Another Scary Chart From Amazon

Amazon has some pretty scary charts. Technically it has been bouncing off the upper Bollinger band, but has since pulled back from that area. The charts I'm talking about are of a more fundamental nature, but it could be scarier. Screen Shot 2013-06-20 at 8.05.37 PM

Amazon is a giant. It is the biggest retailer in the world, it had $61 billion in sales in 2012. It has 209 million active users. But this chart scares me a lot. Here's why.

So what's the problem? It means that all of Amazon's growth, which has been amazing, has not been growing the bottom line, and the bottom line is what counts. So why Amazon been growing the bottom line? Well they have been reinvesting so heavily in growth opportunities. So what's the problem you ask? Well companies that actually have cash like Yahoo, Google, and Apple could encroach on Amazon's business. Amazon doesn't have the cash to allow for any speedbumps in their business, and the space is only getting more competitive. Think of it like this, if I am highly leveraged in my portfolio and the market does what it did yesterday (Dow down 350 points) then it could blow your entire portfolio up. If you are using a modest amount or no leverage and have a plan for when things go south like they did today, then you will not be hurt as badly. Right now Amazon is too highly leveraged for me to sleep well at night owning it.



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