Online Retail is Up – Is Amazon Now a Short? (AMZN) has skyrocketed due to clear indications that online will be the big retail win this season. Fedex reported a huge upside surprise in earnings, driven mostly by international shipments – but also by small packages, meaning online retail. Yet this chart shows irrational exuberance in Amazon. The author has been bashing Amazon for months, to his chagrin so far, but the chart shows how ridiculous the price has become.

This might be best played at the end of the Santa Rally, which typically peaks in early January after the holiday sales season, particularly after the bargain days post Xmas. (Recall I have been saying that retail will be late and discount-driven this year.)

Compounding the pending risks to Amazon are a surprising and disappointing report today that consumer credit is down again. How can retail sustain when consumers lack buying power? There even was a recent story of a surprising amount of cash used at retail (I lost track of the link). Stretching in the rainy day fund to keep the kids happy?

The other risk is a downside surprise in unemployment in January, which will be reported in early February. Seasonal adjustments made the 10.2% blip, and also made the 10% drop that has so spooked markets the last few days. These adjustments now flip the other way after the temp worker retail sales season ends. Underneath the unemployment rate is unemployment reality. This chart from the Big Picture shows that ALL of the increase have been in government-related sectors. the private sector is still in the dumpster.

About Duncan Davidson 228 Articles

Affiliation: NetService Ventures

Duncan is an advisor to NetService Ventures, where he focuses on digital media and the mobile Internet.

Previously he was at four start-ups: Xumii, a mobile social service based on a Social Addressbook; SkyPilot Networks, the performance leader of wireless mesh systems for last-mile access, where he was the founding CEO; Covad Communications (Amex: DVW, $9B market cap at the peak), the leading independent DSL access provider, where he was the founding Chairman; InterTrust Technologies ($9B market cap at the peak), the pioneer in digital rights management technologies, now owned by Sony and Philips, where he was SVP Business Development and the pitchman for the IPO.

Before these ventures, Duncan was a partner at Cambridge Venture Partners, an early-stage venture firm, and managing partner of Gemini McKenna, a joint venture between Regis McKenna's marketing firm and Gemini Consulting, the global management consulting arm of Cap Gemini.

He serves on the board or is an adviser to Aggregate Knowledge (content discovery), Livescribe (digital pen), AllVoices (citizen journalism), Xumii (mobile social addressbook), Verismo (Internet settop box), and Widevine (DRM for IPTV).

Visit: Duncan Davidson's Blogs

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