A very good trader friend of mine executed his short position in AMZN today at 206.07. He
shared some of his beliefs/opinions with me on taking such a position. Jotting down here
for everyone's enjoyment:
- the fall in earnings and negative free cash flows- after backing out capital
expenditures and changes in short term liabilities- should be a concern for investors.
- recent profit decline eliminates it as a long-candidate in a lot of momentum
- such parabolic rise is generally met with a catastrophic fall later
- reported earnings gains of 15% is a radical departure from the expected-50% growth
- cash flow problems can not be ignored as an exception because Amazon is actually
showing declining profitability.
- Amazon's profit declined 33% last quarter while revenues jumped 36%: the profit decline
can not be taken lightely as WS pumps make one believe
- free cash flow that is almost entirely made up of increases in short term liabilities
implies lower multiple is in the offing
- analysts are fakely leading all little lemmings' herd back to the slaughter-house,
while the poor weaklings are incapable of understanding the distribution happening
right in their face
- Other than cloud-infra portion, that may be worth $50 at most, afterall its a retailer
specializing in discretionary products that does not deserve such high valuation, given
the budgetary and austerity headwinds that we are facing in the economy
- Congress will not allow a sales-tax-free nirvana for any enterprise anymore, when the
treasury needs revenue so desperately in the face of the shortfalls, he thinks.
- The short term oscillator is creating a bearish divergence and is confirmed by
declining up volume, in an extremely-overbought, post-news scenario.
- Many AMZN holders are starting to let the greed get the best of them. They are ignoring
the advice of Warren Buffett: "Be fearful when others are greedy and greedy when others
are fearful." Obviously, AMZN shorts are not the greedy ones; in fact they are the most
humbled-down creatures on the planet currently and many presently started feeling that,
it would be best to jump off a cliff, rather than endure this daily pain of single-
entity-irrational-exuberance of the gone-mad crowd! This is the case of a parabolic-rise
in optimism in the short term (a move worth 46 points in a mega-cap in a few weeks), a
psychologically-perfect point to enter the other realm.
- After looking at the exponential rise in his net-worth in just 4 weeks, the big boy
JeffB might laugh so hard that, the laughter-waves might agitate the pacific-ocean via
chaos-theory, resulting into a reflection-tsunami that may in turn slam the Seattle
- The point of going long anywhere is to get a better reward at reasonable risk - not the
case here anymore - this may suddenly drop 20-30 points in just two sessions any day,
while the upside is mere 2 points, as per his calculations!
Even though he made some decent moola in his first dip here from 206 to 183, but, now he seems to be off, by getting in too early at ~ $215. But, he said, in this go, he won't cover until $150. So, to get his insights, tried to reach him on phone... got the news that he went out to see his cardiologist today ... for just routine check-up I was told. I hope it was just routine and he is not taking this pps-rise insult to his intellect too seriously here. I pray for him. He is as close to a perfect trader as I have seen!
This is a "fake" post (I can tell by your 14 5-star ratings), but I'll reply anyway.
Has your "friend" read Jeff Bezo's letter to shareholders of 1997? If not, he hasn't done his homework, and his opinion is worthless. He may be correct about the value of Amzxon's retailing business, and Amazon's cloud computing business, but don't you know there's a premium for a great CEO? If not, you shouldn't trade AMZN.
Before you jump in and lose your money shorting AMZN, ask yourself: Can you explain why it's so overpriced? If not, you shouldn't trade AMZN.
I don't care what you do, it will make exactly zero difference in my life. Good luck!
>>"Do you have any skin in the game?"
Yes and No. His insights opened my eyes as to what a hot-potato that I was holding in my hand now and I dumped my portion, after enjoying the ride from 106 to 196! 90 points in a year was good enough for me.
"Your "friend" is dumb.
There's nothing new or surprising to what "he" says."
And so are the 10 or whatever shorts rec'd his post. They act like they have never seen (and they haven't, and their lack of due diligence (regarding knowledge of previous similar cycles) is so glaringly obvious) Amazon go through an investment cycle before as if they thought it was only supposed to impact fulfillment and not any of the other expenses.
And they ve been pumping amazon on offering free music cloud etc which brings in no money. Now google has it nflx and apple next. Then they pump tablet even though apple has won. Apple has underperformed for weeks on good news be careful longs elevator down whe it happens