Touche. Capone and Escobar sold the people what they wanted. I suppose it was unjust of me to compare such free-trade capitalists to a trade-impeding would-be monopolist like Amazon.

I was riffing on the opening line: “Amazon is the most defensible company on earth” because Capone and Escobar were good at defending themselves until they got taken down.

Am I the only one who gets reminded of Standard Oil when I look at Amazon? They seem to think that “competition is sin” when it’s external competition that threatens Amazon.

It was that very government suppression that increased — not inflated — the value of the services Capone and Escobar provided, and thus they profited handsomely.

Alphose Capone and Pablo Escobar must have created a lot of value, then…

Amazon is the worst of all. For 10 years Amazon has sold at P/Es that are ridiculous — currently at 177x earnings but it has traded as high as 1,000x or more. Yes, it has revenue growth but just the other day Bezos announced yet another price cut on AWS — their high-margin cloud server business. The rest of Amazon actually operates at breakeven or even a loss, especially when shipping is considered. So when you take 5 or 10 points off AWS margins what you’re really doing is to destroy the entire profitability of the company! Oh, and AWS is not the low-cost provider of these services either; I recently tried to compare their service against Digital Ocean’s (where The Market Ticker currently resides after I moved it off my own infrastructure) and was unable, with ~30 minutes of study, to determine exactly what I had to buy to be equal to what I could easily understand at Digital Ocean and how much it would cost. Amazon lost as a result and for many workloads this will continue since I can’t be the only geek who throws up his hands when I can’t figure out how to compare apples to apples easily. In short AWS pricing looks a lot like trying to figure out how much your doctor is going to gang***** you for in the hospital! The problem for Amazon is that unlike the medical system there’s no protection from competition for them.

The last two, Tesla and Netflix, are even worse.

Netflix has been running perennial negative free cash flow. The only reason they’re in business at all is that the bond market continues to allow them to borrow money! That’s right, without that they’re out of business immediately because they have forward commitments to spend on content but don’t generate enough cash to pay for that commitment. The market “believes” that some day all that programming will continue to generate cash flow without having to continue to spend on it. Really folks? Ever look at the residual fees for a TV show? They’re worth almost nothing! So Netflix must continue to spend more and more and what’s worse is that their US market is saturated and all their growth, in percentage terms, is coming from overseas. That would great except that most of those people don’t speak English and have different cultures so now you need differentiated programming for them at even more cost! This is a company that on an operating basis has, in my opinion, negative current value as a going concern but it sells for about $155 a share. Yeah.

Then there’s Tesla. Tesla loses money on every car they sell even with government subsidies! In other words it’s a tax farm and yet it loses money even after stealing funds for every car from the taxpayer! Those subsidies, by the way, will eventually expire and when they do the company will lose even more money per vehicle sold. The only reason Tesla is still in business is that it, like Netflix keeps going back to the bond market and convincing them to pour more cash on a bonfire and, by the way, their total debt load is now greater than their annual revenue! This is a company that, on a current operating basis is an outrageous zero and exists only because it manages to convince the bond market and steal from the taxpayer.

I’ve seen this movie before, and by the way, most of the recent gains in the market and a huge percentage of the gains since the 2008 recession have come from these companies.

Does Amazon make any money?

Is Amazon a Bubble that will pop?

Over the years, Drucker observed, the company “A” foundry did a workmanlike job, but nothing spectacular. The same guy ran the place for well over a decade. The company “B” foundry, on the other hand, was continually at the forefront of innovation — and several of the foundry managers had been promoted to other parts of the business.