The Last Bubble Standing – Amazon’s Same Day Trip Through The Casino – David Stockman’s Contra Corner 07-27-15

David Stockman writes:

Amazon’s valuation, its one day gain and last week’s Google gain are reminiscent of the days before the tech wreck 15 years ago. The 12 Big Cap Techs of 2000 saw their peak combined valuation of $3.8 trillion plunge to $875 billion a decade later, even as their sales and earnings continued to grow.

Amazon’s market cap boost by $40 billion in the seconds after its earnings release had nothing to do with Amazon but to robo-traders and fast money chasing one of the greatest bubbles still standing in the casino, raving about the performance of AWS, Amazon’s totally unrelated cloud computing services division.

AWS is valued at 110 times. However, Google, Microsoft, Oracle et al are not about to cede the cloud to Amazon. With no barriers to entry, no killer patents, no material brand equity, no irreproducible sales and service network expect prices to fall rapidly – Oracle’s Ellison has promised to cut prices by 90% and he has rarely failed to follow through on those kind of promises. The cloud is destined to become Microsoft’s entire franchise.

Amazon’s $250 billion market cap is a bubble and it is being valued at 109 times free cash flow. In 25 years it has never, ever generated any material free cash flow despite its $96 billion of LTM sales, or paid a dividend.

Amazon is not a la GE in the 1950s because it has never made a profit beyond occasional quarterly chump change, nor does Bezos seemingly plan to ever make one.

We are in the waning days of the third great central bank enabled bubble this century, a casino that is all about beanstalks which grow to the sky and sell-side gobbledygook.

Nothing from UBS, a serial swindler and confessed criminal organization (Sic), can be taken seriously.

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US Stocks Climb for 3rd Week as Fed Avoids Stimulus Cut – Bloomberg 09-20-13

Salient to Investors:

Tim Hartzell at Sequent Asset Mgmt said the underlying data may turn weaker despite 5 years of easy money, and stocks are dependent on this monetary stimulus.

Economists predict the US will expand 1.6 percent in 2013 and 2.7 percent in 2014. 24 of 41 economists expect a December tapering.

Stephen Wood at Russell Investments said near-term, risk assets like no tapering.

Tom Mangan at James Investment Research expects yelling and screaming but would be very surprised if they actually shut down the government, and the market impact will be limited.

Economic bellwether FedEx stock rose to the highest level since July 2007.

Utility stocks pay 4.1 percent in dividends for the second-biggest payout among S&P 500 groups.

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