taking which is truly an asset, that rose also comes with a thorn when a recession hits. He will be forced to make money and/or generate FCF to finance maintaining his competitive stance vs encroaching competition (vs upcoming things like e-ink competitive tablet by Apple for reading in sunlight which would seriously damage Amazon's book biz but also their online store in its entirety, as well as improved retail models which are adapting to the new online+showroom stores model which Apple already has perfected, and the slow but sure coming of niche online specialty shops like B&H and ABT and Newegg in electronics).


    Rather well done Paulo, you nailed this one. I'd edit your paragraph about Fire Phone to calculate the EPS wiggle room Amazon mgt created in Q3 by taking the write off. Assuming they slow-sell the firephone for its original cost, say $350, that's $170 / 480mm shares * (1 - 30% tax rate) = 25 cents of fudge room for AMZN to improve eps. Most of this would've been taken in Q4 as that's the easiest qtr for AMZN to unload the firephone inventory. So when you compare AMZN's eps beat, and assume a worst-case scenario of selling ALL of the written down inventory at original cost, that's a potential 25 cents of artificial boost to Q4 eps "beat".

    It's also worth mentioning that forex is really a zero-sum game in the end. While you might lose money owning euros for a quarter, Americans and other regions with stronger relative currency also get the benefit of stronger dollars. So it's disingenious to blame forex for lack of growth. You win some, you lose some. But when you "win some" you don't bother to mention forex benefits in the first paragraph of your earnings statement.
    Jan 30, 2015. 02:18 PM | 10 Likes Like |Link to Comment
  • Apple: Winning The Profit Battle, Losing The Smartphone War [View article]
    It has not equalized, or else app makers would be porting to Android before iOS. The opposite is true. In fact, as iPhone continues to gain share amongst people who have phones that can actually function properly, that will result in even heavier bias towards developing for iOS first and Android second, which will further the difference in the quality and usage of the phones. Feedback loop. Android has only established a beachhead, it is common for there to be a #2. Look at Apple vs. Microsoft in computers, or Microsoft vs. Netscape in browsers. But don't underestimate the power of the monopoly before it's actually called a monopoly. Apple isn't even there yet, it's still early in their dominance. It would be perhaps a different story if Apple were asleep at the wheel, but they are busy innovating with REAL R&D, introducing new concepts which are actually adopted (Siri, Facetime, Apple Pay), and perhaps most importantly paying attention to costs while producing the best phones on the market at each pricepoint.

    I think you should pay attention to what Apple says about low-end phones, they never say they won't enter that part of the market, they say they won't produce a cruddy phone simply to match prices with low-end phones that are NOT good phones. Ever use a cheap chinese cotton swab? they cheat you on the cotton, and it hurts your ear. Sure, you can buy them for half the price of Q-tips, but if they injure your ear, it really doesn't matter if you got them for free, does it?
    Jan 29, 2015. 09:50 PM | Likes Like |Link to Comment
  • Apple: Winning The Profit Battle, Losing The Smartphone War [View article]
    You're missing a huge concept in computing, which is networking effect. iOS is the new Windows OS, and as one person in your family/company/country uses it, its more likely another will use same device. I shall use Facetime as a rudimentary example.

    iPhones only SEEM like they get less battery life sometimes, bc iPhone users use their phone more than Android users. This is bc Android phones are not fun to use, their apps are inferior to the same apps on iOS, and the phones are quirky, ESPECIALLY at the low end, whereas Apple's low end phones are excellent.

    Predicted growth for Apple's March qtr is around 20%. This compares to say Amazon's 14% growth in the Xmas qtr. So that is testament that your comment about China sales being stacked in the 4th qtr and therefore aiding that qtr unjustly, while true, actually doesn't matter. Ok, so use an average of 25% growth. That still means it's not just how China was stacked in the Xmas qtr. What's funny is, iPhones are actually taking market share in Android's low-price wheelhouse. The high end was already owned by Apple prior to 6 and 6plus.

    Another thing you should consider, is that Apple and Android have completely different models. Apple controls their entire ecosystem, which everyone tauts as a bad thing, but in reality it allows them to innovate easier in the important areas to innovate. Facetime, Siri, Finger ID, and now Apple Pay are all best-in-class innovations that didn't become standard until Apple released their version. And if you think about it, these types of apps solidify the Apple network to great detriment of Android network. iPhone users have a tremendous advantage over Android users, and Android users don't understand this until they move onto the leading iOS platform, and that's why they are sticky and Android customers are not (as Apple just proved in the most recent qtr).

    You will be proved dead wrong here over time, and a short time at that. You're missing the forest for the trees here, Apple is a monopoly just like Microsoft before it in desktops. Android's share in terms of use, AND dollars will decrease as time goes by. At this point, the fluctuations won't even go Android's way for even brief periods of time.

    Lastly, but most importantly, you forget that Apple is not only the quality leader, but also the quantity leader as Android OEMs are split up and THIS is the reason why Apple is the low-cost-provider of smartphones in the world. It's VERY impossible to beat a monopoly, but it's even more impossible when that monopoly happens to give its customers the best value AND the best price. compare any Android you like, to a similarly-functional iPhone, and the price of the Android is not cheaper at any level Apple sells.

    Question: Do YOU own a low end Android priced at sub $300 price and use it every day? I already know the answer, you don't. You don't bc those phones are not good, and since component prices and technology innovation aren't growing THAT quickly, you won't for a very long time, and by then, Apple will own that market too with a phone that's cheaper AND better than the Android model.
    Jan 29, 2015. 09:41 PM | 1 Like Like |Link to Comment
  • Tesla China Problem - Elon Musk Admits Sales Are Down [View article]
    Actually, it was:

    "Things were a little weaker in China, but just bc of, I think, some communications issues that we need to fix-- most importantly around charging. People have the misperception that charging is difficult in China, but... ... we feel we've solved all the charging issues. But we gotta work to correct that misperception. ...China was sorta unexpectedly weak in the 4th qtr. ...still we had more than enough demand to make up for the reduced demand in China, and we'll fix the China issues, I think, and be in pretty good shape probably towards the middle of the year"

    I'm not sure which Detroit Auto Show (N.A. Auto show) you're quoting, but I would hope you're either paraphrasing or your quotes come from some other back-room talk he gave that wasn't filmed like the one you can watch on YouTube.
    Jan 26, 2015. 04:16 PM | 1 Like Like |Link to Comment
  • Free Windows 10 Upgrade Can Impact Microsoft And The PC Market [View article]
    Your experience is so far from mine, consider yourself lucky. OR, maybe you're an IT professional or close to it.

    Windows has been out to lunch for years, but it's SUCH a strong monopoly, that people just accept less. So tell me, what about Windows 7, 8, and 10 make it a better computer for you vs. say the XP days? For me, not one thing, in fact, the changes to Office led me to leave that system, and the changes to Windows have taken me from all-microsoft not long ago, to having one "token" MS computer around just bc I have a single piece of software that refuses to run on anything else. Actually, it might work on Apple's computers, but I haven't had time to try them yet for work purposes.

    Microsoft is a follower at this point, and not a very good one. Putting Office online, only makes me wonder why I'm stricken to Office in the first place if I'm a new customer.

    Microsoft is the new IBM, but what's nice is IBM has done rather well in the past 20 years. but I highly doubt the company of tomorrow will be standardizing on MS computers, and the consumer has already loaded up the truck and is pulling away daily. You can see this in Chromebook and Mac sales.
    Jan 26, 2015. 02:52 PM | Likes Like |Link to Comment
  • Natural Gas Fundamentals Are Now Compatible With Higher Prices [View article]
    I think what you're forgetting is price for NG has fwd assumptions. So last year inventories were low, and a very very cold winter was expected this winter. So this winter we are improving on niether, so NG prices haven't quite gone to "acceptance" level yet. That should come as the winter comes to a final close in March. The swinging pantry door eventually goes shut, but the overshoots can be tremendous and misleading. (is that door coming at me at a slowing damping rate, or is someone behind it accelerating it fwd??)

    Due to energy prices fast recovery in early 2009, I think the same has been expected this time around. It will take longer for those dreams to die this time around.

    Changes in supply don't come about without unexpected occurances. We haven't really had many of those surprises. Expect them.

    Weather is an awful way to try and bet on NG prices. I wouldn't pay attention to 15 day forecasts, as in the grand scheme of things they are entirely irrelevant.
    If February is 5 degrees above normal, what does it matter if January is 3 degrees below normal? And no one has been able to predict weather beyond that measured in days, this is a harder job than guessing stock market direction in my humble opinion.

    NG prices are dependent on a very large set of things, none of which are talked about here. What about coal, solar, wind, nuclear, wars, political changes, OPEC, delivery prices, balance sheets of the players? Not a complete list either, haven't even gotten into local market effects.

    $3.00 plus or minus $0.50 just doesn't look like an industry-changing clearance price to me. I think we're closer in oil prices, and we likely aren't there yet either, in either price OR timing.
    Jan 26, 2015. 02:27 PM | 2 Likes Like |Link to Comment
  • Free Windows 10 Upgrade Can Impact Microsoft And The PC Market [View article]
    Never upgraded anything in electronics without big problems, so if Windows 10 follows the typical cycle, downloading it will screw every Windows 7 and 8 owner, rendering their computers "UNWORKABLE", such that they have to buy a new one. But guess what? People will continue to buy MS computers, bc they are so scared they won't have Office if they get an ASUS Chromebox or an Apple computer. People are sheep, and Microsoft takes advantage of this, the same way IBM does in enterprise software.

    So while MS SHOULD have cruddy performance coming their way thanks to bad OSs and even more cumbersome upgrades, just like people keep electing Dumbocrats and Republitards and expecting something better-- Microsoft will continue to sack the wallets of people worldwide, and the sheeple are too scared to do anything about it.

    That's what you're missing.
    Jan 23, 2015. 03:10 PM | Likes Like |Link to Comment
  • Amazon.com Sees Used Diapers In More Ways Than One [View article]
    There's really no need, in books tv shows movies songs and video games Amazon no longer has an advantage bc they are all digital, and in electronics Amazon charges taxes whereas most 'google shopping' merchants do not. So you only need to go to Amazon once to get their best price, then you simply buy from the site offering free shipping and same/lower price, and with a gaurantee via Paypal or Google Checkout, and you end up with the best price all for about a minute of extra time simply to do the search. Once you have Paypal or Google Checkout set up, the checkout is actually faster than Amazon too, bc they don't try to hide the sales tax til the very last page like Amazon sneakily does. Haven't bought much from Amazon in over a year-- ABT, B&H, Macmall Newegg, iTunes or Google PLay for most everything. Either that or you're headed over to Dollar Tree or Home Depot.
    Jan 23, 2015. 02:48 PM | 2 Likes Like |Link to Comment
  • The Incredible Shrinking Tesla Disclosure [View article]
    I'd be interested in seeing the link to the Germany 12k prediction by Musk from 2013.

    Technically, Toyota entered a partnership with Tesla, and DID use their technology.
    Jan 15, 2015. 11:02 AM | Likes Like |Link to Comment
  • The Incredible Shrinking Tesla Disclosure [View article]
    Don't forget Porsche. What was their annual sales and profitability for Volkswagen last year? (as compared to Tesla's 35k-ish)
    Jan 15, 2015. 10:57 AM | Likes Like |Link to Comment
  • The Incredible Shrinking Tesla Disclosure [View article]
    My experience is mgt of most all companies change reported metrics all the time, and almost without exception its changed to put the company in a more favorable light. This is nothing new. At least, not in the past 15 years anyway.
    Jan 15, 2015. 10:53 AM | 1 Like Like |Link to Comment
  • Amazon.com Sees Used Diapers In More Ways Than One [View article]
    Google shopping is not a joke at all, you can get cheaper electronics there vs AMZN due to shipping, taxes, and better customer service, all without any hassle thanks to Paypal and Google Wallet checkouts. Have you ever used ABT or B&H or Newegg?
    eBay is growing, so not sure where your data comes from.
    As for Wal-mart, they are in inning 1 of price matching ever since the playing field was levelled in the past 24 months. AMZN got a 15 year head start on using the tax issue to base its entire model, and its inventory turns advantage is becoming a non-advantage thanks to digital goods (books, movies, etc..) as well as having to build out more shipping centers and then copying the Apple model by creating actual stores. That's a cashflow problem.

    and it's irreLeVant btw.
    Jan 13, 2015. 03:38 PM | 1 Like Like |Link to Comment
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