Four months ago, I did a “bankruptcy bomb” review on Amazon (see link in comments) & concluded “it hasn’t exploded yet, but it’s smouldering and could be atomic”


Last night it detonated

Causing $180bn of damage after hours as it ripped through portfolios worldwide

So if you own funds that hold it because it’s a “great company” or big in the benchmark,

please call the portfolio paramedics because you took a hit

And while getting treated, please re-read the disclosure about, “past performance not being indicative of future returns..” again

it seems you missed it last time

I think the pain is just beginning, and here’s why

Amazon’s story was always, “don’t worry about profits, they’re building for the future & when they get to scale, it’s going to be beautiful”

Well, I’d say they’re at scale with the $127bn of sales in 3 months,

But they reported comprehensive income of only $500m & free cash OUTFLOW of $6.5bn in a single quarter

AFTER adding back $5.5bn in stock-based compensation!

They now have $160bn of net liabilities (net current assets less long-term liabilities)

or $276bn of total commitments per 10Q

And we’re in the holidays quarter when people buy stuff and yet the mid-point of their operating income guidance is $2bn – less than this quarter!

So you tell me how they’re going to repay all that debt when they’re dropping $6.5bn a quarter?

Because that’s not beautiful, that’s fugly!

“Yes, but I love their product”

Well, I love my duvet & use it 7 hours a day but that doesn’t mean I should own a Hungarian goose farm!

“Yes but they’re spending on content and that should drive subscribers”

Well they reportedly dropped $1bn making Lord of the Rings which seems fitting considering how much fantasy is involved in this stock

Look, pretend I came to you and said I’ve got this great company

It’s called “Mississippi” – they make no money, are haemorrhaging cash, and have $160bn in debt

Are you seriously telling me you’d pay $1trillion for that?

Of course, you wouldn’t

I think Jeff Bezos is one of the greatest illusionists ever

Not only does he makes bridges disappear to get his mega-yacht out the shipyard, but he seems to have most fund managers completely under his spell – sucessfully distracting them from looking at the balance sheet and focused on an illusory future

So please do some homework this weekend – download the factsheets of the funds you’re invested in and look at their performance and tech exposure

And then ask how much more pain you can take

because this past week suggests it’s a long way from over

“Well, I am thinking about getting some Value exposure and we’re having an investment committee meeting next month..”

Great, you take your time. I’ll ask the tech stocks to stop imploding while you deliberate