The Next Big Short – – Jeff Bezos’ Brobdingnagian Bubble

If you have forgotten your Gulliver’s Travels, recall that Jonathan Swift described the people of Brobdingnag as being as tall as church steeples and having a ten foot stride. Everything else was in proportion – – with rats the size of mastiffs and the latter the size of four elephants, while flies were ‘as big as a Dunstable lark’ and wasps were the size of partridges.
Hence the word for this fictional land has come to mean colossal, enormous, gigantic, huge, immense or, as the urban dictionary puts it, ‘really f*cking big’.
That would also describe the $325 billion bubble which comprises Amazon’s market cap. It is at once brobdangnagian and preposterous – – a trick on the casino signifying that the crowd has once again gone stark raving mad.
When you have arrived at a condition of extreme ‘irrational exuberance’ there is probably no insult to ordinary valuation metrics that can shock. But for want of doubt consider that AMZN earned the grand sum of $79 million last quarter and $328 million for the LTM period ending in September.
That’s right. Its conventional PE multiple is 985X!
And, no, its not a biotech start-up in phase 3 FDA trials with a sure fire cancer cure set to be approved any day; its actually been around more than a quarter century, putting it in the oldest quartile of businesses in the US.
But according to the loony posse of sell-side apologists who cover the company – – there are 15 buy recommendations – – Amazon is still furiously investing in ‘growth’ after all of these years. So never mind the PE multiple; earnings are being temporarily sacrificed for growth.

This post was published at David Stockmans Contra Corner by David Stockman ‘ December 31, 2015.


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