(The future of fashion? Wikipedia, MS Paint)
We know that retailers are vulnerable to Amazon (AMZN), because Amazon has economies of scale, interesting vision, operational prowess, machine learning, an innovative culture, and a history of upending the way consumers buy and interact with products.
So it's not at all surprising that news of Amazon Prime Wardrobe, a revamped effort to resolve the longstanding issue that you can't try on clothes online, has been accompanied by a drop in apparel stocks.
From SA's Breaking News item:
The leading decliners off the news are Xcel Brands (XELB -3.6%), Perry Ellis International (PERY -3.3%), Columbia Sportswear (COLM -3.5%), G-III Apparel (GIII -3.1%), V.F. Corporation (VFC -3.3%), Ascena Retail group (ASNA -7%), Tailored Brands (TLRD -7.8%), Tilly's (TLYS -5.2%) and J.C. Penney (JCP -5.3%).
What segment of the economy could Amazon enter that would not cause incumbents to rethink their strategies and positions? My first guess was biotechnology, because it's too complicated. Gold mining also came to mind. At some point we won't have this type of reaction to Amazon news, whether because Amazon reaches the limits of its powers or because there's nothing left for it to take over.
The Oil Narrative
(Don't forget about me. Wikipedia)
Bull markets come with credible stories. Two stories have a lot of bull market explanatory power: Infrastructure, and innovation.
In mid-2017, innovation is the dominant story. Amid Amazon's Whole Foods (WFM) acquisition, there's a seeming large-scale media narrative focus on tech stocks and the potential for future growth born of Silicon Valley innovation. Even the skeptical reactions to that story reinforce the mindset that innovation, and by extension the tech sector, is the thing to watch.
But let's not forget our old friend oil, which as recently as a few years ago made a much better case as primary driver of investor sentiment and behavior. Oil is a primary vector of infrastructure stories. We build and use infrastructure to extract oil, and we use oil to build infrastructure. A rising oil price can add momentum to an infrastructure story. It did for a good post-crisis stretch.
But like the true economies they overlay, stories can shift. The relatively high oil prices leading up to the late 2014 crash supported industrial activity that later proved unviable at lower prices, helping oil take down corporate profits and stock prices along with it. Stocks may not be vulnerable in quite the same way today. Nevertheless, oil can quickly recapture investors' imaginations. Today, crude hit lows last seen in November. Just something to keep an eye on.
See also: Iron ore forecast in low $40s by Citi analysts as supply keeps growing, Caterpillar's global machine sales add 8%, gaining momentum, Fed's Evans wants to wait until December before considering another rate hike, Total to move forward with Iranian gas project, commits initial $1B.
- Instagram Stories hits 250M daily users; Snap -2.9%
- Sprint jumps 3.2% on report of T-Mobile merger prep
- Douglas Kass (@DougKass) has some pessimistic ideas about Disney's (NYSE:DIS) EPS growth rate.
- portfolio turbines (@BorisB2) observes that there's not much of a party going on in restaurants.
- Ryan Tate (@ryantate) shares an article about what he calls Apple's "internal secret police from repressive US spy agencies."
- Steven Russolillo (@srussolillo) compares iPhones (sales) to Barbie dolls (sales).
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.