The investment world is often thought of as conservative, traditional, middle of the road, and one that conforms with the norms of society. Increasingly, especially as the digital age continues to transform our world, these staid notions are being replaced with wild extremes. For example, financial advisers have typically run a relationship business based on long time trusted counselors who look out for their clients. Now, however, millennials are changing this idea as they would rather not deal with people, instead preferring automation and software as low cost alternatives to the fees advisers charge for better service (returns?). Within the possible investment instrument universe, the change from individual stock picking to index investing has moved billions toward fund families offering the ETF alternative. As for individual equities, the massive valuations given entities like Amazon and Tesla, versus more established companies like say, Wal-Mart, Target, Ford, and GM, are leading some observers, like myself, to believe these extremes are a bit much, and offering up opportunities in some entities being scorned.
My thinking is that yes, Amazon (AMZN) is a juggernaut and well positioned for continued growth. Its business model, in my mind, is essentially a replica of Costco, as 50 million customers paying 100 bucks a year for Amazon Prime is just the online version. It supplements Amazon Web Services as providing the vast cash flow for Mr. Bezos to continue investing in Echo (voice activated services), drones and planes for delivery, automated retail and new book retail locations, and huge investments in India and the Middle East. Still, large competitors like Wal-Mart (WMT), Target (TGT) , Best Buy (BBY), and Costco (COST) are sitting up straight and fully engaged, to say the least. For those buying Amazon, and Tesla (TSLA), which face plenty of competition and have yet to prove sustainable cash generation, well, better you than me.
In the market last week, both retail sales and the latest inflation reading were weaker than expected, although consumer confidence remains quite strong. The largest banks reported on Thursday, with JP Morgan Chase, Citi, and Wells Fargo netting six, five, and four billion respectively. Mr. Dimon noted the consumer and economy remains in pretty good shape. Clearly. Elsewhere, you may have noticed the little issue United (UAL) had with a passenger, who was summarily hauled off a plane to make way for United employees. Can you believe he has now contacted a lawyer who claims he was mistreated? I suspect United will settle, although it appears it had good reason to throw the guy off, but the way they handled the situation was thuggish, to say the least. I am sure the shorts are now circling United.
