Colleagues:
A number of weeks ago when AMZN announced its stock split, I speculated that bringing the price down into the $30-40 range might encourage a whole host of people to buy into this year's "story stock" since it was at a buyable price (as opposed to $100 which many small investors find unbuyable). I never expected the kind of run-up we have had in the past week or so, but I am not totally surprised. I am surprised that many of you continue to look for shares to short, especially given the current market conditions.
Consider this possible scenario: Sometime in the next couple of days, a major disaster hits in the Far East, such as a bank failure in Japan, the collapse of one of the eastern stock markets, or even a natural disaster that has severe economic consequences. Suppose there is a major effect on the projected earnings of American companies. Suddenly, a lot of money in the US stock market is looking for a different place to reside. Bond prices are too low, so what stocks seem to be weathering the Asian storm? Internet related stocks, right? (Yes, I know; AMZN is not an internet stock. I have read all 6200 posts to this thread. But try to tell that to the people buying.) Suddenly, AMZN takes off to 100 and the company announces a 3-1 split to lower the stock into the 30s where the small investor can get onboard again.
Yes, I know the valuations are stupid, but has understanding that gotten you anything yet except huge loses? I believe a lot of these investors are prepared to ride this one out for a couple of years to see what happens. AMZN may dip and roll, but it may not fall into the final verdict is in five or more years from now. Do you really want to tie up your money and wait that long?
Walter High |
