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  • In Hotel QE, You Can Check In But You Can't Check Out [View article]
    Mark CFA-
    There are all the semantic gymnastics about "printing money" akin to Clinton's meaning of the word "is" which make my eyes glaze over.

    The issue is whether these QE programs will result in the economy getting showered with more credit than its output capacity - the classic too much money chasing not enough goods.

    But banks are content with the 0.25% they earn on the reserves, as at the QE-engineered suppressed rates it is not sufficient to compensate them for the credit risk i.e. return of the money and the possible reversion to the mean in rates.

    With the bank's balance sheet now repaired both because of the post-crisis changes in mark-to-market rules and decline of rates at the high end of the curve which helped them lightened their balance sheet of MBS by selling to the Fed at inflated prices, it will be a steeper yield curve which tapering is expected to bring about that will make it worth their while to convert their reserves into loans and that may actually help boost economic activity and inflation. OTOH, regulations regarding credit standards will dampen their capacity to lend.

    As a layman with just a rudimentary understanding of the voodoo of monetary policy, common sense indicates that the Fed continuing its QE is actually suppressing the pulse of the economy and may actually be contributing to frustrating their twin QE goals of higher employment and inflation.
    Nov 21, 2013. 07:14 PM | Likes Like |Link to Comment
  • Survey says: Online prices lower at Amazon than Wal-Mart [View news story]
    I think Wal-Mart is a wrong competitive benchmark for Amazon. It has a higher minimum order size for free shipping of $50 vs. Amazon's $35 (though it has free in-store pickup and returns for many items with no minimum order size). Plus, their customer service sucks.

    There are other emerging developments which might evolve to more effective push back at Amazon. For instance, American Express has teaming up with ShopRunner (which had a recent large investment from Alibaba) where Amex card holders get free 2-day 2-way shipping without order minimums. This should diminish the appeal of Amazon Prime regardless of the recent move by Amazon to raise the min order size to $35 for non-Prime free shipping in order to nudge shopper to sign up for Prime.

    Notable ShopRunner partners are ToysRus/BabiesRus, (owned by Walgreens), FTD, MacMall, NewEgg, TigerDirect, PetsMart, etc.

    Target too offers a not well publicized free shipping program to its in-house credit card (RedCard) account holders with no order minimums plus a 5% discount.
    Nov 18, 2013. 12:38 PM | 1 Like Like |Link to Comment
  • Losing Relative Market Share To Wal-Mart And Google [View article]
    Yes Paulo, good points in breaking down the aggregate GM.

    But nonetheless, concerning the issue of "price-match", I am still perplexed by the hollowness of the competitive response by big box B&M and Amazon bear's misguided expectation that it will help brake the relentless juggernaut from rolling over them.

    Only hope is Amazon stumbling from overreach and consumer fatigue with online commerce and will have nothing to do with the motley crew of competitors who seem so bafflingly inept.
    Nov 17, 2013. 11:55 PM | Likes Like |Link to Comment
  • Losing Relative Market Share To Wal-Mart And Google [View article]
    "..Walmart is running commercials on television that they will match pricing at Amazon. So is Target. "

    I don't understand the competitive strategy of price-match. As a customer, in an online shopping scenario, why would I bother with jumping through the hoops to get a price-match from Best Buy/Wal-Mart/Target... when with another click I could as well proceed to order from the place I already found has a better price?

    Only one I could think of would be the faster gratification and free store pickup regardless of order size and convenience of return to store.

    And why should it be a "price-match on demand"? That implies an admission that their prices may be higher, but they would grudgingly sell for less when shamed about it. Are they thinking this would promote a form of reverse show-rooming where shoppers research and decide on what to buy on Amazon and then schlep to their store to get it? Too much trouble for a shopper and moreover, the store might not carry that item.

    Better policy would be for them to loudly declare that they pro-actively monitor prices and sell at prices that match or are better than the competition. But in the event they goofed up in their pro-active price-match, will match it none the less when it is brought to their attention. This will be a policy with greater integrity, than the one now where the burden of vigilance is on the customer. I am sure they can work out an arrangement with their vendors where they receive concessions on their costs when they practice price-matching. Anyway, with their volume leverage, I am sure their wholesale costs are just as good as what Amazon enjoys. It is not as if the margins are paper-thin like the often talked about 1-2% of Amazon's. That is their operating margin after factoring in their aggressive investment expenses. Their Gross Margins are something like 28%, which might be slimmer than what these big box B&M’s are accustomed to, buy 1/2 a loaf is better than none.
    Nov 17, 2013. 07:08 PM | Likes Like |Link to Comment
  • Losing Relative Market Share To Wal-Mart And Google [View article]
    There are so many competitive advantages that WMT (and others) had that they have squandered. Even after WMT has shaken off the stupor with the belated focus on ecommerce, it's online execution still seems subpar, even compared to other middling online merchants, leave alone Amazon.

    I speak this from personal experience (just a single one, and perhaps isolated and not systemic), and I don't have any inclination to go through it again. Even though the price was a tad higher than at Amazon, and where I live I pay sales tax at both anyway, I ordered from for the imagined convenience of store pickup and return. It was anything but.

    The item was DOA (I don't fault walmart for that) and the return to store was an excruciating experience. Even while ordering this free shipping over $50 item, I was subjected to bait & switch shipping choices with exaggerated estimates of shipping times for free to home (or to store) to nudge me into paying a little extra for "expedited" shipping. And the email order acknowledgement came without a tracking hyperlink (just the number for me to copy and paste at ) is something I don't even see from even small online outfits.

    There was this Alibaba's Jack Ma keynote from a Credit Suisse investment conference earlier this year ( ) where he offered this insight that B&M retail should instead of thinking of their online venture as something to complement their B&M retail should instead think of their physical B&M presence as the on-ramp to serve their online business. Something I hope the big box execs heed.
    Nov 15, 2013. 04:09 PM | Likes Like |Link to Comment
  • Losing Relative Market Share To Wal-Mart And Google [View article]
    Google, Ebay, WMT, Best Buy, B&N, Target .. and the list can be long, coulda and shoulda prevented Amazon from becoming the juggernaut it has become.

    But for whatever reasons - misunderestimation of Bezos' drive, conflicted priorities, tepid execution etc., as of now, seems the train has left the station for them to catch up. As for Alibaba, the china connection may be an albatross to its perception as a trust worthy site for Americans to shop at.

    Anecdotally I can tell you, Amazon has become synonymous with online shopping at the best prices, whether the later part is in fact refutable with a price comparison shopping which not many I know do as diligently as I do.

    It is not the competition which may put the brakes on Amazon's prospects, but a change or plateauing of consumer taste for online shopping. Several people I know do online shopping as a last resort and even though I have been an early adopter, I now find the task tedious and sometimes much rather schlep to a mall or costco for a curated selection of items rather that the "eyes glazed-over" experience of wading through the overwhelming quantity of choices.
    Nov 15, 2013. 03:23 PM | Likes Like |Link to Comment
  • Losing Relative Market Share To Wal-Mart And Google [View article]
    André -
    Bond offering?
    Why not an AWS IPO?
    With all the deservedly upbeat assessment of its cloud business in the media and by analysts post their new product announcements this week in Vegas, why not IPO a small slice of AWS? Sure, they will have to disclose the gory financials, but they just might be quite decent both revenue and profit-wise.
    Nov 15, 2013. 03:02 PM | Likes Like |Link to Comment
  • Losing Relative Market Share To Wal-Mart And Google [View article]
    Yes byron. I too think the past two day ramp coinciding with their Las Vegas AWS conference has to do with the dawning realization that AWS is becoming an IT data services powerhouse putting that industry on the defensive in a way reminiscent of Border's & Circuit CIty in books and electronics.

    I think focusing on its retail business is a red herring which I think Bezos is gunning more for A/P free float than profits to allow it to finance its IT ambitions and support the revenue-metric judged stock price (which helps pays almost a $1billion of talent payroll) much like Buffett uses Berkshire's insurance premium float to finance its investment portfolio.
    Nov 15, 2013. 10:30 AM | 2 Likes Like |Link to Comment
  • Dividend Stocks Are Not A Bubble, But Many Technology High-Fliers Are Dangerously Overhyped [View article]
    Reg. AMZN, you write:
    "..At the end of the day, the goal for a business is not to grow revenues to the sky and be a disruptive force in as many industries as possible, but to make money for the shareholders. .."

    What a sweet, but quaint notion.
    There was this provocative article by Prof. Stephen Bainbridge, UCLA School of Law sometime ago "Who Owns the Corporation? Nobody" where he posited that we recognize the fact that the "Executive Cadre" are the "platonic guardians" of the hoi polloi shareholders and it is a legal fiction we cling to that shareholders are some sort of owners.

    And as for shareholders, they treat their fractional "ownership" as betting slips and the price of a stock at any given time is the result of gaming the market with the hope of profits by buying low and selling high. They deceive themselves if they think that they invest in the traditional sense of capitalism, that is, to put capital into a company with the idea that there will be a profitable return from the operation of that business.
    Nov 14, 2013. 10:24 AM | 1 Like Like |Link to Comment
  • More on the Amazon/USPS deal [View news story]
    "..Dan Rayburn has reported hearing from an Amazon insider the e-commerce giant ended Q3 with 15M+ Prime subs."

    However, I was reading here ( ) that Netflix with 30 million US subscribers accounts for 31.62% of US downstream internet traffic while Amazon video accounts for just 1.61%, which suggest that a mere 1.5 million Amazon Prime users are streaming its video, i.e just 10% of the estimated 15 million Prime customers find the streaming video service compelling enough.

    Or, perhaps could it be that the "15 million" figure is a dubious one?
    Nov 11, 2013. 01:03 PM | 1 Like Like |Link to Comment
  • Does It Make Sense To Implement The Taleb Portfolio? [View article]
    ".. I think that everyone is thinking the same thing.It seems like everyone is looking over their shoulder for that correction.."

    Yet the complacent Equity Put/Call Ratio now at 0.61 and which was even lower a little earlier seems to indicate that the bearish talk has been mostly talk and the players are not putting their money where their mouth.
    Nov 3, 2013. 08:52 AM | Likes Like |Link to Comment
  • Analyzing Amazon's Free Cash Flow Performance [View article]
    One other dynamic to keep an eye on is the A/P days. From an already stretched level, it has been getting progressively stretched yoy and at some point has to level off as vendors push back against such onerous terms. For example, A/P days were 72, 74, 76 days for 4Q10, 4Q11 & 4Q12 and in keeping with trend might be 78 days for 4Q13.

    Another thing is A/R levels will also rise as AWS books increasing large enterprise and government business.

    Also, even though you have addressed the matter of stock based compensation, I feel it is incorrect to maintain that ".. Amazon has been able to invest without, on a net basis, raising a dime of additional capital..", as I think SBC ought to be regarded as raising capital for financing payroll from an infatuated, sugar daddy market.

    Thank you for a cogent, dispassionate analysis of a complex and baffling beast of an enterprise.
    Nov 3, 2013. 08:32 AM | 3 Likes Like |Link to Comment
  • Does It Make Sense To Implement The Taleb Portfolio? [View article]
    When you say "real return bonds" do you mean TIPs?
    And did you buy these directly or as an ETF or mutual fund?
    Nov 2, 2013. 09:31 AM | Likes Like |Link to Comment
  • AWS Growth Potential And Margins Are Overestimated [View article]
    Are you referring to this article?

    AWS Fails The Price/Performance Test. But Does It Matter?
    Oct 30, 2013. 03:31 PM | Likes Like |Link to Comment
  • AWS Growth Potential And Margins Are Overestimated [View article]
    You forgot to add Verizon to the list...
    WSJ: New Verizon Cloud Offerings Take Aim at Amazon
    Oct 29, 2013. 07:53 PM | Likes Like |Link to Comment