This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Amazon Busy Digging Its Own Grave

However, when checking the same merchant's price on eBay or the merchant's Web site is only a click away, the ability for Amazon to increase margins is naturally constrained. Why should Amazon investors anticipate higher share prices if product sales margins and merchant fees remain under pressure?

My good friend Rocco Pendola correctly pointed out in Apple Competes With Its Unwritten Future that investors of almost all timeframes have made money.

One very popular investing style that never appears to go out of fashion is the musical chair method. I refer to it as the Thanksgiving turkey theory of investing. If you read "Fooled by Randomness" and "The Black Swan" by Nassim Nicholas Taleb, you know how this investment thesis concludes.

Taleb brilliantly illustrates the potential error in assuming the future by using the past. Imagine a turkey on a farm and its relationship with the farmer. Each day the farmer comes to the turkey and brings the turkey food.

Each day the turkey grows to trust the farmer more than the last. There is no reason not to trust the farmer. After all, the farmer provides shelter, water and food. It doesn't take long for the turkey to view the farmer as its support and that the farmer will be there for him every day with more food and water.

This is the same as many investors and analysts view Amazon. They see the chart moving higher and higher and see no reason for it to stop. This, that and the other thing will happen, and everything is pointing towards a higher stock price.

In fact, if you had suggested a year ago that it was time to sell Amazon, look how foolish you would appear right now. The turkey feels the same way, and on the day before Thanksgiving the turkey trusts the farmer more than any other point.

It's the day the turkey holds the highest amount of trust that the farmer approaches with an axe instead of a daily ration of food. The incredibly fantastic share price leads me to believe that Amazon is either in or near its own November, otherwise I wouldn't sound the warning bells to be careful.

If you buy Amazon, you may want to keep an eye out for Walmart, Target and other retail giants to see if they turn into a farmer.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,159.93 +128.79 0.76%
S&P 500 2,001.17 +17.04 0.86%
NASDAQ 4,550.9590 +32.0570 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs