Jeff Bezos Is Now the World's Second Richest Person
I know that I&#x27;ll get skewered for this, but here goes: recently I&#x27;ve convinced myself we are on the verge of a very serious Amazon stock correction. Just today I saw three separate articles (without seeking them out) giving umpteen reasons Amazon is going to a trillion, or that Amazon is only getting started. Then I turned on CNBC during lunch and what are they talking about? Amazon.<p>There&#x27;s simply too much positive sentiment around this company and it makes me very nervous. It reminds me of 2007 when everyone was making a killing on real estate and the idea was laughable that the market would reverse. The stock is way overbought and the only questions I have are &quot;by how much?&quot; And &quot;when is the reversal coming?&quot;<p>There are other reasons I&#x27;m skeptical about Amazon remaining at its current valuation. One major one is that the meteoric rise in the stock price has coincided nicely with the economic recovery. Amazon&#x27;s ecommerce business is one that&#x27;s built for good times. It remains to be seen how they fare in downtimes. What I mean by that is that much of what I see people buy on Amazon (myself included) are largely frivolous gadgets that one simply wouldn&#x27;t buy in a time of economic fear. Right now people largely feel wealthy and feel comfortable shelling out for prime memberships and willing to pay a premium for convenience. In a down economy that&#x27;s the first thing to go.<p>Of course a down economy will weigh heavily on most companies, but I believe especially so on Amazon because it is a stock that is already overbought and relies on people buying shit they don&#x27;t need for the sake of convenience.<p>Apart from that I believe they will face increasing competition from Alibaba, Walmart, and others.<p>Finally, there are the numbers. Despite the $400+ billion valuation, Amazon did less that a billion in profit from their ecommerce business last quarter! The stock shot up because that was higher than analysts predicted!<p>I have serious doubts about the long term profitability of Amazon&#x27;s ecommerce business. Physical delivery of goods, particularly last mile delivery is just too expensive. Sure, drones might come but I wouldn&#x27;t base an investment on that hope.<p>My prediction is that an economic downturn is going to send this stock into a tailspin.