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Amazon.com Inc. Message Board

  • patchyscalp patchyscalp Sep 8, 2001 4:44 PM Flag

    A clearcut case of buy and hold

     

    Er, I mean Sell and Don't Cover. I've become a terminal short on this company.

    Bloomberg had a segment on Bezos that they ran about 4 times between 11:30 a.m. and 12:30 p.m. today. The interviewer was either agitated or exasperated. E.g.

    "Whaddya mean 'by very well'?! Do you have more customers, more sales, what?"

    Bezos the Clown: "We have more customers and are making more sales to active customers".

    I clearly understood Bezo's response and whole interview to be double-speak and would make Clinton blush (if that's possible). This dried up piece of phlegm is about to get scraped off the sidewalk by the next leg down. If the interviewers had it with Bezos, what do you think the big bagholders are thinking? The first sign of death is when vendors stop supplying goods on credit to Bezos. Then Bezos will offer them stock instead of cash.

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    • grumpy_and_the_other_six grumpy_and_the_other_six Sep 10, 2001 9:12 PM Flag

      inferior to an engineer, particularly THAT engineer. The reason he seeks the safety of the closed world of engineering is because he is overwhelmed by the compleity of the real world. That is also why why he tries to shout the world into lining up for his childish simplicities.

      One of the most pleasant things about many engineers is that they often develop a great regard for honesty, and become very honest people themselves. I have always attributed it to the fact that you can't bullshit a computer. It is too bad when someone goes into engineering and misses one of the biggest rewards of the profession.

    • grumpy_and_the_other_six grumpy_and_the_other_six Sep 10, 2001 8:06 PM Flag

      to time, referred to you and the Nemesis_editor as "intellectual bookends". The weaseling language reproduced below is a nice piece of evidence that you are moral bookends as well. Nemesis_editor hides behind exactly this kind of thing all of the time.

      [[[[[[I have never suggested anyone make any trades short or long in any stock. Once again it seems you have a reading comprehension problem. I provide the facts. The readers must make informed decisions. It is especially funny to read you, who along with that dope inagua kept predicting the exact month amzn would run out of cash, implying that a short term short position would be safe. The analysis was completely wrong and some might have been enticed by your continued insistence and flawed analysis. Pot, kettle, black.]]]]]

    • crushing_2billion_dollar_debt crushing_2billion_dollar_debt Sep 10, 2001 6:56 PM Flag

      The last line of my previous post "and costs me interest" was printed in error.

    • crushing_2billion_dollar_debt crushing_2billion_dollar_debt Sep 10, 2001 6:53 PM Flag

      Even if one holds out of the money's prior to expiration one still has a good chance to lose
      some or all of the price he paid for the option, even on the worst of stocks. That's why I decided to sell my last Put options on Amazon as soon as they were in the money and stop buying options. Sometimes I'll do a short
      with a bit of a hedge by selling a Put against my short. I calculate in advance how much money I would still be ahead should the stock price go to zero by subtracting the gain on my short vs. the loss on the Put value if the Put value would reach the maximum it could (at a stock value of zero). On the other hand, if the stock price goes up in the short term, the Put option value declines. All the while I am earning interest on the Put option sale and short sale. It's kind of like selling covered Calls in reverse. The downside is if the stock tanks to zero you won't make as much money on your short because you will be in the red on the Put. But it's better than BUYING an option cold-turkey which ties up my money and it does give you a bit of a fall back on your short position when the stock price has its up day(s).
      and costs me interest.

    • noto_says_buy_before_meeting noto_says_buy_before_meeting Sep 10, 2001 6:41 PM Flag

      I agree. That's why I like selling options occasionally. I mean, for example, check out long term Calls on a stock like QCOM with high strike prices like $100 or more. Granted the stock could go above that strike before expiration but the odds aren't so good that they will. In fact, when I used to buy options I lost the great majority of time. Buying Amazon options are one of the few that I actually made money on, but even still you have to get kind of lucky that the stock price heads south fast enough at a point between when you bought it and expiration. Overall, buying options has been a very poor investment for me and I imagine most everyone else. That's why selling them is, pardon the pun, a better option.

    • grumpy_and_the_other_six grumpy_and_the_other_six Sep 10, 2001 5:46 AM Flag

      nonsense posts printed out, and am wondering whether it is worth the trouble to go through them and point out some of the more glaring absurdities. I will probably let inertia take over and not bother.

      Ones particular piece of absurdity, however, is capable of causing so much mischief that I have no choice but to call attention to it. Your statement that there is no risk in failing to cover part of a position at what looks to be an intermediate low on the coincident implication that shorting is a low risk activity are, like most of your statements, seriously at odds with reality.

      When on is evaluating the "risks" of a trade, there are at least five steps to the evaluation. First, identifying what might happen. Second, quantifying how severe the damage might be if that thing happens. Third, identifying how likely it is that such a thing might happen at each intensity. Repeat steps on through three for every possible thing that you or anyone else can think of. Fourth, combine all the results into an overall evaluation of risk. Fifth, throw in a generous "fudge factor" for the things that could not have been forseen.

      One of the reasons that shorts tend to be more intelligent and to do much more work than longs is that shorting is vastly more risky than going long. In addition to going against the long term bias of the market, and to having the deck stacked against one in terms of the rules, and in suffering under continual disapproval from the rest of the herd, there is the fact that the potential losses are unlimited. Money management is far more important for the short than for the long, since the extent of HIS possible loss must be continually calculated, while for the long the largest possible loss is printed right on the label.

      Any beginner in any market is especially subject to "gambler's risk", the risk that luck goes against you for long enough to break you before the odds can rescue you. That danger is particularly acute for beginning shorts. I consider it highly immoral of Raidehz and Nemesis_editor to encourage the unwary to bet significant sums of money, whatever significant somes of money might mean to the individual involved, on a long position in Amazon. I consider it to be much more immoral for Nemesis_editor to do this than Raidehz, since he is much better equipped to understand how unlikely long term success is. I don't consider it immoral for peeshe39 to do so, I don't theink she is capable of understanding or quantifying any of the issues involved.

      I would be highly remis if I did not similarly
      excoriate you for any language that implies that anyone unable or unwilling to "Do The Math", and more importantly, "Understand the Math", open a short position in ANY stock, even Amazon. That includes the math of the margin and T25 collateral requirements, and an awareness that margin percentages for volatile stocks are subject to change by the brokerage house, and the overall percentage is subject to change by the Federal Reserve.

      If people want to participate on the short side without doing the work, let them buy puts.
      The old saw about pilots certainly applies to shorts. There are old shorts, and there are old shorts, but there are no old bold shorts. Two of the most famous and successful shorts in history died broke, along with a great many less successful ones.

    • charlie_ponzi_and_his_scheme charlie_ponzi_and_his_scheme Sep 9, 2001 9:48 PM Flag

      Personally, I've learned that buying any stock poses a huge risk, especially in a market as we have today; one that consists of so many obviously overvalued companies, so many that do not offer a dividend, and most of all so many that have never even once proven they can make a profit at all, much less the hope of sharing profits. When you have a situation where the majority of companies on the stock exchange are of such calibre, the losses for the stock investment community can only ultimately continue to swell (though we cannot know what any one day will bring). And when those losses swell, most people will not only sell the overpriced profitable companies and money bleeders, but they will sell just about everything else to recoup as much of their principle as possible. Much of the money tied up by the public in stocks, is tied into mutual funds that have a combination of the overpriced and money bleeding companies as well as more fairly priced profit-sharing companies.
      When investors sell the majority of the junk, the minority of better stocks in their portfolios will likely go to.
      Since the majority of companies on the exchanges are either grossly overvalued by any historical metric, or else they are scams like Amazon (i.e. companies whose models are flawed and will never do anything but lose more money till broke), I believe that shorting is the most sain form of investing, though certainly still highly risky for those incapable of withstanding potential significant upswings. Indeed, in addition to the likelihood that an overvalued stock will ultimately decline below one's selling price, one also receives a "dividend" of sorts when one shorts a stock as you earn interest on the cash you get from the sale of the stock. In a better world, perhaps it would be nice if this were not true. Perhaps it would be nicer to have all publicly traded companies being profitable and historically fairly priced and offering dividends so that shorting would be the lesser desireable option for investors to consider. However, since the situation today has evolved as it has evolved, with hundreds of non-profit and overhyped companies going public in the past 10 years, then shorting is my investment of choice.

    • charlie_ponzi_and_his_scheme charlie_ponzi_and_his_scheme Sep 9, 2001 9:00 PM Flag

      Point well taken. In the real world, however, even stocks that offer nice dividends
      often fluctuate dramatically, though logically they should for the most part stay at a stationary bid-ask level for a very long time. For example, had I purchased stock in MO a year or so ago in the $20's only to see it rise into the $50's at one point in 2001, would I prefer to sell the stock and lose my dividend, thus locking into a 100% gain in such a short period of time, or should I just continue to hold it merely because I continue to receive that great dividend and my original intent was to keep my money with MO forever? Thus, even though the 100% increase in the stock price is not rational and should not have happened based upon the companies' fundamentals (good as they may be), yet it DID happen---someone WAS willing to pay such a price. Now the fact that someone somewhere was willing to pay as much as over $50/share for my shares at one time, is not rationale or reasonable vis a vis
      what the high bidder was willing to pay just one year earlier. Yet, that is not my concern. My concern is that I see a large short term profit potential staring me in the face. It wouldn't matter to me that my purpose in buying the stock at $23 would have initially been to keep my money with MO for eternity; what would matter to me is that a more than 100% gain on my money in just one year is unusually and irrationally high and an offer I would not refuse to cash in on---and perhaps some day later, if the stock price goes back to where I originally bought it or close to that figure, I would consider investing in that company again. Furthermore, it is reasonable to presume that when the bid-ask on a stock rises dramatically in a short time frame, many profit takers who think like you will eventually emerge and sell too, causing the stock price to drop. To not bother following the stock price regularly is to ignore these possibilities (I would say probabilities). Yes, the stock price could go higher, but I personally would have been more than satisfied with a huge short term gain even though it would mean losing the dividend (which is still paltry compared to the huge gain on the stock price).
      What would I then do with the profits I gained from the sale of my stock? I would for the time being put it either in an insured CD where I would receive interest comparable to what I would get from MO anyhow.
      Let me ask you, Sonny. Had you purchased MO
      at $23 last year, and just happened to notice that it more than doubled in such a short time, would you have sold the stock and put the money
      to use somewhere else (like an insured bank account)? Is your purpose is truely to make the company more successfull by leaving your money with them, then you would not have sold.
      If your purpose is primarily yourself interest
      of making a large and fast profit in the here and now present, then you would sell and let the other guy who bought your shares worry about making the company more successfull. Selfish? Perhaps. But if I have the choice between grabbing a big selfish profit right now, and hoping to make even more later by selflessly keeping my money with MO (or whomever), then I would prefer being a bit selfish. And I would never know I had the choice unless I kept close tract of the stock price on a regular basis.

    • charlie_ponzi_and_his_scheme charlie_ponzi_and_his_scheme Sep 9, 2001 2:44 PM Flag

      By the way, Sonny, I do recall you once being asked about the stocks you own and how they have done. I don't recall your exact response, but you did say that they have not performed well. Perhaps at one time on some of your stocks you were ahead on the stock price. Are you saying you have no regrets that you didn't
      sell at a profitable level and that you would still not sell if such stocks ever again move back up into a position of profitability for you? And what good is a dividend ultimately if the stock price is below what you paid for it to the extent that your overall investment is still in the red?

    • charlie_ponzi_and_his_scheme charlie_ponzi_and_his_scheme Sep 9, 2001 2:39 PM Flag

      No, "Too soon" is a sarcasm for meaning that while many other people are concerned about trying to make the last dime on a stock after it has already appreciated over the price one paid for it, he didn't worry about it, and sold it. The price may or may not have gone up further from that point, but ultimately either
      went down in value or else it did go higher but, so what because he made his profit anyhow?
      I have personal experience with this. I bought a company at declining prices after my openning position. The stock was/is fundamentally sound (currently trading at about 1/3 book value with a PE of about 4, and profitable for many consecutive years--though no dividend is given, at least not yet). I bought heavily in the $6's, with my cost average at about $6.40 for about 20,000 shares.
      My last major purchase of shares was the day before earnings about 2 years ago. I anticipated earnings would be very good based upon a number of factors (of course, I could have been wrong, so there is always a risk).
      The next day the stock went up about $1.25. I sold most of my position that day, the rest a little later. Profit for that short time was about $8k. Fine with me. Did the stock go higher? I didn't care (that much). 1 1/2 years later, the same stock of the same company with basically the same fundamentals is now trading at under $4 per share. Had I hung on and waited, as fundamentals would dictate I should, I would be down about $50k. Did I get lucky? Perhaps, but it was a well calculated gamble. Could I have lost from the get go? Certainly, I understood there is a risk in buying any stock but I at least chose one that was fundamentally fairly priced and sound. According to you, should I have continued to hold that stock regardless of my immediate short term large profit staring me in the face? I would assume the answere you will give is yes because the fundamentals were still good and the stock price comparitively fair. Sonny, your strategy may be good for you, but it is not the only strategy, and one should constantly review one's positions in my opinion.

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