Capitulation IV; Analysts Like to Herd; Agony and Euphoria

Miner Sentiment

Bloomberg hating on gold. “Looks like a short”, “Nothing uglier”, “Not even an asset”…AFTER miners drop 90%.

What's uglier than gold

“The Direxion Daily Gold Miners Bear 3X Shares, or DUST, is up a whopping 99 percent in July.” via @

Grant on gold July 22 2015 Zweig   The same analyst who suggested buying miners within 1% of the all-time top in Sept. 17, 2011 now says gold is a “doorstop” in July 17, 2015.  NOW, he tells me!  Journalists chase price and sentiment.

Zweig

Goldman sees gold to $1,000 (July 2015) and Goldman sees gold at 1840 by end 2012  Note a pattern?

gold_10_year_o_b_usd

Media piles on late in trend:

Perhaps today the absurdity has reached the apex of its crescendo with this utterly ridiculous “letter to gold bug” published by Marketwatch:   It’s time to surrender and let the yellow metal fall to its bear market low

Better analysis: Gold Warns Again and Heavy wears the crown

yen and gold

Amazon Beats

AMZN

amzn 1 yr

How analysts react after Amazon reports–follow the herd recommendations regardless of price. Analysis?

http://www.bloomberg.com/news/articles/2015-07-24/wall-street-cranks-up-its-outlook-for-amazon-after-it-delivers-monster-earnings-report

The headlines reported that AMZN’s sales were up 20% year over year for Q2 and that net income had swung from a loss of $123mm to a profit of $92 million yr/yr for Q2.  While those numbers are what they are, sales growth from Q1 to Q2 was a mere 2.9% – pretty much in-line with the rate of inflation.

The media propagandists attributed AMZN’s highly “surprising” quarter to big gains in its AWS business segment, which is its cloud-computing business.  However, if we drill down into the numbers made available in its 8-K, we find that the AWS segment represents just 7.7% of AMZN’s revenue stream vs. 6.6% of revenues in Q1.   Sure seems like a lot of manic hype over well less than 10% of AMZN’s business model.

As it turns out, AMZN’s AWS business model, like everything else it does, is seeded in low quality sources of revenue that will ultimately prove to be unsustainable.  Why?  See this comment sent to me by someone who read my Amazon research report and who used to specialize in high tech accounting for Silicon Valley start-ups:

I audited many of the high fliers that crashed and burned, took companies public & was at the printers the day the bubble really burst which ultimately tabled that IPO…Amazon Web Services is growing by leaps and bounds and a significant amount of those $’s are coming from venture backed start-ups. Almost the entire Silicon Valley and other startups outside the Valley use AWS. Venture backed startups have exploded just as AWS revenues have exploded…That segment of their business will get walloped which right now seems to be a main source of their operating income.  

Read more: Dot con

Notice the difference between mining stocks and Amazon–Deja-Vu of the late 1999’s/2000.  Remember the music Sugar Ray

amzn fomo

bezos_laughing

2 responses to “Capitulation IV; Analysts Like to Herd; Agony and Euphoria

  1. http://www.brainyquote.com/quotes/quotes/c/charliemun545818.html

    By the way, if one is afraid of massive inflation, shouldn’t one not buy ebay instead? Ebay by default earns a fixed percentage of the actual price level of all goods traded on it- worldwide. As do the credit card companies and other transaction processing firms.

    And one could try to be smart and buy it on margin. For obvious reasons.

    Seems to be better to learn from one’s mistakes than to keep on whining ’bout how the world markets are so unfair and so irrational and so against you.

    I liked your case study investing posts, but stayed away because of your fundamentalist gold religion. Sad to learn that it only got worse.

    The only case that is left to be studied is a real-time case of cognitive dissonance andof backfire effects : you

    • #1 Gold is not an investment. Gold is simply non-fiat money that the market has chosen over the past 10,000 years. Don’t confuse investment with holding money.

      I am not afraid of “inflation” but fiat debt loads that leads to monetary chaos–see China for example.

      I don’t own gold, but junior mining companies in gold, silver, copper. I take a three-to-five year outlook so price declines are what I hope for. You can’t buy low without them.

      Low prices as a investor are what an investor should seek out. Let’s hope gold goes lower.

      Ebay doesn’t look cheap especially with Amzn encroaching on their business. Where is the margin of safety? Amzn will never need to earn a profit 🙂

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