Is Trumps Criticism of Amazon really valid?

Market Trends - 04/04/2018

Why, we ask ourselves, is the world’s largest online retailer suffering so? After all, did it not have an outstanding Christmas selling season? (Yes, it did.) Do they not utterly dominate several important sectors of the US economy? (Yes, they do and they include the worlds’ of cloud computing and web site hosting, for individuals small and medium sized businesses and mammoth corporations, retail grocery sales and delivery, books, etc.) So we ask, what’s the problem?

The current administration in Washington had placed Amazon in its crosshairs early on in its tenure. Mr. Bezos is the founder of Amazon and the owner of the Washington Post newspaper. The President has accused Amazon of abusing the US Postal Service through a contract disadvantageous to the Post Office.  (See chart notation) This, despite an independent federal government audit that considers the arrangement to be profitable for the Post Office. The threat of government retaliation against the firm has sent investors fleeing the stock and driving the price down. Will it recover? We believe so. Firstly, it is not a social medium like Facebook for example, whose value is largely the goodwill of its enormous user base. Amazon holds inventory, possesses assets beyond the brains of its employees and performs services that are not as fickle and easily abandoned by customers as those Facebook provides. Secondly the firestorm rained on the stock by the administration is largely unjustified and therefore, like much of what constitutes actions by the administration, likely hollow and void of content or action. In the current atmosphere of fear and uncertainty in the markets, Amazon has been thrown out with the bath water. We expect that Amazon will recover and come back sharply, but not this week. The buffeting will continue for the near term and so we trade Amazon Down hourly and for end of day positions and not longer, because the buffeting will subside and the ship will right itself in the medium term.


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