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Amazon over valued (draft)

https://seekingalpha.com/article/4092561-amazons-stock-looks-headed-waterfall#alt1

The Amazon Con: Bulls May Be Crying A River One Of These Days

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126 comments

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About: Amazon.com, Inc. (AMZN), COST, HD, TGT

DoctoRx

Special situations, growth at reasonable price, value, micro-cap

Summary

AMZN is a stock one has to believe in to justify its price, yet current quarter results are improbably bad once again.

MD: Anyone who has used Amazon’s services is likely to be a believer. What the richest person in the world is a big holder in the company, doesn’t that say something about “his” belief in the company?

Its acquisition of Whole Foods is a case of a 200X P/E stock buying a 30X P/E stock, showing the former stock is overvalued.

The entire move from mail order (or e-mail order) delivery to stores was done 90 years ago, but there is no first-mover advantage now for AMZN.

MD: Now that is abject nonsense. Amazon began by making it easier and more efficient for buyers to find sellers and vice versa. It was just a “classified advertising” implementation on the WWW … and it wasn’t the only one. Bezos sees business as three days: day one it develops; day two it rides the wave; day three it dies. Bezos will never leave day one if he can help it.

As competition ramps in e-commerce, with big box chains with the advantage of pick up in store, AMZN may see worsening losses in its core retail division.

MD: Pretty amazing someone can see the big box chains with the advantage. “Pick up in store” is no enticement for me. Save me the trip is my enticement. I think there is a middle ground. Deliver to my nearby convenience store and I’ll pick up there … and enjoy lower shipping cost of course.

Thus, while timing is impossible and there are no certainties, risk-reward for AMZN looks poor, while many other stocks trade normally and are therefore priced for positive returns.

MD: This guy would have thought Standard Oil looked poor … and of course Microsoft and Apple and Oracle (both of which were on the ropes at one time) and Google.

Introduction – rationale for another bearish article

When the facts change, I change my mind (per Keynes). But when the facts get stronger, I carry on with a bullish or bearish thesis, and that’s the case in my humble opinion with Amazon.com’s (AMZN) stock price. This article happens to propound a bearish hypothesis, but as an example of sticking with a bullish hypothesis that is not working, on September 15, 2015, Seeking Alpha published my final Apple (AAPL) article. The stock was going nowhere, hanging around a pitiful $100, yet the title of the article was a straightforward:

Mr. Market Errs: Apple Is Unlikely To Be Stopped In Its Rise To Further Heights

In the bullet points, I argued that:

  • … facts suggest that the iPhone (and therefore Apple) may in fact be on the verge of a major, historic victory.
  • Even if that does not occur, AAPL remains an undervalued stock with strong total return potential for patient investors.”

As it happened, 8 months later, AAPL was down another 10%, and as late as July, it was below $100: but look at it now. So – I was early but (so far) basically correct.

MD: I wouldn’t touch Apple with a long stick. How in the world can they compete with a Linux based system? How can they compete with Open Source? They have to keep innovating … or they are killed by commodity providers.

I look at AMZN that way, in reverse. Timing things like this even to the year is impossible. (And, of course, sometimes I am simply wrong.)

MD: I wonder what he thinks about BitCoin. That who concept is laughably wrong on its face … the the price of a BitCoin continues to go up exponentially.

Next, a few introductory clarifications. First, the “con” referred to in the article is about the stock price, more specifically the resurrection of the 1997-2000 con game that eyeballs, or in AMZN’s case, eyeballs plus sales at near-zero profit margins, mattered to the exclusion of earnings.

MD: If you pour all your earnings into building infrastructure, are you creating a worthless company? If you expense everything instead of capitalizing it, are you creating a worthless company? If you only had to look at earnings, a financial statement would be just one line instead of may pages and many many lines.

I’ll end my comments here. This guy is going nowhere! You can read the rest of the article by going to the link at the top … repeated here.

https://seekingalpha.com/article/4092561-amazons-stock-looks-headed-waterfall#alt1

Posted on

What is money?

WHAT IS MONEY?

Definition: Money is an “in-process promise to complete a trade over time and space”

Proof:

Examine trade: (1) Negotiation; (2) Promise to deliver; (3) Delivery.

In simple barter exchange in the “here-and-now”, (2) and (3) happen simultaneously, on the spot. Any exchange of “value for value” (e.g.corn for piglets;  gold or gold backed exchange for other stuff; etc.) is in this category and does not involve money.

Money enables simple barter exchange over time and space. Thus, money is obviously “a promise to deliver”. It can be nothing else. It doesn’t exist before the promise is made nor after delivery is made”.

Money is only created by traders (like you and me buying things over time). It is not created by banks nor the governments they institute. In fact, “all” governments are just traders. But unlike you and me, they never deliver on their trading promises which create money. They just roll them over. And that is DEFAULT. And purposeful DEFAULT is COUNTERFEITING.

Banks sustain themselves on tribute collections (and all your tax payments go to the banks as tribute collections). Governments sustain themselves on counterfeiting. You give them sustenance through the INFLATION their counterfeiting generates.

We have never had a proper Medium of Exchange (MOE) process. But it is trivial to institute one. And anyone, or any group of traders, can create a “proper” MOE process. And multiple processes can co-exist and compete (by minimizing costs).

DESCRIPTION OF A PROPER Medium of Exchange (MOE) PROCESS:

The trader sees clear to make a trade over time and space and chooses to create “money” to effect the trade. For example, you or I choose to trade 360 monthly payments for a house, which we can take possession of and live in now and over the whole term of the promise and beyond.

The trader gets his promise “certified” (now bankers make you come hat-in-hand begging for what they fictitiously call a loan “of their capital” … that’s the scam). “Certification” means the trader’s identity and the terms of his promise are recorded and performance on the promise are transparently displayed to all lookers.

The certificates … first in the form of a simple ledger entry that creates the money and then transfers it to the seller … then circulate as the most common object in “virtually” every simple barter exchange. We know it as money (it may be a ledger entry; coin; or currency … but only one at a time).

The dollars we use everyday come from a “nearly proper” MOE process run by the banks and their “association”, the Federal Reserve. It has a leakage goal (i.e. INFLATION) of 2% and delivers 4% INFLATION on average. It gives its members privilege to create 10x as much money as they have … earning 4%x10 or 40% annual return … doubling “their” money in less than two years. Thus “a capitalist is simply two years”.

“A proper” process monitors performance on the promise (e.g.: did the trader make his monthly payment). If he did, all is well in paradise. If he didn’t, the process “immediately” makes an INTEREST collection of an amount equal to his DEFAULT … reclaiming the money as if he paid it back.  This guarantees perpetual perfect balance of the supply and demand for the money … it guarantees perpetual zero INFLATION.

The operative relation is: INFLATION = DEFAULT – INTEREST = zero.

Who pays the interest? Non-responsible traders do.  An existing well known model is the Mutual Casualty Insurance Company. Here INCOME = PREMIUMS – CLAIMS = zero. The money is made on the investment income and works to reduce premiums actuarially. Another distinction with the money process is that “all” members of the insurance group pay PREMIUMS. With a proper MOE process, responsible traders  (i.e. traders like you and me who never DEFAULT) experience zero INTEREST load over the duration of their promise.

Note: For any given money creating trade, no money exists “before” the trading promise is certified, nor “after” final delivery (delivery returning the money which is then destroyed). And since “all” money is created in this way, “all” money in circulation is an “in-process promise to complete a trade over time and space”.

With a “proper” MOE process, banks are “competed” out of existence. A “proper” MOE process could be instituted right now (unless the governments they institute outlaw it) and banks would have to change or go out of business. And since INFLATION is perpetually zero, the governments “must” sustain themselves only on tax and fee collections. They cannot counterfeit. Irresponsible traders are drummed out of the marketplace.

What could be simpler and more obvious?

What hoax could be larger than that leveled on virtually all of us by the banks and the governments they institute?

Why did WTC7 fall down?