Newsflash: So why should Apple be looked as hording their cash when what they are doing is smart and responsible? Why Amazon is spending almost every single cent they earn and they will need to get billions in loans very soon look as a good thing?
I never claimed either or, BTW there's nothing wrong with hoarding (amassing, or whatever you want to call it) over $100 billion dollars.
Newsflash: So why should Apple be looked as hording their cash when what they are doing is smart and responsible? Why Amazon is spending almost every single cent they earn and they will need to get billions in loans very soon look as a good thing?
I never claimed either or, BTW there's nothing wrong with hoarding (amassing, or whatever you want to call it) over $100 billion dollars.
Money can't buy happiness. I have $50MM and I'm no more happy than when I only had $48MM.
On a different note. How is it that Amazon dares to not raise prices? Apple sells for the same price or higher than Amazon and is making money hand over fist...?
Superior technology doesn’t always win. Plasma was vastly superior to LCD and they're not longer being made. The dot coms went belly up because people simply stopped buying from them. Though Amazon lost money their business actually went up by a lot. One can survive a long time by threading water and keeping one's nose just above the water.
As far as a business is concerned, superior technology doesn't always win. The product that the business puts out has to bring something new to the table that is worth spending money on. It's up the company to convince customers that their product is worth spending money on compared to the existing products. My comment about superior technology was in regards to Amazon's record of disrupting industries. In my book, outlasting competitors by being able to eat losses longer than they can isn't really that impressive to me.
Dot coms went belly up because most of them either (a) had no real product but simply presented grandiose plans for one, (b) were working on a product that had limited upside potential, or (c) had a product but sold it below cost in order to follow the "market share first profits later" strategy. They didn't fail simply because people stopped buying from them. Dot coms presented their grandiose ideas to venture capitalists who didn't know how to value these companies. They wrote huge checks to dot com startups based on their pitches. These companies burned through their VC funding on their pie-in-the-sky concepts. After burning through VC cash, the companies went public and watched their valuations soar. They posted losses but continued to push the idea that they had to lose money in order to get big quickly. This went on until those companies had burned through all the cash raised through the IPO. After burning through the IPO money too, investors finally wisened up to the fact that the ideas were nothing more than just pipe dreams. In the face of mounting losses, many went belly up.
The point is that the dot coms didn't fail simply because people stopped buying them. Those companies were bid up to unreasonable valuations on the basis of nothing more than blue sky. If a business isn't making money, it has to get the money from somewhere to cover its expenses. For many dot coms, the source of money came from venture capitalists. They raised some more cash after their IPOs to keep the party going a bit longer. After the money ran out, they went bust.
One can survive for a long time treading water, which is what Amazon is doing as far as profitability is concerned. That's true. Amazon can continue doing what they're doing because they have the money to keep on eating losses. But Amazon commands a large P/E multiple. The market expects Amazon to stop having to tread water eventually. There just doesn't seem to be an end in sight.
Quote:
Originally Posted by dasanman69
They are making money, they're just not hoarding it the way Apple does.
You defend Amazon's poor profitability by saying that they're making money but they're choosing not to "hoard it" like Apple. Apple is not hoarding their money. Apple's pile of profits is like an overflowing toilet. If you think Apple should emulate Amazon, what would you have Apple do with its profits?
Newsflash: So why should Apple be looked as hording their cash when what they are doing is smart and responsible? Why Amazon is spending almost every single cent they earn and they will need to get billions in loans very soon look as a good thing?
Imagine the world were 100x its current size and people had decent wealth distribution. Now 95% of the population would be dying to buy their first smartphone. If that growth potential existed, I would tell Apple to take their 50 bill in profits and reinvest it in Apple. Buy more factories equipment etc. They would now report a loss. Should their stock tank or go up? Their PE would be through the roof...
If Amazon stopped reinvesting the 4 bil a year they do, that money would go right to their bottom line. So they could bank a profit of 4,000,000,000 minus the 300 mil... or show a profit of 3.7 billion. They could then throw that in a bank offshore or give it back to investors. Amazon has faith in their market growth and is investing accordingly. There isn't much growth in high end phones... so Apple is banking profits instead. Both have merit in different markets.
Amazon's drop in profits is actually because they got out Amazoned... by Google. Amazon's accidentally stumbled into becoming the largest cloud provider in the world. Profits were juicy. Juicy enough that even Apple wanted to become a bigger player. Googles new pricing put a dagger in one of Amazon's bigger money makers. Amazon got undersold and is going to have to struggle to deal with it.
I think a reversion to Amazon's historical p/e of 60-100 should be expected. That would put the share price between $50-$100.
Look, companies built on low margins can't raise those margins (profits) without destroying their customer base. Just ask Ron Johnson (Apple, JCPenney).
If Amazon stopped reinvesting the 4 bil a year they do, that money would go right to their bottom line. So they could bank a profit of 4,000,000,000 minus the 300 mil... or show a profit of 3.7 billion. They could then throw that in a bank offshore or give it back to investors. Amazon has faith in their market growth and is investing accordingly. There isn't much growth in high end phones... so Apple is banking profits instead. Both have merit in different markets.
This is such a lopsided and naive view of why Amazon is not making money. So far gone there is no point in trying to reel you back in. Cut bait as they say in fishing. lol
Your view of Apple also is in the same category... limited and naive.
This is such a lopsided and naive view of why Amazon is not making money. So far gone there is no point in trying to reel you back in. Cut bait as they say in fishing. Your view of Apple also is in the same category... limited and naive.
Great argument¡ “You’re wrong, but I won’t bother explaining why.” I’m sure he believes you¡
Great argument¡ “You’re wrong, but I won’t bother explaining why.” I’m sure he believes you¡
Don't need to convert everyone. Save that for the religions. I can't explain how the stock markets work to my grandkids until they learn basic math skills either.
Don't need to convert everyone. Save that for the religions. I can't explain how the stock markets work to my grandkids until they learn basic math skills either.
You’re not really making your case for not making your case.
And that’s a valid point with which I generally agree. Thing is, he isn’t.
In this case he is out to lunch. The 3.7B he suggests Amazon could allocate towards profit is laughable. Just look at the financials and it will indicate it covers basics not 'investments'. Most businesses call it overhead/expenses. How does cashflow magically become profit?
Other companies invest into the future but bank a profit at the same time. Amazon has had 18+ years. I call BS.
Other companies invest into the future but bank a profit at the same time. Amazon has had 18+ years. I call BS.
Jeff Bezos has played it pretty smart because he's retained a significant shareholding himself. Currently he has 18% and is the largest Amazon shareholder giving him a personal net worth somewhere close to $27b - he is the 21st wealthiest individual in the world by this standard. This makes it difficult for other shareholders to gain leverage to have him replaced in order to profit. When he feels like investing in one of his own interests outside of Amazon, he just sells shares:
That's a pretty neat position to be in because you have all these big funds (BlackRock is one of them btw with $3.2b) tied up in the company with billions and they can't do anything to you. They won't risk trying to lower the value of their own assets and building up the stock means Bezos can sell fewer shares to do whatever he wants. The investors will still have gained from the value increase in the stock but the only way they can profit is to sell it.
This is another example of where the debate over income distribution isn't entirely accurate. The stat that came out recently was that the top 85 wealthiest people in the world hold around the same wealth as the bottom 50%. Jeff Bezos is one of the 85 people but the billions he has don't exist. What he has are highly overvalued shares in Amazon. The problem is you can't limit considerations over income to actual cash values because as far as we know, he could sell all his shares for cash for the amount listed. We just can't be certain that he'd be able to sell all his shares at the current price unless he does it.
Maybe it's time for regulators to clamp down on the rampant speculation in Wall Street by capping the P/E. I'm not sure what would be a good number but I imagine it would be lower than 851. This would mean a company couldn't sell shares that many times higher than their earnings. There could be exclusions for IPOs if they need to raise cash. It borders on fraud if the P/E is that high because the two values are supposed to be linked. Tesla's even worse at over 1300. There should at least be a separation between near-term earnings results and speculative future gains the way that investment banking is supposed to be separate from savings. When do earnings ever shoot up over 10x in 1 year? Then companies would be valued based on the more tangible earnings results rather than speculative values.
Doesn't Walmart do the same thing? It's just capitalism.
Yes, I expect Walmart do. That is exactly the problem with capitalism. We have globalised companies intertwined with governments in an unhealthy and tangled financial relationship. The evidence is there for all to see, especially in the USA, but here in the UK too, namely that all the people trying to earn a living by providing brick and mortar stores which give a place identity, character, history and a sense of community are being wiped out by rootless global corporations like Amazon and Walmart who sell the same products for loads less money that no small firm can compete with.
Why do you think that in my village, the baker, corner shop, garage and post office have all closed leaving us with just a pub? Why does the lovely town where I went to school now look hideous, desperate and almost identical to so many other towns - full of betting shops, pound shops, mini supermarkets and nail bars?
When your main motivation for choosing a supplier is low cost, this is the result. I've bought a few things off Amazon that are next to impossible to buy where I live such as small lithium batteries and other oddities but I try and buy everything locally whenever I can. Amazon and the supermarkets can all fold up and vanish tomorrow and it won't be a day too soon in my book.
Yet many of the purchases I make through Amazon are fulfilled by someone else. Amazon just handles the transaction (sound familiar?). In this case they're helping the competition not eliminating them.
Gnats that exist at the pleasure of Amazon. A fig leaf that Amazon can point to and say "See? We're not a monopoly!" If your competition consists of very small operations who are dependent on you for their existence, that's not really competition, is it? Amazon can tighten the spigot on these 'competitors' any time somebody falls out of line. You know, delaying shipment, downgrading product search placement, it's been known to happen. Just ask Hachette.
Maybe it's time for regulators to clamp down on the rampant speculation in Wall Street by capping the P/E. I'm not sure what would be a good number but I imagine it would be lower than 851. This would mean a company couldn't sell shares that many times higher than their earnings. There could be exclusions for IPOs if they need to raise cash. It borders on fraud if the P/E is that high because the two values are supposed to be linked. Tesla's even worse at over 1300. There should at least be a separation between near-term earnings results and speculative future gains the way that investment banking is supposed to be separate from savings. When do earnings ever shoot up over 10x in 1 year? Then companies would be valued based on the more tangible earnings results rather than speculative values.
I'm not against regulation in principle but this is not a practical or even sensible proposal. Banning high P/Es is like banning stupidity (in this case the stupidity of investors). And anyone who bans stupidity is in essence, banning himself, or herself as the case may be.
Comments
Well, I can't say I disagree with you there.
I never claimed either or, BTW there's nothing wrong with hoarding (amassing, or whatever you want to call it) over $100 billion dollars.
Money can't buy happiness. I have $50MM and I'm no more happy than when I only had $48MM.
On a different note. How is it that Amazon dares to not raise prices? Apple sells for the same price or higher than Amazon and is making money hand over fist...?
That's a lot of Macking
Lot of people at AI have hearts (and brains). I love this site, its writers & its patrons.
By 2012, er 2020 big changes will be coming. For the good.
Did you write that 3 years ago and only now hit the 'reply' button?
Superior technology doesn’t always win. Plasma was vastly superior to LCD and they're not longer being made. The dot coms went belly up because people simply stopped buying from them. Though Amazon lost money their business actually went up by a lot. One can survive a long time by threading water and keeping one's nose just above the water.
As far as a business is concerned, superior technology doesn't always win. The product that the business puts out has to bring something new to the table that is worth spending money on. It's up the company to convince customers that their product is worth spending money on compared to the existing products. My comment about superior technology was in regards to Amazon's record of disrupting industries. In my book, outlasting competitors by being able to eat losses longer than they can isn't really that impressive to me.
Dot coms went belly up because most of them either (a) had no real product but simply presented grandiose plans for one, (b) were working on a product that had limited upside potential, or (c) had a product but sold it below cost in order to follow the "market share first profits later" strategy. They didn't fail simply because people stopped buying from them. Dot coms presented their grandiose ideas to venture capitalists who didn't know how to value these companies. They wrote huge checks to dot com startups based on their pitches. These companies burned through their VC funding on their pie-in-the-sky concepts. After burning through VC cash, the companies went public and watched their valuations soar. They posted losses but continued to push the idea that they had to lose money in order to get big quickly. This went on until those companies had burned through all the cash raised through the IPO. After burning through the IPO money too, investors finally wisened up to the fact that the ideas were nothing more than just pipe dreams. In the face of mounting losses, many went belly up.
The point is that the dot coms didn't fail simply because people stopped buying them. Those companies were bid up to unreasonable valuations on the basis of nothing more than blue sky. If a business isn't making money, it has to get the money from somewhere to cover its expenses. For many dot coms, the source of money came from venture capitalists. They raised some more cash after their IPOs to keep the party going a bit longer. After the money ran out, they went bust.
One can survive for a long time treading water, which is what Amazon is doing as far as profitability is concerned. That's true. Amazon can continue doing what they're doing because they have the money to keep on eating losses. But Amazon commands a large P/E multiple. The market expects Amazon to stop having to tread water eventually. There just doesn't seem to be an end in sight.
Quote:
They are making money, they're just not hoarding it the way Apple does.
You defend Amazon's poor profitability by saying that they're making money but they're choosing not to "hoard it" like Apple. Apple is not hoarding their money. Apple's pile of profits is like an overflowing toilet. If you think Apple should emulate Amazon, what would you have Apple do with its profits?
Newsflash: So why should Apple be looked as hording their cash when what they are doing is smart and responsible? Why Amazon is spending almost every single cent they earn and they will need to get billions in loans very soon look as a good thing?
Imagine the world were 100x its current size and people had decent wealth distribution. Now 95% of the population would be dying to buy their first smartphone. If that growth potential existed, I would tell Apple to take their 50 bill in profits and reinvest it in Apple. Buy more factories equipment etc. They would now report a loss. Should their stock tank or go up? Their PE would be through the roof...
If Amazon stopped reinvesting the 4 bil a year they do, that money would go right to their bottom line. So they could bank a profit of 4,000,000,000 minus the 300 mil... or show a profit of 3.7 billion. They could then throw that in a bank offshore or give it back to investors. Amazon has faith in their market growth and is investing accordingly. There isn't much growth in high end phones... so Apple is banking profits instead. Both have merit in different markets.
Amazon's drop in profits is actually because they got out Amazoned... by Google. Amazon's accidentally stumbled into becoming the largest cloud provider in the world. Profits were juicy. Juicy enough that even Apple wanted to become a bigger player. Googles new pricing put a dagger in one of Amazon's bigger money makers. Amazon got undersold and is going to have to struggle to deal with it.
Look, companies built on low margins can't raise those margins (profits) without destroying their customer base. Just ask Ron Johnson (Apple, JCPenney).
If Amazon stopped reinvesting the 4 bil a year they do, that money would go right to their bottom line. So they could bank a profit of 4,000,000,000 minus the 300 mil... or show a profit of 3.7 billion. They could then throw that in a bank offshore or give it back to investors. Amazon has faith in their market growth and is investing accordingly. There isn't much growth in high end phones... so Apple is banking profits instead. Both have merit in different markets.
This is such a lopsided and naive view of why Amazon is not making money. So far gone there is no point in trying to reel you back in. Cut bait as they say in fishing. lol
Your view of Apple also is in the same category... limited and naive.
Great argument¡ “You’re wrong, but I won’t bother explaining why.” I’m sure he believes you¡
Great argument¡ “You’re wrong, but I won’t bother explaining why.” I’m sure he believes you¡
Don't need to convert everyone. Save that for the religions. I can't explain how the stock markets work to my grandkids until they learn basic math skills either.
You’re not really making your case for not making your case.
You’re not really making your case for not making your case.
I think I am. I don't post much. Often, I agree with your views. However, you sometimes post just to be argumentative.
My point is, why argue or try to convince someone that is so deluded or have demonstrated they lack the foundational knowledge to have a discussion.
I would say ‘happen’ or ‘situationally expected’ instead of ‘just’.
And that’s a valid point with which I generally agree. Thing is, he isn’t.
And that’s a valid point with which I generally agree. Thing is, he isn’t.
In this case he is out to lunch. The 3.7B he suggests Amazon could allocate towards profit is laughable. Just look at the financials and it will indicate it covers basics not 'investments'. Most businesses call it overhead/expenses. How does cashflow magically become profit?
Other companies invest into the future but bank a profit at the same time. Amazon has had 18+ years. I call BS.
Jeff Bezos has played it pretty smart because he's retained a significant shareholding himself. Currently he has 18% and is the largest Amazon shareholder giving him a personal net worth somewhere close to $27b - he is the 21st wealthiest individual in the world by this standard. This makes it difficult for other shareholders to gain leverage to have him replaced in order to profit. When he feels like investing in one of his own interests outside of Amazon, he just sells shares:
http://www.forbes.com/sites/briansolomon/2013/11/06/jeff-bezos-sells-1-million-amazon-shares-pocketing-over-250-million-after-washington-post-splurge/
That's a pretty neat position to be in because you have all these big funds (BlackRock is one of them btw with $3.2b) tied up in the company with billions and they can't do anything to you. They won't risk trying to lower the value of their own assets and building up the stock means Bezos can sell fewer shares to do whatever he wants. The investors will still have gained from the value increase in the stock but the only way they can profit is to sell it.
This is another example of where the debate over income distribution isn't entirely accurate. The stat that came out recently was that the top 85 wealthiest people in the world hold around the same wealth as the bottom 50%. Jeff Bezos is one of the 85 people but the billions he has don't exist. What he has are highly overvalued shares in Amazon. The problem is you can't limit considerations over income to actual cash values because as far as we know, he could sell all his shares for cash for the amount listed. We just can't be certain that he'd be able to sell all his shares at the current price unless he does it.
Maybe it's time for regulators to clamp down on the rampant speculation in Wall Street by capping the P/E. I'm not sure what would be a good number but I imagine it would be lower than 851. This would mean a company couldn't sell shares that many times higher than their earnings. There could be exclusions for IPOs if they need to raise cash. It borders on fraud if the P/E is that high because the two values are supposed to be linked. Tesla's even worse at over 1300. There should at least be a separation between near-term earnings results and speculative future gains the way that investment banking is supposed to be separate from savings. When do earnings ever shoot up over 10x in 1 year? Then companies would be valued based on the more tangible earnings results rather than speculative values.
Good post.
Yet many of the purchases I make through Amazon are fulfilled by someone else. Amazon just handles the transaction (sound familiar?). In this case they're helping the competition not eliminating them.
Gnats that exist at the pleasure of Amazon. A fig leaf that Amazon can point to and say "See? We're not a monopoly!" If your competition consists of very small operations who are dependent on you for their existence, that's not really competition, is it? Amazon can tighten the spigot on these 'competitors' any time somebody falls out of line. You know, delaying shipment, downgrading product search placement, it's been known to happen. Just ask Hachette.
Maybe it's time for regulators to clamp down on the rampant speculation in Wall Street by capping the P/E. I'm not sure what would be a good number but I imagine it would be lower than 851. This would mean a company couldn't sell shares that many times higher than their earnings. There could be exclusions for IPOs if they need to raise cash. It borders on fraud if the P/E is that high because the two values are supposed to be linked. Tesla's even worse at over 1300. There should at least be a separation between near-term earnings results and speculative future gains the way that investment banking is supposed to be separate from savings. When do earnings ever shoot up over 10x in 1 year? Then companies would be valued based on the more tangible earnings results rather than speculative values.
I'm not against regulation in principle but this is not a practical or even sensible proposal. Banning high P/Es is like banning stupidity (in this case the stupidity of investors). And anyone who bans stupidity is in essence, banning himself, or herself as the case may be.