As you can see from the chart on the right, while we had a very impressive break-out last Friday, it was only impressive when you price the indexes in Dollars – priced in Euros, we were unable to break over the 50 dmas, which are in decline in a constant currency. The Dollar stopped going down yesterday and the markets stopped going up – it's a pretty straightforward relationship.

It's not just AMZN, of course but that's one of our favorite shorts because, even with the most bullish of forward projections – they are still priced like dot com mania never left us at 8x the valuation of AAPL, who make 41 TIMES more money than AMZN. AAPL makes $25Bn a year on $108Bn in sales, AMZN make $600M on $48Bn in sales. AMZN has been around since 1994 – it's not like they just started doing this stuff. If AMZN doubled their bottom line without increasing sales, then they'd make $1.2Bn on $48Bn in sales, still 1/20th of AAPL's profits.

It's not just AMZN that has completely unrealistic pricing, of course, with the consumer taking it on the chin, much of Retail is way overpriced for realistic forward prospects. In fact, the p/e ratio of the entire S&P 500 is up to 15 again – about the value at which we usually get our market corrections, while, at the same time, 2012 consensus earnings estimates have fallen off sharply.

Since then, earnings expectations have gone lower and lower but traders are snapping up stocks at higher and higher prices, pushing the p/e multiplier to extremes – and that's only if October earnings come in as expected (July was generally disappointing). Of course, having a $660Bn company like AAPL (4% of the S&P) with a forward p/e of 12.5 certainly papers over a travesty like AMZN, with a $116Bn market cap and a forward p/e of 108. Certainly there is no room for error in those numbers and, obviously, there is not even the whiff of a possibility that the economy won't be better next year than it is now. IF ALL THAT HAPPENS, THEN AMZN will be well on their way to that $1.8Tn in sales while WMT, TGT, COST and even AAPL just roll over and hand their business to Bezos without a fight.
So we have a weak Dollar driving up the price of everything you use Dollars to buy, we have consumers(who still make up 70% of our GDP) with low confidence and declining credit and we have extremely unrealistic market pricing and earnings expectations. What could possibly go wrong?



