Amazon to $3,000??
Ralph Waldo Emerson said, "A foolish consistency is the hobgoblin of little minds."
When I was younger, I thought this meant that being consistent was the "wrong" way to go about it. I thought that doing things the same way, time after time, appealed to "little minds" that couldn't handle too much change.
After all, change can be challenging. Change often requires us to think in new ways, "outside the box." Of course, that can mean acting when you have no frame of reference. Life is good at teaching us that we are more prone to make a mistake when taking action in an unfamiliar situation where we may not know the rules...
I was raised to embrace change, as it is very often the one thing you can count on. I used to believe that being able to think on my feet, to adapt to different scenarios, was clearly a mark of my creativity, of my genius.
Then I turned 21...
Ha! Actually, the practical aspects of life didn't get important to me until I was nearly 30. At 21 I was still playing bass in rock bands. And I was five years from packing it all up and going skiing in Colorado for a couple years.
I waited tables and bartended in those days. That's where I really learned the value of consistency. If you drink perfect Manhattans, you know how they're supposed to taste. You don't want it to be "creative" — which is why I think the $12 craft cocktail thing is an affront to decency. Keep the damned simple syrup and infused basil bullshit to yourself.
Creativity and consistency aren't mutually exclusive. Writing a song, inventing a new pasta sauce — these are creative endeavors. But to be great, you then have to reproduce them a million times exactly the same way.
Anyway. I started thinking about all this because I decided to mix it up today and write a digest-style letter, 'cause I haven't done that in a while...
**Regarding consistency in investing and trading, I'll just say, "yes." Great companies share qualities, and so it is possible to approach due diligence with a recipe. But it's essential that you have to be able to mix and match your ingredients. The Wealth Advisory has ~300% gains with Bank of America (NYSE: BAC) and Twilio (NYSE: TWLO). But a rigid investment model that got you in BAC would never have Twilio.
On the other hand, a rigid trading model is the only way to go. I look for certain setups in certain stocks. If they aren't there, I don't trade. Real Income Trader is up an average of 52% on each and every option trade we've made this year.
**I read that the Trump administration has fed 40,000 pages of regulation into the shredder. And in just the last few quarters (maybe a full year), productivity has actually started to move. And you gotta have productivity gains to get wage gains and keep it all under the Fed's wage inflation radar. I think it's clear that companies operate better when they have fewer restrictions.
But does that mean we just throw the whole regulation book out? Mmmmm, not so fast. Johnson & Johnson is being sued because it told moms that dousing babies in carcinogenic talcum powder was a great idea. This is the whole problem with Ayn Rand's objectivism thing. It sounds great to say, "The proper moral purpose of one's life is the pursuit of one's own happiness." But there are far too many examples of one person's happiness coming at another's expense. I'm all for deregulation. But there's a fine line between efficiency and releasing the hounds.
**I see that Trump is getting ready to make some big changes to cars' fuel efficiency standards. There's a lot involved with this issue. Current standards have helped us get to peak oil demand — where annual oil demand is peaking right now. There's political change in the Middle East (anything's gotta be better than where it's been). Automakers are embracing electric vehicles. China won't be "going back" on its EV commitments. And we're installing more and more renewable energy. (Before you complain, ask Texas how they like wind power. They don't like it; they LOVE it. Because it makes money.)
How's the U.S. shale business going? The U.S. drillers are as efficient as they come. We've got light, sweet crude gushing out of the Permian Basin. We've got massive oil exports going. And yet oil stocks just can't seem to rally. Maybe it's because long-term investors don't want to own a capital-intensive, low-margin finite resource where demand has plateaued and that's threatened by new technology?
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**The biggest shipper in the world is Maersk. It is saying that global trade growth has basically been cut in half because of the trade war. And the New York Fed says the annual cost for the American household is about $800. The full 25% tariffs on $300 billion in stuff haven't been levied yet. You can look at that and say, "Oh, it's just $75 billion. That's a drop in the $19 trillion U.S. GDP bucket." But how many jobs is $75 billion? That's the real risk (layoffs) that's not being accounted for.
**Some people are ridiculing the Piper Jaffray analyst who says Amazon is going to $3,000 in the next two years. These people don't understand Amazon Web Services (AWS). AWS is a platform for the entire back end of any business. Customer service, inventory control, billing, payment processing, security, email lists — whatever you need to make your business go, AWS has it.
It's effectively made it so it can partner with any company in the world. Like Disney. Netflix. Slack. Spotify. Pfizer. Samsung. Comcast. NASA. Johnson & Johnson. BMW. Adobe. Airbnb. Expedia. Zillow... I'll be surprised if Amazon isn't $3,000 in two years. But the thing is, that's just 50% up from current prices. I know how you can do way better than that (no stock options or anything crazy)...
**Income inequality: If you calculate current value of loot, Rockefeller was three times richer than Amazon CEO Jeff Bezos. That would be a fortune of $450 billion. Giveaways — tuition, college, reparations, health care — aren't the answer. It's opportunity and investment, and a Fed that doesn't saddle the middle class with bailouts for the rich.
Until next time,
A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.
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