Action in the Internet stocks is beginning to make investing a lot easier. Yesterday morning, for example, Amazon went up by another $2 billion in a couple of hours, to what would have been nearly “11 times Barnes & Noble” – the new “p/b” ratio as I have come to think of it, except that the truth is that B&N (symbol BKS) has also been rising, and so, with its profitable 504-store chain and its own unprofitable Internet site, Barnes & Noble now commands a value nearly one-seventh, not one-eleventh, as great as mighty Amazon.
One way of looking at all this is to think AMZN has gotten ahead of itself. (Was it more than a few weeks ago that an analyst made headlines predicting a target of 400 by the end of 1999? His only mistake was that word “end.” A keener mind would have targeted 400 for the “end of the first week” of 1999.) It reached its year-end, adjusted for splits, last night. (Well, 138 on the split stock, or 414 pre-split. But what’s an extra $725 million in market value? A mere rounding error!)
Wall Street now values Amazon more highly than FedEx, United Airlines and Barnes & Noble combined.
I am not one to quibble, and I am not going to say anything about Amazon’s losing more and more money. The market is telling us clearly that one day those mounting losses will turn to gushing profits and someday, conceivably, an actual cash money dividend. (Cash. You know, the stuff you might use to buy food or pay the rent.)
Rather, with Yahoo also up 30-odd points yesterday, and many others as well (I only pick on Amazon because it so mercilessly picks on me), I am here to draw the practical conclusions. To interpret the market’s message, as it were.
The first thing is: Forget all those beaten-down oil and oil-related stocks. The Internet will largely reduce the need to leave your home; far more fuel-efficient autos are just a few years off in any case; and global warming pretty well spells the end of the demand for heating oil.
Next, forget most of those high-yielding real estate investment trusts, especially the ones that invest in shopping centers. Yes, there will still be shopping centers, but on the margin, with competition from e-shopping about to boom, the tenants are going to get squeezed mercilessly, and thus, in the long run if not the short, squeeze many of the REITs.
And of course, forget the retailers themselves! I just placed a huge order with www.netgrocer.com. Netgrocer is hardly perfect yet – Arizona diet honey-flavored ginseng green tea is nowhere to be found, and they were out of the sliced carrots I ordered (don’t ask). But this nonetheless shifted $440 of business from the supermarket up the street onto a FedEx truck (I may have stupidly – insanely – shorted a few shares of AMZN a couple of months ago, but at least I’ve long owned a little FedEx) – and that can’t be good for the supermarket.
So, bang: Oil is history, retailing is history, commercial real estate is history. With the deflationary pressure that Internet competition and efficiency will bring (it’s efficient to cut out the middleman), say good-bye, also, to inflation, which means good-bye to gold and mining stocks. It also means low interest rates, which means there’s no point putting your money anyplace safe, like a bond or a bank, so you may as well join everyone else in putting it all into the market – Internet stocks being the ones that seem to go up the most – which is why I personally think that in 10 years, Amazon.com will have a $50 trillion valuation and own the entire world. (Two good acquisitions to start with: FedEx, to control the shipping process, and Disney/ABC, to be sure of some entertaining content on the site. It might also be useful to acquire IBM, to assure solid technology, and possibly Motorola or one of the others with an interest in a global satellite system.)
The interesting thing (to me, anyway) is that while I obviously think much of this is overdone or preposterous, it can’t all be dismissed out of hand. What’s more, when this impeachment uncertainty is finally over one way or another, even the stodgy old Dow, which managed barely a 233-point ho-hum gain yesterday could really begin to strut its stuff.
[My apologies. Yesterday I promised you free books. I’ve pushed that off to tomorrow.]
Quote of the Day
Guys, just remember: if you get real lucky, if you make a lot of money, if you go out and buy a lot of stuff, it's gonna break. You got your biggest, fanciest mansion in the world. It has air conditioning. It has a pool. Just think of all the pumps that are going to go out. Or go to a yacht basin any place in the world. Nobody is smiling and I'll tell you why: something broke that morning. The generator's out, the microwave oven doesn't work, the cook's gay. Things just don't mean happiness.~Ross Perot to Harvard B-School students, quoted in Forbes
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