Glenn - thanks for the welcome message. My decision to short AMZN today was made with the full realization that the stock could go either way - and if the stock does rise by five points, I will cover (for my sake, I'm hoping it won't open 30 higher on Monday and leave me severely in the red). However, it is my feeling that the probability of AMZN going down further is greater than the probability of it rising - and I believe this will be true up until at least next Wednesday (I have no idea what will happen after the end of Wednesday's Fed meeting or after the release of NAPM data on Thursday).
I agree with you that Amazon's recent investment in regional distribution centers could lead to new business (larger retail goods). However, there are two risks for Amazon here:
1. Competition: Wal-Mart essentially already has such regional distribution centers in place - in fact, they have distribution centers with built-in showrooms. Wal-Mart does not yet have the web presence of Amazon - they do have a functioning web site, though, through which customers can purchase items that Wal-Mart sells.
2. Overexpansion into too many unrelated areas: One could argue that Amazon might have done better to leave the distribution to someone else - that Amazon should maintain it's focus on it's primary area of expertise, selling and marketing merchandise on the web, and leave the distribution to someone else. Is Amazon spreading itself too thin? Books, CDs, Videos, Auctions, Pharmaceuticals (through Drugstore.com) - and now potentially larger retail goods (as the investment in these distribution centers suggests). Would a better strategy have been to have formed a joint venture with Wal-Mart - or even Federal Express or UPS?
The above are risks, and risks only at this point. And I'm sure that Jeff Bezos and his management team are smart enough that they fully considered these risks in making their decision to acquire the distribution centers. Mr. Bezos has, after all, made himself a billionaire many times over, and he certainly didn't achieve this wealth by not being smart (I'm still working on my first billion - and believe me, I have a very long way to go). But, in summary, I'm very concerned about the risks above.
Thanks again for your message.
-Eric Wells |
